CONSOLIDATED CIGAR HOLDINGS INC, 424B1, 1996-08-16

CONSOLIDATED CIGAR HOLDINGS INC
424B1, 1996-08-16
TOBACCO PRODUCTS

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<PAGE>

Filed Pursuant to Rule 424(b)(1)
Under the Securities Act of 1933, as Amended
Registration File No.: 333-6819

5,400,000 SHARES

CONSOLIDATED CIGAR HOLDINGS INC.

CLASS A COMMON STOCK

(PAR VALUE $0.01 PER SHARE)

All of the 5,400,000 shares of Class A Common Stock offered hereby are
being sold by the Company. Of the 5,400,000 shares of Class A Common Stock
offered, 4,400,000 shares are being offered hereby in the United States and
1,000,000 shares are being offered in a concurrent international offering
outside the United States. The initial public offering price and the
aggregate underwriting discount per share are identical for both offerings.
See "Underwriting."

Each share of Class A Common Stock entitles its holder to one vote, and
each share of Class B Common Stock, par value $0.01 per share (the "Class B
Common Stock" and, together with the Class A Common Stock, the "Common
Stock"), of the Company entitles its holder to ten votes. All of the shares
of Class B Common Stock are owned by Mafco Consolidated Group Inc. (NYSE:MFO)
("Mafco Consolidated Group"), a corporation 85% owned by Ronald O. Perelman,
through his ownership of Mafco Holdings Inc. Immediately after consummation
of the Offerings (assuming no exercise of the over-allotment options granted
to the Underwriters), Mafco Consolidated Group will beneficially own shares
of Class B Common Stock representing approximately 97.9% of the combined
voting power of the outstanding shares of Common Stock. The net proceeds from
the Offerings will be paid as a dividend to Mafco Consolidated Group. See
"Use of Proceeds."

Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. For factors considered in determining the
initial public offering price, see "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.

The Class A Common Stock has been approved for listing on the New York
Stock Exchange under the symbol "CIG," subject to official notice of
issuance.

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>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- -------------- -------------
<S> <C> <C> <C>
Per Share .. $23.00 $1.55 $21.45
Total(3) .... $124,200,000 $8,370,000 $115,830,000
</TABLE>

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

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(2) Before deducting estimated expenses of $2,400,000 payable by the
Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 525,000 shares of Class A Common Stock at
the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. Additionally, the Company
has granted the International Underwriters a similar option with
respect to an additional 150,000 shares as part of the concurrent
International Offering. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds
to Company will be $139,725,000, $9,416,250 and $130,308,750,
respectively. See "Underwriting."

The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York,
on or about August 21, 1996, against payment therefor in immediately
available funds.

GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
CHASE SECURITIES INC.

The date of this Prospectus is August 15, 1996.

<PAGE>

[GRAPHIC OF HAND HOLDING H. LIPMAN CIGAR OMITTED]

IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS
A COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET, OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

<PAGE>
PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements of the Company contained elsewhere in this Prospectus.
Unless otherwise indicated or unless the context otherwise requires, the
information contained in this Prospectus (i) gives effect to the amendment to
the Company's certificate of incorporation to change the Company's authorized
capital stock to Class A Common Stock, Class B Common Stock and preferred
stock, par value $0.01 per share, to be effected simultaneously with the
consummation of the Offerings; (ii) gives effect to the conversion of each
outstanding share of the Company's current common stock, par value $1.00 per
share, into approximately 24,600 shares of its newly created Class B Common
Stock (totaling 24,600,000 shares of Class B Common Stock) (see "Description
of Capital Stock"); and (iii) assumes the Underwriters' over-allotment
options are not exercised. Simultaneously with or prior to consummation of
the Offerings, the Company intends to issue a promissory note in the
aggregate principal amount of $70.0 million (the "Promissory Note") to Mafco
Consolidated Group and to pay to Mafco Consolidated Group a cash dividend of
approximately $5.6 million funded by borrowings under the Credit Agreement
(as defined herein). See "Certain Relationships and Related Transactions."
Unless the context otherwise requires, all references in this Prospectus to
the Company mean Consolidated Cigar Holdings Inc. and its subsidiaries.

THE COMPANY

Consolidated Cigar Holdings Inc. is the largest manufacturer and marketer
of cigars sold in the United States in terms of dollar sales, with a 1995
market share of approximately 23% according to the Company's estimates. The
Company markets its cigar products under a number of well-known brand names
at all price levels and in all segments of the growing cigar market,
including premium large cigars, mass market large cigars and mass market
little cigars. The Company attributes its leading market position to the
following competitive strengths: (i) well-known brand names, many of which
are the leading brands in their category; (ii) broad range of product
offerings within both the premium and mass market segments of the United
States cigar market; (iii) commitment to and reputation for manufacturing
quality cigars; (iv) marketing expertise and close attention to customer
service; (v) efficient manufacturing operations; and (vi) an experienced
management team. The Company is also a leading producer of pipe tobacco and
is the largest supplier of private label and branded generic pipe tobacco to
mass market retailers. In addition, the Company distributes a variety of pipe
and cigar smokers' accessories.

The Company's cigars and pipe tobacco products are marketed under a number
of well-known brand names. The Company's premium cigars include the H.
UPMANN, MONTECRISTO, DON DIEGO, TE-AMO, SANTA DAMIANA, ROYAL JAMAICA, PRIMO
DEL REY and MONTECRUZ brands. The Company's mass market large cigars include
the ANTONIO Y CLEOPATRA (also known as AYC), DUTCH MASTERS, EL PRODUCTO,
MURIEL, BACKWOODS, SUPER VALUE and SUPRE SWEETS brands. The Company's mass
market little cigars include the DUTCH TREATS, SUPER VALUE and SUPRE SWEETS
brands. The Company's pipe tobacco products include the MIXTURE NO. 79 and
CHINA BLACK brands.

The Company believes that the growing cigar market and increased demand
for cigars continue to offer the Company substantial growth opportunities.
Recently, cigar smoking has gained popularity in the United States, resulting
in a significant increase in consumption and retail sales of cigars,
particularly for premium cigars. Management believes that this increase in
cigar consumption and retail sales is the result of a number of factors,
including: (i) the increase in the number of adults over the age of 50 (a
demographic group believed to smoke more cigars than any other demographic
segment) and (ii) the emergence of an expanding base of younger affluent
adults who have recently started smoking cigars and who tend to smoke premium
cigars. The Company believes the increase in cigar smoking is in large part
attributable to a positive and improving image of cigar smoking resulting
from increased publicity, including the success of Cigar Aficionado magazine,
the increased visibility of use by celebrities and the proliferation of
"Cigar Smokers" dinners and other special events for cigar smokers.

<PAGE>

in 1995. Growth in the premium segment has continued to accelerate in 1996.
The mass market segment of the industry has also experienced increased
consumption with a compound annual unit growth rate of 7.2% from 1993 to 3.8
billion units in 1995. Retail sales of cigars, which generally declined from
1964 to 1987 and grew modestly from 1987 to 1993, experienced significant
growth from 1993 to 1995 with retail sales of cigars outpacing unit growth
since 1991. This growth in retail sales of cigars was primarily the result of
a combination of increased prices and a shift in the sales mix to more
expensive cigars. Total retail sales have increased at a compound annual
growth rate of 9.3% from 1991 to $1.0 billion in 1995, while the
corresponding compound annual unit growth rate was only 3.6%. There can be no
assurance that unit consumption and retail sales of cigars will continue to
increase in the future. See "Risk Factors--Declining Market for Cigars
through 1993" and "--Extensive and Increasing Regulation of Tobacco
Products."

The Company's financial results reflect the strength of the cigar industry
and the Company's leadership position in that industry. In 1995, the Company
had net sales of $158.2 million, operating income of $31.4 million and net
income of $13.9 million, representing increases of 20.3%, 35.1%, and 81.3%,
respectively, from 1994 results. For the first twenty-six weeks of 1996, the
Company had net sales of $92.2 million, operating income of $21.2 million and
net income of $11.2 million, representing increases of 29.0%, 51.6%, and
100.0%, respectively, from the first twenty-six weeks of 1995. Further,
because of the high demand for the Company's cigars, especially its premium
cigars, the Company's backorders increased from 3.2 million cigars at
December 31, 1994 to 4.3 million cigars at December 31, 1995, and further
increased to 12.0 million cigars at June 29, 1996. For the year ended
December 31, 1995 and the twenty-six week period ended June 29, 1996, cigars
accounted for approximately 90% of the Company's net sales.

The Company believes that its competitive strengths, together with the
following initiatives, will enable the Company to accelerate its growth,
increase its profitability and enhance its market share:

CAPITALIZE ON GROWTH OPPORTUNITIES IN THE PREMIUM MARKET SEGMENT. The
Company intends to capitalize on the rapidly growing premium cigar market by
(i) increasing the Company's production capabilities through its planned
expansion of its existing facilities in the Dominican Republic and Honduras
and the construction of new facilities in Jamaica, (ii) improving the
market's awareness and recognition of its premium cigars through targeted
marketing programs and (iii) expanding its premium cigar product offerings
through the introduction of super-premium cigars, such as H. UPMANN
CHAIRMAN'S RESERVE and PLAYBOY by DON DIEGO, and the extension of its
existing brands.

EXPAND MASS MARKET CIGAR BUSINESS. The Company will seek to expand further
its mass market cigar business by leveraging its well-known brand names and
capitalizing on the growth in the premium segment with brand extensions in
higher priced categories within the mass market segment. In addition, the
Company intends to introduce new flavors, sizes, packaging and other new
features and improvements to its existing mass market cigar products.

BROADEN MASS MARKET CIGAR DISTRIBUTION CHANNELS. The Company intends to
broaden its existing relationships and actively develop new relationships
with mass market retailers. The Company is also pursuing opportunities in
other distribution channels, including marketing its mass market cigars to
convenience stores to take advantage of the increase in consumer demand for
mass market cigars in such locations.

IMPROVE MANUFACTURING PROCESSES AND RAW MATERIAL PROCUREMENT. The Company
continually seeks ways to improve further the efficiency of its manufacturing
operations in order to ensure quality and realize cost savings. To ensure the
quality of its raw materials while also maximizing cost savings, the Company
will (i) continue to develop long-term relationships with tobacco suppliers,
(ii) expand its commercial and technical ties with local growers, (iii)
obtain its tobacco raw materials from a variety of suppliers and growers and
(iv) take advantage of its large purchasing requirements to negotiate
favorable terms from suppliers.

PURSUE SELECTIVELY STRATEGIC ACQUISITIONS. The Company intends to pursue
selectively strategic acquisitions in the cigar and pipe tobacco products
industry to expand its market share and product lines and benefit from
synergies.

<PAGE>

The following chart sets forth in simplified form the ownership structure
of the Company immediately prior to consummation of the Offerings.

Ronald O. Perelman
100%

Mafco Holdings Inc.
("Mafco Holdings")
85%
Mafco Consolidated Group Inc.
("Mafco Consolidated Group")
100%

CONSOLIDATED CIGAR
HOLDINGS INC.
(THE "COMPANY")
100%

Consolidated Cigar Corporation
("Consolidated Cigar")

The Company is a holding company with no business operations of its own.
The Company's only material asset is all of the outstanding capital stock of
Consolidated Cigar Corporation ("Consolidated Cigar"), through which the
Company conducts its business operations.

Immediately after consummation of the Offerings, Mafco Consolidated Group
will beneficially own all of the 24,600,000 outstanding shares of Class B
Common Stock, which will represent approximately 97.9% of the combined voting
power of the outstanding shares of Common Stock (approximately 97.6% if the
Underwriters' over-allotment options are exercised in full). Mafco
Consolidated Group is 85% owned through Mafco Holdings Inc. ("Mafco
Holdings") by Ronald O. Perelman. See "Ownership of Common Stock" and
"Certain Relationships and Related Transactions."

The Company was incorporated on January 6, 1993 under the laws of the
state of Delaware. The Company's principal executive offices are located at
5900 North Andrews Avenue, Suite 700, Fort Lauderdale, Florida 33309-2369 and
its telephone number is (954) 772-9000.

<PAGE>

THE OFFERINGS

The offering of 4,400,000 shares of Class A Common Stock initially being
offered in the United States (the "U.S. Offering") and the offering of
1,000,000 shares of Class A Common Stock initially being offered in a
concurrent international offering outside the United States (the
"International Offering") are collectively referred to as the "Offerings."
The closing of each of the Offerings is conditioned upon the closing of the
other Offering.

<TABLE>
<CAPTION>
<S> <C>
Class A Common Stock offered by the Company:

U.S. Offering ...................... 4,400,000 shares

International Offering ............. 1,000,000 shares

Common Stock to be outstanding
after the Offerings ............... 5,400,000 shares of Class A Common Stock (a)
24,600,000 shares of Class B Common Stock (b)
30,000,000 shares of Common Stock (a)

Voting rights ...................... The Class A Common Stock and Class B Common Stock vote as a
single class on all matters, except as otherwise required by
law, with each share of Class A Common Stock entitling its holder
to one vote and each share of Class B Common Stock entitling
its holder to ten votes. All of the shares of Class B Common
Stock are owned by Mafco Consolidated Group, an indirect 85%
owned subsidiary of Mafco Holdings. Immediately after
consummation of the Offerings, Mafco Consolidated Group will
beneficially own shares of Class B Common Stock representing
approximately 97.9% of the combined voting power of the outstanding
shares of Common Stock (approximately 97.6% if the Underwriters'
over-allotment options are exercised in full).

Use of Proceeds ..................... The net proceeds from the Offerings will be paid as a dividend
to Mafco Consolidated Group. See "Use of Proceeds."

Proposed New York Stock Exchange
symbol ............................. CIG
</TABLE>

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

(a) Excludes 3,000,000 shares of Class A Common Stock reserved for
issuance under the Consolidated Cigar Holdings Inc. 1996 Stock Plan
(the "Stock Plan"), including 1,150,000 shares of Class A Common
Stock subject to outstanding options granted at the initial public
offering price of the Class A Common Stock. See "Management --Stock
Plan."

(b) Each share of Class B Common Stock is convertible at any time into
one share of Class A Common Stock and converts automatically into one
share of Class A Common Stock upon a transfer to any person other
than a Permitted Transferee (as defined herein) of Mafco Consolidated
Group. See "Description of Capital Stock --Class A Common Stock and
Class B Common Stock."

RISK FACTORS

See "Risk Factors" beginning on page 9 for a discussion of certain risks
that should be considered in connection with an investment in the Class A
Common Stock offered hereby.

<PAGE>

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA

The following table presents summary historical financial data of the
Company for the years ended December 31, 1994 and 1995, which were derived
from the audited Consolidated Financial Statements of the Company included
elsewhere in this Prospectus. The summary historical data for the twenty-six
week periods ended July 1, 1995 and June 29, 1996 and as of June 29, 1996
have been derived from the unaudited Consolidated Financial Statements of the
Company, included elsewhere in this Prospectus, which reflect, in the opinion
of management of the Company, all adjustments (which include only normal
recurring adjustments) necessary for the fair presentation of the financial
data for such periods. The results of such interim periods are not
necessarily indicative of the results for the full fiscal year. The summary
unaudited pro forma balance sheet data as of June 29, 1996 give pro forma
effect to the (i) Offerings, (ii) the payment to Mafco Consolidated Group of
the net proceeds from the Offerings, (iii) the payment to Mafco Consolidated
Group of the $5.6 million dividend funded by borrowings under the Credit
Agreement and (iv) the issuance of the Promissory Note, assuming that the
Offerings, the payment to Mafco Consolidated Group of the net proceeds from
the Offerings and the payment to Mafco Consolidated Group of the $5.6 million
dividend funded by borrowings under the Credit Agreement had been consummated
and the Promissory Note had been issued on June 29, 1996. The pro forma
adjustments are based upon available information and certain assumptions that
the management of the Company believes are reasonable. The summary unaudited
pro forma data do not purport to represent the results of operations or the
financial position of the Company that actually would have occurred had the
Offerings, the payment to Mafco Consolidated Group of the net proceeds from
the Offerings and the payment to Mafco Consolidated Group of the $5.6 million
dividend funded by borrowings under the Credit Agreement been consummated and
the Promissory Note been issued on June 29, 1996, or project the results of
operations or financial position of the Company and its subsidiaries for any
future date.

The Company's only material asset is all of the outstanding capital stock
of Consolidated Cigar, through which the Company conducts its business
operations. The summary historical and pro forma financial data therefore
reflect the consolidated results of Consolidated Cigar.

The following summary historical financial data should be read in
conjunction with "Selected Historical and Pro Forma Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus.

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE><CAPTION>
YEAR ENDED DECEMBER
31, TWENTY-SIX WEEKS ENDED
---------------------- -------------------------------
1994 1995 JULY 1, 1995 JUNE 29, 1996
---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales ................................... $131,510 $158,166 $71,449 $92,200
Cost of sales ............................... 78,836 94,347 42,166 53,416
---------- ---------- -------------- ---------------
Gross profit ................................ 52,674 63,819 29,283 38,784
Selling, general and administrative expenses 29,413 32,393 15,295 17,578
---------- ---------- -------------- ---------------
Operating income ............................ 23,261 31,426 13,988 21,206
Other (expenses) income:
Interest expense, net ....................... (12,838) (12,635) (6,650) (5,301)
Minority interest ........................... 78 (262) (45) (141)
Miscellaneous, net .......................... (828) (1,000) (438) (444)
---------- ---------- -------------- ---------------
Income before provision for income taxes ... 9,673 17,529 6,855 15,320
Provision for income taxes .................. 1,989 3,599 1,266 4,143
---------- ---------- -------------- ---------------
Net income .................................. $ 7,684 $ 13,930 $ 5,589 $11,177
========== ========== ============== ===============
Pro forma earnings per share(a) ............. $ 0.45 $ 0.37
========== ===============
</TABLE>

<TABLE>
<CAPTION>
JUNE 29, 1996
-----------------------
ACTUAL PRO FORMA
---------- -----------
<S> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total assets ..................................................... $200,518 $200,518
Long-term debt (including current portion and the Promissory
Note) ........................................................... 111,500 187,088
Total stockholder's equity (deficit) ............................. 58,325 (17,263)
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, TWENTY-SIX WEEKS ENDED
---------------------- -------------------------------
OTHER DATA: 1994 1995 JULY 1, 1995 JUNE 29, 1996
---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C>
Gross margin (b) ...................................... 40.1% 40.3% 41.0% 42.1%
Operating margin (b) .................................. 17.7 19.9 19.6 23.0
Cash flows provided by operating activities .......... $ 14,259 $ 19,801 $ 6,328 $10,668
Cash flows provided by (used for) investing activities 5,036 (989) (170) (3,538)
Cash flows used for financing activities .............. (18,810) (19,367) (6,084) (7,328)
Capital expenditures .................................. 788 983 370 3,170
Amortization of goodwill .............................. 1,771 1,771 886 826
EBITDA (c) ............................................ 30,046 38,125 17,292 24,409
EBITDA margin (c) ..................................... 22.8% 24.1% 24.2% 26.5%
</TABLE>

(footnotes on following page)

<PAGE>

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

(a) The pro forma per share data give effect to the consummation of the
Offerings and the $5.6 million dividend funded by borrowings under the
Credit Agreement and are calculated assuming that 30,000,000 shares of
Common Stock had been outstanding for each period presented as a result
of the conversion of the outstanding shares of the Company's current
common stock into approximately 24,600,000 shares of its newly created
Class B Common Stock and the issuance of 5,400,000 shares of its newly
created Class A Common Stock in the Offerings. On a pro forma basis,
net income would have been $13.5 million and $11.0 million for the year
ended December 31, 1995 and the twenty-six weeks ended June 29, 1996,
respectively.

(b) Gross margin is defined as gross profit as a percentage of net sales
and operating margin is defined as operating income as a percentage of
net sales.

(c) EBITDA is defined as earnings before interest expense, net, taxes,
extraordinary items, depreciation and amortization and minority
interest. The Company believes that EBITDA is a measure commonly used
by analysts, investors and others interested in the cigar industry.
Accordingly, this information has been disclosed herein to permit a
more complete analysis of the Company's operating performance. EBITDA
should not be considered in isolation or as a substitute for net income
or other consolidated statement of operations or cash flows data
prepared in accordance with generally accepted accounting principles as
a measure of the profitability or liquidity of the Company. EBITDA does
not take into account the Company's debt service requirements and other
commitments and, accordingly, is not necessarily indicative of amounts
that may be available for discretionary uses. EBITDA margin is defined
as EBITDA as a percentage of net sales.

<PAGE>

RISK FACTORS

Prospective purchasers of the Class A Common Stock offered hereby should
consider carefully all of the information set forth in this Prospectus and,
in particular, should evaluate the following risks in connection with an
investment in the Class A Common Stock.

SIGNIFICANT LEVEL OF INDEBTEDNESS; ABILITY TO SERVICE INDEBTEDNESS

The Company has a significant amount of outstanding indebtedness. As of
June 29, 1996, after giving effect to (i) the consummation of the Offerings,
(ii) the payment to Mafco Consolidated Group of the net proceeds from the
Offerings, (iii) the payment to Mafco Consolidated Group of the $5.6 million
dividend funded by borrowings under the Credit Agreement and (iv) the
issuance of the Promissory Note, the outstanding indebtedness of the Company
would have been $187.1 million and the Company would have had a stockholders'
deficit of $17.3 million. The Company and, subject to certain limitations
contained in their outstanding debt instruments, the subsidiaries of the
Company may incur additional indebtedness to finance working capital needs,
capital expenditures, acquisitions or for other purposes. See "Description of
Certain Indebtedness."

The Company's level of consolidated indebtedness could have important
consequences to the holders of Class A Common Stock, including the following:
(i) a substantial portion of the Company's consolidated cash flows from
operations must be dedicated to the payment of the interest on and principal
of its outstanding indebtedness and will not be available for other purposes,
including payment of dividends; (ii) the ability of the Company to obtain
financing in the future for working capital needs, capital expenditures,
acquisitions or other purposes may be materially limited or impaired; (iii)
the Company's level of indebtedness may reduce the Company's flexibility to
respond to changing business and economic conditions; and (iv) certain of the
Company's borrowings are and will continue to be at variable rates of
interest, which could result in higher interest expense in the event of
increases in interest rates.

The Company intends to satisfy anticipated cash requirements, including
for debt service, through cash flows from operations and funds from
borrowings under credit facilities. There can be no assurance, however, that
cash flows from operations and funds from available borrowings under the
Company's existing credit facilities will be sufficient to meet the Company's
cash requirements on a consolidated basis. If the Company is unable to
satisfy such cash requirements, the Company could be required to adopt one or
more alternatives, such as reducing or delaying capital expenditures,
refinancing or restructuring its indebtedness, selling assets or operations,
seeking capital contributions or loans from affiliates of the Company or
issuing additional shares of capital stock. There can be no assurance that
any of such actions could be effected, that they would enable the Company to
continue to satisfy its capital requirements or that they would be permitted
under the terms of the Company's various debt instruments then in effect. See
"--Impact of Holding Company Structure."

RESTRICTIONS IMPOSED BY THE TERMS OF THE COMPANY'S INDEBTEDNESS; CONSEQUENCES
OF FAILURE TO COMPLY

The terms and conditions of the debt instruments of Consolidated Cigar,
including its credit agreement (the "Credit Agreement") and its 10 1/2%
Senior Subordinated Notes due 2003 (the "Senior Subordinated Notes"), impose
restrictions on Consolidated Cigar and its subsidiaries that affect, among
other things, their ability to incur debt, pay dividends or make
distributions, make acquisitions, create liens, sell assets, create
restrictions on the payment of dividends and other payments and make certain
investments. The terms of the Credit Agreement also require Consolidated
Cigar to maintain specified financial ratios and satisfy certain tests,
including maximum leverage ratios and minimum interest coverage ratios. As of
June 29, 1996, there was approximately $21.5 million outstanding and $17.4
million available under the Credit Agreement and $90.0 million aggregate
principal amount of Senior Subordinated Notes outstanding. After giving
effect to the borrowings under the Credit Agreement to fund the $5.6 million
dividend to Mafco Consolidated Group, there would have been approximately
$27.1 million outstanding and $11.8 million available under the Credit
Agreement as of June 29, 1996.

<PAGE>

Consolidated Cigar's obligations under the Credit Agreement are guaranteed
by the Company and by all of the domestic subsidiaries of Consolidated Cigar.
Such guarantees and borrowings under the Credit Agreement are, and following
consummation of the Offerings will continue to be, secured by first priority
liens on all of the material assets of Consolidated Cigar and its domestic
subsidiaries and pledges of the capital stock of all of Consolidated Cigar's
subsidiaries (with certain exceptions for the capital stock of foreign
subsidiaries) and a pledge of all of the shares of common stock of
Consolidated Cigar owned by the Company (collectively, the "Collateral"). The
occurrence of a change of control of the Company would be an event of default
under the Credit Agreement and would permit the lenders under the Credit
Agreement to accelerate the debt outstanding thereunder and, if the debt is
not paid, to proceed to realize on the Collateral. Moreover, such event would
permit the holders of outstanding Senior Subordinated Notes to require the
repurchase of their notes.

The ability of the Company and its subsidiaries to comply with the terms
of their respective debt instruments can be affected by events beyond their
control, including events such as changes in prevailing economic conditions,
changes in consumer preferences and changes in the competitive environment,
which could have the effect of impairing the Company's operating performance,
and there can be no assurance that the Company and its subsidiaries will be
able to comply with the provisions of their respective debt instruments,
including compliance by Consolidated Cigar with the financial ratios and
tests contained in the Credit Agreement. Breach of any of these covenants or
the failure to fulfill the obligations thereunder and the lapse of any
applicable grace periods would result in an event of default under the
applicable debt instruments, and the holders of such indebtedness could
declare all amounts outstanding under their debt instruments to be due and
payable immediately. Any such declaration under a debt instrument is likely
to result in an event of default under one of the other debt instruments of
the Company and its subsidiaries. There can be no assurance that the assets
or cash flows of the Company or its subsidiaries would be sufficient to repay
in full borrowings under their respective outstanding debt instruments,
whether upon maturity or if such indebtedness were to be accelerated upon an
event of default, or upon a required repurchase in the event of a change of
control, or that the Company would be able to refinance or restructure the
payments on such indebtedness. In the case of the Credit Agreement, if such
indebtedness were not so repaid, refinanced or restructured, the lenders
could proceed to realize on the Collateral. See "--Significant Level of
Indebtedness; Ability to Service Indebtedness," "--Impact of Holding Company
Structure" and "Description of Certain Indebtedness."

IMPACT OF HOLDING COMPANY STRUCTURE

The Company is a holding company with no business operations of its own.
The Company's only material asset is all the outstanding capital stock of
Consolidated Cigar, through which the Company conducts its business
operations. Accordingly, the Company will be dependent upon the earnings and
cash flows of, and dividends and distributions from, Consolidated Cigar to
pay its expenses and meet its obligations, including principal payments on
the $70.0 million Promissory Note, and to pay any cash dividends or
distributions on the Common Stock that may be authorized by the Board of
Directors of the Company. There can be no assurance that Consolidated Cigar
will generate sufficient earnings and cash flows to pay dividends or
distribute funds to the Company to enable the Company to pay its expenses and
meet its obligations, including principal payments on the Promissory Note, or
that applicable state law and contractual restrictions, including negative
covenants contained in the debt instruments of the Company's subsidiaries,
including Consolidated Cigar, then in effect, will permit such dividends or
distributions. The terms of each of the Credit Agreement and the Senior
Subordinated Notes currently restrict Consolidated Cigar from paying
dividends or making distributions to the Company, each subject to certain
limited exceptions. See "--Significant Level of Indebtedness; Ability to
Service Indebtedness" and "--Restrictions Imposed by the Terms of the
Company's Indebtedness; Consequences of Failure to Comply."

<PAGE>

DECLINING MARKET FOR CIGARS THROUGH 1993

According to industry sources, the cigar industry experienced declining
consumption between 1964 and 1993 at a compound annual rate of 3.6% (and,
with respect to large cigar consumption, at a compound annual rate of 5.0%).
The Company experienced similar trends in the unit volume of its cigars
during such period. While the cigar industry has experienced significantly
better trends in unit consumption since 1993 compared to this historical
trend, there can be no assurance that the recent positive trends will
continue or that the Company would be able to offset any future decline in
consumption. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business--Market Overview."

EXTENSIVE AND INCREASING REGULATION OF TOBACCO PRODUCTS

Cigar manufacturers, like other producers of tobacco products, are subject
to regulation in the United States at the federal, state and local levels.
Federal law has required health warnings on cigarettes since 1965 and has
recently required states, in order to receive full funding for federal
substance abuse block grants, to establish a minimum age of 18 years for the
sale of tobacco products, together with an appropriate enforcement program.
The recent trend is toward increasing regulation of the tobacco industry. A
variety of bills relating to tobacco issues have been recently introduced in
the Congress of the United States, including bills that would have (i)
prohibited the advertising and promotion of all tobacco products and/or
restricted or eliminated the deductibility of such advertising expenses; (ii)
increased labeling requirements on tobacco products to include, among other
things, addiction warnings and lists of additives and toxins; (iii) modified
federal preemption of state laws to allow state courts to hold tobacco
manufacturers liable under common law or state statutes; (iv) shifted
regulatory control of tobacco products and advertisements from the U.S.
Federal Trade Commission (the "FTC") to the U.S. Food and Drug Administration
(the "FDA"); (v) increased tobacco excise taxes; and (vi) required tobacco
companies to pay for health care costs incurred by the federal government in
connection with tobacco related diseases. Hearings have been held on certain
of these proposals; however, to date, none of such proposals have been passed
by Congress. In addition, various federal agencies, including the FDA, have
recently proposed to regulate the tobacco industry. Under the FDA proposal,
the FDA would, among other things, regulate the marketing, promotion and
advertisement of certain tobacco products. The FDA has indicated that it
expects to adopt a final rule during the fall of 1996. The regulation of the
tobacco industry by the FDA could have a material adverse effect on the
Company's business. Numerous proposals have also been considered at the state
and local legislative level and by regulatory bodies, including requiring
little cigars to be "fire-safe" (i.e., cigars that extinguish themselves if
not continuously smoked), restricting smoking in certain public areas and
requiring cigar or pipe tobacco to carry health warnings. There can be no
assurance as to the ultimate content, timing or effect of any additional
regulation of tobacco products by any federal, state, local or regulatory
body, and there can be no assurance that any such legislation or regulation
would not have a material adverse affect on the Company's business. See
"Business--The Tobacco Industry--Regulation."

