LOEWS CINEPLEX ENTERTAINMENT CORP, 424B1, 1998-08-03

LOEWS CINEPLEX ENTERTAINMENT CORP
424B1, 1998-08-03
MOTION PICTURE THEATERS

Previous: NATIONAL EQUITY TRUST LOW FIVE PORTFOLIO SERIES 19, 497J, 1998-08-03

Next: AMERICA FIRST MORTGAGE INVESTMENTS INC, 8-K, 1998-08-03

<PAGE>
RULE NO. 424(b)(1)
REGISTRATION NO. 333-56897

10,000,000 Shares

[LOGO] LOEWS CINEPLEX
---------------------
ENTERTAINMENT

Common Stock
($.01 par value)

------------

All of the shares of common stock, $.01 par value ("Common Stock"), of Loews
Cineplex Entertainment Corporation ("Loews Cineplex" or the "Company")
offered hereby are being sold by the Company.

In addition, the Company is concurrently offering (the "Note Offering") $300
million principal amount of Senior Subordinated Notes due 2008 (the "New
Notes") of the Company in transactions exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act"). See
"The Concurrent Transactions." The shares of Common Stock offered
hereby and the New Notes offered by the Company are being
offered separately. The closing of this offering is not
conditioned upon the closing of the Note Offering.

The Common Stock is listed on the New York Stock Exchange ("NYSE") under
the symbol "LCP" and on The Toronto Stock Exchange ("TSE") under the
symbol "LCX." On July 30, 1998, the last reported sale price of
the Common Stock on the NYSE was $11.00 per share and the last
reported sale price of the Common Stock on the TSE was
Cdn$16.59 per share. See "Price Range of Common
Stock."

FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" ON PAGE 18.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY(1)
------------ ------------- ------------
<S> <C> <C> <C>
Per Share.................................. $11.00 $0.66 $10.34
Total(2)................................... $110,000,000 $6,600,000 $103,400,000
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $775,000.
(2) The Company has granted the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase a maximum of 1,500,000
additional shares to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $126,500,000,
Underwriting Discounts and Commissions will be $7,590,000 and Proceeds to
Company will be $118,910,000.

The shares of Common Stock are offered by the several Underwriters when, as
and if issued by the Company, delivered to and accepted by the Underwriters
and subject to their right to reject orders in whole or in part. It is
expected that the shares of Common Stock will be ready for delivery on or
about August 5, 1998, against payment in immediately available funds.

CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY

Prospectus dated July 30, 1998.
<PAGE>

The 900-seat premiere "house" at the Sony Lincoln
Square Theatre is often the host of New York premieres.

PHOTO

The Loews Cineplex prototype has stadium seating,
oversized screens and state-of-the-art digital sound systems.

Loews Cineplex has introduced expanded concession
offerings, providing more variety to its patrons.

PHOTO

The Sony IMAX(R) Theatre at Lincoln Square has
the largest screen in North America.

<PAGE>

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
OFFERED HEREBY, INCLUDING OVER-ALLOTMENT, STABILIZING TRANSACTIONS, SYNDICATE
SHORT COVERING TRANSACTIONS AND PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED HEREIN, INCLUDING, WITHOUT LIMITATION, UNDER
"SUMMARY," "RISK FACTORS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "THE CONCURRENT TRANSACTIONS" AND
"BUSINESS," AND INCLUDING, WITHOUT LIMITATION, STATEMENTS CONCERNING
(I) BUSINESS STRATEGY (INCLUDING, WITHOUT LIMITATION, THE COMPANY'S PLANS TO
IMPROVE OPERATING EFFICIENCIES AND REDUCE COSTS), (II) EXPANSION PLANS AND
(III) CAPITAL EXPENDITURES, CONTAIN CERTAIN FORWARD-LOOKING STATEMENTS.
BECAUSE SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES, ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS." THE WORDS "INTEND,"
"BELIEVE," "EXPECT," "ANTICIPATE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-
LOOKING STATEMENTS. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THEIR DATES. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE.

IN ADDITION TO OTHER FACTORS AND MATTERS DISCUSSED ELSEWHERE HEREIN,
MANAGEMENT BELIEVES THAT THE FOLLOWING ADDITIONAL FACTORS COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE DISCUSSED IN FORWARD-LOOKING
STATEMENTS: (I) THE EFFECT OF ECONOMIC CONDITIONS ON A NATIONAL, REGIONAL OR
INTERNATIONAL BASIS; (II) THE ABILITY OF LOEWS CINEPLEX TO INTEGRATE THE
OPERATIONS OF CINEPLEX ODEON CORPORATION ("CINEPLEX ODEON"), THE COMPATIBILITY
OF THE OPERATING SYSTEMS OF THE COMBINED COMPANIES, AND THE DEGREE TO WHICH
EXISTING ADMINISTRATIVE FUNCTIONS AND COSTS ARE COMPLEMENTARY OR REDUNDANT;
(III) COMPETITIVE PRESSURES IN THE MOTION PICTURE EXHIBITION INDUSTRY; (IV)
THE FINANCIAL RESOURCES OF, AND FILMS AVAILABLE TO, THE COMPANY'S COMPETITORS;
(V) CHANGES IN LAWS AND REGULATIONS, INCLUDING CHANGES IN ACCOUNTING
STANDARDS; (VI) THE DETERMINATION OF THE NUMBER, JOB CLASSIFICATION AND
LOCATION OF EMPLOYEE POSITIONS TO BE ELIMINATED AS A RESULT OF THE COMBINATION
OF LOEWS THEATRES (AS HEREINAFTER DEFINED) AND CINEPLEX ODEON; AND
(VII) OPPORTUNITIES THAT MAY BE PRESENTED TO, AND PURSUED BY, THE COMPANY.
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and financial statements,
including the related notes, appearing elsewhere in this Prospectus.
Prospective investors are urged to read this Prospectus in its entirety. Unless
otherwise indicated, industry data contained herein is derived from publicly
available industry trade journals, government reports and other publicly
available sources, which the Company has not independently verified but which
the Company believes to be reliable, and where such sources were not available,
from Company estimates, which the Company believes to be reasonable, but which
cannot be independently verified. As used in this Prospectus, "$" refers to
U.S. dollars and "Cdn$" refers to Canadian dollars. Unless otherwise stated or
where the context otherwise requires, (i) references herein to the "Company" or
"Loews Cineplex" refer to Loews Cineplex Entertainment Corporation and its
direct and indirect subsidiaries, (ii) all information herein assumes no
exercise of the Underwriters' over-allotment option and (iii) all information
herein gives effect to (A) the automatic conversion that will occur upon
consummation of this offering (the "Equity Offering") of shares of the
Company's Class A Non-Voting Common Stock currently held by Sony Pictures
Entertainment Inc. ("SPE") into an equal number of shares of Common Stock and
(B) the issuance of 3,255,212 additional shares of Common Stock to Universal
Studios, Inc. ("Universal") for no additional consideration (the "Universal
Issuance") under anti-dilution provisions in the Company's subscription
agreement with Universal (the "Subscription Agreement"). See "Certain
Relationships and Related Transactions." References herein to "fiscal" years
refer to the Company's fiscal years ended February 28 or 29, as the case may
be. Information given with respect to "North America" includes the United
States and Canada and excludes Mexico.

THE COMPANY

Loews Cineplex is the world's largest publicly traded theatre exhibition
company in terms of revenues and operating cash flow. On May 14, 1998, the
Company completed the business combination (the "Combination") of the Loews
Theatres exhibition business ("Loews Theatres") of SPE and Cineplex Odeon
Corporation ("Cineplex Odeon"), another major motion picture exhibitor with
operations in the United States and Canada. On a pro forma basis for the fiscal
year ended February 28, 1998, the Company had approximately $1.0 billion in
revenues. Approximately 71% of such revenues was related to box office receipts
and approximately 29% was generated by concession sales and other revenues. The
Company's pro forma share of total industry box office receipts in North
America in 1997 was approximately 10.2%.

As of May 31, 1998, Loews Cineplex owned and operated or had interests in
2,794 screens at 450 locations, of which 2,783 screens were located in 22 U.S.
states, the District of Columbia and 6 Canadian provinces. The Company's North
American exhibition screens represent approximately 8.8% of all exhibition
screens in North America. The Company's North American theatres are
concentrated in densely populated urban and suburban areas, with a strong
presence in metropolitan New York, Boston, Chicago, Baltimore, Dallas, Houston,
Detroit, Los Angeles, Seattle, Washington, D.C., Toronto, Montreal and
Vancouver. Approximately 83% of the Company's U.S. theatres are located in 11
of the 15 largest areas of dominant influence as defined by the A.C. Nielsen
Company/EDI ("ADIs") in the United States, and approximately 83% of the
Company's Canadian theatres are located in the top 10 ADIs in Canada. Since
June 10, 1998, the Company has also owned a 50% interest in 108 screens in 13
locations in Spain through a joint venture with Yelmo Films S.A. ("Yelmo
Films"), a leading local Spanish exhibitor. The Company has also established an
initial presence in both Hungary and Turkey.

1
<PAGE>

The Company holds a 50% partnership interest in each of Loeks-Star Theatres
and Magic Johnson Theatres (collectively, the "U.S. Partnerships"). As of May
31, 1998, the U.S. Partnerships held interests in and operated 12 locations
with a total of 149 screens. Loeks-Star Theatres' circuit is located in the
metropolitan Detroit, Michigan area. Magic Johnson Theatres' circuit is located
in densely populated urban areas with predominantly minority populations.
Unless otherwise noted, the screen and location figures presented herein for
the Company include the screens and locations of the Company's U.S.
Partnerships.

Loews Cineplex was the first commercial motion picture exhibitor in North
America, and perhaps the world, with operations beginning in 1904, when Marcus
Loew set up a "nickelodeon" in a rented room above a penny arcade store in
Cincinnati, Ohio. Loews Cineplex's theatre circuit has grown over the years
through both internal development and acquisitions. Today, Loews Cineplex
operates theatres under the Loews, Sony and Cineplex Odeon theatres names, and
the Company's partnerships and joint ventures operate theatres under the Star,
Magic Johnson and Yelmo Cineplex names.

KEY BUSINESS STRATEGIES

The Company's goals are:

. to be the leading theatrical exhibitor in densely populated metropolitan
centers in North America;

. to expand into selected international markets through joint ventures,
new theatre construction and acquisitions; and

. to maintain its reputation as a preferred exhibitor for distributors and
theatre-going patrons.

The Company has developed a number of successful operating and expansion
strategies designed to achieve these goals and place it at the forefront of the
industry.

OPERATING STRATEGY

The Company intends to achieve the same high levels of operating performance
and cash flow growth historically achieved by Loews Theatres by applying its
proven operating strategy to the recently acquired Cineplex Odeon theatres and
to the Company's new ventures. During the last five fiscal years, the Company's
Loews Theatres circuit consistently achieved strong operating results, with
Total EBITDA per location growing at a compound annual growth rate of 18.3%
from fiscal 1994 to fiscal 1998 and its Total EBITDA margin improving from
16.1% to 18.0% during the same period. The Company has achieved these results
by actively managing and improving the Loews Theatres portfolio, providing a
high level of customer service, actively controlling operating costs, closely
monitoring operations on a daily basis, and increasing efficiency through the
integration of highly flexible state-of-the-art information systems into the
Company's theatre operations. In contrast, Cineplex Odeon experienced virtually
no growth in Modified EBITDA (which, in the case of Cineplex Odeon, is
substantially comparable to Loews Theatres' Total EBITDA) per theatre from 1993
through 1997, and its Modified EBITDA margin declined from 13.0% in 1993 to
10.8% in 1997. The Company believes that this lack of growth and margin decline
was attributable primarily to capital constraints and Cineplex Odeon
management's need to focus on certain long-term strategies. For the definitions
of Total EBITDA, Modified EBITDA and EBITDA, see "--Historical and Unaudited
Pro Forma Combined Key Operating Statistics."

The Company's management believes that there are significant opportunities to
improve the performance of the combined circuit by adopting Loews Theatres'
policies and practices throughout the combined circuit. Key elements of the
Company's operating strategy include:

PURSUE COST SAVINGS AND OPERATING EFFICIENCIES

2
<PAGE>

overhead and taking advantage of economies of scale. Since the consummation of
the Combination, the Company has already begun to reduce overhead costs through
headcount reductions, negotiated the extension of significant volume discounts
on bulk concession items to the Cineplex Odeon circuit and implemented other
efficiencies. The Company estimates that initial steps taken to date will
result in annual cost savings and operating efficiencies of approximately $10
million. The Company anticipates that, over the next several years, these cost
savings and operating efficiencies will increase to approximately $25 million
annually.

Apply Proven Operating Practices. Over the past five fiscal years, Loews
Theatres increased concession revenue per patron by 31.3% from $1.63 to $2.14.
This increase was attributable to expanded concession offerings designed to
provide more variety to patrons, increased prices, the implementation of
employee training and incentive programs which encourage "upselling" and
improve customer service, and more efficient design of concession stands in the
Company's new theatres. Loews Theatres' concession margins have increased from
80.8% to 84.5% during the same period. This improvement was due to the
Company's ability to obtain favorable terms with its vendors, benefit from
volume discounts and offer a varied product mix while maintaining attractive
margins. In contrast, Cineplex Odeon increased its concession revenue per
patron by only 7.6% from $1.57 to $1.69 and its concession margins decreased
from 85.9% to 80.6% from 1994 to 1997. The Company expects that Loews Theatres'
proven operating practices will improve Cineplex Odeon's overall concession
productivity and margins.

Loews Theatres' theatre operating expenses (including concession costs) as a
percentage of revenues decreased from 78.8% to 74.4% between fiscal 1994 and
fiscal 1998. Loews Theatres has been successful in reducing these expenses by
minimizing rent through favorable real estate practices and implementing more
efficient facilities layouts in the Company's newer theatres, as well as by
cross-training its staff and adjusting staffing levels based on "real time"
information from its theatres in order to increase staffing efficiency. Between
1993 and 1997, Cineplex Odeon's theatre operating expenses (including
concession costs) as a percentage of revenues increased from 84.2% to 85.7%.
The Company believes that by applying Loews Theatres' proven operating
practices Cineplex Odeon's cost structure will improve as the two circuits are
integrated.

Realize Economies of Scale. The Company believes that it can improve
operating margins by realizing cost savings through the elimination of overhead
redundancies and by spreading the remaining overhead costs over a larger
theatre circuit. The Company also anticipates that it will realize additional
benefits created by economies of scale such as volume purchase discounts,
application of more favorable terms with selected vendors and service suppliers
and certain revenue generating contracts on a circuitwide basis. Additional
efficiencies are expected to be realized through more efficient film
programming and scheduling, enabling the Company to exhibit motion pictures for
the maximum play time by matching optimal auditoria size with rapidly changing
audience demands.

FOCUS ON CUSTOMER SERVICE

The Company's goal is to be the industry leader in, and to provide an
unprecedented level of, customer service and convenience, positioning Loews
Cineplex as the "theatre of choice" for movie-going patrons. Loews Theatres has
developed a proven customer service program focused on increasing patronage and
generating customer loyalty by improving the overall movie-going experience.
This program includes optimizing the scheduling of showtimes to lessen
congestion at its theatres, offering more frequent showtimes of popular films
for the convenience of its patrons, guaranteeing "next-in-line" service to
improve ticket and concession sales, and scripted greetings to promote a
friendly atmosphere. The Company also provides intensive employee training to
improve service and sales techniques and increase concession sales. By serving
customers more quickly, the Company believes that it can increase its
concession revenues per patron. To encourage increased patronage, the Company
has established new concession programs, providing a wider selection of
concession items and enhanced promotions and merchandising activities. The
Company has also established a series of box office admission discount
programs, including bargain matinees, as incentives for patronage by select
groups of customers, including senior citizens and children.

3
<PAGE>

MAINTAIN STATE-OF-THE-ART INFORMATION SYSTEMS

In the last three years, Loews Theatres has streamlined its point-of-sales
system and invested in state-of-the-art computer technology at its theatre box
offices and concession stands, enabling it to increase productivity and manage
operating costs more efficiently. Touch screen selling stations at its box
offices and concession stands provide quicker service, resulting in higher
customer turnover and productivity improvements. This system has shortened
transaction processing times and provides "real time" information to the home
office regarding attendance levels, box office receipts, concession sales and
employee productivity at each location, as well as better inventory management
and control. Immediate access to attendance levels and concession sales at each
theatre allows management to make daily adjustments to staffing levels and
inventories in order to maximize staffing efficiencies and concession
productivity. This is especially important during critical operating periods
such as weekends and holidays. The Company has also made significant
investments in technology to streamline and enhance features within its major
reporting systems. Over the past three years, the Company has spent
approximately $13.0 million on information systems technology. The Company has
begun to integrate the Cineplex Odeon theatres into the Company's systems in
order to achieve similar benefits in its revenues and operating costs.

EXPAND ANCILLARY REVENUES

The Company is continually identifying ancillary revenue opportunities in
addition to box office and concession revenues. The Company believes that it
can be an attractive medium for advertising and joint marketing and promotion
efforts because it can provide access to mass audiences throughout North
America (approximately 145 million patrons in fiscal 1998 on a pro forma basis)
with highly attractive demographics. The Company maintains screen advertising
programs circuitwide with local and national advertisers. The Company is
currently advertising Calvin Klein Jeans' products on its serving containers
for popcorn and beverages and is exploring additional advertising and marketing
programs with other world class consumer product companies. The Company has
also generated additional revenue through the leasing of its theatres for
motion picture premieres and screenings, corporate events and private parties.
Certain of the Company's theatres, such as the Sony Lincoln Square Theatre in
New York City, have earned reputations as the "preferred" theatres for these
events given their locations in key urban markets as well as their upscale
settings.

MOTIVATE KEY EMPLOYEES

The Company adopted the Stock Incentive Plan (as hereinafter defined) in
connection with the Combination which is designed to link compensation of
management with stockholder return. The Company expects to expand this program
by granting additional options to key employees. The Company provides
additional incentives to its theatre staff employees through the payment of
commissions for concession productivity over certain target levels, and through
the offer of benefits such as college tuition assistance programs designed to
reduce employee turnover and increase operating efficiencies.

EXPANSION STRATEGY AND PORTFOLIO MANAGEMENT

A key component of Loews Cineplex's business strategy is to pursue a
significant expansion and upgrade of its portfolio of movie theatre properties.
The Company plans to spend an aggregate of approximately $1.0 billion in
capital expenditures during the next five years to (i) develop or acquire
additional theatres in the North American and international markets, (ii)
expand the number of screens at certain existing theatres, (iii) significantly
upgrade and modernize existing theatres where appropriate and (iv) dispose of
obsolete, unprofitable and non-strategic theatres. During the past four fiscal
years, Loews Theatres has achieved an average return on investment from new
theatre construction of greater than 20% per annum (calculated on the basis of
EBITDA to net investment).

4
<PAGE>

UPGRADE AND EXPAND IN NORTH AMERICA

In the past four years, Loews Theatres has implemented a major theatre
reconfiguration and expansion program. This program has increased screens per
location from 5.4 at the end of fiscal year 1994 to 7.4 at the end of fiscal
year 1998. In conjunction with this expansion program, the Company has adopted
a prototype design for new theatre construction which typically has between 12
and 24 screens depending on the location, with oversized screens, stadium
seating, rocking chair seats, state-of-the-art digital sound systems and
spacious lobbies. The prototype also provides operating efficiency in the
design, location and size of concession stands and incorporates state-of-the-
art point-of-sale technology. The Company believes larger multiscreen theatres
are more efficient to operate and provide for greater operating margins and
better asset utilization. The greater number of screens per theatre provides
effective leverage of fixed costs and staffing levels over a larger revenue
base. Multiscreen facilities also enable Loews Cineplex to present a variety of
films with more frequent showtimes to the movie-going public, in order to
maximize attendance levels.

During the five fiscal years ended February 28, 1998, Loews Theatres
constructed and placed into service 25 new multiplex and megaplex theatres with
a total of 286 screens. During the same period, Loews Theatres also added 52
new screens at existing theatres. The quality of the Company's theatres and
their major metropolitan locations position the Company's theatres among the
top grossing theatres in the United States. The Company currently operates the
three highest grossing theatres in the United States for the 1998 year-to-date
according to A.C. Nielsen Company/EDI: (i) the 13-screen flagship Sony Theatres
Lincoln Square in New York City (home of the first commercial 3-D IMAX(R)
theatre in the United States); (ii) the 18-screen Universal City at Citywalk, a
retail and entertainment complex in Universal City, California; and (iii) the
20-screen Star Theatres in Southfield, Michigan.

The Company believes that a significant opportunity exists to improve the
Company's competitive position in many of its existing markets as well as to
selectively enter new markets in North America that are currently underserved.
The Company's goal in this expansion effort is to develop a more modern
portfolio of multiplex and megaplex theatre properties which offer customers an
exceptional movie-going experience. The Company currently is targeting to open
approximately 12 to 15 new theatre locations annually, and to add new screens
at certain existing locations. The Company has enacted a program to upgrade
existing theatres with stadium seating, where appropriate. The Company also
expects to close or dispose of certain overlapping theatre locations and
underperforming theatres, including older obsolete theatres that contribute
only marginally to cash flow from operations or that are operating at a loss.
The Company has preliminarily targeted approximately 550 screens for
disposition or closing over the next five years. While in the aggregate the
screens to be disposed of currently generate significant revenues, the Company
believes that the disposition or closure of these screens will not negatively
impact the Company's operating cash flow on an ongoing basis. Closure costs
related to most of these theatre closings have been provided for as part of the
"Excess Purchase Price" in connection with the purchase accounting adjustments
resulting from the Combination. See "Unaudited Pro Forma Financial
Information." In connection with the Combination, the Company also agreed with
the U.S. Department of Justice (the "DOJ") and the attorneys general of New
York and Illinois to dispose of 25 additional theatres with 85 screens. See
"Business--Properties."

EXPAND INTERNATIONALLY

According to the Baskerville Communications Corporation, the international
(i.e., non-North American) share of total worldwide box office receipts rose
from 43% in 1983 to 62% in 1996 and since 1983 international box office
receipts have increased at approximately a 9% compounded annual growth rate.
The Company believes that the international market offers significant growth
opportunities to motion picture exhibitors, particularly through the
replication of the multiplexing process underway today in the domestic arena.
Much of the world is underscreened and underserved by poor quality theatres.
According to Screen Digest, there were approximately 9,000 people per screen in
the United States in 1996, compared to an average of approximately

5
<PAGE>

20,000 people per screen in Western Europe and approximately 79,000 people per
screen in Latin America. In the United States, the average person visits a
theatre approximately five times per year, compared to 1.9 times per year in
Western Europe and only 0.6 times per year in Latin America. Marginal increases
in attendance rates and increased average ticket prices have had a dramatic
impact in expanding box office receipts.

In June 1998, the Company formed its Loews Cineplex International division to
develop, construct and operate theatres outside of North America. The Company
is currently considering expansion opportunities in selected areas throughout
the world that the Company believes are underscreened and underserved by
existing operators and is currently pursuing several opportunities in Western
Europe and developed countries in other regions. The Company has targeted
selected markets in Western Europe for its international expansion based on the
favorable economy, ease of doing business and availability of attractive
partners. The Company intends to identify local partners in targeted
international markets with whom management can pursue joint venture
opportunities that capitalize on the Company's development and operating
expertise and access to capital, and that take advantage of the local partners'
established presence and significant local expertise. The Company has recently
announced the formation of a joint venture with Yelmo Films to operate existing
theatres and construct and operate new state-of-the-art multiplex theatres in
Spain. See "--Recent Developments." The Company also operates a six-screen
theatre in Hungary and a five-screen theatre in Turkey. The Company is
currently evaluating several other specific international expansion
opportunities in Western Europe, Eastern Europe, Latin America and Asia.

PURSUE ACQUISITIONS AND JOINT VENTURES

The Company is continually seeking opportunities to acquire theatre circuits
with locations that complement the Company's existing locations and that
provide the opportunity to improve operating margins through significant cost
savings realized through economies of scale. Acquisitions can also provide the
critical mass needed to expand into new markets. The Company targets
acquisitions that can be consummated at an attractive valuation and where there
is a significant strategic fit with the Company's existing theatre circuit.

The Company also explores joint ventures with partners that offer
complementary expertise, enabling Loews Cineplex to increase its success in
entering certain niche markets or markets where it currently does not have a
presence. The Company's partnership interest in the Loeks-Star Theatre circuit
provides the opportunity to capitalize on the local reputation and consumer
recognition of a high quality circuit, while offering the resources and
expertise of a national exhibitor. The Magic Johnson Theatres partnership
leverages the brand name recognition of one of the most well-known and
respected athletes in the world and provided Loews Theatres with a unique
vehicle through which to make the first successful entry into underserved,
minority markets. The Company's joint venture with Yelmo Films in Spain is
another example of the Company's strategy of combining its financial resources
and operating expertise with a partner's knowledge of a local market in order
to expand into a new market with the optimal combination of key elements to
facilitate a successful entry.

OPEN THEATRES IN LOCATION-BASED ENTERTAINMENT CENTERS

As consumers seek more sophisticated entertainment offerings, the Company and
its competitors have begun to construct new theatres in location-based
entertainment centers. In addition to theatres, these centers typically have
specialty retail stores, themed restaurants and video arcades, all of which
have high entertainment content. The Company currently operates the 18-screen
Universal City theatre multiplex at Citywalk, and will operate a 15-screen
theatre and a Sony IMAX(R) theatre at Metreon, Sony's 350,000 square foot
entertainment center in San Francisco scheduled to open in mid-1999. The
Company will continue to explore these opportunities with Sony and Universal as
well as other developers of location-based entertainment centers.

PRINCIPAL STOCKHOLDERS

The Company's principal stockholders include SPE, a wholly owned subsidiary
of Sony Corporation of America ("SCA"), Universal and the Charles Rosner
Bronfman Discretionary Trust and certain related

6
<PAGE>

stockholders (the "Claridge Group"), which own 51.1% (49.9% of the Company's
voting Common Stock), 26.0% (26.6% of the Company's voting Common Stock) and
9.6% (9.8% of the Company's voting Common Stock) of the Company's capital
stock, respectively, before giving effect to the Equity Offering. Upon
consummation of the Equity Offering, SPE, Universal and the Claridge Group will
own 39.5%, 25.6% (25.5% of the Company's voting Common Stock) and 7.4% (7.4% of
the Company's voting Common Stock), respectively, of the Company's capital
stock and collectively own approximately 72.5% of the Company's capital stock
(and 72.4% of its voting Common Stock). SPE, Universal and the Claridge Group
are collectively referred to herein as the "Stockholders."

PRINCIPAL EXECUTIVE OFFICES

The address of Loews Cineplex's principal executive offices is 711 Fifth
Avenue, 11th Floor, New York, New York 10022 and its telephone number is (212)
833-6200.

RECENT DEVELOPMENTS

YELMO CINEPLEX DE ESPANA

On June 10, 1998, Loews Cineplex and Yelmo Films formed Yelmo Cineplex de
Espana, a 50/50 joint venture, to develop, construct and operate movie theatres
throughout Spain. Yelmo Films, Spain's second largest film exhibition company
and leading builder of state-of-the-art multiplex theatres, currently owns and
operates 108 screens (25 of which were opened in 1997) at 13 theatre locations
in high-density population areas in Madrid, Catalunya and Galicia. Under the
terms of the agreement, Loews Cineplex and Yelmo Films formed a 50/50 joint
venture into which Yelmo Films contributed its existing theatre assets and
Loews Cineplex will contribute cash equal to the agreed value of these assets
net of debt on an "as-needed" basis, primarily to fund the construction of new
multiplexes. The newly formed company expects to add approximately 15 new
theatre locations and approximately 175 screens to its existing assets in the
next several years. There are currently eight theatre locations, representing
70 screens, which are in various stages of development. The Spanish film
exhibition market has experienced strong growth recently with a 34% increase in
box office receipts since 1993.

7
<PAGE>

THE EQUITY OFFERING

<TABLE>
<S> <C>
Common Stock offered by the
Company......................... 10,000,000 shares
Common Stock to be outstanding
after the Equity Offering (1)... 58,538,646 shares
Use of proceeds.................. The Company intends to use the net proceeds
from the Equity Offering to reduce
outstanding borrowings under the Bank Credit
Facilities (as hereinafter defined). Amounts
repaid under the Bank Credit Facilities may
be reborrowed and used by the Company for
funding its North American and International
expansion plans and for general corporate
purposes, subject in each case to
satisfaction of certain covenants and
financial ratios. See "Use of Proceeds."
Concurrent Note Offering......... The Company is concurrently offering $300
million aggregate principal amount of the
Company's Senior Subordinated Notes due 2008
in transactions exempt from registration
under the Securities Act. The Note Offering
is scheduled to close concurrently with the
Equity Offering. However, the closing of the
Equity Offering is not contingent on the
closing of the Note Offering.
NYSE symbol...................... LCP
TSE symbol....................... LCX
</TABLE>
- --------
(1) Based on the number of shares outstanding as of July 29, 1998. Excludes (i)
3,404,665 shares of Common Stock that are issuable upon the exercise of
outstanding options as of July 29, 1998 (of which options for 1,620,418
shares are currently exercisable) and (ii) an aggregate of 1,784,247
additional shares of Common Stock reserved for issuance under the Company's
Stock Incentive Plan.

8
<PAGE>

THE CONCURRENT TRANSACTIONS

The Company is concurrently undertaking the following transactions, none of
which is conditioned on any of the others, which are designed to increase
stockholders' equity, reduce the Company's debt and interest expense, improve
the public float for the Common Stock, increase the Company's access to capital
markets and improve the Company's operating and financial flexibility:

. The Company is offering hereby 10 million shares of Common Stock
pursuant to the Equity Offering.

. The Company is concurrently offering in the Note Offering $300 million
aggregate principal amount of the New Notes in transactions exempt from
registration under the Securities Act. For a description of the New
Notes, see "Description of Certain Indebtedness--The New Notes." The New
Notes will be issued pursuant to an indenture to be entered into between
the Company and Bankers Trust Company (the "New Note Indenture") and
will be general unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt (as defined in the
New Note Indenture) of the Company, including indebtedness under the
Bank Credit Facilities. Proceeds from the Note Offering are expected to
be used to fund the purchase of Plitt Notes (as hereinafter defined)
tendered pursuant to the Plitt Note Repurchase. See "Risk Factors--
Equity Offering Not Conditioned on Note Offering."

. The Company's wholly owned subsidiary, Plitt Theatres, Inc. ("Plitt"),
currently has outstanding $200 million aggregate principal amount of its
10 7/8% Senior Subordinated Notes due 2004 (the "Plitt Notes"), which
the Company unconditionally guaranteed on a senior subordinated basis in
connection with closing the Combination. As a result of the consummation
of the Combination, a "change of control" provision was triggered under
the indenture under which the Plitt Notes were issued (the "Plitt
Indenture"). Accordingly, on June 15, 1998, Plitt commenced an offer to
purchase (the "Change of Control Offer") any and all of the Plitt Notes
for cash in an amount equal to 101% of the principal amount thereof,
plus accrued and unpaid interest to (but excluding) the date of
purchase. Also on June 15, 1998, Plitt commenced an at-the-market tender
offer (the "At-the-Market Offer" and, together with the Change of
Control Offer, the "Plitt Note Repurchase") for any and all outstanding
Plitt Notes. Under the terms of the At-the-Market Offer, as amended on
June 26, 1998, Plitt will purchase the outstanding Plitt Notes for cash
at a purchase price determined by reference to a fixed spread of 55
basis points over the yield to maturity of the United States Treasury
6.25% Bond due May 31, 1999 (the "Reference Security") on the second
business day preceding the expiration date of the At-the-Market Offer
(the "Rate Date"), plus accrued and unpaid interest to (but excluding)
the date of payment. In connection with the At-the-Market Offer, Plitt
also sought consents to certain proposed amendments (the "Proposed
Amendments") to the Plitt Indenture. The purpose of the Proposed
Amendments is to eliminate certain restrictive covenants contained in
the Plitt Indenture, thereby affording Plitt additional financial and
operational flexibility. The At-the-Market Offer is conditioned upon,
among other things, no event continuing that could materially impair the
benefits to the Company of the At-the-Market Offer and Consent
Solicitation at the time the At-the-Market Offer was commenced. The
Consent Solicitation terminated on July 1, 1998, with Plitt receiving
consents from holders of approximately 97% of the outstanding Plitt
Notes. The Change of Control Offer expired on July 13, 1998, with
holders of $3.0 million aggregate principal amount of the Plitt Notes
electing to receive the change of control consideration if the At-the-
Market Offer is not consummated and no holders tendering solely into the
Change of Control Offer. The At-the-Market Offer will expire on August
4, 1998, unless extended. Payment for tendered Plitt Notes is expected
to be made on August 5, 1998. Assuming that all of the Plitt Notes are
purchased by Plitt pursuant to the At-the-Market Offer and that the
yield on the Reference Security on the Rate Date is equal to such yield
on July 29, 1998 (5.345%), the total purchase price for the Plitt Notes
(the "Total Plitt Note Consideration") would be approximately $219
million plus accrued and unpaid interest.

9
<PAGE>

The following table sets forth the sources of funds to be used to effect the
foregoing transactions and the application of such funds, assuming the sale by
the Company of 10,000,000 shares of Common Stock in the Equity Offering,
consummation of the Note Offering and the repurchase of 100% of the outstanding
Plitt Notes pursuant to the At-the-Market Offer. The table below assumes Total
Plitt Note Consideration equal to 109.281% of the outstanding principal amount
thereof, based on the yield of the Reference Security at July 29, 1998. The
actual Total Plitt Note Consideration will depend upon the market conditions
prevailing at the time such transaction is priced.

SOURCES OF FUNDS USES OF FUNDS
(IN MILLIONS)
<TABLE>
<S> <C>
Equity Offering (1)..... $110
Note Offering (1)(2).... 298
----
Total................... $408
====
</TABLE>
<TABLE>
<S> <C>
Total Plitt Note Consideration..... $219
Expenses (3)....................... 15
Paydown of the Bank Credit Facili-
ties.............................. 174
----
Total.............................. $408
====
</TABLE>
- --------
(1) Before deduction of underwriting discounts and commissions and after
original issue discount.
(2) If the Note Offering is not consummated, the Company may use the proceeds
of the Equity Offering together with borrowings under the Bank Credit
Facilities to pay the Total Plitt Note Consideration, in which case the
borrowings under the Bank Credit Facilities would increase from current
levels.
(3) Expenses have been estimated at $7.4 million for the Equity Offering and
$8.0 million for the Note Offering and include underwriting discounts and
commissions.

10
<PAGE>

SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

Loews Cineplex

The following table sets forth summary historical financial data, based on
continuing operations, for the Company for the five fiscal years ended February
28, 1998 and has been derived from the Company's annual consolidated financial
statements. The following summary financial data for the three-month periods
ended May 31, 1998 and May 31, 1997 is unaudited, but, in the opinion of
management, includes all adjustments necessary for a fair presentation of the
financial position and results of operations for such periods. The results of
operations for the three months ended May 31, 1998 are not necessarily
indicative of the results to be attained for the entire year. The summary
historical financial data should be read in conjunction with the separate
consolidated financial statements and notes thereto of Loews Cineplex and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," which are included elsewhere in this Prospectus. THE FISCAL YEAR
HISTORICAL DATA AND THE UNAUDITED FINANCIAL DATA FOR THE THREE MONTHS ENDED MAY
31, 1997 DO NOT GIVE EFFECT TO THE COMBINATION OR INCLUDE HISTORICAL
INFORMATION FOR CINEPLEX ODEON. However, related historical financial data for
Cineplex Odeon are presented following such data. The unaudited financial data
as of, and for the three months ended, May 31, 1998, reflects the Combination
and includes the results of Cineplex Odeon from May 15, 1998 through May 31,
1998.

The unaudited pro forma combined income statement data give effect (i) to the
Combination ("Pro Forma") and (ii) to the Combination, the Equity Offering, the
Note Offering, the Plitt Note Repurchase and the issuance of 3,255,212
additional shares of Common Stock to Universal (the "Universal Issuance") for
no additional consideration pursuant to the anti-dilution provisions of the
Subscription Agreement (the "Transactions" and such adjusted pro forma data is
referred to as "Pro Forma, As Adjusted"), in each case as if the relevant
Transactions had occurred on March 1, 1997, by combining the results of
operations of the Company for the year ended February 28, 1998, with the
results of operations of Cineplex Odeon for the year ended December 31, 1997,
and, with respect to the three months ended May 31, 1998 by combining the
results of operations of the Company and Cineplex Odeon for the three months
ended May 31, 1998. The unaudited pro forma combined balance sheet data present
the Pro Forma, As Adjusted financial position of the Company and Cineplex Odeon
at May 31, 1998, assuming that the relevant Transactions had been consummated
as of that date. The Combination has been accounted for under the purchase
method of accounting.

The unaudited summary pro forma financial information is not necessarily
indicative of the Company's combined financial position or results of
operations that actually would have occurred if the Transactions had been
consummated on the dates indicated. In addition, they are not intended to be a
projection of results of operations that may be attained by the Company in the
future. This unaudited summary pro forma financial information should be read
in conjunction with detailed unaudited pro forma financial information and the
historical financial statements and notes thereto of the Company and Cineplex
Odeon included elsewhere in this Prospectus.

Loews Cineplex has arranged to obtain an independent appraisal of significant
assets, liabilities and business operations of Cineplex Odeon. Upon completion
of the determination of fair value, the Excess Purchase Price (as hereinafter
defined) will be allocated to specific assets and liabilities of Cineplex
Odeon. It is anticipated that there will be reductions in the carrying value
associated with certain assets, and alternatively the fair value of certain
other assets may exceed carrying value. Accordingly, the final valuation could
result in materially different amounts and allocations of Excess Purchase Price
from the amounts and allocations presented in the following unaudited pro forma
financial data, primarily between goodwill and property, equipment and
leaseholds, resulting in corresponding changes in depreciation and amortization
amounts. For every one million dollars of Excess Purchase Price allocated to
fixed assets, depreciation and amortization will increase $25,000 annually
(assuming an average 20 year service life for fixed assets and straight line
depreciation). Based on preliminary estimates of fair value related to certain
assets, additional "Excess Purchase Price" of between $100 million and $150
million could result at the conclusion of the valuation. See "Risk Factors,"
"Unaudited Pro Forma Financial Information" and "Cautionary Statement
Concerning Forward-Looking Statements."

11
<PAGE>

Loews Cineplex

<TABLE>
<CAPTION>
UNAUDITED
PRO FORMA
ACTUAL YEAR ENDED
YEAR ENDED FEBRUARY 28 OR 29, FEBRUARY 28, 1998 (1)(6)
---------------------------------------------------------- --------------------------
PRO FORMA, AS
1994 1995 1996 1997 1998 PRO FORMA ADJUSTED(2)(3)
---------- ---------- ---------- ---------- ---------- ---------- --------------
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues.... $ 244,864 $ 255,392 $ 264,585 $ 273,498 $ 296,933 $ 688,195 $ 688,195
Concessions revenues... 75,355 79,287 84,358 90,643 104,009 248,671 248,671
Other revenues......... 8,800 8,656 10,153 11,204 12,568 38,956 38,956
---------- ---------- ---------- ---------- ---------- ---------- ----------
329,019 343,335 359,096 375,345 413,510 975,822 975,822
---------- ---------- ---------- ---------- ---------- ---------- ----------
Theatre operations and
other expenses
(including concession
costs)................ 259,173 268,236 277,375 282,480 307,568 771,670 771,670
General and
administrative........ 17,449 18,753 20,282 21,447 28,917 59,230 59,230
Depreciation and
amortization.......... 37,873 38,572 41,273 44,576 52,307 104,801 105,601
Loss on sale/disposals
of theatres........... 3,491 13,420 7,249 9,951 7,787 13,683 13,683
Interest expense, net.. 9,865 10,613 15,376 14,776 14,319 50,350 47,153
Income tax
expense/(benefit)..... 4,662 (1,337) 309 2,295 2,751 2,292 2,292
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...... $ (3,494) $ (4,922) $ (2,768) $ (180) $ (139) $ (26,204) $ (23,807)
========== ========== ========== ========== ========== ========== ==========
Earnings (loss) per
common share (4):
basic................. $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.58) $ (0.41)
diluted............... $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.58) $ (0.41)
Weighted average shares
and equivalent
outstanding (4):
basic................. 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 45,347,632 58,602,844
diluted............... 20,472,807 20,472,807 20,472,807 20,472,807 20,924,890 49,038,046 62,293,258
BALANCE SHEET DATA (AT
PERIOD END):
Property, equipment and
leaseholds, net....... $ 566,043 $ 605,982 $ 602,435 $ 613,692 $ 609,152
Total assets........... $ 675,667 $ 723,108 $ 715,810 $ 721,372 $ 728,551
Total long-term debt
(including current
maturities and capital
leases)............... $ 263,791 $ 313,098 $ 298,680 $ 306,342 $ 307,616
Total liabilities...... $ 343,147 $ 395,510 $ 390,980 $ 396,722 $ 404,040
Stockholders' equity... $ 332,520 $ 327,598 $ 324,830 $ 324,650 $ 324,511
CASH FLOW STATEMENT
DATA(5):
Cash flow provided by
operating
activities........... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185
</TABLE>
- --------
(1) The excess of the purchase price over the historical net book value of the
net assets of Cineplex Odeon and the allocation of such excess has not yet
been determined.
(2) Pro forma adjustments assume the repurchase of 100% of the outstanding
Plitt Notes at a price of 109.281%. The New Notes are assumed to bear
interest at a rate of 8 7/8% per annum with a yield to maturity of 9.0% per
annum.
(3) If the Note Offering is not consummated, depreciation and amortization,
interest expense and net income (loss) would have been $104,801, $42,653,
and $(18,507), respectively. See "Unaudited Pro Forma Financial
Information."
(4) Restated in all periods presented to reflect impact of a stock dividend
declared on February 5, 1998.
(5) Due to the subjectivity inherent in the assumptions concerning the timing
and nature of the uses of cash generated by the unaudited pro forma
adjustments, cash flow from operations are not presented in the unaudited
pro forma data.
(6) The unaudited pro forma data is not necessarily indicative of the combined
results of operations of the Company that would have occurred nor is it
necessarily indicative of future operating results of the Company.

12
<PAGE>

<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS ENDED MAY 31,
--------------------------------------------------------
1997 1998(1)(7)
----------- -------------------------------------------
PRO FORMA,
ACTUAL ACTUAL(2) PRO FORMA AS ADJUSTED(3)(6)
----------- ----------- ----------- -----------------
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING
AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues..... $ 67,370 $ 83,207 $ 148,747 $ 148,747
Concessions revenues.... 23,486 31,170 56,471 56,471
Other revenues.......... 2,360 3,437 9,107 9,107
----------- ----------- ----------- -----------
93,216 117,814 214,325 214,325
----------- ----------- ----------- -----------
Theatre operations and
other expenses
(including concession
costs)................. 71,095 89,943 175,948 175,948
General and
administrative......... 5,937 7,946 15,116 15,116
Depreciation and
amortization........... 12,597 14,681 24,314 24,514
Interest expense, net... 3,622 6,106 13,225 12,426
Income tax
expense/(benefit)...... 365 (119) 258 258
----------- ----------- ----------- -----------
Net income (loss)....... $ (400) $ (743) $ (14,536) $ (13,937)
=========== =========== =========== ===========
Earnings (loss) per
common share(4):
basic.................. $ (0.02) $ (0.03) $ (0.32) $ (0.24)
diluted................ $ (0.02) $ (0.03) $ (0.32) $ (0.24)
Weighted average shares
and equivalent
outstanding(4):
basic.................. 20,472,807 24,619,805 45,366,410 58,621,622
diluted................ 20,472,807 24,984,549 48,780,043 62,035,255
BALANCE SHEET DATA (AT
PERIOD END):
Property, equipment and
leaseholds, net........ $ 1,180,376 $ 1,180,376
Total assets............ $ 1,617,287 $ 1,625,287
Total long-term debt
(including current
maturities and capital
leases)................ $ 729,841 $ 653,778
Total liabilities....... $ 1,022,019 $ 927,394
Stockholders' equity.... $ 595,268 $ 697,893
CASH FLOW STATEMENT
DATA(5):
Cash flow provided by
operating activities.. $ 9,974 $ 27,292
</TABLE>
- --------
(1) The excess of the purchase price over the historical net book value of the
net assets of Cineplex Odeon and the allocation of such excess has not yet
been determined.
(2) Includes operating results of Cineplex Odeon from May 15, 1998 through May
31, 1998.
(3) Pro forma adjustments assume the repurchase of 100% of the outstanding
Plitt Notes at a price of 109.281%. The New Notes are assumed to bear
interest at a rate of 8 7/8% per annum with a yield to maturity of 9.0% per
annum.
(4) Restated in all periods presented to reflect impact of a stock dividend
declared on February 5, 1998.
(5) Due to the subjectivity inherent in the assumptions concerning the timing
and nature of the uses of cash generated by the unaudited pro forma
adjustments, cash flow from operations is not presented in the unaudited
pro forma data.
(6) If the Note Offering is not consummated, depreciation and amortization,
interest expense, net income (loss) and total assets would have been
$24,314, $11,301, $(12,612) and $1,617,287, respectively. See "Unaudited
Pro Forma Financial Information."
(7) The unaudited quarterly pro forma data is not necessarily indicative of the
combined results of operations of the Company that would have occurred nor
is it necessarily indicative of future operating results of the Company.
Further, due to seasonality in the exhibition industry, the Company's first
fiscal quarter of 1998 is not necessarily representative of future
operating results for the remainder of the year.

13
<PAGE>

Cineplex Odeon

The following table sets forth summary historical financial data, based on
continuing operations, for Cineplex Odeon for the five fiscal years ended
December 31, 1997 and has been derived from Cineplex Odeon's annual
consolidated financial statements and notes related thereto. The summary
historical financial data should be read in conjunction with the separate
consolidated financial statements and notes thereto of Cineplex Odeon and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cineplex Odeon," which are included elsewhere in this Prospectus.
Cineplex Odeon's historical financial statements are prepared in accordance
with generally accepted accounting principles ("GAAP") in Canada, which, except
as described in footnote 17 to Cineplex Odeon's historical financial
statements, conform in all material respects with accounting principles
generally accepted in the United States.

<TABLE>
<CAPTION>
ACTUAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND
PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues..... $ 388,944 $ 384,558 $ 365,220 $ 358,973 $ 399,171
Concessions revenues.... 138,387 133,850 126,319 126,636 147,892
Other revenues.......... 18,899 22,704 21,611 24,083 26,714
----------- ----------- ----------- ----------- -----------
546,230 541,112 513,150 509,692 573,777
----------- ----------- ----------- ----------- -----------
Theatre operations and
other expenses
(including concession
costs)................. 459,759 459,258 440,747 440,685 491,443
General and
administrative......... 15,494 16,229 17,575 18,192 20,313
Depreciation and
amortization........... 41,577 40,859 42,621 43,648 45,715
Other expenses
(income)............... (1,267) 2,900 2,862 1,377 43,401
Interest expense, net... 28,033 33,641 40,983 35,482 33,900
Income taxes............ 1,665 2,398 1,269 1,390 1,072
----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ 969 $ (14,173) $ (32,907) $ (31,082) $ (62,067)
=========== =========== =========== =========== ===========
Earnings (loss) per
common share:
basic.................. $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
diluted................ $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
Weighted average shares
outstanding and
equivalent outstanding:
basic.................. 106,730,000 110,175,000 114,764,000 163,473,000 176,795,000
diluted................ 115,181,000 118,245,000 122,616,000 176,107,000 191,304,000
BALANCE SHEET DATA (AT
PERIOD END):
Property, equipment and
leaseholds, net........ $ 619,309 $ 614,741 $ 583,442 $ 579,841 $ 567,431
Total assets............ $ 697,105 $ 688,693 $ 649,643 $ 644,171 $ 635,475
Long-term debt
(including current
maturities and capital
leases)................ $ 394,571 $ 396,665 $ 399,454 $ 341,301 $ 367,240
Total liabilities....... $ 496,718 $ 492,518 $ 483,651 $ 425,591 $ 484,293
Shareholders' equity.... $ 200,387 $ 196,175 $ 165,992 $ 218,580 $ 151,182
CASH FLOW STATEMENT
DATA:
Cash flow provided by
operating activities... $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
</TABLE>

14
<PAGE>

HISTORICAL AND UNAUDITED PRO FORMA
COMBINED KEY OPERATING STATISTICS

Loews Cineplex

The table below sets forth key operating statistics for Loews Cineplex on an
actual basis and on a pro forma combined basis giving effect to the
Combination. In order to arrive at a more meaningful presentation of financial
operating data related to the productivity and performance of Loews Cineplex,
and, except as otherwise noted, all amounts below include 100% of the operating
results of the U.S. Partnerships, although Loews Cineplex has only a 50%
interest in each of the U.S. Partnerships. This information does not include
any potential benefit that may be realized from anticipated operating
efficiencies and cost savings as a result of the Combination. Management views
these statistics as key financial measures and believes that certain investors
find them useful in analyzing companies in the motion picture exhibition
industry. No measure is more meaningful than another, and management uses these
measures collectively to assess Loews Cineplex's operating performance.

<TABLE>
<CAPTION>
UNAUDITED THREE MONTHS ENDED
UNAUDITED MAY 31,
ACTUAL PRO FORMA --------------------------------
YEAR ENDED FEBRUARY 28 OR 29, YEAR ENDED 1997 1998(7)
----------------------------------------------------- FEBRUARY 28, -------- ----------------------
1994 1995 1996 1997 1998 1998(1)(7) ACTUAL ACTUAL PRO FORMA(1)
--------- --------- --------- --------- --------- ------------ -------- -------- ------------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated
at period end.... 981 1,030 950 959 1,035 2,704 986 2,794 2,728
Locations operated
at period end.... 182 180 154 143 139 439 142 450 437
Screens per
location......... 5.4 5.7 6.2 6.7 7.4 6.2 6.9 6.2 6.2
Attendance........ 52,113 52,656 53,544 53,133 58,387 143,266 12,855 16,686 31,052
Total revenues.... $ 360,828 $ 377,171 $ 400,412 $ 421,613 $ 480,437 $1,042,749 $105,553 $134,739 $231,251
Revenues per
screen(2)........ $ 367.82 $ 366.19 $ 421.49 $ 439.64 $ 464.19 $ 385.63 $ 107.60 $ 100.40 $ 84.77
Revenues per
location(2)...... $1,982.57 $2,095.39 $2,600.08 $2,948.34 $3,456.38 $ 2,375.28 $ 733.01 $ 701.77 $ 529.18
EBITDA(3)......... $ 48,906 $ 42,926 $ 54,190 $ 61,467 $ 69,238 $ 131,239 $ 16,184 $ 19,925 $ 23,261
Total EBITDA(4)... $ 57,982 $ 62,540 $ 68,177 $ 78,273 $ 86,643 $ 154,540 $ 17,841 $ 22,210 $ 25,546
Partners' share of
Total EBITDA..... $ 3,677 $ 4,287 $ 4,800 $ 4,853 $ 6,339 $ 6,339 $ 1,025 $ 1,419 $ 1,419
Attributable
EBITDA(4) ....... $ 54,305 $ 58,253 $ 63,377 $ 73,420 $ 80,304 $ 148,201 $ 16,816 $ 20,791 $ 24,127
Total EBITDA per
screen(2)........ $ 59.10 $ 60.72 $ 71.77 $ 81.62 $ 83.71 $ 57.15 $ 18.19 $ 16.55 $ 9.36
Total EBITDA per
location(2)...... $ 318.58 $ 347.44 $ 442.71 $ 547.36 $ 623.33 $ 352.03 $ 123.90 $ 115.68 $ 58.46
Total EBITDA per
patron(2)........ $ 1.11 $ 1.19 $ 1.27 $ 1.47 $ 1.48 $ 1.08 $ 1.39 $ 1.33 $ 0.82
Concessions
revenue per
patron(2)........ $ 1.63 $ 1.70 $ 1.82 $ 1.98 $ 2.14 $ 1.88 $ 2.12 $ 2.20 $ 2.00
Concessions
margin........... 80.8% 80.9% 80.9% 82.8% 84.5% 82.4% 84.2% 84.6% 83.0%
Admissions revenue
per patron(2).... $ 5.16 $ 5.34 $ 5.52 $ 5.79 $ 5.91 $ 5.14 $ 5.93 $ 5.69 $ 5.16
CASH FLOW
STATEMENT
DATA(5)(6):
Net cash provided
by operating
activities....... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
Net cash used in
investing
activities....... $ (32,098) $ (82,486) $ (34,690) $ (53,254) $ (51,439) $ (8,960) $(18,590)
Net cash
(used)/provided
by financing
activities....... $ (23,022) $ 46,359 $ (14,005) $ 5,048 $ (5,842) $ 10,449 $ 20,019
</TABLE>
- -------
(1) The information presented is derived from unaudited pro forma information
which is presented elsewhere in this Prospectus. See "Unaudited Pro Forma
Financial Information."
(2) All per screen, location and patron ratios are calculated based upon
screens and locations as of period end and include the U.S. Partnerships
except for the actual three months ended May 31, 1998 and 1997, which are
calculated using a weighted average number of screens and locations. This
is due to the inclusion of the operations of Cineplex Odeon for the last 17
days of the period ended May 31, 1998. Use of the weighted average number
of screens and locations for the remaining historical data would not result
in substantially different data from the information presented.
(3) EBITDA consists of earnings before interest, income taxes, depreciation and
amortization including equity earnings from investments in the U.S.
Partnerships. EBITDA should not be construed as an alternative to operating
income (as determined in accordance with U.S. GAAP), as a measure of the
Company's operating performance, or as an alternative to cash flows from
operating activities (as determined in accordance with U.S. GAAP), as a
measure of the Company's liquidity. EBITDA measures the amount of cash that
a company has available for investment or other uses and is used by the
Company as a measure of its performance. The Company believes that EBITDA
is an important measure, in addition to cash flow from operations,
Attributable EBITDA and Total EBITDA, in viewing its overall liquidity and
borrowing capacity.
(4) Total EBITDA consists of EBITDA plus loss on sale/disposals of theatres and
100% of the operating results of the U.S. Partnerships. Total EBITDA should
not be construed as an alternative to operating income (as determined in
accordance with U.S. GAAP), as a measure of the Company's operating
performance, or as an alternative to cash flows from operating activities
(as determined in accordance with U.S. GAAP), as a measure of the Company's
liquidity. Total EBITDA measures the amount of cash that a company has
available for investment or other uses and is used by the Company as a
measure of its performance. The Company believes that Total EBITDA is an
important measure, in addition to cash

15
<PAGE>

flow from operations, Attributable EBITDA and EBITDA, in viewing its overall
liquidity and borrowing capacity. Attributable EBITDA equals Total EBITDA
less partners' share of Total EBITDA. A reconciliation of EBITDA to Total
EBITDA and Attributable EBITDA follows:

<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
ACTUAL MAY 31,
YEAR ENDED UNAUDITED -------------------------
FEBRUARY 28 OR 29, PRO FORMA 1997 1998
--------------------------------------- YEAR ENDED ------- -----------------
1994 1995 1996 1997 1998 FEBRUARY 28, 1998 ACTUAL ACTUAL PRO FORMA
------- ------- ------- ------- ------- ----------------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA.................. $48,906 $42,926 $54,190 $61,467 $69,238 $131,239 $16,184 $19,925 $23,261
Add: Loss on
sale/disposals of
theatres*............. 3,491 13,420 7,249 9,951 7,787 13,683 -- -- --
------- ------- ------- ------- ------- -------- ------- ------- -------
Modified EBITDA,
including equity
earnings............... 52,397 56,346 61,439 71,418 77,025 144,922 16,184 19,925 23,261
Less: Equity
earnings/other,
included in EBITDA.... 1,769 2,380 2,862 2,851 3,060 3,060 393 553 553
Add: EBITDA from U.S.
Partnerships.......... 7,354 8,574 9,600 9,706 12,678 12,678 2,050 2,838 2,838
------- ------- ------- ------- ------- -------- ------- ------- -------
Total EBITDA............ 57,982 62,540 68,177 78,273 86,643 154,540 17,841 22,210 25,546
Less: Partners' share
of Total EBITDA....... 3,677 4,287 4,800 4,853 6,339 6,339 1,025 1,419 1,419
------- ------- ------- ------- ------- -------- ------- ------- -------
Attributable EBITDA..... $54,305 $58,253 $63,377 $73,420 $80,304 $148,201 $16,816 $20,791 $24,127
======= ======= ======= ======= ======= ======== ======= ======= =======
</TABLE>
-------
* Primarily represents (i) the noncash writeoff of the net book value of the
theatres disposed of and (ii) provisions for net disposal costs (where
applicable) related to the disposition of such theatres.
(5) Cash flow statement data includes cash flows from long term investments in
the U.S. Partnerships to the extent of the Company's equity interest.
(6) Due to the subjectivity inherent in the assumptions concerning the timing
and nature of the uses of cash generated by the unaudited pro forma
adjustments, cash flow from operating, investing and financing activities
are not presented in the unaudited pro forma data.
(7) The unaudited pro forma data is not necessarily indicative of the combined
results of operations of the Company that would have occurred nor is it
necessarily indicative of future operating results of the Company.
Further, due to seasonality in the exhibition industry, the Company's
first fiscal quarter of 1998 is not necessarily representative of future
operating results for the remainder of the year.

