PANAVISION INC, 424B4, 1996-11-21

PANAVISION INC
424B4, 1996-11-21
PHOTOGRAPHIC EQUIPMENT & SUPPLIES

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<PAGE>
Filed Pursuant to Rule 424(b)(4)
Registration No. 333-12235

3,500,000 SHARES

PANAVISION INC.
[LOGO]
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)
----------------
Of the 3,500,000 shares of Common Stock offered, 2,800,000 shares are being
offered hereby in the United States and 700,000 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 will be
identical for both Offerings. See "Underwriting."

All of the 3,500,000 shares of Common Stock offered hereby are being sold by
the Company. Prior to the Offerings, there has been no public market for the
Common Stock of the Company. For factors considered in determining the initial
public offering price, see "Underwriting."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE COMMON STOCK.

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "PVI," subject to 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......................................................... $17.00 $1.19 $15.81
Total (3)......................................................... $ 59,500,000 $ 4,165,000 $ 55,335,000
</TABLE>

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(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 $1,950,000 payable by the Company.

(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 420,000 shares of 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
105,000 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 $68,425,000,
$4,789,750 and $63,635,250, 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
November 26, 1996, against payment therefor in immediately available funds.

GOLDMAN, SACHS & CO.
SCHRODER WERTHEIM & CO.
COWEN & COMPANY
------------------

The date of this Prospectus is November 20, 1996.

<PAGE>
[PICTURES OF PANAVISION CAMERA, LENS, OSCAR STATUETTES AND LISTS OF FILMS AND
TELEVISION SHOWS WHICH HAVE USED PANAVISION EQUIPMENT]

THE NAME THAT IS WORTH A THOUSAND PICTURES

<PAGE>
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE 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, OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

ADDITIONAL INFORMATION

The Company has filed with the Commission under the Securities Act a
Registration Statement on Form S-1 with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement in accordance with the rules and regulations of the
Commission. For further information pertaining to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement, including
the exhibits thereto and the financial statements, notes and schedule filed as a
part thereof. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. The Registration Statement may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's Regional
Offices in New York (Seven World Trade Center, New York, New York 10048) and
Chicago (Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois
60661). Copies of such material can be obtained from the public reference
section of the Commission at prescribed rates by writing to the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Such materials can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005 or on the Internet at
http://www.sec.gov.

---------------------
Panavision-Registered Trademark-, PRIMO ZOOM-Registered Trademark-,
Panaflex-Registered Trademark-, Panahead-Registered Trademark-,
3-Perf-Registered Trademark- and Panastar-Registered Trademark- are registered
trademarks of the Company. Oscar-Registered Trademark- is a registered trademark
of the Academy of Motion Picture Arts and Sciences.

The Company intends to furnish its stockholders annual reports containing
audited financial statements and quarterly reports containing unaudited interim
financial information for the first three fiscal quarters of each fiscal year of
the Company.

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION, INCLUDING "RISK FACTORS" AND
THE HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED
HEREIN, THE INFORMATION IN THIS PROSPECTUS (I) ASSUMES NO EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION, (II) GIVES EFFECT TO A 1,413 : 1 STOCK
SPLIT OF THE COMMON STOCK TO BE EFFECTED PRIOR TO THE CLOSING OF THE OFFERINGS
AND (III) GIVES EFFECT TO AN AMENDMENT AND RESTATEMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO BE EFFECTED PRIOR TO THE CLOSING OF THE
OFFERINGS. UNLESS THE CONTEXT INDICATES OR REQUIRES OTHERWISE, AS USED IN THIS
PROSPECTUS, THE "COMPANY" OR "PANAVISION" MEANS PANAVISION INC. AND ALL OF ITS
SUBSIDIARIES AND ITS RESPECTIVE PREDECESSORS.