TOBACCO INDUSTRY LITIGATION

The cigarette and smokeless tobacco industries have experienced and are
experiencing significant health-related litigation involving tobacco and
health issues. Plaintiffs in such litigation have and are seeking
compensation and, in some cases, punitive damages, for various injuries
resulting from the use of tobacco products or exposure to tobacco smoke,
including health care costs. In one such recent case against a cigarette
manufacturer, the plaintiffs were awarded compensatory damages totalling
$750,000. Although, to date, the Company has not been the subject of any such
material health-related litigation and the cigar industry has not experienced
material health-related litigation, there can be no assurance that there will
not be an increase in health-related litigation against the cigarette and
smokeless tobacco industries or similar litigation in the future against
cigar manufacturers. The costs to the Company of defending prolonged
litigation and any settlement or successful prosecution of any material
health-related litigation against

<PAGE>

manufacturers of cigars, cigarettes or smokeless tobacco or suppliers to the
tobacco industry could have a material adverse effect on the Company's
business. See "Business--The Tobacco Industry--Litigation."

EFFECTS OF INCREASES IN EXCISE TAXES

Cigars and pipe tobacco have long been subject to federal, state and local
excise taxes, and such taxes have frequently been increased or proposed to be
increased, in some cases significantly, to fund various legislative
initiatives. In particular, there have been proposals by the federal
government in the past to reform health care through a national program to be
funded principally through increases in federal excise taxes on tobacco
products. Enactment of new or significant increases in existing federal,
state or local excise taxes would result in decreased unit sales of cigars
and pipe tobacco, which could have a material adverse effect on the Company's
business. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Taxation and Regulation--Excise Taxes" and
"Business--The Tobacco Industry--Excise Taxes."

SUBSTANTIAL EFFECTS OF FAILURE TO RECEIVE POSSESSIONS TAX CREDIT

The Company derives a significant amount of its income from its Puerto
Rico operations. Prior to December 31, 1993, income earned by the Company
from its Puerto Rico operations was generally exempt from United States
federal income tax. Section 936 of the Internal Revenue Code of 1986, as
amended (the "Code"), allows a "possessions tax credit" against United States
federal income tax for the amount of United States federal income tax
attributable to the Puerto Rico taxable earnings. As part of the Omnibus
Budget Reconciliation Act of 1993 ("OBRA 93"), the possessions tax credit has
been limited based upon a percentage of qualified wages in Puerto Rico, plus
certain amounts of depreciation (the "Current Limitation"). While the Company
believes that it qualified for the possessions tax credit during 1995, 1994
and 1993, the future eligibility and the amounts of the credit will depend on
the facts and circumstances of the Company's Puerto Rico operations during
each of the taxable years subsequent to 1995. Failure to receive the Section
936 exemption or possessions tax credit attributable to the Company's Puerto
Rico operations would have a material adverse effect on the Company.

On August 2, 1996, Congress passed the Small Business Job Protection Act
of 1996 (the "SBJPA Bill"), which, if enacted into law, would repeal Section
936 of the Code. Under the SBJPA Bill, the Section 936 "possessions tax
credit" would be repealed, subject to special grandfather rules for which the
Company would be eligible, provided that the Company does not add a
"substantial new line of business." Under the grandfather rules, for the
Company's taxable years beginning after December 31, 2001 and before January
1, 2006, the Company's business income from its Puerto Rico operations
eligible for the possessions tax credit would, in addition to the Current
Limitation, generally be limited to its average annual income from its Puerto
Rico operations, adjusted for inflation, computed during the Company's five
most recent taxable years ending before October 14, 1995 and excluding the
highest and lowest years. For taxable years after December 31, 2005, the
possessions tax credit would be eliminated. The repeal of Section 936 in the
manner described above could have a material adverse effect on the Company
for taxable years beginning after December 31, 2001 and before January 1,
2006 to the extent that the Company's annual income from its Puerto Rico
operations exceeds its average annual income from its Puerto Rico operations
(as computed in the manner described in the preceding sentence), and for
taxable years after December 31, 2005. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Taxation and
Regulation--Possessions Tax Credit."

SUBSTANTIAL EFFECTS OF ELIMINATION OF PUERTO RICO TAX EXEMPTION

Pursuant to a grant of industrial tax exemption which expires in 2002,
income earned by Congar International Corporation, a wholly owned subsidiary
of the Company ("CIC"), from the manufacture of cigars in Puerto Rico enjoys
a 90% income tax exemption from Puerto Rican income taxes. The remaining 10%
of such income is taxed at a maximum surtax rate of 45%, resulting in an
effective income tax rate for such income of approximately 4.5% under current
tax rates. Funds repatriated to the Company are subject to a maximum Puerto
Rican tollgate tax of 10%. Legislation enacted in Puerto Rico

<PAGE>

in 1993 included a provision for prepaying a portion of these tollgate taxes
effective for the 1993 fiscal year and subsequent periods. There can be no
assurance that the Puerto Rico tax exemption will not be limited or
eliminated in the future. Any significant limitation on or elimination of the
Puerto Rico tax exemption would have a material adverse effect on the
Company. See Note I of the Notes to the Consolidated Financial Statements of
the Company included elsewhere in this Prospectus.

CONSTRAINTS ON ABILITY TO SATISFY DEMAND

As a result of the increased demand for its hand made premium cigars, the
Company had backorders at the end of 1994 and 1995 of 3.2 million and 4.3
million cigars, respectively, and 12.0 million cigars at June 29, 1996. The
Company's ability to increase its production of premium cigars and decrease
its backorders is constrained by a shortage of experienced skilled laborers.
Although the Company is hiring and training new skilled laborers, the
training process averages up to one year and not all trainees are able to
successfully complete the Company's training program. While the Company is
pursuing measures to increase its production of premium cigars, there can be
no assurance that these measures will be successful or that they will enable
the Company to meet any future level of demand for its premium cigars. Any
material inability of the Company to fill its premium cigar backorders in a
timely manner could have a material adverse effect on the Company's business,
including the loss of sales by the Company.

The Company's ability to manufacture premium and mass market cigars may
also be constrained by the ability of tobacco growers and suppliers to meet
the Company's demands for its raw materials in a timely manner. Tobacco, as a
crop that is harvested annually, restricts the ability of tobacco growers to
adjust acreage grown in any given year to meet changes in market demands. In
addition, increases in acreage of tobacco grown requires significant capital,
which growers may be unable or unwilling to invest. If the rate of escalation
in consumption of cigars and other tobacco products continues, but the supply
of tobacco remains constant or increases at a lower rate than demand, the
Company's ability to increase its production of cigars, and thereby reduce
its backorders, could be inhibited. See "--Social, Political and Economic
Risks Associated with Foreign Operations and International Trade" and
"Business--Backorders."

SOCIAL, POLITICAL AND ECONOMIC RISKS ASSOCIATED WITH FOREIGN OPERATIONS AND
INTERNATIONAL TRADE

A substantial portion of the manufacturing operations of the Company are
located in territories and countries outside of the United States, including
Puerto Rico, the Dominican Republic, Jamaica and Honduras, and the
manufacturer and supplier of the Company's TE-AMO cigars is located in
Mexico. In addition, the Company buys tobacco directly from a large number of
suppliers located in territories and countries outside the United States,
including Brazil, Cameroon, the Central African Republic, Costa Rica,
Germany, Italy, the Dominican Republic, Paraguay, the Philippines, Indonesia,
Honduras and Mexico. The Company is exposed to the risk of changes in social,
political and economic conditions inherent in foreign operations and
international trade, including changes in the laws and policies that govern
foreign investment and international trade in territories and countries where
it currently has operations and conducts international trade, as well as, to
a lesser extent, changes in United States laws and regulations relating to
foreign investment and trade. Any such social, political or economic changes
could pose, among other things, the risk of finished product and raw material
supply interruption or significant increases in finished product and raw
material prices. Accordingly, there can be no assurance that any such changes
in social, political or economic conditions will not have a material adverse
effect on the Company's business.

<PAGE>

CONTROL BY MAFCO CONSOLIDATED GROUP

Holders of the Company's Class A Common Stock are entitled to one vote per
share and holders of the Company's Class B Common Stock are entitled to ten
votes per share. Each share of Class B Common Stock is convertible at any
time into one share of Class A Common Stock and converts automatically into
one share of Class A Common Stock upon a transfer to any person other than a
Permitted Transferee, which generally consists of affiliates of Mafco
Consolidated Group. Immediately after consummation of the Offerings, Mafco
Consolidated Group will beneficially own all of the 24,600,000 outstanding
shares of Class B Common Stock, which will represent approximately 97.9% of
the combined voting power of the outstanding shares of Common Stock
(approximately 97.6% if the Underwriters' over-allotment options are
exercised in full). Accordingly, Mafco Consolidated Group will be able to
elect the entire Board of Directors of the Company and control the vote on
all matters submitted to a vote of the Company's stockholders. Mafco
Consolidated Group is 85% owned through Mafco Holdings by Ronald O. Perelman.

All of the shares of common stock of Mafco Consolidated Group owned by
Mafco Holdings are, and will continue to be, pledged by Mafco Holdings to
secure the obligations of certain of its affiliates under outstanding
indebtedness. Subject to applicable law and the terms of such indebtedness,
Mafco Holdings could sell any or all of the shares of common stock of Mafco
Consolidated Group owned by it from time to time for any reason. In addition,
such shares may be sold in the event that Mafco Holdings or its affiliates
fail to comply with their obligations under the indebtedness which is secured
by the pledge of such shares and the lenders thereunder proceed to realize on
such security. A sale of a sufficient number of shares of Class A Common
Stock held by Mafco Consolidated Group or acquired upon conversion of its
shares of Class B Common Stock or a sale of a sufficient number of shares of
common stock of Mafco Consolidated Group owned by Mafco Holdings would result
in a change of control of the Company. The occurrence of a change of control
of the Company would be an event of default under the Credit Agreement and
would give the holders of the Senior Subordinated Notes the right to require
the repurchase of their Notes, which could require a potential acquiror to
either repay or refinance such indebtedness. See "--Restrictions Imposed by
the Terms of the Company's Indebtedness; Consequences of Failure to Comply"
and "--Anti-Takeover Effects of Dual Classes of Stock" and "Ownership of
Common Stock," "Certain Relationships and Related Transactions--Relationship
with Mafco Consolidated Group and Mafco Holdings."

ANTI-TAKEOVER EFFECTS OF DUAL CLASSES OF STOCK

Following consummation of the Offerings, through its ownership of all the
outstanding shares of Class B Common Stock, Mafco Consolidated Group will be
able to control the vote on all matters submitted to a vote of the Company's
stockholders, including extraordinary transactions such as mergers, sales of
all or substantially all of the Company's assets or going private
transactions. Such control by Mafco Consolidated Group may discourage certain
types of transactions involving an actual or potential change of control of
the Company, including transactions in which the holders of Class A Common
Stock might receive a premium for their shares over prevailing market prices.
See "--Control by Mafco Consolidated Group" and "Description of Capital
Stock."

POSSIBLE FUTURE SALES OF SHARES BY MAFCO CONSOLIDATED GROUP

Immediately after consummation of the Offerings, the Company will have
outstanding 5,400,000 shares of Class A Common Stock and 24,600,000 shares of
Class B Common Stock. Subject to the restrictions described under "Shares
Eligible for Future Sale" and applicable law, Mafco Consolidated Group could
sell any or all of the shares of Common Stock owned by it from time to time
for any reason. Pursuant to a Registration Rights Agreement between the
Company and Mafco Consolidated Group (the "Registration Rights Agreement"),
Mafco Consolidated Group has the right to require the Company to register the
shares of Class A Common Stock acquired upon conversion of its shares of
Class B Common Stock to facilitate their possible sale. Although the Company
can make no prediction as to the effect, if any, that sales of shares of
Class A Common Stock by Mafco Consolidated Group would have on the market
price prevailing from time to time, sales of substantial amounts of Class A
Common Stock or the availability of such shares for sale could adversely
affect prevailing market prices. See "Shares Eligible for Future Sale."

<PAGE>

NO PRIOR MARKET FOR CLASS A COMMON STOCK; DETERMINATION OF PUBLIC OFFERING
PRICE

Prior to the Offerings, there has been no public market for the Class A
Common Stock. Although the Class A Common Stock has been approved for listing
on the New York Stock Exchange ("NYSE"), subject to official notice of
issuance, there can be no assurance as to the development or liquidity of any
trading market for the Class A Common Stock following the Offerings or that
investors in the Class A Common Stock will be able to resell their shares at
or above the initial public offering price. The initial public offering price
for the shares of Class A Common Stock was determined through negotiations
between the Company and the representatives of the Underwriters, and may not
be indicative of the market price of the Class A Common Stock after the
Offerings. See "Underwriting."

DILUTION

Purchasers of the Class A Common Stock will experience immediate and
substantial dilution in net tangible book value per share of Common Stock
from the initial public offering price. To the extent outstanding options to
purchase Class A Common Stock are exercised, there will be further dilution.
See "Dilution."

USE OF PROCEEDS TO PAY DIVIDEND

The net proceeds from the Offerings will be paid as a dividend to Mafco
Consolidated Group. Accordingly, none of the proceeds from the Offerings will
be available for use in the Company's business. See "Use of Proceeds."

<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A Common
Stock offered by the Company hereby will be approximately $113.4 million
($127.9 million if the Underwriters' over-allotment option is exercised in
full), after deducting the underwriting discount and estimated offering
expenses payable by the Company. All the net proceeds of the Offerings will
be paid as a dividend to Mafco Consolidated Group. Accordingly, none of the
proceeds from the Offerings will be available for use in the Company's
business.

DIVIDEND POLICY

The net proceeds from the Offerings will be paid as a dividend to Mafco
Consolidated Group. The Company does not anticipate that, after the
Offerings, any dividends will be declared on the Class A Common Stock in the
foreseeable future. The Company intends to retain earnings to finance the
expansion of its business. In the year ended December 31, 1995 and the
twenty-six week period ended June 29, 1996, the Company paid cash dividends
of $5.0 million and $7.2 million, respectively. Simultaneously with or prior
to consummation of the Offerings, the Company intends to pay to Mafco
Consolidated Group a cash dividend of approximately $5.6 million funded by
borrowings under the Credit Agreement.

The Company, as a holding company with no business operations of its own,
is dependent on dividends and distributions from Consolidated Cigar to pay
any cash dividends or distributions on the Common Stock. The terms of the
Senior Subordinated Notes limit the payment of dividends or distributions to
the Company by Consolidated Cigar to an amount (based on a formula set forth
in the indenture (the "Senior Subordinated Notes Indenture") pursuant to
which the Senior Subordinated Notes were issued) equal to approximately $5.6
million as of June 29, 1996, which amount will be paid by Consolidated Cigar
as a dividend to the Company in connection with the $5.6 million dividend
described above. Consolidated Cigar recently entered into an amendment to the
Credit Agreement, which, among other things, permits Consolidated Cigar to
pay the $5.6 million dividend to the Company and to pay dividends and make
distributions on terms substantially similar to those contained in the Senior
Subordinated Notes Indenture. So long as the Credit Agreement is in effect
and the Senior Subordinated Notes are outstanding, each in their current
form, the Company's ability to obtain distributions from Consolidated Cigar
to enable it to fund dividend payments will be limited. Subject to such
restrictions, any future declaration of cash dividends will be at the
discretion of the Company's Board of Directors and will be dependent upon the
Company's results of operations, financial condition, contractual
restrictions and other factors deemed relevant by the Board of Directors of
the Company. See "Risk Factors--Restrictions Imposed by the Terms of the
Company's Indebtedness; Consequences of Failure to Comply" and "Description
of Certain Indebtedness."

<PAGE>

DILUTION

As of June 29, 1996, the Company had a book value of approximately $58.3
million or $2.37 per share of Common Stock and a deficit in net tangible book
value of approximately $(37.3) million or $(1.52) per share of Common Stock.
"Net tangible book value" per share of Common Stock represents the total
amount of tangible assets of the Company, less the total amount of
liabilities of the Company, divided by the number of shares of Common Stock
outstanding. Without taking into account any changes in net tangible book
value after June 29, 1996, other than to give effect to (i) the sale by the
Company of the 5,400,000 shares of Class A Common Stock offered hereby, (ii)
the payment to Mafco Consolidated Group of the net proceeds from the
Offerings, (iii) the payment to Mafco Consolidated Group of the $5.6 million
dividend funded by borrowings under the Credit Agreement and (iv) the
issuance of the Promissory Note, the pro forma deficit in net tangible book
value of the Common Stock as of June 29, 1996 would have been approximately
$(112.8) million or $(3.76) per share. This represents an immediate dilution
of $26.76 per share to new stockholders. "Dilution" per share represents the
difference between the price per share to be paid by the new stockholders and
the pro forma deficit in net tangible book value per share as of June 29,
1996. The following table illustrates this per share dilution.

<TABLE>
<CAPTION>
<S> <C> <C>
Initial Public Offering Price Per Share ................... $ 23.00
Deficit in net tangible book value per share as of
June 29, 1996 ............................................ $(1.52)
Decrease in net tangible book value per share attributable
to the payment to Mafco Consolidated Group of the net
proceeds from the Offerings, the payment to Mafco
Consolidated Group of the $5.6 million dividend and the
issuance of the Promissory Note .......................... (7.68)
Increase in net tangible book value per share attributable
to the Offerings ......................................... 5.44
---------
Pro forma deficit in net tangible book value per share as
of June 29, 1996 after giving effect to the Offerings,
the payment to Mafco Consolidated Group of the net
proceeds from the Offerings, the payment to Mafco
Consolidated Group of the $5.6 million dividend and the
issuance of the Promissory Note .......................... (3.76)
---------
(Dilution) per share to new stockholders .................. $(26.76)
=========
</TABLE>

The following table sets forth, on a pro forma basis as of June 29, 1996,
the number of shares of Common Stock purchased from the Company, the
effective cash cost to the existing stockholder and the average price per
share paid by the existing stockholder and to be paid by new stockholders.

<TABLE>
<CAPTION>
NUMBER OF AVERAGE
SHARES CONSIDERATION PRICE
PURCHASED PAID PER SHARE
------------ -------------- -----------
<S> <C> <C> <C>
Existing stockholder 24,600,000 $ 30,000,000(a) $ 1.22
New stockholders .... 5,400,000 124,200,000 23.00
------------ -------------- -----------
Total ............... 30,000,000 $154,200,000 5.14
============ ============== ===========
</TABLE>

- ------------
(a) Reflects the effective cash cost of the Common Stock of the Company
less distributions from the Company to Mafco Consolidated Group that
were not funded by retained earnings prior to the payment to Mafco
Consolidated Group of the net proceeds from the Offerings, the payment
to Mafco Consolidated Group of the $5.6 million dividend and the
issuance of the Promissory Note. After giving effect to the payment to
Mafco Consolidated Group of the net proceeds of the Offerings, the
payment to Mafco Consolidated Group of the $5.6 million dividend and
the issuance of the Promissory Note, the effective cash return would
be $(135,528,000).

The calculations in the tables set forth above do not reflect an aggregate
of 3,000,000 shares of Class A Common Stock reserved for issuance under the
Stock Plan, including 1,150,000 shares of Class A Common Stock subject to
outstanding options granted at the initial public offering price of the Class
A Common Stock. See "Management--Stock Plan."

<PAGE>

CAPITALIZATION

The following table sets forth the unaudited actual capitalization of the
Company as of June 29, 1996 and the unaudited pro forma capitalization of the
Company as of June 29, 1996, as adjusted to reflect (i) the sale by the
Company of the 5,400,000 shares of Class A Common Stock offered hereby, (ii)
the payment to Mafco Consolidated Group of the net proceeds from the
Offerings, (iii) the payment to Mafco Consolidated Group of the $5.6 million
dividend funded with borrowings under the Credit Agreement and (iv) the
issuance of the Promissory Note. This table should be read in conjunction
with the Consolidated Financial Statements of the Company included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
JUNE 29, 1996
-------------------------
PRO FORMA AS
ACTUAL ADJUSTED
---------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C> <C>
Long-term debt:
Credit Agreement ............................................ $ 21,500 $ 27,088(a)
Senior Subordinated Notes ................................... 90,000 90,000
Promissory Note (including current portion) ................. -- 70,000
---------- -------------
Total long-term debt ....................................... 111,500 187,088
---------- -------------
Stockholder's equity (deficit):
Preferred stock, par value $0.01 per share, 20,000,000
shares authorized, no shares issued and outstanding ....... -- --
Common stock, par value $1.00 per share, 1,000 shares
authorized, 1,000 shares issued and outstanding ........... 1 --
Class A Common Stock, par value $0.01 per share; 300,000,000
shares authorized; 5,400,000 shares issued and outstanding,
pro forma as adjusted(b) ................................... -- 54
Class B Common Stock, par value $0.01 per share; 250,000,000
shares authorized, 24,600,000 shares issued and
outstanding, pro forma as adjusted ......................... -- 246
Additional paid-in-capital (capital deficiency) ............ 34,834 (17,563)
Retained earnings ........................................... 23,490 --
---------- -------------
Total stockholder's equity (deficit) ....................... 58,325 (17,263)
---------- -------------
Total capitalization ...................................... $169,825 $169,825
========== =============
</TABLE>
- ------------
(a) Reflects borrowings under the Credit Agreement to fund the $5.6 million
dividend to Mafco Consolidated Group.

(b) Excludes an aggregate of 3,000,000 shares of Class A Common Stock
reserved for issuance under the Stock Plan, including 1,150,000 shares
of Class A Common Stock subject to outstanding options granted at the
initial public offering price of the Class A Common Stock. See
"Management--Stock Plan."

<PAGE>

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The selected historical financial data of the Company for, and as of the
end of, each of the periods indicated in the five-year period ended December
31, 1995 have been derived from the audited Consolidated Financial Statements
of the Company. The selected historical financial data for each of the
twenty-six week periods ended July 1, 1995 and June 29, 1996 and as of June
29, 1996 have been derived from the unaudited Consolidated Financial
Statements of the Company, included elsewhere in this Prospectus, which
reflect, in the opinion of management of the Company, all adjustments (which
include only normal recurring adjustments) necessary for the fair
presentation of the financial data for such periods. The results for such
interim periods are not necessarily indicative of the results for the full
fiscal year. The selected unaudited pro forma balance sheet data as of June
29, 1996 give pro forma effect to (i) the Offerings, (ii) the payment to
Mafco Consolidated Group of the net proceeds from the Offerings, (iii) the
payment to Mafco Consolidated Group of the $5.6 million dividend funded with
borrowings under the Credit Agreement and (iv) the issuance of the Promissory
Note, assuming that the Offerings, the payment to Mafco Consolidated Group of
the net proceeds from the Offerings and the payment to Mafco Consolidated
Group of the $5.6 million dividend funded with borrowings under the Credit
Agreement had been consummated and the Promissory Note had been issued on
June 29, 1996. The pro forma adjustments are based upon available information
and certain assumptions that the management of the Company believes are
reasonable. The selected unaudited pro forma data do not purport to represent
the results of operations or the financial position of the Company that
actually would have occurred had the Offerings, the payment to Mafco
Consolidated Group of the net proceeds from the Offerings and the payment to
Mafco Consolidated Group of the $5.6 million dividend funded with borrowings
under the Credit Agreement been consummated and the Promissory Note been
issued on June 29, 1996, or project the results of operations or financial
position of the Company and its subsidiaries for any future date.

The Company's only material asset is all of the outstanding capital stock
of Consolidated Cigar, through which the Company conducts its business
operations. The selected historical and pro forma financial data therefore
reflect the consolidated results of Consolidated Cigar and its predecessors.
Prior to March 3, 1993, Consolidated Cigar was a wholly owned subsidiary of
Triple C Acquisition Corp. ("Triple C"). On March 3, 1993, Mafco Holdings
acquired (the "Acquisition") all of the outstanding shares of Triple C and
merged Triple C into Consolidated Cigar, with Consolidated Cigar being the
surviving corporation. Accordingly, the selected historical financial data
reflect for the periods (i) prior to March 3, 1993, the results of Triple C
and (ii) subsequent to March 2, 1993, the consolidated results of
Consolidated Cigar, as adjusted to account for the Acquisition under the
purchase accounting method. The results of operations and financial condition
of the Company subsequent to the Acquisition ("Post-Acquisition") have been
significantly affected by adjustments resulting from the Acquisition,
including adjustments for the substantial increase in debt associated with
the Acquisition, the allocation of the purchase price and related
amortization. As a result, the Post-Acquisition results of operations and
financial position of the Company are not comparable with the results of
operations and financial position of the Company prior to the Acquisition
("Pre-Acquisition").

The following selected historical financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.

<PAGE>

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRE-ACQUISITION
--------------------------------------------
YEAR ENDED YEAR ENDED TWO MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH
1991 1992 2, 1993
-------------- -------------- ------------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales ............. $124,633 $127,107 $15,563
Cost of sales ......... 78,853 77,852 9,088
-------------- -------------- ------------
Gross profit .......... 45,780 49,255 6,475
Selling, general and
administrative
expenses ............. 26,116 27,836 4,580
-------------- -------------- ------------
Operating income ...... 19,664 21,419 1,895
-------------- -------------- ------------
Other (expenses)
income:
Interest expense, net (13,192) (10,527) (1,660)
Gain on sale of
trademarks ........... -- 6,830 --
Minority interest .... -- (3,345) 5
Miscellaneous, net ... (1,414) (1,364) (226)
-------------- -------------- ------------
Income before
provision for income
taxes and
extraordinary items . 5,058 13,013 14
Provision for income
taxes ................ 633 2,370 91
Extraordinary items .. (220) (514) --
-------------- -------------- ------------
Net income (loss) .... $ 4,645 $ 11,157 $ (77)
============== ============== ============
Pro forma earnings per
share(a) .............
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
POST-ACQUISITION
-------------------------------------------------------------------------------
TEN MONTHS YEAR ENDED YEAR ENDED TWENTY-SIX TWENTY-SIX
ENDED DECEMBER DECEMBER 31, DECEMBER 31, WEEKS ENDED WEEKS ENDED
31, 1993 1994 1995 JULY 1, 1995 JUNE 29, 1996
-------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net sales ............. $110,384 $131,510 $158,166 $71,449 $92,200
Cost of sales ......... 69,871 78,836 94,347 42,166 53,416
-------------- -------------- -------------- -------------- ---------------
Gross profit .......... 40,513 52,674 63,819 29,283 38,784
Selling, general and
administrative
expenses ............. 24,956 29,413 32,393 15,295 17,578
-------------- -------------- -------------- -------------- ---------------
Operating income ...... 15,557 23,261 31,426 13,988 21,206
-------------- -------------- -------------- -------------- ---------------
Other (expenses)
income:
Interest expense, net (10,930) (12,838) (12,635) (6,650) (5,301)
Gain on sale of
trademarks ........... -- -- -- -- --
Minority interest .... 209 78 (262) (45) (141)
Miscellaneous, net ... (690) (828) (1,000) (438) (444)
-------------- -------------- -------------- -------------- ---------------
Income before
provision for income
taxes and
extraordinary items . 4,146 9,673 17,529 6,855 15,320
Provision for income
taxes ................ 1,267 1,989 3,599 1,266 4,143
Extraordinary items .. -- -- -- -- --
-------------- -------------- -------------- -------------- ---------------
Net income (loss) .... $ 2,879 $ 7,684 $ 13,930 $ 5,589 $11,177
============== ============== ============== ============== ===============
Pro forma earnings per
share(a) ............. $ 0.45 $ 0.37
============== ============== ===============
</TABLE>

<TABLE>
<CAPTION>
PRE-ACQUISITION
------------------------------
DECEMBER 31, DECEMBER 31,
1991 1992
-------------- --------------
<S> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total assets ......................... $126,780 $110,725
Long-term debt (including current
portion and the Promissory Note) ... 98,984 79,416
Total stockholder's equity (deficit) 3,157 14,314

</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
POST-ACQUISITION
-----------------------------------------------------------------------
PRO FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 29, JUNE 29,
1993 1994 1995 1996 1996
-------------- -------------- -------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (AT PERIOD END):
Total assets ......................... $205,906 $196,909 $191,730 $200,518 $200,518
Long-term debt (including current
portion and the Promissory Note) ... 145,300 126,200 110,600 111,500 187,088
Total stockholder's equity (deficit) 32,879 40,563 54,328 58,325 (17,263)

</TABLE>

<PAGE>

<TABLE>
<CAPTION>
PRE-ACQUISITION
--------------------------------------------
YEAR ENDED YEAR ENDED TWO MONTHS
DECEMBER 31, DECEMBER 31, ENDED MARCH
1991 1992 2, 1993
-------------- -------------- ------------
<S> <C> <C> <C>
OTHER DATA:
Gross margin(b) ....... 36.7% 38.8% 41.6%
Operating margin(b) .. 15.8 16.9 12.2
Cash flows provided by
operating activities $ 16,699 $ 20,638 $ 3,462
Cash flows provided by
(used for) investing
activities ........... (528) (701) (247)
Cash flows used for
financing activities (15,901) (19,574) (2,078)
Capital expenditures . 572 926 115
Amortization of
goodwill ............. 104 110 18
EBITDA(c) ............. 28,817 29,330 2,792
EBITDA margin(c) ...... 23.1% 23.1% 17.9%
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

(footnotes on following page)

<PAGE>

(a) The pro forma per share data give effect to the consummation of the
Offerings and the $5.6 million dividend funded by borrowings under the
Credit Agreement and are calculated assuming that 30,000,000 shares of
Common Stock had been outstanding for each period presented as a result
of the conversion of the outstanding shares of the Company's current
common stock into approximately 24,600,000 shares of its newly created
Class B Common Stock and the issuance of 5,400,000 shares of its newly
created Class A Common Stock in the Offerings. On a pro forma basis,
net income would have been $13.5 million and $11.0 million for the year
ended December 31, 1995 and for the twenty-six weeks ended June 29,
1996, respectively.

(b) Gross margin is defined as gross profit as a percentage of net sales
and operating margin is defined as operating income as a percentage of
net sales.

<PAGE>

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

The following should be read in conjunction with the Consolidated
Financial Statements of the Company included elsewhere in this Prospectus.

OVERVIEW

The United States cigar industry experienced declining consumption between
1964 and 1993 at a compound annual rate of 3.6%. Recently, cigar smoking has
gained popularity in the United States, resulting in a significant increase
in consumption and retail sales of cigars, particularly for premium cigars.
Management believes that this increase in cigar consumption and retail sales
is the result of a number of factors, including: (i) the increase in the
number of adults over the age of 50 (a demographic group believed to smoke
more cigars than any other demographic segment) and (ii) the emergence of an
expanding base of younger affluent adults who have recently started smoking
cigars and who tend to smoke premium cigars. The growth in industry retail
sales of cigars has outpaced unit growth since 1991 primarily as a result of
a combination of increased prices and a shift in the sales mix to more
expensive cigars. There can be no assurance that unit consumption and retail
sales of cigars will continue to increase in the future. See "Risk
Factors--Declining Market for Cigars through 1993" and "--Extensive and
Increasing Regulation of Tobacco Products."