16
<PAGE>

Cineplex Odeon

The table below sets forth key operating statistics, based on continuing
operations, for Cineplex Odeon as of, and for, each of the periods indicated.
Management views these statistics as key financial measures and believes that
certain investors find them useful in analyzing companies in the motion picture
exhibition industry. No measure is more meaningful than another, and management
uses these measures collectively to assess Cineplex Odeon's operating
performance.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION,
PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at
period end............. 1,622 1,638 1,512 1,549 1,729
Locations operated at
period end............. 363 360 325 316 315
Screens per location.... 4.5 4.6 4.7 4.9 5.5
Attendance.............. 88,225 86,082 81,203 78,356 87,321
Total revenues.......... $ 546,230 $ 541,112 $ 513,150 $ 509,692 $ 573,777
Revenues per screen(1).. $ 336.76 $ 330.35 $ 339.38 $ 329.05 $ 331.85
Revenues per
location(1)............ $1,504.77 $1,503.09 $1,578.92 $1,612.95 $1,812.51
EBITDA(2)............... $ 72,244 $ 62,725 $ 51,966 $ 49,438 $ 18,620
Modified EBITDA(3)...... $ 70,977 $ 65,625 $ 54,828 $ 50,815 $ 62,021
Modified EBITDA per
screen(1).............. $ 43.76 $ 40.06 $ 36.26 $ 32.81 $ 35.87
Modified EBITDA per
location(1)............ $ 195.53 $ 182.29 $ 168.70 $ 160.81 $ 196.89
Modified EBITDA per
patron(1).............. $ 0.80 $ 0.76 $ 0.68 $ 0.65 $ 0.71
Concessions revenue per
patron(4).............. $ 1.57 $ 1.55 $ 1.56 $ 1.62 $ 1.69
Concessions margin...... 85.9% 83.8% 82.6% 82.3% 80.6%
Admissions revenue per
patron(4).............. $ 4.41 $ 4.47 $ 4.50 $ 4.58 $ 4.57
CASH FLOW STATEMENT
DATA:
Cash provided by (used
for) operating
activities............. $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
Cash used for investment
activities............. $ (7,264) $ (41,049) $ (7,714) $ (35,961) $ (58,697)
Cash provided by (used
for) financing
activities............. $ (30,445) $ 9,897 $ 4,245 $ 24,659 $ 28,704
</TABLE>
- --------
(1) All per screen, location and patron ratios are calculated as of period end
and include screens and locations in which Cineplex Odeon has a partnership
interest. Revenues, EBITDA and Modified EBITDA, however, reflect only
Cineplex Odeon's proportionate share of the revenues, EBITDA and Modified
EBITDA of such partnerships, equal to the respective percentage ownership
interests of Cineplex Odeon in such partnerships.
(2) EBITDA consists of earnings before interest, taxes, depreciation and
amortization. EBITDA should not be construed as an alternative to operating
income (as determined in accordance with Canadian GAAP), as a measure of
Cineplex Odeon's operating performance, or as an alternative to cash flow
from operating activities (as determined in accordance with Canadian GAAP),
as a measure of Cineplex Odeon's liquidity. EBITDA measures the amount of
cash that a company has available for investment or other uses and was used
by Cineplex Odeon as a measure of its performance. Cineplex Odeon believes
that EBITDA is an important measure, in addition to cash flow from
operations and Modified EBITDA, in viewing its overall liquidity and
borrowing capacity. EBITDA measures the amount of cash that a company has
available for investment or other uses and is used by the Cineplex Odeon as
a measure of its performance.
(3) Modified EBITDA is EBITDA after eliminating the impact of other expenses
(income). Modified EBITDA should not be construed as an alternative to
operating income (as determined in accordance with Canadian GAAP), as a
measure of Cineplex Odeon's operating performance, or as an alternative to
cash flow from operating activities (as determined in accordance with
Canadian GAAP), as a measure of Cineplex Odeon's liquidity. Modified EBITDA
measures the amount of cash that a company has available for investment or
other uses and was used by Cineplex Odeon as a measure of its performance.
Cineplex Odeon believes that Modified EBITDA is an important measure, in
addition to cash flow from operations and EBITDA, in viewing its overall
liquidity and borrowing capacity. A reconciliation of EBITDA to Modified
EBITDA follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA ............................. $72,244 $62,725 $51,966 $49,438 $18,620
Other expenses (income)............. (1,267) 2,900 2,862 1,377 43,401*
------- ------- ------- ------- -------
Modified EBITDA**................... $70,977 $65,625 $54,828 $50,815 $62,021
======= ======= ======= ======= =======
</TABLE>
--------
* Includes $37.5 million representing unusual and nonrecurring loss on
Cineplex Odeon theatres to be closed as part of the contractual
obligations related to the Combination. This charge was recorded in the
fourth quarter of 1997.
** In the case of Cineplex Odeon, Modified EBITDA is substantially
comparable to Total EBITDA.

(4) Admissions and concessions revenue per patron is affected by the fact that,
during the periods reflected, a significant portion of Cineplex Odeon's
revenues was generated in Canadian dollars and for purposes of financial
reporting has been converted to U.S. dollars.

17
<PAGE>

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following risk factors
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements. These statements are subject to a number of risks
and uncertainties, certain of which are beyond the Company's control. See
"Cautionary Statement Concerning Forward-Looking Statements" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

HISTORICAL NET LOSSES

Each of the Company and Cineplex Odeon reported net losses during the three
fiscal years ended December 31, 1997, in the case of Cineplex Odeon, and
February 28, 1998, in the case of the Company, although each company had
positive cash flow from operations during such periods. Historically, the
respective companies used such cash flow to fund, among other things,
investments in theatre facilities and to service outstanding debt. Among the
principal assumptions made by Loews Cineplex in analyzing the Combination were
that (i) the cash flow of Loews Cineplex would increase compared to the
separate results of Cineplex Odeon and Loews Theatres due to certain cost
savings and revenue enhancements anticipated to result from the Combination,
(ii) the Company would achieve such cost savings and revenue enhancements
through, among other things, the reduction of certain overhead expenses of the
two companies and (iii) the Company would benefit from the complementary
skills and expertise of the respective managements of Loews Theatres and
Cineplex Odeon. There can be no assurance, however, as to the amount of cash
flow that will be generated by the Company and available to fund expansion
projects and service debt of the Company or that the other assumed benefits of
the Combination will be realized. In addition, there can be no assurance that
the Company will not continue to have net losses. Moreover, under U.S. GAAP,
the accounting for the Combination follows the purchase method of accounting.
The valuations and other studies required to determine the allocation of
Excess Purchase Price to the net assets acquired (e.g., fixed assets, goodwill
and other intangibles) have not yet been performed. Accordingly, the final
valuation could result in a materially different amount of Excess Purchase
Price and a materially different allocation of the purchase price among the
purchased assets from the amounts and allocations presented in the pro forma
financial statements included elsewhere herein. The final valuation, and the
allocations and amortization of goodwill resulting therefrom, could materially
affect reported results. See "Unaudited Pro Forma Financial Information."

RISKS OF INTEGRATION

The Combination involves the integration of two theatre circuits that
previously operated independently. No assurance can be given that Loews
Cineplex will be able to integrate the respective operations of the Loews
Theatres and Cineplex Odeon theatre circuits without encountering difficulties
or experiencing the loss of key personnel or that the benefits expected from
such integration will be realized. The integration of two theatre circuits
across geographically dispersed operations can create the risk of interruption
of, or loss of momentum in, the activities of Loews Cineplex's operations,
which could have an adverse effect on Loews Cineplex's business and financial
condition. Furthermore, there can be no certainty that the Combination will
not adversely affect the relationships with key suppliers of either Cineplex
Odeon or Loews Theatres, which also could have an adverse effect on Loews
Cineplex's business and financial condition.

DEPENDENCE UPON MOTION PICTURE PRODUCTION AND PERFORMANCE; SEASONALITY

The ability of the Company to operate successfully depends upon a number of
factors, the most important of which is the availability of suitable motion
pictures for exhibition in its theatres and the commercial success of such
motion pictures in its markets. Accordingly, the ultimate success of the
Company's operations depends on, among other things, the quality, quantity,
availability and acceptance by movie-goers of the films available for
commercial exhibition. Any disruption in the production or distribution of
motion pictures and/or poor performance of motion pictures could have a
material adverse effect on the Company's business and financial condition. In
addition, theatre admission and concession revenues are subject to seasonal
fluctuations that affect all motion picture exhibitors. These fluctuations
result principally from the distribution practices of the major motion picture
studios which have historically concentrated on the release of a
disproportionately large number

18
<PAGE>

of motion pictures during the summer and holiday seasons. This practice has in
the past resulted, and may in the future be expected to result, in variations
in the Company's results from period to period during a fiscal year.

SUBSTANTIAL LEVERAGE AND ABILITY TO SERVICE DEBT

Loews Cineplex is highly leveraged. At May 31, 1998, the Company's total
long-term debt (including capital leases and the current portion of long-term
debt) was approximately $730 million (representing approximately 55.1% of
total capitalization) and, on a pro forma basis, after giving effect to the
Transactions, would have been approximately $654 million (representing
approximately 48.4% of total capitalization).

The degree to which Loews Cineplex is leveraged could have important
consequences to the Company and its stockholders, including: (i) that a
substantial portion of the cash flow from operations of Loews Cineplex and its
subsidiaries will be required to be dedicated to Loews Cineplex's interest and
principal obligations with respect to its indebtedness and may not be
available to Loews Cineplex and its subsidiaries for operations, working
capital, capital expenditures, expansion, acquisitions, general corporate or
other purposes; (ii) the Company's ability to obtain additional financing in
the future for working capital, capital expenditures, expansion, acquisitions,
general corporate or other purposes may be impaired; (iii) the Company may be
more highly leveraged than certain other motion picture exhibitors, which may
place it at a competitive disadvantage; (iv) the Company's flexibility in
planning for, or reacting to, changes in its business and industry may be
limited; and (v) the Company's degree of leverage may make it more vulnerable
in the event of a downturn in its business or industry or the economy in
general. In addition, the Bank Credit Facilities contain, and the New Note
Indenture will contain, financial and other restrictive covenants that will
limit the ability of the Company to, among other things, borrow additional
funds, incur liens on its assets and pay dividends on its capital stock.
Failure by the Company to comply with such covenants could result in an event
of default which, if not cured or waived, could have a material adverse effect
on the Company. See "Description of Certain Indebtedness."

The Company's ability to make scheduled principal payments on, or to pay
interest on, or to refinance its indebtedness depends on its future
performance which, to a certain extent, is subject to general economic,
financial, competitive, legislative, regulatory and other factors beyond its
control. Based upon the Company's current level of operations and anticipated
growth, the management of the Company believes, based on current
circumstances, that the Company's available cash flow, together with available
borrowing capacity under the Bank Credit Facilities and other sources of
liquidity, will be adequate to meet the Company's anticipated future
requirements for working capital, letters of credit, capital expenditures and
scheduled payments of interest and principal on amounts due under the Bank
Credit Facilities, the New Notes and other indebtedness of the Company.
However, there can be no assurance that the Company's businesses will generate
sufficient cash flow from operations or that future financing will be
available in an amount sufficient to enable the Company to service its
indebtedness or to make necessary capital expenditures, or that any
refinancing would be available, or available on commercially reasonable terms.
Further, depending on the timing, amount and structure of any future
acquisitions and the availability of funds for acquisitions under the Bank
Credit Facilities, the Company may need to raise additional capital to fund
the acquisitions of additional businesses. In the event that Loews Cineplex
and its subsidiaries are unable to meet their obligations with respect to
existing indebtedness, they may be required to refinance or restructure all or
a portion of such indebtedness, sell material assets or operations, reduce or
delay capital expenditures or seek to raise additional debt or equity capital.
There can be no assurance that Loews Cineplex and its subsidiaries would be
able to effect any such refinancing or restructuring or sell assets or obtain
any such additional capital on satisfactory terms, or that any of the proceeds
therefrom would be sufficient to enable the Company to service its
indebtedness or to fund its other liquidity needs.

EQUITY OFFERING NOT CONDITIONED ON NOTE OFFERING

Although the Note Offering is scheduled to close concurrently with the
Equity Offering, the Equity Offering is not conditioned on the closing of the
Note Offering. Accordingly, the Equity Offering and the Plitt Note Repurchase
may be completed without the Note Offering. If the Note Offering is not
consummated, the Company may use the proceeds of the Equity Offering together
with borrowings under the Bank Credit Facilities to consummate the At-the-
Market Offer, which would reduce the Company's ability to borrow for other
purposes (including for acquisitions, theatre construction and renovation and
funding of the Company's North American and international expansion plans).

19
<PAGE>

COMPETITION

The entertainment business generally, and the theatrical motion picture
exhibition business in particular, are highly competitive. The Company's
operations are subject to varying degrees of competition with other theatre
circuits with respect to, among other things, licensing films, attracting
patrons, obtaining new theatre sites and acquiring theatre circuits. In
addition, the Company's theatres face competition from alternative motion
picture exhibition delivery systems, including video cassette, laser disk and
digital video disk sales and rentals, satellite television, pay-per-view, pay
television, other basic cable television services, broadcast network and
syndicated television, the world-wide web and the Internet and other media.
There can be no assurance that these alternative media and other forms of home
entertainment that may become available in the future will not materially
adversely affect the business or financial condition of the Company. The
Company will also face competition from other forms of entertainment which
compete for the public's leisure time and disposable income.

UNCERTAINTIES RELATING TO FUTURE EXPANSION PLANS

Historically, both Loews Theatres and Cineplex Odeon greatly expanded their
operations through existing theatre acquisitions and developing new theatres.
The Company intends to continue to pursue a strategy of expansion involving
the development of new theatres, including in foreign markets, and
acquisitions of existing theatres and theatre circuits. Acquisitions generally
would be made to enter into a new area or to expand the Company's presence in
an existing area. There is significant competition for potential site
locations and existing theatre and theatre circuit acquisition and expansion
opportunities. There can be no assurance that the Company will be able to
develop and/or acquire suitable theatres in the future or that its expansion
strategy will result in improvements to its business, financial condition or
profitability. Furthermore, the Company's expansion program may require funds
in addition to internally generated funds and funds provided by the Equity
Offering, the Note Offering and the Bank Credit Facilities. Although the
Company believes that internally generated funds and the funds provided by the
net proceeds of the Equity Offering and borrowings under the Bank Credit
Facilities would be adequate to pay the Total Plitt Note Consideration and
fund the Company's capital and expansion plans for the foreseeable future,
even without the proceeds of the Note Offering, there can be no assurances
that the Company will not have additional financing requirements in the future
or sources of such funds will be available to the Company on acceptable terms.

Development of new movie theatres from concept through construction to
opening is a form of commercial real estate development and is subject to many
of the same risks as commercial real estate development. Loews Cineplex
selectively screens potential development properties to locate new theatres in
areas where attendance levels are expected to be sufficient to provide the
Company with a reasonable return on its investment. Unanticipated costs may be
incurred throughout the development process due to changes in design and/or
increases in building material and construction labor costs. In most areas in
which the Company is likely to develop new theatre facilities or expand
existing facilities, the development and construction of theatres are subject
to state and local planning, zoning and construction regulations, and the
Company may have to obtain approvals and/or permits from planning and zoning
boards and construction officials. In addition, local residents may oppose the
building of a new theatre due to their perception of its impact on the
community. If design or construction costs increase beyond anticipated levels,
or necessary local approvals or permits are delayed, denied or challenged, the
Company might be unable to pursue or complete certain development projects or
the development costs may be significantly increased.

RISK OF FOREIGN OPERATIONS

Foreign operations are generally subject to various risks that are not
present, or not present to the same extent, in domestic operations, including
without limitation restrictions on repatriation of funds, unexpected changes
in tariffs and other trade barriers, difficulties in staffing and managing
foreign operations, changes in foreign government regulations, inflation,
fluctuations in interest rates and currency exchange rates, price, wage and
exchange controls, labor disputes, reduced protection for intellectual
property rights in some countries, licensing requirements, seasonal reductions
in business activity, potentially adverse tax consequences and civil
disturbances and uncertain political and economic environments as well as
risks of war and other risks that may limit or disrupt motion picture
exhibition and markets, restrict the movement of funds or result in the
deprivation

20
<PAGE>

of contract rights or the taking of property by nationalization or
appropriation without fair compensation. There can be no assurance that one or
more of such factors will not have a material adverse effect on the Company's
anticipated future operations in foreign markets and, consequently, on the
Company's business and results of operations. Loews Cineplex's management has
only limited experience in conducting the motion picture exhibition business
in international markets and, accordingly, there can be no assurance that the
Company's future operations in foreign markets will be successful.

CONTROL BY SIGNIFICANT STOCKHOLDERS; ANTI-TAKEOVER PROVISIONS; POTENTIAL
CONFLICTS OF INTEREST

The Company is controlled by SPE, Universal and the Claridge Group, who own,
respectively, 51.1% (49.9% of the voting Common Stock), 26.0% (26.6% of the
voting Common Stock) and 9.6% (9.8% of the voting Common Stock) of the capital
stock of Loews Cineplex. The Stockholders in the aggregate own approximately
86.7% of the outstanding Loews Cineplex Stock (approximately 72.5% after
giving effect to the Equity Offering) and have agreed to vote their respective
Common Stock in connection with the election of Loews Cineplex directors and
certain other matters in accordance with the terms of the Stockholders
Agreement (as defined herein). As a result, the Stockholders will have the
effective ability to control the management and operations of the Company. All
of the directors of Loews Cineplex have been, and will continue to be,
designated by SPE, Universal or the Claridge Group, other than (i) Independent
Directors (as hereinafter defined) and (ii) the directors who are the two most
senior executives of the Company (the "Management Directors"). Pursuant to the
terms of the Amended and Restated Stockholders Agreement dated as of September
30, 1997 by and among the Company, SPE, Universal and the Claridge Group (the
"Stockholders Agreement"), certain actions by the Company will require the
prior consent of SPE and Universal including, without limitation, mergers and
other business combinations involving the Company and third parties. See "The
Stockholders Agreement."

Pursuant to the terms of the Subscription Agreement, Universal has the right
to receive additional shares of Common Stock in respect of the shares of
Common Stock it purchased pursuant to the Subscription Agreement for no
additional consideration if the Company issues additional shares of Common
Stock under certain circumstances for less than $19.0891 per share, subject to
adjustment as set forth therein. These anti-dilution rights only apply to the
first $100 million of additional issuances. Accordingly, upon consummation of
the Equity Offering, the Company will be obligated to issue an additional
3,255,212 shares of Common Stock to Universal for no additional consideration.
After giving effect to such issuance, and to the consummation of the Equity
Offering, Universal would own 25.6% and 95.2% of the outstanding Common Stock
and the non-voting shares of Common Stock, respectively. See "Certain
Relationships and Related Transactions." Such issuance of Common Stock to
Universal for no additional consideration will be dilutive to shareholders of
the Company. See "Dilution." In addition, SPE and Universal are entitled,
under certain circumstances, to purchase additional shares of Common Stock to
maintain their relative ownership interests in the Company upon the issuance
by the Company of additional shares of capital stock. These rights do not
apply with respect to the Equity Offering. See "The Stockholders Agreement--
Equity Purchase Rights."

In addition, certain executives or affiliates of the Company have interests
that may be in conflict with the interests of the Company's stockholders. See
"Certain Relationships and Related Transactions."

The Company's Amended and Restated Certificate of Incorporation (the
Company's "Charter") provides, among other things, that a merger or
consolidation in which the Company is a constituent corporation, and any sale
or other disposition of all or substantially all of the assets of the Company,
generally will require the affirmative vote of the holders of at least 80% of
the outstanding Common Stock if SPE or Universal then beneficially owns a
minimum amount of the Company's equity securities (which percentage shall be
reduced to 66 2/3% if such transaction is approved by at least 14 members of
the Company's Board of Directors). As a result, so long as any stockholder or
combination of stockholders owns more than 20% of the outstanding Common
Stock, it or they may prevent efforts to obtain control of the Company and
therefore deprive the other stockholders of the Company of opportunities to
sell Common Stock at prices higher than those prevailing in the market. The
Company's Charter also contains other provisions that may have an anti-
takeover effect, including provisions relating to the ability of holders of
Loews Cineplex capital stock to call meetings of stockholders or

21
<PAGE>

to remove members of the Company's Board of Directors, to take action by
written consent or to adopt, repeal or amend the Company's By-laws or any
provisions of the Company's Charter. See "The Stockholders Agreement" and
"Description of Capital Stock."

SPE and certain of its affiliates, and Universal and certain of its
affiliates, currently produce and distribute motion pictures and license them
to, among others, Loews Cineplex. While the management of Loews Cineplex
anticipates that it will conduct business with SPE and Universal on terms no
less favorable to Loews Cineplex than if such relationships were at arm's-
length, SPE and Universal are major stockholders of the Company, and the
interests of SPE and its affiliates and Universal and its affiliates may
conflict from time to time with the interest of the Company. An affiliate of
Universal operates a theatre circuit that competes with the Company's
international operations. In addition, businesses conducted by SPE or
Universal, or by their affiliates, may compete with the business of the
Company in the future.

GOVERNMENTAL REGULATION

In the United States, the distribution of motion pictures is in large part
regulated by federal and state antitrust laws and has been the subject of
numerous antitrust cases. The most significant of these cases is U.S. v.
Paramount Pictures Inc., et al., which was affirmed by the U.S. Supreme Court
in 1950. The consent decrees resulting from the Paramount case bind certain
major film distributors and require the films of such distributors to be
offered and licensed to exhibitors on a film-by-film and theatre-by-theatre
basis. Consequently, Loews Cineplex will not be able to assure itself of a
supply of motion pictures by entering into long-term arrangements with major
distributors, but must compete for its licenses on a film-by-film and theatre-
by-theatre basis. See "Business--Legal Proceedings."

The Americans with Disabilities Act (the "ADA") and certain state statutes
and local ordinances, among other things, require that places of public
accommodation, including theatres (both existing and newly constructed), be
accessible to, and that assistive listening devices be available for use by,
patrons with disabilities. The ADA may require that certain modifications be
made to existing theatres in order to make such theatres accessible to certain
theatre patrons and employees who are disabled. The ADA requires that theatres
be constructed to permit persons with disabilities full use of a theatre and
its facilities and reasonable access to work stations. Loews Cineplex has
established a program to review and evaluate its U.S. theatres and to make
changes that may be required by law. Although Loews Cineplex believes that the
cost of complying with the ADA will not have a material adverse effect on its
financial condition, the Company is unable to predict the extent to which the
ADA or any future laws or regulations regarding the needs of the disabled will
impact the Company. See "Business--Legal Proceedings."

SHARES ELIGIBLE FOR FUTURE SALE; DILUTION

On July 30, 1998, the Company had outstanding 44,080,948 shares of Common
Stock and 1,286,486 shares of non-voting capital stock that are convertible
into Common Stock under certain circumstances. Of these, approximately
6,131,071 shares of Common Stock are freely transferable by persons other than
affiliates of Loews Cineplex without restriction or further registration under
the Securities Act. Upon consummation of the Equity Offering, the Stockholders
will own 42,407,575 shares of Common Stock and all of the outstanding Loews
Cineplex non-voting capital stock and will generally be eligible for sale
without registration under the U.S. Securities Act in accordance with Rule 144
promulgated thereunder and in private offerings, subject to certain
limitations and restrictions set forth in the Stockholders Agreement. In
addition, pursuant to the Stockholders Agreement, the Stockholders have
certain rights to "demand" Loews Cineplex to register their securities for
sale under the Securities Act and/or file a prospectus under Canadian
provincial securities laws and, in the event that the Company proposes to
register any Common Stock under the U.S. Securities Act and/or file a
prospectus under Canadian provincial securities laws, to include their
securities in such registrations and/or prospectus, subject to certain
limitations and exceptions. See "The Stockholders Agreement." Sales of Common

22
<PAGE>

Stock by the Stockholders, or the perception that such sales could occur,
could adversely affect prevailing market prices for Common Stock and the
ability of Loews Cineplex to raise capital by issuing its equity securities.
See "Shares Eligible for Future Sale."

Pursuant to the terms of the Stockholders Agreement, SPE and Universal have
the right, under certain circumstances, to purchase additional shares of
Common Stock to maintain their relative ownership interests in the Company
upon the issuance by the Company of additional shares of capital stock. See
"The Stockholders Agreement." The effect of SPE's and Universal's equity
purchase rights described above may be to dilute the ownership interests of
the stockholders of Loews Cineplex. See "Dilution" and "Certain Relationships
and Related Transactions."

POTENTIAL VOLATILITY OF STOCK PRICE

Prior to the closing of the Combination on May 14, 1998, there was no public
market for the Common Stock. Average daily trading volume for the Common Stock
as reported on the NYSE for the first quarter of 1998 was 69,650 shares.
Despite the increase in the number of shares of Common Stock to be publicly
held as a result of the Equity Offering, there is no assurance a more active
trading market will develop. In addition, the market price of Common Stock
could be subject to wide fluctuations in response to variations in Loews
Cineplex's quarterly results (see "--Dependence upon Motion Picture Production
and Performance; Seasonality" above), announcements of technological
innovations or the development of new products with respect to motion picture
exhibition delivery systems by Loews Cineplex and its competitors, changes in
film licensing prices or other terms by the major motion picture studios and
distributors, general changes in the economies of the United States or Canada,
changes in earnings estimates by securities analysts, or other events or
factors. In addition, the U.S. and Canadian stock markets have experienced
extreme price and volume fluctuations that have affected the market prices of
companies that have often been unrelated to the operating performance of such
companies. These specific factors relating to Loews Cineplex and such broad
market fluctuations may materially adversely affect the market price of the
Common Stock.

RESTRICTIONS IMPOSED BY BANK CREDIT FACILITIES; VARIABLE INTEREST RATES

The Bank Credit Facilities and the Plitt Indenture (if the Proposed
Amendments do not become operative) impose, and the New Note Indenture will,
if the New Notes are issued, impose certain financial and other covenants on
Loews Cineplex, including the maintenance of certain financial tests, all as
described under the heading "Description of Certain Indebtedness." These
covenants could limit the operating flexibility of Loews Cineplex. In
addition, the Bank Credit Facilities prohibit the Company from declaring,
paying or making any dividend or distribution on the Common Stock other than
dividends or distributions payable in shares of the Company's capital stock,
and the Plitt Indenture (if the requisite consents to the Proposed Amendments
are not obtained) and the New Note Indenture restrict the declaration or
payment of dividends unless certain financial tests are satisfied. A failure
to make any required payment under the financing arrangements or to comply
with any of the financial or operating covenants included in the financing
arrangements would generally result in an event of default thereunder,
permitting the lenders to accelerate the maturity of the indebtedness under
certain agreements, including, without limitation, the Bank Credit Facilities
and to foreclose upon the collateral securing such indebtedness. Under any
such circumstances, there can be no assurance that Loews Cineplex would have
sufficient assets to satisfy all of such obligations.

Interest rates payable by Loews Cineplex under the Bank Credit Facilities
are variable based on changes in certain market interest rates and the
maintenance of certain financial performance ratios. If such interest rates
were to rise substantially, the increased interest payments payable by the
Company could have an adverse effect on its financial condition.

23
<PAGE>

THE CONCURRENT TRANSACTIONS

The Company is concurrently undertaking the following transactions, none of
which is conditioned on any of the others, which are designed to increase
stockholders' equity, reduce the Company's debt and interest expense, improve
the public float for the Common Stock, increase the Company's access to
capital markets and improve the Company's operating and financial flexibility.

The Equity Offering. Pursuant to the Equity Offering being made hereby, the
Company is offering 10 million shares of Common Stock.

The Note Offering. The Company is concurrently offering in the Note Offering
$300 million aggregate principal amount of the New Notes in transactions
exempt from registration under the Securities Act. The New Notes will be
issued pursuant to the New Note Indenture and will be general unsecured
obligations of the Company, ranking subordinate in right of payment to all
Senior Debt (as defined in the New Note Indenture) of the Company, including
indebtedness under the Bank Credit Facilities. Proceeds from the Note Offering
are expected to be used to fund the purchase of the Plitt Notes tendered
pursuant to the Plitt Note Repurchase. See "Risk Factors--Equity Offering Not
Conditioned on Note Offering."

The Plitt Note Repurchase. As a result of the consummation of the
Combination, a "change of control" provision was triggered under the Plitt
Indenture. Accordingly, on June 15, 1998, Plitt commenced the Change of
Control Offer to purchase any and all of the Plitt Notes for cash in an amount
equal to 101% of the principal amount thereof, plus accrued and unpaid
interest to (but excluding) the date of purchase. Also on June 15, 1998, Plitt
commenced the At-the-Market Offer for any and all outstanding Plitt Notes.
Under the terms of the At-the-Market Offer, as amended on June 26, 1998, Plitt
will purchase the outstanding Plitt Notes for cash at a purchase price
determined by reference to a fixed spread of 55 basis points over the yield to
maturity of the Reference Security on the Rate Date, plus accrued and unpaid
interest to (but excluding) the date of payment. In connection with the At-
the-Market Offer, Plitt also sought consents to the Proposed Amendments. The
purpose of the Proposed Amendments is to eliminate certain restrictive
covenants contained in the Plitt Indenture, thereby affording Plitt additional
financial and operational flexibility. The At-the-Market Offer is conditioned
upon, among other things, no event continuing that could materially impair the
benefits to the Company of the At-the-Market Offer and Consent Solicitation at
the time the At-the-Market Offer was commenced. The Consent Solicitation
terminated on July 1, 1998, with Plitt receiving consents from holders of
approximately 97% of the outstanding Plitt Notes. The Change of Control Offer
expired on July 13, 1998, with holders of $3.0 million aggregate principal
amount of the Plitt Notes electing to receive the change of control
consideration if the At-the-Market Offer is not consummated and no holders
tendering solely into the Change of Control Offer. The At-the-Market Offer
will expire on August 4, 1998, unless extended. Payment for tendered Plitt
Notes is expected to be made on August 5, 1998. Assuming that all of the Plitt
Notes are purchased by Plitt pursuant to the At-the-Market Offer and that the
yield of the Reference Security on the Rate Date is equal to such yield on
July 29, 1998 (5.345%), the Total Plitt Note Consideration would be
approximately $219 million plus accrued and unpaid interest.

The following table sets forth the sources of funds to be used to effect the
foregoing transactions and the application of such funds, assuming the sale by
the Company of 10,000,000 shares of Common Stock in the Equity Offering,
consummation of the Note Offering and the repurchase of 100% of the
outstanding Plitt Notes pursuant to the At-the-Market Offer. The table below
assumes Total Plitt Note Consideration equal to 109.281% of the outstanding
principal amount thereof, based on the yield of the Reference Security at July
29, 1998. The actual Total Plitt Note Consideration will depend upon the
market conditions prevailing at the time such transaction is priced.

24
<PAGE>

- --------
(1) Before deduction of underwriting discounts and commissions and after
original issue discount.
(2) If the Note Offering is not consummated, the Company may use the proceeds
of the Equity Offering together with borrowings under the Bank Credit
Facilities to pay the Total Plitt Note Consideration, in which case the
borrowings under the Bank Credit Facilities would increase from current
levels.
(3) Expenses have been estimated at $7.4 million for the Equity Offering and
$8.0 million for the Note Offering and include underwriting discounts and
commissions.

USE OF PROCEEDS

The net proceeds to be received by the Company from the sale of the
10,000,000 shares of Common Stock in the Equity Offering after deducting the
underwriting discounts and estimated expenses of the Equity Offering are
estimated to be approximately $102.6 million ($118.1 million if the
Underwriters' over-allotment option is exercised in full). The Company intends
to use the estimated net proceeds to reduce the outstanding balance on the
Bank Credit Facilities, which was $486 million as of July 30, 1998. Amounts
repaid under the Bank Credit Facilities may be reborrowed and are available to
the Company for the funding of its North American and international expansion
plans and for general corporate purposes, subject to satisfaction of certain
covenants and financial ratios. Previous borrowings under the Bank Credit
Facilities were used (i) to repay $153.9 million of outstanding indebtedness
of Cineplex Odeon upon consummation of the Combination, (ii) to fund payments
to SPE totaling $394.8 million (comprising repayment of $299.5 million in
outstanding indebtedness, a dividend of $80.1 million and $15.2 million in
consideration for transferred assets) upon consummation of the Combination,
(iii) to pay $1 million in expenses related to the Combination, and (iv) to
pay approximately $6 million in fees related to the Bank Credit Facilities.
Under the Amended and Restated Master Agreement relating to the Combination,
payments owed by the Company to SPE are subject to specified post-closing
audit procedures, which have not been completed. The Company estimates that
upon completion of the procedures it may be required to pay approximately $15
million. Borrowings under the Bank Credit Facilities currently bear interest
at an average rate of 8.0% per annum based on the administrative agent's base
rate and/or the Eurodollar rate plus a specified margin, as the case may be.
See "Description of Certain Indebtedness--Credit Agreement."

25
<PAGE>

PRICE RANGE OF COMMON STOCK

The Company's Common Stock has been listed on the NYSE under the symbol
"LCP" and on the TSE under the symbol "LCX" since May 15, 1998 (the day
following the closing of the Combination). The prices set forth below reflect
the high and low sales prices of the Common Stock during the periods
indicated, as reported in the consolidated transaction reporting systems of
the NYSE and the TSE:

FISCAL YEAR ENDED FEBRUARY 28, 1999

<TABLE>
<CAPTION>
HIGH LOW
NYSE: --------- ---
<S> <C> <C>
First Quarter (from May 15, 1998)........................... $20 $15 3/8
Second Quarter (through July 30, 1998)...................... 15 15/16 10 7/8
<CAPTION>
HIGH LOW
TSE (CDN$): --------- ---
<S> <C> <C>
First Quarter (from May 15, 1998)........................... $29 $22 5/32
Second Quarter (through July 30, 1998)...................... 22 51/64 16 19/32
</TABLE>

On July 30, 1998, the last reported per share sale price of Common Stock as
reported by the NYSE was $11.00 per share and the last reported per share
sales price of the Common Stock as reported by the TSE was Cdn$16.59 per
share. There were approximately 1,701 holders of record of the Common Stock as
of July 15, 1998.

DIVIDEND POLICY

Since the consummation of the Combination on May 14, 1998, the Company has
not paid any dividends on its Common Stock and does not anticipate paying any
cash dividends on the Common Stock in the foreseeable future. In addition, the
Bank Credit Facilities prohibit the Company from declaring, paying or making
any dividend or distribution on the Common Stock other than dividends or
distributions payable in shares of the Company's capital stock, and the Plitt
Indenture (if the Proposed Amendments do not become operative) and the New
Notes Indenture will restrict the declaration or payment of dividends other
than dividends on distributions payable in shares of the Company's capital
stock unless certain financial tests are satisfied. Whether the Company will
pay dividends in the future and the amount thereof will be determined by the
Company's Board of Directors and will depend on its future earnings, capital
requirements, financial condition and other relevant factors. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources (after the Consummation of the
Combination)" and "Description of Certain Indebtedness." It is expected that
all of the earnings, if any, of the Company will be retained to support
current operations and to fund acquisitions and development of new theatres in
North America and internationally or be used to reduce indebtedness under the
Bank Credit Facilities.

26
<PAGE>

DILUTION

The net tangible book value (deficit) of the Company as of May 31, 1998 was
approximately $280.5 million, or $6.18 per share of Common Stock. Net tangible
book value (deficit) per share represents an amount equal to the Company's
total assets (excluding intangible assets) less its total liabilities, divided
by the number of shares of Common Stock outstanding. After giving effect to
the Equity Offering and the application by the Company of the estimated net
proceeds therefrom as described under "Use of Proceeds," the pro forma net
tangible book value (deficit) of the Company at May 31, 1998 would have been
approximately $383.2 million, or $6.54 per share of Common Stock. See
"Unaudited Pro Forma Financial Information" and "Use of Proceeds." This
represents an immediate increase in net tangible book value of $0.36 per share
to the existing stockholders and an immediate net tangible book value dilution
of $4.46 per share to new investors purchasing shares in the Equity Offering.
The following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Per share price to the public ............................... $11.00
Net tangible book value (deficit) per share at May 31,
1998(1)................................................... $ 6.18
Increase in net tangible book value per share attributable
to new investors.......................................... 0.36
------
Pro forma net tangible book value (deficit) per share after
the Equity Offering......................................... 6.54
------
Dilution per share to new investors.......................... $ 4.46
======
</TABLE>
- --------
(1) Gives effect to (i) the issuance of an additional 3,255,212 shares of
Common Stock pursuant to the anti-dilution provisions of the Subscription
Agreement and (ii) the issuance of 1,202,486 shares of Common Stock upon
automatic conversion of the Company's Class A Non-Voting Common Stock held
by SPE upon consummation of the Equity Offering. See "Certain
Relationships and Related Transactions" and "Description of Capital
Stock--Common Stock."

The foregoing computations assume no exercise of stock options. As of July
29, 1998 there were outstanding stock options to purchase an aggregate of
3,404,665 shares of Common Stock at an average exercise price of $13.05 per
share. Since the exercise of such options would have an antidilutive effect,
there would be no additional dilution to new investors.

If the Underwriters' over-allotment option is exercised in full, the
increase in net tangible book value per share to existing stockholders will be
$0.45 per share and the dilution per share to new stockholders will be $4.37.

The valuations and other studies, required to determine the fair value of
the assets acquired and liabilities assumed in connection with the
Combination, have not been performed, and, accordingly, the adjustments
reflected in the unaudited pro forma financial information are preliminary and
subject to further revisions and adjustments. For purposes of the unaudited
pro forma information, the carrying value of the Cineplex Odeon net assets
acquired was assumed to approximate fair value. Therefore, the excess of
purchase price over the historical net book value of the net assets of
Cineplex Odeon has been classified on the pro forma balance sheet as "Excess
Purchase Price" and has been excluded from the pro forma net tangible book
value in the table above. Every million dollars of Excess Purchase Price
allocated to tangible assets will increase net tangible book value per share
and decrease dilution per share by $0.02.

27
<PAGE>

CAPITALIZATION

The following table sets forth (i) the consolidated historical
capitalization of the Company as of May 31, 1998 and (ii) such capitalization
of the Company as adjusted to give effect to the Equity Offering, the Note
Offering and the Plitt Note Repurchase as if they had been consummated as of
that date. The information contained in this table should be read in
conjunction with the historical and unaudited pro forma financial information
of the Company, together with the related notes thereto, included elsewhere
herein.

<TABLE>
<CAPTION>
MAY 31, 1998
-------------------------
PRO FORMA,
ACTUAL AS ADJUSTED(1)
---------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total Debt (including current portion)
Bank Credit Facilities............................. $ 473,000 $ 299,382
Plitt Notes (guaranteed by Loews Cineplex)......... 200,000 --
New Senior Subordinated Notes due 2008 of the
Company(2)........................................ -- 297,555
Capital lease obligations.......................... 29,468 29,468
Mortgages Payable.................................. 27,373 27,373
---------- ----------
Total debt......................................... 729,841 653,778
---------- ----------
Stockholders' equity
Common Stock, $.01 par value, 300,000,000 shares
authorized;
44,079,924 shares issued and outstanding and
58,537,622 shares
Pro Forma, As Adjusted............................ 441 585
Class A Non-Voting Common Stock, $.01 par value,
10,000,000
shares authorized; 1,202,486 shares issued and
outstanding and
nil Pro Forma, As Adjusted........................ 12 --
Class B Non-Voting Common Stock, $.01 par value,
10,000,000
shares authorized; 84,000 issued and outstanding.. 1 1
Additional paid-in capital......................... 591,613 694,106
Retained earnings.................................. 3,201 3,201
---------- ----------
Total stockholders' equity......................... 595,268 697,893
---------- ----------
Total capitalization................................. $1,325,109 $1,351,671
========== ==========
</TABLE>
- --------
(1) Gives effect to the Universal Issuance and the automatic conversion that
will occur upon consummation of the Equity Offering of shares of the
Company's Class A Non-Voting Common Stock currently held by SPE into an
equal number of shares of Common Stock. See "Certain Relationships and
Related Transactions."
(2) If the Note Offering is not consummated, the Company may use the proceeds
of the Equity Offering together with borrowings under the Bank Credit
Facilities to pay the Total Plitt Note Consideration, in which case the
borrowings under the Bank Credit Facilities would increase from current
levels.

28
<PAGE>

SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION

SELECTED HISTORICAL FINANCIAL DATA

Loews Cineplex

The following table sets forth selected historical financial data, based on
continuing operations, for the Company for the five fiscal years ended
February 28, 1998 and has been derived from the Company's annual consolidated
financial statements. The following selected financial data for the three-
month periods ended May 31, 1998 and May 31, 1997 is unaudited, but, in the
opinion of management, includes all adjustments necessary for a fair
presentation of the financial position and results of operations for such
periods. The results of operations for the three months ended May 31, 1998 are
not necessarily indicative of the results to be attained for the entire year.
The selected historical financial data should be read in conjunction with the
separate consolidated financial statements and notes thereto of Loews Cineplex
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations," which are included elsewhere in this Prospectus. THE FISCAL
YEAR HISTORICAL DATA AND THE UNAUDITED FINANCIAL DATA FOR THE THREE MONTHS
ENDED MAY 31, 1997 DO NOT GIVE EFFECT TO THE COMBINATION OR INCLUDE HISTORICAL
INFORMATION FOR CINEPLEX ODEON. However, selected historical financial data
for Cineplex Odeon are presented following such data. The unaudited financial
data as of, and for the three months ended, May 31, 1998, reflects the
Combination and includes the results of Cineplex Odeon from May 15, 1998
through May 31, 1998.

<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS
YEAR ENDED FEBRUARY 28 OR 29, ENDED MAY 31,
---------------------------------------------------------- ----------------------
1994 1995 1996 1997 1998 1997 1998(2)
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues..... $ 244,864 $ 255,392 $ 264,585 $ 273,498 $ 296,933 $ 67,370 $ 83,207
Concessions revenues.... 75,355 79,287 84,358 90,643 104,009 23,486 31,170
Other revenues.......... 8,800 8,656 10,153 11,204 12,568 2,360 3,437
---------- ---------- ---------- ---------- ---------- ---------- ----------
329,019 343,335 359,096 375,345 413,510 93,216 117,814
---------- ---------- ---------- ---------- ---------- ---------- ----------
Theatre operations and
other expenses
(including concession
costs)................. 259,173 268,236 277,375 282,480 307,568 71,095 89,943
General and
administrative......... 17,449 18,753 20,282 21,447 28,917 5,937 7,946
Depreciation and
amortization........... 37,873 38,572 41,273 44,576 52,307 12,597 14,681
Loss on sale/disposals
of theatres............ 3,491 13,420 7,249 9,951 7,787 -- --
Interest expense, net... 9,865 10,613 15,376 14,776 14,319 3,622 6,106
Income tax
expense/(benefit)...... 4,662 (1,337) 309 2,295 2,751 365 (119)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)....... $ (3,494) $ (4,922) $ (2,768) $ (180) $ (139) $ (400) $ (743)
========== ========== ========== ========== ========== ========== ==========
Earnings (loss) per
common share(1):
basic.................. $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
diluted................ $ (0.17) $ (0.24) $ (0.14) $ (0.01) $ (0.01) $ (0.02) $ (0.03)
Weighted average shares
and equivalent
outstanding (1):
basic.................. 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 20,472,807 24,619,805
diluted................ 20,472,807 20,472,807 20,472,807 20,472,807 20,924,890 20,472,807 24,984,549
BALANCE SHEET DATA (AT
PERIOD END):
Property, equipment and
leaseholds, net....... $ 566,043 $ 605,982 $ 602,435 $ 613,692 $ 609,152 $1,180,376
Total assets........... $ 675,667 $ 723,108 $ 715,810 $ 721,372 $ 728,551 $1,617,287
Total long-term debt
(including current
maturities and capital
leases)............... $ 263,791 $ 313,098 $ 298,680 $ 306,342 $ 307,616 $ 729,841
Total liabilities...... $ 343,147 $ 395,510 $ 390,980 $ 396,722 $ 404,040 $1,022,019
Stockholders' equity... $ 332,520 $ 327,598 $ 324,830 $ 324,650 $ 324,511 $ 595,268
CASH FLOW STATEMENT
DATA:
Cash flow provided by
operating activities.. $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
</TABLE>
- --------
(1) Restated in all periods presented to reflect impact of a stock dividend
declared on February 5, 1998.
(2) Includes operating results of Cineplex Odeon from May 15, 1998 through May
31, 1998.

29
<PAGE>

Cineplex Odeon

The following table sets forth selected historical financial data, based on
continuing operations, for Cineplex Odeon for the five fiscal years ended
December 31, 1997 and has been derived from Cineplex Odeon's annual
consolidated financial statements and notes related thereto. The selected
historical financial data should be read in conjunction with the separate
consolidated financial statements and notes thereto of Cineplex Odeon and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Cineplex Odeon," which are included elsewhere in this Prospectus.
Cineplex Odeon's historical financial statements are prepared in accordance
with GAAP in Canada, which, except as described in footnote 17 to Cineplex
Odeon's historical financial statements, conform in all material respects with
accounting principles generally accepted in the United States.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARES OUTSTANDING AND
PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Admissions revenues..... $ 388,944 $ 384,558 $ 365,220 $ 358,973 $ 399,171
Concessions revenues.... 138,387 133,850 126,319 126,636 147,892
Other revenues.......... 18,899 22,704 21,611 24,083 26,714
----------- ----------- ----------- ----------- -----------
546,230 541,112 513,150 509,692 573,777
----------- ----------- ----------- ----------- -----------
Theatre operations and
other expenses
(including concession
costs)................. 459,759 459,258 440,747 440,685 491,443
General and
administrative......... 15,494 16,229 17,575 18,192 20,313
Depreciation and
amortization........... 41,577 40,859 42,621 43,648 45,715
Other expenses
(income)............... (1,267) 2,900 2,862 1,377 43,401
Interest expense, net... 28,033 33,641 40,983 35,482 33,900
Income taxes............ 1,665 2,398 1,269 1,390 1,072
----------- ----------- ----------- ----------- -----------
Net income (loss)....... $ 969 $ (14,173) $ (32,907) $ (31,082) $ (62,067)
=========== =========== =========== =========== ===========
Earnings (loss) per
common share:
basic.................. $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
diluted................ $ 0.01 $ (0.13) $ (0.29) $ (0.19) $ (0.35)
Weighted average shares
outstanding and
equivalent outstanding:
basic.................. 106,730,000 110,175,000 114,764,000 163,473,000 176,795,000
diluted................ 115,181,000 118,245,000 122,616,000 176,107,000 191,304,000
BALANCE SHEET DATA (AT
PERIOD END):
Property, equipment and
leaseholds, net........ $ 619,309 $ 614,741 $ 583,442 $ 579,841 $ 567,431
Total assets............ $ 697,105 $ 688,693 $ 649,643 $ 644,171 $ 635,475
Long-term debt
(including current
maturities and capital
leases)................ $ 394,571 $ 396,665 $ 399,454 $ 341,301 $ 367,240
Total liabilities....... $ 496,718 $ 492,518 $ 483,651 $ 425,591 $ 484,293
Shareholders' equity.... $ 200,387 $ 196,175 $ 165,992 $ 218,580 $ 151,182
CASH FLOW STATEMENT
DATA:
Cash flow provided by
operating activities... $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
</TABLE>

30
<PAGE>

HISTORICAL AND UNAUDITED PRO FORMA COMBINED KEY OPERATING STATISTICS

Loews Cineplex

The table below sets forth key operating statistics for Loews Cineplex on an
actual basis and on a pro forma combined basis giving effect to the
Combination. In order to arrive at a more meaningful presentation of financial
operating data related to the productivity and performance of Loews Cineplex,
and, except as otherwise noted, all amounts below include 100% of the
operating results of the U.S. Partnerships, although Loews Cineplex has only a
50% interest in each of the U.S. Partnerships. This information does not
include any potential benefit that may be realized from anticipated operating
efficiencies and cost savings as a result of the Combination. Management views
these statistics as key financial measures and believes that certain investors
find them useful in analyzing companies in the motion picture exhibition
industry. No measure is more meaningful than another, and management uses
these measures collectively to assess Loews Cineplex's operating performance.

<TABLE>
<CAPTION>
UNAUDITED UNAUDITED
ACTUAL PRO FORMA THREE MONTHS ENDED
YEAR ENDED FEBRUARY 28 OR 29, YEAR ENDED MAY 31,
----------------------------------------------------- FEBRUARY 28, ----------------------------
1994 1995 1996 1997 1998 1998(1)(7) 1997 1998(7)
--------- --------- --------- --------- --------- ------------ -------- ------------------
PRO
ACTUAL ACTUAL FORMA(1)
-------- -------- --------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION, PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at
period end........... 981 1,030 950 959 1,035 2,704 986 2,794 2,728
Locations operated at
period end........... 182 180 154 143 139 439 142 450 437
Screens per location.. 5.4 5.7 6.2 6.7 7.4 6.2 6.9 6.2 6.2
Attendance............ 52,113 52,656 53,544 53,133 58,387 143,266 12,855 16,686 31,052
Total revenues........ $ 360,828 $ 377,171 $ 400,412 $ 421,613 $ 480,437 $1,042,749 $105,553 $134,739 $231,251
Revenues per
screen(2)............ $ 367.82 $ 366.19 $ 421.49 $ 439.64 $ 464.19 $ 385.63 $ 107.60 $ 100.40 $ 84.77
Revenues per
location(2).......... $1,982.57 $2,095.39 $2,600.08 $2,948.34 $3,456.38 $ 2,375.28 $ 733.01 $ 701.77 $ 529.18
EBITDA(3)............. $ 48,906 $ 42,926 $ 54,190 $ 61,467 $ 69,238 $ 131,239 $ 16,184 $ 19,925 $ 23,261
Total EBITDA(4)....... $ 57,982 $ 62,540 $ 68,177 $ 78,273 $ 86,643 $ 154,540 $ 17,841 $ 22,210 $ 25,546
Partners' share of
Total EBITDA......... $ 3,677 $ 4,287 $ 4,800 $ 4,853 $ 6,339 $ 6,339 $ 1,025 $ 1,419 $ 1,419
Attributable EBITDA(4)
..................... $ 54,305 $ 58,253 $ 63,377 $ 73,420 $ 80,304 $ 148,201 $ 16,816 $ 20,791 $ 24,127
Total EBITDA per
screen(2)............ $ 59.10 $ 60.72 $ 71.77 $ 81.62 $ 83.71 $ 57.15 $ 18.19 $ 16.55 $ 9.36
Total EBITDA per
location(2).......... $ 318.58 $ 347.44 $ 442.71 $ 547.36 $ 623.33 $ 352.03 $ 123.90 $ 115.68 $ 58.46
Total EBITDA per
patron(2)............ $ 1.11 $ 1.19 $ 1.27 $ 1.47 $ 1.48 $ 1.08 $ 1.39 $ 1.33 $ 0.82
Concessions revenue
per patron(2)........ $ 1.63 $ 1.70 $ 1.82 $ 1.98 $ 2.14 $ 1.88 $ 2.12 $ 2.20 $ 2.00
Concessions margin.... 80.8% 80.9% 80.9% 82.8% 84.5% 82.4% 84.2% 84.6% 83.0%
Admissions revenue per
patron(2)............ $ 5.16 $ 5.34 $ 5.52 $ 5.79 $ 5.91 $ 5.14 $ 5.93 $ 5.69 $ 5.16
CASH FLOW STATEMENT
DATA(5)(6):
Net cash provided by
operating
activities........... $ 55,150 $ 36,188 $ 46,326 $ 47,976 $ 64,185 $ 9,974 $ 27,292
Net cash used in
investing
activities........... $ (32,098) $ (82,486) $ (34,690) $ (53,254) $ (51,439) $ (8,960) $(18,590)
Net cash
(used)/provided by
financing
activities........... $ (23,022) $ 46,359 $ (14,005) $ 5,048 $ (5,842) $ 10,449 $ 20,019
</TABLE>
- -------
(1) The information presented is derived from unaudited pro forma information
which is presented elsewhere in this Prospectus. See "Unaudited Pro Forma
Financial Information."
(2) All per screen, location and patron ratios are calculated based upon
screens and locations as of period end and include the U.S. Partnerships
except for the actual three months ended May 31, 1998 and 1997, which are
calculated using a weighted average number of screens and locations. This
is due to the inclusion of the operations of Cineplex Odeon for the last
17 days of the period ended May 31, 1998. Use of the weighted average
number of screens and locations for the remaining historical data would
not result in substantially different data from the information presented.
(3) EBITDA consists of earnings before interest, income taxes, depreciation
and amortization including equity earnings from investments in the U.S.
Partnerships. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with U.S. GAAP), as a
measure of the Company's operating performance, or as an alternative to
cash flows from operating activities (as determined in accordance with
U.S. GAAP), as a measure of the Company's liquidity. EBITDA measures the
amount of cash that a company has available for investment or other uses
and is used by the Company as a measure of its performance. The Company
believes that EBITDA is an important measure, in addition to cash flow
from operations, Attributable EBITDA and Total EBITDA, in viewing its
overall liquidity and borrowing capacity.
(4) Total EBITDA consists of EBITDA plus loss on sale/disposals of theatres
and 100% of the operating results of the U.S. Partnerships. Total EBITDA
should not be construed as an alternative to operating income (as
determined in accordance with U.S. GAAP), as a measure of the

31
<PAGE>

Company's operating performance, or as an alternative to cash flows from
operating activities (as determined in accordance with U.S. GAAP), as a
measure of the Company's liquidity. Total EBITDA measures the amount of cash
that a company has available for investment or other uses and is used by the
Company as a measure of its performance. The Company believes that Total
EBITDA is an important measure, in addition to cash flow from operations,
Attributable EBITDA and EBITDA, in viewing its overall liquidity and
borrowing capacity. Attributable EBITDA equals Total EBITDA less partners'
share of Total EBITDA. A reconciliation of EBITDA to Total EBITDA and
Attributable EBITDA follows:

<TABLE>
<CAPTION>
UNAUDITED
THREE MONTHS ENDED
ACTUAL MAY 31,
YEAR ENDED -----------------------
FEBRUARY 28 OR 29, UNAUDITED 1997 1998
--------------------------------------- PRO FORMA ------- ---------------
YEAR ENDED PRO
1994 1995 1996 1997 1998 FEBRUARY 28, 1998 ACTUAL ACTUAL FORMA
------- ------- ------- ------- ------- ----------------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EBITDA................ $48,906 $42,926 $54,190 $61,467 $69,238 $131,239 $16,184 $19,925 $23,261
Add: Loss on
sale/disposals of
theatres*........... 3,491 13,420 7,249 9,951 7,787 13,683 -- -- --
------- ------- ------- ------- ------- -------- ------- ------- -------
Modified EBITDA,
including equity
earnings............. 52,397 56,346 61,439 71,418 77,025 144,922 16,184 19,925 23,261
Less: Equity
earnings/other,
included in EBITDA.. 1,769 2,380 2,862 2,851 3,060 3,060 393 553 553
Add: EBITDA from U.S.
Partnerships........ 7,354 8,574 9,600 9,706 12,678 12,678 2,050 2,838 2,838
------- ------- ------- ------- ------- -------- ------- ------- -------
Total EBITDA.......... 57,982 62,540 68,177 78,273 86,643 154,540 17,841 22,210 25,546
Less: Partners' share
of Total EBITDA..... 3,677 4,287 4,800 4,853 6,339 6,339 1,025 1,419 1,419
------- ------- ------- ------- ------- -------- ------- ------- -------
Attributable EBITDA... $54,305 $58,253 $63,377 $73,420 $80,304 $148,201 $16,816 $20,791 $24,127
======= ======= ======= ======= ======= ======== ======= ======= =======
</TABLE>
--------
* Primarily represents (i) the noncash writeoff of the net book value of
the theatres disposed of and (ii) provisions for net disposal costs
(where applicable) related to the disposition of such theatres.

(5) Cash flow statement data includes cash flow from long term investments in
the U.S. Partnerships to the extent of the Company's equity interest.
(6) Due to the subjectivity inherent in the assumptions concerning the timing
and nature of the uses of cash generated by the unaudited pro forma
adjustments, cash flows from operating, investing and financing activities
are not presented in the unaudited pro forma data.
(7) The unaudited pro forma data is not necessarily indicative of the combined
results of operations of the Company that would have occurred nor is it
necessarily indicative of future operating results of the Company. Further,
due to seasonality in the exhibition industry, the Company's first fiscal
quarter of 1998 is not necessarily representative of future operating
results for the remainder of the year.

32
<PAGE>

Cineplex Odeon

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SCREEN, LOCATION,
PER PATRON AND MARGIN DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Screens operated at
period end............. 1,622 1,638 1,512 1,549 1,729
Locations operated at
period end............. 363 360 325 316 315
Screens per location.... 4.5 4.6 4.7 4.9 5.5
Attendance.............. 88,225 86,082 81,203 78,356 87,321
Total revenues.......... $ 546,230 $ 541,112 $ 513,150 $ 509,692 $ 573,777
Revenues per screen(1).. $ 336.76 $ 330.35 $ 339.38 $ 329.05 $ 331.85
Revenues per
location(1)............ $1,504.77 $1,503.09 $1,578.92 $1,612.95 $1,812.51
EBITDA(2)............... $ 72,244 $ 62,725 $ 51,966 $ 49,438 $ 18,620
Modified EBITDA(3)...... $ 70,977 $ 65,625 $ 54,828 $ 50,815 $ 62,021
Modified EBITDA per
screen(1).............. $ 43.76 $ 40.06 $ 36.26 $ 32.81 $ 35.87
Modified EBITDA per
location(1)............ $ 195.53 $ 182.29 $ 168.70 $ 160.81 $ 196.89
Modified EBITDA per
patron(1).............. $ 0.80 $ 0.76 $ 0.68 $ 0.65 $ 0.71
Concessions revenue per
patron(4).............. $ 1.57 $ 1.55 $ 1.56 $ 1.62 $ 1.69
Concessions margin...... 85.9% 83.8% 82.6% 82.3% 80.6%
Admissions revenue per
patron(4).............. $ 4.41 $ 4.47 $ 4.50 $ 4.58 $ 4.57
CASH FLOW STATEMENT
DATA:
Cash provided by (used
for) operating
activities............. $ 38,674 $ 31,435 $ 3,522 $ 12,416 $ 30,780
Cash used for investment
activities............. $ (7,264) $ (41,049) $ (7,714) $ (35,961) $ (58,697)
Cash provided by (used
for) financing
activities............. $ (30,445) $ 9,897 $ 4,245 $ 24,659 $ 28,704
</TABLE>
- --------
(1) All per screen, location and patron ratios are calculated as of period end
and include screens and locations in which Cineplex Odeon has a
partnership interest. Revenues, EBITDA and Modified EBITDA, however,
reflect only Cineplex Odeon's proportionate share of the revenues, EBITDA
and Modified EBITDA of such partnerships, equal to the respective
percentage ownership interests of Cineplex Odeon in such partnerships.
(2) EBITDA consists of earnings before interest, taxes, depreciation and
amortization. EBITDA should not be construed as an alternative to
operating income (as determined in accordance with Canadian GAAP), as a
measure of Cineplex Odeon's operating performance, or as an alternative to
cash flow from operating activities (as determined in accordance with
Canadian GAAP), as a measure of Cineplex Odeon's liquidity. EBITDA
measures the amount of cash that a company has available for investment or
other uses and was used by Cineplex Odeon as a measure of its performance.
Cineplex Odeon believes that EBITDA is an important measure, in addition
to cash flow from operations and Modified EBITDA, in viewing its overall
liquidity and borrowing capacity. EBITDA measures the amount of cash that
a company has available for investment or other uses and is used by
Cineplex Odeon as a measure of its performance.
(3) Modified EBITDA is EBITDA after eliminating the impact of other expenses
(income). Modified EBITDA should not be construed as an alternative to
operating income (as determined in accordance with Canadian GAAP), as a
measure of Cineplex Odeon's operating performance, or as an alternative to
cash flow from operating activities (as determined in accordance with
Canadian GAAP), as a measure of Cineplex Odeon's liquidity. Modified
EBITDA measures the amount of cash that a company has available for
investment or

33
<PAGE>

other uses and was used by Cineplex Odeon as a measure of its performance.
Cineplex Odeon believes that Modified EBITDA is an important measure, in
addition to cash flow from operations and EBITDA, in viewing its overall
liquidity and borrowing capacity. A reconciliation of EBITDA to Modified
EBITDA follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1994 1995 1996 1997
------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
EBITDA............................ $72,244 $62,725 $51,966 $49,438 $ 18,620
Other expenses (income)........... (1,267) 2,900 2,862 1,377 43,401*
------- ------- ------- ------- --------
Modified EBITDA**................. $70,977 $65,625 $54,828 $50,815 $ 62,021
======= ======= ======= ======= ========
</TABLE>
--------
* Includes $37.5 million representing unusual and nonrecurring loss on
Cineplex Odeon theatres to be closed as part of the contractual
obligations related to the Combination. This charge was recorded in the
fourth quarter of 1997.
** In the case of Cineplex Odeon, Modified EBITDA is substantially
comparable to Total EBITDA.
(4) Admissions and concessions revenue per patron is affected by the fact that,
during the periods reflected, a significant portion of Cineplex Odeon's
revenues was generated in Canadian dollars and for purposes of financial
reporting has been converted to U.S. dollars.