THE COMPANY

Panavision Inc. (the "Company" or "Panavision") is a leading designer and
manufacturer of high-precision film camera systems, comprising cameras, lenses
and accessories, for the motion picture and television industries. The Company's
camera systems are not available for sale and are rented exclusively through its
domestic and international owned and operated facilities and agent network.
Panavision-Registered Trademark- is recognized in the motion picture and
television industries as the preeminent brand name for cinematography equipment.
Since the Company was founded, Panavision has received two OSCARS and 17 Awards
for Scientific and Technical Achievement from the Academy of Motion Picture Arts
and Sciences. Since 1990, two-thirds of the Academy Award nominees for Best
Cinematography, and five of the six cinematographers who have won the OSCAR for
Best Cinematography, used Panavision camera systems.

Panavision camera systems were used to film all of the 1995 top 10 U.S. box
office movies requiring film cameras, including BATMAN FOREVER, APOLLO 13, DIE
HARD WITH A VENGEANCE and ACE VENTURA: WHEN NATURE CALLS. Similarly, many of the
top box office films in 1996, including MISSION: IMPOSSIBLE, INDEPENDENCE DAY,
ERASER, TWISTER, THE ROCK and A TIME TO KILL, were filmed with Panavision camera
systems. In addition to the Company's involvement in the motion picture
industry, a predominant number of U.S. prime time episodic, or "series,"
television programs that are shot on film use Panavision camera systems,
including FRIENDS, SEINFELD, FRASIER and E.R.

The Company believes that its position as an industry leader results from
its broad range of technologically superior and innovative products, its
longstanding collaborative relationships with filmmakers, the breadth of its
inventory of camera equipment and its dedication to customer service. Panavision
is the only supplier of cinematography equipment that manufactures a complete
camera system incorporating its own range of proprietary prime and zoom lenses,
the most critical components of a camera system. The Company continuously
addresses the technical and creative needs of its customers by designing and
manufacturing unique accessories that in many instances have become the industry
standard.
The motion picture and television industries have shown steady growth over
the past several years, and the Company expects the industries to continue to
grow for the foreseeable future. The Company has been successful in providing
camera systems to these industries, capturing over 75% of the market in 1995 for
major studio feature films and episodic television programs in North America. In
addition, the Company estimates that in 1995 it serviced over one-third of the
independent feature film market in North America and 14% of the feature film
market in the United Kingdom and Europe. The Company also supplies camera
systems to the television commercial market in North America, the United
Kingdom, Europe and Japan.

While the Company has been successful in growing its business, its ability
to capture a larger share of the U.S., U.K. and European feature film and
commercial markets has been inhibited by rental equipment shortages resulting
from limited manufacturing capacity and capital expenditure constraints imposed
by the Company's credit facilities. With the Company's relocation to a new
manufacturing facility, its recent recapitalization and the repayment of
indebtedness with proceeds from the Offerings,

3
<PAGE>
the Company believes it will be well-positioned to (i) significantly increase
its production of camera systems, (ii) increase its leading share of the North
American feature film market, (iii) increase its share of the international
feature film market with an emphasis on Europe and (iv) increase its share of
the North American and international commercial markets.

In addition to manufacturing and renting camera systems, the Company also
rents lighting, lighting grip, power generation and related transportation
equipment through Lee Lighting Limited, the largest lighting rental company in
the United Kingdom, as well as through two owned and operated facilities in
Orlando and Toronto. The Company also manufactures and sells lighting filters
and other color-correction and diffusion filters through Lee Filters.

For information concerning the compilation of market share and certain other
information, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Overview."

Panavision Inc. was incorporated in Delaware in 1990. Predecessors of the
Company have been engaged in the design and manufacturing of cinematography
equipment since 1954. The Company's principal executive office is located at
6219 De Soto Avenue, Woodland Hills, California 91367, and its telephone number
is (818) 316-1000.

THE RECAPITALIZATION

The Company conducts its business through Panavision International, L.P.
("PILP") and PILP's subsidiaries. In May 1996, the Company effected a
recapitalization (the "Recapitalization"), pursuant to which, for a total of
$126.1 million in cash, the Company acquired all of the equity interests in PILP
it did not previously own and retired all of PILP's outstanding debt securities.
As part of the Recapitalization, Warburg, Pincus Capital Company, L.P. (together
with its wholly owned subsidiaries, "Warburg, Pincus") and management loaned the
Company $12.5 million in the form of subordinated debt, and the Company borrowed
$110.0 million through a credit arrangement. The balance of the funds required
came from the Company's cash on hand. See "The Recapitalization."