The increased demand for cigars, especially premium cigars, and the
shortage of experienced skilled laborers caused as a result thereof have
resulted in the Company's backorders of premium cigars to increase from 3.2
million cigars at December 31, 1994 to 4.3 million cigars at December 31,
1995, and to further increase to 12.0 million cigars at June 29, 1996. The
Company is hiring and training new rollers and bunchers and is building
additional plant capacity to meet future growth in demand for its premium
cigars. Although the Company believes that these measures will enable it to
increase its production of premium cigars and that the backorders outstanding
at June 29, 1996 will be filled during the second half of 1996, there can be
no assurance that the Company will be able to meet any future level of demand
for its premium cigars. The Company's ability to manufacture premium and mass
market cigars may also be constrained by the ability of tobacco growers and
suppliers to meet the Company's demands for its raw materials in a timely
manner.

As a result of the strong demand for the Company's products, the Company
reported net sales of $158.2 million, operating income of $31.4 million and
net income of $13.9 million in 1995 and for the first twenty-six weeks of
1996 net sales of $92.2 million, operating income of $21.2 million and net
income of $11.2 million.

RESULTS OF OPERATIONS

The discussion set forth below relates to the results of operations and
financial condition of the Company for, and as of the end of, the twenty-six
week periods ended June 29, 1996 and July 1, 1995 and the years ended
December 31, 1995 and 1994, the ten months ended December 31, 1993 and the
two months ended March 2, 1993.

The Company is a holding company with no business operations of its own.
The Company's only material asset is all of the outstanding capital stock of
Consolidated Cigar, through which the Company conducts its business
operations. The results of operations and financial position of the Company
therefore reflect the consolidated results of operations and financial
position of Consolidated Cigar and its predecessors. Prior to March 3, 1993,
Consolidated Cigar was a wholly owned subsidiary of Triple C. On March 3,
1993, Mafco Holdings acquired all of the outstanding shares of Triple C and
merged Triple C into Consolidated Cigar, with Consolidated Cigar being the
surviving corporation. The Post-Acquisition results of operations and
financial condition of the Company have been significantly affected by
adjustments resulting from the Acquisition, including adjustments for the
substantial increase in debt associated with the Acquisition, the allocation
of the purchase price and related amortization. As a result,

<PAGE>

the Post-Acquisition results of operations and financial position of the
Company are not comparable with the Pre-Acquisition results of operations and
financial position of the Company. However, in order to facilitate the
comparison of the results of operations of the Company for the year ended
December 31, 1993 with the year ended December 31, 1994, the Pre-Acquisition
(two months ended March 2, 1993) results of operations of Triple C have been
combined with the Post-Acquisition (ten months ended December 31, 1993)
results of operations of the Company.

The following table sets forth certain statement of operations data and
the related percentage of net sales (dollars in millions):

<TABLE>
<CAPTION>
COMBINED TEN
MONTHS
ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1993
AND TWO MONTHS --------------------------------------
ENDED MARCH 2,
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales ............ $125.9 100.0% $131.5 100.0% $158.2 100.0%
Cost of sales ........ 78.9 62.7 78.8 59.9 94.4 59.7
-------- -------- -------- -------- -------- --------
Gross profit ......... 47.0 37.3 52.7 40.1 63.8 40.3
Selling, general and
administrative
expenses ............ 29.5 23.4 29.4 22.4 32.4 20.4
-------- -------- -------- -------- -------- --------
Operating income .... 17.5 13.9 23.3 17.7 31.4 19.9
Interest expense, net 12.6 10.0 12.8 9.7 12.6 8.0
Minority interest and
miscellaneous
expense, net ........ 0.7 0.6 0.8 0.6 1.3 0.8
Provision for income
taxes ............... 1.4 1.1 2.0 1.5 3.6 2.3
-------- -------- -------- -------- -------- --------
Net income ........... $ 2.8 2.2% $ 7.7 5.9% $ 13.9 8.8%
======== ======== ======== ======== ======== ========
</TABLE>

(RESTUBBED TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
------------------------------------
JULY 1, 1995 JUNE 29, 1996
----------------- -----------------
<S> <C> <C> <C> <C>
Net sales ............ $71.4 100.0% $92.2 100.0%
Cost of sales ........ 42.1 59.0 53.4 57.9
------- -------- ------- --------
Gross profit ......... 29.3 41.0 38.8 42.1
Selling, general and
administrative
expenses ............ 15.3 21.4 17.6 19.1
------- -------- ------- --------
Operating income .... 14.0 19.6 21.2 23.0
Interest expense, net 6.6 9.3 5.3 5.7
Minority interest and
miscellaneous
expense, net ........ 0.5 0.7 0.6 0.7
Provision for income
taxes ............... 1.3 1.8 4.1 4.5
------- -------- ------- --------
Net income ........... $ 5.6 7.8% $11.2 12.1%
======= ======== ======= ========
</TABLE>

TWENTY-SIX WEEKS ENDED JUNE 29, 1996 COMPARED TO TWENTY-SIX WEEKS ENDED JULY
1, 1995

Net sales were $92.2 million and $71.4 million for the first twenty-six
weeks of 1996 and 1995, respectively, an increase of $20.8 million or 29.0%.
The increase in net sales was primarily due to higher sales of cigars. Cigar
sales increased primarily as a result of both a shift in sales mix to higher
priced cigars and price increases on certain cigar brands and, to a slightly
lesser extent, an increase in cigar units, particularly in the premium
market.

Gross profit was $38.8 million and $29.3 million for the first twenty-six
weeks of 1996 and 1995, respectively, an increase of $9.5 million or 32.4%.
The increase in gross profit for the first twenty-six weeks of 1996 was due
to the increase in sales, partially offset by increases in the costs of raw
materials. As a percentage of net sales, gross profit increased to 42.1% for
the first twenty-six weeks of 1996 from 41.0% for the first twenty-six weeks
of 1995, primarily due to fixed manufacturing costs spread over increased net
sales.

Selling, general and administrative ("SG&A") expenses were $17.6 million
and $15.3 million for the first twenty-six weeks of 1996 and 1995,
respectively, an increase of $2.3 million or 14.9% primarily due to increased
marketing and selling expenses. As a percentage of net sales, SG&A expenses
decreased to 19.1% for the first twenty-six weeks of 1996 from 21.4% for the
first twenty-six weeks of 1995. The decrease was primarily due to SG&A
expenses increasing at a lower rate relative to the increase in net sales.

Operating income was $21.2 million and $14.0 million for the first
twenty-six weeks of 1996 and 1995, respectively, an increase of $7.2 million
or 51.6%. As a percentage of net sales, operating income increased to 23.0%
for the first twenty-six weeks of 1996 from 19.6% for the first twenty-six
weeks of 1995, primarily due to higher gross profit margins and a decrease in
SG&A expenses as a percentage of net sales.

Interest expense, net, was $5.3 million and $6.6 million for the first
twenty-six weeks of 1996 and 1995, respectively. The decrease of $1.3 million
or 20.3% was primarily due to a lower amount of debt outstanding for the
first twenty-six weeks of 1996.

<PAGE>

The provision for income taxes as a percentage of income before income
taxes was 27.0% and 18.5% for the first twenty-six weeks of 1996 and 1995,
respectively. The increase in the effective rate is primarily due to an
increase in the provision for federal income taxes during the first
twenty-six weeks of 1996 partially offset by tax benefits associated with the
Company's operations in Puerto Rico. Income tax expense for the first
twenty-six weeks of 1996 reflect provisions for federal income taxes, Puerto
Rico tollgate taxes and taxes on Puerto Rico source income, together with
state and franchise taxes. Income tax expense for the first twenty-six weeks
of 1995 reflect provisions for federal income taxes, net of tax benefit
resulting from the utilization of net operating loss carryforwards, Puerto
Rico tollgate taxes and taxes on Puerto Rico source income, along with state
and franchise taxes.

As a result of the foregoing, the Company had net income of $11.2 million
in the first twenty-six weeks of 1996, compared to $5.6 million in the first
twenty-six weeks of 1995, an increase of $5.6 million or 100.0%.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994

Net sales were $158.2 million and $131.5 million in 1995 and 1994,
respectively, an increase of $26.7 million or 20.3%. The increase in net
sales was primarily due to higher sales of cigars. Cigar sales increased
primarily as a result of an increase in cigar unit volume, particularly in
the premium market, and, to a slightly lesser extent, a shift in sales mix to
higher priced cigars and price increases on certain cigar brands.

Gross profit was $63.8 million and $52.7 million in 1995 and 1994,
respectively, an increase of $11.1 million or 21.2%. The increase in gross
profit for 1995 was due to the increase in sales, partially offset by
increases in the costs of raw materials. As a percentage of net sales, gross
profit increased to 40.3% in 1995 from 40.1% in 1994, primarily due to fixed
manufacturing costs spread over increased net sales.

SG&A expenses were $32.4 million and $29.4 million in 1995 and 1994,
respectively, an increase of $3.0 million or 10.1%, primarily due to
increased marketing and selling expenses. As a percentage of net sales, SG&A
expenses decreased to 20.4% in 1995 from 22.4% in 1994. The decrease was
primarily due to SG&A expenses increasing at a lower rate relative to the
increase in net sales.

Operating income was $31.4 million and $23.3 million in 1995 and 1994,
respectively, an increase of $8.1 million or 35.1%. As a percentage of net
sales, operating income increased to 19.9% in 1995 from 17.7% in 1994,
primarily due to higher gross profit margins and a decrease in SG&A expenses
as a percentage of net sales.

Interest expense, net, was $12.6 million and $12.8 million in 1995 and
1994, respectively. The decrease of $0.2 million was primarily due to a lower
amount of debt outstanding in 1995, partially offset by higher interest
rates.

The provision for income taxes as a percentage of income before income
taxes was 20.5% and 20.6% in 1995 and 1994, respectively. Income tax expense
in 1995 and 1994 reflects provisions for federal income taxes, net of the tax
benefit resulting from the utilization of net operating loss carryforwards,
along with state income and franchise taxes. In addition, income tax expense
includes a provision for Puerto Rico tollgate taxes and taxes on Puerto Rico
source income.

As a result of the foregoing, the Company had net income of $13.9 million
in 1995, compared to $7.7 million in 1994, an increase of $6.2 million or
81.3%.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO COMBINED TEN MONTHS ENDED DECEMBER
31, 1993 AND TWO MONTHS ENDED MARCH 2, 1993

Net sales were $131.5 million and $125.9 million in 1994 and 1993,
respectively, an increase of $5.6 million or 4.4%. The increase in net sales
was primarily due to an increase in cigar sales partially offset by a
decrease in specialty product sales.

Gross profit was $52.7 million and $47.0 million in 1994 and 1993,
respectively, an increase of $5.7 million or 12.1%. The increase in gross
profit for 1994 was primarily due to a decrease of $3.0 million in the
amortization of the Acquisition purchase price allocated to inventory and
also to the increase in sales. As a percentage of net sales, gross profit
increased to 40.1% in 1994 from 37.3% in 1993.

<PAGE>

SG&A expenses were $29.4 million and $29.5 million in 1994 and 1993,
respectively, a decrease of $0.1 million or 0.4%. As a percentage of net
sales, SG&A expenses decreased to 22.4% in 1994 from 23.4% in 1993. The
decrease was primarily due to SG&A expenses increasing at a lower rate
relative to the increase in net sales.

Operating income was $23.3 million and $17.5 million in 1994 and 1993,
respectively, an increase of $5.8 million or 33.3%. As a percentage of net
sales, operating income increased to 17.7% in 1994 from 13.9% in 1993,
primarily due to higher gross profit margins and a decrease in SG&A expenses
as a percentage of net sales.

Interest expense, net, was $12.8 million and $12.6 million in 1994 and
1993, respectively, an increase of $0.2 million or 2.0%. The increase was
primarily due to increased interest expense resulting from the debt incurred
to finance the Acquisition.

The provision for income taxes as a percentage of income before income
taxes was 20.6% and 32.6% in 1994 and 1993, respectively. The decrease in the
effective rate was primarily due to the realization of a valuation allowance
related to deferred tax assets. Income tax expense in 1994 reflects
provisions for federal income taxes, net of the tax benefit resulting from
the utilization of net operating loss carryforward. In addition, income tax
expense in 1994 and 1993 reflects provisions for state income and franchise
taxes, Puerto Rico tollgate taxes as well as taxes on Puerto Rico source
income.

As a result of the foregoing, the Company had net income of $7.7 million
in 1994, compared to $2.8 million in 1993, an increase of $4.9 million or
174.2%.

LIQUIDITY AND CAPITAL RESOURCES

Net cash flows from operating activities were $19.8 million, $14.3 million
and $12.3 million for 1995, 1994 and 1993, respectively, and $10.7 million
and $6.3 million for the first twenty-six weeks of 1996 and 1995,
respectively. The increase of $4.4 million from the first twenty-six weeks of
1995 to the first twenty-six weeks of 1996 was primarily due to an increase
in net income partially offset by increased working capital requirements. The
increase of $5.5 million from 1994 to 1995 was due primarily to the increase
in net income for 1995. The increase of $2.0 million from 1993 to 1994 was
due primarily to the increase in net income and the decrease in working
capital during 1994.

Cash flows used in investing in 1995 and 1993 and the first twenty-six
weeks of 1996 and 1995 are primarily related to capital expenditures. In
1994, however, cash was provided by investing activities as a result of the
sale of a building in Puerto Rico for $5.8 million. Capital expenditures were
$1.0 million, $0.8 million and $1.0 million for the years ended December 31,
1995, 1994 and 1993, respectively, and $3.2 million and $0.4 million in the
first twenty-six weeks of 1996 and 1995, respectively. The capital
expenditures in 1993, 1994, and 1995 and the first twenty-six weeks of 1995
relate primarily to investments in cigar manufacturing equipment and are part
of the continual maintenance and upgrading of the Company's manufacturing
facilities. The capital expenditures in the first twenty-six weeks of 1996
primarily relate to investments in the Company's manufacturing facilities to
meet the increased demand for the Company's premium cigars. The Company's
premium cigar backorders have increased to approximately 12.0 million cigars
at June 29, 1996 from 4.3 million cigars at December 31, 1995. To increase
production to meet the increased demand, the Company is expanding its
existing manufacturing facilities in the Dominican Republic and Honduras and
is constructing, as part of a joint venture, new facilities in Jamaica. The
Company currently expects that its facility expansion projects in the
Dominican Republic and Honduras and the construction project in Jamaica will
be completed by the end of 1996. Capital expenditures for the remainder of
1996 are expected to be approximately $1.9 million. For the first twenty-six
weeks of 1996, $0.5 million of cash flows was also invested, as part of an
equity investment, in the Jamaica joint venture.

Cash flows used for financing activities in 1995, 1994 and 1993 were $19.4
million, $18.8 million and $14.2 million, respectively. Cash flows used for
financing activities in the first twenty-six weeks of 1996 and 1995 were $7.3
million and $6.1 million, respectively. In each period, such cash flows were
used to make net repayments of borrowings, primarily under a credit agreement
and in 1996 and 1995 to pay dividends of $7.2 million and $5.0 million,
respectively.

<PAGE>

In 1993 and 1994, Consolidated Cigar entered into two five-year interest
rate swap agreements in an aggregate notional amount of $85.0 million. Under
the terms of the agreements, Consolidated Cigar receives a fixed interest
rate averaging approximately 5.8% and pays a variable interest rate equal to
the six-month London interbank offered rate (LIBOR). Consolidated Cigar
entered into such agreements to take advantage of the differential between
long-term and short-term interest rates and effectively converted the
interest rate on $85.0 million of fixed-rate indebtedness under the Senior
Subordinated Notes to a variable rate. Had Consolidated Cigar terminated
these agreements, which the Company considers to be held for other than
trading purposes, on July 17, 1996, the Company would have realized a
combined loss of approximately $2.1 million. Future positive or negative cash
flows associated with these agreements will depend upon the trend of
short-term interest rates during the remaining life of the agreements. In the
event of non-performance of the counterparties at anytime during the
remaining lives of these agreements, which expire at December 1998 and
January 1999, the Company could lose some or all of any future positive cash
flows. However, the Company does not anticipate non-performance by such
counterparties. The Company does not currently anticipate terminating these
agreements; however, the Company will from time to time continue to review
its financing alternatives with respect to its fixed and floating rate debt.

The Company intends to fund working capital requirements, capital
expenditures and debt service requirements for the foreseeable future through
cash flows from operations and borrowings under the Credit Agreement. The
Company is dependent on the earnings and cash flows of, and dividends and
distributions from, Consolidated Cigar to pay its expenses and meet its
obligations, including principal payments on the Promissory Note, and to pay
any cash dividends or distributions on the Common Stock that may be
authorized by the Board of Directors of the Company. There can be no
assurance that Consolidated Cigar will generate sufficient earnings and cash
flows to pay dividends or distribute funds to the Company to enable the
Company to pay its expenses and meet its obligations, including principal
payments on the Promissory Note, or that applicable state law and contractual
restrictions, including negative covenants contained in the debt instruments
of the Company's subsidiaries, including Consolidated Cigar, then in effect,
will permit such dividends or distributions. The terms of each of the Credit
Agreement and the Senior Subordinated Notes currently restrict Consolidated
Cigar from paying dividends or making distributions to the Company, each
subject to certain limited exceptions. See "Risk Factors--Restrictions
Imposed by the Terms of the Company's Indebtedness; Consequences of Failure
to Comply."

The Credit Agreement consists of a $60.0 million reducing revolving credit
facility (the "Revolving Credit Facility") and a $20.0 million working
capital facility (the "Working Capital Facility"). The Revolving Credit
Facility and the Working Capital Facility have final maturities on April 3,
1999. The Revolving Credit Facility is subject to quarterly commitment
reductions of $2.5 million during each year of the term of such facility. The
Credit Agreement is secured by first priority liens on all of the material
assets of Consolidated Cigar and its domestic subsidiaries and pledges of the
capital stock of all of Consolidated Cigar's subsidiaries (with certain
exceptions for the capital stock of foreign subsidiaries). The Credit
Agreement is guaranteed by the Company, and by all of the domestic
subsidiaries of Consolidated Cigar. The guarantee by the Company is, and
following consummation of the Offerings will continue to be, secured by a
pledge of all of the shares of common stock of Consolidated Cigar owned by
the Company. The Credit Agreement also contains various restrictive covenants
including, among other things, limitations on the ability of Consolidated
Cigar and its subsidiaries to incur debt, create liens, pay dividends, sell
assets and make investments, acquisitions and capital expenditures. In
addition, the Credit Agreement requires Consolidated Cigar to maintain
specified financial ratios and satisfy certain tests, including maximum
leverage ratios and minimum interest coverage ratios. The Credit Agreement
also contains customary events of default. Consolidated Cigar recently
entered into an amendment to the Credit Agreement, which, among other things,
permits Consolidated Cigar to pay a cash dividend to the Company in the
amount of $5.6 million and to pay dividends and make distributions on terms
substantially similar to those contained in the Senior Subordinated Notes
Indenture. See "Description of Certain Indebtedness--Senior Subordinated
Notes." As of June 29, 1996, there was approximately $17.4 million unused and
available under the Credit Agreement, after taking into account approximately
$1.0 million utilized to support letters of credit. Simultaneously with or
prior to consummation of the Offerings, the Company intends to pay to Mafco
Consolidated Group a cash dividend of approximately $5.6 million funded by
borrowings under the Credit Agreement. As of June 29, 1996, after giving
effect to the borrowings under the Credit Agreement to fund such dividend,
there would have been approximately $11.8 million available under the Credit
Agreement. See "Description of Certain Indebtedness--Credit Agreement." The
Senior Subordinated Notes Indenture contains covenants that, among other
things, limit the issuance of

<PAGE>

additional debt and redeemable stock by Consolidated Cigar, the issuance of
debt and preferred stock by Consolidated Cigar's subsidiaries, the payment of
dividends on and redemption of capital stock of Consolidated Cigar and its
subsidiaries and the redemption of certain subordinated obligations of
Consolidated Cigar, the sale of assets and stock of Consolidated Cigar's
subsidiaries, transactions with affiliates and consolidations, mergers and
transfers of all or substantially all of Consolidated Cigar's assets. The
Senior Subordinated Notes Indenture also prohibits certain restrictions on
distributions from subsidiaries of Consolidated Cigar and contains customary
events of default. See "Description of Certain Indebtedness--Senior
Subordinated Notes."

Simultaneously with or prior to consummation of the Offerings, the Company
intends to issue the Promissory Note in an original principal amount of $70.0
million to Mafco Consolidated Group. The Promissory Note is expected to be
noninterest bearing, unsecured, subordinated to senior indebtedness (as
defined in the Promissory Note) and repayable in whole or in part at any time
or from time to time without premium or penalty. The Promissory Note is
payable in quarterly installments of $2.5 million, beginning March 31, 1997
with the final installment payable on December 31, 2003. The failure by the
Company to make any payment on the Promissory Note when due and the failure
by the Company to cure such non-payment during the 60-day period following
such due date would result in an event of default thereunder, and Mafco
Consolidated Group could declare all remaining amounts outstanding under the
Promissory Note to be immediately due and payable. See "Description of
Certain Indebtedness--Promissory Note."

INFLATION

The Company has historically been able to pass inflationary increases for
raw materials and other costs onto its customers through price increases and
anticipates that it will be able to do so in the future.

TAXATION AND REGULATION

EXCISE TAXES

Cigars and pipe tobacco have long been subject to federal, state and local
excise taxes, and such taxes have frequently been increased or proposed to be
increased, in some cases significantly, to fund various legislative
initiatives. In particular, there have been proposals by the federal
government in the past to reform health care through a national program to be
funded principally through increases in federal excise taxes on tobacco
products. Enactment of significant increases in or new federal, state or
local excise taxes would result in decreased unit sales of cigars and pipe
tobacco, which would have a material adverse effect on the Company's
business. See "Business--The Tobacco Industry--Excise Taxes."

POSSESSIONS TAX CREDIT

Prior to December 31, 1993, income earned by the Company from its Puerto
Rico operations was generally exempt from United States federal income tax.
Section 936 of the Code allows a "possessions tax credit" against United
States federal income tax for the amount of United States federal income tax
attributable to the Puerto Rico taxable earnings. As part of OBRA 93, the
possessions tax credit has been limited based upon a percentage of qualified
wages in Puerto Rico, plus certain amounts of depreciation. The Company
believes that it qualified for the possessions tax credit during 1995, 1994
and 1993. The Company expects that it will continue to qualify for the
possessions tax credit in such amounts to offset the majority of any United
States federal income tax related thereto, but eligibility and the amounts of
the credit will depend on the facts and circumstances of the Company's Puerto
Rico operations during each of the taxable years subsequent to 1995. Failure
to receive the Section 936 exemption or possessions tax credit attributable
to the Company's Puerto Rico operations would have a material adverse effect
on the Company.

On August 2, 1996, Congress passed the SBJPA Bill, which, if enacted into
law, would repeal Section 936 of the Code. Under the SBJPA Bill, the Section
936 "possessions tax credit" would be repealed, subject to special
grandfather rules for which the Company would be eligible, provided that the
Company does not add a "substantial new line of business." Under the
grandfather rules, for the Company's taxable years beginning after December
31, 2001 and before January 1, 2006, the Company's business income from its
Puerto Rico operations eligible for the possessions tax credit would, in
addition to the Current Limitation, generally be limited to its average
annual income from its Puerto Rico operations, adjusted for inflation,
computed during the Company's five most recent taxable years ending before
October 14, 1995 and excluding the highest and lowest years. For taxable
years after December 31, 2005, the possessions tax credit would be
eliminated. The repeal of Section 936 in

<PAGE>

the manner described above could have a material adverse effect on the
Company for taxable years beginning after December 31, 2001 and before
January 1, 2006, to the extent that the Company's annual income from its
Puerto Rico operations exceeds its average annual income from its Puerto Rico
operations (as computed in the manner described in the preceding sentence),
and for taxable years after December 31, 2005. See "Risk Factors--Substantial
Effects of Failure to Receive Possessions Tax Credit."

PUERTO RICO TAX EXEMPTION

Pursuant to a grant of industrial tax exemption which expires in 2002,
income earned by CIC from the manufacture of cigars in Puerto Rico enjoys a
90% income tax exemption from Puerto Rican income taxes. The remaining 10% of
such income is taxed at a maximum surtax rate of 45%, resulting in an
effective income tax rate for such income of approximately 4.5% under current
tax rates. Funds repatriated to the Company are subject to a maximum Puerto
Rican tollgate tax of 10%. Legislation enacted in Puerto Rico in 1993
included a provision for prepaying a portion of these tollgate taxes
effective for the 1993 fiscal year and subsequent periods. There can be no
assurance that the Puerto Rico tax exemption will not be limited or
eliminated in the future. Any significant limitation on or elimination of the
Puerto Rico tax exemption would have a material adverse effect on the
Company. See Note I of the Notes to Consolidated Financial Statements of the
Company included elsewhere in this Prospectus.

REGULATION

Cigar manufacturers, like other producers of tobacco products, are subject
to regulation in the United States at the federal, state and local levels.
The recent trend is toward increasing regulation of the tobacco industry.
There can be no assurance as to the ultimate content, timing or effect of any
additional regulation of tobacco products by any federal, state, local or
regulatory body, and there can be no assurance that any such legislation or
regulation would not have a material adverse effect on the Company's
business. See "Business--The Tobacco Industry--Regulation."

SEASONALITY

The Company's business is generally non-seasonal. However, slight
increases in cigar unit volume are experienced prior to Father's Day and the
Christmas season.

<PAGE>

BUSINESS

GENERAL

The Company is the largest manufacturer and marketer of cigars sold in the
United States in terms of dollar sales, with a 1995 market share of
approximately 23% according to the Company's estimates. The Company markets
its cigar products under a number of well-known brand names at all price
levels and in all segments of the growing cigar market, including premium
large cigars, mass market large cigars and mass market little cigars. The
Company attributes its leading market position to the following competitive
strengths: (i) well-known brand names, many of which are the leading brands
in their category; (ii) broad range of product offerings within both the
premium and mass market segments of the United States cigar market; (iii)
commitment to and reputation for manufacturing quality cigars; (iv) marketing
expertise and close attention to customer service; (v) efficient
manufacturing operations; and (vi) an experienced management team. The
Company is also a leading producer of pipe tobacco and is the largest
supplier of private label and branded generic pipe tobacco to mass market
retailers. In addition, the Company distributes a variety of pipe and cigar
smokers' accessories.

The Company's financial results reflect the strength of the cigar industry
and the Company's leadership position in that industry. In 1995, the Company
had net sales of $158.2 million, operating income of $31.4 million, and net
income of $13.9 million, representing increases of 20.3%, 35.1%, and 81.3%,
respectively, from 1994 results. For the first twenty-six weeks of 1996, the
Company had net sales of $92.2 million, operating income of $21.2 million,
and net income of $11.2 million, representing increases of 29.0%, 51.6%, and
100.0%, respectively, from the first twenty-six weeks of 1995. Further,
because of the high demand for the Company's cigars, especially its premium
cigars, the Company's backorders increased from 3.2 million cigars at
December 31, 1994 to 4.3 million cigars at December 31, 1995, and further
increased to 12.0 million cigars at June 29, 1996.

BUSINESS STRATEGY

The Company believes that its competitive strengths, together with the
following initiatives, will enable the Company to accelerate its growth,
increase its profitability, and enhance its market share:

CAPITALIZE ON GROWTH OPPORTUNITIES IN THE PREMIUM CIGAR SEGMENT

The Company intends to capitalize on the rapidly growing premium cigar
market by (i) increasing the Company's production capabilities through its
planned expansion of its existing facilities in the Dominican Republic and
Honduras and the construction of new facilities in Jamaica, (ii) improving
the market's awareness and recognition of its premium cigars through targeted
marketing programs and (iii) expanding its premium cigar product offerings
through the introduction of new super-premium cigars, such as H. UPMANN
CHAIRMAN'S RESERVE and PLAYBOY by DON DIEGO, and the extension of its
existing brands.

INCREASE PREMIUM CIGAR PRODUCTION. To increase production to meet existing
and expected growth in demand for its premium cigars, the Company is (i)
adding workers for second shifts at its manufacturing facilities in the
Dominican Republic, (ii) actively hiring experienced, skilled rollers and
bunchers, as well as training new rollers and bunchers, (iii) expanding its
manufacturing facilities in the Dominican Republic and Honduras and building
new manufacturing facilities in Jamaica, (iv) evaluating joint venture
opportunities in countries where it may be advantageous to produce premium
cigars and (v) continuing to improve manufacturing efficiencies.

<PAGE>

IMPROVE BRAND AWARENESS AND RECOGNITION. In order to further strengthen
and broaden the brand recognition of its premium cigars and to support new
product introductions, the Company is increasing its marketing and
advertising expenditures for its premium cigar products. This advertising is
designed to enhance the Company's image and to promote specific brands.

EXPAND PREMIUM CIGAR BRANDS. As part of its strategy to capitalize on the
significant growth in the premium cigar market and the increased demand for
its premium cigars, the Company plans to continue to introduce new
super-premium cigars. Recently, the Company introduced two super-premium
cigars, H. UPMANN CHAIRMAN'S RESERVE and PLAYBOY by DON DIEGO. In addition,
the Company plans to introduce, in December 1996, a limited edition,
collectible "Leroy Neiman Selection" cigar box featuring a reproduction of an
original painting by Mr. Neiman. The Company intends to extend its premium
cigar lines, including the MONTECRISTO and SANTA DAMIANA brands, through the
introduction of new sizes, shapes, packaging and other new features. As a
result of increased demand for cigars by women, the Company plans to
introduce into various of the Company's brands cigar shapes designed
specifically for women. The Company believes that such introductions and
extensions will enable it to increase sales by shifting its premium cigar mix
to more expensive cigars.

EXPAND MASS MARKET CIGAR AND PIPE PRODUCTS BUSINESSES

The Company will seek to expand further its mass market cigar business and
pipe tobacco products business by continuing to capitalize on its well-known
brand names and introducing new products that extend the Company's existing
product lines. The Company plans to expand its ANTONIO Y CLEOPATRA line by
introducing CHURCHILL MADURO, a full size machine made, natural wrapper cigar
with a band placed on each cigar resembling those on hand made cigars. In
addition, the Company intends to introduce new flavors, sizes, packaging and
other new features and improvements to its existing mass market cigar and
pipe tobacco products. Since 1989, the Company has introduced new cigar
brands that include DUTCH MASTERS COLLECTION, SUPRE SWEETS and RUSTLERS to
the mass market and extended its existing brands with new cigar products that
included ANTONIO Y CLEOPATRA MINIS, WHIFFS, CONNECTICUT SHADE WRAPPER and
BACKWOODS SWEET AROMATIC. The Company has also introduced new pipe tobacco
products that include MURIEL PIPE TOBACCO and BLACK'N NATURAL.