34
<PAGE>

UNAUDITED PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma combined income statement data give effect
(i) to the Combination ("Pro Forma"), (ii) to the Combination, the Equity
Offering, the Plitt Note Repurchase and the Universal Issuance ("Pro Forma, As
Adjusted--Excluding Note Offering") and (iii) to the Combination, the Equity
Offering, the Note Offering, the Plitt Note Repurchase and the Universal
Issuance (the "Transactions," and such pro forma data as adjusted for the Note
Offering is referred to as "Pro Forma, As Adjusted") in each case as if the
relevant Transactions had occurred on March 1, 1997, by combining the results
of operations of the Company for the year ended February 28, 1998, with the
results of operations of Cineplex Odeon for the year ended December 31, 1997,
and, with respect to the three months ended May 31, 1998 by combining the
results of operations of the Company and Cineplex Odeon for the three months
ended May 31, 1998. The unaudited pro forma combined balance sheet data
present the Pro Forma, As Adjusted--Excluding Note Offering and Pro Forma, As
Adjusted financial position of the Company and Cineplex Odeon at May 31, 1998,
assuming that the relevant Transactions had been consummated as of that date.

Under U.S. GAAP, the accounting for the Combination follows the purchase
method of accounting, where the net assets of the acquired company are
"purchased" by the acquiring company. Accordingly, the cost to acquire
Cineplex Odeon will be allocated to the assets acquired and liabilities
assumed of Cineplex Odeon based on their respective fair values, with the
excess to be allocated to goodwill. The valuations and other studies, required
to determine the fair value of the assets acquired and liabilities assumed,
have not been performed, and, accordingly, the adjustments reflected in the
unaudited pro forma combined financial information are preliminary and subject
to further revisions and adjustments. For purposes of this presentation, the
carrying value of the Cineplex Odeon net assets acquired was assumed to
approximate fair value. Therefore, the excess of purchase price over the
historical net book value of the net assets of Cineplex Odeon has been
classified on the pro forma balance sheet as Excess Purchase Price.

Loews Cineplex has arranged to obtain an independent appraisal of
significant assets, liabilities and business operations of Cineplex Odeon.
Upon completion of the determination of fair value, the Excess Purchase Price
will be allocated to specific assets and liabilities of Cineplex Odeon. It is
anticipated that there will be reductions in the carrying value associated
with certain assets, and alternatively the fair value of certain other assets
may exceed carrying value. Accordingly, the final valuation could result in
materially different amounts and allocations of Excess Purchase Price from the
amounts and allocations presented in the following unaudited pro forma
financial data, primarily between goodwill and property, equipment and
leaseholds, resulting in corresponding changes in depreciation and
amortization amounts. For every one million dollars of Excess Purchase Price
allocated to fixed assets, depreciation and amortization will increase $25,000
annually (assuming an average 20 year service life for fixed assets and
straight line depreciation). Based on preliminary estimates of fair value
related to certain assets, additional Excess Purchase Price of between $100
million and $150 million could result at the conclusion of the valuation.

The unaudited pro forma financial information is not necessarily indicative
of the Company's combined financial position or results of operations that
actually would have occurred had the Transactions been consummated at the
beginning of the periods presented and should not be construed as being
representative of future operations. In addition, no effect has been given to
the disposition of 25 theatres comprising 85 screens in New York and Chicago
that the Company is obligated to sell under an agreement reached with the DOJ
and the attorneys general of New York and Illinois in connection with the
approval of the Combination. The theatres held for disposition represented
approximately 3% of total screens and generated approximately $43 million of
box office revenue and approximately $9 million of cash flow on an annual
basis. THE UNAUDITED PRO FORMA ADJUSTMENTS ALSO DO NOT INCLUDE ANY POTENTIAL
BENEFIT TO BE REALIZED FROM ANTICIPATED OPERATING EFFICIENCIES AND COST
SAVINGS AS A RESULT OF THE COMBINATION. IN ADDITION, THE PRO FORMA, AS
ADJUSTED DEBT LEVEL OF APPROXIMATELY $654 MILLION INCLUDES APPROXIMATELY $29.3
MILLION OF CAPITAL SPENDING ON THEATRE PROJECTS IN VARIOUS STAGES OF
DEVELOPMENT AS OF THE RESPECTIVE BALANCE SHEET DATES. THE UNAUDITED PRO FORMA
ADJUSTMENTS DO NOT INCLUDE THE FUTURE REVENUE STREAMS ASSOCIATED WITH THESE
THEATRE LOCATIONS.

This unaudited pro forma financial information should be read in conjunction
with the historical financial statements and notes thereto of the Company and
Cineplex Odeon included elsewhere in this Prospectus. See "Risk Factors" and
"Cautionary Statement Concerning Forward-Looking Statements."

35
<PAGE>

COMBINED LOEWS THEATRES AND CINEPLEX ODEON

UNAUDITED PRO FORMA INCOME STATEMENT--FISCAL YEAR ENDED FEBRUARY 28, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
LOEWS CINEPLEX PRO FORMA,
THEATRES ODEON PLITT EQUITY AS ADJUSTED -
YEAR ENDED YEAR ENDED PRO FORMA TENDER OFFERING EXCLUDING
2/28/98 12/31/97 ADJUSTMENTS PRO FORMA ADJUSTMENTS(7) ADJUSTMENTS NOTE OFFERING
---------- ---------- ----------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Admissions...... $296,933 $399,171 $ (7,909)(1) $ 688,195 $ 688,195
Concessions..... 104,009 147,892 (3,230)(1) 248,671 248,671
Other (A)....... 12,568 26,714 (326)(1) 38,956 38,956
-------- -------- -------- ---------- --- ---------- ----------
413,510 573,777 (11,465) 975,822 0 0 975,822
-------- -------- -------- ---------- --- ---------- ----------
EXPENSES
Theatre
operations and
other expenses.. 291,421 462,738 (26,695)(1)(1a) 727,464 727,464
Cost of
concessions..... 16,147 28,705 (646)(1) 44,206 44,206
General and
administrative.. 28,917 20,313 10,000(1a) 59,230 59,230
Depreciation and
amortization.... 52,307 45,715 6,779 (2) 104,801 104,801
Loss on
sale/disposal of
theatres and
other........... 7,787 0 5,896 (3) 13,683 13,683
-------- -------- -------- ---------- --- ---------- ----------
396,579 557,471 (4,666) 949,384 0 0 949,384
-------- -------- -------- ---------- --- ---------- ----------
OPERATING
INCOME........... 16,931 16,306 (6,799) 26,438 0 0 26,438
OTHER EXPENSES
Interest
Expense/(Income).. 14,319 33,900 2,131 (4) 50,350 $ (7,697)(10) 42,653
Other Expenses
(Merger
Related)........ 37,505 (37,505)(5) 0
Other Expenses.. 5,896 (5,896)(3) 0
-------- -------- -------- ---------- --- ---------- ----------
INCOME/(LOSS)
BEFORE INCOME
TAXES............ 2,612 (60,995) 34,471 (23,912) 0 7,697 (16,215)
INCOME TAX
EXPENSE/(BENEFIT).. 2,751 1,072 (1,531)(6) 2,292 2,292
-------- -------- -------- ---------- --- ---------- ----------
NET LOSS......... $ (139) $(62,067) $ 36,002 $ (26,204) $ 0 $ 7,697 $ (18,507)
======== ======== ======== ========== === ========== ==========
Shares
Outstanding:
Basic........... 45,347,632(8) 13,255,212(8) 58,602,844
Fully Diluted... 49,038,046(8) 13,255,212(8) 62,293,258
Loss Per Share:
Basic........... $(0.58) $(0.32)
Fully Diluted... $(0.58) $(0.32)
<CAPTION>
DEBT PRO FORMA,
OFFERING AS
ADJUSTMENTS ADJUSTED
-------------- -------------
<S> <C> <C>
REVENUES
Admissions...... $ 688,195
Concessions..... 248,671
Other (A)....... 38,956
-------------- -------------
0 975,822
-------------- -------------
EXPENSES
Theatre
operations and
other expenses.. 727,464
Cost of
concessions..... 44,206
General and
administrative.. 59,230
Depreciation and
amortization.... $ 800(9) 105,601
Loss on
sale/disposal of
theatres and
other........... 13,683
-------------- -------------
800 950,184
-------------- -------------
OPERATING
INCOME........... (800) 25,638
OTHER EXPENSES
Interest
Expense/(Income).. 4,500 (11) 47,153
Other Expenses
(Merger
Related)........
Other Expenses..
-------------- -------------
INCOME/(LOSS)
BEFORE INCOME
TAXES............ (5,300) (21,515)
INCOME TAX
EXPENSE/(BENEFIT).. 2,292
-------------- -------------
NET LOSS......... $(5,300) $ (23,807)
============== =============
Shares
Outstanding:
Basic........... 58,602,844(8)
Fully Diluted... 62,293,258(8)
Loss Per Share:
Basic........... $(0.41)
Fully Diluted... $(0.41)
</TABLE>
- -----
(A) Includes the Company's equity earnings from U.S. Partnerships.

The accompanying notes are an integral part of these unaudited pro forma
financial statements.

36
<PAGE>

COMBINED LOEWS THEATRES AND CINEPLEX ODEON

UNAUDITED PRO FORMA INCOME STATEMENT--FOR THE THREE MONTHS ENDED MAY 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA,
AS ADJUSTED-
LOEWS CINEPLEX PLITT EQUITY EXCLUDING
THEATRES ODEON PRO FORMA TENDER OFFERING NOTE
5/31/98 3/1/98-5/14/98 ADJUSTMENTS PRO FORMA ADJUSTMENTS(7) ADJUSTMENTS OFFERING
-------- -------------- ----------- ---------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Admissions...... $83,207 $ 66,839 $(1,299)(1) $ 148,747 $ 148,747
Concessions..... 31,170 25,861 (560)(1) 56,471 56,471
Other (A)....... 3,437 5,749 (79)(1) 9,107 9,107
------- -------- ------- ---------- ------ ---------- ----------
117,814 98,449 (1,938) 214,325 0 0 214,325
------- -------- ------- ---------- ------ ---------- ----------
EXPENSES
Theatre
operations and
other expenses.. 85,115 86,974 (5,872)(1)(1a) 166,217 166,217
Cost of
concessions..... 4,828 4,999 (96)(1) 9,731 9,731
General and
administrative.. 7,946 4,554 2,616(1a) 15,116 15,116
Depreciation and
amortization.... 14,681 8,101 1,532 (2) 24,314 24,314
------- -------- ------- ---------- ------ ---------- ----------
112,570 104,628 (1,820) 215,378 0 0 215,378
------- -------- ------- ---------- ------ ---------- ----------
OPERATING
INCOME........... 5,244 (6,179) (118) (1,053) 0 0 (1,053)
OTHER EXPENSES
Interest
Expense/(Income).. 6,106 7,674 (555)(4) 13,225 $ (1,924)(10) 11,301
Other Expenses
(Merger
Related)........ 2,009 (2,009)(5) 0
------- -------- ------- ---------- ------ ---------- ----------
INCOME/(LOSS)
BEFORE INCOME
TAXES............ (862) (15,862) 2,446 (14,278) 0 1,924 (12,354)
INCOME TAX
EXPENSE/(BENEFIT)(6).. (119) 377 -- 258 258
------- -------- ------- ---------- ------ ---------- ----------
NET LOSS......... $ (743) $(16,239) $ 2,446 $ (14,536) $ 0 $ 1,924 $ (12,612)
======= ======== ======= ========== ====== ========== ==========
Shares
Outstanding:
Basic........... 45,366,410(8) 13,255,212(8) 58,621,622
Fully Diluted... 48,780,043(8) 13,255,212(8) 62,035,255
Loss Per Share:
Basic........... $(0.32) $(0.22)
Fully Diluted... $(0.32) $(0.22)
<CAPTION>
DEBT PRO FORMA,
OFFERING AS
ADJUSTMENTS ADJUSTED
------------- -------------
<S> <C> <C>
REVENUES
Admissions...... $ 148,747
Concessions..... 56,471
Other (A)....... 9,107
------------- -------------
0 214,325
------------- -------------
EXPENSES
Theatre
operations and
other expenses.. 166,217
Cost of
concessions..... 9,731
General and
administrative.. 15,116
Depreciation and
amortization.... $ 200(9) 24,514
------------- -------------
200 215,578
------------- -------------
OPERATING
INCOME........... (200) (1,253)
OTHER EXPENSES
Interest
Expense/(Income).. 1,125(11) 12,426
Other Expenses
(Merger
Related)........
------------- -------------
INCOME/(LOSS)
BEFORE INCOME
TAXES............ (1,325) (13,679)
INCOME TAX
EXPENSE/(BENEFIT)(6).. 258
------------- -------------
NET LOSS......... $(1,325) $ (13,937)
============= =============
Shares
Outstanding:
Basic........... 58,621,622(8)
Fully Diluted... 62,035,255(8)
Loss Per Share:
Basic........... $(0.24)
Fully Diluted... $(0.24)
</TABLE>
- -----
(A) Includes the Company's equity earnings from U.S. Partnerships.

The accompanying notes are an integral part of these unaudited pro forma
financial statements.

37
<PAGE>

COMBINED LOEWS THEATRES AND CINEPLEX ODEON

UNAUDITED PRO FORMA BALANCE SHEET
AS OF MAY 31, 1998
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA
AS
LOEWS ADJUSTED--
CINEPLEX PLITT EQUITY EXCLUDING DEBT PRO FORMA,
AS OF TENDER OFFERING NOTE OFFERING AS
5/31/98 ADJUSTMENTS ADJUSTMENTS OFFERING ADJUSTMENTS ADJUSTED
---------- ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash
equivalents............ $ 37,785 $ 37,785 $ 37,785
Accounts receivable.... 15,374 15,374 15,374
Prepaid and other
current assets......... 18,773 18,773 18,773
---------- -------- --------- ---------- --------- ----------
TOTAL CURRENT ASSETS... 71,932 0 0 71,932 0 71,932
PROPERTY, EQUIPMENT AND
LEASEHOLDS, NET......... 1,180,376 1,180,376 1,180,376
OTHER ASSETS
Long-term Investments
and Advances to
Partnerships........... 28,941 28,941 28,941
Goodwill (Historical).. 83,913 83,913 83,913
Excess Purchase Price.. 224,304 224,304 224,304
Other Intangible
Assets................. 6,503 6,503 6,503
Deferred charges and
other assets........... 21,318 21,318 $ 8,000 (9) 29,318
---------- -------- --------- ---------- --------- ----------
TOTAL ASSETS............ $1,617,287 $ 0 $ 0 $1,617,287 $ 8,000 $1,625,287
========== ======== ========= ========== ========= ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued expenses....... $ 230,471 $(18,562)(7) $ 211,909 $ 211,909
Interest payable to
Sony affiliate......... 0 0
Other Current
liabilities............ 22,122 22,122 22,122
Current portion of
long-term debt and
other obligations...... 9,785 9,785 9,785
---------- -------- --------- ---------- --------- ----------
TOTAL CURRENT
LIABILITIES............ 262,378 (18,562) 0 243,816 0 243,816
DEFERRED INCOME TAXES... 16,174 16,174 16,174
LONG-TERM DEBT
(including capital lease
obligations)............ 520,056 218,562 (7) $(102,625)(8) 635,993 $(289,555)(9) 346,438
PLITT DEBT.............. 200,000 (200,000)(7) 0 0
8 7/8% SENIOR
SUBORDINATED DEBT....... 0 297,555 (9) 297,555
DEBT DUE TO SONY
AFFILIATES.............. 0 0
OTHER LIABILITIES....... 23,411 23,411 23,411
---------- -------- --------- ---------- --------- ----------
TOTAL LIABILITIES...... 1,022,019 0 (102,625) 919,394 8,000 927,394
---------- -------- --------- ---------- --------- ----------
COMMITMENTS AND
CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock........... 454 132 (8) 586 586
Additional paid-in
capital................ 591,613 102,493 (8) 694,106 694,106
Retained earnings...... 3,201 3,201 3,201
---------- -------- --------- ---------- --------- ----------
TOTAL SHAREHOLDERS'
EQUITY.................. 595,268 0 102,625 697,893 0 697,893
---------- -------- --------- ---------- --------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY.... $1,617,287 $ 0 $ 0 $1,617,287 $ 8,000 $1,625,287
========== ======== ========= ========== ========= ==========
</TABLE>

The accompanying notes are an integral part of these unaudited pro forma
financial statements

38
<PAGE>

- --------
(1) Elimination of the operating results for certain Cineplex Odeon theatres
to be closed as a result of the Combination.

(1a) Reclassification of Cineplex Odeon district office expenses from theatre
operations and other expenses to general and administrative expenses of
$10 million ($2.6 million for the three months ended May 31, 1998) to
conform with Loews Theatres' presentation.

(2) Additional amortization expense for the excess of purchase price over
historical book value of Cineplex Odeon's net assets acquired and
transaction related costs. "Excess Purchase Price" (currently estimated at
$224 million at May 31, 1998) consists of (i) the excess of fair value
over the historical book value of net assets for Cineplex Odeon calculated
at May 14, 1998, (ii) transaction related costs and (iii) the
establishment of certain liabilities as a result of the Combination. The
excess of fair value over the historical book value of net assets for
Cineplex Odeon was determined based upon the sales price per Cineplex
Odeon Common Share outstanding and the estimated net book value of
Cineplex Odeon at the closing date of the Combination. The Excess Purchase
Price of approximately $224 million has been amortized based upon a useful
life of 40 years. For each five-year reduction in the useful life assigned
to Excess Purchase Price there would be an increase of $800,000 to
amortization expense on an annual basis. Amortization has also been
adjusted to reflect the impact of theatre dispositions and deferred
financing costs as follows:

<TABLE>
<S> <C>
Amortization of Excess Purchase Price over 40 years.......... $5.5 million
Plus: Amortization of deferred Financing Charges ($6.6
million) over 5 years....................................... 1.3 million
------------
Total Fiscal Year Ended February 28, 1998.................... $6.8 million
============
Total Quarter Ended May 31, 1998............................. $1.7 million*
============
</TABLE>

* Total of approximately $200,000 was recorded by Loews Cineplex for the
period from May 15, 1998 through May 31, 1998.

The final determination of Excess Purchase Price will be based upon the
completion of a formal valuation of the Cineplex Odeon net assets as of the
closing date of the Combination. Based upon preliminary estimates of fair
value related to certain assets, additional Excess Purchase Price of
between $100 million and $150 million could result at the conclusion of the
valuation.

(3) Reclassification of certain costs relating to loss on theatre
dispositions/impairments and other restructuring charges to conform to
U.S. GAAP financial statement presentation.

(4) Adjustment necessary to reflect interest expense based upon the pro forma
long-term debt balance of approximately $686 million at February 28, 1998
and the actual long-term debt balance (including current portion) of $730
million at May 31, 1998 at an average annual interest rate of 7.5%.
Amounts reflected are net of capitalized interest on projects under
development. Each .125 percentage point change in the interest rate
charged on long-term borrowings would result in a change in interest
expense of approximately $900,000 based on the actual debt level of $730
million.

(5) Elimination of impact of unusual and nonrecurring loss on Cineplex Odeon
theatres and other activity pursuant to contractual obligations related to
the Combination. These theatres are not related to theatres to be disposed
of in connection with the DOJ settlement.

(6) Income taxes have been calculated at applicable statutory rates, adjusted
for nondeductible items and state and local minimum taxes.

(7) Represents payment of the estimated premium required as part of the Plitt
Note Repurchase (assuming a Tender Price of 109.281%. Since the Pro Forma
adjustments recognize refinancing of the Plitt Notes, interest expense
savings were previously considered. Further, the reclassification of $18.6
million from accounts payable to Long-Term Debt reflects the funding of
the premium for the Plitt Note Repurchase through Long-Term Debt rather
than working capital as previously considered.

39
<PAGE>

(8) Equity Offering Adjustments as follows (in thousands, except share data):

<TABLE>
<S> <C>
Issuance of 10 million shares at $11.00 per share................. $ 100
Issuance of 3,255,212 shares issued to Universal pursuant to the
Subscription Agreement (transferred from additional-paid-in-capi-
tal)............................................................. 32
Additional paid-in capital........................................ 109,868
--------
Gross proceeds from Equity Offering............................... 110,000
Expenses related to Equity Offering (estimated)................... (7,375)
--------
$102,625
========
</TABLE>

The assumed net proceeds of $102.6 million from the Equity Offering have
been reflected in this pro forma financial information as a reduction of
Long-Term Debt.

Note: The Equity Offering may include an over-allotment of 15% for
additional shares. If this provision were exercised in full, the Company
would receive $16.5 million of additional gross proceeds from the Equity
Offering and would issue an additional 1.5 million shares.

<TABLE>
<CAPTION>
RECONCILIATION OF BASIC
TO DILUTED EPS
--------------------------
FEB. 28, 1998 MAY 31, 1998
------------- ------------
<S> <C> <C>
Basic Shares Outstanding Before Equity
Offering....................................... 45,347,632 45,366,410
Shares Issued in Equity Offering*............... 13,255,212 13,255,212
---------- ----------
Basic Shares Outstanding After Equity Offering.. 58,602,844 58,621,622
========== ==========
Basic Shares Outstanding Before Equity
Offering....................................... 45,347,632 45,366,410
Weighted Average Dilution Under Stock Option
Plans.......................................... 3,690,414 3,413,633
---------- ----------
Weighted Average Diluted Shares Outstanding
Before Equity Offering......................... 49,038,046 48,780,043
========== ==========
Basic Shares Outstanding After Equity Offering.. 58,602,844 58,621,622
Weighted Average Dilution Under Stock Option
Plans.......................................... 3,690,414 3,413,633
---------- ----------
Weighted Average Diluted Shares Outstanding
After Equity Offering.......................... 62,293,258 62,035,255
========== ==========
</TABLE>
- --------
* Shares issued in conjunction with Equity Offering comprised of 10
million shares at $11.00 per share sold in public offering and 3,255,212
shares issued to Universal pursuant to the Subscription Agreement.

(9) Represents the issuance of $300 million senior subordinated notes (net of
original issue discount) and the estimated costs ($8.0 million) associated
with the new debt offering. These costs will be amortized over the life of
the debt (assuming 10 years).

(10) Interest Expense Adjustment Related to the Equity Offering:

<TABLE>
<S> <C>
Annual Interest Expense as reflected in the unaudited pro
forma combined Income Statement prior to the Equity
Offering and the Note Offering ............................ $50.4 million
Less: annual interest savings assuming paydown of long-term
debt utilizing proceeds from Equity Offering*.............. 7.7 million
-------------
Adjusted Interest Expense................................... $42.7 million
=============
Quarterly Interest Expense as reflected in the unaudited pro
forma combined Income Statement prior to the Equity Offer-
ing and the Note Offering.................................. $13.2 million
Less: quarterly interest savings assuming paydown of long-
term debt utilizing
proceeds from Equity Offering*............................. 1.9 million
-------------
Adjusted Interest Expense................................... $11.3 million
=============
</TABLE>
- --------
*Annual impact of $102.6 million at 7.5% interest rate.

40
<PAGE>

(11) Debt Offering Adjustments as follows:

<TABLE>
<S> <C>
Incremental annual interest related to issuance of $300
million Senior Subordinated Notes......................... $ 4.5 million
==============
Total each quarter......................................... $1.125 million
==============
</TABLE>

Represents difference anticipated in rate on new borrowing of 8 7/8%
compared to blended rate under the Bank Credit Facilities of 7.5% (plus
amortization of original issue discount).

NOTE:

. The combined pro forma financial information does not reflect the impact of
the settlement reached with the Department of Justice under which the
Company will divest itself of certain theatres in New York and Chicago.
This treatment is not deemed significant for separate pro forma
presentation.

In addition, the pro forma financial data do not include any potential
payments owed by the Company to SPE as a result of the Combination. The
final payment to SPE is subject to specific post-closing audit procedures,
which have not yet been completed. The Company estimates that upon
completion of the procedures, it may be required to pay approximately $15
million.

. The unaudited pro forma data is not necessarily indicative of the combined
results of operations of the Company that would have occurred nor is it
necessarily indicative of future operating results of the Company. Further,
due to seasonality in the exhibition industry, the Company's first fiscal
quarter of 1998 is not necessarily representative of future operating
results for the remainder of the year.

41
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

LOEWS CINEPLEX

GENERAL

The following discussion of the Company's financial condition and operating
results should be read in conjunction with the selected historical financial
data and the audited consolidated financial statements of the Company for the
fiscal years ended February 28, 1998, February 28, 1997 and February 29, 1996
and with selected historical financial data and the unaudited consolidated
financial statements of the Company for the three month periods ended May 31,
1998 and 1997. The information presented below includes the results of
Cineplex Odeon, which became a wholly owned subsidiary of the Company on May
14, 1998, for the 17 day period ended May 31, 1998 and does not include any of
its results prior to that time.

This discussion incorporates operating results of partnerships in which the
Company has interests to the extent of its equity share as required by the
equity method of accounting.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MAY 31, 1998 COMPARED TO THREE MONTHS ENDED MAY 31, 1997

Operating Revenues of approximately $117.8 million for the three months
ended May 31, 1998 were $24.6 million, or 26.4%, higher than the comparable
period of the prior year. Operating revenues are generated primarily from
admission revenues and concession sales. Admission revenues for the three
months ended May 31, 1998 of approximately $83.2 million were $15.8 million,
or 23.4%, higher, and concession revenues of approximately $31.2 million were
$7.7 million, or 32.8%, higher, in comparison to the three months ended May
31, 1997. The increases in revenue for the quarter were primarily due to the
inclusion of 17 days of operating results for Cineplex Odeon of $26.5 million.

Operating Costs of approximately $89.9 million for the three months ended
May 31, 1998 were approximately $18.8 million, or 26.4%, higher than the three
months ended May 31, 1997, due primarily to the inclusion of 17 days of
operating results for the Cineplex Odeon theatres of $21.1 million.

General and Administrative Costs of approximately $7.9 million for the three
months ended May 31, 1998 were $2.0 million higher than the three months ended
May 31, 1997 due primarily to the inclusion of 17 days of operating results
for Cineplex Odeon and start up costs associated with the Company's
international operations.

Depreciation and Amortization Costs of approximately $14.7 million for the
three months ended May 31, 1998 were $2.1 million higher than for the three
months ended May 31, 1997 due to the inclusion of 17 days of operating results
for the Cineplex Odeon theatres.

Interest Expense of approximately $6.1 million for the three months ended
May 31, 1998 was $2.5 million higher than for the three months ended May 31,
1997 due primarily to the inclusion of 17 days of results for Cineplex Odeon
and the impact of additional borrowings under the Company's Bank Credit
Facilities.

Modified EBITDA for the three months ended May 31, 1998 of $19.9 million
increased $3.7 million in comparison to the three months ended May 31, 1997
primarily due to the inclusion of 17 days of results for Cineplex Odeon.
Modified EBITDA (earnings before interest, taxes, depreciation and
amortization, and gains/losses on asset disposal or sales) is a measure of
financial performance that management uses in measuring the Company's
financial performance. Modified EBITDA measures the amount of cash that a
company has available for investment or other uses and is used by the Company
as a measure of performance. Modified EBITDA is primarily a management tool
and only one measure of financial performance to be considered by the
investment community. Modified EBITDA is not an alternative to measuring
operating results or cash flow under U.S. GAAP.

42
<PAGE>

FISCAL YEAR ENDED FEBRUARY 28, 1998 COMPARED TO FISCAL YEAR ENDED FEBRUARY
28, 1997

Operating Revenues of approximately $413.5 million for the fiscal year ended
February 28, 1998 were $38.2 million, or 10.2%, higher than the comparable
period of the prior year. Operating revenues are generated primarily from
admission revenues and concession sales. Admission revenues for the fiscal
year ended February 28, 1998 of approximately $296.9 million were $23.4
million, or 8.6%, higher and concession revenues of approximately $104.0
million were $13.4 million, or 14.8%, higher in comparison to the fiscal year
ended February 28, 1997. Other income for the year ended February 28, 1998 of
approximately $12.6 million was $1.4 million higher than the same period in
fiscal 1997. These increases in revenues were due primarily to the effect of
additional revenue from new theatre openings/expansion of existing theatres of
$33.8 million, higher admissions and concession revenue per patron resulting
in an increase of $6.4 million and $5.2 million, respectively, partially
offset by other reductions in operating revenues, including the effect of
theatre dispositions, which reduced operating revenues by approximately $7.2
million.

Operating Costs of approximately $307.6 million for the year ended February
28, 1998 were $25.1 million, or 8.9%, higher than the fiscal year ended
February 28, 1997 due primarily to increased costs of $22.7 million related to
the aforementioned increase in operating revenues and higher occupancy costs
attributable to new theatre openings of $5.4 million offset by lower costs,
including the effect of theatre dispositions, of $3.0 million.

General and Administrative Costs of approximately $28.9 million for the year
ended February 28, 1998 were $7.5 million higher than the fiscal year ended
February 28, 1997 due primarily to higher salaries and fringe benefits as a
result of normal merit increases and higher staffing levels required as a
result of increased business activity, certain contractual buyouts and other
costs related to the Combination and the start-up of the Company's
international operations.

Depreciation and Amortization Costs of approximately $52.3 million for the
year ended February 28, 1998 were $7.7 million higher than for the fiscal year
ended February 28, 1997 due primarily to the effect of new theatre openings,
provisions for asset impairment under SFAS No. 121 and incremental
depreciation on refurbishment and information systems expenditures.

Loss on Sale/Disposal of Theatres of approximately $7.8 million for the year
ended February 28, 1998 was $2.2 million lower than for the fiscal year ended
February 28, 1997 due primarily to the timing, nature and characteristics of
theatre dispositions. During fiscal 1998, Loews Cineplex disposed of 10
theatres comprising 28 screens.

Interest Expense of approximately $14.3 million for the year ended February
28, 1998 was $500,000 lower than for the fiscal year ended February 28, 1997
due primarily to the impact of lower interest rates partially offset by the
impact of new borrowings.

Modified EBITDA for the year ended February 28, 1998 of $77.0 million
increased $5.6 million in comparison to the year ended February 28, 1997
primarily due to the increase in admission and concession revenues per patron
and the impact of newly opened theatres which were previously discussed.

FISCAL YEAR ENDED FEBRUARY 28, 1997 COMPARED TO FISCAL YEAR ENDED FEBRUARY
29, 1996

Operating Revenues of approximately $375.3 million for the fiscal year ended
February 28, 1997 were $16.2 million, or 5%, higher than the comparable period
of the prior year. Operating revenues are generated primarily from admission
revenues and concession sales. Admission revenues for the fiscal year ended
February 28, 1997 of approximately $273.5 million were $8.9 million, or 3%,
higher and concession revenues of approximately $90.6 million were $6.3
million, or 7%, higher in comparison to the fiscal year ended February 29,
1996. These increases in both admissions and concessions revenues were due
primarily to the effect of additional revenue from new theatre
openings/expansion of existing theatres of approximately $19.2 million, higher
admissions and concessions revenue per patron resulting in an increase of
$11.2 million and $6.5 million, respectively, partially offset by other
reductions in operating revenues, including the effect of theatre
dispositions, which reduced operating revenues by approximately $20.7 million.

43
<PAGE>

Operating Costs of approximately $282.5 million for the year ended February
28, 1997 were $5.1 million, or 2%, higher than the fiscal year ended February
29, 1996 due primarily to costs of $16 million directly related to the
aforementioned increase in operating revenues and higher occupancy costs
attributable to new theatre openings of $2.8 million offset by lower costs,
including the effect of theatre dispositions, of $13.7 million.

General and Administrative Costs of approximately $21.4 million for the year
ended February 28, 1997 were $1.2 million higher than the fiscal year ended
February 29, 1996 due primarily to higher salaries and fringe benefits as a
result of normal merit increases.

Depreciation and Amortization Costs of approximately $44.6 million for the
year ended February 28, 1997 were $3.3 million higher than for the fiscal year
ended February 29, 1996 due primarily to the effect of new theatre openings.

Loss on Sale/Disposal of Theatres of approximately $10.0 million for the
year ended February 28, 1997 was $2.7 million higher than for the fiscal year
ended February 29, 1996 due primarily to the timing, nature and
characteristics of theatre dispositions. During fiscal 1997, Loews Cineplex
disposed of an aggregate 15 theatres comprising 57 screens.

Interest Expense of approximately $14.8 million for the year ended February
28, 1997 was $600,000 lower than for the fiscal year ended February 29, 1996
due primarily to the impact of lower interest rates partially offset by the
impact of new borrowings.

Modified EBITDA for the year ended February 28, 1997 of $71.4 million
increased $10.0 million in comparison to the year ended February 29, 1996, due
primarily to the increase in admission and concession revenues per patron and
the impact of newly opened theatres which were previously discussed.

LIQUIDITY AND CAPITAL RESOURCES (PRIOR TO CONSUMMATION OF THE COMBINATION)

Cash flow from operations for the three months ended May 31, 1998 was
approximately $27.3 million, which was approximately $17.3 million higher than
for the three months ended May 31, 1997. Cash flow from operations for the
year ended February 28, 1998 was approximately $64.2 million, which was
approximately $16.2 million higher than for the year ended February 28, 1997.
Loews Cineplex derives substantially all of its revenues from cash collected
at the box office and through concession sales. Generally, this provides Loews
Cineplex with a working capital operating float since cash revenues are
generally collected in advance of the payment of related expenses. Prior to
the closing of the Combination, Loews Theatres determined the amount of cash
required to fund operational needs and all cash in excess of the daily
operational needs was "swept" by Sony Capital Corporation, an affiliate, and
applied to Loews Theatres' intercompany payable account with its affiliates.
Since Loews Theatres does not carry any significant amounts of inventory or
accounts receivable and any excess cash historically was "swept" by an
affiliate of Loews Theatres' corporate parent, it has historically operated
with negative working capital. However, there are times during the year when,
based on seasonal changes in the pattern of cash collections and the timing of
cost and expense payments, additional working capital may be required. During
such times, Loews Theatres had an arrangement whereby SCA and/or its
affiliates would make additional funds available to Loews Theatres through a
short-term credit facility at interest rates, commensurate with market,
established at the time of the loan. Historically, Loews Theatres funded its
capital requirements for its new theatre acquisition, construction and
reconfiguration programs with internally generated funds and borrowings under
its intercorporate credit facility with SCA (the "Sony Facility").

On May 14, 1998 and in connection with the Combination, the Company repaid
all amounts outstanding under the Sony Facility. At February 28, 1998, Loews
Theatres' outstanding balance under the Sony Facility

44
<PAGE>

was approximately $296.3 million and net borrowings for the year then ended
were approximately $1.8 million. At February 28, 1997, Loews Theatres'
outstanding balance against the Sony Facility was approximately $294.6 million
and net borrowings during the fiscal year ended February 28, 1997 were
approximately $8.2 million.

For periods prior to the closing of the Combination, Loews Cineplex is
included in the consolidated federal income tax returns of SCA. For financial
reporting purposes, Loews Cineplex reports its federal income tax expense and
related liability as if it filed a separate income tax return. The resultant
liability (or benefit) is treated as an intercompany payable (or receivable).

Loews Cineplex has made significant investments in its theatres over the
last five years (including new builds, reconfigurations of existing theatres
and closing unprofitable or uncompetitive theatres). For the five-year period
ending February 28, 1998, Loews Cineplex has added 338 screens (including 52
screen expansions at existing locations) at 25 locations.

The Company has experienced, and expects to continue to realize, improved
operating results as a result of investments in theatres over the last five
years (including new builds, reconfigurations of existing theatres and closing
unprofitable or uncompetitive theatres). At May 31, 1998, the Company had
capital spending commitments for the future development and construction of 41
theatre properties comprising 608 screen aggregating approximately $290.0
million.

Additionally, the Company is committed, under the terms of the joint venture
agreement dated June 10, 1998 with Yelmo Films to provide funding for the
future development and construction of theatre properties aggregating
approximately $50 million.

LIQUIDITY AND CAPITAL RESOURCES (AFTER CONSUMMATION OF THE COMBINATION)

Subsequent to consummation of the Combination, the Company has performed all
cash management functions on a "stand-alone" basis.

In connection with the Combination, Loews Cineplex entered into the $1.0
billion Bank Credit Facilities. The Bank Credit Facilities, together with
funds in the amount of $84.5 million paid by Universal under the Subscription
Agreement, replaced Cineplex Odeon's existing credit facility and the Sony
Facility, funded cash paid to SPE and/or its affiliates in connection with the
Combination and, together with the net proceeds of the Equity Offering and the
Note Offering will provide ongoing financing to Loews Cineplex to fund further
expansion in North America and internationally. The Company initially borrowed
$500 million under the Bank Credit Facilities at the time the Combination was
consummated. The Bank Credit Facilities are comprised of a $750 million senior
secured revolving credit facility, secured by substantially all of the assets
of Loews Cineplex and its U.S. subsidiaries, and a $250 million uncommitted
facility. The Bank Credit Facilities bear interest at a rate of either the
current prime rate as offered by Bankers Trust Company and Adjusted Eurodollar
(as defined in the credit agreement governing the Bank Credit Facilities) rate
plus an applicable margin based on the Leverage Ratio (as defined in the
credit agreement governing the Bank Credit Facilities). The Bank Credit
Facilities include various financial covenants, including a leverage test and
interest coverage test, as well as customary restrictive covenants, including:
(i) limitations on indebtedness, (ii) limitations on dividends and other
payment restrictions, (iii) limitations on asset sales, (iv) limitations on
transactions with affiliates, (v) limitations on the issuance and sale of
capital stock of subsidiaries, (vi) limitations on lines of business, (vii)
limitations on merger, consolidation or sale of assets and (viii) certain
reporting requirements. Future cash needs in excess of amounts provided by
operations will be funded by the Bank Credit Facilities and proceeds of the
Equity Offering and the Note Offering that are not used to repurchase Plitt
Notes pursuant to the Plitt Note Repurchase.

The Company's borrowings under the Bank Credit Facilities at May 31, 1998
totaled $473 million.

In June 1998, the Company entered into interest rate exchange agreements
effectively setting a fixed rate of 5.5065% per annum (plus a margin) on a
notional amount of $150 million of indebtedness.

As a result of the consummation of the Combination, Loews Cineplex is
obligated to make the Change of Control Offer. In order to satisfy this
requirement and retire the Plitt Notes, on June 15, 1998, Plitt commenced

45
<PAGE>

the At-the-Market Offer. Under the terms of the At-the-Market Offer, as
amended on June 26, 1998, Plitt will purchase the outstanding Plitt Notes for
cash at a purchase price to be determined by reference to a fixed spread of 55
basis points over the yield to maturity of the Reference Security on the Rate
Date, plus accrued and unpaid interest to (but excluding) the date of payment.
The Consent Solicitation sought noteholder approval of the Proposed Amendments
in order to eliminate certain restrictive covenants contained in the Plitt
Indenture. The Consent Solicitation terminated on July 1, 1998, when a
supplemental indenture effecting the Proposed Amendments was executed, with
holders of approximately 97% of the outstanding principal amount of the Plitt
Notes consenting to the Proposed Amendments. However, the Proposed Amendments
will only become operative upon consummation of the At-the-Market Offer. The
At-the-Market Offer, which expires August 4, 1998, is subject to various
conditions, including no event continuing that could materially impair the
benefits to the Company of the At-the-Market Offer and Consent Solicitation
contemplated at the time the At-the-Market Offer was commenced. Based on the
yield of the Reference Security at July 30, 1998, if all of the Plitt Notes
are tendered and all of the holders thereof are entitled to receive consent
payments, the Total Plitt Note Consideration would be approximately $219
million or 109.281% of the outstanding principal amount of the Plitt Notes,
plus accrued and unpaid interest. The Company anticipates utilizing the
proceeds of the Note Offering to pay the Total Plitt Note Consideration. To
the extent that the Note Offering has not been completed prior to the
consummation of the Plitt Note Repurchase, the Company may pay the Total Plitt
Note Consideration with the proceeds of the Equity Offering and by drawing on
its current availability under the Bank Credit Facilities. In connection with
closing the Combination, the Company guaranteed the Plitt Notes on a senior
subordinated basis, and Cineplex Odeon was released from its guarantee of the
Plitt Notes. See "The Concurrent Transactions."

Concurrently with the Equity Offering, the Company is offering $300 million
aggregate principal amount of its New Senior Subordinated Notes due 2008. The
New Notes will be general unsecured obligations of the Company, ranking
subordinate in right of payment to all Senior Debt (as defined in the New Note
Indenture) of the Company, including indebtedness under the Bank Credit
Facilities. For a description of the New Notes, see "Description of Certain
Indebtedness--The New Notes." Proceeds from the Note Offering are expected to
be used to fund the purchase of Plitt Notes tendered pursuant to the Plitt
Note Repurchase and/or the Change of Control Offer. Although the Note Offering
is scheduled to close concurrently with the Equity Offering, consummation of
the Equity Offering is not conditioned upon consummation of the Note Offering,
and consummation of the Note Offering is not conditioned upon consummation of
the Equity Offering. See "Risk Factors--Equity Offering Not Conditioned on
Note Offering."

On February 5, 1998, in connection with the Combination, the Company
declared and paid a stock dividend of 19,269,348.25 shares of Common Stock and
1,202,486 shares of Class A Non-Voting Common Stock to the Company's sole
stockholder of record at the time. In connection with the stock dividend,
$205,000 was transferred from retained earnings to additional paid-in capital
and Common Stock.

EFFECT OF INFLATION

Inflation has not had a material effect on Loews Cineplex's operations.

YEAR 2000 ISSUE

The Year 2000 issue affects virtually all companies and organizations. Loews
Cineplex has implemented programs designed to ensure that all software used in
connection with providing services to its customers and its internal
operations will manage and manipulate data involving the transition of dates
from 1999 to 2000 without functional or data abnormality. Loews Cineplex does
not anticipate incurring significant additional costs to address the Year 2000
issue, although the effectiveness of Loews Cineplex's present efforts to
address the Year 2000 issue cannot be assured. In addition, it is currently
unknown whether vendors and other third parties with whom Loews Cineplex
conducts business will successfully address the Year 2000 issue with respect
to their own computer software. If Loews Cineplex's present efforts to address
the Year 2000 issue are not successful, or if

46
<PAGE>

vendors and other third parties with which Loews Cineplex conducts business do
not successfully address the Year 2000 issue, Loews Cineplex's business and
financial condition could be adversely affected.

NEW ACCOUNTING PRONOUNCEMENTS

Loews Cineplex has determined that three new pronouncements that have been
issued but are not yet effective are applicable to Loews Cineplex, and may
have an impact on its financial statements:

Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure
about Segments of an Enterprise and Related Information," which is effective
for Loews Cineplex's fiscal year ending February 28, 1999, requires Loews
Cineplex to disclose financial information about business segments, including
certain information about products and services, activities in different
geographic areas and other information.

SFAS No. 132, "Employer's Disclosure about Pensions and Other Post-
Retirement Benefits," is effective for the Company's fiscal year ending
February 28, 1999. SFAS No. 132 standardizes the disclosure requirements for
pension and other post-retirement plans; the standard does not change the
measurement or recognition of such plans.

Additionally, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activity," is effective for all the Company's fiscal quarters of all
fiscal years beginning February 28, 2000. This statement standardizes the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts by requiring that the Company
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value.

Loews Cineplex expects to adopt these standards when required and does not
believe they will have a material impact on its financial statements.

CINEPLEX ODEON

INTRODUCTION

Management's discussion and analysis of results of operations and financial
condition focuses on liquidity, capital resources and the results of Cineplex
Odeon's operations. This section should be read in conjunction with the
consolidated financial statements, the notes thereto and other information
presented elsewhere herein.

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1997 AND 1996

Cineplex Odeon recorded a net loss for the year ended December 31, 1997 of
$62,067,000 compared to a net loss for the year ended December 31, 1996 of
$31,082,000 and a net loss for the year ended December 31, 1995 of
$32,907,000. Included in the 1997 net loss are other expenses of $43,401,000
(1996--$1,377,000 and 1995--$2,862,000). Other expenses in 1997 includes a
charge of $46,239,000 representing the costs associated with terminating
certain leases and disposing of certain properties and the write-off of the
net book value attributable to the related properties.

Industry admission revenue and attendance increased in 1997 by 7.7% and 3.9%
respectively compared to 1996 figures.

Cineplex Odeon reported its results in United States dollars. In order to
eliminate the impact of exchange rate fluctuations on the yearly comparison of
both admission and concession revenue, the results for the Canadian operations
discussed below are stated in Canadian dollars. In 1996 Cineplex Odeon sold
five theatres located in Texas. The impact of this sale is not considered
significant to Cineplex Odeon's United States results.

Cineplex Odeon's United States theatre circuit box office revenue increased
for both the year and the quarter ended December 31, 1997 by 3.3% and 10.0%
respectively when compared to the corresponding period in the prior year. This
increase in box office revenue for the year ended December 31, 1997 was the
result of an increase in attendance of 1.7% and an increase in box office
revenue per patron of 1.6%. The increase in box office revenue in the fourth
quarter of 1997 was the result of an attendance increase of 8.2% and an
increase in box office revenue per patron of 1.8%. The increase in attendance
in the fourth quarter reflects a strong slate of

47
<PAGE>

pictures released in that period, including Titanic, and the impact of new
theatres opened by Cineplex Odeon in the United States.

Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 28.4% in 1997 compared to 1996 (when measured in Canadian dollars).
This increase was the result of an increase in attendance of 24.1% and an
increase in box office revenue per patron of 4.3%. In the fourth quarter of
1997 Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 43.5% compared to the fourth quarter of 1996 (when measured in
Canadian dollars). This increase was the result of an increase in attendance
of 39.5% and an increase in box office revenue per patron of 4.0%. The
increase in attendance experienced by Cineplex Odeon's Canadian theatre
circuit in both the quarter and year ended December 31, 1997 compared to 1996
was a result of Cineplex Odeon's relationships with certain film distributors
who enjoyed comparatively more successful film product in 1997 compared to
1996 and the impact of new theatres opened by Cineplex Odeon in Canada.

Cineplex Odeon's United States concession revenue increased by 8.8% in 1997
compared to 1996. This increase was the result of an increase in attendance of
1.7% and an increase in concession revenue per patron of 7.1%. In the fourth
quarter of 1997, Cineplex Odeon's United States concession revenue increased
by 16.9% when compared to the fourth quarter of 1996. For the fourth quarter
the increase was the result of an increase in attendance of 8.2% and an 8.7%
increase in concession revenue per patron.

Cineplex Odeon's Canadian concession revenue increased in 1997 by 31.5%
(when measured in Canadian dollars) compared to 1996, reflecting an increase
in concession revenue per patron of 7.4% and an increase in attendance of
24.1%. For the fourth quarter of 1997, Cineplex Odeon's Canadian concession
revenue increased by 49.4% comprising an increase in attendance of 39.5% and
an increase in concession revenue per patron of 9.9%.

The increase in concession revenue per patron in both the United States and
Canada for the year reflects the impact of Cineplex Odeon's focus in this area
and the augmented design of concession stands in Cineplex Odeon's newer
theatres.

GROSS MARGIN AND OTHER COSTS

The gross margin from theatre operations (being revenue from theatre
operations less film cost, cost of concessions, advertising, theatre payroll,
occupancy and supplies and services), when expressed as a percentage of
theatre operating revenue, increased in 1997 to 16.2% compared to 15.4% in
1996. For the fourth quarter of 1997 compared to the fourth quarter of 1996
the gross margin from theatre operations, when expressed as a percentage of
theatre operating revenue, increased to 17.7% from 14.0%. The increase in
gross margin for both the year and the fourth quarter was primarily the result
of the increase in revenue.

Interest on long-term debt decreased by 4.5% in 1997 compared to the prior
year. The decrease in interest on long-term debt was primarily a result of the
decision to denominate certain of Cineplex Odeon's long-term debt in Canadian
dollars during 1997 which, for the period was subject to a lower interest
rate.

In 1997 other expenses were $43,401,000 compared to $1,377,000 in 1996 and
$2,862,000 in 1995. The primary component of this charge is an expense of
$46,239,000 relating to the costs associated with terminating certain theatre
leases and disposing of certain other theatre properties and the corresponding
write-off of the net book value associated with the properties. It is
anticipated that the disposal of these properties will be substantially
complete by the end of 1998 and will result in an annual operating cash flow
improvement of $7,000,000.

During 1997 the value of the Canadian dollar weakened relative to the United
States dollar. While currency movements affect the reporting of revenues and
expenses of Cineplex Odeon's Canadian operations, the financial impact is
limited as the costs of operating the Canadian theatres are supported by the
revenues of such theatres.

RESULTS OF OPERATIONS--1996 AND 1995

Industry admission revenue and attendance increased in 1996 by 7.6% and 6.0%
respectively compared to 1995 figures.

48
<PAGE>

Cineplex Odeon's United States results were impacted by the sale of 28
theatres, located in Florida and Georgia, to Carmike Cinemas, Inc. in the
second quarter of 1995. In 1996 Cineplex Odeon sold five theatres located in
Texas, the impact of which is not considered significant to Cineplex Odeon's
United States results.

Cineplex Odeon's United States theatre circuit box office revenue decreased
for both the year and the quarter ended December 31, 1996 by 4.0% and 8.6%
respectively when compared to the corresponding period in the prior year.
Adjusting for the impact of the sale of the Florida and Georgia theatres,
Cineplex Odeon's United States theatre circuit box office revenue decreased by
1.9% for the year ended December 31, 1996 compared to the year ended December
31, 1995. This decrease in box office revenue for the year ended December 31,
1996 was the result of a decrease in attendance of 4.3% offset by an increase
in box office revenue per patron of 2.4%. The decrease in attendance in 1996
compared to 1995 is a direct result of increasing competition from other film
exhibitors who have been aggressively building new theatres. The decrease in
box office revenue in the fourth quarter of 1996 was the result of an
attendance decrease of 10.3% offset by an increase in box office revenue per
patron of 1.7%. The decrease in attendance in the fourth quarter reflects the
fact that the film product in the fourth quarter of 1996 was not as strong as
the prior year and the aforementioned increasing competition.

Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 2.8% in 1996 compared to 1995 (when measured in Canadian dollars).
This increase was the result of an increase in attendance of 3.5% offset by a
decrease in box office revenue per patron of 0.7%. In the fourth quarter of
1996 Cineplex Odeon's Canadian theatres reported an increase in box office
revenue of 5.0% compared to the fourth quarter of 1995 (when measured in
Canadian Dollars). This increase was the result of an increase in attendance
of 4.1% and an increase in box office revenue per patron of 0.9%. The increase
in attendance experienced by Cineplex Odeon's Canadian theatre circuit in 1996
compared to 1995 was a result of Cineplex Odeon's relationships with certain
film distributors who enjoyed comparatively more successful film product in
1996 compared to 1995.

Cineplex Odeon's United States concession revenue decreased by 3.0% in 1996
compared to 1995. In the fourth quarter of 1996, Cineplex Odeon's United
States concession revenue decreased by 5.1% when compared to the fourth
quarter of 1995. Adjusting for the impact of the sale of the Florida and
Georgia theatres, Cineplex Odeon's United States concession revenue for the
year ended December 31, 1996 was equivalent to that of the year ended December
31, 1995. This was achieved due to an increase in concession revenue per
patron of 4.3% which offset the decrease in attendance. For the fourth quarter
the decrease was the result of a decrease in attendance of 10.3% offset by a
5.2% increase in concession revenue per patron.

Cineplex Odeon's Canadian concession revenue increased in 1996 by 6.0% (when
measured in Canadian dollars) compared to 1995, reflecting an increase in
concession revenue per patron of 2.5% and an increase in attendance of 3.5%.
For the fourth quarter of 1996, Cineplex Odeon's Canadian concession revenue
increased by 3.7% comprising an increase in attendance of 4.1% and a decrease
in concession revenue per patron of 0.4%. The increase in concession revenue
per patron for the year reflects the impact of Cineplex Odeon's focus in this
area and the augmented design of concession stands in Cineplex Odeon's newer
theatres.

GROSS MARGIN AND OTHER COSTS

The gross margin from theatre operations (being revenue from theatre
operations less film cost, cost of concessions, advertising, theatre payroll,
occupancy and supplies and services), when expressed as a percentage of
theatre operating revenue, decreased in 1996 to 15.4% compared to 15.7% in
1995. The slight decline in gross margin for the year was primarily the result
of a general increase in certain direct costs associated with theatre
operations.

The gross margin from theatre operations, when expressed as a percentage of
theatre operating revenue, decreased in the fourth quarter of 1996 compared to
the fourth quarter of 1995 to 14.0% from 16.4%. The decline in gross margin
for the fourth quarter of 1996 was due to (1) a general increase in certain
direct costs associated with theatre operations; and (2) the fixed component
of theatre operating costs (primarily occupancy costs).

49
<PAGE>

Interest on long-term debt decreased by 13.4% in 1996 compared to the prior
year. The decrease in interest on long-term debt was primarily attributable to
the initial application of equity proceeds from the public offering in the
first quarter of 1996 against Cineplex Odeon's long-term debt.

During 1996 the value of the Canadian dollar strengthened relative to the
United States dollar. While currency movements affect the reporting of
revenues and expenses of Cineplex Odeon's Canadian operations, the financial
impact is limited as the costs of operating the Canadian theatres are
supported by the revenues of such theatres.

RESULTS OF OPERATIONS--SINCE DECEMBER 31, 1997

Unaudited financial statements for Cineplex Odeon for the three months ended
March 31, 1998 and March 31, 1997 are included herein commencing at page F-58.
On a stand alone basis for the three months ended May 31, 1998, Cineplex
Odeon's revenues and EBITDA were lower than for the corresponding period in
the prior year.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOW FROM CONTINUING OPERATIONS

Cash flow from operations in 1997 amounted to a net inflow of $30,780,000
compared to a net inflow of $12,416,000 in 1996. The increase in cash flow
from operations is a function of the increase in revenue experienced in 1997
(See "Results of Operations"). Excluding the impact of the net change in non-
cash working capital, Cineplex Odeon's cash flow from operations for the year
ended December 31, 1997 amounted to a net inflow of $1,622,000 compared to a
net inflow of $10,468,000 for the year ended December 31, 1996. This decline
is attributable to the cash costs associated with the aforementioned
disposition of certain properties which amounted to $21,648,000.

LONG-TERM DEBT

Long-term debt increased from $326,058,000 at December 31, 1996 to
$333,523,000 at December 31, 1997. This increase is the result of the capital
expenditures associated with Cineplex Odeon's expansion program. In connection
with the Combination, Cineplex Odeon repaid $153.9 million of outstanding debt
under its credit facility with funds provided by Loews Cineplex from
borrowings under the Bank Credit Facilities, and the Cineplex Odeon facility
was terminated.

At December 31, 1997 Cineplex Odeon had two interest rate swap agreements
outstanding. The aggregate notional principal associated with the two swap
agreements is $35,000,000 and such agreements require Cineplex Odeon to pay a
fixed interest rate and receive a floating rate. The weighted average fixed
interest rates associated with the swap agreements are 5.73%. These agreements
were terminated in connection with the Combination. Of Cineplex Odeon's long-
term debt at December 31, 1997, approximately 79% was subject to fixed rates
of interest.

FUTURE COMMITMENTS

In 1997 Cineplex Odeon opened seven new theatres and refurbished two
theatres in the United States adding a total of 87 new screens. In Canada in
1997 Cineplex Odeon opened ten new theatres and refurbished four theatres
adding a total of 127 new screens. The total cost associated with the
construction of these theatres was approximately $50,000,000.

CANADIAN ISSUER

Cineplex Odeon is an Ontario corporation which conducts approximately one-
third of its operations in Canada. Cineplex Odeon is subject to certain
Canadian economic, fiscal, monetary and political policies and factors.

Reference is made to Note 17 of the Notes to the Consolidated Financial
Statements of Cineplex Odeon for a reconciliation of Cineplex Odeon's
financial statements to United States generally accepted accounting
principles.

INFLATION

For the three years ended December 31, 1997, inflation did not have a
pronounced effect on Cineplex Odeon's results of operations.

50
<PAGE>

THE MOTION PICTURE EXHIBITION INDUSTRY

GENERAL

The motion picture exhibition industry in North America comprises over 400
exhibitors, approximately 250 of which operate four or more screens. Based on
the listing of exhibitors in the National Association of Theatre Operators
("NATO") 1997-98 Encyclopedia of Exhibition, as of May 1, 1997, the ten
largest exhibitors (in terms of number of screens in the United States)
operated approximately 51% of the total screens, with no one exhibitor
operating more than 10% of the total of 29,731 screens.

The following table presents the ten largest exhibition companies in North
America by box office revenue, screens and theatres according to the most
recent publicly available information:

<TABLE>
<CAPTION>
BOX OFFICE
COMPANY REVENUES SCREENS THEATRES
------- ---------- ------- --------
(MILLIONS)
<S> <C> <C> <C>
Loews Cineplex............................... $688.2(1) 2,781(2) 450(2)
AMC Entertainment............................ 530.7 2,475 231
United Artists Theatres...................... 465.6 2,154 332
Regal Cinemas(3)............................. 344.0 2,306 256
Carmike Cinemas.............................. 322.6 2,720 520
GC Companies................................. 298.3 1,222 182
Cinemark Cinemas............................. 288.1 2,310 233
Act III Theatres(3).......................... 166.4 673 122
Hoyts Cinemas Corp........................... N/A 817 114
National Amusements.......................... N/A 1,141 125
</TABLE>
- --------
(1) Includes Loeks-Star Theatres and Magic Johnson Theatres. Amounts for Loews
Cineplex represent the sum of data reported for Loews Theatres as of
February 28, 1998 and Cineplex Odeon as of December 31, 1997. This data is
not intended to represent total screens, locations or box office revenue
of the Company on a pro forma basis at any time.
(2) Amounts for Loews Cineplex include screens and theatres of Loeks-Star
Theatres and Magic Johnson Theatres.
(3) Data for Regal Cinemas is prior to its merger with Act III Theatres. Act
III Theatres screen and theatre information is as of December 31, 1996.

In 1997, U.S. motion picture attendance was approximately 1.4 billion, the
highest attendance level recorded by NATO during the past 38 years, and in the
same year, box office revenues exceeded $6.4 billion, an 8% increase over
1996. The average ticket price for 1997 was $4.59, an increase of 4% over
1996.

Exhibitors' chief sources of revenue are derived from box office sales of
theatre tickets and sale of concession products at theatres. Box office
revenues are directly related to attendance which is driven by the quality of
the movie-going experience including the comfort, cleanliness and convenience
of the location of theatres, the content and quality of film product
distributed by major motion picture and independent film studios, the ticket
price, the quality of projection and sound presentation and the level of
customer service. Concessions (generally food and beverage items) are sold at
stands located within theatres. Concession revenues are largely dependent on
attendance levels and the effectiveness of theatre staffing, training and the
type and quality of products offered.

Exhibitors' primary operating costs include film costs for licensing rights
paid to motion picture distributors, the cost of concession products, labor,
theatre rents, real estate taxes and advertising. In recent years, film costs
to the exhibition industry have increased. There are a variety of reasons for
this, including a trend toward shorter film exhibition runs. In addition,
exhibitors must spend significant amounts of capital on investments in
developing and constructing theatre facilities.

51
<PAGE>

RELATIONSHIP BETWEEN MOTION PICTURE PRODUCTION AND DISTRIBUTION AND MOTION
PICTURE EXHIBITION

There is an integral relationship between the motion picture exhibition and
the motion picture production and distribution industries. Motion picture
theatres are the primary initial distribution channel for new motion picture
releases, and theatrical success of a motion picture is often the most
important factor in establishing its value in the cable television, pay-per-
view, videocassette and other ancillary markets. At the same time, the
ultimate success of an exhibitor's box office is dependent on, among other
things, the quality, quantity, availability and acceptance by movie going
patrons of the motion picture product produced by the motion picture
production companies and licensed for exhibition to the motion picture
exhibitors by distribution companies.