THE OFFERINGS

The offering of 2,800,000 shares of Common Stock initially being offered in
the United States (the "U.S. Offering") and the offering of 700,000 shares of
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>
<S> <C>
Common Stock offered:
U.S. Offering................................. 2,800,000 shares
International Offering........................ 700,000 shares
Total....................................... 3,500,000 shares
Common Stock to be outstanding after the
Offerings:.................................... 17,630,000 shares(1)
Use of Proceeds................................. Repayment of outstanding indebtedness.
See "Use of Proceeds."(2)
Proposed NYSE symbol............................ "PVI"
</TABLE>

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

(1) Excludes 2,190,150 shares of Common Stock reserved for issuance under the
Company's stock option plan, of which options for 2,135,250 shares have been
granted or will be issued upon completion of the Offerings. See
"Management--Compensation Pursuant to Plans." Assumes the Underwriters'
over-allotment options are not exercised. If such over-allotment is
exercised, up to an additional 525,000 shares will be issued and sold by the
Company.

(2) Of the $53.4 million of estimated net proceeds of the Offerings,
approximately $12.9 million will be used to repay indebtedness (including
accrued interest) owed to Warburg, Pincus and management. See"Use of
Proceeds" and "Certain Transactions."

4
<PAGE>
SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1995 1996(2)
--------- --------- ----------- --------- -----------
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental.................................. $ 54,031 $ 61,642 $ 75,083 $ 54,055 $ 62,814
Lighting rental................................ 933 1,160 4,121 3,210 7,598
Sales and other................................ 11,746 14,298 16,124 12,213 14,638
--------- --------- ----------- --------- -----------
Total...................................... 66,710 77,100 95,328 69,478 85,050
Gross margin....................................... 30,278 36,105 50,959 36,860 44,971
Operating income................................... 9,131 14,453 19,487 13,131 19,987
Net interest expense............................... 5,229 5,318 5,616 4,373 5,589
Income before non-controlling partners' interest in
PILP and income taxes............................ 4,085 9,800 14,286 9,477 14,610
Net income......................................... $ 3,305 $ 7,078 $ 5,563 $ 4,435 $ 8,098
--------- --------- ----------- --------- -----------
--------- --------- ----------- --------- -----------
Net income per common share........................ $ .22 $ .46 $ .36 $ .29 $ .53
--------- --------- ----------- --------- -----------
--------- --------- ----------- --------- -----------
Shares used in computation......................... 15,277 15,277 15,277 15,277 15,277
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED(3)
--------- ---------------

BALANCE SHEET DATA:
Total assets............................................................. $ 164,713 $ 164,713
Total current liabilities................................................ 28,784 28,441
Long-term debt........................................................... 110,492 57,450
Stockholders' equity..................................................... 24,158 77,543
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995(1) 1995 1996(2)
--------- --------- --------- --------- ---------
OTHER DATA:
EBITDA (4)...................................... $ 23,910 $ 30,149 $ 37,381 $ 26,615 $ 33,938
Net cash provided by operations................. 19,304 26,379 34,317 21,146 17,645
Net cash used in investing activities........... (11,444) (15,449) (15,699) (7,682) (22,483)
Net cash used in financing activities........... (2,827) (4,379) (9,724) (6,083) (18,226)
Capital expenditures............................ 12,678 16,251 19,454 11,060 16,641
EBITDA margin percentage (5).................... 35.8% 39.1% 39.2% 38.3% 39.9%
Gross margin percentage (5)..................... 45.4 46.8 53.5 53.1 52.9
Operating income percentage (5)................. 13.7 18.7 20.4 18.9 23.5
</TABLE>

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(1) Includes operating results of Panavision Canada Corporation, a former agent,
since its acquisition effective January 20, 1995.

(2) Includes operating results of Lee Lighting Limited since its acquisition
effective July 1, 1996.