BROADEN MASS MARKET CIGAR DISTRIBUTION CHANNELS

As a result of its existing relationships with mass market retailers, the
Company is well-positioned to take advantage of the increase in consumer
demand for mass market cigars sold through that channel of distribution. The
Company distributes certain of its cigar and pipe tobacco products to, and
develops new private label brands for, mass market retailers, such as WONDER
BLEND for Kmart and other such products for Wal-Mart, Eckerd Drug stores, CVS
stores, Thrifty Drug Stores and numerous other retail chains. The Company
intends to broaden its existing relationships and actively develop new
relationships with other mass market retailers and is pursuing opportunities
in other distribution channels, including actively marketing its mass market
cigars to convenience stores to take advantage of the increase in consumer
demand for mass market cigars at such locations.

IMPROVE MANUFACTURING PROCESSES AND RAW MATERIAL PROCUREMENT

The Company continually seeks ways to improve further the efficiency of
its manufacturing operations in order to ensure quality and realize cost
savings. To ensure the quality of its raw materials while also maximizing
cost savings, the Company will (i) continue to develop long-term
relationships with tobacco suppliers, (ii) expand its commercial and
technical ties with local growers, (iii) obtain its tobacco raw materials
from a variety of suppliers and growers and (iv) take advantage of its large
purchasing requirements to negotiate favorable terms from suppliers.

PURSUE SELECTIVELY STRATEGIC ACQUISITIONS

The Company intends to pursue selectively strategic acquisitions in the
cigar and pipe tobacco products industry to expand its market share and
product lines and benefit from synergies. However, the

<PAGE>

Company's ability to acquire additional tobacco businesses and brands is
limited by, among other things, a dwindling number of potential acquisition
candidates resulting from the consolidation in the tobacco industry as well
as other economic, regulatory and industry factors. The Company also intends
to pursue joint venture opportunities to enhance its overall cigar and pipe
tobacco businesses.

MARKET OVERVIEW

In recent years, cigar smoking has gained popularity in the United States,
resulting in a significant increase in consumption and retail sales of
cigars, particularly for premium cigars. Management believes that this
increase in cigar consumption and retail sales is the result of a number of
factors, including: (i) the increase in the number of adults over the age of
50 (a demographic group believed to smoke more cigars than any other
demographic segment) and (ii) the emergence of an expanding base of younger
affluent adults who have recently started smoking cigars and who tend to
smoke premium cigars. The Company believes the increase in cigar smoking is
in large part attributable to a positive and improving image of cigar smoking
resulting from increased publicity, including the success of Cigar Aficionado
magazine, the increased visibility of use by celebrities and the
proliferation of "Cigar Smokers" dinners and other special events for cigar
smokers.

Consumption of cigars is currently increasing following a decline in
consumption at a compound annual rate of 3.6% from 1964 to 1993. Consumption
of cigars increased to 4.0 billion units in 1995 from 3.4 billion units in
1993, with substantial growth in premium cigars. Consumption of premium
cigars increased at a compound annual unit growth rate of 2.4% from 1976 to
1991, at a compound annual unit growth rate of 8.9% from 1991 to 1994 and at
a unit growth rate of 30.6% from 1994 to 163.9 million units in 1995. Growth
in the premium segment has continued to accelerate in 1996. The mass market
segment of the industry has also experienced increased consumption with a
compound annual unit growth rate of 7.2% from 1993 to 3.8 billion units in
1995. Retail sales of cigars, which generally declined from 1964 to 1987 and
grew modestly from 1987 to 1993, experienced significant growth from 1993 to
1995 with retail sales of cigars outpacing unit growth since 1991. This
growth in retail sales of cigars was primarily the result of a combination of
increased prices and a shift in the sales mix to more expensive cigars. Total
retail sales have increased at a compound annual growth rate of 9.3% from
1991 to $1.0 billion in 1995, while the corresponding compound annual unit
growth rate was only 3.6%. There can be no assurance that unit consumption
and retail sales of cigars will continue to increase in the future. See "Risk
Factors--Declining Market for Cigars through 1993" and "--Extensive and
Increasing Regulation of Tobacco Products."

The following table illustrates the trends in unit consumption and retail
sales experienced by the premium and mass market segments of the U.S. cigar
industry from 1991 to 1995.

U.S. CIGAR INDUSTRY(A)

<TABLE>
<CAPTION>
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Unit Consumption:
Premium(b) ...... 97.2 98.9 109.6 125.5 163.9
Mass market ..... 3,433.3 3,419.2 3,313.8 3,592.6 3,806.4
--------- --------- --------- --------- ---------
Total .......... 3,530.5 3,518.1 3,423.4 3,718.1 3,970.3
========= ========= ========= ========= =========
Retail Sales ..... $ 705.0 $ 715.0 $ 730.0 $ 860.0 $1,005.0
========= ========= ========= ========= =========
</TABLE>

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

(a) Source: Cigar Association of America, Inc. ("CAA").

(b) CAA's premium cigar data includes cigars imported from seven leading
supplier countries and does not include any premium cigars produced in
other countries, including the United States. CAA includes such U.S.
premium cigar production, which approximated 5.0 million units in 1995,
in mass market cigar data.

<PAGE>

PRODUCTS

MASS MARKET CIGARS

Mass market cigars are machine made and generally have a retail price
point of $1.00 or less per cigar. Mass market cigars use less expensive
tobacco than premium cigars. The Company uses a variety of techniques and
grades of tobacco to produce mass market cigars which compete at all the
price points in the mass cigar market. Mass market cigars include large
cigars (weighing three pounds per 1,000 cigars or more) and little cigars
(weighing less than three pounds per 1,000 cigars).

Mass market large cigars generally consist of "filler" tobacco that is
wrapped first with a "binder" and then with a "wrapper." The more expensive
mass market large cigars combine natural leaf wrapper and man-made binder
made from tobacco ingredients instead of natural binder, with filler threshed
into short, uniform pieces. In less expensive mass market large cigars,
man-made wrapper made primarily from tobacco ingredients replaces natural
tobacco leaf. The Company adds flavors and/or plastic tips to certain of its
popularly priced mass market large cigars. The Company's major mass market
brands in the middle price range include ANTONIO Y CLEOPATRA, DUTCH MASTERS,
EL PRODUCTO, BACKWOODS, SUPER VALUE and SUPRE SWEETS. The Company's MURIEL
brand is in the less expensive range.

Little cigars consist of filler tobacco wrapped only by a wrapper with a
filter tip. Little cigars are made on a high-speed machine with man-made
wrapper made from tobacco ingredients and no binder. Little cigars are
flavored and produced with a filter. Generally, little cigars are the lowest
priced segment of the mass market category. The Company's little cigar brands
include DUTCH TREATS, SUPER VALUE and SUPRE SWEETS.

The Company manufactures its own cigar boxes and man-made wrapper, filler
and binder and little cigar filters.

PREMIUM CIGARS

Premium cigars are generally hand made and primarily sell at retail price
points above $1.00 per cigar. The Company's premium cigars are primarily
long-filler, large cigars that have high quality natural leaf wrappers and
binders. The Company uses tobaccos of the best grades for its premium cigars.
Such tobaccos are combined according to brand-specified formulas to create
the filler of each cigar. In order to make hand made cigars, binder tobacco
is hand-wrapped around filler to create the "bunch" which is placed into a
mold. Then, "wrapper" tobacco is hand-wrapped around the bunch, creating a
premium cigar. In the Company's premium cigars, the wrapper, binder and
filler are natural tobacco leaf.

The Company's premium cigars include the well-known H. UPMANN,
MONTECRISTO, DON DIEGO, TE-AMO, SANTA DAMIANA, ROYAL JAMAICA, PRIMO DEL REY
and MONTECRUZ brands as well as other recognized brand names. The Company's
premium cigars are manufactured in its Dominican Republic and Honduras
facilities, except for TE-AMO, which is manufactured in Mexico and purchased
from a third party.

PIPE TOBACCO AND ACCESSORIES

In addition to its cigars, the Company manufactures pipe tobaccos for sale
under its own brand names, such as MIXTURE NO. 79 and CHINA BLACK, and for
sale in bulk to tobacconists, as well as private label brands for chain
stores and wholesale distributors. The Company also distributes smokers'
accessories, such as lighters, tobacco pouches, pipe cleaners and cigar
cutters.

The Company uses tobaccos of various types, grades, countries of origin
and crop years for its pipe tobacco, which are moisturized with steam and
then blended according to specific formulas ("primary blends"). The primary
blends are "cased" (sprayed or dipped) in liquids containing water,
humectant, sugars, licorice, cocoa, fruit juices or other flavorings in order
to keep the tobacco in pliable condition and to enhance its aroma and taste.
The cased tobaccos are cut and dried and then held in bins to allow the
casing and moisture to be distributed uniformly throughout the tobacco.
Thereafter, the tobacco blends are flavored with natural and artificial
flavors, herbs or spices, and blends are held for a short period of time
prior to packaging into pouches, bags, cans or other selling containers.

<PAGE>

SPECIALTY AND OTHER PRODUCTS

The Company's other products include various tobacco and non-tobacco
related products manufactured by the Company in order to utilize excess
manufacturing capacity at certain of its facilities and improve overall
efficiency. See "Certain Relationships and Related Transactions--Specialty
Products Division."

BACKORDERS

The increased demand for cigars, especially premium cigars, has caused the
Company's back orders of premium cigars to increase from 3.2 million cigars
at December 31, 1994 to 4.3 million cigars at December 31, 1995, and to
further increase to 12.0 million cigars at June 29, 1996. The Company's
ability to increase its production of premium cigars and decrease its
backorders is constrained by a shortage of experienced skilled laborers.
Although the Company is hiring and training new rollers and bunchers, the
training process averages up to one year and not all trainees are able to
successfully complete the Company's training program. The Company is also
building additional plant capacity to meet future growth in demand for its
premium cigars. Although the Company believes that these measures will enable
it to increase its production of premium cigars and that the backorders
outstanding at June 29, 1996, which approximated 12.0 million cigars, will be
filled during the second half of 1996, there can be no assurance that the
Company will be able to meet any future level of demand for its premium
cigars. There can be no assurance, however, that demand for the Company's
premium cigars will continue to grow in the future.

SALES AND MARKETING

The Company sells its cigar and pipe tobacco products throughout the
United States to over 2,500 customers, consisting of wholesale distributors,
direct buying chains, including drug store chains and mass market retailers,
and tobacconists. The Company employs a full-time in-house sales organization
to develop and service its sales to wholesalers, distributors, direct buying
chains and tobacconists. The Company's sales force is organized into two
sales units: a mass market division and a premium division. The Company
believes that the organization of its sales force into two divisions
positions it to maintain a high degree of focus on each of its principal
product categories. The mass market sales force calls on distributors and
retail and chain store accounts, including Kmart, Wal-Mart, Eckerd Drug
Stores, CVS stores and Thrifty Drug Stores, across the United States.
Approximately 89% of the Company's mass market cigar products are sold
through wholesale distributors while approximately 11% are sold to direct
buying chains or independent retailers that warehouse for themselves. The
premium cigar sales force calls directly on tobacconists and distributors.
The Company's sales force operates regionally and locally from home and car,
maintaining close familiarity with local customers. Most salesmen maintain a
small stock of inventory which is used primarily to replace local
distributors' old or damaged products and to display new product
introductions or promotions.

The Company supplies cigar merchandising fixtures to retailers at no cost
and believes that it is the primary supplier of such fixtures to the United
States retail trade. These fixtures help to maintain an attractive product
display and to increase shelf space available for the Company's products.

The Company advertises its mass market cigar products primarily through
coupons and other promotions distributed at point of sale and through direct
mail. The Company advertises its premium cigar products in magazines, such as
Cigar Aficionado, Playboy and The New York Times Sunday Magazine, as well as
in newspapers and on radio. In order to strengthen and broaden further the
brand

<PAGE>

recognition of its premium cigars and to maximize the business opportunities
created by the resurgence in popularity of and increased demand for premium
cigars, the Company has increased its marketing and advertising expenditures
in connection with its existing premium cigar brands. The increased
advertising and marketing expenditures are being used to support new product
introductions and increase awareness and recognition of the Company's premium
brands.

Sales of the Company's cigar products outside of the United States are
currently not material, although the Company has begun to strengthen its
presence in the international market for premium and mass market cigars,
particularly in Europe, the Middle East, Latin America and Asia, by
increasing management's focus on the Company's direct export business. The
Company has hired an experienced international marketing manager to
concentrate on foreign sales and promotions and currently has a total of 47
agents and distributors in Europe, the Middle East, Latin America and Asia.

TRADEMARKS

Trademarks and brand name recognition are important to the Company's
business. The Company generally owns the trademarks under which its products
are sold. The Company has registered its trademarks in the United States and
many other countries and will continue to do so as new trademarks are
developed or acquired. The Company does not hold or own the right to use
certain of its well-known trademarks and brand names in certain foreign
markets. The Company's ability to expand into such markets by capitalizing on
the strength of its brand names in the United States may be limited by its
right to use or acquire such brand names in those foreign markets. Unless
otherwise indicated, the Company owns the trademarks listed below:

MASS MARKET CIGAR TRADEMARKS

Antonio y Cleopatra Headline
Backwoods La Corona
Ben Franklin Muriel
Dutch Masters Roi-Tan
Dutch Treats Super Value
El Producto Supre Sweets
Harvester Wonder Blend
PREMIUM CIGAR TRADEMARKS
Cabanas Montecruz
Don Diego Por Larranaga(a)
Don Marcos Primo Del Rey
Don Miguel Santa Damiana
Flor de Canarias Santa Ynez
H. Upmann(a) Super Value
Henry Clay Te-Amo
Las Cabrillas Wonder Blend
Malaguena
Montecristo(a)
PIPE TOBACCO TRADEMARKS
China Black Super Value
Dutch Masters Three Star Royal
Kriswill Wonder Blend
Mixture No. 79

(a) Trademark is owned by Cuban Cigar Brands, N.V., a 51% owned subsidiary
of the Company.

While the Company does not believe that any single trademark is material
to the vitality of its business, it believes that its trademarks taken as a
whole are material to its business. Accordingly, the Company has taken, and
will continue to take, action to protect its interests in all such
trademarks.

<PAGE>

RAW MATERIALS

The Company has developed and is developing long-term relationships with
tobacco suppliers and is expanding its commercial and technical ties with
local growers to secure a variety of sources for raw materials, ensure the
quality of its raw materials and maximize cost savings.

The Company buys tobacco directly from a large number of suppliers in
Brazil, Cameroon, the Central African Republic, Costa Rica, Germany, Italy,
the Dominican Republic, Paraguay, the Philippines, Indonesia, the United
States, Ecuador, Honduras, Mexico and other countries and does not believe
that it is dependent on any single source for tobacco. The Company has
recently experienced shortages in certain types of its natural wrapper and
premium cigar tobaccos due to the increase in demand for high quality natural
wrapped cigars. These shortages have caused the price of natural wrapper and
premium cigar tobaccos to increase. The shortages of the tobacco have not yet
impacted cigar manufacturing or the Company's profitability, but could if the
Company is unable to purchase additional quantities of certain tobaccos in
the future or is unable to pass increases for such raw materials onto its
customers. See "Risk Factors--Social, Political and Economic Risks Associated
with Foreign Operations and International Trade" and "--Backorders."

COMPETITION

The Company is the largest manufacturer and marketer of cigars in the
United States in terms of dollar sales and believes that it is the only
participant in the cigar industry that is a major competitor in all
subcategories of cigars at all price levels. The other three significant
competitors in the cigar market in terms of market share, in order of size,
are General Cigar Co. Inc., a division of Culbro Corporation,
Havatampa/Phillies Cigar Corporation, a privately held corporation, and
Swisher International, also a privately held corporation. In addition,
Tobacco Exporters International Limited (a subsidiary of Rothmans
International) is a significant competitor in the little cigar market. The
Company believes that its leading market position in the cigar industry is
due to its strong, well-known brand names, broad range of product offerings
within both the mass market and premium segments of the United States cigar
market, commitment to and reputation for manufacturing quality cigars,
marketing expertise, close attention to customer service, efficient
manufacturing operations and an experienced management team.

Through its Allied Tobacco Division in Richmond, Virginia, the Company
competes in all areas of the U.S. pipe tobacco business including branded,
private label and bulk tobacco. The Company believes it is the fourth largest
manufacturer in the U.S. of pipe tobacco, in terms of dollar sales, and its
largest competitors in order of size are Lane Limited, John Middleton Inc.
and UST Inc.

THE TOBACCO INDUSTRY

REGULATION

Cigar manufacturers, like other producers of tobacco products, are subject
to regulation in the United States at federal, state and local levels.
Together with changing public attitudes towards smoking, a constant expansion
of smoking regulations since the early 1970's has been a major cause of the
overall decline in consumption of tobacco products. Moreover, the trend is
toward increasing regulation of the tobacco industry.

Federal law has required health warnings on cigarettes since 1965 and has
recently required states, in order to receive full funding for federal
substance abuse block grants, to establish a minimum age of 18 years for the
sale of tobacco products together with an appropriate enforcement program. In
recent years, a variety of bills relating to tobacco issues have been
introduced in the Congress of the United States, including bills that would
have (i) prohibited the advertising and promotion of all tobacco products
and/or restricted or eliminated the deductibility of such advertising
expenses; (ii) increased labeling requirements on tobacco products to
include, among other things, addiction warnings and lists of additives and
toxins; (iii) modified federal preemption of state laws to allow state courts
to hold tobacco manufacturers liable under common law or state statutes; (iv)
shifted regulatory control of tobacco

<PAGE>

products and advertisements from the FTC to the FDA; (v) increased tobacco
excise taxes; and required tobacco companies to pay for health care costs
incurred by the federal government in connection with tobacco related
diseases. Hearings have been held on certain of these proposals; however, to
date, none of such proposals have been passed by Congress. Future enactment
of such proposals or similar bills may have an adverse effect on the sales or
operations of the Company. In addition, various federal agencies, including
the FDA, have recently proposed to regulate the tobacco products industry.
The regulation of the tobacco industry by the FDA could have a material
adverse effect on the Company's business. As described more fully below,
under the FDA proposal the FDA would, among other things, regulate the
marketing, promotion and advertisement of certain tobacco products.

In addition, the majority of states restrict or prohibit smoking in
certain public places and restrict the sale of tobacco products to minors.
Local legislative and regulatory bodies have also increasingly moved to
curtail smoking by prohibiting smoking in certain buildings or areas or by
requiring designated "smoking" areas. In a few states, legislation has been
introduced, but has not yet passed, which would require all little cigars
sold in those states to be "fire-safe" (i.e., cigars which extinguish
themselves if not continuously smoked). Passage of this type of legislation
could have a material adverse effect on the Company's little cigar sales
because of the technological difficulties in complying with such legislation.
There is currently an effort by the U.S. Consumer Product Safety Commission
to establish such standards for cigarettes. The enabling legislation, as
originally proposed, included little cigars; however, little cigars were
deleted due to the lack of information on fires caused by these products.

Although federal law has required health warnings on cigarettes since
1965, there is no federal law requiring that cigars or pipe tobacco carry
such warnings. However, California requires "clear and reasonable" warnings
to consumers who are exposed to chemicals known to the state to cause cancer
or reproductive toxicity, including tobacco smoke and several of its
constituent chemicals. Violations of this law, known as Proposition 65, can
result in a civil penalty not to exceed $2,500 per day for each violation.
Although similar legislation has been introduced in other states, no action
has been taken.

During 1988, the Company and 25 manufacturers of tobacco products entered
into a settlement of legal proceedings filed against them pursuant to
Proposition 65. Under the terms of the settlement, the Company and such other
defendants agreed to label retail packages or containers of cigars, pipe
tobaccos and other smoking tobaccos other than cigarettes manufactured or
imported for sale in California with a specified warning label. To guarantee
compliance with the California requirements, to eliminate errors in
distribution and to maintain the efficiencies of the manufacturing process,
the Company and most of its competitors have begun using the label on all of
their tobacco products shipped to customers in all states, except for a few
premium cigar customers. Massachusetts recently enacted legislation requiring
manufacturers of cigarettes, chewing tobacco and snuff to provide the state
annually with a list of the additives (in descending order of weight) and the
nicotine yield ratings of each brand they produce, which information will,
subject to certain conditions, be made publicly available.

The U.S. Environmental Protection Agency (the "EPA") published a report in
January 1993 with respect to the respiratory health effects of passive
smoking, which concluded that widespread exposure to environmental tobacco
smoke presents a serious and substantial public health concern. In June 1993,
Philip Morris Companies Inc. and five other representatives of the tobacco
manufacturing and distribution industries filed suit against the EPA seeking
a declaration that the EPA does not have the statutory authority to regulate
environmental tobacco smoke, and that, in view of the available scientific
evidence and the EPA's failure to follow its own guidelines in making the
determination, the EPA's final risk assessment was arbitrary and capricious.
The court ruled in May 1995 that plaintiffs have standing to pursue this
action. Whatever the outcome of this litigation, issuance of the report,
which is based primarily on studies of passive cigarette smokers, may lead to
further legislation designed to protect non-smokers.

In February 1994, the FDA, in a letter to an anti-smoking group, claimed
that it may be possible for the FDA to regulate cigarettes under the drug
provisions of the Food, Drug, and Cosmetic Act (the "FDC Act"). The FDA's
claim is based upon allegations that manufacturers may intend that their
products contain nicotine to satisfy an alleged addiction on the part of some
of their customers. The letter indicated

<PAGE>

that regulation of cigarettes under the FDC Act could ultimately result in
the removal from the market of products containing nicotine at levels that
cause or satisfy addiction. In March 1994, the FDA began investigating
whether cigarettes should be regulated as a drug. In July 1995, the FDA
announced that it has concluded for the first time that nicotine is a drug
that should be regulated and proposed to regulate smokeless tobacco and
cigarettes. The FDA definition of cigarettes would include little cigars.
Both the CAA and the Bureau of Alcohol, Tobacco and Firearms oppose the
inclusion of little cigars. The FDA recently published a proposal to regulate
tobacco products, including the marketing, promotion and advertisement of
such products. The initial comment period on the proposal ran through January
2, 1996 with an additional comment period ending on April 19, 1996. The FDA
has indicated that it expects to adopt a final rule during the fall of 1996.
A number of tobacco companies and other entities have filed legal proceedings
challenging the FDA's assertion of jurisdiction to regulate tobacco products.
One tobacco company has proposed, as an alternative to FDA regulation of
tobacco products, a more limited set of restrictions on cigarette sales and
advertising aimed at curbing youth smoking. The Company is unable to predict
the effect on its business and profitability in the event that the FDA
proposal is adopted but, if such proposal is adopted, it could have a
material adverse effect on the operations of the Company.

LITIGATION

Historically, the cigar industry has not experienced material
health-related litigation and, to date, the Company has not been the subject
of any material health-related litigation. However, the cigarette and
smokeless tobacco industries have experienced and are experiencing
significant health-related litigation involving tobacco and health issues.

Litigation against the cigarette industry has historically been brought by
individual cigarette smokers. In 1992, the United States Supreme Court in
Cippollone v. Liggett Group, Inc. ruled that federal legislation relating to
cigarette labeling requirements preempts claims based on failure to warn
consumers about the health hazards of cigarette smoking, but does not preempt
claims based on express warranty, misrepresentation, fraud or conspiracy. To
date, individual cigarette smokers' claims against the cigarette industry
have been generally unsuccessful; however, on August 9, 1996, a Florida jury
in Carter v. Brown & Williamson Tobacco Corporation determined that a
cigarette manufacturer was negligent in the production and sale of its
cigarettes and sold a product that was unreasonably dangerous and defective,
awarding the plaintiffs a total of $750,000 in compensatory damages. The
verdict is expected to be appealed.

Current tobacco litigation generally falls within one of three categories:
class actions, individual actions (which have been filed mainly in the State
of Florida), or actions brought by individual states generally to recover
Medicaid costs allegedly attributable to tobacco-related illnesses. The
pending actions allege a broad range of injuries resulting from the use of
tobacco products or exposure to tobacco smoke and seek various remedies,
including compensatory and, in some cases, punitive damages together with
certain types of equitable relief such as the establishment of medical
monitoring funds and restitution. The major tobacco companies are vigorously
defending these actions, including by challenging the authority of state
attorney generals to bring Medicaid actions attributable to tobacco-related
illnesses and, in some states, bringing preemptive lawsuits to enjoin the
state attorney general from instituting litigation.

In May 1996, the Fifth Circuit Court of Appeals in Castano v. American
Tobacco, et al. reversed a Louisiana district court's certification of a
nationwide class consisting essentially of nicotine dependent cigarette
smokers. Notwithstanding the dismissal, new class actions asserting claims
similar to those in Castano have recently been filed in certain states. To
date, two pending class actions against major cigarette manufacturers have
been certified. The first case is limited to Florida citizens allegedly
injured by their addiction to cigarettes; the other is limited to flight
attendants allegedly injured through exposure to secondhand smoke.

There can be no assurance that there will not be an increase in
health-related litigation involving tobacco and health issues against the
cigarette industry or similar litigation in the future against cigar
manufacturers. The costs to the Company of defending prolonged litigation and
any settlement or

<PAGE>

successful prosecution of any material health-related litigation against
manufacturers of cigars, cigarettes or smokeless tobacco or suppliers to the
tobacco industry could have a material adverse effect on the Company's
business.

EXCISE TAXES

From 1977 until December 31, 1990, cigars were subject to a federal excise
tax of 8.5% of wholesale list price, capped at $20.00 per thousand cigars.
Effective January 1, 1991, the federal excise tax rate on large cigars
(weighing more than three pounds per thousand cigars) increased to 10.625%,
capped at $25.00 per thousand cigars, and increased to 12.75%, capped at
$30.00 per thousand cigars, effective January 1, 1993. However, the base on
which the federal excise tax is calculated was lowered effective January 1,
1991 to the manufacturer's selling price, net of the federal excise tax and
certain other exclusions. In addition, the federal excise tax on pipe tobacco
increased from $0.45 per pound to $0.5625 per pound effective January 1,
1991. The excise tax on pipe tobacco increased effective January 1, 1993, to
$0.675 per pound. The federal excise tax on little cigars (weighing less than
three pounds per thousand cigars) increased from $0.75 per thousand cigars to
$0.9375 per thousand cigars effective January 1, 1991. The excise tax on
little cigars increased to $1.125 per thousand cigars effective January 1,
1993. The increase in the federal excise tax rate in 1991 and again in 1993
did not have a material adverse effect on the Company's product sales.

In the past, there have been various proposals by the federal government
to fund legislative initiatives through increases in federal excise taxes on
tobacco products. In 1993, the Clinton Administration proposed a significant
increase in excise taxes on cigars, pipe tobacco, cigarettes and other
tobacco products to fund the Clinton Administration's health care reform
program. The Company believes that the volume of cigars and pipe tobacco sold
would have been dramatically reduced if excise taxes were enacted as
originally proposed as part of the Clinton Administration's health care
reform program. Future enactment of significant increases in excise taxes,
such as those initially proposed by the Clinton Administration or other
proposals not linked specifically to health care reform, would have a
material adverse effect on the business of the Company. The Company is unable
to predict the likelihood of the passage or the enactment of future increases
in tobacco excise taxes.

Tobacco products are also subject to certain state and local taxes.
Deficit concerns at the state level continue to exert pressure to increase
tobacco taxes. Since 1964, the number of states that tax cigars has risen
from six to forty-one. Since 1988, the following eleven states have enacted
excise taxes on cigars, where no prior tax had been in effect: California,
Connecticut, New Jersey, New York, North Carolina, Ohio, South Dakota, Rhode
Island, Illinois, Missouri and Michigan. State excise taxes generally range
from 2% to 75% of the wholesale purchase price. In addition, the following
nine states have increased existing taxes on large cigars since 1988:
Arizona, Arkansas, Idaho, Iowa, Maine, New York, North Dakota, Vermont and
Washington. The following five states tax little cigars at the same rates as
cigarettes: California, Connecticut, Iowa, Oregon and Tennessee. Except for
Tennessee, all of these states have increased their cigarette taxes since
1988.

State cigar excise taxes are not subject to caps similar to the federal
cigar excise tax. From time to time, the imposition of state and local taxes
has had some impact on sales regionally. The enactment of new state excise
taxes and the increase in existing state excise taxes are likely to have an
adverse effect on regional sales as cigar consumption generally declines.

EMPLOYEES

The Company employs approximately 4,000 persons. The Company believes that
its relations with its employees are satisfactory. Union contracts, expiring
at various dates, cover salesmen in New York and hourly employees in McAdoo,
Pennsylvania and Richmond, Virginia. The McAdoo agreement with the Teamsters
Local 401 expires in December 1998 and the Richmond agreement with the
Warehouse Employees Local 322 expires in January 1999. The Company has
experienced no work stoppages in the last ten years.

<PAGE>

PROPERTIES

As of June 29, 1996, the principal properties owned or leased by the
Company for use in its business included:

<TABLE>
<CAPTION>
APPROXIMATE
OWNED OR FLOOR SPACE
LOCATION PRINCIPAL USE LEASED (SQ. FT.)
- ----------------------------- ----------------------------------- ---------- -------------
<S> <C> <C> <C>
Cayey, Puerto Rico Mass market cigar manufacturing Owned 280,000
Comerio, Puerto Rico Tobacco processing Owned 151,000
Danli, Honduras Premium cigar manufacturing Owned 25,000
Fort Lauderdale, Florida Administrative office Leased 19,000
La Romana, Dominican Republic Premium cigar manufacturing Leased 133,000
Maypen, Jamaica(a) Premium cigar manufacturing Owned 25,000
McAdoo, Pennsylvania Mass market cigar manufacturing and Owned 369,000
distribution
Richmond, Virginia Pipe tobacco manufacturing and Leased 90,000
</TABLE>
premium cigar distribution

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

(a) Facility is under construction and is expected to be completed by the
end of 1996.

The Company believes that its existing and planned manufacturing
facilities and distribution centers are adequate for the current level of the
Company's operations. The Company believes that additional facilities, if
necessary, would be readily available on a timely basis on commercially
reasonable terms. Further, the Company believes that the leased space that
houses its existing manufacturing and distribution facilities is not unique
and could be readily replaced, if necessary, at the end of the terms of its
existing leases on commercially reasonable terms. The Company's leases have
expiration dates ranging from 1999 to 2000, many of which are renewable at
the option of the Company.

All of the principal properties owned by the Company are subject to first
priority liens granted in favor of the lenders under the Credit Agreement.
See "Description of Certain Indebtedness--Credit Agreement."