The motion picture production and distribution industry in North America is
led by a few major movie studios and their distribution operations. The major
studios and distributors are Columbia and TriStar (which are both owned by
Sony), Universal (approximately 84% of which is owned by Seagram), The Walt
Disney Corporation, Warner Bros. (which is owned by Time-Warner Inc.),
Paramount Pictures (which is owned by Viacom Inc.), Twentieth Century-Fox
(which is owned by NewsCorp.) and Metro-Goldwyn-Mayer Inc. These studios
account for approximately 90% of the motion picture product exhibited in the
United States, based on box office receipts.

FILM LICENSING

In order to secure adequate product, theatrical exhibitors, such as the
Company, must engage in continuous negotiations with film distributors for
licensing rights of first run feature motion pictures. Such negotiations are
conducted on a film-by-film and theatre-by-theatre basis and consider, among
other things, the projected success of the movie, the movie's subject content
and appeal to segments of the population and the exhibitor's presence in
metropolitan areas, theatre locations and size. Film exhibition licenses
typically specify rental fees based upon a gross receipts formula or a theatre
admissions revenue-sharing formula. Under a gross receipts formula, the
distributor receives a specified percentage of box office receipts, with the
percentage generally declining over the term of the run. Under a theatre
admissions revenue-sharing formula, the distributor receives a specified
percentage of the excess of box office receipts over a negotiated house
expense.

If there are multiple exhibitors in a film zone, a distributor may require
the exhibitors in a zone to bid for a film or may allocate its films among the
exhibitors in the zone. When films are licensed under the allocation process,
a distributor will choose which exhibitor is offered a movie and then that
exhibitor will negotiate film rental terms directly with the distributor for
the film. Over the past several years, distributors have generally used the
allocation rather than the bidding process to license their films. The Company
does not currently bid for film licenses in any of the markets in which it
operates.

SEASONALITY

The release of motion pictures is often seasonal, with the release of a
disproportionate number of major motion pictures taking place during the
summer and holiday seasons. This industry-wide practice is expected to
continue and may cause significant swings in attendance levels, theatre
staffing levels and reported results for the Company from quarter to quarter.
However, recently there has been an industry trend towards movie releases in
the "off" season to attempt to mitigate the effect described above and annual
attendance levels and admissions revenues have tended to increase moderately
in the recent past.

GOVERNMENT REGULATION

In the United States, the distribution of motion pictures is in large part
regulated by federal and state antitrust laws and has been the subject of
numerous antitrust cases. The most significant of these cases is U.S. v.
Paramount Pictures Inc., et al., which was affirmed by the U.S. Supreme Court
in 1950. The consent decrees resulting from the Paramount case bind certain
major film distributors and require the films of such distributors to be
offered and licensed to exhibitors on a film-by-film and theatre-by-theatre
basis. Consequently, Loews Cineplex will not be able to assure itself of a
supply of motion pictures by entering into long-term arrangements with major
distributors, but must compete and negotiate for its licenses on a film-by-
film and theatre-by-theatre basis. See "Business--Legal Proceedings."

52
<PAGE>

The ADA and certain state statutes and local ordinances, among other things,
require that places of public accommodation, including theatres (both existing
and newly constructed), be accessible to, and that assistive listening devices
be available for use by, patrons with disabilities. The ADA may require that
certain modifications be made to existing theatres in order to make such
theatres accessible to certain theatre patrons and employees who are disabled.
The ADA requires that theatres be constructed to permit persons with
disabilities full use of theatre and its facilities and reasonable access to
work stations. Loews Cineplex has established a program to review and evaluate
its U.S. theatres and to make changes that may be required by law. See
"Business--Legal Proceedings" for information concerning claims alleging that
certain theatres in the Cineplex Odeon circuit are not in compliance with the
ADA.

Motion picture theatres are also subject to certain U.S. and Canadian
federal, state, provincial and local laws governing such matters as
construction, renovation and operation of its theatres, employee wages and
working conditions, health and sanitation regulations. Loews Cineplex believes
all of its theatres are in material compliance with such requirements.

53
<PAGE>

BUSINESS

Loews Cineplex is the world's largest publicly traded theatre exhibition
company in terms of revenues and operating cash flow. On May 14, 1998, the
Company completed the business combination of the Loews Theatres exhibition
business of SPE and Cineplex Odeon, another major motion picture exhibitor
with operations in the United States and Canada. On a pro forma basis for the
fiscal year ended February 28, 1998, the Company had approximately $1.0
billion in revenues. Approximately 71% of such revenues was related to box
office receipts and approximately 29% was generated by concession sales and
other revenues. The Company's pro forma share of total industry box office
receipts in North America in 1997 was approximately 10.2%.

As of May 31, 1998, Loews Cineplex owned and operated or had interests in
2,794 screens at 450 locations, of which 2,783 screens were located in 22 U.S.
states, the District of Columbia and 6 Canadian provinces. The Company's North
American exhibition screens represent approximately 8.8% of all exhibition
screens in North America. The Company's North American theatres are
concentrated in densely populated urban and suburban areas, with a strong
presence in metropolitan New York, Boston, Chicago, Baltimore, Dallas,
Houston, Detroit, Los Angeles, Seattle, Washington, D.C., Toronto, Montreal
and Vancouver. Approximately 83% of the Company's U.S. theatres are located in
11 of the 15 largest ADIs in the United States, and approximately 83% of the
Company's Canadian theatres are located in the top 10 ADIs in Canada. Since
June 10, 1998, the Company has also owned a 50% interest in 108 screens in 13
locations in Spain through a joint venture with Yelmo Films, a leading local
Spanish exhibitor. The Company has also established an initial presence in
both Hungary and Turkey.

The Company holds a 50% partnership interest in each of the U.S.
Partnerships. As of May 31, 1998, the U.S. Partnerships held interests in and
operated 12 locations with a total of 149 screens. Loeks-Star Theatres'
circuit is located in the metropolitan Detroit, Michigan area. Magic Johnson
Theatres' circuit is located in densely populated urban areas with
predominantly minority populations. Unless otherwise noted, the screen and
location figures presented herein for the Company include the screens and
locations of the Company's U.S. Partnerships.

The Company's principal stockholders include SPE, a wholly owned subsidiary
of SCA, Universal and the Claridge Group, which own 51.1% (49.9% of the
Company's voting Common Stock), 26.0% (26.6% of the Company's voting Common
Stock) and 9.6% (9.8% of the Company's voting Common Stock) of the Company's
capital stock, respectively, before giving effect to the Equity Offering. Upon
consummation of the Equity Offering, SPE, Universal and the Claridge Group
will own 39.5%, 25.6% (25.5% of the Company's voting Common Stock) and 7.4%
(7.4% of the Company's voting Common Stock), respectively, of the Company's
capital stock and collectively own approximately 72.5% of the Company's
capital stock (and 72.4% of its voting Common Stock). SPE, Universal and the
Claridge Group are collectively referred to herein as the "Stockholders."

The Company is incorporated under the laws of the State of Delaware with its
principal offices located at 711 Fifth Avenue, 11th Floor, New York, New York
10022, and its telephone number is (212) 833-6200.

54
<PAGE>

KEY BUSINESS STRATEGIES

The Company's goals are:

. to be the leading theatrical exhibitor in densely populated metropolitan
centers in North America;
. to expand into selected international markets through joint ventures,
new theatre construction and acquisitions; and
. to maintain its reputation as a preferred exhibitor for distributors and
theatre-going patrons.

The Company has developed a number of successful operating and expansion
strategies designed to achieve these goals and place it at the forefront of
the industry.

OPERATING STRATEGY

The Company intends to achieve the same high levels of operating performance
and cash flow growth historically achieved by Loews Theatres by applying its
proven operating strategy to the recently acquired Cineplex Odeon theatres and
to the Company's new ventures. During the last five fiscal years, the
Company's Loews Theatres circuit consistently achieved strong operating
results, with Total EBITDA per location growing at a compound annual growth
rate of 18.3% from fiscal 1994 to fiscal 1998 and its Total EBITDA margin
improving from 16.1% to 18.0% during the same period. The Company has achieved
these results by actively managing and improving the Loews Theatres portfolio,
providing a high level of customer service, actively controlling operating
costs, closely monitoring operations on a daily basis, and increasing
efficiency through the integration of highly flexible state-of-the-art
information systems into the Company's theatre operations. In contrast,
Cineplex Odeon experienced virtually no growth in Modified EBITDA (which, in
the case of Cineplex Odeon, is substantially comparable to Loews Theatres'
Total EBITDA) per theatre from 1993 through 1997, and its Modified EBITDA
margin declined from 13.0% in 1993 to 10.8% in 1997. The Company believes that
this lack of growth and margin decline was attributable primarily to capital
constraints and Cineplex Odeon management's need to focus on certain long-term
strategies. For the definitions of Total EBITDA, Modified EBITDA and EBITDA,
see "Selected Historical and Unaudited Pro Forma Financial Information--
Historical and Unaudited Pro Forma Combined Key Operating Statistics."

The Company's management believes that there are significant opportunities
to improve the performance of the combined circuit by adopting Loews Theatres'
policies and practices throughout the combined circuit. Key elements of the
Company's operating strategy include:

PURSUE COST SAVINGS AND OPERATING EFFICIENCIES

The Company believes that it will be able to significantly improve its
revenues, operating cash flow and gross margins by improving operating
efficiencies and reducing costs following the combination of the Loews
Theatres and Cineplex Odeon theatre circuits. The Company believes it can
achieve these efficiency improvements and cost reductions by (i) applying
Loews Theatres' proven operating practices and revenue enhancement programs
throughout the Company's combined chain of theatres and (ii) eliminating
redundant overhead and taking advantage of economies of scale. Since the
consummation of the Combination, the Company has already begun to reduce
overhead costs through headcount reductions, negotiated the extension of
significant volume discounts on bulk concession items to the Cineplex Odeon
circuit and implemented other efficiencies. The Company estimates that initial
steps taken to date will result in annual cost savings and operating
efficiencies of approximately $10 million. The Company anticipates that, over
the next several years, these cost savings and operating efficiencies will
increase to approximately $25 million annually.

Apply Proven Operating Practices. Over the past five fiscal years, Loews
Theatres increased concessions revenue per patron by 31.3% from $1.63 to
$2.14. This increase was attributable to expanded concession offerings
designed to provide more variety to patrons, increased prices, the
implementation of employee training and incentive programs which encourage
"upselling" and improve customer service, and more efficient design of
concession stands in the Company's new theatres. Loews Theatres' concession
margins have increased from 80.8% to 84.5% during the same period. This
improvement was due to the Company's ability to obtain favorable terms with
its vendors, benefit from volume discounts and offer a varied product mix
while maintaining attractive margins. In contrast, Cineplex Odeon increased
its concession revenue per patron by only 7.6% from $1.57 to $1.69 and its
concession margins decreased from 85.9% to 80.6% from 1994 to 1997. The
Company expects that Loews Theatres' proven operating practices will improve
Cineplex Odeon's overall concession productivity and margins.

55
<PAGE>

Loews Theatres' theatre operating expenses (including concession costs) as a
percentage of revenues decreased from 78.8% to 74.4% between fiscal 1994 and
fiscal 1998. Loews Theatres has been successful in reducing these expenses by
minimizing rent through favorable real estate practices and implementing more
efficient facilities layouts in the Company's newer theatres, as well as by
cross-training its staff and adjusting staffing levels based on "real time"
information from its theatres in order to increase staffing efficiency.
Between 1993 and 1997, Cineplex Odeon's theatre operating expenses (including
concession costs) as a percentage of revenues increased from 84.2% to 85.7%.
The Company believes that by applying Loews Theatres' proven operating
practices Cineplex Odeon's cost structure will improve as the two circuits are
integrated.

Realize Economies of Scale. The Company believes that it can improve
operating margins by realizing cost savings through the elimination of
overhead redundancies and by spreading the remaining overhead costs over a
larger theatre circuit. The Company also anticipates that it will realize
additional benefits created by economies of scale such as volume purchase
discounts, application of more favorable terms with selected vendors and
service suppliers and certain revenue generating contracts on a circuitwide
basis. Additional efficiencies are expected to be realized through more
efficient film programming and scheduling, enabling the Company to exhibit
motion pictures for the maximum play time by matching optimal auditoria size
with rapidly changing audience demands.

FOCUS ON CUSTOMER SERVICE

The Company's goal is to be the industry leader in, and to provide an
unprecedented level of, customer service and convenience, positioning Loews
Cineplex as the "theatre of choice" for movie-going patrons. Loews Theatres
has developed a proven customer service program focused on increasing
patronage and generating customer loyalty by improving the overall movie-going
experience. This program includes optimizing the scheduling of showtimes to
lessen congestion at its theatres, offering more frequent showtimes of popular
films for the convenience of its patrons, guaranteeing "next-in-line" service
to improve ticket and concession sales, and scripted greetings to promote a
friendly atmosphere. The Company also provides intensive employee training to
improve service and sales techniques and increase concession sales. By serving
customers more quickly, the Company believes that it can increase its
concession revenues per patron. To encourage increased patronage, the Company
has established new concession programs, providing a wider selection of
concession items and enhanced promotions and merchandising activities. The
Company has also established a series of box office admission discount
programs, including bargain matinees, as incentives for patronage by select
groups of customers, including senior citizens and children.

MAINTAIN STATE-OF-THE-ART INFORMATION SYSTEMS

In the last three years, Loews Theatres has streamlined its point-of-sales
system and invested in state-of-the-art computer technology at its theatre box
offices and concession stands, enabling it to increase productivity and manage
operating costs more efficiently. Touch screen selling stations at its box
offices and concession stands provide quicker service, resulting in higher
customer turnover and productivity improvements. This system has shortened
transaction processing times and provides "real time" information to the home
office regarding attendance levels, box office receipts, concession sales and
employee productivity at each location, as well as better inventory management
and control. Immediate access to attendance levels and concession sales at
each theatre allows management to make daily adjustments to staffing levels
and inventories in order to maximize staffing efficiencies and concession
productivity. This is especially important during critical operating periods
such as weekends and holidays. The Company has also made significant
investments in technology to streamline and enhance features within its major
reporting systems. Over the past three years, the Company has spent
approximately $13.0 million on information systems technology. The Company has
begun to integrate the Cineplex Odeon theatres into the Company's systems in
order to achieve similar benefits in its revenues and operating costs.

EXPAND ANCILLARY REVENUES

56
<PAGE>

(approximately 145 million patrons in fiscal 1998 on a pro forma basis) with
highly attractive demographics. The Company maintains screen advertising
programs circuitwide with local and national advertisers. The Company is
currently advertising Calvin Klein Jeans' products on its serving containers
for popcorn and beverages and is exploring additional advertising and
marketing programs with other world class consumer product companies. The
Company has also generated additional revenue through the leasing of its
theatres for motion picture premieres and screenings, corporate events and
private parties. Certain of the Company's theatres, such as the Sony Lincoln
Square Theatre in New York City, have earned reputations as the "preferred"
theatres for these events given their locations in key urban markets as well
as their upscale settings.

MOTIVATE KEY EMPLOYEES

The Company adopted the Stock Incentive Plan in connection with the
Combination which is designed to link compensation of management with
stockholder return. The Company expects to expand this program by granting
additional options to key employees. The Company provides additional
incentives to its theatre staff employees through the payment of commissions
for concession productivity over certain target levels, and through the offer
of benefits such as college tuition assistance programs designed to reduce
employee turnover and increase operating efficiencies.

EXPANSION STRATEGY AND PORTFOLIO MANAGEMENT

A key component of Loews Cineplex's business strategy is to pursue a
significant expansion and upgrade of its portfolio of movie theatre
properties. The Company plans to spend an aggregate of approximately $1.0
billion in capital expenditures during the next five years to (i) develop or
acquire additional theatres in the North American and international markets,
(ii) expand the number of screens at certain existing theatres, (iii)
significantly upgrade and modernize existing theatres where appropriate and
(iv) dispose of obsolete, unprofitable and non-strategic theatres. During the
past four fiscal years, Loews Theatres has achieved an average return on
investment from new theatre construction of greater than 20% per annum
(calculated on the basis of EBITDA to net investment).

UPGRADE AND EXPAND IN NORTH AMERICA

In the past four years, Loews Theatres has implemented a major theatre
reconfiguration and expansion program. This program has increased screens per
location from 5.4 at the end of fiscal year 1994 to 7.4 at the end of fiscal
year 1998. In conjunction with this expansion program, the Company has adopted
a prototype design for new theatre construction which typically has between 12
and 24 screens depending on the location, with oversized screens, stadium
seating, rocking chair seats, state-of-the-art digital sound systems and
spacious lobbies. The prototype also provides operating efficiency in the
design, location and size of concession stands and incorporates state-of-the-
art point-of-sale technology. The Company believes larger multiscreen theatres
are more efficient to operate and provide for greater operating margins and
better asset utilization. The greater number of screens per theatre provides
effective leverage of fixed costs and staffing levels over a larger revenue
base. Multiscreen facilities also enable Loews Cineplex to present a variety
of films with more frequent showtimes to the movie-going public, in order to
maximize attendance levels.

During the five fiscal years ended February 28, 1998, Loews Theatres
constructed and placed into service 25 new multiplex and megaplex theatres
with a total of 286 screens. During the same period, Loews Theatres also added
52 new screens at existing theatres. The quality of the Company's theatres and
their major metropolitan locations position the Company's theatres among the
top grossing theatres in the United States. The Company currently operates the
three highest grossing theatres in the United States for the 1998 year-to-date
according to A.C. Nielsen Company/EDI: (i) the 13-screen flagship Sony
Theatres Lincoln Square in New York City (home of the first commercial 3-D
IMAX(R) theatre in the United States); (ii) the 18-screen Universal City at
Citywalk, a retail and entertainment complex in Universal City, California;
and (iii) the 20-screen Star Theatres in Southfield, Michigan.

57
<PAGE>

The following table indicates the number of theatre locations, screens and
changes to the Loews Theatres circuit configuration as a result of its theatre
reconfiguration program (including screens and locations relating to Loeks-
Star Theatres and Magic Johnson Theatres but excluding screens and locations
relating to Cineplex Odeon's theatres and Yelmo Cineplex de Espana's theatres)
during the fiscal years ending in 1994 through 1998:

<TABLE>
<CAPTION>
FEBRUARY 28 OR 29, FIVE
------------------------------- YEAR
1994 1995 1996 1997 1998 TOTAL
---- ----- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C>
SCREENS
Beginning of year....................... 944 981 1,030 950 959 944
New construction...................... 60 54 36 44 92 286
Expansions............................ -- 15 3 22 12 52
Dispositions.......................... (23) (20) (119) (57) (28) (247)
--- ----- ----- --- ----- -----
Year end................................ 981 1,030 950 959 1,035 1,035
LOCATIONS
Beginning of year....................... 188 182 180 154 143 188
New construction...................... 7 5 3 4 6 25
Dispositions.......................... (13) (7) (29) (15) (10) (74)
--- ----- ----- --- ----- -----
Year end................................ 182 180 154 143 139 139
Average screens per location............ 5.4 5.7 6.2 6.7 7.4
</TABLE>

With the addition of the Cineplex Odeon theatre circuit as a result of the
Combination, at May 31, 1998, the Company operated theatres at 450 locations
with 2,794 screens or an average of 6.2 screens per location. These include 25
theatres comprising 85 screens in New York City and Chicago that the Company
is obligated to sell under an agreement reached with the DOJ and the attorneys
general of New York and Illinois in connection with the approval of the
Combination. The theatres held for disposition represent approximately 3% of
the Company's total screens and generated approximately $43 million of box
office revenue and approximately $9 million of cash flow in calendar year
1997. The Company also expects to close or dispose of certain overlapping
theatre locations and underperforming theatres, including older obsolete
theatres. In the aggregate, these theatres contribute only marginally to cash
flow from operations or that are operating at a loss. The Company has
preliminarily targeted a significant number of these theatres for closing.

The Company believes that a significant opportunity exists to improve the
Company's competitive position in many of its existing markets as well as to
selectively enter new markets in North America that are currently underserved.
The Company's goal in this expansion effort is to develop a more modern
portfolio of multiplex and megaplex theatre properties which offer customers
an exceptional movie-going experience. The Company currently is targeting to
open approximately 12 to 15 new theatre locations annually, and to add new
screens at certain existing locations. The Company has enacted a program to
upgrade existing theatres with stadium seating, where appropriate. The Company
also expects to close or dispose of certain overlapping theatre locations and
underperforming theatres, including older obsolete theatres that contribute
only marginally to cash flow from operations or that are operating at a loss.
The Company has preliminarily targeted approximately 550 screens for
disposition or closing over the next five years. While in the aggregate the
screens to be disposed of currently generate significant revenues, the Company
believes that the disposition or closure of these screens will not negatively
impact the Company's operating cash flow on an ongoing basis. Closure costs
related to most of these theatre closings have been provided for as part of
the "Excess Purchase Price" in connection with the purchase accounting
adjustments resulting from the Combination. See "Unaudited Pro Forma Financial
Information." In connection with the Combination, the Company also agreed with
the DOJ and the attorneys general of New York and Illinois to dispose of 25
additional theatres with 85 screens. See "--Properties."

EXPAND INTERNATIONALLY

58
<PAGE>

particularly through the replication of the multiplexing process underway
today in the domestic arena. Much of the world is underscreened and
underserved by poor quality theatres. According to Screen Digest, there were
approximately 9,000 people per screen in the United States in 1996, compared
to an average of approximately 20,000 people per screen in Western Europe and
approximately 79,000 people per screen in Latin America. In the United States,
the average person visits a theatre approximately five times per year,
compared to 1.9 times per year in Western Europe and only 0.6 times per year
in Latin America. Marginal increases in attendance rates and increased average
ticket prices have had a dramatic impact in expanding box office receipts.

In June 1998, the Company formed its Loews Cineplex International division
to develop, construct and operate theatres outside of North America. The
Company is currently considering expansion opportunities in selected areas
throughout the world that the Company believes are underscreened and
underserved by existing operators and is currently pursuing several
opportunities in Western Europe and developed countries in other regions. The
Company has targeted selected markets in Western Europe for its international
expansion based on the favorable economy, ease of doing business and
availability of attractive partners. The Company intends to identify local
partners in targeted international markets with whom management can pursue
joint venture opportunities that capitalize on the Company's development and
operating expertise and access to capital, and that take advantage of the
local partners' established presence and significant local expertise. The
Company has recently announced the formation of a joint venture with Yelmo
Films to operate existing theatres and construct and operate new state-of-the-
art multiplex theatres in Spain. See "Summary--Recent Developments." The
Company also operates a six-screen theatre in Hungary and a five-screen
theatre in Turkey. The Company is currently evaluating several other specific
international expansion opportunities in Western Europe, Eastern Europe, Latin
America and Asia.

PURSUE ACQUISITIONS AND JOINT VENTURES

The Company is continually seeking opportunities to acquire theatre circuits
with locations that complement the Company's existing locations and that
provide the opportunity to improve operating margins through significant cost
savings realized through economies of scale. Acquisitions can also provide the
critical mass needed to expand into new markets. The Company targets
acquisitions that can be consummated at an attractive valuation and where
there is a significant strategic fit with the Company's existing theatre
circuit.

Although the Company regularly evaluates acquisition opportunities, the
Company has not entered into any commitment with respect to any future
material acquisition.

OPEN THEATRES IN LOCATION-BASED ENTERTAINMENT CENTERS

As consumers seek more sophisticated entertainment offerings, the Company
and its competitors have begun to construct new theatres in location-based
entertainment centers. In addition to theatres, these centers typically have
specialty retail stores, themed restaurants and video arcades, all of which
have high entertainment content. The Company currently operates the 18-screen
Universal City theatre multiplex at Citywalk, and will operate a 15-screen
theatre and a Sony IMAX(R) theatre at Metreon, Sony's 350,000 square foot
entertainment center in San Francisco scheduled to open in mid-1999. The
Company will continue to explore these opportunities with Sony and Universal
as well as other developers of location-based entertainment centers.

59
<PAGE>

THEATRE OPERATIONS

Nearly all of the Company's screens are located in multiscreen theatres. The
Company's average screens per theatre is 6.2 as of May 31, 1998), and the
Company intends to increase this ratio through the construction of larger
multiplex or megaplex theatres as well as expansion of certain existing
theatres and closing of smaller obsolete theatres. Multiplex theatres enable
the Company to present a variety of films appealing to several segments of the
movie-going public while serving patrons from common support facilities, box
office, concession areas, restrooms and lobby. This strategy enhances
attendance, utilization of theatre capacity and operating efficiencies thereby
enhancing revenues and profitability. Staggered scheduling of starting times
minimizes staffing requirements for crowd control, box office and concession
services while reducing congestion at the box office and in the concession
areas.

The Company relies upon advertising and movie schedules printed in
newspapers to inform its patrons of film selections and show times. The
Company also exhibits in its theatres previews of coming attractions and films
presently playing on the Company's other screens in the same market area.

PROPERTIES
At May 31, 1998, the Company, including Loeks-Star Theatres and Magic
Johnson Theatres, operated or had interests in 2,794 screens in 450 theatres,
of which 46 theatres were owned by the Company, 398 theatres were leased and 6
theatres were subject to management arrangements. The Company's leases are
generally entered into on a long-term basis with terms (including options to
renew) generally ranging from 20 to 40 years. Theatre leases generally provide
for the payment of a fixed annual rent and, in some cases, a percentage of box
office receipts or total theatre revenue. The table below sets forth the
locations of the Company's screens at May 31, 1998 (except in the case of
Spain which is as of June 10, 1998).

<TABLE>
<CAPTION>
UNITED STATES CANADA
------------- -------
STATE SCREENS LOCATIONS(1) PROVINCE SCREENS LOCATIONS(1)
- ----- ------------- ------------ -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Arizona............. 33 4 Alberta........... 116 19
California.......... 69 10 British Columbia.. 53 11
Connecticut......... 32 8 Manitoba.......... 9 3
District of
Columbia........... 38 12 Ontario........... 373 62
Florida............. 7 1 Quebec............ 224 36
Georgia............. 12 1 Saskatchewan...... 27 4
--- ---
Idaho............... 21 5 Total........... 802 135
=== ===
Illinois(2)......... 364 63
Indiana............. 54 6
Kentucky............ 9 2
Maryland............ 169 27 INTERNATIONAL
-------------
Massachusetts....... 82 12
Michigan............ 113 9 COUNTRY SCREENS LOCATIONS(1)
------- ------- ------------
Minnesota........... 25 5 Spain............. 108 13
New Hampshire....... 12 2 Hungary........... 6 1
New Jersey.......... 196 23 Turkey............ 5 1
--- ---
New York(2)......... 299 59 Total........... 119 15
=== ==
Ohio................ 26 4
Pennsylvania........ 7 1
Texas............... 180 20
Utah................ 65 12
Virginia............ 57 9
Washington.......... 111 18
----- ---
Total........... 1,981 313
===== ===
</TABLE>
- --------
(1) Includes theatres owned, leased or managed by the Company, as well as
partnerships in which the Company has interests.
(2) The above properties include theatres scheduled to be divested as a result
of the DOJ settlement. See "--Legal Proceedings."

60
<PAGE>

Pursuant to the agreements governing the Loeks-Star Theatres partnership,
the Company is responsible for film booking arrangements and the facilities
are managed by Loeks Michigan Theatres, Inc. under an operating agreement.
Those agreements also include certain provisions governing the transfer of
partnership interest between the partners and to unaffiliated third parties.

COMPETITION

The North American motion picture exhibition industry is generally
fragmented, with ten large companies owning or operating a majority of
screens. In most of its respective markets, the Company is in direct
competition for film exhibition licensing rights and theatre locations with
both large and small exhibition companies. See "Risk Factors--Competition" and
"The Motion Picture Exhibition Industry."

ENVIRONMENTAL MATTERS

The Company owns, manages and/or operates theatres and other properties that
are subject to certain U.S. and Canadian federal, state and local laws and
regulations relating to environmental protection and human health and safety,
including those governing the investigation and remediation of contamination
resulting from past or present releases of hazardous substances. Certain of
these laws and regulations may impose joint and several liability on certain
statutory classes of persons for the costs of investigation or remediation of
such contamination, regardless of fault or the legality of the original
disposal. These persons include the present or former owner or operator of a
contaminated property, and companies that generated, disposed of or arranged
for the disposal of hazardous substances found at the property.

One of the Company's drive-in motion picture theatres located in the State
of Illinois is currently the subject of investigation by the Illinois
Environmental Protection Agency in connection with the past disposal of auto
shredder residue and other debris which appear to contain hazardous materials.
The Company does not believe that its liabilities, if any, in connection with
this site will be material, although there can be no assurance to that effect.

LEGAL PROCEEDINGS

From time to time, the Company is involved in routine litigation and legal
proceeding in the ordinary course of its business, such as personal injury
claims, employment matters and contractual disputes. Except for those
instances noted below, the Company does not have any litigation or proceedings
that management believes will have a material adverse effect, either
individually or in the aggregate, upon the Company.

DOJ Proceedings. On April 16, 1998, a Complaint was filed in the Southern
District of New York by the United States of America, the State of New York,
by and through its Attorney General, Dennis C. Vacco, and the State of
Illinois, by and through its Attorney General, Jim Ryan vs. SCA, LTM Holdings,
Inc. d/b/a/ Loews Theatres, Cineplex Odeon and Seagram Co. Ltd., alleging
federal antitrust violations in New York and Illinois stemming from the
Combination. That same day the parties entered into, and the Southern District
of New York so ordered, a Stipulation & Order setting forth a proposed Final
Judgment resolving the matter. Under the terms of the agreement, which is
subject to court approval following the public comment period, the Company is
required to divest itself of certain theatres in New York and Chicago. The
theatres held for disposition represented approximately 3% of total screens
and generated approximately $43 million of box office revenue and
approximately $9 million of cash flow on an annual basis.

Six West Retail Acquisition, Inc. On July 24, 1997, Six West Retail
Acquisition, Inc., a real estate development company ("SWRA"), initiated a
lawsuit against the Company and certain of its affiliates in the U.S. District
Court for the Southern District of New York, seeking injunctive relief and
unspecified monetary damages and alleging, among other things, the Company has
violated federal antitrust laws by engaging in block booking agreements and
monopolizing the motion picture exhibition market in New York City. SWRA owns
or leases the Paris and New York Twin theatres in Manhattan. The Paris Theatre
was managed by an operating subsidiary of the Company under an oral management
agreement that has been terminated. The New York Twin Theatre is managed by an
operating subsidiary of the Company under a written management agreement. SWRA

61
<PAGE>

is also alleging that the Company violated its contractual and fiduciary
responsibilities in managing the two theatres. On December 3, 1997, an amended
complaint was filed asserting similar claims with respect to the Festival
Theatre which was operated by a subsidiary of the Company until it was closed
in 1994. All of the defendants moved to dismiss the amended complaint by
motion dated January 8, 1998. No decision on the motion to dismiss has been
rendered by the court as of the date of this Prospectus. The parties have
commenced document production and discovery proceedings. The Company believes
that SWRA's claims are without merit, and the Company intends to oppose SWRA's
claims vigorously.

ADA Litigation. On or about December 17, 1997, the Disability Rights Council
of Greater Washington and others commenced a lawsuit in the U.S. District
Court for the District of Columbia against Cineplex Odeon and Plitt. The
complaint alleges that certain Cineplex Odeon theatres in the Washington, DC
metropolitan area (including Maryland and Virginia) deny persons with physical
disabilities full and equal enjoyment of such theatres as a result of
architectural and structural barriers. The complaint alleges that, as a
consequence, Cineplex Odeon and Plitt are discriminating against such persons
in violation of the ADA and, where applicable, the District of Columbia Human
Rights Act. The plaintiffs are seeking a judgment with injunctive relief
ordering Cineplex Odeon and Plitt to cease violating, and to bring their
facilities into compliance with, such statutes. The plaintiffs are also
seeking compensatory and punitive or exemplary damages in an unknown amount,
as well as costs and attorneys' fees. The Company intends to defend this claim
vigorously.

The DOJ, in coordination with the New York City Commission on Human Rights,
is currently investigating Cineplex Odeon theatres in New York City for
compliance with the ADA and the New York City Human Rights Law, including the
13 theatres in Manhattan that the Company intends to sell in order to comply
with the agreement with the DOJ and the Attorney General of New York. On May
8, 1998, the DOJ informed Cineplex Odeon that it intended to accelerate the
schedule of site visits in light of the impending sale of these theatres. In
addition, the DOJ has alleged that its investigation to date has identified
numerous violations of the ADA. The Company has and will continue to
vigorously oppose the allegations and claims of the DOJ with respect to the
compliance of these theatres under the ADA. Nevertheless, the pending
investigation and related allegations may adversely affect the price received
by the Company in connection with the sale of these theatres.

EMPLOYEES

As of May 15, 1998, the Company employed approximately 12,442 employees,
including 2,772 full-time and 9,670 part-time employees. The Company's
employment levels are generally directly related to seasonal changes in
business activity. The Company is a party to collective bargaining agreements
with 33 unions, of which approximately 1,220 employees are members. The
Company believes that its employee relations are generally good.

Certain of the Company's labor contracts with the I.A.T.S.E. for
projectionists in Chicago expired in February of 1998. On April 27, 1998 the
projectionists were locked-out by the Company, but the theatres continue to
operate despite the lockout. The Company believes that it is premature to
assess the outcome of these negotiations at this time.

I.A.T.S.E. Local 523 has been locked out of a Company theatre in Quebec City
since April 16, 1997, as a result of a dispute over the hours to be worked by,
and wages for, projectionists, but the theatre continues to operate despite
the lockout.

The Company is currently in negotiations with a union in Seattle,
Washington, where there is a possibility of a labor dispute. However,
management is confident that the Company's theatres will continue to operate
there in the event of a strike or lockout.

Additionally, the Company is in negotiations with two unions in the greater
New York area. It is premature to assess the outcome of such negotiations.
However, the Company does not expect any disruption in operations during such
negotiations.

The Company is not currently in discussions with union members in Utah and
Idaho. The current contract has expired, and the local has been decertified in
Utah. Negotiations are likely to begin in the next several months in Idaho and
will resume in Utah if the local is recertified.

62
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following persons are the current directors and executive officers of
the Company. Certain information relating to the directors and executive
officers, which has been furnished to the Company by the individuals named, is
set forth below.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lawrence J. Ruisi................. 50 President, Chief Executive Officer and
Director
Allen Karp........................ 57 Chairman, Chief Executive Officer of
Cineplex Odeon Canada and Director
Travis Reid....................... 43 President, Loews Cineplex United States
J. Edward Shugrue................. 48 President, Loews Cineplex International
John J. Walker.................... 45 Senior Vice President, Chief Financial
Officer and Treasurer
John C. McBride, Jr. ............. 42 Senior Vice President and General Counsel
Seymour Smith..................... 78 Senior Vice President and Deputy General
Counsel
Mindy Tucker...................... 38 Corporate Vice President of Strategic
Planning and Secretary
Joseph Sparacio................... 38 Vice President, Finance and Controller
George A. Cohon................... 61 Director
Marinus N. Henny.................. 47 Director
Ernest Leo Kolber................. 69 Director
Kenneth Lemberger................. 51 Director
Ron Meyer......................... 53 Director
Brian C. Mulligan................. 38 Director
Yuki Nozoe........................ 47 Director
Karen Randall..................... 45 Director
Stanley Steinberg................. 64 Director
Howard Stringer................... 55 Director
Robert J. Wynne................... 55 Director
Mortimer B. Zuckerman............. 60 Director
</TABLE>

Lawrence J. Ruisi--Since May 1998, Mr. Ruisi has served as President and
Chief Executive Officer of Loews Cineplex and a director of Loews Cineplex.
From September 1994 until May 1998, Mr. Ruisi was President of SRE, and from
1990 through May 1998, Mr. Ruisi served as Executive Vice President of SPE. In
such capacities, Mr. Ruisi was responsible for oversight of SPE's theatrical
exhibition group, including the Loews Theatres, Star Theatres of Michigan and
Magic Johnson Theatres circuits.

Allen Karp--Mr. Karp has been Chairman and Chief Executive Officer of
Cineplex Odeon Canada and a director of Loews Cineplex since May 1998. From
December 1989 until May 1998, Mr. Karp served as President and Chief Executive
Officer of Cineplex Odeon.

Travis Reid--Since May 1998, Mr. Reid has served as President, U.S.
Operations of Loews Cineplex. From October 1996 to May 1998, Mr. Reid had
served as President of Loews Theatres and, for the preceding year, served as
Executive Vice President-Film Buying of Loews Theatres. As Executive Vice
President of Loews Theatres, Mr. Reid was involved in all aspects of the
circuit's strategic planning, corporate development and expansion. For the
three years prior to 1995, Mr. Reid served as Senior Vice President of Film.
Prior to joining Loews Theatres in 1991, Mr. Reid served as Vice President of
Film for General Cinema's Midwestern, Southwestern and Western regions.

63
<PAGE>

J. Edward Shugrue--Since June 1998, Mr. Shugrue has served as President,
Loews Cineplex International. From 1996 until 1998, Mr. Shugrue served as a
senior corporate executive of SPE's Corporate Development Group, where he was
responsible for identifying and developing growth opportunities for SPE in
international markets. From 1987 to 1996, Mr. Shugrue served as president of
Columbia TriStar Film Distributors International, the international theatrical
arm of SPE.

John J. Walker--Since 1998, Mr. Walker has served as Senior Vice President,
Chief Financial Officer and Treasurer of Loews Cineplex. From 1990 until 1998,
Mr. Walker served as Executive Vice President and Chief Financial Officer of
Loews Theatres. From 1988 to 1990, Mr. Walker has served as Vice President-
Controller of Loews Theatres. Mr. Walker is responsible for overseeing all
aspects of financial reporting, budgeting, internal auditing, management
information systems, treasury and risk management and insurance. Mr. Walker is
a certified public accountant and is a member of the American Institute of
Certified Public Accountants and the New York State Society of Certified
Public Accountants.

John C. McBride, Jr.--Since January 1998, Mr. McBride has been employed by
Loews Theatres and since May 1998, Mr. McBride has served as Senior Vice
President and General Counsel of Loews Cineplex. From 1996 to 1998, Mr.
McBride served as Senior Vice President, Legal Affairs of SPE. From 1992 to
1996, Mr. McBride served as Vice President, Legal Affairs of SPE. From 1990 to
1992, Mr. McBride served as Assistant General Counsel of SPE.

Seymour Smith--Effective May 1998, Mr. Smith became Senior Vice President
and Deputy General Counsel of the Company. From 1993 to May 1998, Mr. Smith
served as Executive Vice President and General Counsel of Loews Theatres.
Until 1997, Mr. Smith served as a director of Loews Theatres.

Mindy Tucker--Since May 1998, Ms. Tucker has served as Corporate Vice
President of Strategic Planning and Secretary of Loews Cineplex. From 1996 to
1998, Ms. Tucker served as Senior Vice President of Development and Planning
for SRE. From 1994 to 1996, Ms. Tucker served as Vice President of Business
Development for SRE. From 1992 to 1994, Ms. Tucker served as Vice President of
Corporate Strategy and Planning of SPE.

Joseph Sparacio--Since May 1998, Mr. Sparacio has served as Vice President,
Finance and Controller of Loews Cineplex. From 1990 to May 1998, Mr. Sparacio
served as Vice President of Finance and Controller of Loews Theatres. Prior to
joining Loews Theatres, Mr. Sparacio spent eight years with the New York City
office of the independent accounting firm of Ernst & Young where he was a
Senior Manager of Audit. Mr. Sparacio is a certified public accountant and is
a member of the American Institute of Certified Public Accountants and the New
York State Society of Certified Public Accountants.

George A. Cohon--Since 1992, Mr. Cohon has served as Senior Chairman and
Chairman of the Executive Committee of McDonald's Restaurants of Canada
Limited and Senior Chairman of McDonald's in Russia. Mr. Cohon also serves as
a director of The Royal Bank of Canada and Astral Communications Inc.
Additionally, Mr. Cohon is an officer of the Order of Canada.

Marinus N. Henny--Since April 1997, Mr. Henny has been Executive Vice
President and Chief Financial Officer of SCA. From December 1993 to April
1997, Mr. Henny was Executive Vice President of SCA.

The Honorable Ernest Leo Kolber--Senator Kolber was appointed Chairman of
the Board of Cineplex Odeon in December 1989. He has been a Member of the
Senate of Canada since December 1983. From October 1987 to September 1993,
Senator Kolber was Chairman of Claridge Inc. Senator Kolber is a director of
The Seagram Company Ltd. and The Toronto-Dominion Bank, Senator Kolber has
been a director of Loews Cineplex since May 1998.

Kenneth Lemberger--Since January 1997, Mr. Lemberger has been President of
Columbia TriStar Motion Picture Group. From 1994 to January 1997, Mr.
Lemberger was Corporate Executive Vice President of SPE.

64
<PAGE>

Ron Meyer--Mr. Meyer has been President and Chief Operating Officer of
Universal since August 1, 1995. Prior to August 1995, Mr. Meyer served as
President of Creative Artists Agency, Inc., a talent agency that he co-founded
in 1975.

Brian C. Mulligan--Mr. Mulligan has been Senior Vice President, Corporate
Development and Strategic Planning, of Universal since January 1997. From late
1995 to January 1997, Mr. Mulligan served as Vice President of Corporate
Development of Universal and earlier in 1995 he served as Vice President and
Controller of Universal from 1991 to 1995.

Yuki Nozoe--Since October 1996, Mr. Nozoe has been Executive Vice President
of SPE and, since February 1996, Executive Vice President of SCA. From 1993 to
February 1996, Mr. Nozoe was Senior Vice President of Marketing for Sony
Electronics, Inc.

Karen Randall--Since February 1996, Ms. Randall has been Senior Vice
President and General Counsel of Universal. From 1991 to February 1996, Ms.
Randall was Managing Partner of the Los Angeles office of Katten Muchin &
Zavis.

Stanley "Mickey" Steinberg--Since May 1998, Mr. Steinberg has been a
consultant to Sony Development. From August 1994 to May 1998, Mr. Steinberg
served as Chairman of SRE and, in that capacity, has had overall
responsibility for developing and operating retail concepts, food venues and
large retail entertainment centers in the United States and abroad, as well as
Loews Cineplex locations, Sony Plaza and Sony Wonder interactive museum. Prior
to joining SRE, Mr. Steinberg was Executive Vice President and Chief Operating
Officer of Walt Disney Imagineering since 1989.

Howard Stringer--Since May 1998, Mr. Stringer has served as Chairman of SPE.
Mr. Stringer has served as President of SCA and as a member of the Boards of
Directors of SCA, SPE, Sony Electronics, Inc. and Sony Music Entertainment,
Inc. since May 1997. From February 1995 to April 1997, Mr. Stringer was
Chairman and CEO of TELE-TV, a company formed by Bell Atlantic, Nynex and
Pacific Telesis. Prior to that time, Mr. Stringer was President of the CBS
Broadcast Group since 1988.

Robert J. Wynne--Since May 1998, Mr. Wynne has served as Co-President and
Chief Operating Officer of SPE. From November 1997 to May 1998, Mr. Wynne has
been Co-President and Chief of Corporate Operations of SPE, and, since January
1997, Senior Executive Vice President. He joined SPE in November 1995 as
Corporate Executive Vice President. Prior to that, Mr. Wynne was a founding
partner of the law firm Hill, Wynne, Troop and Meisinger, where he served as
primary outside counsel to SPE on major corporate, financing and strategic
transactions since the late 1970's.

Mortimer B. Zuckerman--For more than the past five years, Mr. Zuckerman has
served as Chairman of Boston Properties, Inc. Mr. Zuckerman is also Chairman
and Editor-in-Chief of U.S. News and World Report, Chairman of The Atlantic
Monthly, Chairman and Co-Publisher of the New York Daily News, Chairman of
Fast Company and Chairman of Applied Graphics Technologies.

Subject to the provisions of the Stockholders Agreement described elsewhere
in this Prospectus, all directors hold office until the annual meeting of
stockholders following their election or until their successors are duly
elected and qualified. Officers are appointed by the Board of Directors and
serve at the discretion thereof, subject to certain provisions of the
Stockholders Agreement concerning the appointment of executive officers. See
"The Stockholders Agreement."

65
<PAGE>

EXECUTIVE COMPENSATION

The table set forth below contains information concerning compensation for
services in all capacities to Loews Cineplex of those persons who (i) served
as the chief executive officer of Loews Cineplex and (ii) were the other four
most highly compensated executive officers of Loews Cineplex (determined as of
the end of the last fiscal year and hereafter referred to as the "Named
Executive Officers") for the two fiscal years ended February 28, 1998 and
February 28, 1997, respectively.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------ ------------
SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ----------------- ------ -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... 1998 $728,875(1) $500,000(1) $1,796,933(1)(2) 900,000 $ 56,313(6)
Chief Executive Officer 1997 $683,974(1) $608,802(1) $ 655,200(1)(3) 16,183(7)
Barrie Lawson-Loeks(4).. 1998 $534,070 $250,000 $ 69,360(5) $761,158(6)
Co-Chairman 1997 $522,492 $275,000 $ 50,000(5) 16,914(7)
Jim Loeks(4)............ 1998 $534,070 $250,000 $ 62,160(5) $761,076(6)
Co-Chairman 1997 $522,492 $275,000 $ 50,000(5) 16,430(7)
Travis E. Reid.......... 1998 $393,026 $225,000 250,000 $ 12,116(6)
President 1997 $363,903 $175,000 10,320(7)
Seymour Smith........... 1998 $382,040 $ 60,000 50,000 $ 9,834(6)
Senior Vice President, 1997 $382,061 $ 60,000 7,732(7)
Deputy General Counsel
and Assistant Secretary
</TABLE>
- --------
(1) Represents amounts paid to Mr. Ruisi as President of SRE. In this
capacity, Mr. Ruisi had other responsibilities in addition to the
oversight and direction of the Sony theatrical exhibition group.
(2) Represents amounts paid to Mr. Ruisi in connection with the termination of
his employment agreement with SRE in satisfaction of certain outstanding
incentive award obligations under the agreement.
(3) Represents amounts paid to Mr. Ruisi by SRE pursuant to its long-term
incentive plan.
(4) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
(5) Includes (i) for fiscal 1998, $50,000 for each of Ms. Lawson-Loeks and Mr.
Loeks attributable to forgiveness by an affiliate of SPE of a portion of
relocation indebtedness owed to such affiliate of SPE incurred in 1992,
and $19,360 and $12,160 paid to Ms. Lawson-Loeks and Mr. Loeks,
respectively, as car allowances and (ii) for fiscal 1997, $50,000 for each
of Ms. Lawson-Loeks and Mr. Loeks attributable to forgiveness by an
affiliate of SPE of a portion of relocation indebtedness owed to such
affiliate of SPE incurred in 1992.
(6) Represents $10,400, $56,313, $10,400, $11,546 and $9,834 contributed by
the Company to the Company's savings plan for Ms. Lawson-Loeks and Messrs.
Ruisi, Loeks, Reid and Smith, respectively; premiums paid by the Company
for term-life insurance in the amounts of $758, $676 and $570 for Ms.
Lawson-Loeks and Messrs. Loeks and Reid, respectively; and $750,000 paid
to each of Ms. Lawson-Loeks and Mr. Loeks as separation payments.
(7) Represents $16,183, $16,183, $15,754, $9,750 and $7,732 contributed by the
Company to the Company's savings plan for Ms. Lawson-Loeks and Messrs.
Ruisi, Loeks, Reid and Smith, respectively, and premiums paid by the
Company for term life insurance in the amounts of $731, $676 and $570 for
Ms. Lawson-Loeks and Messrs. Loeks and Reid.

66
<PAGE>

Stock Options. The table below sets forth information with respect to grants
of options to purchase Common Stock during the year ended February 28, 1998 to
the Named Executive Officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS GRANT DATE VALUE
------------------------------------------------------ -----------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE/BASE EXPIRATION GRANT DATE
NAME GRANTED (1) FISCAL YEAR (2) PRICE ($/SHARE) DATE PRESENT VALUE (3)
---- ----------- --------------- --------------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... 900,000 42.0% $13.125 12/16/07 $3,924,000
Barrie Lawson-Loeks(4).. -- -- -- -- --
Jim Loeks(4) ........... -- -- -- -- --
Travis Reid............. 250,000 11.7% $13.125 12/16/07 $1,090,000
Seymour Smith........... 50,000 2.3% $13.125 12/16/07 $ 218,000
</TABLE>
- --------
(1) All options, other than those held by Mr. Ruisi, become exercisable with
respect to twenty percent of the aggregate number of shares of Common
Stock covered by such options on each of the first, second, third, fourth
and fifth anniversaries of the closing of the Combination, but in any
event will be fully vested and exercisable as of the fifth anniversary of
the date of grant. With respect to the options held by Mr. Ruisi, options
to purchase 500,000 shares of Common Stock became exercisable upon grant
and the remaining options will become exercisable in respect of 100,000
shares covered thereby on the first through fourth anniversaries of the
closing of the Combination. Upon a change of control of the Company, all
options outstanding on the date of such change of control will become
immediately and fully exercisable.
(2) Percentages shown are based on a total of 2,145,000 options granted to
employees of the Company during the fiscal year ended February 28, 1998.
(3) These estimates of value were developed solely for the purposes of
comparative disclosure in accordance with the rules and regulations of the
Commission and are not intended to predict future prices of the Company's
common stock. The values assigned to each reported option on this table
are computed using the Black-Scholes option pricing model. The
calculations assume a risk-free rate of return of 5.77%, which represents
the ten-year yield of United States Treasury Notes on the date of grant
and an expected volatility of 23.46%; however, there can be no assurance
as to the actual volatility of the Company's common stock in the future.
The calculations also assume no dividend payout and a five year expected
life.
(4) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.

67
<PAGE>

Aggregated Exercises and Year-End Holdings. The following table sets forth
as of February 28, 1998, for each of the Named Executive Officers (i) the
total number of options for Common Stock (exercisable and unexercisable) held
and (ii) the value of such options that were in-the-money at February 28,
1998.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE AT FEBRUARY 28, 1998 (#)(1) AT FEBRUARY 28, 1998 ($)(3)
EXERCISE REALIZED ------------------------------ -----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Ruisi....... -- -- 500,000 400,000 1,562,500 1,250,000
Barrie Lawson-Loeks(2).. -- -- -- -- -- --
Jim Loeks(2)............ -- -- -- -- -- --
Travis Reid............. -- -- -- 250,000 -- 781,200
Seymour Smith........... -- -- -- 50,000 -- 156,250
</TABLE>
- --------
(1) The number of securities underlying the options give effect to the
Combination.
(2) Ceased to be employees of the Company effective April 1, 1998 upon
termination of their existing employment agreements.
(3) Based on the difference between (i) ten times the per share closing price
of the Common Stock of Cineplex Odeon as reported on the NYSE Composite
Tape on February 28, 1998 and (ii) the exercise price of the options on
such date.

EMPLOYMENT AGREEMENTS

Loews Cineplex and Mr. Ruisi entered into an employment agreement (the
"Agreement") that became effective as of the consummation of the Combination
and provides for an employment term of five years (the "Employment Period").
During the Employment Period Mr. Ruisi will serve as President and Chief
Executive Officer of Loews Cineplex and be a member of Loews Cineplex's Board
of Directors and of its principal Canadian subsidiary's Board of Directors and
of any Executive or similar committee. During the Employment Period Mr. Ruisi
will be paid a base salary of $750,000 each year and will be eligible to
participate in all then-operative employee benefit plans of Loews Cineplex
which are applicable generally to Loews Cineplex's senior executives. In
addition, Mr. Ruisi will be eligible to receive an annual bonus (the "Annual
Bonus") which shall be targeted at $500,000 plus a specified cost of living
adjustment and in any event will be not less than $250,000 plus the specified
cost of living adjustment (the "Minimum Annual Bonus"). In addition to the
initial grant of options to purchase 900,000 shares of Loews Cineplex common
stock pursuant to the Loews Cineplex stock option plan at an exercise price of
$13.125 (the "Initial Options"), Mr. Ruisi will be granted not less than an
additional 100,000 options on each day immediately preceding the second, third
and fourth anniversaries of the date of the consummation of the Combination
(the "Additional Options").

If Mr. Ruisi's employment terminates upon the expiration of his agreement,
or sooner by reason of death or disability, for "cause" (as defined in Mr.
Ruisi's agreement) by Loews Cineplex or by Mr. Ruisi other than by reason of
Loews Cineplex's material breach of the Agreement, Loews Cineplex is obligated
to pay him all accrued but unpaid salary and benefits and a pro rata portion
of the Minimum Annual Bonus for the year of termination. If Loews Cineplex
terminates Mr. Ruisi's employment without cause prior to the expiration of the
Agreement, which it will be deemed to do if it materially reduces Mr. Ruisi's
duties or responsibilities or otherwise materially breaches the Agreement, it
is obligated to provide, in addition to the amounts described in the preceding
sentence, his base salary, employee benefits (excluding car allowance or
leasing benefits) and the Minimum Annual Bonus that would have been payable
during the balance of the Employment Period (or with respect to certain
benefits which are not quantifiable such as health benefits, to continue such
benefits for the balance of the Employment Period), and Mr. Ruisi would have
no obligation to mitigate the amount payable by the Company by seeking
subsequent employment or otherwise. In addition, in the event of such a
termination, the Initial Options and Additional Options awarded prior to the
date of such termination shall vest immediately and continue to be exercisable
in accordance with Loews Cineplex stock option plan for a period of not longer

68
<PAGE>

than twelve months from the date of such termination. Except in the event Mr.
Ruisi's employment is terminated by Loews Cineplex for cause, for a period of
three months following termination, Mr. Ruisi will be entitled, without cost,
to the exclusive use of an office, as well as access to secretarial,
receptionist and telephone services.

Effective as of the consummation of the Combination, Allen Karp became a
director of the Company and Chairman and Chief Executive Officer of Cineplex
Odeon Canada. Allen Karp entered into an employment agreement with Cineplex
Odeon dated July 4, 1996, which was amended on November 28, 1997 in
anticipation of the Combination and which was assumed by the Company as part
of the Combination. The agreement, as amended, provides for (i) an annual
employment term ending on the third anniversary of the Combination, (ii) a
minimum annual base salary of $550,000, (iii) certain employee benefits, (iv)
a guaranteed minimum annual bonus of $155,000 (the "Minimum Bonus"), (v) a
special one-time cash bonus of $1,000,000 (half of which has been paid and the
other half to be paid within 90 days after the Combination), and (vi) an
option to purchase 100,000 shares of the Company's common stock. Mr. Karp's
employment agreement provides that Cineplex Odeon may provide written notice
of non-renewal at any time during the first six months of the last year of the
agreement. If Cineplex Odeon provides such notice, Mr. Karp is entitled to a
termination payment upon the expiration of the agreement in an amount equal to
two times the average of the sum of his annual base salary plus Minimum Bonus
paid and any annual bonus paid or payable in excess of his Minimum Bonus in
respect of the three preceding calendar years minus the base salary and
Minimum Bonus paid to him from the date of such notice to the expiration of
the agreement, together with any compensation previously deferred and not yet
paid.

Mr. Karp's employment agreement also provides that Cineplex Odeon may
provide written notice of non-renewal on a date which is on or before one year
prior to the expiration of the agreement. In such event, Cineplex Odeon may
also elect to terminate Mr. Karp's employment as of the date which is one year
prior to the expiration of the agreement. If Cineplex Odeon gives such notice
of non-renewal but does not terminate Mr. Karp's employment effective one year
prior to the expiry of his agreement, he is entitled to a termination payment
upon the expiration of the agreement in an amount equal to his then annual
base salary plus the Minimum Bonus, together with any compensation previously
deferred and not yet paid by Cineplex Odeon. If Cineplex Odeon provides such
notice and elects to terminate his employment as of the date which is one year
prior to the expiration of the agreement, Mr. Karp is entitled to a
termination payment in an amount equal to two times the average of the sum of
his annual base salary plus Minimum Bonus paid and any annual bonus paid or
payable in excess of his Minimum Bonus in respect of the three preceding
calendar years, together with any compensation previously deferred and not yet
paid. In addition, if Cineplex Odeon provides written notice of non-renewal,
then, in certain circumstances, Mr. Karp may opt to terminate his employment
on 90 days' notice, in which case he will be entitled to a termination payment
equal to the base salary plus Minimum Bonus which would have been paid to him
from the date of termination of his employment to the expiry of his agreement,
together with any compensation previously deferred and not yet paid.

If Mr. Karp's employment agreement is terminated as a result of a material
breach by Cineplex Odeon, he is entitled to a payment equal to the greater of
(i) his most recent annual bonus to the extent it exceeds his Minimum Bonus
and his Minimum Bonus plus the base salary then being paid which would have
otherwise been paid from the date of termination of employment to the
expiration date of the agreement, and (ii) two times the sum of the annual
base salary and Minimum Bonus then being paid plus his most recent annual
bonus paid to the extent it exceeds his Minimum Bonus. In addition, Mr. Karp
will be entitled to any compensation previously deferred and not yet paid by
Cineplex Odeon. If, however, the Aggregate Compensation (as hereinafter
defined) which would have been paid to him from the date of termination of
employment to the expiration date of the agreement plus an amount equal to one
times the Aggregate Compensation is greater than the aforesaid amount, then
that is the termination payment to which he is entitled.

Mr. Karp has the right to terminate his employment at any time for any
reason until the first anniversary of the Combination in which event he will
be entitled to a termination payment equal to the greater of (i) the amount
described in the preceding paragraph, or (ii) an amount equal to the greater
of (A) the Minimum Bonus and base salary that would have otherwise been paid
from the date of termination of employment to the expiration date of

69
<PAGE>

the agreement, plus any previously deferred but unpaid amounts, or (B) an
amount equal to two times the sum of his base salary and Minimum Bonus and the
most recent annual bonus paid to the extent it exceeds his Minimum Bonus in
the one year period prior to the Combination (the "Pre-Combination
Compensation"), plus, to the extent not theretofore paid, the Pre-Combination
Compensation for a period of six months or, if greater, the period from the
consummation of the Combination to the date of termination of employment, plus
any previously deferred but unpaid amounts. For the purpose of making all of
the calculations described in this paragraph, Mr. Karp's employment will be
deemed to have terminated effective as of the consummation of the Combination.
In addition, the bonus paid to Mr. Karp in the one year period prior to the
Combination is deemed to equal his Minimum Bonus. The approximate amount that
would be payable to Mr. Karp if he terminated his employment prior to the
first anniversary of the Combination is $2.8 million, plus any previously
deferred but unpaid amounts.

In addition, Cineplex Odeon may terminate Mr. Karp's employment on not less
than six months' notice or payment of six months' base salary plus Minimum
Bonus in lieu of notice at any time during the term of the agreement. If
Cineplex Odeon provides such notice, Mr. Karp is entitled to a termination
payment in an amount equal to the average of his annual base salary plus
Minimum Bonus and any bonus paid or payable to the extent it exceeds his
Minimum Bonus in respect of the three preceding calendar years (the "Aggregate
Compensation") which would have otherwise been paid to him from the date of
termination of his employment to the expiration date of the agreement plus an
amount equal to one times the Aggregate Compensation, as well as any
compensation previously deferred and not yet paid by Cineplex Odeon. If,
however, Cineplex Odeon terminates Mr. Karp's employment on not less than six
months notice within the year following the Combination, the termination
payment he would be entitled to would not be less than the payment described
in the preceding paragraph.

Subject to any required regulatory approvals, if Cineplex Odeon terminates
the employment of Mr. Karp for any reason, or if Mr. Karp terminates his
employment due to a material breach by Cineplex Odeon or within one year
following the Combination, all stock options previously granted to him and not
then vested shall immediately vest and he shall remain entitled to exercise
any vested and unexercised stock options previously granted to him at any time
until the expiration of the full term of the exercise period of each of such
options.