(3) Adjusted to reflect (i) the sale of 3,500,000 shares of Common Stock in the
Offerings and (ii) the application of the estimated net proceeds therefrom.
See "Use of Proceeds."
(4) EBITDA is calculated by adding back all depreciation and amortization and
net interest expense to income before non-controlling partners' interest in
PILP and income taxes. The Company believes that EBITDA serves as an
important financial analysis tool for measuring and comparing financial
information such as liquidity, operating performance and leverage. EBITDA
should not be considered by the reader as an alternative to net income or
other cash flow measures determined under generally accepted accounting
principles as an indicator of Panavision's performance or liquidity.
Additionally, due to the capital intensive nature of the Company's business,
depreciation and amortization is a significant component of the Company's
operating results. EBITDA as disclosed herein may not be comparable to
similarly titled amounts disclosed by other companies.
(5) EBITDA margin percentage is defined as EBITDA as a percentage of revenue,
gross margin percentage is defined as gross margin as a percentage of
revenue and operating income percentage is defined as operating income as a
percentage of revenue.

5
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following pro forma statement of operations information gives effect to
the Recapitalization and the July 1996 acquisition (the "Lee Lighting
Acquisition") of Lee Lighting Limited ("Lee Lighting"), in each case as if such
transactions had occurred at the beginning of the period presented. The pro
forma financial information should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Unaudited Pro Forma Condensed Consolidated Financial Statements and the
Consolidated Financial Statements of the Company and Lee Lighting and the notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
YEAR ENDED --------------------
DECEMBER 31, 1995 1995 1996
-------------------------------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental......................... $ 75,083 $ 54,055 $ 62,814
Lighting rental....................... 22,081 16,945 17,260
Sales and other....................... 17,913 13,697 15,376
---------- --------- ---------
Total............................. 115,077 84,697 95,450
Gross margin.............................. 55,163 40,577 47,250
Operating income.......................... 20,750 14,392 20,735
Net interest expense...................... 9,458 7,094 7,109
Net income................................ $ 10,382 $ 6,997 $ 11,080
---------- --------- ---------
---------- --------- ---------
Net income per common share(1)............ $ .68 $ .46 $ .73
---------- --------- ---------
---------- --------- ---------
Shares used in computation................ 15,277 15,277 15,277

OTHER DATA:
EBITDA (2)................................ $ 40,616 $ 29,266 $ 35,563
Net cash provided by operations........... 33,868 20,963 16,946
Net cash used in investing activities..... (17,108) (8,888) (23,618)
Net cash used in financing activities..... (9,724) (6,083) (18,226)
Capital expenditures...................... 20,936 12,321 17,791
EBITDA margin percentage (3).............. 35.3% 34.6% 37.3%
Gross margin percentage (3)............... 47.9 47.9 49.5
Operating income percentage (3)........... 18.0 17.0 21.7
</TABLE>

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(1) Supplementary pro forma net income per share adjusted to reflect the use of
the proceeds from the Offerings would be $.75, $.52 and $.73 for the year
ended December 31, 1995 and the nine months ended September 30, 1995 and
1996, respectively.

(2) EBITDA is calculated by adding back all depreciation and amortization and
net interest expense to income before income taxes. The Company believes
that EBITDA serves as an important financial analysis tool for measuring and
comparing financial information such as liquidity, operating performance and
leverage. EBITDA should not be considered by the reader as an alternative to
net income or other cash flow measures determined under generally accepted
accounting principles as an indicator of Panavision's performance or
liquidity. Additionally, due to the capital intensive nature of the
Company's business, depreciation and amortization is a significant component
of the Company's operating results. EBITDA as disclosed herein may not be
comparable to similarly titled amounts disclosed by other companies.

(3) EBITDA margin percentage is defined as EBITDA as a percentage of revenue,
gross margin percentage is defined as gross margin as a percentage of
revenue and operating income percentage is defined as operating income as a
percentage of revenue.

6
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RISK FACTORS

PROSPECTIVE PURCHASERS OF THE 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 COMMON STOCK.