The Company has excess capacity in all of its cigar and pipe tobacco
plants. The Company's ability to take advantage of such excess capacity by
increasing shift operations and the production of premium and mass market
cigars may be limited by the availability of trained laborers and shortages
in the supply of tobacco. See "--Backorders."

The Company believes that its facilities are well maintained and in
substantial compliance with environmental laws and regulations.

LEGAL PROCEEDINGS

The Company is a party to lawsuits incidental to its business. The Company
believes that the outcome of such pending legal proceedings in the aggregate
will not have a material adverse effect on the Company's consolidated
financial position. The Company carries general liability insurance but has
no health hazard policy, which, to the best of the Company's knowledge, is
consistent with industry practice. There can be no assurance, however, that
the Company will not experience material health-related litigation in the
future.

<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

THE COMPANY

The following table sets forth certain information (ages as of July 30,
1996) concerning the Directors and executive officers of the Company. All
Directors serve terms of one year or until the election of their respective
successors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman . . . . . .... 53 Chairman of the Board of Directors and a Director
Howard Gittis . . . . . . . ..... 62 Vice Chairman of the Board of Directors and a Director
Donald G. Drapkin . . . . . . . . 48 Director
Theo W. Folz . . . . . . . . .... 52 President, Chief Executive Officer and a Director
Barry F. Schwartz . . . . . ..... 47 Executive Vice President and General Counsel
Gary R. Ellis . . . . . . . ..... 43 Senior Vice President, Chief Financial Officer and
Treasurer
James M. Parnofiello ............. 47 Vice President and Controller
</TABLE>

CONSOLIDATED CIGAR

The following table sets forth certain information (ages as of July 30,
1996) concerning the Directors and executive officers of Consolidated Cigar.
All Directors serve terms of one year or until the election of their
respective successors.

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
Ronald O. Perelman ............... 53 Chairman of the Board of Directors and a Director
Howard Gittis .................... 62 Vice Chairman of the Board of Directors and a Director
Donald G. Drapkin . . . . . . . . 48 Director
Theo W. Folz ..................... 52 President, Chief Executive Officer and a Director
Richard L. DiMeola ............... 61 Executive Vice President and Chief Operating Officer
Gary R. Ellis .................... 43 Senior Vice President and Chief Financial Officer,
Secretary and Treasurer
James L. Colucci ................. 50 Senior Vice President --Sales and Marketing
George F. Gershel, Jr. ........... 66 Senior Vice President --Tobacco
Denis F. McQuillen ............... 50 Senior Vice President --Manufacturing
James M. Parnofiello ............. 47 Vice President and Controller
</TABLE>

Mr. Perelman has been Chairman of the Board and a Director of the Company
and Consolidated Cigar since 1993. Mr. Perelman has been Chairman of the
Board and Chief Executive Officer of Mafco Holdings and MacAndrews & Forbes
Holdings Inc. ("MacAndrews & Forbes Holdings" and, together with Mafco
Holdings, "MacAndrews & Forbes") and various of its affiliates since 1980.
Mr. Perelman also is Chairman of the Board of Andrews Group Incorporated
("Andrews Group"), Mafco Consolidated Group, Mafco Worldwide Corporation
("Mafco Worldwide"), Marvel Entertainment Group, Inc. ("Marvel"), Meridian
Sports Incorporated ("Meridian Sports"), New World Communications Group
Incorporated ("New World"), New World Television Incorporated ("New World
Television"), Power Control Technologies Inc. ("PCT") and Toy Biz, Inc. ("Toy
Biz") and is the Chairman of the Executive Committee of the Boards of
Directors of Revlon Consumer Products Corporation ("Revlon Products") and
Revlon, Inc. ("Revlon"). Mr. Perelman is a Director of the following
corporations which file reports pursuant to the Exchange Act: Andrews Group,
The Coleman Company, Inc. ("Coleman"), Coleman Holdings Inc. ("Coleman
Holdings"), Coleman Worldwide Corporation ("Coleman Worldwide"), First
Nationwide Bank, a Federal Savings Bank ("First Nationwide Bank"), First
Nationwide Holdings, Inc. ("First Nationwide"), First Nationwide (Parent)
Holdings Inc. ("First Nationwide Parent"), Mafco Consolidated Group, Mafco
Worldwide, Marvel, Marvel Holdings Inc. ("Marvel Holdings"), Marvel (Parent)
Holdings Inc. ("Marvel

<PAGE>

Parent"), Marvel III Holdings Inc. ("Marvel III"), Meridian Sports, New
World, New World Television, NWCG Holdings Corporation ("NWCG Holdings"),
PCT, Revlon, Revlon Products, Revlon Worldwide Corporation ("Revlon
Worldwide") and Toy Biz.

Mr. Gittis has been a Director of the Company and Consolidated Cigar since
1993 and Vice Chairman of the Board of Directors of the Company and
Consolidated Cigar since July 1996. Mr. Gittis has been Vice Chairman and a
Director of MacAndrews & Forbes and various of its affiliates since 1985. Mr.
Gittis is a Director of the following corporations which file reports
pursuant to the Exchange Act: Andrews Group, First Nationwide, First
Nationwide Bank, First Nationwide Parent, Jones Apparel Group, Inc., Loral &
Space Communications Ltd., Mafco Consolidated Group, Mafco Worldwide,
Rutherford-Moran Oil Corporation, New World, New World Television, NWCG
Holdings, PCT, Revlon, Revlon Products and Revlon Worldwide.

Mr. Drapkin has been a Director of the Company and Consolidated Cigar
since August 1996. Mr. Drapkin has been Vice Chairman and a Director of
MacAndrews & Forbes Holdings and various of its affiliates since March 1987.
Mr. Drapkin was a partner in the law firm of Skadden, Arps, Slate, Meagher &
Flom for more than five years prior to March 1987. Mr. Drapkin is a Director
of the following corporations which file reports pursuant to the Exchange
Act: Andrews Group, Coleman, Coleman Holdings, Coleman Worldwide, Marvel,
Marvel Holdings, Marvel Parent, Marvel III, Revlon, Revlon Products, Revlon
Worldwide, The Claridge Hotel and Casino Corporation, Toy Biz and VIMRx
Pharmaceuticals Inc.

Mr. Folz has been President, Chief Executive Officer and a Director of the
Company and Consolidated Cigar since June 1996 and August 1984, respectively.
Mr. Folz has been a Director and President and Chief Executive Officer of the
Tobacco Products Group of Mafco Consolidated Group since June 1995 and Vice
Chairman, Director and Chief Executive Officer of Mafco Worldwide since
January 1995. From January 1987 until June 1988, Mr. Folz was also Chairman
and Chief Executive Officer of Brooks Drug, Inc. ("Brooks"). From June 1982
through July 1984, Mr. Folz was President, a Director and part owner of
Phillies Cigar Company and a Director of Havatampa, Inc.

Mr. Schwartz has been Executive Vice President and General Counsel of the
Company since January 1993. He has been Executive Vice President and General
Counsel of MacAndrews & Forbes and various of its affiliates since 1993. Mr.
Schwartz was Senior Vice President of MacAndrews & Forbes from 1989 to 1993.

Mr. Ellis has been Senior Vice President, Chief Financial Officer and
Treasurer of the Company since June 1996 and Senior Vice President, Chief
Financial Officer, Secretary and Treasurer of Consolidated Cigar since
November 1988. Mr. Ellis has been Senior Vice President and Chief Financial
Officer of the Tobacco Products Group of Mafco Consolidated Group since June
1995. From 1987 to 1988 Mr. Ellis was the Executive Vice President, Chief
Financial Officer and Treasurer of Brooks and from 1985 to 1987 he was the
Vice President and Controller of MacAndrews & Forbes Holdings.

Mr. Parnofiello has been Vice President and Controller of the Company
since June 1996. Mr. Parnofiello has been Vice President of Consolidated
Cigar since January 1996 and Controller of Consolidated Cigar since September
1989. Mr. Parnofiello was Assistant Controller of Consolidated Cigar from
March 1989 to September 1989.

Mr. DiMeola has been Executive Vice President and Chief Operating Officer
of Consolidated Cigar since November 1988. Mr. DiMeola joined Consolidated
Cigar in January 1985 as President of the Premium Products Division.

Mr. Colucci has been Senior Vice President of Sales and Marketing of
Consolidated Cigar since November 1988. Mr. Colucci was Vice President of
Sales and Marketing of Consolidated Cigar from 1985 to 1988. From 1982 to
1985, Mr. Colucci was Senior Vice President and General Manager of Design
Wire, Inc. (a company selling wire racks to supermarkets). Prior to 1985, for
eight years, Mr. Colucci held various sales and marketing positions with
Consolidated Cigar.

Mr. Gershel has been Senior Vice President --Tobacco of Consolidated Cigar
since June 1977. Mr. Gershel joined Consolidated Cigar in 1961.

<PAGE>

Mr. McQuillen has been Senior Vice President of Manufacturing of
Consolidated Cigar since December 1985. Mr. McQuillen joined Consolidated
Cigar in 1981.

After consummation of the Offerings, the Company intends to seek the
election of at least two Directors who are neither officers nor employees of
Mafco Consolidated Group or any of its affiliates.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors has established an Executive Committee and a
Compensation Committee and expects to establish an Audit Committee.

The Executive Committee has all powers and rights necessary to exercise
the full authority of the Board of Directors in the management of the
business and affairs of the Company when necessary in between meetings of the
Board of Directors. The members of the Executive Committee are Messrs.
Perelman, Gittis and Folz.

The Compensation Committee has the responsibility of reviewing the
performance of the executive officers of the Company and recommending to the
Board of Directors of the Company annual salary and bonus amounts for all
officers of the Company. The Compensation Committee shall consist of at least
two Directors who are "outside directors" within the meaning of Section
162(m) of the Code. The members of the Compensation Committee are Messrs.
Gittis and Drapkin.

The Audit Committee will have the responsibility of reviewing and
supervising the financial controls of the Company. The Audit Committee's
responsibilities will include (i) making recommendations to the Board of
Directors of the Company with respect to the Company's financial statements
and the appointment of independent auditors, (ii) reviewing significant audit
and accounting policies and practices of the Company, (iii) meeting with the
Company's independent public accountants concerning, among other things, the
scope of audits and reports and (iv) reviewing the performance of overall
accounting and financial controls of the Company. The Audit Committee will
consist of two Directors who are neither officers nor employees of the
Company.

COMPENSATION OF DIRECTORS

Directors who do not receive compensation as officers or employees of the
Company or any of its affiliates will be paid an annual retainer fee of
$25,000 and a fee of $1,000 for each meeting of the Board of Directors or any
committee thereof they attend, plus reasonable out-of-pocket expenses.

<PAGE>

EXECUTIVE COMPENSATION

The Company, as a holding company with no business operations of its own,
conducts its business through Consolidated Cigar. The executive officers of
the Company receive no compensation for their services to the Company.
Accordingly, the following table presents certain information concerning
compensation paid or accrued for services rendered to Consolidated Cigar in
all capacities during the three years ended December 31, 1995 for the Chief
Executive Officer and the four other most highly compensated executive
officers of Consolidated Cigar whose total annual salary and bonus in the
last fiscal year exceeded $100,000 (collectively, the "Named Executive
Officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------
ALL OTHER
YEAR SALARY BONUS COMPENSATION(A)
------ ---------- ---------- ---------------
<S> <C> <C> <C> <C>
Theo W. Folz
President and Chief Executive Officer 1995 $700,000 $700,000 $3,000
1994 675,000 400,000 3,000
1993 638,000 300,000 4,717
Richard L. DiMeola
Executive Vice President and Chief
Operating Officer ..................... 1995 $260,000 $260,000 $3,000
1994 245,000 120,000 3,000
1993 232,500 90,000 4,717
Gary R. Ellis
Senior Vice President, Chief Financial
Officer, Secretary and Treasurer ..... 1995 $200,000 $200,000 $3,000
1994 185,000 100,000 3,000
1993 175,000 75,000 4,717
James L. Colucci
Senior Vice President of Sales and
Marketing ............................. 1995 $200,000 $200,000 $3,000
1994 185,000 100,000 3,000
1993 175,000 70,000 4,717
George F. Gershel, Jr.
Senior Vice President Tobacco ......... 1995 $230,000 $170,000 $3,000
1994 214,000 75,000 3,000
1993 203,000 57,500 4,717
</TABLE>

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

(a) Represents the Company's matching contribution to the employee's
account under Consolidated Cigar's 401(k) plan.

EMPLOYMENT AGREEMENTS

Mafco Consolidated Group entered into an employment agreement (the "MCG
Employment Agreement") with Mr. Folz with respect to an employment term
commencing on July 1, 1995 and ending on December 31, 1998 unless sooner
terminated by Mr. Folz's death, disability, gross neglect or willful
misconduct (in which case Mafco Consolidated Group may terminate Mr. Folz's
employment immediately upon written notice), or breach by Mafco Consolidated
Group of the agreement. In the event of Mr. Folz's death or disability, a
pro-rated performance bonus and 60% of his base compensation is to be paid to
Mr. Folz or his beneficiaries, as the case may be, for the longer of the
remaining term of the agreement or twelve months. In the event that Mafco
Consolidated Group breaches the MCG Employment Agreement, Mr. Folz is
entitled to terminate his employment under the agreement; in that event, a
pro-rated performance bonus and the remaining base compensation specified in
the agreement is to be

<PAGE>

paid to Mr. Folz offset by any other compensation Mr. Folz receives during
this period, and Mr. Folz is entitled to group life, health and pension plan
coverage, for the longer of the remaining term of the agreement or twelve
months. During the year ended December 31, 1995, Mr. Folz served the Company
and Consolidated Cigar pursuant to the MCG Employment Agreement. The
allocation of base compensation for the year ended December 31, 1995, to
Consolidated Cigar, was $700,000. The MCG Employment Agreement also provides
for a performance bonus under the Tobacco Products Group Performance Bonus
Plan based on achievement of certain EBITDA targets. As of August 1, 1996,
for the services to be rendered by Mr. Folz to the Company and Consolidated
Cigar, Consolidated Cigar has assumed the obligations of Mafco Consolidated
Group under the MCG Employment Agreement with respect to a portion of the
base salary and employee benefits to be provided to Mr. Folz under the MCG
Employment Agreement and, simultaneously therewith, has entered into a new
employment agreement with Mr. Folz memorializing such assumption and expiring
on December 31, 1999. Consolidated Cigar has assumed 70% of the obligations
of Mafco Consolidated Group under the MCG Employment Agreement with respect
to any payments or benefits payable upon Mr. Folz's severance, death or
disability. The base salary which will be paid by Consolidated Cigar to Mr.
Folz will be $770,000 for the year ended December 31, 1996. In addition, Mr.
Folz will be eligible to participate in the Consolidated Cigar Performance
Bonus Plan, subject to stockholder approval of the plan. See "--Consolidated
Cigar Performance Bonus Plan."

Consolidated Cigar entered into an employment agreement with each of
Messrs. DiMeola, Ellis, Colucci and Gershel, each of which commenced on July
1, 1995 and expires on December 31, 1998, unless sooner terminated by the
employee's death, disability (in which case Consolidated Cigar may elect to
terminate the employment agreement), gross neglect or willful misconduct (in
which case Consolidated Cigar may terminate the employment agreement
immediately upon written notice), the employee's willful and material failure
to perform his contractual obligations or by Consolidated Cigar's material
breach of the agreement. In the event of Consolidated Cigar's breach, the
employee is entitled to terminate the employment agreement; in that event,
full compensation and benefits are to be paid to the employee for the longer
of the remaining term of the employment agreement or twelve months, offset by
any other compensation the employee receives during this period. The
employment agreements provide for initial annual base salaries of $260,000
for Mr. DiMeola, $200,000 for each of Messrs. Ellis and Colucci and $230,000
for Mr. Gershel. The employment agreements also provide for performance bonus
payments, based on achievement by Consolidated Cigar of certain EBITDA
targets. Following consummation of the Offerings, such bonus payments shall
be made pursuant to the Consolidated Cigar Performance Bonus Plan, subject to
stockholder approval of the plan. On or about the date of consummation of the
Offerings, Consolidated Cigar will enter into new employment agreements with
each of Messrs. DiMeola, Ellis, Colucci and Gershel having terms
substantially similar to their existing employment agreements, but which will
expire on December 31, 1999.

CONSOLIDATED CIGAR PERFORMANCE BONUS PLAN

The Company has adopted, subject to stockholder approval, the Consolidated
Cigar Performance Bonus Plan. Compensation payable under the Consolidated
Cigar Performance Bonus Plan is intended to qualify as "performance based
compensation" under Section 162(m) of the Code. Senior executive officers of
the Company and Consolidated Cigar, selected for participation in the
Consolidated Cigar Performance Bonus Plan by the Compensation Committee, will
be entitled to participate in the Consolidated Cigar Performance Bonus Plan.
The performance goals under the Consolidated Cigar Performance Bonus Plan
will be based on achievement of EBITDA targets established by the
Compensation Committee with respect to each calendar year. The payments under
the Consolidated Cigar Performance Bonus Plan to any one individual during
any calendar year may not exceed $2,000,000.

DEFINED BENEFIT PLAN

Domestic (United States) salaried employees of Consolidated Cigar are
eligible to participate in the Consolidated Cigar Domestic Salaried
Employees' Defined Benefit Plan, a defined benefit pension plan (the "Plan"),
which, effective as of the end of 1995, was merged into a defined benefit
pension plan

<PAGE>

sponsored by a subsidiary of Mafco Consolidated Group. The merger of the Plan
did not change the level of pension benefits provided to Consolidated Cigar
employees. Plan benefits are a factor of service (up to a maximum of 33
years) with Consolidated Cigar and "Average Final Compensation" (average
monthly compensation during the 60 consecutive months in which compensation
was highest in the ten years prior to termination of employment).
Compensation includes total wages, overtime, bonuses and 401(k) salary
deferrals, and excludes fringe benefits and employer contributions to other
deferred compensation plans. Benefits in the Plan are reduced by (i) any
annuity purchased under the Gulf Western Consumer Products Salaries Employees
Retirement Plan (the "Gulf & Western Plan") as of March 8, 1983 and (ii) the
actuarial equivalent of any Consolidated Cigar-provided benefits received
under Consolidated Cigar's 401(k) plan.

Consolidated Cigar established a benefit restoration plan effective
January 1, 1994 (the "BRP") which was designed to restore retirement benefits
to those employees whose eligible pension earnings were limited to $150,000
under regulations recently enacted by the Internal Revenue Service. The BRP
is not funded and all other vesting and payment rules follow the Plan.

The monthly payment under the Plan and BRP, expressed as a straight life
annuity, before adjustment for social security beginning at age 65 and before
reduction for benefits payable under the Gulf & Western Plan or the Company's
401(k) plan, are as follows:

<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
REMUNERATION 5 10 15 20 25 33
------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 50,000 $ 315 $ 631 $ 946 $1,262 $1,575 $ 2,083
75,000 473 946 1,419 1,893 2,365 3,124
100,000 631 1,262 1,893 2,525 3,156 4,160
250,000 1,578 3,156 4,734 6,313 7,891 10,416
</TABLE>

Benefits under the Plan are subject to the maximum limitations imposed by
federal law on pension benefits. The annual limitation in 1995 was $120,000
or $10,000 per month, based on a maximum annual compensation of $150,000. The
maximum annual remuneration considered for purposes of the BRP will be
increased to $500,000 in 1996.

As of December 31, 1995, the credited years of service under the Plan were
12 years for Mr. Folz, 11 years for Mr. DiMeola, seven years for Mr. Ellis,
19 years for Mr. Colucci and 35 years for Mr. Gershel.

STOCK PLAN

The Company has adopted and Mafco Consolidated Group, as the sole
stockholder of the Company, has approved the Stock Plan. A maximum of
3,000,000 shares of Class A Common Stock are reserved for issuance under the
Stock Plan, subject to equitable adjustment upon the occurrence of any stock
dividend, stock split, recapitalization, combination, exchange of shares,
merger, consolidation, liquidation, split-up, spin-off or other similar
change in capitalization, any distribution to common stockholders, including
a rights offering, other than cash dividends, or similar corporate
transaction. Unless otherwise determined by the Board of Directors, the Stock
Plan will be administered by the Compensation Committee. Grants of stock
options, stock appreciation rights, restricted stock and unrestricted stock
(collectively, "Awards") may be made under the Stock Plan (subject to
specified aggregate limits and annual individual limits on certain types of
awards) to selected employees, consultants and Directors of the Company and
its present or future affiliates.

The Compensation Committee and the Board of Directors each have authority,
subject to the terms of the Stock Plan, to determine, among other things,
when and to whom to grant Awards under the plan, the number of shares to be
covered by Awards, the types and terms of options, stock appreciation rights,
restricted stock and unrestricted stock granted and the exercise price of the
stock options and stock appreciation rights and to prescribe, amend and
rescind the rules and regulations relating to the Stock Plan.

Stock options granted under the Stock Plan may be either "incentive stock
options," as such term is defined in Section 422 of the Code, or nonqualified
stock options. The exercise price of nonqualified stock options may be above,
at or below the fair market value per share of Class A Common Stock on

<PAGE>

the date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of the Company's outstanding
capital stock (a "10% Stockholder"), the exercise price of any incentive
stock option granted must equal at least 110% of the fair market value of the
Class A Common Stock on the date of the grant. The exercise price of
incentive stock options for all other employees must be at or above the fair
market value per share of Class A Common Stock on the date of the grant. The
maximum term of any incentive stock option granted under the Stock Plan is
ten years (five years in the case of an incentive stock option granted to a
10% Stockholder).

Stock appreciation rights may be granted alone or in tandem with stock
options under the Stock Plan. A stock appreciation right is a right to be
paid an amount equal to the excess of the fair market value of a share of
Class A Common Stock on the date the stock appreciation right is exercised
over either the grant price determined by the Compensation Committee or the
Board of Directors (in the case of a free standing stock appreciation right)
or the exercise price of the related stock option (in the case of a tandem
stock appreciation right), with payment to be made in cash, Class A Common
Stock, or both, as specified in the agreement granting the Award (the "Award
Agreement") or as otherwise determined by the Compensation Committee or the
Board of Directors.

No person may be granted stock options or stock appreciation rights under
the Stock Plan in any calendar year representing an aggregate of more than
750,000 shares of Class A Common Stock. Stock options and stock appreciation
rights shall be exercisable at the times and upon the conditions that the
Compensation Committee or the Board of Directors may determine, as reflected
in the applicable Award Agreement.

Restricted or unrestricted stock awards, either alone or in tandem with
other awards, may be granted under the Stock Plan. Vesting of restricted
stock awards may be conditioned upon the completion of a specified period of
service, the attainment of specific performance goals or such other factors
as the Compensation Committee or the Board of Directors may determine. During
the restricted period, the grantee may not transfer, assign or otherwise
encumber or dispose of the restricted stock, except as permitted by the
Compensation Committee or the Board of Directors. During the restricted
period, the grantee will have the right to vote the restricted stock and to
receive any dividends if and to the extent so provided in the applicable
Award Agreement.

Unless otherwise provided in a grantee's Award Agreement, (i) upon
termination of such grantee's employment or service as a consultant or a
Director due to death or disability, any unvested options, stock appreciation
rights and restricted stock shall vest in full, all options and stock
appreciation rights shall remain exercisable for a period of one year and
shall terminate thereafter and (ii) upon termination of such grantee's
employment or service as a consultant or a Director for any reason other than
death or disability, any unvested options, stock appreciation rights and
restricted stock shall terminate and all vested options and stock
appreciation rights shall remain exercisable for a period of three months and
shall terminate thereafter.

Unless otherwise provided in a grantee's Award Agreement, awards granted
under the Stock Plan may be transferred by the grantee only by will or by the
laws of descent and distribution, and may be exercised only by the grantee
during his or her lifetime. The Stock Plan may, at any time and from time to
time, be altered, amended, suspended or terminated by the Board of Directors,
in whole or in part; provided that no amendment which requires stockholder
approval in order for the Stock Plan to continue to comply with Section
162(m) of the Code will be effective unless such amendment has received the
requisite approval by the Company's stockholders. In addition, no amendment
may be made which adversely affects any of the rights of the grantee under
any Award theretofore granted without such grantee's consent. No awards will
be made under the Stock Plan following the tenth anniversary of the date of
adoption of the Stock Plan.

NEW PLAN BENEFITS

The Company will make initial grants under the Stock Plan of nonqualified
options having terms of ten years to purchase Class A Common Stock at an
exercise price equal to the initial public offering price, of which options
to purchase 250,000, 55,000, 50,000, 50,000, 50,000, 455,000 and 650,000
shares of

<PAGE>

Class A Common Stock will be granted to Messrs. Folz, DiMeola, Ellis, Colucci
and Gershel, all executive officers as a group, and all employees as a group,
respectively. These initial grants will vest one-third each year beginning on
the first anniversary of the date of grant and will become 100% vested on the
third anniversary of the date of grant. In addition, the Company will grant
options to purchase 500,000 shares of Class A Common Stock to Mr. Perelman on
the same terms as the options granted to executive officers of the Company.
See "Certain Relationships and Related Transactions--Relationship with Mafco
Consolidated Group." In addition, on June 25, 1996, Mafco Consolidated Group
granted to Mr. Folz options to purchase 100,000 shares of its common stock at
an exercise price of $22.00 per share. These options have a term of ten years
and vest 25% upon the date of grant and 25% on each of the first, second and
third anniversaries of the date of grant.

FEDERAL INCOME TAX CONSEQUENCES

The following sets forth a summary of federal income tax consequences of
participation in the Stock Plan.

A holder of an incentive stock option will generally realize taxable
income only upon disposition of shares acquired upon exercise of the
incentive stock option rather than upon the grant or timely exercise of the
incentive stock option. Tax consequences of an untimely exercise of an
incentive stock option are determined in accordance with the rules applicable
to nonqualified stock options. The amount by which the fair market value of
the Class A Common Stock on the exercise date of an incentive stock option
exceeds the exercise price generally will increase the option holder's
"alternative minimum taxable income."

A holder of a nonqualified stock option generally will not be subject to
tax at the time of the grant of the nonqualified stock option. Rather, upon
exercise of a nonqualified stock option, the optionee generally will include
in ordinary income the excess, if any, of the fair market value of the Class
A Common Stock purchased over the exercise price. The Company generally will
be entitled to a deduction at the time and in the amount that the holder
recognizes ordinary income.

The grant of stock appreciation rights has no federal income tax
consequences at the time of grant. Upon the exercise of stock appreciation
rights, the amount received is generally taxable as ordinary income, and the
Company is entitled to a corresponding deduction.

Generally, the grant of restricted stock has no federal income tax
consequences at the time of grant. Rather, at the time the shares are no
longer subject to a substantial risk of forfeiture (as defined in the Code)
the holder will recognize income in an amount equal to the fair market value
of such shares. A holder may, however, elect to be taxed at the time of the
grant in accordance with Section 83(b) of the Code. The Company generally
will be entitled to a deduction at the time and in the amount that the holder
recognizes ordinary income.

The foregoing constitutes a brief summary of the principal federal income
tax consequences of the transactions based on current federal income tax
laws. This summary is not intended to be exhaustive and does not describe
state, local or foreign tax consequences. Participants in the Stock Plan are
urged to consult their own tax advisors with respect to the consequences of
their participation in the Stock Plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company and Consolidated Cigar did not have a Compensation Committee
during 1995. Officers' compensation during 1995 was determined by the
Compensation Committee of Mafco Consolidated Group, comprised of Mr. Howard
Gittis, Ms. Jewel S. Lafontant-Mankarious and Mr. Robert Sargent Shriver III.

<PAGE>

OWNERSHIP OF COMMON STOCK

Ronald O. Perelman, 35 East 62nd Street, New York, New York 10021, through
Mafco Holdings' ownership of Mafco Consolidated Group, beneficially owns 85%
of the outstanding shares of Common Stock of the Company. Immediately after
consummation of the Offerings, Mafco Consolidated Group will beneficially own
all of the 24,600,000 outstanding shares of Class B Common Stock, which
represent approximately 97.9% of the combined voting power of the outstanding
shares of Common Stock (approximately 97.6% if the Underwriters'
over-allotment option is exercised in full). Accordingly, Mr. Perelman will
beneficially own approximately 83.3% of the combined voting power of the
outstanding shares of Common Stock immediately following consummation of the
Offerings. No other director, executive officer or other person beneficially
owns any shares of Common Stock.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATIONSHIP WITH MAFCO CONSOLIDATED GROUP AND MAFCO HOLDINGS

As a result of Mafco Consolidated Group's stock ownership, the Company's
Board of Directors is, and is expected to continue to be, comprised entirely
of designees of Mafco Consolidated Group, and Mafco Consolidated Group is,
and is expected to continue to be, able to direct and control the policies of
the Company and its subsidiaries, including with respect to mergers, sales of
assets and similar transactions.

Mafco Consolidated Group is 85% owned through Mafco Holdings by Ronald O.
Perelman, who is Chairman of the Board of Directors of the Company. Mafco
Holdings is a diversified holding company with interests in several
industries. Through its 85% ownership of the Company, Mafco Holdings is
engaged in the manufacture and distribution of cigars and pipe tobacco. Mafco
Holdings is engaged in the cosmetics and skin care, fragrance and personal
care products business through its 83% ownership of Revlon. Mafco Holdings
owns 83% of Coleman, which is engaged in the manufacture and marketing of
recreational outdoor products, portable generators, power-washing equipment,
spas and hot tubs and 65% of Meridian Sports, a manufacturer and marketer of
specialized boats and water sports equipment. Marvel, a youth entertainment
company, is 80% owned by Mafco Holdings. Mafco Holdings is also engaged in
the television broadcast and programming production business through its
approximate 42% ownership of New World Communications, and, through its 85%
ownership of Mafco Worldwide, in the processing and distribution of licorice
and other flavoring agents. Mafco Holdings also is in the financial services
business through its 80% ownership of First Nationwide. The principal
executive offices of Mafco Holdings are located at 35 East 62nd Street, New
York, New York 10021.

The Company is insured under policies maintained by Mafco Holdings, and
the Company reimburses Mafco Holdings for the portion of the cost of such
policies attributable to the Company. Management of the Company believes that
such cost is lower than would be incurred were such entities to be separately
insured. In addition, the Company reimburses Mafco Holdings for the Company's
allocable portion of certain costs such as legal, accounting and other
professional fees and other services and related expenses.

Immediately prior to the consummation of the Offerings, the Company will
grant options to purchase 500,000 shares of Class A Common Stock to Mr.
Perelman as compensation for services rendered and to be rendered to the
Company by Mr. Perelman in his capacity as Chairman of the Board of
Directors. Such options will be granted pursuant to the Stock Plan on the
same terms as the initial grants made by the Board of Directors to the
Company's executive officers. See "Management--Stock Plan--New Plan
Benefits."