Travis Reid entered into an amendment to his employment contract with Loews
Cineplex, effective May 1, 1998, which has a term of three years with a two
year option of the Company to renew. Mr. Reid's employment agreement provides
for an annual base salary, which is currently $400,000, and an annual bonus in
an amount determined by Loews Cineplex. Mr. Reid is guaranteed a minimum
aggregate bonus of $400,000 over the four year term of his employment
agreement. Mr. Reid was also granted a non-qualified stock option with respect
to 250,000 shares of Common Stock.

J. Edward Shugrue entered into an employment agreement with Loews Cineplex
dated December 15, 1997, to serve as President-International Operations for a
term of four years and an option by Loews Cineplex to extend the term for an
additional year. The terms of Mr. Shugrue's agreement provide for an annual
base salary of $450,000, with annual cost of living increases at the end of
years one, two and four and a $50,000 increase at the end of year three. The
agreement also provides for a signing bonus of $75,000, an annual bonus with a
target of $200,000 which is subject each year to the attainment of goals to be
established by the Board of Directors of Loews Cineplex, reimbursement of
relocation and related transportation expenses and an automobile allowance of
$1,200 per month. Pursuant to the agreement, Mr. Shugrue was granted a non-
qualified stock option with respect to 225,000 shares of Common Stock. If Mr.
Shugrue's employment is terminated by Loews Cineplex for cause, he will be
entitled to accrued salary through the date of termination and any accrued but
unpaid bonus. If Loews Cineplex terminates Mr. Shugrue's employment without
cause, he will be entitled to his base salary and bonus through the end of the
contract term, reduced by any compensation paid or payable to Mr. Shugrue in
respect of subsequent employment for the same period.

John J. Walker and Loews Cineplex have agreed to enter into an amendment to
his employment agreement with Loews Cineplex, effective on May 1, 1998, which
has a term of three years with an option of the Company to renew for an
additional two years. Mr. Walker's employment agreement provides for an annual
base salary of

70
<PAGE>

$275,000, which will be adjusted each year to reflect the increase (if any) in
the cost of living during the previous year, an annual bonus targeted at
$125,000 and a $50,000 increase in the event the Company exercises its renewal
option. Receipt of the annual bonus is subject to the attainment of
performance goals established each year by the Board of Directors of Loews
Cineplex. Mr. Walker was also granted a non-qualified stock option with
respect to 150,000 shares of Common Stock.

John C. McBride, Jr. began his employment with Loews Cineplex on January 19,
1998 under terms of employment set forth in a letter agreement between Loews
Cineplex and Mr. McBride dated November 17, 1997 (the "McBride Agreement").
The McBride Agreement provides for a term of employment expiring January 18,
2003. Pursuant to the McBride Agreement, Mr. McBride shall receive an annual
base salary of $325,000, which will be adjusted each year to reflect the
increase (if any) in the cost of living during the previous year, and an
annual bonus targeted at between $75,000 and $125,000. Receipt of the annual
bonus is subject to the attainment of performance goals established each year
by the Board of Directors of Loews Cineplex. Pursuant to the McBride
Agreement, Mr. McBride received a signing bonus of $25,000 and is entitled to
reimbursement of relocation expenses. If Loews Cineplex terminates Mr. McBride
without cause prior to January 18, 2003, it is obligated to pay his base
salary and his target bonus through such date, reduced by any compensation
paid or payable to Mr. McBride in respect of subsequent employment (including
self-employment) for the same period. Pursuant to the McBride Agreement, Mr.
McBride was granted a non-qualified stock option with respect to 150,000
shares of Common Stock.

Seymour Smith entered into an employment agreement with Loews Cineplex on
May 1, 1990, which has been subsequently amended and expired on April 30,
1998. Mr. Smith's employment agreement provided for an annual base salary
(currently $362,098), which was adjusted each year to reflect the increase (if
any) in the cost of living during the previous year, and an annual bonus in an
amount determined by Loews Cineplex. Mr. Smith was also granted a non-
qualified stock option with respect to 50,000 shares of Common Stock.

Mindy Tucker entered into an employment agreement with the Company on
December 15, 1997 to serve as Corporate Vice President for Strategic Planning
and Secretary for a term of three years, with an option by the Company for an
additional two years. Ms. Tucker's employment agreement provides for an annual
base salary of $200,000, with annual cost of living increases and a $25,000
increase in the event the Company exercises its option. Her employment
agreement also provides for an annual bonus that will range from $50,000 to
$100,000, subject in each case to the attainment of goals to be established
each year by the Board of Directors of the Company. In addition, Ms. Tucker
was granted a non-qualified stock option with respect to 75,000 shares of
Common Stock. If Ms. Tucker's employment is terminated by the Company for
cause, she will be entitled to accrued salary through the date of termination
and any accrued but unpaid bonus. If the Company terminates her employment
without cause, she will be entitled to receive her base salary and bonus
through the balance of the contract term, reduced by any compensation paid or
payable in respect of subsequent employment (including self-employment) for
the same period.

Joseph Sparacio and Loews Cineplex have agreed to enter into an amendment to
his employment agreement with Loews Cineplex, effective May 1, 1998, which
provides for a term of three years with a two year option by the Company to
renew. Mr. Sparacio's employment agreement provides for an annual base salary
of $200,000, with annual cost of living increases and a $25,000 increase in
the event that the Company exercises the option. Mr. Sparacio's agreement also
provides for an annual bonus targeted at $75,000, subject in each case to the
attainment of goals to be established each year by the Board of Directors of
the Company. Mr. Sparacio was also granted a non-qualified stock option with
respect to 75,000 shares of Common Stock.

During the terms of their employment agreements, Messrs. Reid, Smith, Walker
and Sparacio are also entitled to participate in all employee benefit plans of
SPE or its affiliates that are applicable generally to Loews Cineplex's
executives of comparable rank and to receive either a car allowance in the
case of Mr. Reid or reimbursement for a leased car for each of Messrs. Smith,
Walker and Sparacio. Pursuant to their respective employment agreements, if
the employment of Messrs. Reid, Smith, Walker or Sparacio terminates upon the
expiration of the agreements (each an "Expiration Date"), or sooner by reason
of death or disability, for cause

71
<PAGE>

by Loews Cineplex or by Messrs. Reid, Smith, Sparacio or Walker, Loews
Cineplex is obligated to pay all accrued but unpaid salary, car allowance,
vacation and expenses and other benefits as provided under applicable employee
benefit plans.

If Loews Cineplex terminates the employment of Messrs. Reid, Smith, Walker
or Sparacio without cause prior to the applicable Expiration Date (as
defined), it is obligated to pay such employee's base salary and to continue
providing all employee benefits (excluding any car allowance or leasing
program) until such employee's Expiration Date. However, if any of Messrs.
Reid, Smith, Sparacio or Walker obtains other employment, any amounts payable
under his employment agreement shall be offset by compensation received with
respect to such other employment prior to the applicable Expiration Date.

1997 STOCK INCENTIVE PLAN

On December 16, 1997, the Company's Board of Directors Board of Directors
unanimously adopted, and the stockholders of the Company approved, the LTM
Holdings, Inc. 1997 Stock Incentive Plan (the "Stock Incentive Plan"). The
Company's Board of Directors believes that, in order to attract, retain and
reward valuable personnel, it is important for Loews Cineplex to adopt a
flexible, long-term incentive plan. The principal provisions of the Stock
Incentive Plan are summarized below. This summary, however, does not purport
to be complete and is qualified in its entirety by reference to the provisions
of the Stock Incentive Plan, a copy of which was filed on February 13, 1998 as
an exhibit to the LTM Holdings, Inc.'s Registration Statement on Form S-4 (No.
333-46313). Terms not defined herein shall have the meanings set forth in the
Stock Incentive Plan.

The purpose of the Stock Incentive Plan is to strengthen Loews Cineplex by
providing an incentive to its employees, officers, directors, consultants and
advisors through the granting or awarding of incentive and nonqualified stock
options, stock appreciation and dividend equivalent rights, restricted stock,
performance units, and performance shares to employees (including individuals
who have received a formal, written offer of employment), officers, directors,
consultants and advisors of Loews Cineplex or an affiliate (collectively or
individually, "Awards"), thereby encouraging them to devote their abilities
and energies to the success of Loews Cineplex.

The Stock Incentive Plan is to be administered by a committee consisting of
at least two directors of Loews Cineplex (the "Plan Committee"), and it may be
administered by the entire Board of Directors. If the Plan Committee consists
of less than the entire Board of Directors, each member will be a "nonemployee
director" within the meaning of Rule 16b-3 promulgated under the Exchange Act.
To the extent necessary for any Award to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), each member of the Plan Committee will be an "outside
director" within the meaning of Section 162(m) of the Code.

Each Award under the Stock Incentive Plan will be evidenced by an agreement
that sets forth the terms of the grant. Under the Stock Incentive Plan, the
Plan Committee has the authority to, among other things: (i) select the
individuals to whom Awards will be granted, (ii) determine the type, size and
the terms and conditions of Awards and (iii) establish the terms for treatment
of Awards upon a termination of employment.

Under the Stock Incentive Plan, 4,520,000 shares of authorized and unissued
Common Stock (less the number of shares of Common Stock subject to options
held by Cineplex Odeon employees that were to be converted into options to
acquire Loews Cineplex Common Stock pursuant to the plan of arrangement
governing the Combination) will be available for the grant of Awards to
Eligible Individuals, provided that the maximum number of shares with respect
to which Awards may be granted to any individual during any calendar year is
900,000. In the event of any Change in Capitalization, however, the Plan
Committee may adjust the maximum number and class of shares with respect to
which Awards may be granted, the number and class of shares which are subject
to outstanding Awards and the purchase price thereof. Of the total number of
shares allotted under the Stock Incentive Plan, not more than one-third of the
number of allotted shares may be used for grants of restricted stock. The
maximum dollar amount that an individual may receive during the term of the
Plan in respect of cash-denominated performance units may not exceed $2
million.

72
<PAGE>

Stock Options. The Plan Committee will determine whether any option is a
nonqualified or incentive stock option at the time of grant. The per share
exercise price of an option granted under the Stock Incentive Plan will be
determined by the Plan Committee at the time of grant and set forth in the
option agreement, provided that the purchase price per share under each
incentive stock option must not be less than 100% of the fair market value of
Common Stock subject to the option at the date of grant (110% in the case of
an incentive stock option granted to a Ten Percent Stockholder), and each
option will be exercisable at such dates and in such installments as
determined by the Plan Committee. All outstanding options will become fully
exercisable upon a Change in Control. In addition, the Plan Committee reserves
the authority to accelerate the exercisability of any option at any time. Each
option terminates at the time determined by the Plan Committee provided that
the term of each option may not exceed ten years (five years in the case of
any incentive stock option granted to a Ten Percent Stockholder). The Plan
Committee may accept the surrender of outstanding options and may grant new
options in substitution for them.

Options are not transferable except by will or the laws of descent and
distribution or pursuant to a domestic relations order. Notwithstanding the
foregoing, the Plan Committee may set forth in the option agreement, at the
time of grant or at any time thereafter, that the option may be transferred to
members of the optionee's immediate family, to trusts solely for the benefit
of such immediate family members and to partnerships in which such family
members and/or trusts are the only partners. Options may be exercised during
the optionee's lifetime only by the grantee or his guardian or legal
representative. In the discretion of the Plan Committee, the purchase price
for shares may be paid (i) in cash, (ii) by transferring shares of Common
Stock to Loews Cineplex (provided such shares have been held by the optionee
for at least six (6) months prior to the exercise of the option), or (iii) by
a combination of the foregoing. In addition, options may be exercised through
a registered broker-dealer pursuant to such cashless exercise procedures which
are, from time to time, deemed acceptable by the Plan Committee.

The Plan Committee will determine, at the time the option is granted or
thereafter, and will set forth in the option agreement, the terms and
conditions applicable to such option upon a termination or change in the
status of the employment or service of the optionee by Loews Cineplex, a
subsidiary or a division (including a termination or change by reason of the
sale of a subsidiary or a division).

Stock Appreciation Rights ("SARs"). The Stock Incentive Plan permits the
granting of SARs either in connection with the grant of an option or as a
freestanding right. A SAR permits a grantee to receive upon exercise of the
SAR, cash and/or shares, at the discretion of the Plan Committee, in an amount
equal in value to the excess, if any, of the then per share fair market value
over the per share fair market value on the date the SAR was granted (or
option exercise price in the case of a SAR granted in connection with an
option). When a SAR is granted, however, the Plan Committee may establish a
limit on the maximum amount a grantee may receive on exercise. The Plan
Committee will decide at the time the SAR is granted the date or dates at
which it will become vested and exercisable; however, in the event of a Change
in Control, all SARs become immediately and fully exercisable. The Plan
Committee may accept the surrender of outstanding SARs and may grant new
Awards in substitution for them.

Dividend Equivalent Rights ("DERs"). DERs may be granted in tandem with any
Award under the Stock Incentive Plan and may be payable currently or deferred
until the lapsing of the restrictions on the DERs or until the vesting,
exercise, payment, settlement or other lapse of restrictions on the related
Award. DERs may be settled in cash or Common Stock or a combination thereof,
in a single or multiple installments.

Restricted Stock. The Plan Committee will determine the terms of each
restricted stock Award at the time of grant, including the price, if any, to
be paid by the grantee for the restricted stock, the restrictions placed on
the shares, and the time or times when the restrictions will lapse. In
addition, at the time of grant, the Plan Committee, in their discretion, may
decide: (i) whether any deferred dividends will be held for the account of the
grantee or deferred until the restrictions thereon lapse, (ii) whether any
deferred dividends will be reinvested in additional Common Stock or held in
cash, (iii) whether interest will be accrued on any dividends not reinvested
in additional shares of restricted stock and (iv) whether any stock dividends
paid will be subject to

73
<PAGE>

the restrictions applicable to the restricted stock Award. Unless otherwise
provided at the time of grant, the restrictions on the restricted stock will
lapse upon a Change in Control. Shares of restricted stock are non-
transferable until such time as all restrictions upon such shares lapse. The
Plan Committee may accept the surrender of outstanding shares of restricted
stock and may grant new Awards in substitution for them.

Performance Units and Performance Shares. Performance units and performance
shares will be awarded as the Plan Committee may determine, and the vesting of
performance units and performance shares will be based upon the Company's
attainment within an established period of specified performance objectives to
be determined by the Plan Committee among the following: earnings per share,
share price, pre-tax profits, net earnings, return on equity or assets
(including return on specified assets), revenues, EBITDA, market share or
market penetration, free cash flow or any combination of the foregoing. In the
event of a Change in Control, all or a portion of the performance units will
vest and the restrictions on all or a portion of the performance shares will
lapse, in either case, as determined by the Plan Committee at the time of
grant and as set forth in the agreement evidencing the Award of performance
shares or performance units. The Plan Committee may accept the surrender of
outstanding performance Awards and may grant new Awards in substitution for
them.

Amendments and Termination. The Stock Incentive Plan will terminate on the
day preceding the tenth anniversary of the date of its adoption by the Board.
The Board may at any time and from time to time amend or terminate the Stock
Incentive Plan; provided, however, that, to the extent necessary under
applicable law, no such change will be effective without the requisite
approval of Loews Cineplex's stockholders. In addition, no such change may
alter or adversely impair any rights or obligations under any Awards
previously granted, except with the written consent of the grantee.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of
$1 million in any taxable year to the chief executive officer or any of the
four other most highly compensated executive officers who are employed by the
corporation on the last day of the taxable year, but does allow a deduction
for "performance-based compensation." The Company has structured and intends
to implement and administer the Stock Incentive Plan (except with respect to
any stock options granted with an exercise price less than the fair market
value of the underlying shares on the date of grant) so that compensation
resulting from stock options, SARs and performance awards can qualify as
"performance-based compensation." The Plan Committee, however, has the
discretion to grant such Awards with terms that will result in the Awards not
constituting performance-based compensation. Loews Cineplex will seek, at its
1999 annual meeting of stockholders, stockholder approval of the Stock
Incentive Plan and the material terms of the performance goals applicable to
performance units under the Stock Incentive Plan to allow such options and
SARs granted and other such compensation paid after such meeting to qualify as
performance-based compensation.

Under certain circumstances, the accelerated vesting or exercise of options
or stock appreciation rights, or the accelerated lapse of restrictions with
respect to other Awards, in connection with a Change of Control might be
deemed an "excess parachute payment" for purposes of the golden parachute tax
provisions of Section 280G of the Code. To the extent it is so considered, the
grantee may be subject to a 20% excise tax, and Loews Cineplex may be denied a
federal income tax deduction.

Awards Granted Under the Stock Incentive Plan. On December 16, 1997, the
Plan Committee granted nonqualified stock options under the Stock Incentive
Plan in respect of 900,000, 250,000, 225,000, 150,000, 150,000, 75,000, 75,000
and 50,000 shares of Common Stock to Lawrence J. Ruisi, Travis Reid, J. Edward
Shugrue, John C. McBride, Jr., John J. Walker, Joseph Sparacio, Mindy Tucker
and Seymour Smith, respectively. Each option was granted at an exercise price
of $13.125 per share, the fair market value for such shares on the date of
grant. The terms and conditions of each grant were set forth in a form option
agreement (the "Option Agreement"), which is identical for each of the
individuals listed above (other than as described below with respect to
certain options granted to Mr. Ruisi). The Option Agreement incorporates by
reference the terms and conditions of the Stock Incentive Plan.

74
<PAGE>

Under the Option Agreement (other than options granted to Mr. Ruisi to
purchase 900,000 shares of Common Stock, 500,000 of which were vested upon
grant and the remainder of which will become exercisable in respect of 100,000
shares covered thereby on the first through fourth anniversaries of the
Combination), each option becomes vested and exercisable with respect to
twenty percent of the aggregate number of Loews Cineplex Common Shares covered
by such option on each of the first, second, third, fourth and fifth
anniversaries of the closing of the Combination, but in any event will be
fully vested and exercisable as of the fifth anniversary of the date of grant.
Under the Option Agreement, if an optionee's employment is terminated by Loews
Cineplex without Cause, or as a result of the optionee's death or Disability,
the option becomes immediately and fully vested and is exercisable at any time
within one year after the date of such termination of employment. If an
optionee's employment is terminated as a result of his Retirement, the option
shall, to the extent vested on the date of Retirement, remain exercisable for
three years thereafter. If the optionee's employment is terminated for any
other reason (including the optionee ceasing to be employed by a subsidiary or
division of Loews Cineplex as a result of the sale of such subsidiary or
division), the option shall, to the extent vested on the date of such
termination, remain exercisable for ninety days thereafter, except for options
held by Mr. Ruisi, which shall remain exercisable for a period of one year
following any such termination. In the event that an optionee's employment is
terminated following a Change in Control, the option shall remain exercisable
for one year following such termination. In no event, however, is the option
exercisable beyond its stated term of ten years.

COMPENSATION OF DIRECTORS

The Company currently pays each independent director an annual stipend of
$30,000 plus $1,000 for each meeting of the Board or Committees of the Board
attended by the director. The Company may in the future adopt a stock
compensation program for directors.

75
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

SPE and Universal are major film studios and distributors. Loews Cineplex
has exhibited films distributed by SPE and Universal in the past and expects
to continue to do so in the future. Payments are made based on negotiated
and/or contracted rates established on terms that management believes are
equivalent to an arm's-length basis. At February 28, 1998 and February 28,
1997, respectively, Loews Cineplex owed SPE and its affiliates approximately
$2.5 million and approximately $6.4 million under film licensing agreements.
Loews Cineplex has recognized approximately $30.4 million in film rental
expenses relating to the exhibition of films distributed by SPE for the year
ended February 28, 1998. For its fiscal year ended December 31, 1997, Cineplex
Odeon paid an aggregate of $27.5 million in film licensing fees to Universal
or subsidiaries thereof in the ordinary course of business. A Canadian
division of Cineplex Odeon has provided certain video distribution services to
Universal for which Universal paid Cineplex Odeon approximately $1.0 million
during its fiscal year ended December 31, 1997.

Loews Cineplex and SCA (or its affiliates) have entered into (a) a trademark
agreement governing the ongoing and future use of the "Sony" trademark in
connection with the operation of certain Loews Cineplex theatres (the
"Trademark Agreement"), (b) a tax sharing and indemnity agreement regarding
certain tax, ERISA and other matters (the "Tax Sharing and Indemnity
Agreement") and (c) a transition services agreement (the "Transition Services
Agreement"). Pursuant to the Trademark Agreement, SCA has granted the Company
the right to use the trademark "Sony" and all goodwill associated therewith
(i) in respect of the Sony Lincoln Square Theatre, until May 14, 2003; (ii) in
respect of the Yerba Buena facility (as defined below), for a period expiring
five years from the latest to occur of (a) May 14, 2003 and (b) the date which
is five years from the date on which theatre operations begin at the Yerba
Buena facility; and (iii) in respect of certain other theatres operated by the
Company, until November 14, 1998. Pursuant to the Tax Sharing and Indemnity
Agreement: (i) SCA will be responsible for and will indemnify the Company and
its U.S. subsidiaries against certain consolidated, combined and unitary
federal, state, local and foreign income, franchise and capital taxes for all
taxable years ending on or prior to the closing date of the Combination,
except for such taxes incurred after the closing date of the Combination by
the Company and its U.S. subsidiaries arising by reason of an audit or court
proceeding; (ii) procedures are set forth for (a) the preparation and filing
of certain consolidated, combined and unitary federal and state income,
franchise and capital tax returns with respect to taxable years ending on or
prior to the closing date of the Combination and (b) the conduct and
settlement of certain tax audits and proceedings with respect to such taxable
years; and (iii) the Company has agreed to indemnify and hold harmless SCA and
SPE, and their respective successors and assigns, with respect to certain
liabilities that may arise in connection with certain other agreements.
Pursuant to the Transition Services Agreement, SCA and SPE will provide Loews
Cineplex with certain administrative services currently performed by SPE or
its affiliates on behalf of Loews Cineplex to the extent such services are
required by Loews Cineplex to conduct its operations in the ordinary course of
business following the Combination. Such services will be provided at such
prices and rates, and subject to termination, as may be agreed upon by SPE and
Loews Cineplex but pursuant to terms no less favorable to Loews Cineplex than
would be obtainable from unaffiliated third parties.

An affiliate of SCA is developing an entertainment/retail complex in San
Francisco, California ("Yerba Buena"). Loews Cineplex has entered into a lease
on terms that management believes are equivalent to arm's-length terms with
SCA's affiliate with respect to the operation of a 3-D IMAX(R) theatre and a
state-of-the-art 15 screen multiplex theatre to be located at Yerba Buena.

Jim Loeks and Barrie Lawson-Loeks, who were co-chairmen of Loews Cineplex
until April 1998, are also 50% partners in Loeks-Star Theatres through their
ownership interest in Loeks Michigan Theatres, Inc.

In connection with Cineplex Odeon's sale of its remaining 51% interest in
the Film House Partnership to The Rank Organization PLC ("Rank") in March
1990, Cineplex Odeon agreed to provide, without cost, on-screen advertisements
of Universal Studios, Florida and Universal Studios, California until March
2000. Universal Studios, Florida, a motion picture and television theme
amusement park, is a joint venture between Universal and Rank. Universal
Studios, California, a motion picture and television theme amusement park, is
owned by Universal.

76
<PAGE>

Cineplex Odeon has, since 1984, participated in a joint venture with a group
of investors which developed a theatre complex at the southwest corner of
Yonge and Eglinton Streets in Toronto. The investor group, in which Senator
Kolber, a director of Loews Cineplex, and/or associates of Senator Kolber,
have a minority interest, contributed Cdn$3.3 million of the total financing
required to complete the project and is entitled to repayment thereof,
together with interest thereon, and to ongoing participation in the revenue
derived from the project.

In September 1990, Cineplex Odeon sold its interest in the Universal City
Cinema to Universal. Cineplex Odeon has been retained to manage the theatre on
a long-term basis for a fee based on 3% of gross revenue plus 3% of net cash
flow from the multiplex. In addition, Universal has the right to "put" such
theatre to the Company on the terms described below.

The number of shares of Common Stock issued to Universal pursuant to the
Subscription Agreement at the closing of the Combination is subject to
adjustment pursuant to anti-dilution provisions contained in the Subscription
Agreement. In accordance with these provisions, Loews Cineplex will be
required to issue, subject to applicable stock exchange requirements,
additional shares of Common Stock to Universal for no additional consideration
if Loews Cineplex issues or sells any Common Stock (other than in connection
with the Combination, employee stock options or the conversion of Loews
Cineplex non-voting capital stock) in certain types of transactions to any
person other than Universal or any of its affiliates (a "Sale"), including
issuances upon conversion, exchange or exercise of voting share equivalents,
whether in one or a series of transactions, for consideration (the "Subsequent
Sale Price") of less than $19.0891 per share, subject to adjustment.
Accordingly, upon consummation of the Equity Offering, the Company will be
obligated to issue an additional 3,255,212 shares of Common Stock to Universal
for no additional consideration.

Upon the closing of the first Sale having a Subsequent Sale Price of less
than $19.0891 per share, the number of additional shares to be issued to
Universal would be equal to (a) the quotient of $84.5 million divided by the
Subsequent Sale Price, minus (b) 4,426,606 shares of Common Stock. Upon the
completion of each subsequent Sale, the number of additional shares would be
equal to (w) the quotient of $84.5 million divided by the weighted average
Subsequent Sale Price (determined in accordance with the Subscription
Agreement) of all Sales, minus (x) the number of additional shares of Common
Stock previously issued to Universal pursuant to the adjustment provisions of
the Subscription Agreement, minus (y) the 4,426,606 Loews Cineplex Common
Shares issued to Universal on May 14, 1998 in connection with the Combination,
plus (z) any shares of Common Stock that Universal may be required to deliver
as a result of any prior anti-dilution adjustments. These adjustment
provisions only apply to the first $100 million of additional issuances. The
anti-dilution provisions terminate once the aggregate proceeds of all Sales
equal or exceed $100 million. Accordingly, these provisions will cease to
apply following consummation of the Equity Offering.

From and after the later of (i) the second anniversary of the closing date
of the Combination and (ii) the fifteenth day of the month following the first
month end as of which the outstanding debt of Loews Cineplex is less than 4.75
times the consolidated EBITDA of Loews Cineplex for the 12-month period then
ended (the "Start Date"), Universal will have the right (the "Put Right") to
cause Loews Cineplex to lease the Universal City Cinema motion picture theatre
facility located at the University City, California retail and entertainment
complex (the "Universal City Cinema") pursuant to a 20-year lease (the
"Lease"). If Universal exercises the Put Right, on the date the Lease is
signed (the "Lease Signing Date") Loews Cineplex will pay to Universal cash
consideration for entering into the Lease and the conveyance of the related
personal property equal to (i) ten times the cash flow of the Universal City
Cinema for the 12-month period ended on the last day of the month preceding
Universal's giving notice (the "Put Notice") of its exercise of the put minus
(ii) (if applicable) the cost of eliminating any deficiencies from the
operating requirements and standards set forth in the Lease specifically
listed on a certificate executed by an officer of Universal, which cost shall
be estimated by an engineering firm or other expert selected by Universal and
reasonably acceptable to Loews Cineplex. The Put Right terminates on the third
anniversary of the Start Date if the Put Notice has not been delivered prior
to such date. Loews Cineplex must provide to Universal not less than five days
prior written notice of the Start Date, and, if it fails to provide such
notice, the Start Date is tolled until the fifth day following delivery of
such notice.

77
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of the Company's voting securities immediately prior to the Equity
Offering and as adjusted to reflect the sale of the shares of Common Stock
pursuant to the Equity Offering, the automatic conversion of the Company's
Class A Non-Voting Common Stock currently held by SPE into Common Stock and
the Universal Issuance by (a) each person who is known to the Company to be
the beneficial owner of more than five percent of the Company's voting
securities, (b) each director of the Company, (c) each of the Named Executive
Officers and (d) all directors and executive officers of the Company as a
group. Except as otherwise indicated, the persons or entities listed below
have sole voting and investment power with respect to all shares of the
Company's voting securities owned by them, except to the extent such power may
be shared with a spouse.

78
<PAGE>

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE EQUITY OFFERING THE EQUITY OFFERING(1)
-------------------------- ------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT NUMBER PERCENT
------------------------------------ ------------ ---------- ------------ -----------
<S> <C> <C> <C> <C>
CLASS A NON-VOTING COMMON
STOCK, PAR VALUE $.01 PER
SHARE
Sony Pictures
Entertainment Inc. ..... 1,202,486(1) 100% -- *
550 Madison Avenue
New York, New York 10022
CLASS B NON-VOTING COMMON
STOCK, PAR VALUE $.01 PER
SHARE
Universal Studios, Inc... 80,000(1) 95.2% 80,000 95.2%
100 Universal City Plaza
Universal City, CA 91608
</TABLE>
- --------
* Indicates beneficial ownership or control of less than 1.0% of the
outstanding shares of Loews Cineplex Common Stock.
(1) Adjusted to reflect the Equity Offering and the automatic conversion of
the Company's Class A Non-Voting Common Stock currently held by SPE into
Common Stock and the Universal Issuance.
(2) All of such shares are subject to the terms of the Stockholders Agreement
described below.
(3) Excludes shares of Common Stock issuable upon conversion of Non-Voting
Stock (as hereinafter defined).
(4) Includes shares of Common Stock issuable upon conversion of Class A Non-
Voting Common Stock. See "Capitalization."
(5) Members of the Claridge Group and their shareholdings are as follows: (i)
The Charles Rosner Bronfman Discretionary Trust--1,918,907 shares; (ii)
The Charles Bronfman Trust--1,000,000 shares; (iii) The Charles R.
Bronfman Trust--1,000,000 shares; (iv) The Phyllis Lambert Foundation--
31,410 shares; (v) Bojil Equities Inc.--350,309 shares with respect to
which Senator Kolber exercises voting control, but disclaims any pecuniary
interests; and (vi) Louis Ludwick--23,377 shares. Charles Rosner Bronfman
may be deemed to share beneficial ownership of the shares held by the
three trusts listed above. The number of shares does not include 9,926
shares and 7,500 shares owned by the wives of Mr. Bronfman and Senator
Kolber, respectively, as to which beneficial ownership has been
disclaimed.
(6) Does not include 21,934,625 shares of Loews Cineplex Common Stock and
1,202,486 shares of Class A Non-Voting Common Stock owned by SPE. Messrs.
Henny, Lemberger, Nozoe, Steinberg, Stringer and Wynne, officers of SPE or
its affiliates, disclaim beneficial ownership of all Loews Cineplex shares
owned by SPE.
(7) Includes 350,309 shares of Loews Cineplex Common Stock over which Senator
Kolber has voting control but which are owned directly by Bojil Equities
Inc. and as to which Senator Kolber disclaims beneficial ownership.
Excludes 7,500 shares of Loews Cineplex Common Stock beneficially owned by
Senator Kolber's wife, as to which he disclaims beneficial ownership.
(8) Does not include 11,691,249 shares of Common Stock and 80,000 shares of
Class B Non-Voting Common Stock owned by Universal. Messrs. Meyer and
Mulligan and Ms. Randall, officers of Universal or its affiliates,
disclaim beneficial ownership of all Loews Cineplex shares owned by
Universal.
(9) This number relates solely to options exercisable within 60 days of June
29, 1998.
(10) Includes 1,714 shares of Loews Cineplex Common Stock which are
beneficially owned by the Allen and Sharon Karp Trust, as to which Mr.
Karp disclaims beneficial ownership, and 498,400 shares of Loews Cineplex
Common Stock which relate to options exercisable within 60 days of June
29, 1998.

Universal (in which The Seagram Company Ltd. ("Seagram") owns an
approximately 84% indirect interest) beneficially owns the Loews Cineplex
shares set forth on the table above (the "Seagram Shares"). Based on the most
recent publicly available information related to Seagram: (i) descendants of
the late Samuel Bronfman and trusts established for their benefit (the
"Bronfman Trusts") beneficially owned, directly or indirectly, an aggregate of
119,923,229 of then outstanding Seagram Shares, constituting approximately
34.6% of then outstanding Seagram Shares, which amount includes the
approximately 14.9% of then outstanding

79
<PAGE>

Seagram Shares owned by trusts established for the benefit of Charles R.
Bronfman, and his descendants, including, without limitation, the Charles
Rosner Bronfman Discretionary Trust and (ii) pursuant to two voting trust
agreements, Charles R. Bronfman served as the voting trustee for approximately
33.5% of the outstanding Seagram Shares and a voting trustee for approximately
0.7% of then outstanding Seagram Shares, which shares are beneficially owned
by the Bronfman Trusts and certain other entities.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
Loews Cineplex's directors and executive officers, and persons who
beneficially own more than 10% of a registered class of Loews Cineplex's
equity securities, to file with the Securities and Exchange Commission initial
reports of ownership and reports of changes in ownership of Loews Cineplex
Common Stock and other equity securities of Loews Cineplex. To Loews
Cineplex's knowledge, based solely on review of the copies of such reports
furnished to Loews Cineplex (and written representations that no other reports
were required), all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners have been
complied with.

80
<PAGE>

THE STOCKHOLDERS AGREEMENT

The following is a brief summary of certain provisions of the Stockholders
Agreement. A copy of the Stockholders Agreement is incorporated as an exhibit
to the Registration Statement of which this Prospectus is a part from the
Company's Annual Report on Form 10-K for the fiscal year ended February 28,
1998. The following description does not purport to be complete and is subject
in all respects to the detailed provisions of the Stockholders Agreement.
Capitalized terms used in this section without definition elsewhere in this
Prospectus shall have the meanings specified in the Stockholders Agreement, as
the context requires.

The Stockholders Agreement provides for certain board, voting, consent,
standstill, purchase, transfer and other rights and obligations for the
parties thereto.

The Board of Directors. Pursuant to the Stockholders Agreement, the
Company's Board of Directors is to comprise 16 members, consisting initially
of six designees of SPE (the "SPE Directors"), three designees of Universal
(the "Universal Directors"), one designee of the Claridge Group (the "Claridge
Director"), two Management Directors and four Independent Directors. The
designees of SPE, Universal and the Claridge Group were designated by such
parties prior to the closing of the Combination. Two of the Independent
Directors were designated by mutual agreement of the Company, SPE, Universal
and a majority of the members of the Independent Committee prior to the
closing of the Combination. The other two Independent Directors have not yet
been designated, and the Company, SPE and Universal have each agreed to use
their best efforts to cause such additional Independent Directors to be
elected as soon as possible. Pursuant to the Stockholders Agreement, the
Management Directors will be the two most senior executive officers of Loews
Cineplex; provided that Allen Karp shall be one of the Management Directors as
long as he is an executive officer of the Company or an affiliate. The initial
Management Directors are Lawrence J. Ruisi, who is the President and Chief
Executive Officer of Loews Cineplex, and Allen Karp, who is Chairman and Chief
Executive Officer of Cineplex Odeon. For purposes of this Prospectus, an
"Independent Director" is any director who (a) is free from any relationship
that, in the opinion of the nominating committee of the Company's Board of
Directors, would interfere with the exercise of independent judgment as a
director, (b) is not an affiliate of Loews Cineplex, SPE, Universal or the
Claridge Group or a current or former officer of the Company or any of its
subsidiaries or a current or former officer or director of SPE or Universal or
any of their respective subsidiaries, (c) does not, in addition to such
individual's role as a member of the Company's Board of Directors, also act on
a regular basis as an individual or representative of an organization serving
as a professional advisor, legal counsel or consultant to management of the
Company or SPE, Universal or the Claridge Group or any of their respective
subsidiaries; and (d) does not represent, and is not a member of the immediate
family of, a person who does not satisfy the requirements of foregoing clauses
(a), (b) or (c) ("Independent Directors").

The Stockholders Agreement provides that SPE, Universal and the Claridge
Group, subject to the exceptions and limitations described below, are entitled
to designate for nomination for election to the Company's Board of Directors,
the number of directors of Loews Cineplex that generally corresponds to such
Stockholder's "Applicable Percentage" set forth on the following chart (the
"Directors Chart"):

<TABLE>
<CAPTION>
NUMBER OF
APPLICABLE PERCENTAGE DIRECTORS
--------------------- ---------
<S> <C>
Greater than 6.25% and less than 9.375%.......................... 1
Greater than 9.375% and less than 15.625%........................ 2
Greater than 15.625% and less than 21.875%....................... 3
Greater than 21.875% and less than 28.125%....................... 4
Greater than 28.125% and less than 34.375%....................... 5
Greater than 34.375% and less than 40.625%....................... 6
Greater than 40.625% and less than 46.875%....................... 7
Greater than 46.875% and less than 53.125%....................... 8
Greater than 53.125% and less than 59.375%....................... 9
Greater than 59.375% and less than 65.625%....................... 10
Greater than 65.625% and less than 71.875%....................... 11
Greater than 71.875% and less than 78.125%....................... 12
Greater than 78.125% and less than 84.375%....................... 13
84.375% and greater.............................................. 14
</TABLE>

81
<PAGE>

provided, however, that

(i) (x) until May 14, 2003, the Claridge Group shall be entitled to
designate one Loews Cineplex director if its Applicable Percentage exceeds
3.5%, and, thereafter, if its Applicable Percentage exceeds 5%, and (y) the
Claridge Group's entitlement to designate two or more Loews Cineplex
directors shall be determined in accordance with the Stockholders Agreement
on the same basis as the entitlement of the other Stockholders;

(ii) if, pursuant to the Directors Chart, the Stockholders would in the
aggregate be entitled to designate more than 14 Loews Cineplex directors,
each reference to a percentage in the Directors Chart under the "Applicable
Percentage" column will be increased by the least number of percentage
points that would result in the Stockholders in the aggregate being
entitled to designate 14 Loews Cineplex directors (after giving effect to
the provisions of clause (i)(x) above); and

(iii) prior to the four-year anniversary of the Closing, no Stockholder
will be entitled to designate more than eight Loews Cineplex directors;
provided, however, that if any Stockholder would be entitled to designate
more than eight Loews Cineplex directors pursuant to the Directors Chart
based on such Stockholder's Adjusted Applicable Percentage (rather than
such Stockholder's Applicable Percentage), (x) such Stockholder will be
entitled to designate the number of Loews Cineplex directors set forth in
the Directors Chart based on such Stockholder's Applicable Percentage and
(y) the limitation contained in this clause (iii) regarding a Stockholder's
entitlement to designate Loews Cineplex directors will thereupon terminate.

Each of SPE and Universal have agreed with the other and each member of the
Claridge Group has agreed with each of SPE and Universal that, notwithstanding
the foregoing:

(i) no Stockholder shall be entitled to designate more than six Loews
Cineplex directors; provided, however, that if any Stockholder would be
entitled to designate more than eight Loews Cineplex directors pursuant to
the Directors Chart based on such Stockholder's Adjusted Applicable
Percentage (rather than such Stockholder's Applicable Percentage), such
Stockholder shall be entitled to designate such greater number of Loews
Cineplex directors and the limitation contained in this clause (i)
regarding a Stockholder's entitlement to designate Loews Cineplex directors
will thereupon terminate; provided, further, that, if at any time
commencing on the three-year anniversary of the Closing, any Stockholder's
Applicable Percentage exceeds 45%, the limitation contained in this clause
(i) regarding a Stockholder's entitlement to designate Loews Cineplex
directors will be increased from six Loews Cineplex directors to seven
Loews Cineplex directors;

(ii) at any time that SPE's Applicable Percentage equals or exceeds
40.625%, but the number of SPE Directors is limited to six by the
immediately preceding clause (i) of this paragraph, Universal has agreed
with SPE that one of the individuals designated by Universal to serve as a
Loews Cineplex director shall be an Independent Director so long as
Universal's Applicable Percentage equals or exceeds 21.875%; and

(iii) at any time that Universal's Applicable Percentage equals or
exceeds 40.625%, but the number of Universal Directors is limited to six by
clause (i) of this paragraph, SPE has agreed with Universal that one of the
individuals designated by SPE to serve as a Loews Cineplex director shall
be an Independent Director so long as SPE's Applicable Percentage exceeds
21.875%.

If the Stockholders collectively have the right to designate at least 13 of
the members of the Company's Board of Directors pursuant to the provisions
described above, SPE and Universal have agreed that at least one of the
individuals designated by each such Stockholder to serve as a Loews Cineplex
director shall be an Independent Director; provided that if one of such
Stockholders shall be entitled to designate only one Director, such
Stockholder shall not be required to designate an Independent Director and the
other such Stockholder shall be required to designate two Independent
Directors.

The parties to the Stockholders Agreement have agreed that, except for the
designees of the Stockholders and for the Management Directors, individuals to
be nominated for election as Loews Cineplex directors shall all be Independent
Directors (unless the Independent Directors shall otherwise agree), and there
shall be at least

82
<PAGE>

two Independent Directors and two Management Directors nominated in each such
election. Each Stockholder has agreed to vote (and to cause its affiliates to
vote) any Voting Shares beneficially owned by it to cause the designees of
SPE, Universal and the Claridge Group and each of the Independent Directors
and Management Directors designated by the Nominating Committee (as described
below) to be elected to the Company's Board of Directors, and Loews Cineplex
has agreed to use its best efforts to cause the election of each such
designee, including nominating such individuals to be elected as members of
the Company's Board of Directors, as provided in the Stockholders Agreement.

In connection with each election of members of the Company's Board of
Directors, the Management Directors and the Independent Directors will be
designated by a nominating committee of the Company's Board of Directors (the
"Nominating Committee"), which will be established to determine whether
prospective nominees as Management Directors and Independent Directors meet
the criteria for such positions. The Nominating Committee will be comprised of
four directors, consisting of (x) two Independent Directors designated by a
majority of the Independent Directors and (y) one SPE Director and one
Universal Director; provided that if at any time there shall cease to be at
least one SPE Director or Universal Director, then the Nominating Committee
will include two SPE Directors or two Universal Directors, as the case may be,
to the extent that SPE or Universal, as applicable, then has two designees
serving as Loews Cineplex directors.

The Stockholders Agreement provides that all other committees of the
Company's Board of Directors will include, subject to any applicable stock
exchange or Exchange Act requirements, a number of SPE Directors and Universal
Directors equivalent to the proportion of such directors then serving on the
whole Company's Board of Directors multiplied by the total number of members
comprising such committee. The Stockholders Agreement contains other
provisions relating to committees of the Company's Board of Directors and
various provisions relating to the procedures, including meetings and agendas,
and the powers of the Company's Board of Directors.

Each Stockholder has agreed that it will not without the prior written
consent of each of SPE and Universal (i) seek the election or removal of any
Loews Cineplex director, except in accordance with the terms of the
Stockholders Agreement; (ii) deposit any shares of Common Stock in a voting
trust or subject any shares of Common Stock to any arrangement with respect to
the voting of such shares (other than a voting trust or arrangement solely
among members of the Claridge Group); (iii) subject to certain exceptions,
engage in any "solicitation" (within the meaning of Rule 14a-11 under the
Exchange Act) of proxies or consents or become a "participant" in any
"election contest" (within the meaning of Rule 14a-11 under the Exchange Act)
with respect to Loews Cineplex, or (iv) form a Group with respect to any
shares of Common Stock, other than a Group consisting exclusively of
Stockholders, any of their affiliates or permitted transferees.

Consent Rights. The Stockholders Agreement provides SPE and Universal with
specified consent rights in respect of specified actions by Loews Cineplex and
its Subsidiaries, so long as their respective Applicable Percentages equal or
exceed the Minimum Percentage. These events include: (a) voluntary bankruptcy
filings by Loews Cineplex or any "significant subsidiary;" (b) acquisitions
and dispositions meeting specified tests of materiality; (c) entering into or
engaging in any business other than the exhibition of films with certain
limited exceptions; (d) any transaction or series of related transactions with
SPE or Universal or any of their respective affiliates involving more than
$1,000,000 per calendar year (excluding arm's-length transactions in the
ordinary course of business, including film booking arrangements); (e)
changing the number of directors comprising the entire Company's Board of
Directors; (f) with certain exceptions, issuing or selling any Voting Shares
or Voting Share Equivalents exceeding specified thresholds; (g) paying cash
dividends on, or making any other cash distributions on or redeeming or
otherwise acquiring for cash, any shares of capital stock of Loews Cineplex,
or any warrants, options, rights or securities convertible into, exchangeable
or exercisable for, capital stock of Loews Cineplex exceeding specified
thresholds; (h) incurring any debt in excess of specified amounts with certain
specified exceptions; (i) hiring, or renewing the employment contract
(including option renewals) of, either of the two most senior executive
officers of Loews Cineplex; (j) entering into any arrangement (other than the
Stockholders Agreement or pursuant thereto) with any holder of Voting Shares
in such holder's capacity as a

83
<PAGE>

holder of Voting Shares which subjects actions taken by Loews Cineplex or any
Subsidiary to the prior approval of any Person; (k) entering into certain
discriminatory shareholder arrangements including any stockholders rights
plan; and (l) amending the Company's By-Laws by action of the Company's Board
of Directors.

Under the Stockholders Agreement, SPE and Universal are entitled to certain
additional consent rights if Loews Cineplex fails to meet certain budgeted
financial targets and their respective Applicable Percentages then equal or
exceed the Minimum Percentage. These rights include the right to approve a new
five-year strategic business plan for Loews Cineplex and the following actions
by Loews Cineplex or any Subsidiary thereof: (a) making capital expenditures
exceeding specified thresholds; (b) incurring any debt in excess of specified
amounts with certain specified exceptions; (c) incurring liens to secure
unsecured debt; and (d) with certain exceptions, issuing or selling any
capital stock of Loews Cineplex.

If Loews Cineplex and either SPE or Universal, as the case may be, disagree
in good faith as to whether the consent rights of such Stockholder described
above are triggered in connection with an action proposed to be taken by Loews
Cineplex, the parties have agreed to submit such a dispute to arbitration by
an independent arbitrator. Pending resolution of such dispute (which generally
must be resolved within ten business days of the submission of the dispute),
Loews Cineplex may not take the action which is the subject of the dispute and
its operations may be interrupted or delayed during such time period as a
result.

In addition to the foregoing consent rights, in connection with any vote or
action by written consent of the Company's Board of Directors related to any
(a) merger, (b) voluntary liquidation, dissolution or winding up of Loews
Cineplex (a "Dissolution"), (c) amendment or restatement of the Company's
Charter or (d) amendment or repeal of any provision of, or addition of any
provision to, the Company's By-laws (a "By-law Amendment"), each Stockholder
has agreed to use its best efforts to cause the Loews Cineplex directors
designated by such Stockholder to vote against such action at the request of
SPE or Universal if its Applicable Percentage exceeds the Minimum Percentage.
The Stockholders have also agreed to vote (and not to consent to) the Voting
Shares beneficially owned by them against any of the foregoing items in
connection with any vote or action by written consent of the stockholders of
Loews Cineplex related thereto at the request of SPE or Universal if its
Applicable Percentage exceeds the Minimum Percentage.

So long as the Applicable Percentage of SPE or Universal equals or exceeds
the Minimum Percentage, (i) the Company's Charter provides that effecting a
Merger or Dissolution or adopting an amendment or restatement of the Company's
Charter or adopting a By-law Amendment by action of the stockholders of Loews
Cineplex shall require the affirmative vote or written consent of the holders
of at least 80% of the outstanding shares of Common Stock; provided that in
the case of any of the foregoing matters (other than adopting a By-law
Amendment by action of the stockholders) such 80% stockholder approval
requirement shall not be applicable if 14 members of the Company's Board of
Directors shall have approved such matter; provided, further, that in the case
of any Merger that is approved by 14 members of the Company's Board of
Directors, such Merger shall require the affirmative vote or written consent
of the holders of at least 66 2/3% of the outstanding shares of Common Stock
and (ii) no Stockholder shall vote in favor of, consent in writing to, or take
any other action to effect an amendment or repeal of such provisions of the
Company's Charter.

Approval of Certain Combinations by Disinterested Directors. The
Stockholders Agreement provides that so long as the Applicable Percentage of
SPE or Universal equals or exceeds the Minimum Percentage, neither SPE nor any
of its affiliates, nor Universal nor any of its affiliates, as the case may
be, shall enter into any contract with Loews Cineplex or any Subsidiary
thereof, nor shall Loews Cineplex otherwise engage in or become obligated to
engage in any transaction or series of related transactions with SPE and/or
its affiliates, or Universal and/or its affiliates, as the case may be, in any
case involving more than $1,000,000 per calendar year, unless such contract or
transaction shall have been approved by a majority of the disinterested
directors following disclosure of the material facts of the contract or
transaction to the disinterested directors. The approval requirement does not
apply to contracts or transactions in the ordinary course of Loews Cineplex's
business, including film booking arrangements.

84
<PAGE>

Restrictions on transfers of Loews Cineplex Stock by the Stockholders. The
Stockholders Agreement includes the following restrictions on transfers by SPE
and Universal:

Restrictions on transfer by SPE and Universal through November 14,
1998. Without the consent of a majority of the Independent Directors, each
of SPE and Universal has agreed not to transfer in privately negotiated
transactions more than 20% of its initial equity interest in the Company
prior to November 14, 1998. This restriction does not apply to transfers
(i) to a permitted transferee, (ii) to another Stockholder or its permitted
transferees, (iii) pursuant to a merger or consolidation in which Loews
Cineplex is a constituent corporation or (iv) pursuant to a bona fide third
party tender offer or exchange offer which was not induced directly or
indirectly by such Stockholder or any of its affiliates.

Tag-Along Rights for All Loews Cineplex Stockholders Including Public
Stockholders. Neither SPE nor Universal nor any of their respective
affiliates may transfer, individually or collectively, an aggregate of more
than 50% of the outstanding Loews Cineplex Stock in one or a series of
related transactions to a third party transferee (or to one or more third
party transferees constituting a Group) unless each stockholder of Loews
Cineplex has the right to participate in such transfer on the same basis as
the proposed transferor(s), subject to the prior right of first refusal of
SPE and Universal described below to purchase the shares so being
transferred if such party is not the transferring stockholder.

Tag-Along Rights of Universal and the Claridge Group. Neither SPE nor any
of its affiliates may transfer an aggregate of more than 50% of SPE's
Initial Interest to any Person (including any Group), other than an SPE
permitted transferee, in one or a series of related transactions, unless
Universal and the Claridge Group each has the right to participate in such
transfer on the same basis as SPE and its affiliates.

Right of First Refusal of SPE and Universal. The following transfers of
Voting Shares by SPE or Universal or their respective affiliates (the
proposed transferor, the "Transferring Party") will be subject to the right
of first refusal in favor of the other: (a) any transfer in one or a series
of related privately negotiated transactions or a public offering if (i) 5%
or more of the then outstanding Voting Shares are subject to the transfer,
(ii) any transferee, or any Group of which a transferee is a member, would,
following such transfer, beneficially own 5% or more of the outstanding
Voting Shares (except, in the case of any public offering, the limitation
set forth in this clause (ii) shall not be applicable if the Transferring
Party has taken all reasonable steps to assure that such limitation shall
have been satisfied) or (iii) in the case of any transfer by SPE or any of
its affiliates, SPE's Applicable Percentage exceeds 25%; (b) any transfer
pursuant to a bona fide third party tender offer or exchange offer; (c) any
transfer to Loews Cineplex or to a subsidiary of Loews Cineplex pursuant to
a self-tender offer or otherwise; and (d) any transfer in a Market Sale. No
right of first refusal applies to any transfer between SPE or Universal and
any of their respective permitted transferees.

Standstill Agreements. Each of SPE and Universal and each member of the
Claridge Group has agreed with Loews Cineplex and with each of SPE and
Universal not to, and to cause its affiliates not to, acquire, directly or
indirectly, the beneficial ownership of any additional Voting Shares, except
for: (a) acquisitions of up to an aggregate of 5% of the outstanding Voting
Shares during any twelve-month period, subject to certain price restrictions;
and (b) acquisitions in privately negotiated transactions from five or fewer
Persons pursuant to offers not made generally to holders of Voting Shares and
pursuant to which the value of any consideration paid for any Voting Shares,
including brokerage fees or commissions, does not exceed 115% of the "Market
Price" (as determined in accordance with the regulations under the Securities
Act (Ontario)). The exceptions described in clauses (a) and (b) above are not
available to a Stockholder whose Applicable Percentage would equal or exceed
25% after the acquisition if, as a result of such acquisition, the Public
Stockholders would beneficially own less than 20% of the outstanding Voting
Shares.

There are additional exceptions for acquisitions, (i) from a Stockholder,
(ii) pursuant to the exercise of equity purchase rights (see "--Equity
Purchase Rights" below), (iii) on terms and conditions approved by the
Independent Directors, (iv) pursuant to a tender or exchange offer made in
accordance with applicable law, (v) to restore a Stockholder's percentage
interest following a dilutive issuance of Voting Shares or (vi) acquisitions
of Shares of Common Stock upon the conversion of Non-Voting Stock.

85
<PAGE>

The Stockholders have agreed that, in the case of any acquisition permitted
pursuant to the foregoing provisions that would constitute a "Rule 13e-3
transaction" (as defined in Rule 13e-3 under the Exchange Act), prior to the
consummation of any such transaction (x) a nationally recognized investment
bank shall have delivered an opinion to the Company's Board of Directors that
such transaction is fair from a financial point of view to the stockholders of
Loews Cineplex, other than the applicable Stockholder, (y) a majority of the
Independent Directors shall have approved the transaction and (z) if the
public stockholders of Loews Cineplex beneficially own more than 20% of the
Voting Shares and if approval of stockholders of Loews Cineplex is required by
the DGCL or the Company's Charter, a majority of the shares of Common Stock
held by such public stockholders shall have been voted in favor of the
transaction.

The restrictions described in the preceding three paragraphs terminate on
the earlier of (x) May 14, 2004 and (y) any time after May 14, 2002 upon the
Claridge Group ceasing to have the right to designate a Loews Cineplex
director pursuant to the Stockholders Agreement, or upon the occurrence of:

(i) a bona fide tender or exchange offer to acquire more than 20% of the
Voting Shares having been made by any Person (except that such restrictions
shall not terminate as to any Stockholder if such tender or exchange offer
is made by such Stockholder or any of its affiliates or by any Person
acting in concert with such Stockholder or any of its affiliates or is
induced by such Stockholder or any of its affiliates); provided that if
such offer is withdrawn or expires without being consummated, such
restrictions shall be reinstated (but no such reinstatement shall prohibit
any Stockholder from thereafter purchasing Voting Shares pursuant to a
contract entered into prior to the withdrawal or expiration of such tender
offer or exchange offer or pursuant to a tender offer or exchange offer
commenced by a Stockholder prior to such time);

(ii) the Applicable Percentage of SPE, Universal or the Claridge Group
equaling or exceeding 80%; provided that, in the case of Universal, such
percentage shall be 33 1/3% at any time Universal and its affiliates
beneficially own more Voting Shares than any other holder of shares of
Common Stock;

(iii) with respect to any Stockholder, such Stockholder's Applicable
Percentage being less than 15% (provided that such restrictions shall be
reinstated if such Stockholder's Applicable Percentage equals or exceeds
15% within one year thereafter);

(iv) any person (other than a Stockholder or a permitted transferee)
beneficially owning more than 20% of the Voting Shares, excluding from the
Voting Shares beneficially owned by such person and Voting Shares acquired
from a Stockholder, a permitted transferee or Loews Cineplex; or

(v) the public stockholders beneficially owning more than 66 2/3% of the
Voting Shares.

Each of SPE and Universal has agreed with the other and each member of the
Claridge Group has agreed with each of SPE and Universal that neither such
Stockholder nor any of its affiliates will acquire, directly or indirectly,
the beneficial ownership of any Voting Shares if immediately prior to such
acquisition such Stockholder's Applicable Percentage exceeds 50%, excluding
Voting Shares acquired from another Stockholder or its permitted transferees,
or if, as a result of such acquisition, (i) such Stockholder and its
affiliates would beneficially own an aggregate of more than 50% of the Voting
Shares, excluding Voting Shares acquired from another Stockholder or its
permitted transferees, or (ii) the Public Stockholders would beneficially own
less than 20% of the outstanding Voting Shares. The restrictions described in
clause (ii) does not apply to a Stockholder and its affiliates, if, upon
consummation of such acquisition, such Stockholder's Applicable Percentage
would be less than 25%. This restriction does not prohibit the acquisition of
shares of Common Stock upon the conversion of Non-Voting Stock.

The restrictions described in the preceding paragraph will terminate if: (a)
the Applicable Percentage of either SPE or Universal is less than 10%
(provided that such restrictions shall be reinstated if such Stockholder's
Applicable Percentage equals or exceeds 10% within one year thereafter); (b) a
bona fide tender or exchange offer to acquire more than 15% of the outstanding
Voting Shares is made by any person (except that such restrictions shall not
terminate as to any Stockholder if such tender or exchange offer is made by
such Stockholder or any of its affiliates or by any person acting in concert
with such Stockholder or any of its affiliates

86
<PAGE>

or is induced by such Stockholder or any of its affiliates); provided that if
such offer is withdrawn or expires without being consummated, such
restrictions shall be reinstated (but no such reinstatement shall prohibit any
Stockholder from thereafter purchasing Voting Shares pursuant to a contract
entered into prior to the withdrawal or expiration of such tender offer or
exchange offer or pursuant to a tender offer or exchange offer commenced by a
Stockholder prior to such time); or (c) any person (other than a Stockholder
or a permitted transferee) beneficially owns more than 15% of the Voting
Shares, excluding Voting Shares acquired from a Stockholder or a permitted
transferee, but only if the sum of the Applicable Percentages of SPE and
Universal is less than 45%.

Registration Rights. The Stockholders Agreement grants to the Stockholders
certain demand and piggyback registration rights with respect to the
registration under the Securities Act of shares of Common Stock (including any
shares of Common Stock issuable upon conversion of Non-Voting Stock) owned by
them. At any time after May 14, 1999, the Stockholders will be able to make
demands for registration ("Demand Registration") under the Securities Act of
shares of Common Stock owned by them, subject to certain limitations. In no
event shall the Company be required to effect, in the case of each of SPE and
Universal, more than four Demand Registrations, in the case of the Claridge
Group, more than one Demand Registration, and in the aggregate, nine Demand
Registrations. In addition, at any time following the completion of the sale
for cash by the Company in one or more underwritten public offerings of Common
Stock for an aggregate offering price of $200 million (before deducting
underwriting discounts and commissions), the Stockholders will have piggyback
rights to include shares of Common Stock owned by them in any registration
statement filed by the Company with respect to its Common Stock, subject to
certain exceptions.

Equity Purchase Rights. The Stockholders Agreement provides that if Loews
Cineplex proposes to issue or sell any Voting Shares pursuant to a transaction
in respect of which SPE or Universal shall have the right to consent under the
Stockholders Agreement, each such Stockholder will have the right, exercisable
in whole or in part and subject to the applicable rules of any stock exchange
on which shares of Common Stock shall then be listed, to acquire from Loews
Cineplex a portion of the Voting Shares proposed to be issued or sold to
Persons other than such Stockholder and its affiliates (the "Issuance Shares")
up to an amount equal to the number of Issuance Shares multiplied by such
Stockholder's then Applicable Percentage, prior to giving effect to the
consummation of the proposed issuance or sale and any acquisition by a
Stockholder pursuant to the exercise of such rights.

Assignments of Rights and Obligations to transferees. Permitted transferees
of a Stockholder will be subject to the terms and conditions of the
Stockholders Agreement as if such permitted transferees were SPE (in the case
SPE or a permitted transferee of SPE is the transferor), Universal (in the
case Universal or a permitted transferee of Universal is the transferor) or a
member of the Claridge Group (in the case a member of the Claridge Group or a
permitted transferee thereof is the transferor). Third party transferees of a
Stockholder will be subject to certain terms and conditions in the
Stockholders Agreement. In certain circumstances, third party transferees will
have the right to designate directors and may also be entitled to registration
rights. Third party transferees will not receive the tag-along rights, rights
of first refusal or equity purchase rights described above. In addition, the
rights of SPE and Universal to consent to certain significant corporate events
described under "--Consent Rights" above may not be assigned to third parties.