DEPENDENCE ON FEATURE FILM INDUSTRY

The Company's operations are dependent on the feature film market,
including, in particular, that in the United States. Over the past four years,
the Company has benefited from an increase in the number of major studio feature
films (and especially large-budget action films), which tend to use larger
camera packages than the feature films made by independent producers. A
significant reduction in the total number of feature films produced, including,
in particular, major studio or large-budget action films, could have a material
adverse impact on the Company's operations.

COMPETITION

The market for the Company's cinematography equipment is highly competitive,
primarily driven by technology, customer service and, to a lesser extent, price.
The Company's continued success will depend on its ability to develop,
manufacture and market its products. As a manufacturer of equipment, the
Company's primary competitors are Arriflex Corporation ("Arriflex") and Moviecam
F.G. Bauer G.m.b.H ("Moviecam"). As a renter of equipment, the Company competes
with numerous rental houses, which purchase equipment from other manufacturers
and then rent that equipment to their customers. There can be no assurance that
the Company will be able to continue to develop, manufacture and market its
products successfully against existing or new competitors. See "Business--
Competition."

TECHNOLOGICAL CHANGE

The motion picture and television industries are subject to technological
change, evolving industry standards, changing customer requirements and
improvements in and expansion of product offerings. The Company's ability to
anticipate changes in technology, industry standards, customer requirements and
product offerings and to develop and introduce new and enhanced products will be
significant factors in the Company's ability to remain a leader in the
manufacturing and rental of cinematography equipment. Although the Company
believes it is well-positioned to meet the changing needs of the motion picture
and television industries, there can be no assurance that products or
technologies developed by others will not render the Company's products or
technologies noncompetitive or obsolete. See "Business--Products--Research and
Product Development."

DEPENDENCE ON KEY PERSONNEL

The Company is dependent upon the continued services of the key officers and
management personnel listed under "Management." The loss of key personnel could
have a material adverse effect on the Company. The Company believes that its
future success also will depend significantly upon its ability to attract,
motivate and retain additional highly skilled managerial, operational, technical
and sales and marketing personnel. Competition for such personnel is intense,
and there can be no assurance that the Company will be successful in attracting,
assimilating and retaining the personnel it requires to develop, manufacture and
market its products or expand its operations. See "Business--Employees,"
"Management--Executive Officers and Directors" and "--Other Key Employees."

DEPENDENCE UPON KEY SUPPLIERS

The Company uses outside vendors for the manufacture of certain components
used in its products, such as the grinding, manufacture and polishing of certain
camera lens elements. The Company

7
<PAGE>

generally does not have supply contracts with its outside vendors. Although the
Company believes that such vendors could be replaced, the loss of one or more of
such vendors could disrupt the Company's business. See
"Business--Products--Manufacturing and Assembly."

INTERNATIONAL SALES; FOREIGN EXCHANGE RISK

In 1993, 1994 and 1995, approximately 39%, 45% and 45% of the Company's
revenue, respectively, was generated outside of the United States, primarily in
the United Kingdom and Canada. The Company intends to expand the scope of its
operations outside of the United States and expects that international
operations will continue to account for a significant portion of its revenue in
future periods. The results of operations of the Company's U.K. subsidiaries are
translated from pounds sterling to United States dollars. Therefore, the
Company's results of operations are affected by fluctuations in exchange rates
between such currencies.

DEPENDENCE ON MANUFACTURING FACILITY

The Company's manufacturing facility is located in Woodland Hills,
California. Since the Company is dependent on its manufacturing facility, a
disruption of the Company's manufacturing operations could have a material
adverse effect on the Company's business, financial condition and results of
operations. Such disruption could result from various factors including human
error or a natural disaster such as earthquake, fire or flood. The Company does
not maintain business interruption insurance that would reimburse the Company in
the event of an earthquake.