TAX SHARING AGREEMENT

The Company, Consolidated Cigar and Mafco Consolidated Group have been,
for federal income tax purposes, members of an affiliated group of
corporations of which Mafco Holdings is the common parent (the "Tax Group").
As a result of such affiliation, the Company, Consolidated Cigar, and Mafco

<PAGE>

Consolidated Group have been included in the consolidated federal income tax
returns and, to the extent permitted by applicable law, included in combined
state or local income tax returns filed on behalf of the Tax Group. Pursuant
to a tax sharing agreement among the Company, Consolidated Cigar, and Mafco
Consolidated Group and a tax sharing agreement between Mafco Consolidated
Group and Mafco Holdings (collectively, the "Tax Sharing Agreements"), the
Company has been required to pay to Mafco Consolidated Group with respect to
each taxable year an amount equal to the consolidated federal and state and
local income taxes that would have been incurred by the Company had it not
been included in the consolidated federal and any combined state or local
income tax returns filed by the Tax Group. The net amounts paid by
Consolidated Cigar, through the Company, during the years ended December 31,
1993, 1994 and 1995 were approximately $0, $383,710 and $448,408,
respectively. After consummation of the Offerings, the Company, Consolidated
Cigar and Mafco Consolidated Group will continue to be included in the Tax
Group.

Under existing federal income tax regulations the Company, Consolidated
Cigar and Mafco Consolidated Group are liable for the consolidated federal
income taxes of the Tax Group for any taxable year in which they are a member
of the Tax Group. Pursuant to the Tax Sharing Agreements, Mafco Holdings has
agreed to indemnify the Company and Consolidated Cigar for any such federal
income tax liability.

PROMISSORY NOTE

Simultaneously with or prior to the consummation of the Offerings, the
Company intends to issue the Promissory Note in an original principal amount
of $70 million to Mafco Consolidated Group. The Promissory Note is expected
to be noninterest bearing, unsecured, subordinated to senior indebtedness (as
defined in the Promissory Note) and repayable in whole or in part at any time
or from time to time without premium or penalty. The Promissory Note is
payable in quarterly installments of $2.5 million beginning March 31, 1997
with the final installment payable on December 31, 2003. See "Description of
Certain Indebtedness."

PURCHASE OF LICORICE EXTRACT

The Company purchases all of the licorice extract used as flavoring and
moistening agents in its manufacturing processes from Mafco Worldwide, an
indirect wholly owned subsidiary of Mafco Consolidated Group. During the
years ended December 31, 1993, 1994 and 1995, the Company purchased
approximately $210,000, $265,000 and $269,000 of licorice extract from Mafco
Worldwide. The Company believes that the licorice extract purchased from
Mafco Worldwide was purchased on terms no less favorable to the Company than
those obtainable in an arm's length transaction with an independent third
party.

SPECIALTY PRODUCTS DIVISION

The Company's Specialty Products Division assembles lipstick containers
for Revlon Products, an 83% owned subsidiary of Mafco Holdings. Revlon
Products purchased lipstick containers from the Company for approximately
$481,000, $763,000 and $874,000 for the years ended December 31, 1993, 1994
and 1995, respectively. The Company believes that the terms of such
arrangements with Revlon Products were no less favorable to the Company than
those obtainable in an arm's length transaction with an independent third
party.

REGISTRATION RIGHTS AGREEMENT

Prior to the consummation of the Offerings, the Company and Mafco
Consolidated Group will enter into the Registration Rights Agreement pursuant
to which Mafco Consolidated Group and certain transferees of Common Stock
held by Mafco Consolidated Group (the "Holders") will have the right to
require the Company to register (a "Demand Registration") all or part of the
Class A Common Stock issuable upon conversion of the Class B Common Stock
owned by such Holders under the Securities Act of 1933, as amended (the
"Securities Act"); provided that the Company (i) will not be obligated to
effect

<PAGE>

a Demand Registration within 180 days of the closing date of the Offerings
unless Goldman, Sachs & Co. has given its consent and (ii) may postpone
giving effect to a Demand Registration for up to a period of 30 days if the
Company believes such registration might have a material adverse effect on
any plan or proposal by the Company with respect to any financing,
acquisition, recapitalization, reorganization or other material transaction,
or the Company is in possession of material non-public information that, if
publicly disclosed, could result in a material disruption of a major
corporate development or transaction then pending or in progress or in other
material adverse consequences to the Company. Mafco Consolidated Group has
advised the Company that it does not have any present intention to request
any such registration. In addition, the Holders will have the right to
participate in registrations by the Company of its Class A Common Stock (a
"Piggyback Registration"). The Company will pay any expenses incurred in
connection with any Demand Registration or Piggyback Registration, except for
underwriting discounts, commissions and certain expenses attributable to the
shares of Class A Common Stock sold by such Holders.

DESCRIPTION OF CAPITAL STOCK

Immediately prior to the closing of the Offerings, the Company will amend
its Certificate of Incorporation to change its authorized capital stock to
300,000,000 shares of Class A Common Stock, 250,000,000 shares of Class B
Common Stock and 20,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"), and to convert each outstanding share of its
current common stock into 24,600 shares of its newly created Class B Common
Stock (totaling 24,600,000 shares of Class B Common Stock). The following
summary description of the capital stock of the Company is qualified in its
entirety by reference to the form of Amended and Restated Certificate of
Incorporation of the Company (the "Amended Certificate") and Amended and
Restated By-Laws of the Company (the "By-Laws"), a copy of each of which is
filed as an exhibit to the Registration Statement (as defined herein) of
which this Prospectus forms a part.

CLASS A COMMON STOCK AND CLASS B COMMON STOCK

The Amended Certificate provides for two classes of common stock, Class A
Common Stock and Class B Common Stock, the two classes of which are
substantially identical, except for disparity in voting power. See "Risk
Factors--Control by Mafco Consolidated Group."

Each share of Class A Common Stock entitles the holder of record to one
vote and each share of Class B Common Stock entitles the holder of record to
ten votes at each annual or special meeting of stockholders, in the case of
any written consent of stockholders, and for all other purposes. The holders
of Class A Common Stock and Class B Common Stock will vote as a single class
on all matters submitted to a vote of the stockholders, except as otherwise
provided by law. Neither the holders of Class A Common Stock nor the holders
of Class B Common Stock have cumulative voting or preemptive rights. The
Company may, as a condition to counting the votes cast by any holder of Class
B Common Stock at any annual or special meeting of stockholders, in the case
of any written consent of stockholders, or for any other purpose, require the
furnishing of such affidavits or other proof as it may reasonably request to
establish that the Class B Common Stock held by such holder has not, by
virtue of the provisions of the Amended Certificate, been converted into
Class A Common Stock.

The holders of the Class A Common Stock and Class B Common Stock will be
entitled to receive dividends and other distributions as may be declared
thereon by the Board of Directors of the Company out of assets or funds of
the Company legally available therefor, subject to the rights of the holders
of any series of Preferred Stock and any other provision of the Amended
Certificate. The Amended Certificate provides that if at any time a dividend
or other distribution in cash or other property is paid on Class A Common
Stock or Class B Common Stock, a like dividend or other distribution in cash
or other property will also be paid on Class B Common Stock or Class A Common
Stock, as the case may be, in an equal amount of shares. The Amended
Certificate provides that if shares of Class A Common Stock are paid on Class
A Common Stock and shares of Class B Common Stock are paid on Class B Common
Stock, in an equal amount per share of Class A Common Stock and Class B
Common Stock, such payment will be deemed to be a like dividend or other
distribution. In the case of any split, subdivision, combination or
reclassification of Class A Common Stock or Class B Common Stock, the shares
of Class B Common

<PAGE>

Stock or Class A Common Stock, as the case may be, will also be split,
subdivided, combined or reclassified so that the number of shares of Class A
Common Stock and Class B Common Stock outstanding immediately following such
split, subdivision, combination or reclassification will bear the same
relationship to each other as that which existed immediately prior thereto.

In the event of any liquidation, dissolution or winding up of the Company,
the holders of Class A Common Stock and the holders of Class B Common Stock
will be entitled to receive the assets and funds of the Company available for
distribution after payments to creditors and to the holders of any Preferred
Stock of the Company that may at the time be outstanding, in proportion to
the number of shares held by them, respectively, without regard to class.

In the event of any corporate merger, consolidation, purchase or
acquisition of property or stock, or other reorganization in which any
consideration is to be received by the holders of Class A Common Stock or the
holders of Class B Common Stock, the holders of Class A Common Stock and the
holders of Class B Common Stock will receive the same consideration on a per
share basis; except that, if such consideration shall consist in any part of
voting securities (or of options or warrants to purchase, or of securities
convertible into or exchangeable for, voting securities), the holders of
Class B Common Stock may receive, on a per share basis, voting securities
with ten times the number of votes per share as those voting securities to be
received by the holders of Class A Common Stock (or options or warrants to
purchase, or securities convertible into or exchangeable for, voting
securities with ten times the number of votes per share as those voting
securities issuable upon exercise of the options or warrants, or into which
the convertible or exchangeable securities may be converted or exchanged,
received by the holders of Class A Common Stock).

The Amended Certificate provides that no person holding record or
beneficial ownership of shares of Class B Common Stock (a "Class B Holder")
may transfer (as defined in the Amended Certificate), and the Company will
not register the transfer of, such shares of Class B Common Stock, except to
a Permitted Transferee. A Permitted Transferee generally means an affiliate
of the Class B Holder. In certain circumstances set forth in the Amended
Certificate, the change in ownership or control of a record or beneficial
holder of Class B Common Stock will also result in the conversion of such
holder's Class B Common Stock into Class A Common Stock. The Amended
Certificate also provides that the Company will not register the transfer of
any shares of Class B Common Stock unless the transferee and the transferor
of such Class B Common Stock have furnished such affidavits and other proof
as the Company may reasonably request to establish that such proposed
transferee is a Permitted Transferee. In addition, upon any purported
transfer of shares of Class B Common Stock not permitted under the Amended
Certificate, all shares of Class B Common Stock purported to be so
transferred will be deemed to be converted into shares of Class A Common
Stock, and stock certificates formerly representing such shares of Class B
Common Stock will thereupon and thereafter be deemed to represent such number
of shares of Class A Common Stock as equals the number of shares of Class A
Common Stock into which such shares of Class B Common Stock could be
converted pursuant to the terms of the Amended Certificate.

In the event that the number of shares of Class B Common Stock and Class A
Common Stock held by the Class B Holders and their Permitted Transferees
issued and outstanding at any time shall constitute less than ten percent of
the total combined number of shares of Class A Common Stock and Class B
Common Stock of the Company, all shares of Class B Common Stock then issued
and outstanding will be deemed to be converted into shares of Class A Common
Stock, and stock certificates formerly representing such shares of Class B
Common Stock will thereupon and thereafter be deemed to represent such number
of shares of Class A Common Stock as equals the number of shares of Class A
Common Stock into which such shares of Class B Common Stock could be
converted pursuant to the terms of the Amended Certificate.

The Class A Common Stock has been approved for listing on the NYSE under
the symbol "CIG," subject to official notice of issuance.

PREFERRED STOCK

The Board of Directors, without further stockholder authorization, is
authorized to issue, from time to time, Preferred Stock in one or more
series, to establish the number of shares to be included in any

<PAGE>

such series and to fix the designations, powers, preferences and rights of
the shares of each such series and any qualifications, limitations or
restrictions thereof, including dividend rights and preferences over
dividends on the Common Stock, conversion rights, voting rights, redemption
rights, the terms of any sinking fund therefor and rights upon liquidation.
The ability of the Board of Directors of the Company to issue Preferred
Stock, while providing flexibility in connection with financing, acquisitions
and other corporate purposes, could have the effect of discouraging,
deferring or preventing a change in control of the Company or an unsolicited
acquisition proposal, since the issuance of Preferred Stock could be used to
dilute the share ownership of a person or entity seeking to obtain control of
the Company. In addition, because the Board of Directors of the Company has
the power to establish the preferences, powers and rights of the shares of
any such series of Preferred Stock, it may afford the holders of any
Preferred Stock preferences, powers and rights (including voting rights)
senior to the rights of the holders of Common Stock, which could adversely
affect the rights of holders of Common Stock.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

Section 203 ("Section 203") of the General Corporation Law of the State of
Delaware (the "DGCL") provides, in general, that a stockholder acquiring more
than 15% of the outstanding voting stock of a corporation subject to Section
203 (an "Interested Stockholder") but less than 85% of such stock may not
engage in certain Business Combinations (as defined in Section 203) with the
corporation for a period of three years subsequent to the date on which the
stockholder became an Interested Stockholder unless (i) prior to such date
the corporation's board of directors approved either the Business Combination
or the transaction in which the stockholder became an Interested Stockholder
or (ii) the Business Combination is approved by the corporation's board of
directors and authorized by a vote of at least 66 2/3% of the outstanding
voting stock of the corporation not owned by the Interested Stockholder. The
Amended Certificate contains a provision electing not to be governed by
Section 203.

LIMITATIONS ON DIRECTORS' LIABILITY

The Amended Certificate contains a provision which eliminates the personal
liability of a director to the Company and its stockholders for certain
breaches of his or her fiduciary duty of care as a director. This provision
does not, however, eliminate or limit the personal liability of a director
(i) for any breach of such director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Delaware
statutory provisions making directors personally liable, under a negligence
standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. This provision offers persons who serve on the
Board of Directors of the Company protection against awards of monetary
damages resulting from breaches of their duty of care (except as indicated
above), including grossly negligent business decisions made in connection
with takeover proposals for the Company. As a result of this provision, the
ability of the Company or a stockholder thereof to successfully prosecute an
action against a director for a breach of his duty of care has been limited.
However, the provision does not affect the availability of equitable remedies
such as an injunction or recision based upon a director's breach of his duty
of care. The Securities and Exchange Commission (the "Commission") has taken
the position that the provision will have no effect on claims arising under
the federal securities laws.

In addition, the Amended Certificate and By-Laws provide mandatory
indemnification rights, subject to limited exceptions, to any person who was
or is party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that such person
is or was a director or officer of the Company, or is or was serving at the
request of the Company as a director or officer of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise.
Such indemnification rights include reimbursement for expenses incurred by
such person in advance of the final disposition of such proceeding in
accordance with the applicable provisions of the DGCL.

TRANSFER AGENT AND REGISTRAR

American Stock Transfer & Trust Co. is the transfer agent and registrar
for the Common Stock.

<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Immediately after consummation of the Offerings, the Company will have
outstanding 5,400,000 shares of Class A Common Stock and 24,600,000 shares of
Class B Common Stock, assuming no exercise of the over-allotment options
granted to the Underwriters. Of these shares, the 5,400,000 shares of Class A
Common Stock sold in the Offerings (or a maximum of 6,075,000 shares if the
over-allotment options are exercised in full) will be freely tradeable
without restrictions or further registration under the Securities Act, unless
purchased by "affiliates" of the Company (as that term is defined under the
Securities Act). The 24,600,000 shares of Class B Common Stock owned by Mafco
Consolidated Group are, and the 24,600,000 shares of Class A Common Stock
issuable upon conversion of such shares of Class B Common Stock will be,
"restricted securities" as defined in Rule 144 under the Securities Act, and
may not be sold in the absence of registration under the Securities Act other
than pursuant to Rule 144 under the Securities Act or another exemption from
registration under the Securities Act.

In general, under Rule 144, as currently in effect, (i) a person (or
persons whose shares are required to be aggregated) who has beneficially
owned shares of Class A Common Stock as to which at least two years have
elapsed since such shares were sold by the Company or by an affiliate of the
Company in a transaction or chain of transactions not involving a public
offering ("restricted securities") or (ii) an affiliate of the Company who
holds shares of Class A Common Stock that are not restricted securities may
sell, within any three-month period, a number of such shares that does not
exceed the greater of 1% of the Company's Class A Common Stock then
outstanding or the average weekly trading volume in the Class A Common Stock
during the four calendar weeks preceding the date on which notice of such
sale required under Rule 144 was filed. Sales under Rule 144 are also subject
to certain provisions relating to the manner and notice of sale and
availability of current public information about the Company. Affiliates of
the Company must comply with the requirements of Rule 144, including the
two-year holding period requirement, to sell shares of Class A Common Stock
that are restricted securities. Furthermore, if a period of at least three
years has elapsed from the date restricted securities were acquired from the
Company or an affiliate of the Company, a holder of such restricted
securities who is not an affiliate of the Company at the time of the sale and
has not been an affiliate of the Company at any time during the three months
prior to such sale would be entitled to sell such shares without regard to
the volume limitation and other conditions described above.

All shares of Class B Common Stock owned by Mafco Consolidated Group and
all shares of Class A Common Stock issuable upon conversion of such shares of
Class B Common Stock will immediately after consummation of the Offerings be
eligible (subject to the 180-day lock-up arrangement described below) for
sale in the public market pursuant to, and in accordance with the volume,
manner of sale and other conditions of, Rule 144 described above. Pursuant to
the Registration Rights Agreement, Mafco Consolidated Group has the right to
require the Company to register the shares of Class A Common Stock acquired
upon conversion of its shares of Class B Common Stock to facilitate their
possible sale, although Mafco Consolidated Group has advised the Company that
it does not have any present intention to request any such registration. See
"Certain Relationships and Related Transactions --Registration Rights
Agreement."

The Company and Mafco Consolidated Group have agreed that, subject to
certain exceptions, they will not offer, sell or otherwise dispose of any
shares of Class A Common Stock, other than in the Offerings, or any security
convertible into or exchangeable or exercisable for shares of Class A Common
Stock without the prior written consent of Goldman, Sachs & Co. on behalf of
the Underwriters for a period of 180 days after the date of this Prospectus.
See "Underwriting."

The shares of Class A Common Stock authorized for issuance pursuant to
Awards that may be granted under the Stock Plan may be either authorized but
unissued shares or treasury shares obtained by the Company through market or
private purchases. See "Management--Stock Plan." The Company intends to
register under the Securities Act the shares of Class A Common Stock issuable
upon the exercise of options granted pursuant to the Stock Plan.

Prior to the Offerings, there has been no public market for the Class A
Common Stock. Although the Company can make no prediction as to the effect,
if any, that sales of shares of Class A Common Stock by Mafco Consolidated
Group would have on the market price prevailing from time to time, sales of
substantial amounts of Class A Common Stock or the availability of such
shares for sale could adversely affect prevailing market prices. See "Risk
Factors--Possible Future Sales of Shares by Mafco Consolidated Group."

<PAGE>

DESCRIPTION OF CERTAIN INDEBTEDNESS

Each of the following summaries of certain provisions of certain debt
instruments of the Company does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of such
debt instruments.

CREDIT AGREEMENT

The Credit Agreement entered into by Consolidated Cigar with The Chase
Manhattan Bank (the "Bank") consists of the $60.0 million Revolving Credit
Facility and the $20.0 million Working Capital Facility. The Revolving Credit
Facility and the Working Capital Facility have final maturities in April
1999. The Revolving Credit Facility is subject to quarterly commitment
reductions of $2.5 million during each year of the term of such facility. The
Credit Agreement is secured by first priority liens on all of the material
assets of Consolidated Cigar and its domestic subsidiaries and pledges of the
capital stock of all of Consolidated Cigar's subsidiaries (with certain
exceptions for the capital stock of foreign subsidiaries). The Credit
Agreement is guaranteed by the Company, and by all of the domestic
subsidiaries of Consolidated Cigar. The guarantee by the Company is, and
following consummation of the Offerings will continue to be, secured by a
pledge of all of the shares of common stock of Consolidated Cigar owned by
the Company. As of June 29, 1996, there was approximately $17.4 million
unused and available under the Credit Agreement, after taking into account
approximately $1.0 million utilized to support letters of credit.
Simultaneously with or prior to consummation of the Offerings, the Company
intends to pay to Mafco Consolidated Group a cash dividend of approximately
$5.6 million funded by borrowings under the Credit Agreement. As of June 29,
1996, after giving effect to the borrowings under the Credit Agreement to
fund such dividend, there would have been approximately $11.8 million
available under the Credit Agreement.

Loans outstanding under the Credit Agreement bear interest, at
Consolidated Cigar's option, at either (i) the Bank's base rate plus 1.0%;
(ii) the Bank's 30, 60, 90 or 180 day LIBOR rate plus 2.0% or (iii) with
respect to loans to Consolidated Cigar's wholly owned subsidiary CIC, and
subject to availability, the Bank's "936 Rate" plus 2.0%.

The Credit Agreement contains various restrictive covenants including,
among other things, limitations on the ability of Consolidated Cigar and its
subsidiaries to incur debt, create liens, pay dividends, sell assets and make
investments, acquisitions and capital expenditures. In addition, the Credit
Agreement requires Consolidated Cigar to maintain specified financial ratios
and satisfy certain tests, including maximum leverage ratios and minimum
interest coverage ratios. The Credit Agreement also contains customary events
of default. Consolidated Cigar recently entered into an amendment to the
Credit Agreement, which, among other things, permits Consolidated Cigar to
pay the $5.6 million dividend to the Company and to pay dividends and make
distributions on terms substantially similar to those contained in the Senior
Subordinated Notes Indenture.

SENIOR SUBORDINATED NOTES

In February 1993, Consolidated Cigar sold $90 million aggregate principal
amount of its Senior Subordinated Notes and as of June 29, 1996, $90 million
aggregate principal amount of Senior Subordinated Notes were outstanding. The
Senior Subordinated Notes bear interest at the rate of 10 1/2% per annum,
payable semi-annually on March 1 and September 1. The Senior Subordinated
Notes mature on March 1, 2003 and Consolidated Cigar is not required to make
any sinking fund payments with respect to the Senior Subordinated Notes. The
Senior Subordinated Notes are subordinate in right of payment to all senior
debt of Consolidated Cigar, including the liabilities of Consolidated Cigar
under the Credit Agreement, rank pari passu with all future senior
subordinated debt of Consolidated Cigar and rank senior to all future
subordinated debt of Consolidated Cigar.

The Senior Subordinated Notes are redeemable at the option of Consolidated
Cigar, on and after March 1, 1998, in whole or in part, at the following
redemption prices (expressed as percentages of the principal amount) for the
12 month period beginning each March 1: 1998--103.00%; 1999--101.50%; and
2000 and thereafter--100%, plus, in each case, accrued and unpaid interest to
the date fixed for

<PAGE>

redemption. In addition, the Senior Subordinated Notes are redeemable at any
time upon a Change of Control (as defined in the Senior Subordinated Notes
Indenture) at the redemption prices set forth in the Senior Subordinated
Notes Indenture.

The Senior Subordinated Notes Indenture contains certain covenants that,
among other things, limit the issuance of additional debt and redeemable
stock by Consolidated Cigar, the issuance of debt and preferred stock by
Consolidated Cigar's subsidiaries, the payment of dividends on and redemption
of capital stock of Consolidated Cigar and its subsidiaries and the
redemption of certain subordinated obligations of Consolidated Cigar, the
sale of assets and stock of Consolidated Cigar's subsidiaries, transactions
with affiliates and consolidations, mergers and transfers of all or
substantially all of Consolidated Cigar's assets. The Senior Subordinated
Notes Indenture also prohibits certain restrictions on distributions from
subsidiaries of Consolidated Cigar and contains customary events of default.

In addition, upon the occurrence of a Change of Control (as defined in the
Senior Subordinated Notes Indenture), each holder of the Senior Subordinated
Notes has the right, subject to the satisfaction of certain conditions
relating to Consolidated Cigar's bank indebtedness, to require Consolidated
Cigar to repurchase such holder's Senior Subordinated Notes at 101% of the
principal amount thereof, plus accrued and unpaid interest to the date of
purchase.

PROMISSORY NOTE

Simultaneously with or prior to consummation of the Offerings, the Company
intends to issue the Promissory Note in an original principal amount of $70
million to Mafco Consolidated Group. The Promissory Note is expected to be
noninterest bearing, unsecured, subordinated to senior indebtedness (as
defined in the Promissory Note) and repayable in whole or in part at any time
or from time to time without premium or penalty. The Promissory Note is
payable in quarterly installments of $2.5 million beginning March 31, 1997
with the final installment payable on December 31, 2003. The failure by the
Company to make any payment on the Promissory Note when due and the failure
by the Company to cure such non-payment during the 60-day period following
such due date would result in an event of default thereunder, and Mafco
Consolidated Group could declare all remaining amounts outstanding under the
Promissory Note to be immediately due and payable.

CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general summary of certain United States federal income
and estate tax consequences expected to result under current law from the
purchase, ownership, sale or other taxable disposition of Class A Common
Stock by any person or entity other than (a) a citizen or resident of the
United States, (b) a corporation created or organized in or under the laws of
the United States or of any state thereof, or (c) a person or entity
otherwise subject to United States federal income taxation on income from
sources outside the United States (a "non-U.S. Holder"). This summary does
not address all United States federal income and estate tax considerations
that may be relevant to non-U.S. Holders in light of their particular
circumstances or to certain non-U.S. Holders that may be subject to special
treatment under United States federal income tax laws. Furthermore, this
summary does not discuss any aspects of foreign, state or local taxation.
This summary is based on current provisions of the Code, existing, temporary
and proposed regulations promulgated thereunder and administrative and
judicial interpretations thereof, all of which are subject to change,
possibly with retroactive effect. Each prospective purchaser of Class A
Common Stock is advised to consult their tax advisor with respect to the tax
consequences of acquiring, holding and disposing of Class A Common Stock.

DIVIDENDS

Dividends paid to a non-U.S. Holder of Class A Common Stock generally will
be subject to withholding of United States federal income tax at a 30% rate
(or such lower rate as may be specified by an applicable income tax treaty)
unless the dividend is effectively connected with the conduct of a trade or
business of the non-U.S. Holder within the United States, in which case the
dividend will be taxed at ordinary federal income tax rates. If the non-U.S.
Holder is a corporation, such effectively

<PAGE>

connected income may also be subject to an additional "branch profits tax." A
non-U.S. Holder may be required to satisfy certain certification requirements
in order to claim treaty benefits or otherwise claim a reduction of, or
exemption from, the withholding obligation pursuant to the above described
rules.

SALE OR OTHER DISPOSITION OF CLASS A COMMON STOCK

A non-U.S. Holder generally will not be subject to United States federal
income tax in respect of any gain recognized on the sale or other taxable
disposition of Class A Common Stock unless (i) the gain is effectively
connected with a trade or business of the non-U.S. Holder in the United
States; (ii) in the case of a non-U.S. Holder who is an individual and holds
the Class A Common Stock as a capital asset, the holder is present in the
United States for 183 or more days in the taxable year of the disposition and
either (a) the individual has a "tax home" for United States federal income
tax purposes in the United States or (b) the gain is attributable to an
office or other fixed place of business maintained by the individual in the
United States; (iii) the non-U.S. Holder is subject to tax pursuant to the
provisions of United States federal income tax law applicable to certain
United States expatriates; or (iv) the Company is or has been during certain
periods preceding the disposition a "U.S. real property holding corporation"
for United States federal income tax purposes (which the Company does not
believe it is or is likely to become) and, assuming that the Class A Common
Stock continues to be "regularly traded on an established securities market"
for tax purposes, the non-U.S. Holder held, directly or indirectly, at any
time during the five-year period ending on the date of disposition, more than
5% of the outstanding Class A Common Stock.

BACKUP WITHHOLDING AND REPORTING REQUIREMENTS

DIVIDENDS. United States backup withholding tax will generally not apply
to dividends paid on Class A Common Stock to a non-U.S. Holder at an address
outside the United States. The Company must report annually to the Internal
Revenue Service and to each non-U.S. Holder the amount of dividends paid to,
and the tax withheld with respect to, such holder, regardless of whether any
tax was actually withheld. This information may also be made available to the
tax authorities in the non-U.S. Holder's country of residence.

SALE OR OTHER DISPOSITION OF CLASS A COMMON STOCK. Upon the sale or other
taxable disposition of Class A Common Stock by a non-U.S. Holder to or
through a United States office of a broker, the broker must backup withhold
at a rate of 31% and report the sale to the Internal Revenue Service, unless
the holder certifies its non-U.S. status under penalties of perjury or
otherwise establishes an exemption. Upon the sale or other taxable
disposition of Class A Common Stock by a non-U.S. Holder to or through the
foreign office of a United States broker, or a foreign broker with certain
types of relationships to the United States, the broker must report the sale
to the Internal Revenue Service (but not backup withhold) unless the broker
has documentary evidence in its files that the seller is a non-U.S. Holder
and/or certain other conditions are met, or the holder otherwise establishes
an exemption.

BACKUP WITHHOLDING IS NOT AN ADDITIONAL TAX. Amounts withheld under the
backup withholding rules are generally allowable as a refund or credit
against such non-U.S. Holder's United States federal income tax liability, if
any, provided that the required information is furnished to the Internal
Revenue Service.

PROPOSED REGULATIONS. On April 22, 1996, the Internal Revenue Service
issued proposed regulations relating to withholding, backup withholding and
information reporting that, if adopted in their current form, would, among
other things, unify current certification procedures and forms and clarify
reliance standards. The proposed regulations would, among other things,
eliminate the general current law presumption that dividends paid to an
address in a foreign country are paid to a resident of that country and would
impose certain certification and documentation requirements on non-U.S.
Holders claiming the benefit of a reduced withholding rate with respect to
dividends under a tax treaty. These regulations generally are proposed to be
effective with respect to payments made after December 31, 1997, although in
certain cases they are proposed to be effective only with respect to payments
made after December 31, 1999. Proposed regulations are subject to change,
however, prior to their adoption in final form.

<PAGE>

FEDERAL ESTATE TAXES

Class A Common Stock owned or treated as owned by an individual who is not
a citizen or resident (as specially defined for United States federal estate
tax purposes) of the United States at the time of death will be included in
such individual's gross estate for United States federal estate tax purposes,
unless an applicable estate tax treaty provides otherwise.

LEGAL MATTERS

Certain legal matters with respect to the validity of the shares of Class
A Common Stock offered hereby will be passed upon for the Company by Skadden,
Arps, Slate, Meagher & Flom, New York, New York. Cravath, Swaine & Moore, New
York, New York has acted as counsel for the Underwriters. Skadden, Arps,
Slate, Meagher & Flom and Cravath, Swaine & Moore have from time to time
represented, and may continue to represent, the Underwriters in connection
with various legal matters. Both Skadden, Arps, Slate, Meagher & Flom and
Cravath, Swaine & Moore have from time to time represented, and may continue
to represent, Mafco Holdings and certain of its affiliates (including the
Company) in connection with certain legal matters. Joseph H. Flom, a partner
in the firm of Skadden, Arps, Slate, Meagher & Flom, is a director of Revlon
Group Incorporated, a wholly owned subsidiary of Mafco Holdings.