Certain Remedies. In the event that SPE or Universal has a good faith belief
that Loews Cineplex or any other Stockholder is likely to breach, or has
breached, in any material respect, certain of its obligations under the
Stockholders Agreement (including those described under "--The Board of
Directors" (other than the penultimate paragraph thereof), "--Consent Rights"
and "--Standstill Agreements" above) such Stockholder may deliver notice of
such belief to Loews Cineplex and/or such other Stockholder, as the case may
be. Upon receipt of such notice and until the dispute is resolved (by a court
of competent jurisdiction, an independent arbitrator or otherwise), neither
Loews Cineplex nor any other Stockholder may take any action that would
facilitate such a breach and shall take reasonable actions to prevent such
breach, if it has not yet occurred, or to minimize any adverse consequences to
the aggrieved Stockholder of any such breach. The operations of Loews Cineplex
may be interrupted or delayed pending such resolution. In addition, in the
event that SPE or Loews Cineplex breaches in any material respect any of their
obligations to Universal under the Stockholders

87
<PAGE>

Agreement, SPE and Loews Cineplex shall, at the request of Universal, use
their best efforts to amend the Company's Charter to authorize a new class of
common stock to be issued by Loews Cineplex to Universal and its permitted
transferees in exchange for the Common Stock held by them. Such new class
would be identical in all respect to the Common Stock, except that such class
would entitle the holders thereof to proportionate representation on the
Company's Board of Directors on the same basis that Universal is entitled to
representation thereon pursuant to the Stockholders Agreement, and that the
rights described under "--Consent Rights" above would be incorporated in such
class, and SPE and Universal will cease to have any consent rights under the
Stockholders Agreement. Such new class of common stock, if issued, would be
convertible into shares of Common Stock on a one-for-one basis at any time at
the discretion of the holder.

Termination. Except as otherwise described in the Stockholders Agreement,
the rights and obligations of a Stockholder and its permitted transferees
under the Stockholders Agreement shall terminate upon such Stockholder's
Applicable Percentage equaling less than 6.25% (or, in the case of the
Claridge Group, 3.5% until May 14, 2003 and 5% thereafter), subject to an
exception in circumstances where a Stockholder's Applicable Percentage is
reduced as a result of the issuance of additional Voting Shares by Loews
Cineplex.

88
<PAGE>

DESCRIPTION OF CERTAIN INDEBTEDNESS

The following statements are brief summaries of certain provisions with
respect to the Bank Credit Facilities and the Plitt Notes. Copies of the
credit agreement (the "Credit Agreement") relating to the Bank Credit
Facilities and the Plitt Indenture are incorporated as exhibits to the
Registration Statement of which this Prospectus is a part from the Company's
Annual Report on Form 10-K for the fiscal year ended February 28, 1998. Copies
of the Proposed Amendments to the Plitt Indenture are filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
description does not purport to be complete and is subject in all respects to
the detailed provisions of the Credit Agreement and the Plitt Indenture and
the Proposed Amendments. Capitalized terms used in this section without
definition shall have the meanings specified in the Credit Agreement, the
Plitt Indenture or the Proposed Amendments, as the context requires.

CREDIT AGREEMENT

Facilities. The Bank Credit Facilities consist of two tranches: (i) Tranche
A Revolving Credit Loans in an aggregate principal amount of up to
$750,000,000 for purposes of financing the Combination, future acquisitions,
capital expenditures, permitted investments, working capital and other general
corporate purposes and for the issuance of letters of credit and (ii) Tranche
B Revolving Credit Loans in an aggregate principal amount of up to
$250,000,000 for purposes of financing all or a portion of the purchase of the
Plitt Notes tendered pursuant to the Change of Control Offer, all on the terms
and conditions set forth in the Credit Agreement. Other than the permitted
uses thereof, the terms and conditions applicable to the Tranche A Revolving
Loans and the Tranche B Revolving Loans (collectively, the "Loans") are the
same in all material respects. The credit facilities extended to Loews
Cineplex pursuant to the Credit Agreement constitute the "Bank Credit
Facilities" for purposes of the Indenture and are senior to the Plitt Notes.
See "Risk Factors--Debt Level."

Interest Rates. The Bank Credit Facilities provide for two pricing options:
(i) Loans on which interest is payable quarterly at a Base Rate equal to the
higher of (x) the rate of interest per annum publicly announced from time to
time by the Bankers Trust Company at its prime commercial lending rate in
effect at its principal office in New York City, or (y) the rate which is 1/2
of 1% in excess of the Federal Funds Effective Rate; and (ii) Loans on which
interest accrues for one, two, three, six or if, generally available, nine or
twelve month interest periods (but is payable not less frequently than every
three months) at a rate of interest per annum equal to (x) the Adjusted
Eurodollar Rate, plus (z) an Applicable Margin initially equal to 1.75% per
annum and subject to adjustment downward based on improvements in the Leverage
Ratio and Senior Debt Rating of Loews Cineplex.

Commitment Fees. Commitment Fees initially equal to 0.25% per annum (the
"Commitment Fee Percentage") will be payable quarterly in arrears with respect
to the average daily unused portion of the Tranche A Revolving Loan
Commitments and the Tranche B Revolving Loan Commitments. The Commitment Fee
Percentage is subject to adjustment downward based on improvements in the
Leverage Ratio and the Senior Debt Rating of Loews Cineplex.

Facility Fees. Certain other facility fees may be payable to the
Administrative Agent, the Co-Syndication Agents and the Lenders and from time
to time, in the amounts and at the times, separately agreed upon between Loews
Cineplex and the Administrative Agent, Co-Syndication Agents and the Lenders.

Security. The obligations of Loews Cineplex under the Credit Agreement and
the other Loan Documents are secured by a first priority Lien on substantially
all of the personal property of Loews Cineplex, including without limitation,
a pledge of 100% of the equity interests of Loews Cineplex in each of its
Domestic Subsidiaries and 100% of the equity interests of Loews Cineplex in
each of its Foreign Subsidiaries, up to a maximum of 65% of the total equity
interests of each such Foreign Subsidiary.

Guaranty. The obligations of Loews Cineplex under the Credit Agreement and
the other Loan Documents are jointly and severally guaranteed by each Domestic
Subsidiary of Loews Cineplex, including Plitt, and each guarantor, including
Plitt and each of Plitt's subsidiaries, has secured its obligations under the
guaranty by a first

89
<PAGE>

priority Lien on substantially all of its personal property, including without
limitation, a pledge of 100% of the equity interests of such Domestic
Subsidiary in each of its Domestic Subsidiaries and 100% of the equity
interests of such Domestic Subsidiary in each of its Foreign Subsidiaries, up
to a maximum of 65% of the total equity interests of each such Foreign
Subsidiary.

Negative Covenants. The Credit Agreement contains covenants and provisions
that restrict, among other things, the ability of Loews Cineplex and its
Subsidiaries to: (i) incur Indebtedness; (ii) create, incur or suffer to exist
Liens on any of its property or assets; (iii) enter into guaranties or become
liable with respect to other Contingent Obligations; (iv) make Investments or
enter into joint venture arrangements; (v) make restricted junior payments
(including dividends); (vi) engage in mergers, consolidations and sales of all
or substantially all their assets; (vii) enter into agreements restricting
dividends and advances by their Subsidiaries; and (viii) engage in
transactions with Affiliates.

Financial Covenants. The Credit Agreement requires Loews Cineplex and its
Subsidiaries on a consolidated basis to satisfy certain financial performance
criteria. Specifically, Loews Cineplex will not (i) permit at the end of any
Fiscal Quarter (x) the ratio of Wholly Owned Total Debt to Annualized Pro
Forma Wholly Owned EBITDA, or (y) the ratio of Consolidated Debt to Annualized
Pro Forma EBITDA, to exceed the maximum amounts set forth in the Credit
Agreement for such Fiscal Quarters or (ii) permit at the end of the fiscal
periods specified in the Credit Agreement, the ratio of (z) Annualized Pro
Forma Wholly Owned EBITDA to (y) the sum of (A) Wholly Owned Total Debt
Interest Expense for such period plus (B) Wholly Owned Rent Expense for such
period to be less than the minimum amounts set forth in the Credit Agreement
for such fiscal period.

Prepayments. The Credit Agreement provides that the Loans may be prepaid and
the Tranche A Revolving Loan Commitments and the Tranche B Revolving Loan
Commitments may be permanently reduced without penalty, in whole or in part,
at any time; provided that the Tranche B Revolving Loan Commitments cannot be
permanently reduced prior to the earlier of (i) July 13, 1998 and (ii) the
expiration of the Change of Control Offer; and provided further that
Eurodollar Rate Loans may be prepaid only on the expiration of the applicable
Interest Period unless certain breakage costs are reimbursed to the Lenders.
In addition, the Loans are subject to mandatory prepayment and, under certain
circumstances, reduction in the commitments out of (i) certain Net Asset Sales
Proceeds, (ii) Net Insurance/Condemnation Proceeds, (iii) Net Debt Securities
Proceeds, and (iv) commencing with the fiscal year beginning March 1, 1999,
50% of the Excess Cash Flow of Loews Cineplex and its Subsidiaries. The Loans
are also subject to mandatory prepayment, without a corresponding reduction in
the commitments, to the extent that Available Cash on any date exceeds
$20,000,000.

THE PLITT NOTES

Plitt currently has outstanding $200,000,000 in aggregate principal amount
of the Plitt Notes. The Plitt Notes are guaranteed unconditionally by Loews
Cineplex (which guaranty is subordinated to the Bank Credit Facilities) under
the Indenture. The Indenture contains covenants and provisions that restrict,
among other things, the ability of Loews Cineplex and its Subsidiaries to: (i)
incur indebtedness, including senior subordinated indebtedness; (ii) create,
incur or suffer to exist liens on any of its property or assets; (iii) make
certain restricted payments, including dividends; (iv) enter into guaranties;
(v) make investments or enter into joint venture arrangements; (vi) make
restricted junior payments; (vii) engage in mergers, consolidations and sales
of all or substantially all their assets; and (viii) engage in transactions
with affiliates. Plitt may, at its option, on or after June 15, 1999, redeem
all or any portion of the outstanding Plitt Notes in exchange for a redemption
price equal to (i) 105.438%, plus accrued interest, for Plitt Notes redeemed
prior to June 15, 2000, (ii) 102.719%, plus accrued interest, for Plitt Notes
redeemed on or after June 15, 2000 but prior to June 15, 2001 and (iii) 100%,
plus accrued interest, for Plitt Notes redeemed on or after June 15, 2001 but
before the stated maturity date of the Plitt Notes. In connection with closing
the Combination, the Company guaranteed the Plitt Notes on a senior
subordinated basis, and Cineplex Odeon was released from its guarantee of the
Plitt Notes.

As a result of the consummation of the Combination, Loews Cineplex is
obligated to initiate the Change of Control Offer to purchase all of the
issued and outstanding Plitt Notes at a price equal to 101% of the outstanding

90
<PAGE>

principal amount thereof plus accrued interest to the date of repurchase. In
order to satisfy this requirement and retire the Plitt Notes, on June 15,
1998, Plitt commenced the At-the-Market Offer, which is scheduled to expire on
August 4, 1998. In connection with the At-the-Market Offer, the Company
solicited consents from the holders of the Plitt Notes to, among other things,
the Proposed Amendments to the Plitt Indenture. The Consent Solicitation
terminated on July 1, 1998, with Plitt receiving consents from holders of
approximately 97% of the outstanding Plitt Notes. The Proposed Amendments will
only become operative upon consummation of the At-the-Market Offer. If the
Proposed Amendments become operative, the restrictions on Loews Cineplex and
its Subsidiaries described in the foregoing paragraph will be terminated.
Based on the yield of the Reference Security at July 29, 1998, if all such
Plitt Notes are tendered and all of the holders thereof are entitled to
receive consent payments, the Total Plitt Note Consideration would be
approximately $219 million or 109.281% of the outstanding principal amount of
the Plitt Notes.

The guarantee by Loews Cineplex of any Plitt Notes that remain outstanding
after completion of the Plitt Note Repurchase will rank pari passu with the
New Notes. Any such Plitt Notes remaining outstanding will also be general
obligations of Plitt and, accordingly, the claims of the holders thereof to
the assets and cash flow of Plitt will effectively rank superior to the claims
of the holders of the New Notes.

THE NEW NOTES

Concurrently with the Equity Offering, the Company is offering the New Notes
in transactions exempt from registration under the Securities Act. Proceeds
from the Note Offering are expected to be used to fund the purchase of Plitt
Notes tendered pursuant to the Plitt Note Repurchase. Consummation of the
Equity Offering is not conditioned upon consummation of the Note Offering and
consummation of the Note Offering is not conditioned upon consummation of the
Equity Offering. See "Risk Factors--Equity Offering Not Conditioned on Note
Offering."

The New Notes will be governed by the New Note Indenture. The New Notes will
be subordinated to the Bank Credit Facilities and other Senior Debt of the
Company under the New Note Indenture. The New Note Indenture is expected to
contain covenants and provisions that restrict, among other things, the
ability of Loews Cineplex and its subsidiaries to: (i) incur indebtedness
unless certain financial tests are satisfied; (ii) make certain restricted
payments, including dividends and investments; (iii) enter into guaranties;
(iv) engage in mergers, consolidations and sales of all or substantially all
their assets; and (v) engage in transactions with affiliates. The New Note
Indenture is expected to permit the Company, at its option, on or after August
1, 2003, to redeem all or any portion of the outstanding New Notes.

91
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The following statements are brief summaries of certain provisions with
respect to the Company's capital stock contained in the Company's Charter and
By-laws, copies of which are incorporated by reference as exhibits to the
Registration Statement. The following description does not purport to be
complete and is subject in all respects to applicable Delaware law and to the
provision of the Company's Charter and By-laws.

The authorized capital stock of the Company consists of 300,000,000 shares
of Common Stock, par value $.01 per share, 10,000,000 shares of class A non-
voting common stock, par value $0.01 per share ("Class A Non-Voting Common
Stock"), 10,000,000 shares of class B non-voting common stock, par value $0.01
per share ("Class B Non-Voting Common Stock" and, together with Class A Non-
Voting Common Stock, the "Non-Voting Stock"), and 10,000,000 shares of
preferred stock, par value $0.01 per share ("Preferred Stock"). Immediately
following the consummation of the Equity Offering, and based on the number of
shares outstanding as of July 29, 1998, there will be 58,538,646 shares of
Common Stock outstanding, no shares of Class A Non-Voting Common Stock
outstanding, 84,000 shares of Class B Non-Voting Common Stock outstanding,
3,404,665 shares of Common Stock issuable upon exercise of outstanding
options, and no shares of Preferred Stock outstanding.

COMMON STOCK

The rights of holders of Common Stock and Non-Voting Stock (together, "Loews
Cineplex Stock") are identical except with respect to voting and conversion
rights. Subject to the provisions of the DGCL (as hereinafter defined) and the
terms of any series of Preferred Stock, the holders of Loews Cineplex Stock
are entitled to receive dividends as and when declared by the Company's Board
of Directors out of funds legally available therefor. Upon the liquidation,
dissolution or winding up of the Company, the holders of Loews Cineplex Stock
will be entitled to share ratably the net assets of the Company remaining
after payment or provision for payment of all debts and other liabilities of
the Company and subject to the rights of any holders of any outstanding
Preferred Stock. The Loews Cineplex Stock has no preemptive or similar rights
or conversion rights (except as described under the captions "The Stockholders
Agreement--Equity Purchase Rights" and "Certain Relationships and Related
Transactions," and except as described below), and are not subject to further
calls or assessments by the Company. The holders of Common Stock are entitled
to one vote per share on all matters to be voted on by the stockholders. The
holders of Non-Voting Stock are not entitled to vote such shares, except as
required by law. The holders of Common Stock do not have the right to vote
cumulatively in the election of the Company's directors. Class A Non-Voting
Common Stock shall convert into Common Stock, on a one-for-one basis (i) upon
their transfer to any party other than SPE and its affiliates, (ii) if, as a
result of an issuance of Common Stock by the Company, SPE and its affiliates
aggregate ownership would be diluted below 49.9% of the outstanding Common
Stock, in an amount that would result in SPE and its affiliates beneficially
owning not more than 49.9% of the outstanding Common Stock and (iii) at May
14, 2001. As a result of the Equity Offering, all of the Class A Non-Voting
Common Stock will convert into voting Common Stock. Class B Non-Voting Common
Stock shall convert into Common Stock on a one-for-one basis, upon the later
of (i) a transfer to any person, other than the person to whom such shares
were issued pursuant to the Combination or an affiliate thereof, and (ii) May
14, 2003.

PREFERRED STOCK

The Company's Charter provides that the Company's Board of Directors is
authorized, without further action by the stockholders, to issue, from time to
time, Preferred Stock in one or more series and to fix for each such series
the number of shares comprising such series and such voting powers,
designations, preferences and relative, participating, optional or other
special rights and such qualifications, limitations or restrictions thereof as
shall be stated or expressed in the resolution or resolutions adopted by the
Company's Board of Directors providing for the issuance of such series and to
the fullest extent as may be permitted by the DGCL. The issuance of Loews
Cineplex Preferred Stock may adversely affect the voting rights and other
rights of the holders of Loews Cineplex Stock. As of the date of this
Prospectus, no shares of Preferred Stock are outstanding.

92
<PAGE>

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

As of the date of this Prospectus, there were approximately 255,919,052
shares of Common Stock, 8,797,514 shares of Class A Non-Voting Common Stock,
9,916,000 shares of Class B Non-Voting Common Stock and 10,000,000 shares of
Preferred Stock available for future issuance without stockholder approval
other than as provided in the Stockholders Agreement or as required by the
rules of the NYSE or the TSE. These additional shares may be utilized for a
variety of corporate purposes, including future public offerings to raise
additional capital or to facilitate corporate acquisitions.

Loews Cineplex currently does not have any plans to issue additional Loews
Cineplex Stock (including Preferred Stock) other than Common Stock that may be
issued pursuant to the Equity Offering and Common Stock that may be issued
upon the exercise of options that have been granted or that may be granted in
the future to Loews Cineplex's employees or upon the conversion of Non-Voting
Stock in accordance with the Company's Charter.

CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS AND DELAWARE LAW

The Company's Charter and By-laws and Delaware law contain provisions that
could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise. Such provisions could have the effect of
discouraging open market purchases of the Common Stock because they may be
considered disadvantageous by a stockholder who desires to participate in a
business combination or elect a new director.

Section 203 of Delaware Law. The Company is a Delaware corporation and is
subject to Section 203 ("Section 203") of the Delaware General Corporation Law
(the "DGCL"). In general, Section 203 prevents an "interested stockholder"
(defined as a person who, together with affiliates and associates,
beneficially owns or is an affiliate or associate of the corporation and did
beneficially own within the last three years 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (as
defined) with a Delaware corporation for three years following the time such
person became an interested stockholder unless (i) before such persons became
an interested stockholder, the board of directors of the corporation approved
the transaction in which the interested stockholder became an interested
stockholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain employee stock
ownership plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or (iii) following the transaction in
which such person became an interested stockholder, the business combination
is approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
"interested stockholder." A "business combination" generally includes mergers,
stock or asset sales involving 10% or more of the market value of the
corporation's assets or stock, certain stock transactions and certain other
transactions resulting in a financial benefit to the interested stockholders
or an increase in their proportionate share of any class or series of a
corporation. The existence of Section 203 of the DGCL could have the effect of
discouraging an acquisition of the Company or stock purchases in furtherance
of an acquisition.

Limitation on Directors' Liabilities and Indemnification. The Company's
Charter provides that to the fullest extent permitted by the DGCL as it
currently exists, a director of the Company shall not be liable to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a
director. Under the current DGCL, liability of a director may not be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and
(iv) for any transaction from which the director derives an improper personal
benefit. The effect of this provision of the Company's Charter is to eliminate
the rights of the Company and its stockholders

93
<PAGE>

(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care
as director (including breaches resulting from negligent or grossly negligent
behavior) except in the situations described in clauses (i) through (iv)
above. In addition, the Company's By-laws provide that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by the DGCL.

Insofar as limitations of, or indemnification for, liabilities arising under
the Securities Act may be permitted for directors and executive officers
pursuant to the foregoing provisions, the Company understands that, in the
opinion of the Commission, such limitation of, and indemnification for,
liabilities is against public policy as expressed in the Securities Act and is
therefore unenforceable.

Supermajority and Other Provisions. Pursuant to Article V of the Company's
Charter and subject to the exceptions described below, at any time when SPE or
Universal has an Article III Consent Right (as defined in the Stockholders
Agreement), the consummation by the Company of a "Significant Event" will
require the affirmative vote or written consent of the holders of at least 80%
of the outstanding Common Stock in addition to any affirmative vote required
by the DGCL or by the terms of any series of Preferred Stock. Each of the
following is a "Significant Event:" (a) any merger or consolidation in which
the Company is a constituent corporation (other than a merger of the Company
into another corporation that owns at least 90% of the outstanding stock of
each class and series of the stock of the Company pursuant to Section 253 of
the DGCL) or any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions) of all or substantially all of the
assets of the Company and its subsidiaries taken as a whole; provided that a
merger that satisfies all of the following criteria is not a Significant Event
and is not subject to Article V of the Company's Charter: (i) the Company is
the surviving corporation; (ii) all Common Stock outstanding immediately prior
to the consummation thereof remain outstanding immediately after the
consummation thereof and the only change in the capital stock of the Company
resulting from the merger is the issuance of shares of capital stock pursuant
thereto; and (iii) no consent of the stockholders of the Company would be
required in connection therewith under the DGCL and (b) the adoption of any
plan or proposal for the liquidation, dissolution or winding-up of the
Company. Notwithstanding the foregoing, the affirmative vote or written
consent of the holders of at least 80% of the outstanding Common Stock will
not be required in connection with any particular Significant Event if such
Significant Event shall be approved by at least 14 members of the Company's
Board of Directors and, in such circumstances (i) in the case of any
Significant Event described in (a) above, such Significant Event shall require
the affirmative vote or written consent of holders of at least 66 2/3% of the
outstanding Common Stock in addition to any requirements of the DGCL or the
terms of any series of Preferred Stock then outstanding and (ii) in the case
of any Significant Event described in (b) above, such Significant Event shall
require only such affirmative vote or written consent as is required by the
DGCL or by the terms of any series of Preferred Stock then outstanding. See
"The Stockholders Agreement."

The Stockholders Agreement contains certain restrictions on Transfers by SPE
and Universal (and their respective affiliates). See "The Stockholders
Agreement."

The Company's Charter also provides that: (i) at any time when SPE and its
wholly owned subsidiaries, Universal and its wholly owned subsidiaries and the
members of the Claridge Group do not beneficially own in the aggregate more
than 50% of the outstanding Common Stock, (a) any action required or permitted
to be taken by the stockholders of Loews Cineplex may only be taken at a duly
called annual or special meeting of the stockholders of the Company and may
not be taken by written consent of stockholders and (b) directors of the
Company may be removed without "cause" (as defined in the Company's Charter)
only by the affirmative vote or written consent of the holders of at least 80%
of the outstanding Common Stock (if SPE and its wholly owned subsidiaries,
Universal and its wholly owned subsidiaries and the members of the Claridge
Group beneficially own more than 50% of the Common Stock, directors of the
Company may be removed without cause by the affirmative vote or written
consent of the holders of at least 50% of the outstanding Common Stock); (ii)
except as otherwise provided by the DGCL and subject to the rights of holders
of Preferred Stock then outstanding, special meetings of the stockholders of
the Company may be called only by the Company's Board, pursuant to a
resolution approved by at least 14 of the members thereof; (iii) at any time
when the Applicable Percentage of

94
<PAGE>

SPE or Universal equals or exceeds the Minimum Percentage (as defined below),
the affirmative vote or written consent of the holders of at least 80% of the
outstanding Loews Cineplex Shares will be required in order for the
stockholders to adopt, repeal or amend the By-laws of the Company and; (iv)
the affirmative vote of the holders of at least 80% of the outstanding Loews
Cineplex Shares will be required to adopt, repeal or amend any provision of
the Company's Charter (provided that such 80% approval requirement shall not
be applicable (a) if at any time, the Applicable Percentage of SPE or
Universal equals or exceeds the Minimum Percentage, such adoption, repeal or
amendment is approved by at least 14 members of the Company's Board and (b)
if, at any time the Applicable Percentage of SPE and Universal is less than
the Minimum Percentage, such adoption, repeal or amendment is approved by a
majority of the members of the Company's Board of Directors).

REGISTRATION RIGHTS

The Stockholders Agreement grants to the Stockholders certain demand and
piggyback registration rights with respect to the registration under the
Securities Act of shares of Common Stock (including any shares of Common Stock
issuable upon conversion of Non-Voting Stock) owned by them. At any time after
May 14, 1999, the Stockholders will be able to make demands for registration
("Demand Registration") under the Securities Act of shares of Common Stock
owned by them, subject to certain limitations. In no event shall the Company
be required to effect, in the case of each of SPE and Universal, more than
four Demand Registrations, in the case of the Claridge Group, more than one
Demand Registration, and in the aggregate, nine Demand Registrations. In
addition, at any time following the completion of the sale for cash by the
Company in one or more underwritten public offerings of Common Stock for an
aggregate offering price of $200 million (before deducting underwriting
discounts and commissions), the Stockholders will have piggyback rights to
include shares of Common Stock owned by them in any registration statement
filed by the Company with respect to its Common Stock, subject to certain
exceptions.

TRANSFER AGENT AND REGISTRAR

ChaseMellon Shareholder Services LLC at its offices in New York is the
Company's principal transfer agent and principal registrar, and Montreal Trust
Company of Canada at its offices in Toronto is the Company's branch transfer
agent and branch registrar.

95
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon the closing of the Equity Offering the Company expects to have
approximately 58,538,646 shares of Common Stock outstanding (assuming that the
Underwriters do not exercise their over-allotment option). The 10,000,000
shares of Common Stock sold in the Equity Offering, and 6,131,071 shares of
Common Stock that were outstanding on July 29, 1998, will be freely tradable
without restriction or further registration under the Securities Act, unless
held by an "affiliate" of the Company as that term is defined in the
Securities Act (which shares will be subject to the resale limitations of Rule
144). All of the remaining shares will be "restricted securities" under the
Securities Act and may not be sold unless they are registered or unless an
exemption from registration, such as the exemptions provided by Rule 144, Rule
701, or Rule 144A under the Securities Act, is available. Upon the
consummation of the Equity Offering, 23,137,111 restricted shares of Common
Stock held by SPE will be eligible for sale pursuant to Rule 144 and Rule 701,
subject to the limitations described below and the lock-up arrangements
described under "Underwriting."

In general, under Rule 144 as currently in effect, a stockholder (or
stockholders whose shares are aggregated) who has beneficially owned shares
constituting "restricted securities" (generally defined as securities acquired
from the Company or an affiliate of the Company in a non-public transaction)
for at least one year, is entitled to sell within any three-month period a
number of shares that does not exceed the greater of one percent of the
outstanding Common Stock or the average weekly trading volume in the Common
Stock during the four calendar weeks preceding the date on which notice of
such sale is filed pursuant to Rule 144. The holder may only sell such shares
through unsolicited brokers' transactions. Sales under Rule 144 are also
subject to certain provisions regarding the manner of sale, notice
requirements and the availability of current public information about the
Company. A stockholder (or stockholders whose shares are aggregated) who is
not an affiliate of the Company for at least 90 days prior to a proposed
transaction and who has beneficially owned "restricted securities" for at
least two years is entitled to sell such shares under Rule 144 without regard
to the limitations described above. Affiliates may sell shares not
constituting restricted shares in accordance with the foregoing volume
limitations and other requirements (other than the one-year holding
requirement).

Rule 701 sets forth special resale provisions relating to sales of Common
Stock issued pursuant to a written compensation plan or contract. In general,
employees of the Company who purchased their shares pursuant to such written
compensation plan or contract may be entitled to rely on the resale provisions
of Rule 701 under the Securities Act, which permits nonaffiliates to sell
their Rule 701 shares without having to comply with the current public
information, holding period, volume limitation or notice provision of Rule 144
and permits affiliates to sell their Rule 701 shares without having to comply
with Rule 144's holding period restrictions.

Rule 144A provides a nonexclusive safe harbor exemption from the
registration requirements of the Securities Act for specified resales of
restricted securities to certain institutional investors. In general, Rule
144A allows unregistered resales of restricted securities to a "qualified
institutional buyer," which generally includes an entity, acting for its own
account or for the account of other qualified institutional buyers, that in
the aggregate owns or invests at least $100 million in securities of
unaffiliated issuers. Rule 144A does not extend an exemption to the offer or
sale of securities that, when issued, were of the same class as securities
listed on a national securities exchange or quoted on NASDAQ. The shares of
Common Stock outstanding as of the date of this Prospectus would be eligible
for resale under Rule 144A because such shares, when issued, were not of the
same class as any listed or quoted securities.

The Company has an effective registration statement on Form S-8 under the
Securities Act in respect of approximately 4,520,000 shares of Common Stock
issuable under the Stock Incentive Plan. The Form S-8 includes, in some cases,
shares for which an exemption under Rule 144 or Rule 701 would also be
available, thus permitting the resale of shares issued under the stock option
plan by non-affiliates in the public market without restriction under the
Securities Act. Shares registered thereunder are eligible for sale in the
public market, subject to vesting and, in certain cases, subject to the lock-
up agreements described under "Underwriting." As of July 29, 1998, options to
purchase 3,404,665 shares of Common Stock are outstanding under the Stock
Incentive Plan.

96
<PAGE>

CERTAIN UNITED STATES FEDERAL TAX
CONSIDERATIONS FOR NON-UNITED STATES HOLDERS

The following is a general discussion of the material U.S. federal income
and estate tax consequences of the ownership and disposition of Common Stock
applicable to Non-U.S. Holders of such Common Stock. A "Non-U.S. Holder" is a
beneficial owner of Common Stock that is not, for U.S. federal income tax
purposes, (i) a citizen or individual resident of the United States, (ii) a
corporation or partnership created or organized in the United States or under
the laws of the United States or of any state (other than any partnership
treated as foreign under U.S. Treasury regulations), (iii) an estate whose
income is includable in gross income for United States federal income tax
purposes regardless of source or (iv) in general, a trust subject to the
primary supervision of a court within the United States and the control of one
or more United States persons.

An individual may, subject to certain exceptions, be deemed to be a resident
alien (as opposed to a non-resident alien) by virtue of being present in the
United States for at least 31 days in the calendar year and for an aggregate
of at least 183 days during a three-year period ending in the current calendar
year (counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year, and one-sixth
of the days present in the second preceding year). Resident aliens are subject
to tax as if they were U.S. citizens.

This discussion does not consider specific facts and circumstances that may
be relevant to a particular Non-U.S. Holder's tax position (including the fact
that in the case of a Non-U.S. Holder that is a partnership, the U.S. tax
consequences of holding and disposing of shares of Common Stock may be
affected by certain determinations made at the partner level) and does not
consider U.S. state and local or non-U.S. tax consequences. This discussion
also does not consider the tax consequences for any person who is a
shareholder, partner or beneficiary of a holder of the Common Stock. Further,
it does not consider Non-U.S. Holders subject to special tax treatment under
the U.S. federal tax laws (including but not limited to banks and insurance
companies, dealers in securities, U.S. expatriates and holders of securities
held as part of a "straddle," "hedge," or "conversion transaction"). The
following discussion is based on provisions of the U.S. Internal Revenue Code
of 1986, as amended (the "Code"), the applicable Treasury regulations
promulgated thereunder, and administrative and judicial interpretations as of
the date hereof, all of which are subject to change or differing
interpretation, possibly with retroactive effect. The following summary is
included herein for general information. ACCORDINGLY, EACH PROSPECTIVE NON-
U.S. HOLDER IS URGED TO CONSULT A TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL
TAX CONSEQUENCES OF HOLDING AND DISPOSING OF COMMON STOCK, AS WELL AS ANY TAX
CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY U.S. STATE, LOCAL OR OTHER
U.S. OR NON-U.S. TAXING JURISDICTION.

DIVIDENDS

The Company does not anticipate paying any cash dividends on the Common
Stock in the foreseeable future. See "Dividend Policy." In the event, however,
that the Company does pay dividends on the Common Stock, such dividends paid
to a Non-U.S. Holder of Common Stock will generally be subject to withholding
of U.S. federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty in effect between the United
States and the Non-U.S. Holder's jurisdiction of residence. Non U.S. Holders
should consult their tax advisors regarding their entitlement to benefits
under a relevant income tax treaty.

Dividends that are (i) effectively connected with a Non-U.S. Holder's
conduct of a trade or business in the United States or, (ii) if an income tax
treaty applies, attributable to a permanent establishment, or, in the case of
an individual, a "fixed base," in the United States ("U.S. trade or business
income"), are generally subject to U.S. federal income tax on a net income
basis at regular graduated rates, but are not generally subject to the 30%
withholding tax if the Non-U.S. Holder files the appropriate U.S. Internal
Revenue Service ("IRS") form with the payor (which form, under U.S. Treasury
regulations generally effective for payments made after December 31, 1999 (the
"Final Regulations"), in certain circumstances may require the Non-U.S. Holder
to

97
<PAGE>

provide a U.S. taxpayer identification number). Any U.S. trade or business
income received by a Non-U.S. Holder that is a corporation may also, under
certain circumstances, be subject to an additional "branch profits tax" at a
30% rate or such lower rate as may be specified by an applicable income tax
treaty.

Under currently applicable U.S. Treasury regulations, dividends paid to an
address in a foreign country are presumed (absent actual knowledge to the
contrary) to be paid to a resident of such country for purposes of the
withholding discussed above and for purposes of determining the applicability
of an income tax treaty rate. Under the Final Regulations, however, a Non-U.S.
Holder of Common Stock who wishes to claim the benefit of an applicable income
tax treaty rate generally will be required to satisfy applicable certification
and other requirements. In addition, the Final Regulations contain special
rules regarding the availability of treaty benefits for payments made to (a)
foreign intermediaries, (b) U.S. or foreign wholly-owned entities that are
disregarded for U.S. federal income tax purposes and (c) partnerships and
other entities that are treated as fiscally transparent in the United States,
the applicable income tax treaty jurisdiction, or both. Prospective Non-U.S.
Holders should consult their own tax advisors as to the effect, if any, of the
Final Regulations on an investment in the Common Stock.

A Non-U.S. Holder of Common Stock that is eligible for a reduced rate of
U.S. withholding tax pursuant to an income tax treaty may obtain a refund of
any excess amounts withheld by filing an appropriate claim for a refund with
the IRS.

DISPOSITION OF COMMON STOCK

A Non-U.S. Holder generally will not be subject to U.S. federal income tax
in respect of gain recognized on a disposition of Common Stock unless: (i) the
gain is U.S. trade or business income (in which case, the branch profits tax
described above may also apply to a corporate Non-U.S. Holder); (ii) the Non-
U.S. Holder is an individual who holds the Common Stock as capital asset
within the meaning of Section 1221 of the Code, is present in the United
States for 183 or more days in the taxable year of the disposition and meets
certain other requirements; or (iii) the Company is or has been a U.S. real
property holding corporation ("USRPHC") for U.S. federal income tax purposes
at any time during the shorter of the five-year period ending on the date of
disposition and the period that the Common Stock was held by the Non-U.S.
Holder. In general, a U.S. corporation will be a USRPHC if the fair market
value of its U.S. real property interests equals or exceeds 50% of the total
fair market value of its U.S. and non-U.S. real property interests and its
assets used or held for use in a trade or business. Although the determination
of whether the Company is a USRPHC at any given time will depend on its
particular facts and circumstances, the Company believes it is likely that it
currently is a USRPHC and will remain a USRPHC for the foreseeable future.
However, even if the Company is a USRPHC, a Non-U.S. Holder which did not
beneficially own, directly or indirectly, more than 5% of the total fair
market value of the Common Stock at any time during the shorter of the five-
year period ending on the date of disposition and the period that the Common
Stock was held by the Non-U.S. Holder (a "Non-5% Holder") and which is not
otherwise subject to tax under clauses (i) or (ii) above will not be subject
to U.S. federal income tax on any gain realized on the disposition of Common
Stock if, at any time during the calendar year of the disposition, the Common
Stock was regularly traded on an established securities market within the
meaning of the applicable regulations. The Common Stock is listed on the NYSE.
Although not free from doubt, the Common Stock should be considered to be
regularly traded on the NYSE for any calendar quarter during which it is
regularly quoted by brokers or dealers which hold themselves out to buy or
sell the Common Stock at the quoted price. If the Common Stock were not
considered to be regularly traded on the NYSE at any time during the
applicable calendar year, then a Non-5% Holder would be subject to U.S.
federal income tax on any gain realized on the disposition of its Common Stock
on a net income basis as if the gain were effectively connected with the
conduct of a United States trade or business by the Non-5% Holder during the
taxable year and, in such case the person acquiring Common Stock from a Non-5%
Holder generally would be required to withhold 10% of the amount of the
proceeds of the disposition. Such withholding may be reduced or eliminated
pursuant to a withholding certificate issued by the IRS in accordance with
applicable regulations. All Non-U.S. Holders should consult their own tax
advisors regarding application of the foregoing rules to them.

98
<PAGE>

FEDERAL ESTATE TAXES

Common Stock owned or treated as owned by an individual who is a Non-U.S.
Holder at the time of death will be included in the individual's gross estate
for U.S. federal estate tax purposes, unless an applicable estate tax treaty
provides otherwise. Such individual's estate may be subject to U.S. federal
estate tax on the property includable in the gross estate for U.S. federal
estate tax purposes.

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

Generally, the Company must report annually to the IRS and to each Non-U.S.
Holder the amount of dividends paid to such holder and any tax withheld with
respect to such dividends. The information reporting requirements apply
regardless of whether withholding is required. Copies of the information
returns reporting such dividends and withholding may also be made available to
the tax authorities in the country in which the Non U.S.-Holder is a resident
under the provisions of an applicable income tax treaty or agreement.

Under certain circumstances, the IRS requires "information reporting" and
"backup withholding" at a rate of 31% with respect to certain payments on
Common Stock. Under current law, Non-U.S. Holders of Common Stock generally
would be exempt from IRS information reporting requirements and U.S. backup
withholding with respect to dividends paid on Common Stock at an address
outside the United States. However, information reporting and backup
withholding will apply to dividends paid on the Common Stock to beneficial
owners with addresses in the United States that are not "exempt recipients"
and that fail to provide in the manner required certain identifying
information.

The payment of the proceeds of the disposition of Common Stock by a holder
to or through the U.S. office of a broker generally will be subject to
information reporting and backup withholding at a rate of 31% unless the Non-
U.S. Holder either certifies its status as a Non-U.S. Holder under penalties
of perjury or otherwise establishes an exemption. In general, the payment of
the proceeds of the disposition by a Non-U.S. Holder of Common Stock to or
through a non-U.S. office of a non-U.S. broker will not be subject to backup
withholding or information reporting. However, in the case of the payment of
proceeds from the disposition of Common Stock effected by a non-U.S. office of
a broker that is a U.S. person or a "U.S. related person," existing
regulations require information reporting (but, currently, not backup
withholding) on the payment unless the broker receives a statement from the
owner, signed under penalty of perjury, certifying its non-U.S. status or the
broker has documentary evidence in its files as to the Non-U.S. Holder's
foreign status and the broker has no actual knowledge to the contrary. For
this purpose, a "U.S. related person" is (i) a "controlled foreign
corporation" for U.S. federal income tax purposes, or (ii) a foreign person
50% or more of whose gross income from all sources for the three-year period
ending with the close of its taxable year preceding the payment (or for such
part of the period that the broker has been in existence) is derived from
activities that are effectively connected with the conduct of a U.S. trade or
business.

Under the Final Regulations, which generally are effective for payments made
after December 31, 1999, the payment of dividends, and the payment of proceeds
from the disposition of Common Stock through brokers having certain
connections with the United States, may be subject to information reporting
and backup withholding at a rate of 31% unless certain IRS certification
requirements are satisfied or an exemption is otherwise established.
Prospective Non-U.S. Holders should consult with their own tax advisors
regarding the application of the Final Regulations to their particular
circumstances.

Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be refunded (or credited against the holder's U.S.
federal income tax liability, if any) provided that the required information
is furnished to the IRS.

99
<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement, dated July 30, 1998 (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Credit Suisse First
Boston Corporation, Bear, Stearns & Co. Inc., BT Alex. Brown Incorporated,
Goldman, Sachs & Co. and Smith Barney Inc. are acting as the representatives
(the "Representatives"), have severally but not jointly agreed to purchase
from the Company the following respective numbers of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ----------
<S> <C>
Credit Suisse First Boston Corporation............................ 1,760,000
Bear, Stearns & Co. Inc........................................... 1,760,000
BT Alex. Brown Incorporated....................................... 1,760,000
Goldman, Sachs & Co............................................... 1,760,000
Smith Barney Inc.................................................. 1,760,000
ING Baring Furman Selz LLC........................................ 200,000
Invemed Associates, Inc........................................... 200,000
Josephthal & Co. Inc.............................................. 200,000
Charles Schwab & Co., Inc......................................... 200,000
Yorkton (USA) Securities, Inc. ................................... 400,000
----------
Total........................................................... 10,000,000
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will be
obligated to purchase all of the shares of Common Stock offered hereby (other
than those shares covered by the over-allotment option described below) if any
are purchased. The Underwriting Agreement provides that, in the event of a
default by an Underwriter, in certain circumstances the purchase commitments
of non-defaulting Underwriters may be increased or the Underwriting Agreement
may be terminated.

The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of this Prospectus, to purchase up
to 1,500,000 additional shares at the public offering price, less the
underwriting discounts and commissions, all as set forth on the cover page of
this Prospectus. Such option may be exercised only to cover over-allotments,
if any, in the sale of the shares of Common Stock offered hereby. To the
extent such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of additional shares of Common Stock as it was obligated to purchase pursuant
to the Underwriting Agreement.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public initially at the
public offering price set forth on the cover page of this Prospectus and,
through the Representatives, to certain dealers at such price less a
concession of $.40 per share, and the Underwriters and such dealers may allow
a discount of $.10 per share on sales to certain other dealers. After the
initial public offering, the public offering price and concession and discount
to dealers may be changed by the Representatives.

The Company, SPE, Universal, members of the Claridge Group holding in the
aggregate 4,269,216 shares of Common Stock and all of the Company's directors
and executive officers have agreed that they will not offer, sell, contract to
sell, pledge or otherwise dispose of, directly or indirectly, or, in the case
of the Company, file or cause to be filed with the Commission a registration
statement under the Securities Act relating to, any shares of Common Stock or
securities or other rights convertible into or exchangeable or exercisable for
any shares of Common Stock, or publicly disclose the intention to make any
such offer, sale, pledge, disposal or, in the case of the Company, filing,
without the prior written consent of Credit Suisse First Boston Corporation,
for a period of 90 days after the date of this Prospectus, excepting, in the
case of the Company, grants of employee stock options pursuant to an option
plan in effect on the date of this Prospectus and issuances of Common Stock
pursuant to the exercise of options under any such plan.

100
<PAGE>

The Underwriters have reserved for sale, at the initial public offering
price, up to 500,000 shares of Common Stock for employees, directors and
certain other persons associated with the Company who have expressed an
interest in purchasing such shares of Common Stock in the Equity Offering. The
number of shares available for sale to the general public in the Equity
Offering will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares not so purchased will be offered by the
Underwriters to the general public on the same terms as the other shares
offered hereby.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or to
contribute to payments that the Underwriters may be required to make in
respect thereof.

The Representatives, on behalf of the Underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934, as amended. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Syndicate covering
transactions involve purchases of the Common Stock in the open market after
the distribution has been completed in order to cover syndicate short
positions. Penalty bids permit the Representatives to reclaim a selling
concession from a syndicate member when Common Stock originally sold by such
syndicate member is purchased in a syndicate covering transaction to cover
syndicate short positions. Such stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of Common Stock to be higher
than it would otherwise be in the absence of such transactions. These
transactions may be effected on the NYSE or otherwise and, if commenced, may
be discontinued at any time.

Certain of the Underwriters and their affiliates have provided from time to
time, and expect to provide in the future, various investment banking and
commercial banking services to the Company, for which such Underwriters have
received and will receive fees and commissions. Credit Suisse First Boston
Corporation acted as financial advisor to SCA and SPE in connection with the
Combination. Goldman, Sachs & Co. is acting as dealer manager for the Plitt
Note Repurchase. Certain of the Underwriters or their affiliates may act as
financial intermediaries in connection with the offering of the New Notes.
Further, Credit Suisse First Boston has been retained by the Company to
provide advice in connection with the disposition of 25 theatres pursuant to a
settlement entered into between the Company and DOJ. In addition, Credit
Suisse First Boston, New York branch (an affiliate of Credit Suisse First
Boston Corporation), and Bankers Trust Company (an affiliate of BT Alex. Brown
Incorporated) acted as Co-Syndication Agents and are Lenders and, in the case
of Bankers Trust Company, Administrative Agent, under the Bank Credit
Facilities and will, in the aggregate, receive in excess of 10% of the net
proceeds from the Equity Offering upon repayment by the Company of outstanding
indebtedness under the Bank Credit Facilities with net proceeds of the Equity
Offering. Accordingly, the Equity Offering is being made in compliance with
the requirements of Rule 2710(c)(8) of the Conduct Rules of the National
Association of Securities Dealers, Inc. This rule provides generally that if
more than 10% of the net proceeds from the sale of the Common Stock, not
including underwriting compensation, is paid to the Underwriters of such
securities or their affiliates, the price at which the Common Stock is to be
distributed to the public may not be lower than that recommended by a
"qualified independent underwriter" meeting certain standards. Bear, Stearns &
Co. Inc. is assuming the responsibilities of acting as the qualified
independent underwriter in pricing the offering and conducting due diligence.
The price of the Common Stock, when sold to the public at the public offering
price set forth on the cover page of this Prospectus, will be no higher than
that recommended by Bear, Stearns & Co. Inc.

The Company is currently in compliance in all material respects with the
terms of the Bank Credit Facilities. The decision of the Underwriters to
distribute the Common Stock was made independent of the Company's lenders to
which they are affiliated, which lenders had no involvement in determining
whether or when to distribute the Common Stock under this offering or the
terms of the offering. The Underwriters will not receive any benefit from this
offering other than their respective portions of the underwriting discounts or
commissions as set forth on the cover page of this Prospectus.

101
<PAGE>

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Common Stock are effected. Accordingly, any
resale of the Common Stock in Canada must be made in accordance with
applicable securities laws, which will vary depending on the relevant
jurisdiction, and in accordance with stock exchange rules and which may
require resales to be made in accordance with available statutory exemptions
or pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority.

The Common Stock is listed on the TSE. Under the rules of the TSE, a
purchaser of Common Stock on a private placement basis must complete and
return to the Underwriters for filing with the TSE a Private Placement
Questionnaire and Undertaking in the form included as Annex A to this
Prospectus. In the Private Placement Questionnaire and Undertaking, the
purchaser undertakes not to sell the Common Stock for a period of six months
without the prior consent of the TSE or for such longer period as may be
prescribed by applicable securities laws of the province in which the
purchaser resides.

Purchasers are advised to seek legal advice prior to any resale of Common
Stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from
whom such purchase confirmation is received that (i) such purchaser is
entitled under applicable provincial securities laws to purchase such Common
Stock without the benefit of a prospectus qualified under such securities
laws, (ii) where required by law, that such purchaser is purchasing as
principal and not as agent, and (iii) such purchaser has reviewed the text
above under "--Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available,
including common law rights of action for damages or rescission or rights of
action under the civil liability provisions of the U.S. federal securities
laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such
persons in Canada or to enforce a judgment obtained in Canadian courts against
the issuer or such persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of Common Stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
Common Stock acquired by such purchaser pursuant to the Offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from the Company. Only one
such report must be filed in respect of Common Stock acquired on the same date
and under the same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of Common Stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the Common
Stock in their particular circumstances and with respect to the eligibility of
the Common Stock for investment by the purchaser under relevant Canadian
legislation.

102
<PAGE>

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York. Certain legal matters relating to the Equity Offering will be
passed upon for the Underwriters by Dewey Ballantine LLP, New York, New York.

EXPERTS

The consolidated financial statements of Loews Cineplex and subsidiaries as
of February 28, 1998 and 1997 and for each of the three fiscal years in the
period ended February 28, 1998 and the financial statements of Loeks-Star
Partners at February 26, 1998 and February 27, 1997 and for each of the three
fiscal years in the period ended February 26, 1998, included in this
Prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm experts in auditing and accounting.

The consolidated financial statements of Cineplex Odeon as of December 31,
1997 and December 31, 1996 and for each of the years in the three year period
ended December 31, 1997 have been included in this Prospectus in reliance upon
the report of KPMG, independent chartered accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act (together with all amendments, exhibits and
schedules thereto, the "Registration Statement") with respect to the Common
Stock offered hereby. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in
the Registration Statement, certain items of which are omitted as permitted by
the rules and regulations of the Commission. For further information
pertaining to the Company and the Common Stock offered hereby, reference is
made to the Registration Statement. Statements contained in this Prospectus
regarding the contents of any contract or other document are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information, as well as the Registration Statement, may be inspected, without
charge, at the public reference facility maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and at
the Commission's regional offices located at Seven World Trade Center,
New York, NY 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661-2511. Copies of such material may also be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, DC 20549, at prescribed rates. Such materials can also be
inspected at the offices of The New York Stock Exchange, Inc., 20 Broad
Street, New York, NY 10005 or on the Commission's web site on the Internet
(http://www.sec.gov).

103
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LOEWS CINEPLEX ENTERTAINMENT CORPORATION
Three Months ended May 31, 1998 and May 31, 1997
Unaudited Condensed Consolidated Balance Sheets ........................ F-2
Unaudited Condensed Consolidated Statements of Operations............... F-3
Unaudited Condensed Consolidated Statements of Cash Flows............... F-4
Notes to Unaudited Condensed Consolidated Financial Statements.......... F-5
Three years ended February 28, 1998, February 28, 1997 and February 29,
1996
Report of Independent Accountants....................................... F-12
Consolidated Balance Sheet.............................................. F-13
Consolidated Statement of Operations.................................... F-14
Consolidated Statement of Changes in Stockholder's Equity............... F-15
Consolidated Statement of Cash Flows.................................... F-16
Notes to Consolidated Financial Statements.............................. F-17
LOEKS-STAR PARTNERS
Three year periods ending February 26, 1998, February 27, 1997 and Febru-
ary 29, 1996
Report of Independent Accountants....................................... F-30
Balance Sheet........................................................... F-31
Statements of Income.................................................... F-32
Statements of Partners' Capital......................................... F-33
Statements of Cash Flows................................................ F-34
Notes to Financial Statements........................................... F-35
CINEPLEX ODEON CORPORATION
Three years ended December 31, 1997, 1996 and 1995
Independent Auditors' Report............................................ F-39
Consolidated Balance Sheet.............................................. F-40
Consolidated Income Statement........................................... F-41
Consolidated Statement of Changes in Cash Resources..................... F-42
Consolidated Statement of Changes in Shareholders' Equity............... F-43
Notes to Consolidated Financial Statements.............................. F-44
Three month periods ended March 31, 1998 and 1997 (unaudited)
Consolidated Balance Sheet.............................................. F-58
Consolidated Income Statement........................................... F-59
Consolidated Statement of Changes in Cash Resources..................... F-60
Notes to Consolidated Financial Statements.............................. F-61
</TABLE>

F-1
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents......... $ 37,785 $ 9,064
Accounts receivable............... 15,374 5,479
Inventories....................... 4,659 1,146
Prepaid expenses and other current
assets........................... 14,114 2,520
---------- --------
TOTAL CURRENT ASSETS............ 71,932 18,209
PROPERTY, EQUIPMENT AND LEASEHOLDS,
NET................................ 1,180,376 609,152
EXCESS PURCHASE PRICE............... 224,304 --
OTHER ASSETS
Long-term investments and advances
to partnerships.................. 28,941 31,763
Goodwill, net..................... 83,913 53,143
Other intangible assets, net...... 6,503 6,005
Deferred charges and other
assets........................... 21,318 10,279
---------- --------
TOTAL ASSETS.................... $1,617,287 $728,551
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses......................... $ 230,471 $ 62,934
Due to Sony affiliates............ -- 3,810
Deferred revenue.................. 22,122 --
Current maturities of long-term
debt and other obligations....... 9,785 770
---------- --------
TOTAL CURRENT LIABILITIES....... 262,378 67,514
DEFERRED INCOME TAXES............... 16,174 18,299
LONG-TERM DEBT AND OTHER
OBLIGATIONS........................ 720,056 10,513
DEBT DUE TO SONY AFFILIATES......... -- 292,523
PENSION AND OTHER POSTRETIREMENT
OBLIGATIONS........................ 9,668 3,791
OTHER LIABILITIES................... 13,743 11,400
---------- --------
TOTAL LIABILITIES............... 1,022,019 404,040
---------- --------
COMMITMENTS AND CONTINGENCIES (Note
13)
STOCKHOLDERS' EQUITY
Common stock ($.01 par value,
300,000,000 shares authorized;
44,079,924 shares issued and
outstanding at May 31, 1998 and
19,270,321 shares issued and
outstanding at February 28, 1998) 441 193
Common stock-Class A non-voting
($.01 par value, 10,000,000
authorized; 1,202,486 shares
issued and outstanding at May 31,
1998 and February 28, 1998)...... 12 12
Common stock-Class B non-voting
($.01 par value, 10,000,000
shares authorized; 84,000 shares
issued and outstanding at May 31,
1998 and nil issued and
outstanding at February 28, 1998) 1 --
Additional paid-in capital........ 591,613 299,277
Retained earnings................. 3,201 25,029
---------- --------
TOTAL STOCKHOLDERS' EQUITY...... 595,268 324,511
---------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY........... $1,617,287 $728,551
========== ========
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated fi-
nancial statements.

F-2
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
----------------------------
MAY 31,
1998 (B) MAY 31, 1997
------------- -------------
<S> <C> <C>
REVENUES
Admissions..................................... $ 83,207 $ 67,370
Concessions.................................... 31,170 23,486
Other.......................................... 3,437 2,360
------------- -------------
117,814 93,216
------------- -------------
EXPENSES
Theatre operations and other expenses.......... 85,115 67,400
Cost of concessions............................ 4,828 3,695
General and administrative..................... 7,946 5,937
Depreciation and amortization.................. 14,681 12,597
------------- -------------
112,570 89,629
------------- -------------
INCOME FROM OPERATIONS........................... 5,244 3,587
INTEREST EXPENSE................................. 6,106 3,622
------------- -------------
LOSS BEFORE INCOME TAXES......................... (862) (35)
INCOME TAX (BENEFIT)/ EXPENSE.................... (119) 365
------------- -------------
NET LOSS......................................... $ (743) $ (400)
============= =============
Weighted Average Shares Outstanding--basic
(A)........................................... 24,619,805 20,472,807
Weighted Average Shares Outstanding--diluted
(A)........................................... 24,984,549 20,472,807
Loss per Share--basic.......................... $(.03) $(.02)
===== =====
Loss per Share--diluted........................ $(.03) $(.02)
===== =====
</TABLE>
- --------
(A) The quarter ended May 31, 1997 has been restated to reflect a stock
dividend declared on February 5, 1998.
(B) Includes the operating results of Cineplex Odeon Corporation from May 15,
1998 through May 31, 1998.

The accompanying notes are an integral part of these unaudited consolidated
financial statements.

F-3
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
-----------------------
MAY 31, MAY 31,
1998 1997
--------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................. $ (743) $ (400)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization...................... 14,681 12,597
Equity earnings from long-term investments, net of
distributions received............................ (514) 640
Changes in operating assets and liabilities:
Decrease in deferred taxes......................... (2,125) (953)
(Increase)/decrease in accounts receivable......... 291 491
Increase/(decrease) in accounts payable and accrued
expenses.......................................... 12,030 (1,652)
Increase/(decrease) in other operating assets and
liabilities, net.................................. 3,672 (749)
--------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 27,292 9,974
--------- -------
INVESTING ACTIVITIES...................................
Repayments/(borrowings) from partnerships............ 5,994 (3,556)
Investments in partnerships.......................... (2,658) --
Capital expenditures................................. (16,117) (5,404)
Merger related costs................................. (5,809) --
--------- -------
NET CASH USED IN INVESTING ACTIVITIES.................. (18,590) (8,960)
--------- -------
FINANCING ACTIVITIES
(Repayment)/borrowing of debt due to Sony
affiliates.......................................... (299,487) 10,535
Proceeds from bank credit facility................... 500,000 --
Repayment of long-term debt.......................... (179,294) (86)
Proceeds on exercise of stock options................ 351 --
Deferred financing fees from bank credit facility.... (5,943) --
Dividend paid to Sony affiliate on Combination....... (80,108) --
Proceeds from issuance of common stock to Universal
on Combination...................................... 84,500 --
--------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES.............. 20,019 10,449
--------- -------
INCREASE IN CASH AND CASH EQUIVALENTS.................. 28,721 11,463
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....... 9,064 2,160
--------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............. $ 37,785 $13,623
========= =======
Supplemental Cash Flow Information:
Income taxes paid, net of refunds received....... $ 600 $ 917
========= =======
Interest paid (including $6,942 and $6,609 paid
to Sony affiliates)............................. $ 9,121 $ 6,861
========= =======
</TABLE>

The accompanying notes are an integral part of these unaudited consolidated
financial statements.

F-4
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

NOTE 1--THE COMPANY AND BASIS OF PRESENTATION

Loews Cineplex Entertainment Corporation ("LCP" or the "Company", formerly
LTM Holdings, Inc.), is a major motion picture theatre exhibition company with
operations in North America and Europe. The Company conducts business under
the Loews Theatres, Sony Theatres, Cineplex Odeon Theatres, Star Theatres,
Magic Johnson Theatres and Yelmo Cineplex Theatres marquees. As of May 31,
1998, LCP owns, or has interests in, and operates 2,794 screens at 450
theatres in 22 states and the District of Columbia, 6 Canadian provinces,
Hungary and Turkey. The Company's principal markets include New York, Boston,
Chicago, Baltimore, Dallas, Houston, Detroit, Los Angeles, Seattle, Washington
D.C., Toronto, Montreal and Vancouver. The Company holds a 50% partnership
interest in each of the Loeks-Star Theatres ("LST") and Magic Johnson Theatres
("MJT") partnerships. LST and MJT hold interests in and operate 12 locations,
comprising a total of 149 screens. Screens and locations for the partnerships
are included in the Company amounts referred to above. Since June 10, 1998,
the Company also has a 50% interest in 108 screens in 13 theatre locations in
Spain through a joint venture with Yelmo Films S.A, called Yelmo Cineplex de
Espana.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information; therefore, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included.
The business combination with Cineplex Odeon has been accounted for under the
purchase method of accounting, and, therefore, the unaudited consolidated
financial statements include the operating results of Cineplex Odeon
Corporation from the date of combination (May 15, 1998) to May 31, 1998.
Operating results for the three months ended May 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending February
28, 1999. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on
Form 10-K for the year ended February 28, 1998.