INFLUENCE BY EXISTING STOCKHOLDERS

Upon completion of the Offerings, the Company's existing stockholders,
including Warburg, Pincus and the Company's executive officers, will
beneficially own approximately 80.5% of the outstanding shares of the Company's
voting stock. As a result, existing stockholders will be able to continue to
elect the Company's Board of Directors and take other corporate actions
requiring stockholder approval, as well as dictate the direction and policies of
the Company. Such concentration of ownership also could delay, deter or prevent
a change in control of the Company. In addition, pursuant to a stockholders
agreement, Warburg, Pincus and management have the right to designate five
persons to be appointed or nominated to the Company's Board of Directors. See
"Management--Stockholders Agreement" and "Principal Stockholders."

ABSENCE OF PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offerings, there has been no public market for the Common
Stock. Although the Common Stock has been approved for listing, subject to
notice of issuance, on the New York Stock Exchange ("NYSE"), there can be no
assurance that an active trading market for the Common Stock will develop or be
sustained following the Offerings or that the market price of the Common Stock
will not decline below the initial public offering price. The initial public
offering price was determined by negotiation between the Company and the
Representatives of the Underwriters based upon several factors and may not be
indicative of future market prices. The price at which the Common Stock will
trade will depend upon a number of factors, some of which are beyond the
Company's control. Such factors include, but are not limited to, the Company's
historical and anticipated operating results, general market and economic
conditions, quarterly fluctuations in the Company's financial and operating
results, announcements by the Company or others and developments affecting the
Company, its products, its clients, the markets in which it competes or the
industry generally. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations. These broad market
fluctuations may adversely affect the market price of the Common Stock. See
"Underwriting."

8
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL FOR ADVERSE EFFECT ON STOCK PRICE;
REGISTRATION RIGHTS

Sales of a substantial number of shares of Common Stock in the public market
or the prospect of such sales could adversely affect prevailing market prices
for the Common Stock. Upon completion of the Offerings, the Company will have
outstanding 17,630,000 shares of Common Stock. Of these shares, the 3,500,000
shares of Common Stock to be sold in the Offerings will be freely tradable
without restriction under the Securities Act of 1933, as amended (the
"Securities Act"), except for any such shares which may be acquired by an
"affiliate" of the Company. The Company and certain stockholders, who will own
an aggregate of approximately 14,130,000 shares of Common Stock after the
Offerings, have agreed not to sell or otherwise dispose of any shares of Common
Stock or substantially similar securities for 180 days after the date of this
Prospectus without the prior written consent of Goldman, Sachs & Co. Subject to
such lock-up arrangements, approximately 12,717,000 shares of Common Stock will
be eligible for sale in the public market subject to compliance with the resale
volume limitations and other restrictions of Rule 144 under the Securities Act
and an additional 1,413,000 shares will be eligible for sale in the public
market under Rule 144 under the Securities Act in June 1998. Promptly after the
closing of the Offerings, the Company intends to file a registration statement
under the Securities Act covering the sale of 2,190,150 shares of Common Stock
reserved for issuance under its stock option plan. Upon completion of the
Offerings, there will be outstanding options to purchase a total of 2,135,250
shares of Common Stock. See "Management--Compensation Pursuant to Plans." The
Company has granted certain stockholders registration rights with respect to
approximately 14,130,000 shares of Common Stock. See "Description of Capital
Stock--Registration Rights." The sale of such shares could have a material
adverse effect on the Company's ability to raise capital in the public markets.
See "Shares Eligible for Future Sale."

IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW INVESTORS

Investors purchasing shares of Common Stock in the Offerings will incur
substantial and immediate dilution of $12.63 per share in the net tangible book
value of the Common Stock from the initial public offering price. In addition,
these investors will incur additional dilution upon the exercise of outstanding
stock options. See "Dilution."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS

The Company's Certificate of Incorporation authorizes the issuance of
Preferred Stock without stockholder approval and upon such terms as the Board of
Directors may determine. The issuance of Preferred Stock could have the effect
of making it more difficult for a third party to acquire, or of discouraging a
third party from acquiring or making a proposal to acquire, a majority of the
outstanding stock of the Company and could adversely affect the prevailing
market price of the Common Stock. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of holders of
Preferred Stock that may be issued in the future. The Company has no present
plans to issue any shares of Preferred Stock. See "Description of Capital
Stock--Preferred Stock."