EXPERTS

The Consolidated Financial Statements and schedules of the Company as of
December 31, 1994 and 1995 and for the two month period ended March 2, 1993
(the Pre-Acquisition period), the ten month period ended December 31, 1993
and the years ended December 31, 1994 and 1995, appearing in this Prospectus
and elsewhere in the Registration Statement (as defined herein), have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon appearing elsewhere herein, and are included in reliance upon
such report given upon the authority of said firm as experts in accounting
and auditing.

AVAILABLE INFORMATION

The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-1 (as amended, the "Registration Statement")
of which this Prospectus is a part under the Securities Act with respect to
the Class A Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto, to which reference is hereby made. Statements made in
this Prospectus as to the contents of any contract, agreement or other
document are summaries of the material terms of such contract, agreement or
other document. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made
to the exhibit for a more complete description of the matter involved. The
Registration Statement (including the exhibits and schedules thereto) filed
by the Company with the Commission may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and will also be
available for inspection and copying at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New
York 10048 and at Citicorp Center, 500 West Madison Street (Suite 1400),
Chicago, Illinois 60661. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission also maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.

Upon completion of the Offerings, the Company will be subject to the
informational requirements of the Exchange Act, and, in accordance therewith,
will file reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information can be inspected and copied at the addresses set forth above. The
Company intends to furnish its stockholders with annual reports containing
consolidated financial statements audited by its independent certified public
accountants and with quarterly reports containing unaudited condensed
consolidated financial statements for each of the first three quarters of
each fiscal year.

<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES

---------

<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Auditors .................................................... F-2

Consolidated Balance Sheets as of December 31, 1994 and 1995 ...................... F-3

Consolidated Statements of Operations
for the two month period ended March 2, 1993, the ten month period ended December
31, 1993 and the years ended December 31, 1994 and 1995 ......................... F-4

Consolidated Statements of Stockholder's Equity
for the two month period ended March 2, 1993, the ten month period ended December
31, 1993 and the years ended December 31, 1994 and 1995 ......................... F-5

Consolidated Statements of Cash Flows
for the two month period ended March 2, 1993, the ten month period ended December
31, 1993 and the years ended December 31, 1994 and 1995 ......................... F-6

Notes to Consolidated Financial Statements ........................................ F-8

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Condensed Consolidated Balance Sheet as of June 29, 1996 ................ F-20

Unaudited Condensed Consolidated Statements of Operations for the twenty-six week
periods ended July 1, 1995 and June 29, 1996 .................................... F-21

Unaudited Condensed Consolidated Statements of Cash Flows for the twenty-six week
periods ended July 1, 1995 and June 29, 1996 .................................... F-22

Notes to Unaudited Condensed Consolidated Financial Statements .................... F-23
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder
Consolidated Cigar Holdings Inc.

We have audited the accompanying consolidated balance sheets of
Consolidated Cigar Holdings Inc. (formerly Consolidated Cigar (Parent)
Holdings Inc.) and subsidiaries as of December 31, 1994 and 1995 and the
related consolidated statements of operations, stockholder's equity, and cash
flows for the two month period ended March 2, 1993, the ten month period
ended December 31, 1993 and the years ended December 31, 1994 and 1995. The
two month period ended March 2, 1993 presents historical Pre-Acquisition
financial statement amounts of Consolidated Cigar Corporation (the
"Pre-Acquisition Company"). 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 in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Company at December 31, 1994 and 1995, and the consolidated results of
the Pre-Acquisition Company's operations and cash flows for the two month
period ended March 2, 1993, and the Company's consolidated results of
operations and cash flows for the ten month period ended December 31, 1993
and the years ended December 31, 1994 and 1995, in conformity with generally
accepted accounting principles.

Ernst & Young LLP
New York, New York
January 24, 1996

F-2

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 1,700 $ 1,145
Accounts receivable, less allowances of $3,602 and $4,322, respectively 12,912 14,883
Inventories ............................................................ 37,874 39,022
Deferred taxes and other ............................................... 524 3,914
-------------- --------------
Total current assets .................................................. 53,010 58,964
Property, plant and equipment, net ...................................... 38,025 35,370
Trademarks, less accumulated amortization of $1,587 and $2,453,
respectively ........................................................... 32,887 32,021
Goodwill, less accumulated amortization of $3,171 and $4,942,
respectively ........................................................... 67,596 61,374
Other intangibles and assets, less accumulated amortization of $3,244
and $4,670, respectively ............................................... 5,391 4,001
-------------- --------------
Total assets .......................................................... $196,909 $191,730
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ....................................................... $ 4,073 $ 3,797
Accrued expenses ....................................................... 13,985 16,103
Due to affiliate ....................................................... 452 1,685
-------------- --------------
Total current liabilities ............................................. 18,510 21,585
Long-term debt .......................................................... 126,200 110,600
Deferred taxes .......................................................... 2,844 4,066
Other liabilities ....................................................... 8,792 1,151
-------------- --------------
Total liabilities ..................................................... 156,346 137,402
-------------- --------------
Commitments and contingencies ........................................... -- --
Stockholder's equity:
Common stock, $1.00 par value, 1,000 shares authorized, issued and
outstanding ........................................................... 1 1
Additional paid-in capital ............................................. 29,999 34,834
Retained earnings ...................................................... 10,563 19,493
-------------- --------------
Total stockholder's equity ............................................ 40,563 54,328
-------------- --------------
Total liabilities and stockholder's equity ............................ $196,909 $191,730
============== ==============

</TABLE>

See notes to consolidated financial statements.

F-3

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRE-
ACQUISITION POST-ACQUISITION
------------- ----------------------------------------------
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net sales ................................ $15,563 $110,384 $131,510 $158,166
Cost of sales ............................ 9,088 69,871 78,836 94,347
------------- -------------- -------------- --------------
Gross profit ............................. 6,475 40,513 52,674 63,819
Selling, general and administrative
expenses ................................ 4,580 24,956 29,413 32,393
------------- -------------- -------------- --------------
Operating income ......................... 1,895 15,557 23,261 31,426
------------- -------------- -------------- --------------
Other (expenses) income:
Interest expense ........................ (1,662) (10,954) (12,847) (12,647)
Interest income ......................... 2 24 9 12
Minority interest ....................... 5 209 78 (262)
Miscellaneous, net ...................... (226) (690) (828) (1,000)
------------- -------------- -------------- --------------
(1,881) (11,411) (13,588) (13,897)
------------- -------------- -------------- --------------
Income before provision for income taxes 14 4,146 9,673 17,529
Provision for income taxes ............... 91 1,267 1,989 3,599
------------- -------------- -------------- --------------
Net income (loss) ........................ $ (77) $ 2,879 $ 7,684 $ 13,930
============= ============== ============== ==============
Pro Forma earnings per
common share (unaudited) ................ $ 0.45
==============
</TABLE>

See notes to consolidated financial statements.

F-4

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
-------- ------------ ---------- ---------
<S> <C> <C> <C> <C>
Pre-Acquisition:
Balance at December 31, 1992 ..... $-- $12,294 $ 2,020 $14,314
Net loss for the two months ...... -- -- (77) (77)
-------- ------------ ---------- ---------
Balance at March 2, 1993 .......... $-- $12,294 $ 1,943 $14,237
======== ============ ========== =========
Post-Acquisition:
Initial capitalization ............ $ 1 $29,999 $ -- $30,000
Net income for the ten months .... -- -- 2,879 2,879
-------- ------------ ---------- ---------
Balance at December 31, 1993 ..... 1 29,999 2,879 32,879
-------- ------------ ---------- ---------
Net income ........................ -- -- 7,684 7,684
-------- ------------ ---------- ---------
Balance at December 31, 1994 ..... 1 29,999 10,563 40,563
-------- ------------ ---------- ---------
Net income ........................ -- -- 13,930 13,930
Cash dividends paid ............... -- -- (5,000) (5,000)
Contribution to capital by parent -- 4,835 -- 4,835
-------- ------------ ---------- ---------
Balance at December 31, 1995 ..... $ 1 $34,834 $19,493 $54,328
======== ============ ========== =========

</TABLE>

See notes to consolidated financial statements.

F-5

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRE-
ACQUISITION POST-ACQUISITION
------------- ----------------------------------------------
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ....................... $ (77) 2,879 $ 7,684 $13,930
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization .......... 1,123 10,289 7,613 7,699
Deferred income ........................ -- 887 (205) (205)
Gain on the sale of fixed assets ...... -- -- (390) --
Changes in assets and liabilities net
of acquisitions:
(Increase) decrease in:
Accounts receivable .................. 3,245 (3,323) (1,852) (1,971)
Inventories .......................... (3,573) 854 (969) (1,148)
Deferred taxes and other ............. (6) 235 44 (1,367)
Increase (decrease) in:
Accounts payable ..................... 868 48 (326) (276)
Accrued expenses and other
liabilities ......................... 1,882 (3,027) 2,660 3,139
------------- -------------- -------------- --------------
Net cash provided by operating activities 3,462 8,842 14,259 19,801
------------- -------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures .................... (115) (881) (788) (983)
Proceeds from the sale of fixed assets . -- 100 5,832 1
Decrease (increase) in other assets .... (132) (170) (8) (7)
------------- -------------- -------------- --------------
Net cash provided by (used for) investing
activities .............................. (247) (611) 5,036 (989)
------------- -------------- -------------- --------------
</TABLE>

See notes to consolidated financial statements.

F-6

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
PRE-
ACQUISITION POST-ACQUISITION
------------- ----------------------------------------------
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows from acquisitions:
Acquisition financing ................ $ -- $ 156,619 $ -- $ --
Cost of acquisition .................. -- (104,180) -- --
Deferred financing costs ............. -- (6,406) -- --
Accrued fees and expenses ............ -- 3,970 -- --
Initial capitalization ............... -- 30,000 -- --
Repayment of long term debt .......... -- (77,375) -- --
------------- -------------- -------------- --------------
Net cash provided by acquisitions .... -- 2,628 -- --
------------- -------------- -------------- --------------
Cash flow from financing activities:
Repayment of revolving loan, net .... (2,078) (11,319) (19,100) (15,600)
Dividend paid ........................ -- -- -- (5,000)
Due to affiliates and other
borrowings .......................... -- (824) 290 1,233
------------- -------------- -------------- --------------
Net cash used for financing activities (2,078) (12,143) (18,810) (19,367)
------------- -------------- -------------- --------------
(Decrease) increase in cash and cash
equivalents .......................... 1,137 (1,284) 485 (555)
Cash and cash equivalents, beginning
of period ............................ 1,362 2,499 1,215 1,700
------------- -------------- -------------- --------------
Cash and cash equivalents, end of
period ............................... $ 2,499 $ 1,215 $ 1,700 $ 1,145
============= ============== ============== ==============
Supplemental disclosures of cash flow
information:
Interest paid during the period ..... $ 218 $ 10,433 $ 12,921 $ 13,067
Income taxes paid during the period . 161 333 1,444 1,477
</TABLE>

See notes to consolidated financial statements.

F-7

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A --BASIS OF PRESENTATION

Consolidated Cigar Holdings Inc. (formerly Consolidated Cigar (Parent)
Holdings Inc.) (the "Company") is a holding company with no business
operations of its own and was formed as a Delaware corporation on January 6,
1993 to hold all of the outstanding capital stock of Consolidated Cigar
Corporation ("Consolidated Cigar"), through which the Company conducts its
business operations. The results of operations and financial position of the
Company therefore reflect the consolidated results of operations and
financial position of Consolidated Cigar and its predecessors. Unless the
context otherwise requires, all references in these notes to the consolidated
financial statements of the Company mean Consolidated Cigar Holdings Inc. and
its subsidiaries.

On December 11, 1992, Triple C Acquisition Corp. ("Triple C"), Mafco
Holdings Inc. ("Mafco Holdings") and a wholly owned subsidiary of Mafco
Holdings entered into an agreement and plan of merger, pursuant to which the
wholly owned subsidiary was merged into Triple C, with Triple C being the
surviving corporation. Pursuant to the merger which was consummated on March
3, 1993, Mafco Holdings acquired all the outstanding shares of Triple C
common stock and warrants to purchase Triple C common stock (the
"Acquisition") for an aggregate purchase price of $188.0 million, including
fees and expenses. The Acquisition was financed with bank borrowings under an
$80.0 million revolving credit agreement with a bank group lead by The Chase
Manhattan Bank ("Chase"), the issuance of $90.0 million of 10 1/2% senior
subordinated notes due 2003 and a $30.0 million capital contribution from
Mafco Holdings. Immediately following the Acquisition, Triple C merged into
Consolidated Cigar Corporation ("Consolidated Cigar"), with Consolidated
Cigar being the surviving corporation. As a result, Consolidated Cigar became
an indirect wholly owned subsidiary of Mafco Holdings.

Prior to March 3, 1993 (referred to herein as the "Pre-Acquisition"
period), Consolidated Cigar was a wholly owned subsidiary of Triple C. The
accompanying financial statements for periods subsequent to March 2, 1993
(referred to herein as the "Post Acquisition" period), reflect the results of
the Acquisition.

The Post Acquisition financial statements contained herein are those of
the Company and its subsidiaries which have been adjusted to account for the
Acquisition under the purchase accounting method (i.e., the assets purchased
and liabilities assumed have been adjusted to fair values based upon an
allocation of the purchase price). As a result of adjustments related to the
Acquisition, the financial statements of the Post Acquisition Company are not
directly comparable to the financial statements of the Pre-Acquisition
Company. The Pre-Acquisition financial statements reflect Triple C's cost of
acquiring Consolidated Cigar in November 1988.

NOTE B --1995 CHANGE IN OWNERSHIP

On June 15, 1995, Mafco Holdings and Mafco Consolidated Group Inc. ("Mafco
Consolidated Group"), formerly known as Abex Inc. ("Abex"), consummated an
agreement and plan of merger (the "Merger Agreement") executed between the
parties on January 6, 1995. The Merger Agreement provided for, among other
things, the merger of C & F Merger Inc., a subsidiary of Mafco Holdings and
the indirect parent of both the Company and Mafco Worldwide Corporation
("Mafco Worldwide"), with Mafco Consolidated Group, which was the surviving
corporation in the merger. As a result, the Company became an indirect wholly
owned subsidiary of Mafco Consolidated Group.

NOTE C --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

The Company operates principally in one segment, manufacturing,
distributing, and selling cigars in all sections of the industry. The Company
also manufactures smoking tobaccos for sale under its own brand names, in
bulk to tobacconists as well as private label brands for chain stores and
wholesale distributors.

F-8

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after the elimination of all significant
intercompany accounts and transactions. Cuban Cigar Brands, N.V. ("CCB"), a
51% owned subsidiary, has also been accounted for as a consolidated
subsidiary.

Inventories

Leaf tobacco is carried at the lower of average cost or market. In
accordance with generally recognized industry practice, all leaf tobacco
inventory is classified as current although portions of such inventory,
because of the duration of the aging process, ordinarily would not be
utilized within one year. Cigars and other inventories are generally valued
at the lower of cost (using the first-in, first-out method) or market.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets which range
from 10 years to 20 years. Leasehold improvements are amortized over their
estimated useful lives or the term of the lease, whichever is shorter.
Repairs and maintenance are charged to operations as incurred and
expenditures for additions and improvements are capitalized.

Trademarks

Trademarks consist of registered and unregistered tradenames of cigars or
other tobacco brands which are being amortized on a straight-line basis over
40 years.

Goodwill

Goodwill represents the excess of cost over fair value of net assets
acquired in the Acquisition. Goodwill is being amortized over 40 years on a
straight-line basis which is consistent with industry practice. The Company's
accounting policy regarding the assessment of the recoverability of the
carrying value of goodwill and other intangibles is to review the carrying
value of goodwill and other intangibles if the facts and circumstances
suggest that they may be impaired. If this review indicates that goodwill and
other intangibles will not be recoverable, as determined based on the
undiscounted future cash flows of the Company, the carrying value of goodwill
and other intangibles will be reduced to its estimated fair value.

As discussed in Notes I and J, during 1995, goodwill was reduced by $4.4
million due to the reduction in the valuation allowance for deferred tax
assets and due to the establishment and transfer of deferred tax assets
related to certain pension plan liabilities that were transferred to a
related affiliate.

Impairment of Long-Lived Assets

In March 1995, Statement of Financial Accounting Standards ("SFAS") issued
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS 121 requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying amount. SFAS 121
also addresses the accounting for long-lived assets that are expected to be
disposed of. SFAS 121 is effective for financial statements for fiscal years
beginning after December 15, 1995, and therefore the Company will adopt SFAS
121 in the first quarter of 1996. The Company does not believe the effect of
this adoption will be material.

F-9

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE C --SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition

Revenue is recognized from product sales upon shipment. Allowances for
sales returns, customer incentive programs and promotions are recorded at the
time of sale.

Interest Rate Swaps

Consolidated Cigar entered into interest rate swap agreements to modify
the interest characteristics of its outstanding debt from a fixed to a
floating rate basis. These agreements involve the receipt of fixed rate
amounts in exchange for floating rate interest payments over the life of the
agreement without an exchange of the underlying principal amount. The
differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The
related amount payable to or receivable from counterparties is included in
accrued expenses. To the extent previous interest rate swap agreements have
been terminated, the resulting gain is being recognized over the remaining
original life of the terminated agreements. The fair values of the swap
agreements (which amount is described in Note G) are not recognized in the
financial statements.

Income Taxes

Effective January 1, 1993 the Company adopted SFAS 109, "Accounting for
Income Taxes". SFAS 109 requires the liability method of computing deferred
taxes. The cumulative effect of the change was immaterial, as was the effect
of the 1% federal income tax increase that resulted from the 1993
Consolidated Omnibus Budget Reconciliation Act passed in August 1993 ("OBRA
1993").

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of accounts receivable. The
Company's customers are geographically dispersed but are concentrated in the
tobacco industry. The Company historically has had no material losses on its
accounts receivable from customers in the tobacco industry in excess of
allowances provided.

Cash Flow Information

Cash equivalents are considered to be all highly liquid investments with
maturities of three months or less when acquired and exclude restricted cash.

Use of Estimates

Preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Reclassifications

Certain reclassifications of 1994 amounts have been made to conform to the
1995 financial statement presentation.

Pro Forma Earnings per Share (Unaudited)

Pro forma earnings per share gives effect to the Company's initial public
offering (the "Offering") and the payment to Mafco Consolidated Group of a
$5.6 million cash dividend funded by borrowings under Consolidated Cigar's
Credit Agreement (as defined herein). Pro forma earnings per share is
calculated assuming that 30,000,000 shares of common stock are outstanding
upon the consummation of the Offering as a result of the expected conversion
of the outstanding shares of the Company's current common stock into
approximately 24,600,000 shares of its newly created Class B Common Stock,
par value $0.01 per share, and the expected issuance of 5,400,000 shares of
Class A Common Stock, par value $0.01 per share, upon consummation of the
Offering. On a pro forma basis, net income would have been $13.5 million for
the year ended December 31, 1995.

F-10

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE D --INVENTORIES

The components of inventories are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies $27,337 $27,518
Work in process ........... 1,582 1,692
Finished goods ............ 9,716 10,634
-------------- --------------
38,635 39,844
Reserve for obsolescence . (761) (822)
-------------- --------------
$37,874 $39,022
============== ==============
</TABLE>

NOTE E --PROPERTY, PLANT AND EQUIPMENT, NET

The components of property, plant and equipment, net are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Land .................... $ 1,804 $ 1,804
Buildings ............... 13,202 13,254
Machinery and equipment 27,783 28,597
Leasehold improvements . 276 276
Furniture and fixtures . 1,475 1,555
-------------- --------------
44,540 45,486
Accumulated depreciation (6,515) (10,116)
-------------- --------------
$38,025 $ 35,370
============== ==============
</TABLE>

Depreciation expense was $0.4 million for the two months ended March 2,
1993, $3.2 million for the ten months ended December 31, 1993, $3.7 million
for the 1994 fiscal year and $3.6 million for the 1995 fiscal year.

On September 7, 1994, the Company sold a 250,000 square foot building in
Cayey, Puerto Rico for gross proceeds of approximately $5.8 million. The
Company realized a gain of approximately $0.4 million as a result of the sale
which is included in selling, general and administrative expenses. Net
proceeds of approximately $5.0 million were utilized to repay bank debt.

NOTE F --ACCRUED EXPENSES

Included in accrued expenses are the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Employee benefits and other compensation $ 5,436 $ 7,226
Interest ................................ 3,667 3,452
Promotional ............................. 1,387 1,345
Taxes ................................... 1,295 1,592
Other ................................... 2,200 2,488
-------------- --------------

$13,985 $16,103
============== ==============
</TABLE>

F-11

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE G --LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Bank borrowings (a) .......... $ 36,200 $ 20,600
Senior subordinated notes (b) 90,000 90,000
-------------- --------------
$126,200 $110,600
============== ==============
</TABLE>

(a) Represents borrowings under a credit agreement (the "Credit Agreement")
with Chase dated February 23, 1993, providing for a $60.0 million
reducing revolving credit facility (the "Revolving Credit Facility")
and a $20.0 million working capital facility (the "Working Capital
Facility"). The Revolving Credit Facility and the Working Capital
Facility have final maturities on April 3, 1999. The Revolving Credit
Facility is subject to quarterly commitment reductions of $2.5 million
during each year of the term of the facility. The Credit Agreement is
secured by perfected first priority liens on all of the material assets
of Consolidated Cigar and its domestic subsidiaries and perfected
pledges of the stock of all Consolidated Cigar's subsidiaries (with
certain exceptions for the stock of foreign subsidiaries). The Credit
Agreement is guaranteed by the Company and by all of the domestic
subsidiaries of Consolidated Cigar. The guarantee by the Company is
secured by a pledge of all the outstanding stock of Consolidated Cigar.

The Credit Agreement established interest payments at the option of
Consolidated Cigar based upon the following rates:

<TABLE>
<CAPTION>
<S> <C> <C>
Base Rate Loans Prime plus 1 3/4%
936 Loans 936 Rate plus 2 3/4%
Eurodollar Funds Eurodollar plus 2 3/4%
</TABLE>

Beginning with the fourth quarter of fiscal 1995 the above rates were
reduced by 1/4% in accordance with the Credit Agreement.

The average interest rate under the Credit Agreement was approximately
8.9% at December 31, 1995.

The Credit Agreement contains various covenants which govern, among other
things, the ability to incur indebtedness, pay dividends, incur lease rental
obligations, make capital expenditures, use proceeds from asset sales,
participate in mergers and other activities. The Credit Agreement also
requires Consolidated Cigar to satisfy certain financial covenants related to
net worth, capital expenditures and various ratios.

The maximum amounts of borrowings that are allowed under the Credit
Agreement at the end of 1995 through its maturity are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- -------------- --------------
<S> <C>
1995 ....... $52,500
1996 ....... 34,887
1997 ....... 24,887
1998 ....... 14,887
</TABLE>

Outstanding letters of credit of approximately $1.6 million reduced the
available borrowings under the Credit Agreement at December 31, 1995.

F-12

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE G --LONG-TERM DEBT (Continued)
(b)Represents $90.0 million in principal amount of 10 1/2% Senior
Subordinated Notes Due 2003 (the "Senior Subordinated Notes") issued in
connection with the Acquisition.

The Senior Subordinated Notes bear interest at the rate of 10 1/2% per
annum, mature on March 1, 2003 and are redeemable at a premium prior to
maturity starting March 1, 1998. The Senior Subordinated Notes are
redeemable earlier at a premium in the event of a change of control.
The indenture relating to the Senior Subordinated Notes limits, among
other things, dividends and other distributions, certain types of
indebtedness, certain mergers, consolidations and sales of assets.

The scheduled repayments of long-term debt for the next five years based
on the outstanding balances at December 31, 1995 are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- -------------- --------------
<S> <C>
1996 ....... $ 0
1997 ....... 0
1998 ....... 5,713
1999 ....... 14,887
2000 ....... 0
</TABLE>

The fair value of the Company's long-term debt at December 31, 1995 is
estimated based on the quoted market prices for the same issues or on the
current rates offered to the Company for debt of the same remaining
maturities. The estimated fair value of long-term debt was approximately $2.7
million more than the carrying value of $110.6 million.

Because judgment is required in interpreting market data to develop
estimates of fair value, the estimates are not necessarily indicative of the
amounts that could be realized or would be paid in a current market exchange.
The effect of using different market assumptions or estimation methodologies
may be material to the estimated fair value amounts.

Consolidated Cigar entered into two five-year interest-rate swap
agreements in an aggregate notional amount of $85.0 million. Under the terms
of the agreements, Consolidated Cigar receives a fixed interest rate
averaging 5 4/5% and pays a variable interest rate equal to the six month
LIBOR. Consolidated Cigar entered into such agreements to take advantage of
the differential between long-term and short-term interest rates and
effectively converted the interest rate on $85.0 million of fixed-rate
indebtedness to a variable rate. From inception of the agreements through
January 1996 Consolidated Cigar has paid $0.8 million in settlement, which
occurs at the end of each six month period of the agreements. Had
Consolidated Cigar terminated these agreements, which the Company considers
to be held for other than trading purposes, on December 31, 1995, a combined
loss of approximately $0.3 million would have been realized. Future positive
or negative cash flows associated with these agreements will depend upon the
trend of short-term interest rates during the remaining life of the
agreements. In the event of non-performance of the counterparties at anytime
during the remaining lives of these agreements which expire at December 1998
and January 1999, the Company could lose some or all of any future positive
cash flows. However, the Company does not anticipate non-performance by such
counterparties.

NOTE H --COMMITMENTS AND CONTINGENCIES

The Company rents facilities and equipment under operating lease
agreements which expire at various dates through 2000. Net rental expense
under operating leases was $0.2 million for the two

F-13

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE H --COMMITMENTS AND CONTINGENCIES (Continued)

months ended March 2, 1993, $1.3 million for the ten months ended December
31, 1993, $1.7 million for the year ended December 31, 1994 and $1.8 million
for the year ended December 31, 1995.

Future minimum rental commitments on a cash basis for all noncancelable
operating leases are as follows:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, (IN THOUSANDS)
- -------------- --------------
<S> <C>
1996 ....... $834
1997 ....... 863
1998 ....... 877
1999 ....... 715
2000 ....... 145
</TABLE>

Additional commitments exist resulting from contracts to purchase tobacco
from various suppliers. At the end of fiscal 1995, outstanding contracts to
purchase tobacco amounted to $5.3 million which were all U.S. dollar
obligations.

The Company is a party to various pending legal actions. In the opinion of
management, based upon the advice of its outside counsel, the liability, if
any, from all pending litigation will not materially affect the Company's
consolidated financial position or results of operations.

NOTE I --INCOME TAXES

The Company, Consolidated Cigar and Mafco Holdings entered into a Tax
Sharing Agreement effective January 1, 1993, pursuant to which, for all
taxable periods beginning on or after the Acquisition, Consolidated Cigar
will be included in the consolidated federal and certain state income tax
returns of Mafco Holdings. The Company will pay to Mafco Holdings amounts
equal to the taxes that the Company would otherwise have to pay if it were to
file a separate federal tax return. For all periods presented, federal and
state income taxes were provided as if the Company filed its own income tax
returns. Pursuant to the Tax Sharing Agreement with Mafco Holdings, tax
carryforward losses that arose prior to the Acquisition are not available to
the Company on a go-forward basis. Effective with the consummation of the
Merger Agreement, the Company, Consolidated Cigar and Mafco Consolidated
Group entered into a revised tax sharing agreement which requires the Company
to pay to Mafco Consolidated Group an amount equal to the federal and certain
state income taxes that the Company would pay if the Company had filed its
own federal and state income tax returns. The Company has generated U.S. tax
net operating loss carryforwards of $2.9 million subsequent to the
Acquisition, which were utilized completely during the 1994 and 1995 fiscal
years.

Prior to the Acquisition, Consolidated Cigar was included in the federal
income tax return of Triple C and filed certain state and local tax returns
on its own.

F-14

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE I --INCOME TAXES (Continued)
The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------ -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal .. $-- $ -- $ 266 $1,880
State ..... 14 86 222 423
Foreign .. 77 764 1,494 1,292
------------ -------------- -------------- --------------
91 850 1,982 $ 3,595
------------ -------------- -------------- --------------
Deferred:
Federal ... -- -- -- (600)
Foreign .. -- 417 7 604
------------ -------------- -------------- --------------
-- 417 7 4
------------ -------------- -------------- --------------
$91 $1,267 $1,989 $3,599
============ ============== ============== ==============
</TABLE>

Deferred taxes result from temporary differences in the recognition of
income and expenses for financial and income tax reporting purposes and also
result from the differences between the fair value of assets acquired in
business combinations and their tax basis. The approximate effect of the
temporary differences that gave rise to deferred tax balances were as
follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accounts receivable ............. $1,159 $1,437
Accrued expenses ................ 1,144 1,628
Net operating loss carryforwards 1,119 --
Other ........................... 1,050 1,139
-------------- --------------
Total deferred tax asset ...... 4,472 4,204
Valuation allowance ............. (2,622) --
-------------- --------------
Net deferred tax asset ......... 1,850 4,204
-------------- --------------
Deferred tax liabilities:
Property, plant and equipment .. 3,682 3,474
Unremitted earnings ............. 891 1,579
Other ........................... 121 42
-------------- --------------
Total deferred tax liability .. 4,694 5,095
-------------- --------------
Net deferred tax liability .... $2,844 $ 891
============== ==============
</TABLE>

Of the total valuation allowance of $2.6 million for the 1994 fiscal year,
approximately $2.0 million was accounted for as a reduction of goodwill
during fiscal 1995.

The net deferred tax liability relates mainly to the Company's Puerto Rico
subsidiary which is not consolidated for federal income tax purposes. This
represents the temporary difference attributable to property, plant and
equipment at Puerto Rico's effective local tax and toll gate tax rate.

F-15

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE I --INCOME TAXES (Continued)
As discussed in Note J, during fiscal 1995 certain pension liabilities
were transferred to an affiliate. In connection with this transaction, a
deferred tax asset in the amount of $2.4 million was recorded along with a
reduction of goodwill relating to the unfunded pension liability at the date
of the Acquisition. This deferred tax asset was then transferred to Mafco
Consolidated Group.