NOTE 2--BUSINESS COMBINATION

At the closing of the Combination, the Company issued 7,264,642 shares of
Common Stock and 80,000 shares of Class B Non-Voting Common Stock to Universal
Studios, Inc. ("Universal"), 4,324,003 shares of Common Stock and 4,000 shares
of Class B Non-Voting Common Stock to the Charles Rosner Bronfman Family Trust
and certain related shareholders (the "Claridge Group") and 6,111,269 shares
of common stock to the other shareholders of record of Cineplex Odeon
Corporation, for an aggregate value of approximately $266.8 million, in
exchange for the outstanding shares of Cineplex Odeon Corporation and its
wholly-owned subsidiary, Plitt Theatres, Inc. In addition, the Company issued
4,426,607 shares of common stock to Universal for consideration of $84.5
million as required under a subscription agreement and 2,664,304 shares of
common stock in connection with the transfer by Sony Pictures Entertainment
Inc. ("SPE") of its interest in Star Theatres of Michigan, Inc. ("Star") and
S&J Theatres, Inc. ("S&J") to the Company.

As a result of the Combination, SPE, Universal, the Claridge Group and
others own 51.1% (49.9% voting common stock), 26.0% (26.6% voting common
stock), 9.6% and 13.3%, respectively, of LCP common stock.

F-5
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

The Combination has been accounted for under the purchase method of
accounting and, accordingly, the cost to acquire Cineplex Odeon will be
allocated to the assets acquired and liabilities assumed of Cineplex Odeon
based on their respective fair values, with the excess to be allocated to
goodwill. The Company has arranged for an independent valuation and other
studies required to determine the fair value of the assets acquired and
liabilities assumed. These valuations and studies have not been completed and,
accordingly, the balances reflected in the unaudited consolidated statement of
financial position as of May 31, 1998 are preliminary and subject to further
revision and adjustments. For purposes of these unaudited financial
statements, the carrying value of the Cineplex Odeon net assets acquired was
assumed to approximate fair value. Therefore, the $224.3 million of excess
purchase price over the historical net book value of the net assets of
Cineplex Odeon (excluding $31million of historical goodwill) has been
classified on the unaudited balance sheet as Excess Purchase Price and the
related amortization expense reflected in the unaudited consolidated statement
of operations and the following unaudited pro forma results of operations for
the three months ended May 31, 1998 has been recorded on a straight line basis
over a forty year period.

Upon completion of the determination of fair value, the Excess Purchase
Price will be allocated to specific assets and liabilities of Cineplex Odeon.
It is anticipated that there will be reductions in the carrying value
associated with certain assets, and alternatively the fair value of certain
other assets and liabilities may exceed carrying value. Accordingly, the final
valuation could result in materially different amounts and allocations of
Excess Purchase Price from the amounts and allocations reflected in the
following unaudited pro forma results of operations and the unaudited
consolidated financial statements, primarily between goodwill, property,
equipment and leaseholds and certain liabilities resulting in corresponding
changes in depreciation and amortization amounts. For every one million
dollars of Excess Purchase Price allocated to fixed assets, depreciation and
amortization will increase $25 annually (assuming an average 20 year service
life for fixed assets and straight line depreciation). Based on preliminary
estimates of fair value related to certain assets and liabilities, additional
Excess Purchase Price of between $100 million and $150 million could result at
the conclusion of the valuation. The Company currently anticipates that the
necessary valuations and related allocations will be completed by the end of
fiscal 1999.

The unaudited condensed pro forma results of operations presented below
assumes that the Combination occurred at the beginning of each period
presented. The unaudited pro forma information is not necessarily indicative
of the combined results of operations of LCP and Cineplex Odeon that would
have occurred if the transaction had occurred on the dates previously
indicated nor are they necessarily indicative of future operating results of
the combined company.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
MAY 31, MAY 31,
1998 1997
--------- ---------
<S> <C> <C>
Revenues............................................... $ 214,325 $ 228,358
========= =========
Net loss............................................... $(14,536) $ (8,310)
========= =========
Net loss per common share.............................. $ (0.32) $ (0.18)
========= =========
</TABLE>

F-6
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

NOTE 3--ACCOUNTS RECEIVABLE

As of May 31, 1998, accounts receivable consisted of trade receivables of
$12,248 and other receivables of $3,126. As of February 28, 1998, accounts
receivable consisted of trade receivables of $1,885 and other receivables of
$3,594.

NOTE 4--PROPERTY, EQUIPMENT AND LEASEHOLDS

Property, equipment and leaseholds totaled $1,180,376 and $609,152 as of May
31, 1998 and February 28, 1998, respectively. The increase experienced during
the period is primarily due to the inclusion of the net book value of the
property, equipment and leaseholds of Cineplex Odeon Corporation in
conjunction with the Combination. As more fully described in Note 2, for
purposes of these unaudited consolidated financial statements, the historical
carrying value of Cineplex Odeon property, equipment and leaseholds was
assumed to approximate fair value and is subject to further revision and
adjustment.

NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of:

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
-------- ------------
<S> <C> <C>
Accounts payable--trade................................ $ 80,973 $36,924
Accrued expenses and other............................. 149,498 26,010
-------- -------
$230,471 $62,934
======== =======
</TABLE>

NOTE 6--LONG-TERM DEBT AND OTHER OBLIGATIONS

Long-term debt and other obligations consist of:

<TABLE>
<CAPTION>
MAY 31, FEBRUARY 28,
1998 1998
-------- ------------
<S> <C> <C>
Mortgages payable-Non-recourse, payable from 1998
through 2008. Interest rates from 5.61% to 11.5%... $ 27,373 $ 250
Capitalized lease obligations payable in various
amounts through 2017. Interest rates range from 8%
to 16%............................................. 29,468 11,033
Bankers Trust revolving credit facility of up to
$750,000, with interest at Base Rate (as defined)
(8.5% at May 31, 1998) due 2003.................... 473,000 --
Plitt Theatres, Inc. Senior Subordinated Notes with
interest at 10.875%
due 2004........................................... 200,000 --
-------- -------
729,841 11,283
Less: Current maturities............................ 9,785 770
-------- -------
$720,056 $10,513
======== =======
</TABLE>

F-7
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

secured by substantially all of the assets of LCP and its subsidiaries, and a
$250 million uncommitted facility. The credit facility bears interest, at a
rate of either the current prime rate as offered by Bankers Trust Company or
an Adjusted Eurodollar rate plus an applicable margin based on the Company's
Leverage Ratio (as defined). The senior credit facility includes various
financial covenants, including a leverage test and interest coverage test, as
well as customary restrictive covenants, including: (i) limitations on
indebtedness, (ii) limitations on dividends and other payment restrictions,
(iii) limitations on asset sales, (iv) limitations on transactions with
affiliates, (v) limitations on the issuance and sale of capital stock of
subsidiaries, (vi) limitations on lines of business, (vii) limitations on
merger, consolidation or sale of assets and (viii) certain reporting
requirements. The Company's initial borrowing under the new credit facility to
fund the aforementioned transactions at the time of closing was $500 million.

The Company's revolving credit facility and Plitt Theatres, Inc. note
indenture contain certain covenants including those related to the maintenance
of maximum leverage ratios and a minimum debt service coverage ratio, as
defined by the agreements.

At February 28, 1998, the Company had debt due to a Sony Corporation of
America affiliate totaling $296,333 carrying an interest rate of 5.9%.
Concurrently with the closing of the Combination the Company repaid this debt
on May 14, 1998.

NOTE 7--STOCKHOLDERS' EQUITY

The following table reconciles the Company's stockholders' equity for the
period from February 28, 1998 to May 31, 1998.

<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
VOTING NON-VOTING NON-VOTING PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
---------- ------ ---------- ------ ---------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, February 28,
1998................... 19,270,321 $193 1,202,486 $12 -- $-- $299,277 $25,029
Net loss through May
14, 1998.............. -- -- -- -- -- -- -- (3,944)
Exchange of existing
Cineplex Odeon shares
in conjunction with
the Combination....... 17,699,914 177 -- -- 84,000 1 266,579 --
Issuance of shares to
Universal under a
subscription
agreement............. 4,426,607 44 -- -- -- -- 84,456 --
Issuance of shares to
Sony affiliates for
Star Theatres and S&J
Theatres.............. 2,664,304 27 -- -- -- -- (27) --
Stock Options
Exercise.............. 18,778 -- -- -- -- -- 351 --
Dividend to Sony
affiliate............. -- -- -- -- -- -- (59,023) (21,085)
---------- ---- --------- --- ------ ---- -------- -------
44,079,924 441 1,202,486 12 84,000 1 591,613 --
Results from May 14, to
May 31, 1998.......... -- -- -- -- -- -- -- 3,201
---------- ---- --------- --- ------ ---- -------- -------
Balance at May 31,
1998................... 44,079,924 $441 1,202,486 $12 84,000 $ 1 $591,613 $ 3,201
========== ==== ========= === ====== ==== ======== =======
</TABLE>

F-8
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

NOTE 8--LEASES

The Company conducts a significant part of its operations in leased
premises. Leases generally provide for minimum rentals plus percentage rentals
based upon sales volume and also require the tenant to pay a portion of real
estate taxes and other property operating expenses. Lease terms generally
range from 20 to 40 years and contain various renewal options, generally in
intervals of 5 to 10 years.

Future minimum rental commitments at May 31, 1998 and February 28, 1998,
related to operating and capital leases, having an initial or remaining
noncancelable lease term of one or more years, aggregated $1,838,309 and
$521,469, respectively. The increase in future minimum lease commitments
experienced during the period was primarily due to the inclusion of the
Cineplex Odeon commitments assumed as a result of the consummation of the
Combination.

NOTE 9--EARNINGS PER SHARE

In 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where appropriate, restated,
to conform with the requirements of SFAS No. 128. A reconciliation of the
number of shares used in the computations for basic and diluted net loss per
share is as follows:

<TABLE>
<CAPTION>
THREE MONTHS ENDED MAY 31, 1998
-----------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS net loss applicable to common
stock.................................... ($743) 24,619,805 ($0.03)
Effect of dilutive securities............. -- 364,744 --
----- ---------- ------
Diluted EPS net loss...................... ($743) 24,984,549 ($0.03)
===== ========== ======
<CAPTION>
THREE MONTHS ENDED MAY 31, 1997
-----------------------------------
INCOME SHARES PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS net loss applicable to common
stock.................................... ($400) 20,472,807 ($0.02)
Effect of dilutive securities............. -- -- --
----- ---------- ------
Diluted EPS net loss...................... ($400) 20,472,807 ($0.02)
===== ========== ======
</TABLE>

NOTE 10--STOCK OPTIONS

Pursuant to the Combination, the Company has converted the outstanding
Cineplex Odeon stock options as of May 14, 1998 into the Company's stock
options. As a result, the Company has a total of 3,413,633 stock options at a
weighted average exercise price of $13.05 outstanding at May 31, 1998. Of the
total options outstanding as of that date a total of 1,526,360 are currently
exercisable.

F-9
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

NOTE 11--NEW ACCOUNTING PRONOUNCEMENT

The following new pronouncement has been issued but is not yet effective:

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activity,"
is effective for all the Company's fiscal quarters for all fiscal years
beginning February 28, 2000. This statement standardizes the accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, by requiring that the Company recognize those items as assets
or liabilities in the statement of financial position and measure them at fair
value.

The Company expects to adopt the above standard when required and does not
believe that it will have a significant impact on its financial position or
operating results.

NOTE 12--SUBSEQUENT EVENTS

Plitt Tender Offer

As a result of the Combination, Plitt Theatres, Inc. ("Plitt"), Cineplex
Odeon's U.S. theatre group became a wholly owned subsidiary of the Company.
Plitt has outstanding $200 million aggregate principal amount of its 10 7/8%
Senior Subordinated Notes due 2004 (the "Plitt Notes"). Additionally, a
"change of control" was triggered under provisions of the indenture under
which the Plitt Notes were issued (the "Plitt Indenture"). Accordingly, on
June 15, 1998, Plitt commenced an offer to purchase (the "Change of Control
Offer") any and all of the Plitt Notes for cash in an amount equal to 101% of
the principal amount thereof, plus accrued and unpaid interest to (but
excluding) the date of purchase.

On June 15, 1998, Plitt commenced an at-the-market tender offer and consent
solicitation (the "At-the-Market Offer" and, together with the Change of
Control Offer, the "Plitt Note Repurchase") for any and all outstanding Plitt
Notes. Under the terms of the At-the-Market Offer, as amended on June 26,
1998, Plitt has offered to purchase the outstanding Plitt Notes for cash at a
purchase price to be determined by reference to a fixed spread of 55 basis
points over the yield to maturity of the United States Treasury 6.25% Bonds
due May 31, 1999 (the "Reference Security") on the second business day
preceding the expiration date of the At-the-Market Offer (the "Rate Date"),
plus accrued and unpaid interest to (but excluding) the date of payment. The
consent solicitation sought noteholder approval to amend the indenture in
order to eliminate substantially all of the restrictive covenants contained in
the indenture. The consent solicitation expired on July 1, 1998, when a
supplemental indenture effecting the proposed amendments was executed. On July
2, 1998, the Company announced that the holders of more than 95% of the
outstanding principal amount of the Plitt Notes consented, in connection with
the at-the-market offer, to the above mentioned amendments. However, the
proposed amendments will only become operative upon consummation of the At-
the-Market Offer. The At-the-Market Offer, which expires on August 4, 1998, is
subject to various conditions, including no event continuing that could
materially impair the benefits to the Company of the offer and consent
solicitation contemplated at the time that the offer was commenced.

Equity Offering

On June 15, 1998, the Company filed a Registration Statement on Form S-1
under the Securities Act of 1933 offering to sell 10 million shares of Common
Stock, plus up to an additional 1.5 million shares under an over-allotment
option to be granted to the underwriters.

If the offering is consummated, the Company may be obligated to issue
additional shares of Common Stock to Universal for no additional consideration
pursuant to anti-dilution provisions in the Company's subscription agreement
with Universal.

F-10
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA OR AS OTHERWISE NOTED)

Debt Offering

On June 17, 1998, the Company commenced an offering of $200 million
aggregate principal amount of Senior Subordinated Notes due 2008 to qualified
institutional buyers in reliance on Rule 144A under the Securities Act of
1933.

NOTE 13--COMMITMENTS AND CONTINGENCIES

The Company has entered into commitments for the future development and
construction of theatre properties aggregating approximately $290.0 million
(including letters of credit in the amount of $23.1 million). The Company has
also guaranteed an additional $45.4 million related to obligations under lease
agreements entered into by MJT. The Company is of the opinion that MJT will be
able to perform under its respective obligations and that no payment will be
required and no losses will be incurred under these guarantees.

Additionally, the Company is committed, under the terms of the joint venture
agreement dated June 10, 1998 with Yelmo Films S.A., to provide funding for
the future development and construction of theatre properties aggregating up
to approximately $50 million. This acquisition will be accounted for under the
purchase method of accounting and the operating results of the joint venture
will be included from the date of acquisition.

The Company is a defendant in various lawsuits arising in the ordinary
course of business and is involved in certain environmental matters. It is the
opinion of management that any liability to the Company which may arise as a
result of these matters will not have a material adverse effect on its
financial condition.

F-11
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Loews Cineplex Entertainment
Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Loews Cineplex Entertainment Corporation and its subsidiaries at February
28, 1998 and 1997, and the results of their operations and their cash flows
for each of the three years in the period ended February 28, 1998, in
conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ Price Waterhouse LLP

New York, New York
May 21, 1998

F-12
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
FEBRUARY 28,
-----------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................................. $ 9,064 $ 2,160
Accounts receivable........................................ 5,479 4,437
Inventories................................................ 1,146 1,455
Prepaid expenses and other current assets.................. 2,520 2,235
-------- --------
TOTAL CURRENT ASSETS..................................... 18,209 10,287
PROPERTY, EQUIPMENT AND LEASEHOLDS, NET...................... 609,152 613,692
OTHER ASSETS
Long-term investments and advances to partnerships......... 31,763 23,642
Goodwill (less accumulated amortization of $17,989 in 1998
and $16,200 in 1997)...................................... 53,143 54,932
Other intangible assets (less accumulated amortization of
$3,165 in 1998 and $3,088 in 1997)........................ 6,005 6,340
Deferred charges and other assets.......................... 10,279 12,479
-------- --------
TOTAL ASSETS............................................. $728,551 $721,372
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses...................... $ 62,934 $ 55,685
Due to SCA affiliates...................................... 3,810 1,323
Current maturities of long-term debt and other
obligations............................................... 770 508
-------- --------
TOTAL CURRENT LIABILITIES................................ 67,514 57,516
DEFERRED INCOME TAXES........................................ 18,299 22,111
LONG-TERM DEBT AND OTHER OBLIGATIONS......................... 10,513 11,284
DEBT DUE TO SCA AFFILIATES................................... 292,523 293,227
ACCRUED POST RETIREMENT BENEFITS............................. 3,791 3,483
OTHER LIABILITIES............................................ 11,400 9,101
-------- --------
TOTAL LIABILITIES........................................ 404,040 396,722
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 13)
STOCKHOLDER'S EQUITY
Common stock ($.01 par value, 25,000,000 shares authorized;
19,270,321 shares issued and outstanding in 1998 and $200
par value 1,000 shares authorized; 972.75 issued and
outstanding in 1997)...................................... 193 195
Common stock--Class A non-voting ($.01 par value,
10,000,000 shares authorized, 1,202,486 shares issued and
outstanding in 1998; no shares authorized in 1997)........ 12 --
Additional paid-in capital................................. 299,277 299,082
Retained earnings.......................................... 25,029 25,373
-------- --------
TOTAL STOCKHOLDER'S EQUITY............................... 324,511 324,650
-------- --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY............... $728,551 $721,372
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.

F-13
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Admissions............................ $ 296,933 $ 273,498 $ 264,585
Concessions........................... 104,009 90,643 84,358
Other................................. 12,568 11,204 10,153
---------- ---------- ----------
413,510 375,345 359,096
---------- ---------- ----------
EXPENSES
Theatre operations and other ex-
penses............................... 291,421 266,846 261,286
Cost of concessions................... 16,147 15,634 16,089
General and administrative............ 28,917 21,447 20,282
Depreciation and amortization......... 52,307 44,576 41,273
Loss on sale/disposals of theatres.... 7,787 9,951 7,249
---------- ---------- ----------
396,579 358,454 346,179
---------- ---------- ----------
INCOME FROM OPERATIONS.................. 16,931 16,891 12,917
INTEREST EXPENSE........................ 14,319 14,776 15,376
---------- ---------- ----------
INCOME/(LOSS) BEFORE INCOME TAXES....... 2,612 2,115 (2,459)
INCOME TAX EXPENSE...................... 2,751 2,295 309
---------- ---------- ----------
NET LOSS................................ $ (139) $ (180) $ (2,768)
========== ========== ==========
Weighted Average Shares Outstanding--
basic (A)............................ 20,472,807 20,472,807 20,472,807
========== ========== ==========
Weighted Average Shares Outstanding--
diluted (A).......................... 20,924,890 20,472,807 20,472,807
========== ========== ==========
Loss per Share--basic................. $ (.01) $ (.01) $ (.14)
========== ========== ==========
Loss Per Share--diluted............... $ (.01) $ (.01) $ (.14)
========== ========== ==========
</TABLE>
(A) Fiscal years ended February 28, 1997 and February 29, 1996 have been
restated to reflect a stock dividend declared on February 5, 1998.

The accompanying notes are an integral part of these consolidated financial
statements.

F-14
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT SHARE INFORMATION)

<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------------------------
CLASS A
NON- ADDITIONAL
VOTING VOTING PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
------------- ------ --------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, MARCH 1,
1995................... 972.75 $195 -- $-- $299,082 $28,321
YEAR ENDED FEBRUARY 29,
1996:
Net loss.............. -- -- -- -- -- (2,768)
------------- ---- --------- --- -------- -------
BALANCES, FEBRUARY 29,
1996................... 972.75 195 -- -- 299,082 25,553
YEAR ENDED FEBRUARY 28,
1997:
Net loss.............. -- -- -- -- -- (180)
------------- ---- --------- --- -------- -------
BALANCES, FEBRUARY 28,
1997................... 972.75 195 -- -- 299,082 25,373
YEAR ENDED FEBRUARY 28,
1998:
Stock dividend........ 19,269,348.25 (2) 1,202,486 12 195 (205)
Net loss.............. -- -- -- -- -- (139)
------------- ---- --------- --- -------- -------
BALANCES, FEBRUARY 28,
1998................... 19,270,321 $193 1,202,486 $12 $299,277 $25,029
============= ==== ========= === ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-15
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
--------------------------------------
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................. $ (139) $ (180) $ (2,768)
Adjustments to reconcile net loss to
net cash provided by operating activ-
ities:
Depreciation and amortization....... 52,307 44,576 41,273
Loss on sale/disposals of theatres.. 7,787 9,951 7,249
Equity earnings from long-term in-
vestments, net of distributions re-
ceived............................. 887 (553) (1,974)
Changes in operating assets and lia-
bilities:
Increase/(Decrease) in due to SCA
affiliates......................... 2,487 (1,154) (1,840)
Decrease in deferred income taxes... (3,812) (2,806) (1,998)
Increase in accounts receivable..... (1,042) (846) (1,992)
Increase in accounts payable and ac-
crued expenses..................... 7,249 977 11,850
Increase in other operating assets
and liabilities, net............... (1,539) (1,989) (3,474)
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVI-
TIES................................... 64,185 47,976 46,326
-------- -------- --------
INVESTING ACTIVITIES
Proceeds from sale of assets.......... -- 1,043 17,707
(Advances to)/Repayments from partner-
ships................................ (9,008) 6,623 1,090
Capital contributions to partner-
ships................................ -- -- (1,500)
Capital expenditures.................. (42,431) (60,920) (51,987)
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES... (51,439) (53,254) (34,690)
-------- -------- --------
FINANCING ACTIVITIES
(Repayment)/Borrowing of debt due to
SCA affiliate........................ (5,333) 5,575 (13,421)
Repayments of long-term debt.......... (509) (527) (584)
-------- -------- --------
NET CASH (USED)/PROVIDED BY FINANCING
ACTIVITIES............................. (5,842) 5,048 (14,005)
-------- -------- --------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 6,904 (230) (2,369)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR................................ 2,160 2,390 4,759
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
YEAR................................... $ 9,064 $ 2,160 $ 2,390
======== ======== ========
Supplemental Cash Flow Information:
Income taxes paid, net of refunds
received........................... $ 1,934 $ 1,414 $ 385
======== ======== ========
Interest paid (including $14,638,
$15,394 and $15,194 paid to SCA af-
filiates).......................... $ 15,823 $ 16,488 $ 16,393
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-16
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED)

NOTE 1--ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Loews Cineplex Entertainment Corporation ("LCP", "Loews Cineplex" or the
"Company"), formerly LTM Holdings, Inc., is one of the major motion picture
exhibitors in the United States and conducts business under the Loews, Sony,
Star, and Magic Johnson Theatres marquees. At February 28, 1998, LCP was an
indirect wholly owned subsidiary of Sony Pictures Entertainment Inc. ("SPE"),
which itself is an indirect wholly owned subsidiary of Sony Corporation of
America ("SCA"). LCP owns, or has interests in, and operates 1,035 screens at
139 theatres in 16 states as of February 28, 1998. The Company's principal
markets include New York, Boston, Chicago, Dallas, Houston, Baltimore and
Detroit.

Business Combination

On May 14, 1998, pursuant to the Amended and Restated Master Agreement (the
"Master Agreement") dated September 30, 1997, LTM Holdings, Inc. and Cineplex
Odeon Corporation ("Cineplex" or "Cineplex Odeon"), another major motion
picture exhibitor with operations in the U.S. and Canada, combined (the
"Combination"). As called for in the Master Agreement, the outstanding common
shares of Cineplex Odeon were exchanged for LCP shares on a ten for one basis.
Universal Studios, Inc., a major shareholder of Cineplex Odeon, contributed
cash of $84.5 million to the Company in exchange for additional shares of
stock in the Company. SPE and its affiliates have received a cash payment of
approximately $395 million (subject to certain final closing adjustments)
representing (i) a cash payment to satisfy all intercompany indebtedness to
affiliates of SCA as of the closing date, (ii) a cash payment equal to the
fair value of certain transferred assets, and (iii) the payment of a dividend
of approximately $80 million to a subsidiary of SPE. The combination will be
accounted for by LCP under the purchase method of accounting and any excess of
purchase price over the fair value of the net assets of Cineplex Odeon will be
recorded as goodwill.

At the closing of the Combination, the Company issued 11,691,249 shares of
Common Stock and 80,000 shares of Class B Non-Voting Common Stock to Universal
Studios, Inc., 4,324,003 shares of Common Stock and 4,000 shares of Class B
Non-Voting Common Stock to the Claridge Group and 6,013,456 shares of common
stock to the other shareholders of record of Cineplex Odeon Corporation in
exchange for the outstanding shares of Cineplex Odeon Corporation and its
wholly-owned subsidiary, Plitt Theatres, Inc. on that day. In addition, the
Company issued 2,664,304 shares of common stock in connection with the
transfer of SPE's interest in Star Theatres of Michigan, Inc. ("Star") and S&J
Theatres, Inc. ("S&J") to the Company.

As a result of the Combination, SPE, Universal Studios, Inc., the Claridge
Group and others own 51.1% (49.9% voting common stock), 26.0% (26.6% voting
common stock), 9.6% and 13.3%, respectively, of LCP common stock.

Credit Facility

On May 14, 1998, LCP entered into a $1 billion senior credit facility with
Bankers Trust Company, as administrative agent. This new credit facility
replaces all existing credit facilities and/or credit arrangements of Cineplex
Odeon and LTM (see Note 6 for additional information).

At the closing, the Company guaranteed on a senior subordinated basis $200
million outstanding principal amount of the 10 7/8% Senior Subordinated Notes
due 2004 of Plitt Theatres, Inc.

F-17
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Department of Justice Settlement

On April 16, 1998, Loews Theatres and Cineplex Odeon reached an agreement
with the Department of Justice allowing the Combination to proceed. This
agreement has also been approved by the Attorneys General of New York and
Illinois, who had opposed the proposed merger under the antitrust laws. Under
the terms of the agreement, which is subject to court approval following a
public comment period, LCP will divest itself of certain theatres in New York
and Illinois.

Basis of Presentation and Consolidation: The consolidated financial
statements include the accounts of Loews Cineplex Entertainment Corporation
and its wholly-owned subsidiaries. As part of the Combination with Cineplex
Odeon, SPE and its affiliates have transferred their interests in S&J, which
owns a 50% interest in the Magic Johnson Theatre Partnership ("MJT"), and
Star, which indirectly owns a 50% interest in the Loeks-Star Theatre
Partnership ("LST"), and certain other exhibition assets to subsidiaries of
LCP. As these transfers were among parties under common control, LCP has
included the assets, liabilities and results of operations of S&J and Star in
these financial statements for all periods included herein on an as if pooled
basis. Majority owned companies are consolidated and 50% or less owned
investments in which the Company has significant influence are accounted for
under the equity method of accounting. Significant intercompany accounts and
transactions have been eliminated.

Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenues and Expenses: Substantially all revenues are recognized when
admission and concession sales are received at the theatres. Other revenues
include the Company's equity earnings from long-term investments. Film rental
costs are accrued based on a percentage of box office receipts under the terms
of the film license arrangements.

Cash and Cash Equivalents: The Company considers all operating funds held in
financial institutions, cash held by the theatres and all highly liquid
investments with original maturities of three months or less when purchased to
be cash equivalents.

Fair Value of Financial Instruments: Cash, accounts receivable, accounts
payable, accrued liabilities and notes payable are reflected in the financial
statements at carrying value which approximates fair value. Long-term debt
principally consists of obligations which carry floating interest rates that
approximate current market rates.

Inventories: Inventories of concession products are stated at the lower of
cost (determined on the first-in, first-out method) or market.

Long-term Investments and Advances to Partnerships: Investments in
partnerships are recorded under the equity method of accounting whereby the
cost of the investment is adjusted to reflect the Company's proportionate
share of the partnerships' operating results. Advances to partners represent
advances to respective partnerships, in which LCP has interests, for working
capital and other capital requirements.

Deferred Charges and Other Assets: Deferred charges consist principally of
prepaid costs associated with recently opened theatres which are generally
amortized over three years, construction advances subject to repayment and
certain merger related costs.

F-18
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property, Equipment and Leaseholds: Property, equipment and leaseholds are
stated at historical cost less accumulated depreciation and amortization. The
Company has acquired the rights to use certain theatre facilities under
previously existing operating leases from other motion picture exhibitors.
Purchase values assigned to these theatre lease rights acquired are
capitalized and amortized over future periods.

Depreciation and amortization are provided on the straight-line basis over
the following useful lives:

<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings................................ 30-40
Equipment................................ 5-10
Leasehold Improvements................... Life of lease but not in excess of
useful lives or 40 years
Theatre Lease Rights..................... Life of lease but not in excess of
useful lives or 40 years
</TABLE>

Interest costs during the period of development and construction of new
theatre properties are capitalized as part of the historical cost of the
asset. Interest capitalized was $741, $586 and $139, respectively, during the
fiscal years ended February 28, 1998, February 28, 1997 and February 29, 1996.

Goodwill and other intangible assets: Goodwill, which represents the excess
of the purchase price over the fair values of net assets acquired, is
amortized using the straight-line method over 40 years. Other intangible
assets are amortized over their estimated useful lives which range from 5 to
40 years. Management continuously assesses the recoverability of the net
unamortized goodwill and other intangibles by determining whether the
amortization of these balances over the remaining life can be recovered
through projected future undiscounted income from operations.

Long-Lived Assets: Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of" requires the recoverability of the carrying value of long-
lived assets to be evaluated when changes occur in historical operating
results, future projections and economic and competitive factors, among
others. The Company continuously assesses the recoverability of its long-lived
assets in accordance with SFAS No. 121, by determining whether the carrying
value of these balances over the remaining life can be recovered through
projected future cash flows. Based upon these measures, management has
determined that the carrying value of its long-lived assets is recoverable and
fairly stated.

Stock Based Compensation: As permitted under SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company elected to account for its stock based
compensation plans under the provisions of Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees," and related
interpretations. The Company has complied with the disclosure requirements of
SFAS No. 123 (see Note 12 to these Consolidated Financial Statements).

Earnings Per Share: In 1997, the Financial Accounting Standards Board issued
SFAS No. 128, "Earnings per Share." SFAS No. 128 replaced the calculation of
primary and fully diluted earnings per share with basic and diluted earnings
per share. Unlike primary earnings per share, basic earnings per share
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods
have been presented, and

F-19
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

where appropriate, restated to conform with the requirements of SFAS No. 128.
A reconciliation of the number of shares used in the computations for basic
and diluted net loss per share is as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES
FEBRUARY 28, 1998
-----------------
<S> <C>
Basic loss per share....................................... 20,472,807
Weighted average dilution under stock plans................ 452,083
----------
Weighted average diluted loss per share.................... 20,924,890
==========
</TABLE>

Net loss used in the computation of basic and diluted net loss per share is
not affected by the assumed issuance of stock under the Company's stock plans
and is therefore the same for both calculations.

Seasonality: The Company's business is seasonal with a substantial portion
of its revenues being derived during the summer months and holiday season.

Income Taxes: For periods prior to the closing of the Combination, the
Company filed a consolidated tax return with SCA for federal income tax
purposes and combined tax returns with SCA in certain state and local
jurisdictions. However, for financial reporting purposes the Company
calculates federal, state and local income taxes as if it filed its tax
returns on a stand-alone basis. Any federal, state or local income tax
liability, resulting from the consolidated or combined filings with SCA, is
recorded as a payable to a SCA affiliate. Any state or local income tax
liability resulting from a separately filed tax return by the Company is
recorded as state or local income taxes payable. The Company accounts for
income taxes in accordance with SFAS No. 109 "Accounting for Income Taxes,"
following the liability method whereby deferred income tax assets and
liabilities are established annually based on the temporary differences
between the financial statement and tax recorded basis of assets and
liabilities, including assets and liabilities acquired in business
combinations, at currently enacted tax rates.

New Accounting Pronouncements: The following new pronouncements have been
issued but are not yet effective:

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information," is effective for the Company's fiscal year ending February 28,
1999. The standard requires the Company to disclose financial information
about business segments including certain information about products and
services, activities in different geographic areas and other information.

The Company expects to adopt the above standards when required and does not
believe they will have a significant impact.

NOTE 2--ACCOUNTS RECEIVABLE

As of February 28, 1998, accounts receivable consisted of trade receivables
of $1,885 and other receivables of $3,594. As of February 28, 1997, accounts
receivable consisted of trade receivables of $2,455 and other receivables of
$1,982.

F-20
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 3--PROPERTY, EQUIPMENT AND LEASEHOLDS

Property, equipment and leaseholds consists of:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Land.............................................. $ 42,173 $ 42,173
Buildings......................................... 227,782 218,420
Equipment......................................... 149,468 132,236
Leasehold Improvements............................ 101,440 100,954
Theatre Lease Rights.............................. 346,176 351,747
Construction in Progress.......................... 30,859 18,758
-------- --------
TOTAL PROPERTY, EQUIPMENT AND LEASEHOLDS........ 897,898 864,288
Less: Accumulated Depreciation and Amortization... 288,746 250,596
-------- --------
$609,152 $613,692
======== ========
</TABLE>

The cost of property and equipment under capital leases amounted to $12,971
and $13,330 with accumulated depreciation of $4,584 and $4,191 as of February
28, 1998 and February 28, 1997, respectively. Depreciation expense of property
and equipment under capital leases is included in depreciation and
amortization expense.

During fiscal 1998, the Company continued to review the assets and related
intangibles of its motion picture theatres for impairment in accordance with
the provisions of SFAS No. 121. As a result of this process, the Company has
recognized a provision for asset impairment of $4,409 which is included in
depreciation and amortization in the Consolidated Statement of Operations.

NOTE 4--LONG-TERM INVESTMENTS AND ADVANCES TO PARTNERSHIPS

As discussed in Note 1, effective May 14, 1998, SPE has contributed its
interests in S&J and Star, whose principal assets are investments in LST and
MJT. The historical carrying values for investments in S&J and Star totaled
$22,100 and $18,100 at February 28, 1998 and February 28, 1997, respectively.

The Company's long-term investments consist of a 50% interest in LST which
operated 9 theatres with 108 screens and a 50% interest in MJT which operated
3 theatres with 36 screens at February 28, 1998. The Company accounts for
these investments following the equity method of accounting.

The Company's carrying value of its investment in LST was approximately
$11,102 and $11,100 as of February 28, 1998 and February 28, 1997,
respectively. The Company's carrying value in its investment in MJT was
approximately $370 and $1,300 at February 28, 1998 and February 28, 1997,
respectively.

The Company's equity share of earnings in LST and MJT for the fiscal years
ended February 28, 1998, February 28, 1997 and February 29, 1996 was
approximately $2,905, $2,900 and $2,800, respectively.

As of February 28, 1998 and February 28, 1997, the Company had a receivable
from LST of $10,955 and $5,421, respectively. This receivable was in the form
of both notes and working fund advances. As of February 28, 1998 and February
28, 1997, the Company had a receivable from MJT of $9,336 and $5,862,
respectively.

F-21
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The following table presents condensed financial information for the LST and
MJT partnerships on a combined basis:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Admissions Revenue..................... $48,036 $34,248 $30,980
Concession and Other Revenues.......... 22,461 15,378 13,514
------- ------- -------
Total Revenues......................... 70,497 49,626 44,494
Theatre Operating Costs (including cost
of concessions)....................... 55,769 38,281 33,467
General and Administrative Costs....... 2,051 1,516 1,429
------- ------- -------
12,677 9,829 9,598
Depreciation and Amortization.......... 5,459 3,157 2,870
------- ------- -------
Income from Operations................. $ 7,218 $ 6,672 $ 6,728
======= ======= =======
Net Income............................. $ 5,810 $ 5,786 $ 5,639
======= ======= =======
Current Assets......................... $ 2,949 $ 2,109
======= =======
Noncurrent Assets...................... $50,697 $42,946
======= =======
Current Liabilities.................... $16,963 $10,708
======= =======
Noncurrent Liabilities................. $14,112 $ 9,629
======= =======
</TABLE>

On April 27, 1998, LST refinanced the debt then outstanding with the
Company. The new facility is a line of credit with a third-party financial
institution which matures on April 30, 2003. The proceeds of this line of
credit were used to repay the outstanding affiliate debt due to the Company.

NOTE 5--ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Accounts payable--trade............................ $36,924 $31,957
Accrued expenses and other......................... 26,010 23,728
------- -------
$62,934 $55,685
======= =======
</TABLE>

NOTE 6--LONG-TERM DEBT AND OTHER OBLIGATIONS

Long-term debt and other obligations consist of:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Mortgages payable--Non-recourse, payable through
1999. Interest rates from 8.5% to 9%............. $ 250 $ 254
Capitalized lease obligations related to theatre
leases, payable in various amounts through 2011.
Interest rates range from 8% to 16%.............. 11,033 11,538
------- -------
11,283 11,792
Less: Current Maturities.......................... 770 508
------- -------
$10,513 $11,284
======= =======
</TABLE>

F-22
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Annual maturities of obligations under capital leases and long-term debt for
the next five fiscal years and thereafter are set forth as follows:

<TABLE>
<CAPTION>
YEAR ENDING FEBRUARY CAPITAL LEASES DEBT TOTAL
-------------------- -------------- ---- -------
<S> <C> <C> <C>
1999............................................. $ 520 $250 $ 770
2000............................................. 568 -- 568
2001............................................. 620 -- 620
2002............................................. 675 -- 675
2003............................................. 701 -- 701
Thereafter....................................... 7,949 -- 7,949
------- ---- -------
$11,033 $250 $11,283
======= ==== =======
</TABLE>

On May 14, 1998, in connection with the Combination, the Company entered
into a $1 billion senior credit facility with Bankers Trust Company, as
administrative agent. The new credit facility has been used to repay all
intercompany amounts due to SCA and affiliates and has replaced Cineplex
Odeon's existing credit facility. This credit facility is comprised of a $750
million senior secured revolving credit facility, secured by substantially all
of the assets of LCP and its U.S. subsidiaries, and a $250 million uncommitted
facility. The credit facility bears interest, at a rate of either the current
prime rate as offered by Bankers Trust Company or an Adjusted Eurodollar rate
plus an applicable margin based on the Company's Leverage Ratio (as defined).
The senior credit facility includes various financial covenants, including a
leverage test and interest coverage test, as well as customary restrictive
covenants, including: (i) limitations on indebtedness, (ii) limitations on
dividends and other payment restrictions, (iii) limitations on asset sales,
(iv) limitations on transactions with affiliates, (v) limitations on the
issuance and sale of capital stock of subsidiaries, (vi) limitations on lines
of business, (vii) limitations on merger, consolidation or sale of assets and
(viii) certain reporting requirements. The Company's initial borrowing under
the new credit facility to fund the aforementioned transactions at the time of
closing was $500 million.

NOTE 7--LEASES

Future minimum rental commitments at February 28, 1998 under the above
mentioned operating and capital leases, having an initial or remaining
noncancelable lease term of one or more years are set forth as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING FEBRUARY LEASES LEASES
-------------------- --------- -------
<S> <C> <C>
1999...................................................... $ 35,860 $ 1,416
2000...................................................... 35,419 1,415
2001...................................................... 34,719 1,416
2002...................................................... 34,168 1,415
2003...................................................... 33,164 1,368
Thereafter................................................ 337,106 10,892
-------- -------
Total Minimum Rentals..................................... $510,436 17,922
========
Less Amount Representing Interest......................... 6,889
-------
Present Value of Net Minimum Rentals...................... $11,033
=======
</TABLE>

F-23
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Minimum rental expense aggregated $31,368, $30,200 and $29,900 for the years
ended February 28, 1998, February 28, 1997 and February 29, 1996,
respectively, related to operating leases. Percentage rental expense for those
same periods aggregated $3,449, $2,918 and $2,571, respectively.

NOTE 8--EMPLOYEE AND POST-RETIREMENT BENEFIT PLANS

The Company accrues amounts ranging from 20% to 23% of gross salaries for
fringe benefits (i.e. Medical, Dental, FICA and Savings Plan Contributions),
which approximates actual costs incurred and SPE billings on behalf of the
Company.

Profit Sharing and Savings Plan: The Company has a defined contribution
Profit Sharing and Savings Plan ("Savings Plan") for substantially all
eligible salaried employees under which the Company contributes by matching
50% of the employee contribution up to a maximum of 6% of the statutory limit
of eligible compensation. A participant may elect to contribute up to an
additional 10% of eligible compensation (subject to the statutory limit),
however this amount is not eligible for matching contributions by the Company.
The Savings Plan also provides for special profit sharing contributions, the
annual amount of which is determined at the discretion of the Company. The
expense recorded by the Company related to contributions to the Savings Plan
aggregated $1,670, $1,204 and $1,037 for the years ended February 28, 1998,
February 28, 1997 and February 29, 1996, respectively.

Employee Health and Welfare and Other Post-retirement Benefits: Employee
health and welfare benefits and post-retirement benefits are administered and
provided for by SPE. Costs related to post-retirement benefits are allocated
to the Company based on actuarially determined amounts. The Company has
accrued post-retirement benefits of $3,791 and $3,483 at February 28, 1998 and
February 28, 1997, respectively, and recognized an annual cost of $339, $262
and $137 for the years ended February 28, 1998, February 28, 1997 and February
29, 1996, respectively.

Other Plans: Various employees are covered by union sponsored pension plans.
The contributions are determined in accordance with provisions of negotiated
labor contracts. Under these agreements, pension expense aggregated $1,204,
$1,471 and $1,429 for the years ended February 28, 1998, February 28, 1997 and
February 29, 1996, respectively.

NOTE 9--RELATED PARTY TRANSACTIONS

The Company has exhibited films distributed by SPE in the past, and expects
to continue to do so in the future. Payments are based on negotiated and/or
contracted rates established on terms that management believes are equivalent
to an arm's-length basis. At February 28, 1998 and February 28, 1997, the
Company owed SPE and affiliates $2,521 and $6,352, respectively, under film
licensing agreements. The Company has recognized film rental expenses relating
to the exhibition of films distributed by SPE in the amount of $30,399,
$16,189 and $16,668 for the years ended February 28, 1998, February 28, 1997
and February 29, 1996, respectively.

F-24
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The debt due to (from) SCA affiliates at February 28, 1998 and February 28,
1997, consists of the following:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Short Term:
Due from affiliates........................... $ -- $ (2,683)(C)
Accrued interest payable...................... 3,810 (A) 4,006 (A)
-------- --------
TOTAL SHORT-TERM............................ 3,810 1,323
-------- --------
Long Term:
Promissory Notes due to affiliates............ 182,170 (A) 184,420 (A)
Debt due to SCA affiliate..................... 66,135 (B) 69,218 (B)
-------- --------
248,305 253,638
Payable due to SCA Affiliate in lieu of income
taxes (Note 10)................................ 44,218 39,589
-------- --------
TOTAL LONG-TERM............................. 292,523 293,227
-------- --------
TOTAL....................................... $296,333 $294,550
======== ========
</TABLE>

Interest expense incurred on the "Debt due to SCA Affiliates" was $14,638,
$14,934 and $15,218 for the years ended February 28, 1998, February 28, 1997
and February 29, 1996, respectively.

(A) Represents promissory notes payable to an affiliate of SCA. The notes
bear interest at an intercorporate rate determined by SCA which is in
effect thirty days prior to the commencement date of each quarter (the "SCA
Intercorporate Rate"). Interest is payable on November 1 and May 1, of each
fiscal year. Interest rates were 5.9%, 6.1% and 6.2% as of February 28,
1998, February 28, 1997 and February 29, 1996, respectively. The notes
mature in the form of a balloon payment due October 31, 1998 and are
subordinate to all other existing and future liabilities of the Company. As
described in Note 6 the Company has negotiated a new credit facility which
has replaced the SCA credit facilities. The new credit facility is a long-
term facility and since its proceeds have, in part, been used to pay off
the existing intercompany debt, all intercompany debt is being reported by
the Company as long-term.

(B) Prior to the closing of the Combination, the Company periodically
transferred excess cash to a SCA affiliate for cash management purposes and
in turn receives cash advances from the SCA affiliate to fund the Company's
short-term working capital requirements. The balance "Debt due to SCA
Affiliate" represents the amount of cash provided by a SCA affiliate to
fund the Company's working capital needs and capital expenditure
requirements in excess of cash repatriated. This working fund bore interest
at the SCA Intercorporate Rate. As described in Note 6, the Company has
negotiated a new credit facility which has replaced the SCA credit
facilities. The new credit facility is a long-term facility and since its
proceeds have, in part, been used to pay off the existing intercompany
debt, all intercompany debt is being reported by the Company as long-term.

In addition to the above related party transactions, SCA affiliates provide
certain services relating to the following activities: Insurance and risk
management services including excess liability, workman's compensation and
officers and directors coverage among others, benefits administration and
payroll processing, and tax processing services. LCP provides certain services
to SCA affiliates relating to the following activities: Finance,
Administrative and MIS support. The net amount charged to the Company for
these services amounted to $570, $1,207 and $1,325 for the years ended
February 28, 1998, February 28, 1997 and February 29, 1996, respectively. For
the years ended February 28, 1998, February 28, 1997 and February 29, 1996,
the Company

F-25
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

was also charged by a SCA affiliate for certain administrative related
services in the amounts of $1,835, $1,667, and $1,716, respectively. The
Company believes the costs of the above mentioned services are commensurate
with that which would be charged by third parties for similar services.

NOTE 10--INCOME TAXES

For periods prior to the closing of the Combination, the Company filed a
consolidated tax return with SCA for federal income tax purposes and combined
tax returns with SCA in certain state and local jurisdictions. However, for
financial reporting purposes, the Company calculates federal, state and local
income taxes as if it filed its returns on a stand-alone basis. Any federal,
state or local income tax liability resulting from the consolidated or
combined filing with SCA is included in the balance sheet under the caption
"Debt due to SCA affiliate" (see Note 9). Any state or local income tax
liability resulting from a separately filed tax return by the Company is
recorded as state and local income taxes payable.

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Current tax expense
U.S. Federal........................ $ 4,013 $ 3,269 $ 1,263
State and Local..................... 2,551 1,832 1,044
------- ------- -------
Total Current..................... 6,564 5,101 2,307
Deferred tax expense/(benefit)
U.S. Federal........................ (2,744) (2,019) (1,438)
State and Local..................... (1,069) (787) (560)
------- ------- -------
Total tax provision............... $ 2,751 $ 2,295 $ 309
======= ======= =======
</TABLE>

Reconciliation of the provision for income taxes to the statutory federal
income tax rate follows:

<TABLE>
<CAPTION>
FEB. 28, FEB. 28, FEB. 29,
1998 % 1997 % 1996 %
-------- ----- -------- ----- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Provision/(benefit) on
pre-tax income/(loss) at
statutory federal income
tax rate................ $ 914 35.0% $ 741 35.0% $(861) 35.0%
Provision for state and
local taxes (net of
federal income tax
benefit)................ 963 36.9 679 32.1 315 (12.8)
Other non-deductible
expenses (primarily
amortization of goodwill
and other intangible
assets)................. 874 33.5 875 41.4 855 (34.8)
------ ----- ------ ----- ----- ------
$2,751 105.4% $2,295 108.5% $ 309 (12.6)%
====== ===== ====== ===== ===== ======
</TABLE>

F-26
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Net deferred tax assets and liabilities are comprised of the following:

<TABLE>
<CAPTION>
FEBRUARY 28, FEBRUARY 28,
1998 1997
------------ ------------
<S> <C> <C>
Net deferred tax assets
Loss on sale/disposals of theatres............. $ 6,683 $ 3,540
Accrued post retirement benefits............... 1,623 1,491
Other.......................................... 189 1,242
------- -------
Total Net Deferred Tax Assets................ 8,495 6,273
------- -------
Net deferred tax liabilities
Depreciation--Property, equipment and
leaseholds.................................... 23,733 24,974
Amortization--Other intangible assets.......... 3,061 3,410
------- -------
Total Net Deferred Tax Liabilities........... 26,794 28,384
------- -------
Net Deferred Tax Liability................... $18,299 $22,111
======= =======
</TABLE>

NOTE 11--LOSS ON SALE/DISPOSALS OF THEATRES

Aggregate losses on sale/disposals of theatres were $7,787, $9,951 and
$7,249 during the fiscal years ended February 28, 1998, February 28, 1997 and
February 29, 1996, respectively, and were recorded primarily in connection
with management's decision to dispose of several theatres during those fiscal
years.

NOTE 12--STOCK OPTION PLAN

The Company has adopted the 1997 Stock Incentive Plan (the "Plan") providing
for the granting of options to employees, officers, directors, consultants and
advisors of the Company or an affiliate. The Plan is administered by a
committee of the Board of Directors (the "Committee"). The Plan provides for
the grants or awards of incentive and non-qualified stock options, stock
appreciation and dividend equivalent rights, restricted stock, performance
units and performance shares. During December 1997, the Company granted non-
qualified stock options to certain key employees. Except in the case of
500,000 options granted, which vest immediately, the options granted generally
vest and become exercisable ratably over a five year period commencing on the
first anniversary of the closing date of the Combination, but in any event,
will be fully vested and exercisable as of the fifth anniversary of the date
of grant. The options generally expire ten years after grant.

The following table summarizes information about stock options outstanding
at February 28, 1998:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Shares under option:
Outstanding at beginning of year................ -- $ --
Granted....................................... 2,170,000 $13.125
Exercised..................................... -- --
Forfeited..................................... -- --
Outstanding at end of year.................... 2,170,000 $13.125
Options exercisable at year-end................. 500,000 $13.125
Weighted average fair value of options granted
during 1998.................................... $ 4.36
</TABLE>

F-27
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

The fair value of each stock option granted during fiscal 1998 is estimated
on the date of grant utilizing the Black-Scholes options pricing model based
on the following assumptions:

<TABLE>
<S> <C>
Expected life (years)................................................. 5.0
Expected volatility................................................... 23.46%
Expected dividend yield............................................... --
Risk free interest rate............................................... 5.77%
</TABLE>

The Company applies APB No. 25 and related interpretations in accounting for
the Plan. Accordingly, as the exercise price at the date of grant equaled the
estimated fair value of a common share, no compensation cost has been
recognized in connection with the issuance of options under the Plan. Had
compensation cost for the Plan been determined based upon the fair value at
the date of grant, consistent with the methodology under SFAS No. 123, the
Company's net loss and loss per share for the year ended February 28, 1998
would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
FOR THE
YEAR ENDED
FEBRUARY 28,
1998
------------
<S> <C> <C>
Net loss............................................ As reported $ (139)
=======
Pro forma $(1,555)
=======
Loss per share--basic............................... As reported $ (0.01)
=======
Pro forma $ (0.08)
=======
Loss per share--diluted............................. As reported $ (0.01)
=======
Pro forma $ (0.07)
=======
</TABLE>

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts. The Company anticipates granting additional
awards in future years.

NOTE 13--COMMITMENTS AND CONTINGENCIES

The Company has entered into commitments for the future development and
construction of theatre properties aggregating approximately $177,777
(including letters of credit in the amount of $17,242). The Company has also
guaranteed an additional $45,860 related to obligations under lease agreements
entered into by MJT. The Company is of the opinion that MJT will be able to
perform under its respective obligations and that no payment will be required
and no losses will be incurred under these guarantees.

Additionally, as a result of the consummation of the Combination, the
Company is obligated to offer to purchase all of the outstanding 10 7/8%
Senior Subordinated Notes due June 15, 2004 of Plitt Theatres, Inc. ("Plitt
Notes") at a price equal to 101% of the outstanding principal amount thereof
plus accrued interest. If all such notes are tendered, the amount required to
be paid could be approximately $202 million. The Company anticipates utilizing
a portion of the Credit Facility should any bondholders accept the tender
offer. In connection with the Combination, the Company guaranteed the
obligations of Plitt Theatres under the Plitt Notes on a senior subordinated
basis, and Cineplex Odeon was released from its guarantee of such notes.

F-28
<PAGE>

LOEWS CINEPLEX ENTERTAINMENT CORPORATION
(FORMERLY LTM HOLDINGS, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 14--STOCKHOLDER'S EQUITY

On December 16, 1997, the Company's Board of Directors passed a resolution
increasing the number of common shares authorized from 1,000 shares to 2,000
shares. Subsequently, on February 5, 1998, the Company's Board of Directors
passed an additional resolution further increasing the number of common shares
authorized from 2,000 to 25,000,000, as well as authorizing the issuance of up
to 10,000,000 shares of Class A Non-Voting $.01 par value Common Stock.

Additionally, on February 5, 1998, the Board of Directors declared, and the
Company paid, a stock dividend of 19,269,348.25 shares of common stock and
1,202,486 shares of Class A Non-Voting Common Stock. As a result of the stock
dividend, approximately $205,000 was transferred from retained earnings to
additional paid-in-capital and common stock.

On May 7, 1998, the Company's Board of Directors passed a resolution
increasing the number of common shares authorized from 25,000,000 to
300,000,000. Additionally, the resolution included the authorization to issue
up to 10,000,000 shares of Class B Non-Voting $.01 par value Common Stock and
10,000,000 shares of $.01 par value preferred stock. This action was taken in
conjunction with the anticipated closing of the Combination on May 14, 1998.

F-29
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Loeks-Star Partners

In our opinion, the accompanying balance sheet and the related statements of
income, of partners' capital and of cash flows present fairly, in all material
respects, the financial position of Loeks-Star Partners at February 26, 1998
and February 27, 1997 and the results of its operations and its cash flows for
the fifty-two weeks ended February 26, 1998, the fifty-two weeks ended
February 27, 1997 and the fifty-three weeks ended February 29, 1996,
respectively, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

/s/ Price Waterhouse LLP

Battle Creek, Michigan
April 15, 1998

F-30
<PAGE>

LOEKS-STAR PARTNERS

BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash.............................................. $ 730 $ 156
Accounts receivable............................... 596 206
Inventories....................................... 164 109
Prepaid expenses and other........................ 1,042 715
------- -------
TOTAL CURRENT ASSETS............................ 2,532 1,186
Property and equipment, net......................... 27,393 23,767
Investment in Star Southfield Center, L.L.C......... 6,485 5,450
Goodwill, less accumulated amortization ($1,690 in
1998 and $1,509 in 1997)........................... 4,461 4,642
------- -------
TOTAL ASSETS.................................... $40,871 $35,045
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Notes payable to partner--current portion......... $ 1,000 $ 2,000
Accounts payable.................................. 2,704 2,413
Accrued film rental............................... 6,143 3,885
Other............................................. 1,582 809
------- -------
TOTAL CURRENT LIABILITIES....................... 11,429 9,107
Deferred state taxes................................ 610 580
Notes payable to partner............................ 7,000 3,200
Partners' capital................................... 21,832 22,158
------- -------
TOTAL LIABILITIES AND PARTNERS' CAPITAL......... $40,871 $35,045
======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-31
<PAGE>

LOEKS-STAR PARTNERS

STATEMENTS OF INCOME
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-THREE
WEEKS ENDED WEEKS ENDED WEEKS ENDED
FEBRUARY 26, FEBRUARY 27, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Box office receipts.................. $39,005 $27,992 $27,344
Concessions.......................... 18,327 12,887 12,208
Other................................ 902 611 509
------- ------- -------
TOTAL REVENUES..................... 58,234 41,490 40,061
------- ------- -------
EXPENSES:
Operating expenses................... 44,170 30,460 28,958
General and administrative........... 2,253 1,678 1,397
Depreciation and amortization........ 2,490 2,371 2,323
Amortization of pre-opening ex-
penses.............................. 1,237 -- --
------- ------- -------
TOTAL EXPENSES..................... 50,150 34,509 32,678
------- ------- -------
OPERATING INCOME................... 8,084 6,981 7,383
------- ------- -------
OTHER INCOME (EXPENSE):
Interest income...................... 74 63 342
Interest expense..................... (640) (644) (1,460)
------- ------- -------
(566) (581) (1,118)
------- ------- -------
Income before equity in net loss of
Star Southfield Center, L.L.C......... 7,518 6,400 6,265
Equity in net loss of Star Southfield
Center, L.L.C......................... (265) -- --
------- ------- -------
NET INCOME......................... $ 7,253 $ 6,400 $ 6,265
======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-32
<PAGE>

LOEKS-STAR PARTNERS

STATEMENTS OF PARTNERS' CAPITAL
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
LOEKS STAR
PARTNER PARTNER TOTAL
--------- --------- ---------
<S> <C> <C> <C>
Partners' capital--February 23, 1995........... $ 7,934.1 $ 7,934.1 $15,868.2
Net income allocated........................... 3,132.3 3,132.3 6,264.6
Distributions to partners...................... (888.5) (888.5) (1,777.0)
--------- --------- ---------
Partners' capital--February 29, 1996........... 10,177.9 10,177.9 20,355.8
Net income allocated........................... 3,199.9 3,199.9 6,399.8
Distributions to partners...................... (2,298.8) (2,298.8) (4,597.6)
--------- --------- ---------
Partners' capital--February 27, 1997........... 11,079.0 11,079.0 22,158.0
Net income allocated........................... 3,626.4 3,626.4 7,252.8
Distributions to partners...................... (3,789.4) (3,789.4) (7,578.8)
--------- --------- ---------
PARTNERS' CAPITAL--FEBRUARY 26, 1998........... $10,916.0 $10,916.0 $21,832.0
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-33
<PAGE>

LOEKS-STAR PARTNERS

STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
FIFTY-TWO FIFTY-TWO FIFTY-THREE
WEEKS ENDED WEEKS ENDED WEEKS ENDED
FEBRUARY 26, FEBRUARY 27, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income............................ $ 7,253 $ 6,400 $ 6,265
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation........................ 2,309 2,190 2,142
Amortization........................ 181 181 181
Equity in net loss of Star
Southfield Center, L.L.C........... 265 -- --
Deferred state taxes................ 30 -- (45)
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable....................... (390) 15 166
(Increase) decrease in
inventories...................... (55) 3 (7)
(Increase) decrease in prepaid
expenses and other............... (327) (99) 89
Increase (decrease) in accounts
payable.......................... 291 541 (168)
Increase in accrued film rental... 2,258 783 251
Increase (decrease) in other
current liabilities.............. 774 (332) (22)
------- -------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES..................... 12,589 9,682 8,852
------- -------- -------
INVESTING ACTIVITIES:
Acquisition of property and
equipment............................ (5,936) (873) (382)
Construction advances--Star Southfield
Center, L.L.C........................ -- (55) (1,086)
Cash contribution to Star Southfield
Center, L.L.C........................ (1,300) (4,309) --
------- -------- -------
NET CASH USED IN INVESTING
ACTIVITIES..................... (7,236) (5,237) (1,468)
------- -------- -------
FINANCING ACTIVITIES:
Net borrowings under the revolving
credit line.......................... 1,000 -- --
Principal payments on note payable to
partner.............................. (2,000) (17,663) (1,971)
Proceeds from borrowings on note
payable to partner................... 3,800 6,500 --
Distributions to partners............. (7,579) (4,598) (1,777)
------- -------- -------
NET CASH USED IN FINANCING
ACTIVITIES..................... (4,779) (15,761) (3,748)
------- -------- -------
NET INCREASE (DECREASE) IN CASH......... 574 (11,316) 3,636
CASH AT BEGINNING OF YEAR............... 156 11,472 7,836
------- -------- -------
CASH AT END OF YEAR..................... $ 730 $ 156 $11,472
======= ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest.............................. $ 511 $ 1,001 $ 1,412
State and local taxes................. $ 291 $ 300 $ 373
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-34
<PAGE>

LOEKS-STAR PARTNERS

NOTES TO FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)

1. ORGANIZATION

Loeks-Star Partners (the Partnership) consists of two partners, Loeks
Michigan Theatres, Inc. (Loeks) and Star Theatres of Michigan, Inc. (Star), a
wholly-owned subsidiary of Sony Pictures Entertainment, Inc. (Sony). The
Partnership is engaged in the business of motion picture exhibition in the
State of Michigan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Revenues and Expenses

Substantially all revenues are recognized when box office receipts and
concession sales are received at the theatres. Film rentals are accrued based
on percentage of box office receipts under the terms of the film licensee
arrangements.