9
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the sale of the 3,500,000 shares of
Common Stock offered hereby are estimated to be $53.4 million ($61.7 million if
the Underwriters' over-allotment option is exercised in full), after deducting
the underwriting discount and estimated offering expenses. The net proceeds of
the Offerings will be used to repay indebtedness of the Company.

Of the debt to be repaid, (i) approximately $40.5 million is indebtedness
under the Company's senior bank loan which was incurred in the Recapitalization
and bears interest at a floating rate (8.37% per annum as of October 29, 1996)
with a maturity date of March 31, 2004, and (ii) approximately $12.9 million is
indebtedness (including accrued interest) which was incurred in the
Recapitalization and is owed to Warburg, Pincus and Messrs. Scott, Farrand and
Marcketta pursuant to subordinated demand notes which bear interest at 6.83% per
annum. See "The Recapitalization" and "Certain Transactions."

DIVIDEND POLICY

The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying any cash dividends on the Common Stock in the foreseeable
future. The current policy of the Company's Board of Directors is to retain
earnings to finance the operations and expansion of the Company's business. In
addition, the Company's existing credit agreement restricts the Company's
ability to pay dividends to its stockholders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

10
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996. The as adjusted capitalization reflects the issuance and
sale of the 3,500,000 shares of Common Stock offered hereby by the Company and
the application of the estimated net proceeds therefrom. See "Use of Proceeds."

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
---------- -------------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Term bank loan.......................................................... $ 91,000 $ 57,450
Revolving credit facility............................................... 7,000 0
Notes to affiliates..................................................... 12,492 0
---------- -------------

Total long-term debt.................................................. 110,492 57,450

Stockholders' equity:
Preferred stock, par value $.01 per share, 2,000,000 shares authorized,
no shares issued and outstanding...................................... -- --
Common stock, par value $.01 per share, 50,000,000 shares authorized,
14,130,000 shares issued and outstanding(1)........................... 141 176
Additional paid-in capital.............................................. 14,259 67,609
Retained earnings....................................................... 9,802 9,802
Foreign currency translation adjustment................................. (44) (44)
---------- -------------
Total stockholders' equity............................................ 24,158 77,543

Total capitalization.................................................. $ 134,650 $ 134,993
---------- -------------
---------- -------------
</TABLE>

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

(1) Excludes an aggregate of 2,190,150 shares of Common Stock reserved for
issuance under the Company's stock option plan, including 2,135,250 shares
of Common Stock subject to outstanding options. See
"Management--Compensation Pursuant to Plans."

11
<PAGE>
DILUTION

The net tangible book value of the Company at September 30, 1996 was
$23,633,000 or approximately $1.67 per share of Common Stock. Net tangible book
value per share represents the amount of total tangible assets less total
liabilities, divided by the aggregate number of shares of Common Stock
outstanding as of September 30, 1996. Without taking into account any changes in
the Company's net tangible book value after September 30, 1996, other than to
give effect to the receipt of the net proceeds from the sale of the 3,500,000
shares of Common Stock offered hereby at an initial public offering price of
$17.00 per share and after deducting the underwriting discount and estimated
offering expenses to be paid by the Company, the net tangible book value of the
Company at September 30, 1996 would have been $77,018,000, or $4.37 per share.
This represents an immediate increase in net tangible book value of $2.70 per
share of Common Stock to existing stockholders and an immediate dilution of
approximately $12.63 per share to new investors purchasing shares in the
Offerings. The following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Initial public offering price per share............................... $ 17.00
Net tangible book value before the Offerings........................ $ 1.67
Increase per share attributable to the Offerings.................... 2.70
---------
Net tangible book value per share after the Offerings................. 4.37
---------
Dilution per share to new investors................................... $ 12.63
---------
---------
</TABLE>

The following table sets forth as of September 30, 1996, the number of
shares of Common Stock purchased from the Company, the total consideration paid
to the Company and the average price per share paid by existing stockholders and
by the new investors purchasing shares of Common Stock from the Company in the
Offerings (before deducting the underwriting discount and estimated offering
expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------------- --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........................ 14,130,000 80% $ 13,770,000 19% $ 0.97
New investors................................ 3,500,000 20 59,500,000 81 $ 17.00
------------- --- -------------- --- -------
Total.................................... 17,630,000 100% $ 73,270,000 100%
------------- --- -------------- ---
------------- --- -------------- ---
</TABLE>