A reconciliation of the statutory U.S. income tax rate and the effective
income tax rate is as follows:

<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------ -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Statutory rate ............. $ 5 $ 1,451 $ 3,386 $ 6,135
U.S. loss without benefit . 599 685 -- --
Realization of valuation
reserve and other ......... -- -- (490) (666)
Foreign income not subject
to statutory tax rate .... (530) (1,445) (1,749) (2,765)
State income taxes,
net in 1995 ............... 14 86 222 275
Non-deductible amortization 3 490 620 620
------------ -------------- -------------- --------------
$ 91 $ 1,267 $ 1,989 $ 3,599
============ ============== ============== ==============
</TABLE>

The domestic and foreign components of income (loss) before income taxes
are as follows:

<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------ -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
United States . $(1,933) $(4,758) $(2,725) $ 66
Foreign ........ 1,947 8,904 12,398 17,463
------------ -------------- -------------- --------------
$ 14 $ 4,146 $ 9,673 $17,529
============ ============== ============== ==============
</TABLE>

Foreign income primarily consists of Puerto Rico income. Pursuant to a
grant of industrial tax exemption which expires in 2002, 90% of the income
earned from the manufacture of cigars in Puerto Rico is tax exempt from
Puerto Rican income taxes. The remaining 10% of such income is taxed at a
maximum surtax rate of 45%, resulting in an effective income tax rate of
approximately 4.5%. The benefit to the Company amounted to approximately $0.7
million for the two months ended March 2, 1993, $3.1 million for the ten
months ended December 31, 1993, $3.5 million for the year ended December 31,
1994 and $5.1 million for the year ended December 31, 1995.

Funds repatriated to the Company from its Puerto Rico subsidiary are
subject to a maximum Puerto Rican tollgate tax of 10%. Legislation enacted in
Puerto Rico in 1993 included a provision for prepaying a portion of these
tollgate taxes effective for the 1993 fiscal year and subsequent periods.

Income earned from Puerto Rico operations is generally exempt from federal
income tax. Section 936 of the Internal Revenue code allows a "possessions
tax credit" against U.S. income tax attributable to the Puerto Rico taxable
earnings. As part of the OBRA 1993, the Internal Revenue Service has limited
this exemption based upon a percentage of qualified wages in Puerto Rico,
plus certain amounts of depreciation. The Company believes that it qualified
for the possessions tax credit during each of the fiscal years ended 1993,
1994 and 1995.

F-16

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE I --INCOME TAXES (Continued)
During 1995, proposed legislation was introduced before the U.S. Senate
House Committee on Ways and Means regarding tax reform and the possible
repeal of Section 936 of the Internal Revenue Code. The proposal, as drafted,
in September 1995 called for the repeal for taxable years beginning after
December 31, 1995, however a credit would be granted for an additional 10
year phase in period under a special grandfather rule. The credit would be
limited to the average annual income, adjusted for inflation, claimed over
three of the last five most recent years ended before September 13, 1995,
excluding the highest and lowest years. The Company does not believe the
effect of the proposal would be material during the phase in period because
of the special grandfather rule. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations --Taxation and Regulation
- --Possessions Tax Credit."

The Company also manufactures cigars in the Dominican Republic pursuant to
a 100% tax exemption which expires in 2010.

NOTE J --PENSION PLANS

Consolidated Cigar maintains tax qualified non-contributory defined
benefit pension plans covering substantially all hourly and salaried
employees in the U.S. and Puerto Rico (the "Pension Plans"). In accordance
with an agreement between Consolidated Cigar and MCG Intermediate Holdings
Inc. ("MCG"), which is a wholly owned subsidiary of Mafco Consolidated Group
who maintains the Abex Retirement Plan, the Pension Plans were merged with
and into the Abex Retirement Plan, effective December 31, 1995.

The Abex Retirement Plan will be the surviving plan with all the assets
and liabilities of the merged Pension Plans becoming assets and liabilities
of the surviving Abex Retirement Plan. The effect of the merger of the
Pension Plans was recorded as a contribution to capital of $4.8 million by
Mafco Consolidated Group. The capital contribution is net of a $2.4 million
deferred tax asset. The Company will continue to record pension expense
related to these plans in future years.

Consolidated Cigar also provides a separate non-contributory defined
benefit pension plan for hourly employees in its Richmond, Virginia location
and a benefit restoration plan ("BRP") for certain officers.

The pension plans' benefit formulas generally base payments to retired
employees upon their length of service and a percentage of qualifying
compensation during the 60 consecutive months in which compensation was
highest, in the ten years prior to retirement. Pension benefits are limited
to 33 years of credited service and are reduced by the actuarial equivalent
of any benefits received under Consolidated Cigar's 401(k) Plans.

The following table sets forth Consolidated Cigar's remaining pension
plans' funded status reflecting the merger with the Abex Retirement Plan. The
Richmond, Virginia plan's assets exceed its liabilities and the BRP is
unfunded. These amounts are recognized in the consolidated financial
statements under the captions "Other Liabilities" and "Accrued Expenses" as
unfunded liabilities with the 1995 data based upon actuarial projections:

F-17

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE J --PENSION PLANS (Continued)

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1995
-------------------------------- --------------------------------
ASSETS EXCEED ACCUMULATED ASSETS EXCEED ACCUMULATED
ACCUMULATED BENEFITS EXCEED ACCUMULATED BENEFITS EXCEED
BENEFITS ASSETS BENEFITS ASSETS
--------------- --------------- --------------- ---------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Plan assets at fair value .................... $478 $11,027 $462 $ --
Actuarial present value of
benefit obligation:
Vested benefits ............................. 353 14,180 368 139
Non-vested benefits ......................... 43 910 32 8
--------------- --------------- --------------- ---------------
Accumulated benefit obligations .............. 396 15,090 400 147
Effect of projected future
salary increases ............................ -- 4,620 -- 148
--------------- --------------- --------------- ---------------
396 19,710 400 295
--------------- --------------- --------------- ---------------
Funded status-over (under) ................... 82 (8,683) 62 (295)
Unrecognized net loss (gain) ................. (11) 290 6 (249)
Prior service cost not yet recognized in net
periodic pension cost ....................... 28 69 27 309
Adjustment for minimum liability ............. -- (7) -- --
Unrecognized net transition asset ............ (71) -- (67) --
--------------- --------------- --------------- ---------------
Net asset (liability) included in the Balance
Sheet ....................................... $ 28 $(8,331) $ 28 $(235)
=============== =============== =============== ===============
</TABLE>

The discount rate used in determining the actuarial present value of the
projected benefit obligation was 8 1/4% in 1994 and 7 1/4% in 1995. The rate
of increase in future compensation levels reflected in such determinations
was 5.0% and 4 1/2% for the U.S. and Puerto Rico Plans, respectively in 1994
and 4 1/2% and 4.0% respectively in 1995. The assumed long-term rate of
return on assets was 8 1/4% in 1993, 1994 and 1995. Consolidated Cigar's
funding policy is to contribute annually an amount necessary to satisfy the
Internal Revenue Service's minimum funding standards. Plan assets consist
principally of equity, fixed income and money market funds.

F-18

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTE J --PENSION PLANS (Continued)
The following table sets forth the periodic net pension expense:

<TABLE>
<CAPTION>
TWO MONTHS TEN MONTHS YEAR ENDED YEAR ENDED
ENDED MARCH ENDED DECEMBER DECEMBER 31, DECEMBER 31,
2, 1993 31, 1993 1994 1995
------------ -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service cost --benefits
earned during the
period ................ $ 103 $ 510 $ 615 $ 490
Interest cost on
projected benefit
obligation ............ 222 1,111 1,506 1,644
Actual return on
plan assets ........... (130) (649) (942) (2,598)
Net amortizations
and deferrals ......... (11) (56) 42 1,661
------------ -------------- -------------- --------------
Net pension expense ... $ 184 $ 916 $1,221 $ 1,197
============ ============== ============== ==============
</TABLE>

Consolidated Cigar has adopted two deferred compensation plans pursuant to
Section 401(k) of the Internal Revenue Code for all domestic salaried
employees and certain union employees who have a minimum of six months of
service (the "401(k) Plans"). It has been Consolidated Cigar's policy to
contribute 2% of each domestic salaried employee's compensation into their
401(k) Plan. Consolidated Cigar does not contribute to the union employees
401(k) Plan. Amounts expensed under the 401(k) Plans for the two months ended
March 2, 1993 were $30,800, for the ten months ended December 31, 1993 were
$154,200, for the year ended December 31, 1994 were $192,000 and for the year
ended December 31, 1995 were $202,000.

NOTE K --RELATED PARTY TRANSACTIONS

Pursuant to a Reimbursement Agreement between Mafco Holdings and
Consolidated Cigar, Mafco Holdings provides the Company with certain
allocated services upon request. In addition, as discussed in Note I, the
Company has agreed to pay Mafco Holdings and Mafco Consolidated Group certain
amounts related to income tax expense. Amounts due to affiliates totaled
$452,000 and $1.7 million at December 31, 1994 and 1995 respectively,
principally relating to income taxes.

The Company purchases certain raw materials from Mafco Worldwide
Corporation which amounted to $210,000, $265,000 and $269,000 for the years
ended December 31, 1993, 1994 and 1995, respectively. The Company also
provides services for Revlon, Inc., a subsidiary of Mafco Holdings which
amounted to $481,000, $763,000 and $874,000 for the years ended December 31,
1993, 1994 and 1995, respectively. Amounts due to and from these affiliates
were not significant at December 31, 1994 and 1995.

F-19

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
JUNE 29,
JUNE 29, 1996
1996 (UNAUDITED)
(UNAUDITED) NOTE E
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ........................................... $ 947 $ 947
Accounts receivable, less allowance of $4,499 ....................... 18,241 18,241
Inventories ......................................................... 42,915 42,915
Prepaid expenses and other .......................................... 4,568 4,568
----------- -----------
Total current assets .............................................. 66,671 66,671
Property, plant and equipment, net ................................... 37,275 37,275
Trademarks, less accumulated amortization of $2,887 .................. 31,588 31,588
Goodwill, less accumulated amortization of $5,768 .................... 60,549 60,549
Other intangibles and assets, less accumulated amortization of $4,205 4,435 4,435
----------- -----------
Total assets ...................................................... $200,518 $200,518
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
Current liabilities:
Current Portion of Promissory Note .................................. $ -- $ 5,000
Accounts payable .................................................... 6,579 6,579
Accrued expenses .................................................... 16,595 16,595
Due to affiliate .................................................... 637 637
----------- -----------
Total current liabilities ......................................... 23,811 28,811
Long-term debt ....................................................... 111,500 117,088
Promissory Note ...................................................... -- 65,000
Deferred tax and other liabilities ................................... 6,882 6,882
----------- -----------
Total liabilities ................................................. 142,193 217,781
----------- -----------
Commitments and contingencies ........................................
Stockholder's equity:
Common stock, $1.00 par value, 1,000 shares authorized, issued
and outstanding .................................................... 1 1
Additional paid-in capital (capital deficiency) ...................... 34,834 (17,264)
Retained earnings .................................................... 23,490 --
----------- -----------
Total stockholder's equity (deficit) .............................. 58,325 (17,263)
----------- -----------
Total liabilities and stockholder's equity ........................ $200,518 $200,518
=========== ===========
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-20

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
-------------------------------
JULY 1, 1995 JUNE 29, 1996
-------------- ---------------
<S> <C> <C>
Net sales .................................... $71,449 $92,200
Cost of sales ................................ 42,166 53,416
-------------- ---------------
Gross profit ................................. 29,283 38,784
Selling, general and administrative expenses 15,295 17,578
-------------- ---------------
Operating income ............................. 13,988 21,206
Other expenses:
Interest expense, net ....................... (6,650) (5,301)
Minority interest ........................... (45) (141)
Miscellaneous, net .......................... (438) (444)
-------------- ---------------
Income before provision for income taxes .... 6,855 15,320
Provision for income taxes ................... 1,266 4,143
-------------- ---------------
Net income ................................... $ 5,589 $11,177
============== ===============
Pro forma earnings per
common share ................................ $ 0.37
=======
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-21

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
TWENTY-SIX TWENTY-SIX
WEEKS ENDED WEEKS ENDED
JULY 1, 1995 JUNE 29, 1996
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income ..................................................... $ 5,589 $11,177
Adjustments to reconcile net income to net cash provided by
(used for) operating activities:
Depreciation and amortization .................................. 3,742 3,647
Deferred income ................................................ (103) (102)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable ........................................... (2,256) (3,358)
Inventories ................................................... (2,331) (3,893)
Prepaid expenses and other .................................... (450) (654)
Increase in:
Accounts payable .............................................. 1,227 2,782
Accrued expenses and other liabilities ........................ 910 1,069
-------------- ---------------
Net cash provided by operating activities ....................... 6,328 10,668
-------------- ---------------
Cash flows used for investing activities:
Capital expenditures ........................................... (370) (3,170)
Investment in joint venture .................................... -- (482)
Increase in other assets ....................................... 200 114
-------------- ---------------
Net cash used for investing activities .......................... (170) (3,538)
-------------- ---------------
Cash flows (used for) provided by financing activities:
(Repayment) borrowings of revolving loan, net .................. (700) 900
Dividends paid ................................................. (5,000) (7,180)
Due from affiliates and other borrowings ....................... (384) (1,048)
-------------- ---------------
Net cash used for financing activities .......................... (6,084) (7,328)
-------------- ---------------
Increase (decrease) in cash and cash equivalents ................ 74 (198)
Cash and cash equivalents, beginning of period .................. 1,700 1,145
-------------- ---------------
Cash and cash equivalents, end of period ........................ $ 1,774 $ 947
============== ===============
Supplemental disclosures of cash flow information:
Interest paid during the period ................................ $ 6,819 $ 5,521
Income taxes paid during the period ............................ 314 4,830
</TABLE>

See notes to unaudited condensed consolidated financial statements.

F-22

<PAGE>

CONSOLIDATED CIGAR HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE A --BASIS OF PRESENTATION

On June 15, 1995, Mafco Holdings Inc. ("Mafco Holdings") and Mafco
Consolidated Group Inc. ("Mafco Consolidated Group"), formerly known as Abex
Inc. ("Abex"), consummated an agreement and plan of merger (the "Merger
Agreement") executed between the parties on January 6, 1995. The Merger
Agreement provided for, among other things, the merger of C&F Merger Inc., a
subsidiary of Mafco Holdings and the indirect parent of both the Company and
Mafco Worldwide Corporation ("Mafco Worldwide") with Mafco Consolidated
Group, which was the surviving corporation in the merger. As a result, the
Company became an indirect wholly owned subsidiary of Mafco Consolidated
Group.

The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
accordingly include all adjustments (consisting only of normal recurring
accruals) which, in the opinion of management, are necessary for a fair
statement of the operations for the periods presented. Accordingly, they do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. The fiscal
year of the Company is comprised of four quarters with each quarter
consisting of thirteen weeks ending on Saturday except the last quarter which
ends on December 31st. The statements should be read in conjunction with the
consolidated financial statements of the Company and notes thereto for the
fiscal year ended December 31, 1995 included elsewhere herein. The results of
operations for the twenty-six week periods ended July 1, 1995 and June 29,
1996 are not necessarily indicative of the results for the entire year.

NOTE B --INVENTORIES

The components of inventories are as follows:

<TABLE>
<CAPTION>
JUNE 29, 1996
---------------
(IN THOUSANDS)
<S> <C>
Raw materials and supplies $29,684
Work in process ........... 2,276
Finished goods ............ 11,964
---------------
43,924
Reserve for obsolescence . (1,009)
---------------
$42,915
===============
</TABLE>

NOTE C --INITIAL PUBLIC OFFERING

On June 26, 1996, the Company filed a registration statement with the
Securities and Exchange Commission relating to an initial public offering
(the "Offering") of approximately 15% of its common stock. If the Offering is
consummated, the net proceeds are expected to be distributed as a dividend to
Mafco Consolidated Group.

NOTE D --PRO FORMA EARNINGS PER SHARE

Pro forma earnings per share gives effect to the Offering and the payment
to Mafco Consolidated Group of a $5.6 million cash dividend funded by
borrowings under Consolidated Cigar's credit agreement. Pro forma earnings
per share is calculated assuming that 30,000,000 shares of common stock are
outstanding upon the consummation of the Offering, as a result of the
expected conversion of the outstanding shares of the Company's current common
stock into approximately 24,600,000 shares

F-23

<PAGE>

of its newly created Class B Common Stock, par value $0.01 per share, and
the expected issuance of 5,400,000 shares of Class A Common Stock, par value
$0.01 per share, upon consummation of the Offering. On a pro forma basis, net
income would have been $11.0 million for the twenty-six weeks ended June 29,
1996.

NOTE E --PRO FORMA BALANCE SHEET

The Pro Forma Balance Sheet as of June 29, 1996 gives pro forma effect to
the expected issuance by the Company of a promissory note (the "Promissory
Note") in the aggregate principal amount of $70.0 million to Mafco
Consolidated Group in connection with the Offering and the payment to Mafco
Consolidated Group of a $5.6 million cash dividend funded by borrowings under
Consolidated Cigar's credit agreement. The Promissory Note is expected to be
payable in quarterly installments of $2.5 million beginning March 31, 1997
with the final installment payable on December 31, 2003.

F-24

<PAGE>

UNDERWRITING

Subject to the terms and conditions of the U.S. Underwriting Agreement,
the Company has agreed to sell to each of the U.S. Underwriters named below,
and each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated
and Chase Securities Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase from the Company, the
respective number of shares of Class A Common Stock set forth opposite its
name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A COMMON
UNDERWRITER STOCK
- ------------------------------------- --------------
<S> <C>
Goldman, Sachs & Co. ................. 1,006,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ................ 1,006,000
Morgan Stanley & Co. Incorporated ... 1,006,000
Chase Securities Inc. ................ 330,000
Sanford C. Bernstein & Co., Inc. .... 88,000
CS First Boston Corporation .......... 109,000
Dean Witter Reynolds Inc. ............ 109,000
Gruntal & Co., Incorporated .......... 88,000
Interstate/Johnson Lane Corporation . 88,000
Montgomery Securities ................ 109,000
Raymond James & Associates, Inc. .... 88,000
The Robinson-Humphrey Company, Inc. . 88,000
Scott & Stringfellow, Inc. ........... 88,000
Wasserstein Perella Securities, Inc. 109,000
Whale Securities Co., L.P. ........... 88,000
Total .............................. 4,400,000
==============
</TABLE>

Under the terms and conditions of the U.S. Underwriting Agreement, the
U.S. Underwriters are committed to take and pay for all of the shares offered
hereby, if any are taken.

The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth
on the cover page of this Prospectus and in part to certain dealers at such
price less a concession of $0.93 per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $0.10 per share
to certain brokers and dealers. After the shares of Class A Common Stock are
released for sale to the public, the offering price and other selling terms
may from time to time be varied by the Representatives.

The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and
sale of 1,000,000 shares of Class A Common Stock in an international offering
outside the United States. The offering price and aggregate underwriting
discounts and commissions per share for the Offerings are identical. The
closing of the U.S. Offering made hereby is a condition to the closing of the
International Offering, and vice versa. The representatives of the
International Underwriters are Goldman Sachs International, Merrill Lynch
International, Morgan Stanley & Co. International Limited and Chase Manhattan
International Limited.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution
of the shares offered hereby and subject to certain exceptions, it will
offer, sell or deliver the shares of Class A Common Stock, directly or
indirectly, only in the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (a) any individual who is a
resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase
is located in the United States. Each of the International Underwriters has
agreed pursuant to the Agreement Between that, as a part of the distribution
of the shares offered as a part of the International Offering and subject to
certain exceptions, it will (i) not, directly or indirectly, offer, sell or
deliver shares of Class A Common Stock (a)

U-1

<PAGE>

in the United States or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United
States or to any U.S. persons and (ii) cause any dealer to whom it may sell
such shares at any concession to agree to observe a similar restriction.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so
sold shall be the initial public offering price, less an amount not greater
than the selling concession.

The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
360,000 additional shares of Class A Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their
over-allotment option, the U.S. Underwriters have severally agreed, subject
to certain conditions, to purchase approximately the same percentage thereof
that the number of shares to be purchased by each of them, as shown in the
foregoing table, bears to the 4,400,000 shares of Class A Common Stock
offered hereby. The Company has granted the International Underwriters a
similar option to purchase up to an aggregate of 150,000 additional shares of
Class A Common Stock.

The Company and Mafco Consolidated Group have agreed that, subject to
certain exceptions, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date
of this Prospectus, they will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee
stock option or purchase plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) which are substantially similar to the shares of Class A Common
Stock or which are convertible into or exchangeable for securities which are
substantially similar to the shares of Class A Common Stock without the prior
written consent of Goldman, Sachs & Co., except for the shares of Class A
Common Stock offered in connection with the Offerings.

The U.S. Underwriters have reserved up to 450,000 shares of Class A Common
Stock offered hereby for sale to certain employees of the Company at the
initial public offering price. The number of shares available to the general
public will be reduced to the extent such employees purchase reserved shares.
Any reserved shares that are not so purchased by such employees will be
offered by the U.S. Underwriters to the general public on the same terms as
the other shares offered hereby.

The representatives of the U.S. Underwriters and the International
Underwriters have informed the Company that they do not expect sales to
accounts over which the U.S. Underwriters and the International Underwriters
exercise discretionary authority to exceed five percent of the total number
of shares of Class A Common Stock offered by them.

Prior to the Offerings, there has been no public market for the Class A
Common Stock. The public offering price was negotiated among the Company and
the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Class A Common Stock, in addition to prevailing market
conditions, were the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of
the Company's management and the consideration of the above factors in
relation to market valuation of companies in related businesses. There can be
no assurance that an active trading market will develop for the Class A
Common Stock or that the Class A Common Stock will trade in the public market
subsequent to the Offerings at or above the public offering price.

The Class A Common Stock has been approved for listing on the NYSE under
the symbol "CIG," subject to official notice of issuance. In order to meet
one of the requirements for listing the Class A Common Stock on the NYSE, the
U.S. Underwriters have undertaken to sell lots of 100 or more shares to a
minimum of 2,000 beneficial holders.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.

Certain of the U.S. Underwriters and the International Underwriters and
their affiliates participate on a regular basis in various general financing
and banking transactions for the Company and its affiliates. Chase Securities
Inc. is an affiliate of The Chase Manhattan Bank, which is agent bank and a
lender under the Credit Agreement.

U-2

<PAGE>

[GRAPHIC OF MONTECRISTO CIGAR OMITTED]

<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary ......................... 3
Risk Factors ............................... 9
Use of Proceeds ............................ 16
Dividend Policy ............................ 16
Dilution ................................... 17
Capitalization ............................. 18
Selected Historical and Pro Forma Financial
Data ...................................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ................................ 22
Business ................................... 29
Management ................................. 40
Ownership of Common Stock .................. 48
Certain Relationships and Related
Transactions .............................. 48
Description of Capital Stock ............... 50
Shares Eligible for Future Sale ............ 53
Description of Certain Indebtedness ....... 54
Certain United States Tax Consequences to
Non-United States Holders ................. 55
Legal Matters .............................. 57
Experts .................................... 57
Available Information ...................... 57
Index to Consolidated Financial Statements F-1
Underwriting ............................... U-1
</TABLE>

THROUGH AND INCLUDING SEPTEMBER 9, 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER
A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

5,400,000 SHARES

CONSOLIDATED CIGAR
HOLDINGS INC.

CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

PROSPECTUS

GOLDMAN, SACHS & CO.

MERRILL LYNCH & CO.

MORGAN STANLEY & CO.
INCORPORATED

CHASE SECURITIES INC.

REPRESENTATIVES OF THE UNDERWRITERS

<PAGE>

ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

5,400,000 SHARES

CONSOLIDATED CIGAR HOLDINGS INC.

CLASS A COMMON STOCK

(PAR VALUE $0.01 PER SHARE)

All of the 5,400,000 shares of Class A Common Stock offered hereby are
being sold by the Company. Of the 5,400,000 shares of Class A Common Stock
offered, 1,000,000 shares are being offered hereby in an international
offering outside the United States and 4,400,000 shares are being offered in
a concurrent United States offering. The initial public offering price and
the aggregate underwriting discount per share are identical for both
offerings. See "Underwriting."

Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. For factors considered in determining the
initial public offering price, see "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.

The Class A Common Stock has been approved for listing on the New York
Stock Exchange under the symbol "CIG," subject to official notice of
issuance.

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

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.

(2) Before deducting estimated expenses of $2,400,000 payable by the
Company.

(3) The Company has granted the International Underwriters an option for 30
days to purchase up to an additional 150,000 shares of Class A Common
Stock at the initial public offering price per share, less the
underwriting discount, solely to cover over-allotments. Additionally,
the Company has granted the U.S. Underwriters a similar option with
respect to an additional 525,000 shares as part of the concurrent U.S.
offering. If such options are exercised in full, the total initial
public offering price, underwriting discount and proceeds to Company
will be $139,725,000, $9,416,250 and $130,308,750, respectively. See
"Underwriting."

The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that certificates for the shares will be ready for delivery in New
York, New York, on or about August 21, 1996, against payment therefor in
immediately available funds.

GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL
MORGAN STANLEY & CO.
INTERNATIONAL

CHASE MANHATTAN INTERNATIONAL

The date of this Prospectus is August 15, 1996.

<PAGE>

ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

[GRAPHIC OF HAND HOLDING H. LIPMAN CIGAR OMITTED]

This Prospectus does not constitute an offer to sell or the solicitation
of an offer to buy the shares in any jurisdiction in which such offer or
solicitation is unlawful. There are restrictions on the offer and sale of the
shares in the United Kingdom. All applicable provisions of the Financial
Services Act 1986 and the Public Offers of Securities Regulations 1995 with
respect to anything done by any person in relation to the shares, in, from or
otherwise involving the United Kingdom must be complied with. See
"Underwriting."

In this Prospectus, references to "dollars", "U.S.$" and "$" are to United
States dollars.

<PAGE>

ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

UNDERWRITING

Subject to the terms and conditions of the International Underwriting
Agreement, the Company has agreed to sell to each of the International
Underwriters named below, and each of such International Underwriters, for
whom Goldman Sachs International, Merrill Lynch International, Morgan Stanley
& Co. International Limited and Chase Manhattan International Limited are
acting as representatives (the "Representatives"), has severally agreed to
purchase from the Company, the respective number of shares of Class A Common
Stock set forth opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A COMMON
STOCK
--------------
UNDERWRITER
- -------------------------------------------
<S> <C>
Goldman Sachs International ................ 264,000
Merrill Lynch International ................ 264,000
Morgan Stanley & Co. International Limited 264,000
Chase Manhattan International Limited ..... 88,000
ABN AMRO Rothschild ........................ 40,000
Barclays de Zoete Wedd Limited ............. 40,000
Credit Lyonnais Securities ................. 40,000
--------------
Total .................................... 1,000,000
==============
</TABLE>

Under the terms and conditions of the International Underwriting
Agreement, the International Underwriters are committed to take and pay for
all of the shares offered hereby, if any are taken.

The International Underwriters propose to offer the shares of Class A
Common Stock in part directly to the public at the initial public offering
price set forth on the cover page of this Prospectus and in part to certain
dealers at such price less a concession of $0.93 per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $0.10 per share to certain brokers and dealers. After the shares of
Class A Common Stock are released for sale to the public, the offering price
and other selling terms may from time to time be varied by the
Representatives.

The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. Offering (the
"U.S. Underwriters") providing for the concurrent offer and sale of 4,400,000
shares of Class A Common Stock in a U.S. offering in the United States. The
offering price and aggregate underwriting discounts and commissions per share
for the Offerings are identical. The closing of the International Offering
made hereby is a condition to the closing of the U.S. Offering, and vice
versa. The representatives of the U.S. Underwriters are Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated and Chase Securities Inc.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the Offerings, each of the
U.S. Underwriters has agreed that, as a part of the distribution of the
shares offered as part of the U.S. Offering and subject to certain
exceptions, it will offer, sell or deliver the shares of Class A Common
Stock, directly or indirectly, only in the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction (the "United States")
and to U.S. persons, which term shall mean, for purposes of this paragraph:
(a) any individual who is a resident of the United States or (b) any
corporation, partnership or other entity organized in or under the laws of
the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of
the International Underwriters named herein has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered
hereby and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Class A Common Stock (a) in the
United States or to any U.S. persons or (b) to any person who it believes
intends to reoffer, resell or deliver the shares in the United States or to
any U.S. persons and (ii) cause any dealer to whom it may sell such shares at
any concession to agree to observe a similar restriction.

U-1

<PAGE>
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to
an aggregate of 150,000 additional shares of Class A Common Stock solely to
cover over-allotments, if any. If the International Underwriters exercise
their over-allotment option, the International Underwriters have severally
agreed, subject to certain conditions, to purchase approximately the same
percentage thereof that the number of shares to be purchased by each of them,
as shown in the foregoing table, bears to the 1,000,000 shares of Class A
Common Stock offered hereby. The Company has granted the U.S. Underwriters a
similar option to purchase up to an aggregate of 525,000 additional shares of
Class A Common Stock.

Each International Underwriter has also agreed that (a) it has not offered
or sold and prior to the date six months after the date of issue of the
shares of Class A Common Stock will not offer or sell any shares of Class A
Common Stock to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses
or otherwise in circumstances which have not resulted and will not result in
an offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (b) it has complied, and will comply,
with all applicable provisions of the Financial Services Act 1986 of Great
Britain with respect to anything done by it in relation to the shares of
Class A Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
shares of Class A Common Stock to a person who is of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1995 of Great Britain or is a person to whom the document
may otherwise lawfully be issued or passed on.

Buyers of shares of Class A Common Stock offered hereby may be required to
pay stamp taxes and other charges in accordance with the laws and practices
of the country of purchase in addition to the initial public offering price.

U-2

<PAGE>

ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

The U.S. Underwriters have reserved up to 360,000 shares of Class A
Common Stock offered as part of the U.S. Offering for sale to certain
employees of the Company at the public offering price. The number of shares
available to the general public will be reduced to the extent such employees
purchase reserved shares. Any reserved shares that are not so purchased by
such employees will be offered by the U.S. Underwriters to the general public
on the same terms as the other shares offered as part of the U.S. Offering.

The representatives of the International Underwriters and the U.S.
Underwriters have informed the Company that they do not expect sales to
accounts over which the International Underwriters and the U.S. Underwriters
exercise discretionary authority to exceed five percent of the total number
of shares of Class A Common Stock offered by them.

The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.

Certain of the International Underwriters and U.S. Underwriters and their
affiliates participate on a regular basis in various general financing and
banking transactions for the Company and its affiliates. Chase Securities
Inc. is an affiliate of The Chase Manhattan Bank, which is agent bank and a
lender under the Credit Agreement.

U-3

<PAGE>

[GRAPHIC OF MONTECRISTO CIGAR OMITTED]

<PAGE>
ALTERNATE PAGE FOR INTERNATIONAL PROSPECTUS

TABLE OF CONTENTS

5,400,000 SHARES

CONSOLIDATED CIGAR
HOLDINGS INC.

CLASS A COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

PROSPECTUS

GOLDMAN SACHS INTERNATIONAL

MERRILL LYNCH INTERNATIONAL

MORGAN STANLEY & CO.
INTERNATIONAL

CHASE MANHATTAN INTERNATIONAL

REPRESENTATIVES OF THE UNDERWRITERS