Property and Equipment

Land, buildings and equipment are stated at cost and include expenditures
for major renewals and betterments. Maintenance and repairs that do not
improve or extend the lives of the respective assets are expensed as incurred.

Depreciation is computed using the straight-line method and is recognized
over the estimated useful lives of the related assets which range from 10 to
31.5 years. Interest costs related to the period of development and
construction of new theatre properties are capitalized as part of the
historical cost of the asset.

Income Taxes

No federal income taxes are provided in the Partnership financial statements
as the Partnership results of operations are included in the federal income
tax returns of the individual partners. The Partnership conducts operations in
the State of Michigan, which imposes a tax based, in part, on factors other
than income, and requires the Partnership entity rather than the individual
partners to pay the tax. This tax is included in general and administrative
expenses.

The future tax consequences of current Michigan capital acquisitions are
recognized as deferred state taxes in the year of acquisition.

Goodwill

Goodwill represents the excess of the Loeks credited capital contribution
over the net book value of assets contributed upon Partnership formation.
Goodwill is being amortized over approximately thirty-five years on a
straight-line basis.

Retirement Plan

The Partnership has a 401(k) plan for full-time employees with over one year
of service. The Partnership, at its discretion, may elect to match employee
contributions up to 5% of each employee's gross wages. In 1998, 1997 and 1996,
the Partnership expense for matching contributions approximated $91, $73 and
$56, respectively.

F-35
<PAGE>

LOEKS-STAR PARTNERS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)

Theatre Pre-opening Expenses

Expenses associated with new theatre openings are expensed as incurred. Pre-
opening expenses incurred during 1998 aggregated $1,237. No pre-opening
expenses were incurred in 1997 or 1996.

Reclassifications

Certain amounts in the 1997 financial statements and related notes have been
reclassified to conform with the 1998 presentation.

3. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
1998 1997
------------ ------------
<S> <C> <C>
Land............................................... $ 849 $ 249
Land and leasehold improvements.................... 23,424 20,538
Structures......................................... 2,120 2,118
Sound and projection equipment..................... 4,401 3,851
Furniture and fixtures............................. 7,381 6,766
Concession equipment............................... 1,624 1,592
Other equipment.................................... 2,714 2,712
Construction-in-progress........................... 1,479 231
-------- --------
43,992 38,057
Less--allowance for depreciation................... (16,599) (14,290)
-------- --------
$ 27,393 $ 23,767
======== ========
</TABLE>

4. LEASES AND COMMITMENTS

The Partnership leases the land and/or buildings for eight of its nine
theatres. These leases are classified as operating leases and certain leases
require contingent lease payments, primarily based on a percentage of box
office receipts in excess of stated minimum amounts. The leases also contain
provisions (a series of renewal options) for each theatre which can extend
lease terms up to forty years beyond the initial lease term at the option of
the Partnership.

Total rent expense included in operating expenses is comprised of the
following:

<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27, FEBRUARY 29,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Minimum lease payments............... $3,650 $1,513 $1,512
Contingent lease payments............ 432 295 267
Rentals under cancelable leases...... 28 30 20
------ ------ ------
$4,110 $1,838 $1,799
====== ====== ======
</TABLE>

F-36
<PAGE>

LOEKS-STAR PARTNERS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)

Future minimum lease payments as of February 26, 1998 are as follows:

<TABLE>
<S> <C>
1999................................................................. $ 4,212
2000................................................................. 4,183
2001................................................................. 4,233
2002................................................................. 4,169
2003................................................................. 4,144
Thereafter........................................................... 47,822
-------
$68,763
=======
</TABLE>

5. NOTES PAYABLE TO PARTNER

Partnership debt payable to Star is as follows:

<TABLE>
<CAPTION>
FEBRUARY 26, FEBRUARY 27,
1998 1997
------------ ------------
<S> <C> <C>
Revolving credit line with interest payable semi-
annually, plus interest at a rate of 7.31% at
February 26, 1998, due April 1, 2000............. $ 1,000 $ --
Term loan, payable in semi-annual installments of
$1,000 plus interest at a rate of 7.31% at
February 26, 1998, due April 1, 2001............. 7,000 5,200
------- -------
8,000 5,200
Less: current portion............................. (1,000) (2,000)
------- -------
$ 7,000 $ 3,200
======= =======
</TABLE>

On April 27, 1998, the Partnership refinanced the debt then outstanding
under the Partnership credit facility in place at February 26, 1998.
Classification of the debt outstanding at February 26, 1998 is based on the
terms of the new credit facility except for the $1,000 payment made on April
1, 1998 under the old credit facility. The new credit facility is a $50,000
line of credit which matures on April 30, 2003. Interest on borrowings under
the line of credit bear interest at a fixed or variable LIBOR based rate at
the borrower's option, as defined by the credit agreement, and is payable
monthly. In addition, a commitment fee equal to 1/4% of the daily average
unused portion of the line of credit is payable quarterly. The credit
agreement also includes certain financial covenants which the Partnership must
comply with during the term of the agreement.

6. RELATED PARTY TRANSACTIONS

Each partner is reimbursed for expenses incurred for services provided.
Loeks was reimbursed $1,200, $911 and $903 in 1998, 1997 and 1996
respectively, for management services. Star was paid $60 in 1998, 1997 and
1996 for film-buying services.

Star, in its capacity as film buying agent, has retained Sony Theatres
Management Corp., an affiliate, as its agent to negotiate film rental terms.
The Partnership recognized film rental expense of $20,552, $14,640 and $13,756
in 1998, 1997 and 1996 respectively.

The Partnership also purchased $601, $110 and $394 of equipment at Loeks'
cost from Loeks in 1998, 1997 and 1996 respectively.

F-37
<PAGE>

LOEKS-STAR PARTNERS

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(ALL DOLLAR AMOUNTS IN THOUSANDS EXCEPT AS OTHERWISE NOTED)

7. INVESTMENT IN STAR SOUTHFIELD CENTER, L.L.C.

In 1996, the Partnership entered into a joint venture with Millennium
Partners LCC (Millennium Entertainment Partners L.P. prior to May 28, 1997) to
form Star Southfield Center, L.L.C. for the purpose of constructing and
leasing a twenty screen motion picture theatre and retail complex. The total
investment at February 27, 1997 consisted of $1,141 of construction advances
and $4,309 of cash contributions. An additional cash contribution of $1,300
was made during 1998. The complex opened for operations in June 1997.

The investment is carried at cost and adjusted to reflect the Partnership's
equity in earnings or losses and distributions of the joint venture.

The Partnership holds a 50% voting interest in the joint venture and
operating results are allocated as defined in the operating agreement.
Condensed balance sheets of Star Southfield Center, L.L.C. which has a fiscal
year ending October 31 are as follows:

<TABLE>
<CAPTION>
UNAUDITED AUDITED
------------ -----------------------
FEBRUARY 28, OCTOBER 31, OCTOBER 31,
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
Current assets........................ $ 565 $ 987 $ 590
Properties, net....................... 40,144 40,247 16,121
Other................................. 265 278 315
------- ------- -------
Total assets........................ $40,974 $41,512 $17,026
======= ======= =======
Current liabilities................... $ 3,532 $ 4,505 $ 3,944
Notes payable-long-term............... 24,471 23,848 2,182
Partners' capital..................... 12,971 13,159 10,900
------- ------- -------
Total liabilities and members'
equity............................. $40,974 $41,512 $17,026
======= ======= =======
</TABLE>

The Partnership's equity in the net loss of Star Southfield Center L.L.C.
through February 28, 1998 is $265. The operating results of Star Southfield
Center L.L.C. through February 28, 1998 are as follows:

<TABLE>
<CAPTION>
UNAUDITED AUDITED
----------------- -----------------
NOVEMBER 1, 1997 FISCAL YEAR
TOTAL THROUGH THROUGH ENDED
FEBRUARY 28, 1998 FEBRUARY 28, 1998 OCTOBER 31, 1997
----------------- ----------------- ----------------
<S> <C> <C> <C>
Total revenues.......... $3,044 $1,601 $1,443
------ ------ ------
Expenses:
Operating expenses.... 902 477 425
Depreciation and
amortization......... 1,501 693 808
------ ------ ------
Total expenses........ 2,403 1,170 1,233
------ ------ ------
Operating income........ 641 431 210
Interest expense, net... 1,170 619 551
------ ------ ------
Net loss.............. $ (529) $ (188) $ (341)
====== ====== ======
</TABLE>

F-38
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Shareholders of Cineplex Odeon Corporation

We have audited the consolidated balance sheets of Cineplex Odeon
Corporation as at December 31, 1997 and December 31, 1996 and the consolidated
statements of income and changes in shareholders' equity and cash resources
for each of the years in the three year period ended December 31, 1997. These
financial statements are the responsibility of the Corporation's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Corporation as at
December 31, 1997 and December 31, 1996 and the results of its operations and
the changes in its shareholders' equity and cash resources for each of the
years in the three year period ended December 31, 1997 in accordance with
generally accepted accounting principles.

KPMG

Chartered Accountants
Toronto, Canada
February 13, 1998

F-39
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED BALANCE SHEET
(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,505 $ 2,718
Accounts receivable (note 3) 13,222 9,552
Other 9,315 8,852
--------- ---------
26,042 21,122
PROPERTY, EQUIPMENT AND LEASEHOLDS (note 4) 567,431 579,841
OTHER ASSETS
Long-term investments and receivables 2,206 2,535
Goodwill (less accumulated amortization of $12,382;
1996-$11,281) 31,687 32,816
Deferred charges (less accumulated amortization of
$5,194; 1996-$3,671) 8,109 7,857
--------- ---------
42,002 43,208
--------- ---------
TOTAL ASSETS $ 635,475 $ 644,171
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals (note 5) $ 91,849 $ 59,474
Deferred income (note 6) 20,364 17,150
Current portion of long-term debt and other
obligations 27,446 6,926
--------- ---------
139,659 83,550
LONG-TERM DEBT (note 7) 333,523 326,058
CAPITALIZED LEASE OBLIGATIONS (note 11) 6,271 8,317
DEFERRED INCOME (note 6) 3,965 6,594
PENSION OBLIGATION (note 9) 875 1,072
SHAREHOLDERS' EQUITY
Capital stock (note 10) 555,400 555,374
Translation adjustment 939 4,016
Retained earnings (deficit) (405,157) (340,810)
--------- ---------
151,182 218,580
COMMITMENTS AND CONTINGENCIES (note 11)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 635,475 $ 644,171
========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-40
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED INCOME STATEMENT
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
REVENUE
Admissions............ $ 399,171 $ 358,973 $ 365,220
Concessions........... 147,892 126,636 126,319
Other................. 26,714 24,083 21,611
----------- ----------- -----------
573,777 509,692 513,150
EXPENSES
Theatre operations and
other expenses....... 462,738 418,328 418,731
Cost of concessions... 28,705 22,357 22,016
General and
administrative....... 20,313 18,192 17,575
Depreciation and
amortization......... 45,715 43,648 42,621
----------- ----------- -----------
557,471 502,525 500,943
----------- ----------- -----------
Income before the
undernoted (note 17)... 16,306 7,167 12,207
Other expenses (note
12).................... (43,401) (1,377) (2,862)
----------- ----------- -----------
Income/(loss) before
interest on long-term
debt and income taxes
(note 17).............. (27,095) 5,790 9,345
Interest on long-term
debt................... 33,900 35,482 40,983
----------- ----------- -----------
Loss before income
taxes.................. (60,995) (29,692) (31,638)
Income taxes (note 13).. 1,072 1,390 1,269
----------- ----------- -----------
NET LOSS................ $ (62,067) $ (31,082) $ (32,907)
=========== =========== ===========
BASIC
Weighted average shares
outstanding............ 176,795,000 163,473,000 114,764,000
Loss per share.......... $ (0.35) $ (0.19) $ (0.29)
FULLY DILUTED
Weighted average shares
outstanding............ 191,304,000 176,107,000 122,616,000
Loss per share.......... $ (0.35) $ (0.19) $ (0.29)
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-41
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES
(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
CASH PROVIDED BY (USED
FOR)
OPERATING ACTIVITIES
Net loss............... $(62,067) $(31,082) $(32,907)
Depreciation and
amortization.......... 45,715 43,648 42,621
Write down of property,
equipment and
leaseholds............ 24,591 -- --
Other non-cash items... (6,617) (2,098) 1,258
-------- -------- --------
1,622 10,468 10,972
Net change in non-cash
working capital....... 29,158 1,948 (7,450)
-------- -------- --------
30,780 12,416 3,522
-------- -------- --------
FINANCING ACTIVITIES
Decrease in long-term
debt and other
obligations........... (5,275) (58,411) (9,289)
Increase in long-term
debt and other
obligations........... 31,017 -- 14,085
Issue of share capital,
net of issue costs.... 26 82,895 64
Other.................. 2,936 175 (615)
-------- -------- --------
28,704 24,659 4,245
-------- -------- --------
INVESTMENT ACTIVITIES
Additions to property,
equipment and
leaseholds............ (66,203) (36,989) (30,749)
Long-term investments.. 4,270 -- (109)
Proceeds on sale of
certain theatre
properties............ 3,563 1,974 23,674
Proposed merger costs.. (2,280) -- --
Other.................. 1,953 (946) (530)
-------- -------- --------
(58,697) (35,961) (7,714)
-------- -------- --------
NET INCREASE DURING
YEAR.................... 787 1,114 53
CASH AT BEGINNING OF
YEAR.................... 2,718 1,604 1,551
-------- -------- --------
CASH AT END OF YEAR...... $ 3,505 $ 2,718 $ 1,604
======== ======== ========
CASH FLOW FROM OPERATING
ACTIVITIES PER SHARE
Basic.................. $ 0.17 $ 0.08 $ 0.03
Fully Diluted.......... $ 0.16 $ 0.07 $ 0.03
CHANGE IN NON-CASH
WORKING CAPITAL
Current assets
Accounts receivable.... $ (3,938) $ 1,117 $ 629
Other.................. (214) (1,024) 1,383
Current liabilities
Accounts payable and
accruals.............. 29,660 (998) (9,509)
Deferred income........ 3,276 2,157 508
Income taxes payable... 374 696 (461)
======== ======== ========
$ 29,158 $ 1,948 $ (7,450)
======== ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION
Interest on long-term
debt paid............. $ 33,900 $ 35,482 $ 40,983
======== ======== ========
Income taxes paid...... $ 1,072 $ 1,390 $ 1,269
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-42
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS OF U.S. DOLLARS, EXCEPT FOR NUMBER OF SHARES)

<TABLE>
<CAPTION>
SUBORDINATING RESTRICTED
COMMON STOCK VOTING SHARES RETAINED TOTAL
-------------------- --------------------------EARNINGS TRANSLATION SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT (DEFICIT) ADJUSTMENT EQUITY
----------- -------- ------------- --------------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994..................... 65,541,677 $213,890 49,204,245 $258,525 $(276,821) $ 581 $196,175
Exercise of options...... 38,950 64 64
Net loss................. (32,907) (32,907)
Translation adjustment... 2,660 2,660
----------- -------- ------------- ----------- --------- ------- --------
BALANCE AT DECEMBER 31,
1995..................... 65,580,627 213,954 49,204,245 258,525 (309,728) 3,241 165,992
Exercise of options....... 276,118 375 375
Net loss.................. (31,082) (31,082)
Translation adjustment.... 775 775
Issue of shares.............37,477,412 49,187 24,242,181 33,333 82,520
----------- -------- ------------- ----------- --------- ------- --------
BALANCE AT DECEMBER 31,
1996..................... 103,334,157 263,516 73,446,426 291,858 (340,810) 4,016 218,580
Exercise of options...... 18,750 26 26
Net loss................. (62,067) (62,067)
Proposed merger costs
(note 20)............... (2,280) (2,280)
Translation adjustment... (3,077) (3,077)
----------- -------- ------------- ----------- --------- ------- --------
BALANCE AT DECEMBER 31,
1997..................... 103,352,907 $263,542 73,446,426 $291,858 $(405,157) $ 939 $151,182
=========== ======== ============= =========== ========= ======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-43
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

1. GENERAL

The Corporation is incorporated under the Ontario Business Corporations Act.

The financial results of the Corporation's operations are presented in
United States dollars, as approximately two-thirds of the Corporation's
activities emanate from the United States.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in Canada, which, except as described
in note 17, conform in all material respects with accounting principles
generally accepted in the United States. A summary of significant accounting
policies is set out below.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Corporation and its subsidiaries. Intercompany accounts
and transactions have been eliminated. The Corporation accounts for its
interests in joint ventures through the proportionate consolidation method.

Inventories: Inventories are stated at the lower of cost (first-in, first-
out basis) and net realizable value.

Property, Equipment and Leaseholds: Property, equipment and leaseholds are
stated at cost less accumulated depreciation and amortization. Depreciation
and amortization are calculated using the following methods and annual rates:

<TABLE>
<S> <C>
Buildings..................... Straight-line over 40 years
Projection equipment.......... Straight-line over 20 years
Other equipment............... Straight-line over 15 years
Leaseholds.................... Straight-line over periods from 15 to 40 years
</TABLE>

Construction in progress is depreciated from the date the asset is ready for
productive use.

Goodwill: Goodwill represents the excess of the purchase price of certain
businesses over the fair value of the net identifiable assets acquired and is
being amortized, on a straight-line basis, over 40 years. The Corporation
regularly reviews the recoverability of goodwill by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through projected future undiscounted income from operations before interest
on long-term debt and effects of goodwill amortization.

Deferred Income: Advance payments received under a strategic marketing
relationship with a major supplier, advance sales of admissions, the sale of
gift certificates and income from certain promotional programs are included as
deferred income, and are recognized as income when services are rendered.

Deferred Charges: Deferred charges, consisting primarily of costs associated
with debt refinancing, are amortized over the term of the related debt.

Foreign Currency Translation: Assets and liabilities denominated in a
currency other than U.S. dollars are translated to U.S. dollars at exchange
rates in effect at the balance sheet date. The resulting gains or losses are
accumulated in a separate component of shareholders' equity under the caption
"Translation adjustment". Revenue and expense items are translated at average
exchange rates prevailing during the year.

Admissions Revenue: Admissions revenue from the exhibition of motion
pictures is recognized on the dates of exhibition.

F-44
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

Earnings Per Share: Basic earnings per share are calculated using the
weighted daily average number of Common Shares and Subordinate Restricted
Voting Shares outstanding. Fully diluted earnings per share are calculated
assuming the exercise of stock options at the beginning of the year, or for
those stock options issued during the year, at the date of the grant to the
extent the impact is dilutive.

Interest Rate Hedging Activities: The Corporation uses interest rate swaps
to manage interest rate risk. These financial instruments are not held for
trading purposes and any payments or receipts under such contracts are
recognized as adjustments to interest expense.

Measurement Uncertainty: The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.

3. ACCOUNTS RECEIVABLE

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Trade............................................. $10,246,000 $8,446,000
Current portion of long-term receivables.......... 162,000 150,000
Other............................................. 3,021,000 1,098,000
Employee loans.................................... 210,000 323,000
Allowance for doubtful accounts................... (417,000) (465,000)
----------- ----------
$13,222,000 $9,552,000
=========== ==========
</TABLE>

4. PROPERTY, EQUIPMENT AND LEASEHOLDS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------- -------------
<C> <S> <C> <C>
Land................................................. $ 62,436,000 $ 63,116,000
------------- -------------
Buildings Cost.................... 123,023,000 126,217,000
Accumulated
depreciation............ (25,700,000) (19,919,000)
------------- -------------
97,323,000 106,298,000
------------- -------------
Equipment Cost.................... 141,499,000 136,521,000
Accumulated
depreciation............ (76,384,000) (70,851,000)
------------- -------------
65,115,000 65,670,000
------------- -------------
Leaseholds Cost.................... 566,754,000 537,153,000
Accumulated
(including capital leases) depreciation............ (230,490,000) (197,688,000)
------------- -------------
336,264,000 339,465,000
------------- -------------
Construction in progress............................. 6,293,000 5,292,000
------------- -------------
$ 567,431,000 $ 579,841,000
============= =============
</TABLE>

The net book value of assets held under capital leases at December 31, 1997
was $18,734,000 (1996-$20,508,000), net of accumulated amortization of
$9,053,000 (1996-$7,700,000).

F-45
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

5. ACCOUNTS PAYABLE AND ACCRUALS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Trade.............................................. $49,851,000 $40,332,000
Accrued liabilities................................ 20,554,000 9,809,000
Sales and other taxes.............................. 9,817,000 8,517,000
Other.............................................. 11,627,000 816,000
----------- -----------
$91,849,000 $59,474,000
=========== ===========
</TABLE>

6. DEFERRED INCOME

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Strategic marketing relationship................... $ 5,665,000 $ 8,296,000
Advance admission sales............................ 11,452,000 9,678,000
Gift certificates.................................. 5,522,000 5,001,000
Promotional programs............................... 1,401,000 491,000
Other.............................................. 289,000 278,000
----------- -----------
24,329,000 23,744,000
Less: Current portion.............................. 20,364,000 17,150,000
----------- -----------
$ 3,965,000 $ 6,594,000
=========== ===========
</TABLE>

7. LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Senior subordinated notes maturing June 15,
2004, bearing interest at 10.875%.............. $200,000,000 $200,000,000
Bank credit facilities of $158,530,000 maturing
December 31, 1999.............................. 110,957,000 79,940,000
Various notes and mortgages (interest rates from
5.61% to 11.50%)............................... 47,071,000 49,877,000
------------ ------------
358,028,000 329,817,000
Less: Current portion........................... 24,505,000 3,759,000
------------ ------------
$333,523,000 $326,058,000
============ ============
</TABLE>

The bank credit facilities bear interest at variable rates based upon an
applicable margin over LIBOR or the bank's reference rate. The applicable
margin for LIBOR borrowings will vary from a maximum of 2.25% to a minimum of
1.25% based upon the Corporation meeting certain financial ratios. During
1997, the Corporation reached an agreement with the bank syndicate
participating in the bank credit facilities to (1) defer a commitment
reduction scheduled for December 31, 1997 in the amount of $10,000,000; and
(2) provide the Corporation with an additional commitment of $20,600,000.
Based on the above information, commitment reductions under the bank credit
facility are $40,000,000 in 1998 with the balance due in 1999. The bank credit
facilities are secured by certain assets of the Corporation and its
subsidiaries.

The bank credit facilities contain restrictive covenants which require the
Corporation to maintain certain financial ratios. Given the uncertainty with
respect to the admission and concession revenue that the Corporation

F-46
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

will generate, the Corporation may not meet certain financial covenants as
early as the first quarter end during the next fiscal year. The Corporation
believes that the bank syndicate participating in the bank credit facilities
would waive the particular financial covenants if the Corporation is not in
compliance at a measurement date during the next twelve month period.

Principal repayments on long-term debt during each of the next five years
approximate the following:

<TABLE>
<S> <C>
1998............................................................ $ 24,505,000
1999............................................................ 119,047,000
2000............................................................ 2,083,000
2001............................................................ 1,169,000
2002............................................................ 4,034,000
Thereafter...................................................... 207,190,000
------------
$358,028,000
============
</TABLE>

8. FINANCIAL INSTRUMENTS

(i) Swap Agreements--The Corporation has entered into interest rate swap
agreements to manage its interest rate exposure. At December 31, 1997 the
Corporation had outstanding two interest rate swap agreements with a
commercial bank. The details of the swaps are as follows:

(a) Notional principal--$15,000,000. The Corporation pays 5.74% per
annum, payable on a quarterly basis and receives three month LIBOR rate.
This swap expires November 30, 1998.

(b) Notional principal--$20,000,000. The Corporation pays 5.72% per
annum, payable on a quarterly basis and receives three month LIBOR rate.
This swap expires November 30, 1998.

The Corporation is exposed to credit loss in the event of non-performance by
the other party to the interest rate swap agreements. However, the Corporation
does not anticipate non-performance by the counterparty.

(ii) Currency Options--The Corporation has entered into three currency
option agreements to manage its exposure to movements in the Canadian dollar
relative to the United States dollar. These agreements are for a total
notional principal of $6,000,000 Canadian, $44,000,000 Canadian and
$50,000,000 Canadian and expire on January 14, 1998, January 28, 1998 and
March 30, 1998 respectively. The Corporation is exposed to credit loss in the
event of non-performance by the other party to the currency option. However,
the Corporation does not anticipate non-performance by the counterparty.

(iii) Fair Value of Financial Instruments--The carrying value of cash,
accounts receivable, accounts payable and accruals and the current portion of
long-term debt and other obligations approximates fair value due to the short
term maturities of these instruments. Financial instruments with a carrying
value different from their fair value include:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets
Long-term investments and
receivables
--Practicable to estimate
fair value.............. $ 631,000 $ 7,135,000 $ 935,000 $ 7,873,000
--Not practicable........ $ 1,575,000 $ -- $ 1,600,000 $ --
Financial liabilities
Long-term debt............ $333,523,000 $347,523,000 $326,058,000 $326,558,000
Swap agreements net re-
ceivable................. $ -- $ 32,000 $ -- $ 123,000
</TABLE>

F-47
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

The fair value of long-term investments and receivables is based on quoted
market prices (where applicable) or by discounting future cash flows,
including interest payments, using rates currently available for similar
investments and receivables. The fair value of long-term debt is based on
quoted market prices (where applicable) or by discounting future cash flows,
including interest payments, using rates currently available for debt of
similar terms and maturity. The fair value of interest rate swap agreements
are the estimated amounts that the Corporation would receive upon termination
of the agreements.

9. PENSION OBLIGATION

The Corporation has a defined benefit pension plan covering full-time
employees in the United States. The benefits under this plan are based upon
years of service and the employees' compensation for certain periods during
the last years of employment. This plan is non-contributory and the
Corporation's funding policy is to make the minimum annual contribution
required by the applicable regulations. At December 31, 1997, approximately
52% of the assets of this plan were held in bonds, 36% in treasury bills, 11%
in equities, and 1% in cash. The most recent actuarial estimate for the plan
covering these employees as at December 31, 1997 indicates pension fund assets
of $6,679,000 (1996--$6,557,000) and accrued pension benefits of $12,779,000
(1996--$12,185,000).

The Corporation has a pension plan covering full time employees in Canada.
Prior to January 1, 1993 this plan was a defined benefit plan and effective on
that date it was converted to a defined contribution plan. At the date of the
conversion benefits under the defined benefit plan were frozen. The most
recent actuarial estimate for the plan covering Canadian employees indicates a
surplus of pension fund assets over accrued benefits of approximately
$2,101,000.

At December 31, 1997, the Corporation's pension obligation is $1,846,000, of
which $875,000 is the long-term portion ($2,145,000 at December 31, 1996 of
which $1,072,000 was the long-term portion).

10. CAPITAL STOCK

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Authorized:
Unlimited number of Common Shares, no par value....
Unlimited number of First Preference Shares
issuable in series, no par value..................
Unlimited number of Subordinate Restricted Voting
Shares, no par value..............................
Issued:
103,352,907 Common Shares (December 31, 1996--
103,334,157)...................................... $263,542,000 $263,516,000
73,446,426 Subordinate Restricted Voting Shares
(December 31, 1996--73,446,426)................... 291,858,000 291,858,000
------------ ------------
$555,400,000 $555,374,000
============ ============
</TABLE>

i) On March 20, 1996 the Corporation filed a supplemented short form
prospectus in Canada and the United States pursuant to the multi-
jurisdictional disclosure system with respect to an offering of 25,000,000
Common Shares to the public at a price of $1.375 per share, for an aggregate
consideration of $34,375,000. In addition, in accordance with the provisions
of the Amended and Restated Subscription Agreement, Universal Studios, Inc.
(Universal) (formerly MCA INC.) and the Charles Rosner Bronfman Trust (the
Trust) agreed to subscribe for

F-48
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

24,242,181 Subordinate Restricted Voting (SRV) Shares and 12,121,454 Common
Shares respectively, at the same price as the offering to the public, for
aggregate consideration of $50,000,000. The public offering and the
subscriptions by Universal and the Trust were completed on March 28, 1996. On
April 16, 1996, the Corporation issued 355,958 Common Shares at a price of
$1.375 per share as part of the over-allotment option provided to the
underwriters pursuant to the public offering. The net proceeds from the
issuance of the Common and SRV Shares were used to reduce indebtedness owing
under the Corporation's revolving bank credit facilities.

ii) The SRV Shares are held by Universal. Under the terms of the shares,
Universal is entitled to exercise no more than one-third less one vote of the
voting rights applicable to all issued voting shares.

iii) In 1996 the Amended and Restated Stock Option Plan (the Option Plan)
was approved. The Option Plan provides for the granting of rights to purchase
Common Shares under both incentive and non-incentive stock option agreements.
The options granted under the Option Plan are for 10 year terms and vest over
various periods to a maximum of 5 years. The maximum number of options which
can be granted under the Option Plan is 17,646,716.

The following options to purchase Common Shares expire between October 15,
2001 and December 18, 2007:

<TABLE>
<CAPTION>
DECEMBER 31,
OPTION PRICE PER SHARE 1997
---------------------- ------------
<S> <C>
$1.70 Canadian.................................................. 8,450
1.87 Canadian.................................................. 14,323,939
2.00 Canadian.................................................. 106,750
2.60 Canadian.................................................. 15,000
1.31 United States............................................. 1,000,000
----------
Options outstanding end of year................................. 15,454,139
==========
</TABLE>

Stock option transactions for the respective years were as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------- -----------------------
NUMBER WEIGHTED AV. NUMBER WEIGHTED AV.
OF EXERCISE OF EXERCISE
OPTIONS PRICE ($CDN) OPTIONS PRICE ($CDN)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Options outstanding begin-
ning of year.............. 14,503,239 1.87 7,835,289 3.06
Additional options grant-
ed........................ 1,121,750 1.79 8,019,020 1.87
Less options exercised..... 18,750 1.87 276,118 1.87
Less options terminated,
canceled or expired....... 152,100 1.87 1,074,952 2.74
---------- ---- ---------- ----
Options outstanding end of
year...................... 15,454,139 1.86 14,503,239 1.87
========== ==== ========== ====
</TABLE>

At December 31, 1997 there were 10,385,334 options exercisable and 1,621,666
options available for grant.

(iv) Under the Corporation's current financing arrangements, the Corporation
is prohibited from paying any Common Share or Subordinate Restricted Voting
Share dividends unless it is in compliance with specified financial ratios.
The Corporation is not currently in compliance with such financial ratios. Any
such payment of dividends is further subject to annual limitations.

F-49
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

11. COMMITMENTS AND CONTINGENCIES

(i) Certain theatre properties and theatre equipment are subject to lease
agreements. Certain of the property leases require the Corporation to pay
additional rent and to pay all business and realty taxes and a proportion of
the landlord's operating costs in respect of the leased premises. Future
minimum payments, by year and in the aggregate, under theatre operating leases
and theatre and equipment capital leases, as at December 31, 1997, are as
follows:

<TABLE>
<CAPTION>
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
<S> <C> <C>
1998....................................... $ 2,613,000 $ 86,846,000
1999....................................... 2,441,000 85,702,000
2000....................................... 2,316,000 83,682,000
2001....................................... 1,085,000 81,360,000
2002....................................... 520,000 78,118,000
Thereafter................................. 1,521,000 755,759,000
----------- --------------
Total minimum lease payments............... 10,496,000 $1,171,467,000
==============
Less: Imputed interest at rates between
7.5% and 8.5%............................. 2,255,000
Current portion............................ 1,970,000
-----------
$ 6,271,000
===========
</TABLE>

(ii) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities have
proposed to reassess taxes in respect of certain transactions and income and
expense items. The Corporation and its subsidiaries are vigorously contesting
the adjustments proposed by the taxation authorities. Although such matters
cannot be predicted with certainty, management does not consider the
Corporation's exposure to such proposed reassessments to be material to these
financial statements.

(iii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its business. The
outcome of this litigation is not currently determinable. Although such
matters cannot be predicted with certainty, management does not consider the
Corporation's exposure to such litigation to be material to these financial
statements.

12. OTHER INCOME (EXPENSES)

Other income(expenses) is comprised of the following:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net loss on sale or write down of
theatre related assets........... $(46,239,000) $ (14,000) $(3,014,000)
Net gain on sale or realization of
non-theatre related assets....... 3,787,000 -- 1,175,000
Other............................. (949,000) (1,363,000) (1,023,000)
------------ ----------- -----------
$(43,401,000) $(1,377,000) $(2,862,000)
============ =========== ===========
</TABLE>

During the year ended December 31, 1997 the Corporation conducted a review
of its operating assets and identified a select number of theatres for
disposal. Accordingly, the Corporation took a charge of $46,239,000
representing the costs associated with terminating certain leases and
disposing of certain properties and the write-off of the net book value
attributable to the related properties. It is anticipated that the disposal
plan will be substantially completed by the end of fiscal 1998. An amount of
$10,307,000, representing remaining lease termination payments, is included in
accounts payable as at December 31, 1997.

F-50
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

13. INCOME TAXES

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current.................................. $1,072,000 $1,390,000 $1,269,000
========== ========== ==========
</TABLE>

The Corporation's income tax provision based upon income(loss) from
continuing operations before income taxes is made up as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Statutory income tax rate........... 44.0% 44.0% 44.0%
Provision based on statutory income
tax rate........................... $(27,173,000) $(13,064,000) $(13,921,000)
Increase (decrease) in income tax
provision resulting from:
Tax exempt portion of capital
gains............................ (359,000) (6,000) (48,000)
Permanent differences other than
capital gains.................... 519,000 62,000 766,000
Non-recognition of tax benefit of
current year's losses for tax
purposes:
Canada............................ -- -- 1,290,000
United States..................... 35,130,000 14,050,000 11,913,000
Recognition of tax benefit of prior
years' losses for tax purposes:
Canada............................ (8,117,000) (1,042,000) --
United States..................... -- -- --
------------ ------------ ------------
-- -- --
Large Corporations Tax and state
taxes.............................. 1,072,000 1,390,000 1,269,000
------------ ------------ ------------
Income tax provision................ $ 1,072,000 $ 1,390,000 $ 1,269,000
============ ============ ============
</TABLE>

For taxation purposes there are net operating loss carryforwards of
approximately $272,000,000 available to offset future taxable income. These
losses expire between the years 1998 and 2012. A portion of the United States
net operating loss carryforwards, in the amount of $41,000,000, are subject to
annual limitations under Section 382 of the Internal Revenue Code of 1986, as
amended.

F-51
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

14. SEGMENTED INFORMATION

Substantially all of the Corporation's operations are in the exhibition
business, including the exhibition and distribution of motion picture films.
The geographic distribution of revenue, income(loss) before income taxes,
income taxes, income (loss) and assets are shown below:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue
Canada.......................... $206,547,000 $159,068,000 $150,026,000
United States................... 367,230,000 350,624,000 363,124,000
------------ ------------ ------------
$573,777,000 $509,692,000 $513,150,000
============ ============ ============
Income (loss) before income taxes
Canada.......................... $ 19,236,000 $ 2,394,000 $ (2,788,000)
United States................... (80,231,000) (32,086,000) (28,850,000)
------------ ------------ ------------
$(60,995,000) $(29,692,000) $(31,638,000)
============ ============ ============
Income taxes
Canada.......................... $ 323,000 $ 235,000 $ 126,000
United States................... 749,000 1,155,000 1,143,000
------------ ------------ ------------
$ 1,072,000 $ 1,390,000 $ 1,269,000
============ ============ ============
Income (loss)
Canada.......................... $ 18,913,000 $ 2,159,000 $ (2,914,000)
United States................... (80,980,000) (33,241,000) (29,993,000)
------------ ------------ ------------
$(62,067,000) $(31,082,000) $(32,907,000)
============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Assets
Canada........................................... $163,323,000 $142,448,000
United States.................................... 472,152,000 501,723,000
------------ ------------
$635,475,000 $644,171,000
============ ============
</TABLE>

Film exhibition operations outside of Canada and the United States are
currently limited to one theatre (six screens) in Budapest, Hungary. This
location is not material to the Corporation's financial position or results of
operations and is included with Canada for segmented disclosure purposes.

F-52
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

15. SUMMARY FINANCIAL INFORMATION OF PLITT THEATRES, INC. (PLITT)

The following is summarized consolidated financial information of Plitt:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue........................... $367,230,000 $350,624,000 $363,124,000
============ ============ ============
Income (loss) from continuing
operations before general and
administrative expenses,
depreciation and amortization,
interest on long-term debt and
income taxes..................... $ (1,813,000) $ 45,847,000 $ 46,148,000
============ ============ ============
Net loss.......................... $(80,980,000) $(33,241,000) $(29,993,000)
============ ============ ============
</TABLE>

The results for the year ended December 31, 1997 include $1,313,000 of costs
charged to Plitt by the Corporation (1996-$1,799,000; 1995-$Nil).

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets.................................... $ 14,382,000 $ 17,105,000
Noncurrent assets................................. $457,770,000 $484,618,000
Current liabilities............................... $130,838,000 $ 55,078,000
Noncurrent liabilities............................ $256,008,000 $265,386,000
============ ============
</TABLE>

Current liabilities at December 31, 1997 include a net payable to the
Corporation and other corporations within the consolidated group in the amount
of $32,477,000 (1996--$9,551,000). Noncurrent liabilities at December 31, 1997
and December 31, 1996 include $10,000,000 that is owed to the Corporation.

16. RELATED PARTY TRANSACTIONS

Related party transactions not disclosed elsewhere in these financial
statements include film distribution and exhibition agreements which the
Corporation enters into with Universal. These agreements are conducted in
accordance with normal business terms and conditions. Pursuant to these
agreements, the Corporation, in the year ended December 31, 1997, paid
approximately $27,459,000 in film licensing fees to Universal (1996--
$20,631,000, 1995--$31,198,000) and received from Universal approximately
$1,010,000 (1996--$666,000, 1995--$576,000) relating to distribution services.

17. RECONCILIATION BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)

(i) The Corporation has adopted the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109), for its
financial statements presented under United States accounting principles.
Under FAS 109 the Corporation's method of accounting for income taxes changes
from the deferred method, as recorded under Canadian accounting principles, to
an asset and liability approach. Under the asset and liability method of FAS
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.

F-53
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

The income tax provision for the year ended December 31, 1997 calculated in
accordance with United States accounting principles was the same as that
reported under Canadian accounting principles after reflecting a net decrease
in the valuation allowance of $58,600,000 (1996--net increase of $19,400,000,
1995--net increase of $22,700,000).

The application of the above noted United States accounting principles on
the balance sheet of the Corporation as at December 31, 1997 resulted in no
net difference in deferred taxes from that reported under Canadian accounting
principles. Net deferred tax assets and liabilities are comprised of the
following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Deferred Tax Assets
Non capital losses............................. $22,378,000 $ 98,039,000
Depreciation................................... 27,225,000 25,922,000
Loss on disposals.............................. 13,729,000 --
Other.......................................... 13,768,000 15,039,000
----------- ------------
77,100,000 139,000,000
Less: Valuation allowance...................... (44,400,000) (103,000,000)
----------- ------------
$32,700,000 $ 36,000,000
=========== ============
Deferred Tax Liabilities
Depreciation................................... $32,134,000 $ 34,755,000
Other.......................................... 566,000 1,245,000
----------- ------------
$32,700,000 $ 36,000,000
=========== ============
</TABLE>

(ii) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, all operating income
and expenses, such as those listed in note 12 to the consolidated financial
statements, are required to be included in any subtotal purporting to
represent income (loss) from operations. Therefore, under U.S. GAAP, income
(loss) from operations as cross-referenced from the income statement to this
note would be as follows:

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
$(27,095,000) $5,790,000 $9,345,000
============ ========== ==========
</TABLE>

(iii) The Corporation applies APB Opinion No. 25 in accounting for its stock
options under United States GAAP. Beginning in 1996, United States GAAP
encourages, but does not require, the recording of compensation cost for stock
options at fair value. The new United States accounting pronouncement, SFAS
No. 123, does however, require the disclosure of pro forma net income and
earnings per share information as if the Corporation had accounted for its
stock options issued in 1997, 1996 and 1995 under the fair value method.
Accordingly, the fair value of these options has been estimated at the date of
grant or re-issue using the Black-Scholes option pricing model with the
following assumptions for 1997 and 1996: weighted average risk free interest
rate of 5.83% and 5.96%; dividend yield of 0%; volatility factor of the
expected market price of the Corporation's Common Shares of 0.42 and 0.60; and
a weighted average expected life of the options of 2.0 and 2.9 years. The
weighted-average grant-date fair value of the options issued in 1997 was
Canadian $0.48 and in 1996 was Canadian $0.80. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period which ranges from upon issuance or re-issue
to four years. Retroactive

F-54
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

application of the fair value method to prior years is not permitted,
therefore the full effect of the fair value method will not be reflected in
the pro forma disclosures until it has been applied to all non-vested options.
Assuming the Corporation has accounted for its stock options issued under the
fair value method, United States GAAP pro forma net loss and net loss per
share for the years ended December 31, 1997 and 1996 would have been
$63,559,000 ($0.36 per share) and $35,059,000 ($0.21 per share) respectively.
Compensation cost for the year ended December 31, 1995 has not been estimated
as the number of options issued in the year was insignificant.

(iv) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, presentation of Cash
Flow from Operating Activities per Share is not permitted on the face of the
Statement of Changes in Cash Resources.

(v) In accordance with FAS 87 the following disclosures are made:

DEFINED BENEFIT PENSION PLAN

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Periodic Pension Cost
Service cost...................... $ 315,000 $ 332,000 $ 318,000
Interest cost..................... 899,000 896,000 926,000
Return on assets.................. (554,000) (537,000) (460,000)
Other............................. 214,000 529,000 263,000
--------- ---------- ----------
$ 874,000 $1,220,000 $1,047,000
========= ========== ==========
Key assumptions
Discount rate..................... 7.75% 7.50% 8.00%
Expected long term return on
assets........................... 8.50% 8.50% 8.50%
Compensation increase rate........ 6.00% 6.00% 6.00%
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Reconciliation of Funded Status
Projected benefit obligation.................. $(12,779,000) $(12,185,000)
Plan assets at fair value..................... 6,679,000 6,557,000
Unrecognized net loss......................... 3,384,000 2,515,000
Prior service costs not yet recognized........ 108,000 129,000
Unrecognized net transition obligation........ 824,000 989,000
Other......................................... (62,000) (150,000)
------------ ------------
$ (1,846,000) $ (2,145,000)
============ ============
</TABLE>

DEFINED CONTRIBUTION PENSION PLAN

No cost is recognized in any of the three years ended December 31, 1997 with
respect to this plan.

(vi) Under GAAP in the United States and the financial reporting
requirements of the Securities and Exchange Commission, costs related to the
proposed merger in the amount of $2,280,000, which have been

F-55
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

charged to retained earnings under Canadian GAAP, would be charged to expense
under U.S. GAAP. Accordingly, the following tabular reconciliation is provided
for net loss in accordance with U.S. GAAP:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-----------------
<S> <C>
Net loss as reported on the consolidated income statement.... $(62,067,000)
Proposed merger costs........................................ 2,280,000
------------
Net loss in accordance with U.S. GAAP........................ $(64,347,000)
============
</TABLE>

In accordance with U.S. GAAP the basic and fully diluted loss per share is
$0.36. Shareholders' equity is unaffected.

18. JOINT VENTURES

The Corporation's prorata share of the joint venture operations through
which it carries out part of its activities is summarized below. The Balance
Sheet amounts below reflect the elimination of accounts between these joint
ventures and the Corporation.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenue.................................. $8,367,000 $4,727,000 $3,624,000
Expenses................................. 4,881,000 3,519,000 2,588,000
---------- ---------- ----------
Net income............................... $3,486,000 $1,208,000 $1,036,000
========== ========== ==========
Cash flow from operations................ $3,969,000 $1,589,000 $1,251,000
========== ========== ==========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
------------ ------------
<S> <C> <C>
Current assets....................................... $ 2,281,000 $ 966,000
Noncurrent assets.................................... $12,833,000 $10,953,000
Current liabilities.................................. $ 2,305,000 $ 1,629,000
Noncurrent liabilities............................... $ 2,381,000 $ 2,167,000
=========== ===========
</TABLE>

19. RECLASSIFICATIONS

Certain prior years' balances have been reclassified to conform with the
financial statement presentation adopted in the current year.

20. PROPOSED MERGER

On September 30, 1997, the Corporation announced that it has entered into an
agreement with Sony Pictures Entertainment Inc. ("SPE") and LTM Holdings, Inc.
("LTM") which provides for the combination of the businesses of the
Corporation and LTM. LTM is a private Delaware Corporation wholly-owned by
SPE. The transaction will involve combining the Corporation with the Loews
Theatres Exhibition Group, which consists of Sony/Loews Theatres and its joint
ventures with Star Theatres and Magic Johnson Theatres. It is proposed that
the combined company will be named Loews Cineplex Entertainment Corporation
(LCE). It is anticipated that LCE will have over 2,700 screens in
approximately 450 locations in North America.

F-56
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(ALL AMOUNTS IN U.S. DOLLARS UNLESS OTHERWISE STATED)

Pursuant to a series of related transactions to be effected pursuant to a
Plan of Arrangement under the Business Corporations Act (Ontario), the
Corporation's shares will be exchanged for shares of LCE with the result that
the Corporation will become a wholly-owned subsidiary of LCE. Upon closing of
the transaction, SPE will own approximately 51.1% of LCE's shares
(representing 49.9% of LCE's voting shares); Universal will own approximately
26.0% of LCE's shares (subsequent to a cash subscription of approximately
$84.5 million); the Bronfman Trusts will own approximately 9.6% of LCE's
shares; and the shareholders of the Corporation, other than SPE, Universal and
descendants of the late Samuel Bronfman and trusts established for their
benefit (the "Bronfman Trusts") will own approximately 13.3% of LCE's shares.
It is intended that the LCE shares will be listed on the New York Stock
Exchange and the Toronto Stock Exchange.

The merger is subject to approval by the shareholders of the Corporation and
regulatory approval in both Canada and the United States. The special meeting
of shareholders is scheduled for March 26, 1998. It is anticipated that
closing of this transaction will take place in the second quarter of 1998.

During the year ended December 31, 1997 the Corporation incurred legal,
investment banking and other costs directly attributable to the proposed
merger. Such costs are considered to be a capital transaction under Canadian
GAAP and accordingly have been charged to retained earnings (note 17).

F-57
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash........................................ $ 2,794 $ 3,505
Accounts receivable......................... 11,404 13,222
Other....................................... 9,573 9,315
--------- ---------
23,771 26,042
PROPERTY, EQUIPMENT AND LEASEHOLDS............ 562,220 567,431
OTHER ASSETS
Long-term investments and receivables....... 5,291 2,206
Goodwill.................................... 31,414 31,687
Deferred Charges............................ 7,951 8,109
--------- ---------
44,656 42,002
--------- ---------
TOTAL ASSETS.................................. $ 630,647 $ 635,475
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accruals............... $ 89,289 $ 91,849
Deferred income............................. 19,301 20,364
Current portion of long-term debt and other
obligations................................ 29,418 27,446
--------- ---------
138,008 139,659
LONG-TERM DEBT................................ 336,601 333,523
CAPITALIZED LEASE OBLIGATIONS................. 5,676 6,271
DEFERRED INCOME............................... 3,369 3,965
PENSION OBLIGATION............................ 601 875
SHAREHOLDERS' EQUITY
Capital stock............................... 555,714 555,400
Translation adjustment...................... 625 939
Retained earnings (deficit)................. (409,947) (405,157)
--------- ---------
146,392 151,182
COMMITMENTS AND CONTINGENCIES (note 2)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.... $ 630,647 $ 635,475
========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-58
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED INCOME STATEMENT

(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)

<TABLE>
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
REVENUE
Admissions.................................... $ 101,731 $ 106,392
Concessions................................... 38,718 38,347
Other......................................... 6,262 5,807
------------ ------------
146,711 150,546
EXPENSES
Theatre operations and other expenses......... 120,870 116,485
Cost of concessions........................... 7,422 7,114
General and administrative ................... 5,163 5,167
Depreciation and amortization................. 10,936 11,021
------------ ------------
144,391 139,787
------------ ------------
Income before the undernoted.................... 2,320 10,759
Other income (expenses)......................... 3,330 (73)
------------ ------------
Income before interest on long-term debt and in-
come taxes..................................... 5,650 10,686
Interest on long-term debt...................... 9,198 8,273
------------ ------------
Income/(loss) before income taxes............... (3,548) 2,413
Income taxes.................................... 283 306
------------ ------------
NET INCOME/(LOSS)............................... $ (3,831) $ 2,107
============ ============
BASIC
Weighted average shares outstanding........... 176,878,000 176,784,000
Income/(loss) per share....................... ($0.02) $0.01
FULLY DILUTED
Weighted average shares outstanding........... 192,236,000 191,291,000
Income/(loss) per share....................... ($0.02) $0.01
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-59
<PAGE>

CINEPLEX ODEON CORPORATION

CONSOLIDATED STATEMENT OF CHANGES IN CASH RESOURCES

(IN THOUSANDS OF U.S. DOLLARS EXCEPT PER SHARE FIGURES)

<TABLE>
<CAPTION>
3 MONTHS ENDED 3 MONTHS ENDED
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
(UNAUDITED)
<S> <C> <C>
CASH PROVIDED BY (USED FOR)
OPERATING ACTIVITIES
Net (loss)/income.............................. $(3,831) $ 2,107
Depreciation and amortization.................. 10,936 11,021
Other non-cash items........................... (4,050) (717)
------- -------
3,055 12,411
Net change in non-cash working capital......... (2,025) 3,792
------- -------
1,030 16,203
------- -------
FINANCING ACTIVITIES
Decrease in long-term debt and other obliga-
tions......................................... (2,403) (9,207)
Increase in long-term debt and other obliga-
tions......................................... 6,584 214
Issue of share capital, net of issue costs..... 314 11
Other.......................................... (1,496) (340)
------- -------
2,999 (9,322)
------- -------
INVESTMENT ACTIVITIES
Additions to property, equipment and lease-
holds......................................... (13,801) (9,567)
Long-term investments.......................... 3,402 --
Proceeds on sale of certain theatre proper-
ties.......................................... 2,169 2,626
Proposed merger costs.......................... (959) --
Other.......................................... 4,449 (164)
------- -------
(4,740) (7,105)
------- -------
NET DECREASE DURING PERIOD....................... (711) (224)
CASH AT BEGINNING OF PERIOD...................... 3,505 2,718
------- -------
CASH AT END OF PERIOD............................ $ 2,794 $ 2,494
======= =======
CASH FLOW FROM OPERATING ACTIVITIES PER SHARE
Basic.......................................... $ 0.01 $ 0.09
Fully Diluted.................................. $ 0.01 $ 0.08
SUPPLEMENTAL CASH FLOW INFORMATION
Interest on long-term debt paid................ $ 9,198 $ 8,273
======= =======
Income taxes paid.............................. $ 283 $ 306
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-60
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1998
(IN U.S. DOLLARS)
(UNAUDITED)

1. BASIS OF PRESENTATION

The consolidated financial statements in this document are prepared in
accordance with accounting principles generally accepted in Canada. For the
three months ended March 31, 1998, the application of accounting principles
generally accepted in the United States did not have a material effect on the
measurement of the Corporation's net loss and shareholders' equity. For
information on differences between Canadian and United States generally
accepted accounting principles, reference is made to the Corporation's
consolidated financial statements for the year ended December 31, 1997.

The consolidated financial statements in this document are based in part on
estimates, and include all adjustments consisting of normal recurring accruals
that management believes are necessary for a fair presentation of the
Corporation's financial position as at March 31, 1998, and the results of its
operations for the three months then ended. Operating results for the three
months ended March 31, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998.

The consolidated financial statements and related notes have been prepared
in accordance with generally accepted accounting principles applicable to
interim periods; consequently they do not include all generally accepted
accounting disclosures required for annual consolidated financial statements.
For more complete information these consolidated financial statements should
be read in conjunction with the corporation's consolidated financial
statements for the year ended December 31, 1997.

2. COMMITMENTS AND CONTINGENCIES

(i) The Corporation and its subsidiaries are currently subject to audit by
taxation authorities in several jurisdictions. The taxation authorities have
proposed to reassess taxes in respect of certain transactions and income and
expense items. The Corporation and its subsidiaries are vigorously contesting
the adjustments proposed by the taxation authorities. Although such matters
cannot be predicted with certainty, management does not consider the
Corporation's exposure to such litigation to be material to these financial
statements.

(ii) The Corporation and its subsidiaries are also involved in certain
litigation arising out of the ordinary course and conduct of its business. The
outcome of this litigation is not currently determinable. Although such
matters cannot be predicted with certainty, management does not consider the
Corporation's exposure to such litigation to be material to these financial
statements.

(iii) The Corporation has not completed its test for compliance with the
financial covenants contained in its bank credit facilities as of March 31,
1998. Given the uncertainty with respect to the admission and concession
revenues that the Corporation will generate, there is a possibility that the
Corporation may not meet certain financial covenants in current and future
periods. The Corporation believes that the banking syndicate participating in
the bank credit facilities would waive the particular financial covenants if
the Corporation is not in compliance at a measurement date during the next
twelve month period.

3. PROPOSED COMBINATION

On September 30, 1997, the Corporation announced that it has entered into an
agreement with Sony Pictures Entertainment Inc. (SPE) and LTM Holdings, Inc.
(LTM) which provides for the combination of the businesses of the Corporation
and LTM. LTM is a private Delaware corporation wholly owned by SPE. The
transaction will involve combining the Corporation with the Loews Theatres
Exhibition Group, which consists of Sony/Loews Theatres and its joint ventures
with Loeks-Star Theatres and Magic Johnson Theatres. It is proposed that the
combined company will be named Loews Cineplex Entertainment Corporation (LCE).
LCE will have approximately 2,600 screens in approximately 450 locations in
North America.

F-61
<PAGE>

CINEPLEX ODEON CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Pursuant to a series of related transactions to be effected pursuant to a
Plan of Arrangement under the Business Corporations Act (Ontario), the
Corporation's shares will be exchanged for shares of LCE with the result that
the Corporation will become a wholly owned subsidiary of LCE. Upon closing of
the transaction, SPE will own approximately 51.1% of LCE's shares
(representing 49.9% of LCE's voting shares); Universal Studios, Inc.
(Universal) will own approximately 26% of LCE's shares (subsequent to a cash
subscription of approximately $84.5 million); the Charles Rosner Bronfman
Family Trust and certain related parties (the "Bronfman Trusts") will own
approximately 9.6% of LCE's shares; and the shareholders of the Corporation,
other than SPE, Universal and the Bronfman Trusts, will own approximately
13.3% of LCE's shares. It is intended that LCE's voting shares will be listed
on The New York Stock Exchange and The Toronto Stock Exchange. On March 26,
1998, the shareholders of the Corporation voted to approve the combination.

4. RECLASSIFICATION

Certain of the prior period's balances have been reclassified to conform
with the presentation adopted in the current period.

F-62
<PAGE>

ANNEX A

TORONTO STOCK EXCHANGE

PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING

To be completed by each proposed private placement purchaser of listed
securities or securities which are convertible into listed securities.

QUESTIONNAIRE

1.DESCRIPTION OF TRANSACTION

(a)Name of issuer of the Securities _____________________________________
-------------------------------------------------------------------------
(b)Number and Class of Securities to be Purchased _______________________
-------------------------------------------------------------------------
(c)Purchase Price _______________________________________________________
-------------------------------------------------------------------------

2.DETAILS OF PURCHASER

(a)Name of Purchaser ____________________________________________________
(b)Address ______________________________________________________________
-------------------------------------------------------------------------
(c)Name and addresses of persons having a greater than 10% beneficial
interest in the purchaser
-------------------------------------------------------------------------

3.RELATIONSHIP TO ISSUER

(a) Is the purchaser (or any person named in response to 2(c) above)
an insider of the issuer for the purposes of the Ontario
Securities Act (before giving effect to this private placement)?
If so, state the capacity in which the purchaser (or persons named
in response to 2(c)) qualifies as an insider ______________________
-------------------------------------------------------------------
(b) If the answer to (a) is "no," are the purchaser and the issuer
controlled by the same person or company? If so, give details ____
-------------------------------------------------------------------

4.DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER

Give details of all trading by the purchaser, as principal, in the
securities of the issuer (other than debt securities which are not
convertible into equity securities), directly or indirectly, within the
60 days preceding the date hereof _______________________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------

A-1
<PAGE>

UNDERTAKING

TO: The Toronto Stock Exchange

The undersigned has subscribed for and agreed to purchase, as principal, the
securities described in Item 1 of this Private Placement Questionnaire and
Undertaking.

The undersigned undertakes not to sell or otherwise dispose of any of the said
securities so purchased or any securities derived therefrom for a period of
six months from the date of the closing of the transaction herein or for such
period as is prescribed by applicable securities legislation, whichever is
longer, without the prior consent of The Toronto Stock Exchange and any other
regulatory body having jurisdiction.

DATED AT ____________________________ _____________________________________
(Name of Purchaser--please print)

this ____________ day of ____________ _____________________________________

(Authorized Signature)

19 _____________________________________
(Official Capacity--please print)

_____________________________________
(please print here name of
individual whose signature appears
above, if different from name of
purchaser printed above)

A-2
<PAGE>

The 14-screen Rio Cinemas theatre is the highest
grossing theatre in the Washington, D.C. area.

PHOTO

The Sony Lincoln Square Theatre, with 15 screens
and an IMAX(R) theatre, attracts over 2.5 million patrons
annually.

PHOTO

Concession stands in the Loews Cineplex theatres are
designed for maximum efficiency.

PHOTO

The 20-screen Star Theatres in Southfield, Michigan
is currently the third highest grossing theatre in the U.S.

<PAGE>

- -------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE SUCH DATE.

----------------

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 18
The Concurrent Transactions.............................................. 24
Use of Proceeds.......................................................... 25
Price Range of Common Stock.............................................. 26
Dividend Policy.......................................................... 26
Dilution................................................................. 27
Capitalization........................................................... 28
Selected Historical and Unaudited Pro Forma Financial Information........ 29
Unaudited Pro Forma Financial Information................................ 35
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 42
The Motion Picture Exhibition Industry................................... 51
Business................................................................. 54
Management............................................................... 63
Certain Relationships and Related Transactions........................... 76
Security Ownership of Certain Beneficial Owners and Management........... 78
The Stockholders Agreement............................................... 81
Description of Certain Indebtedness...................................... 89
Description of Capital Stock............................................. 92
Shares Eligible for Future Sale.......................................... 96
Certain United States Federal Tax Considerations for Non-United States
Holders................................................................. 97
Underwriting............................................................. 100
Notice to Canadian Residents............................................. 102
Legal Matters............................................................ 103
Experts.................................................................. 103
Available Information.................................................... 103
Index to Financial Statements............................................ F-1
Annex A--Toronto Stock Exchange Private Placement Questionnaire and
Undertaking............................................................. A-1
</TABLE>

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

[LOGO] LOEWS CINEPLEX
---------------------
ENTERTAINMENT

10,000,000 Shares
Common Stock
($.01 par value)

PROSPECTUS

CREDIT SUISSE FIRST BOSTON
BEAR, STEARNS & CO. INC.
BT ALEX. BROWN
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY

- -------------------------------------------------------------------------------