The foregoing calculations assume no exercise of the Underwriters'
over-allotment options and exclude shares subject to outstanding options and
shares subject to options that will be issued upon completion of the Offerings.
As of September 30, 1996, there were options outstanding to purchase an
aggregate of 1,766,250 shares at an exercise price of $1.22 per share. To the
extent that outstanding options are exercised in the future, there will be
further dilution to new investors. See "Management-- Compensation Pursuant to
Plans."

12
<PAGE>
THE RECAPITALIZATION

The Company is a holding company that conducts its business through PILP.
Prior to the Recapitalization, certain non-controlling partners owned 70% of the
non-voting Class A and 30% of the voting Class B limited partnership units of
PILP. The non-controlling partners consisted of members of the bank group that
provided PILP's prior credit facility and were not otherwise affiliated with the
Company, PILP or Warburg, Pincus. They acquired their interest in PILP in
connection with PILP's prior credit facility. As described below, as a result of
the Recapitalization the Company owns 100% of the oustanding interests of PILP.

In May 1996, the Company effected the Recapitalization, pursuant to which,
for a total of $126.1 million in cash, the Company acquired all of the equity
interests in PILP it did not previously own and retired all of PILP's
outstanding debt securities. The Recapitalization was financed by (i) borrowings
of $110.0 million under a new credit facility, (ii) funds from working capital
and (iii) loans from Warburg, Pincus and management. The loans consisted of
subordinated demand notes of $11,608,000, $580,400, $165,829 and $82,914 issued
to Warburg, Pincus and Messrs. Scott, Farrand and Marcketta, respectively. In
addition, effective July 1, 1996, Warburg, Pincus contributed substantially all
of the assets of Lee Lighting to the Company as a capital contribution in the
amount of $8.0 million. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" for a
description of the credit facility and "Certain Transactions" for a description
of the terms of the subordinated notes issued to Warburg, Pincus and management.

As a result of the Recapitalization, Warburg, Pincus and management (i) own
90% and 10%, respectively, of the Common Stock of the Company outstanding prior
to the Offerings and (ii) hold $11,608,000 and $829,143, respectively, in
subordinated demand notes of the Company. The Company expects to repay such
notes with the proceeds of the Offerings. See "Use of Proceeds."

13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected financial data for the seven months ended December
31, 1991 and for the four years ended December 31, 1995 are derived from the
audited consolidated financial statements of the Company. The financial data of
the Company as of September 30, 1996 and for the nine months ended September 30,
1995 and 1996 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which the Company considers necessary for a fair presentation of the
financial position and the results of operations for these periods. Operating
results for the nine months ended September 30, 1996 are not necessarily
indicative of the results that may be expected for the entire year. The data
should be read in conjunction with the consolidated financial statements,
related notes and other financial information included herein.
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
SEVEN MONTHS YEAR ENDED DECEMBER 31, 30,
ENDED ------------------------------------------ ---------
DECEMBER 31, 1991 1992 1993 1994 1995(1) 1995
------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental.................................... $ 30,355 $ 48,511 $ 54,031 $ 61,642 $ 75,083 $ 54,055
Sales and lighting rental........................ 7,544 14,049 12,679 15,458 20,245 15,423
-------- --------- --------- --------- --------- ---------
Total rental revenue and sales................. 37,899 62,560 66,710 77,100 95,328 69,478
Cost of camera rental.............................. 17,369 28,804 28,600 31,293 32,721 23,959
Cost of sales and lighting rental.................. 4,676 9,201 7,832 9,702 11,648 8,659
-------- --------- --------- --------- --------- ---------
Gross margin....................................... 15,854 24,555 30,278 36,105 50,959 36,860
Selling, general and administrative expenses....... 13,782 21,648 18,875 19,210 28,486 21,351
Research and development expenses.................. 1,408 2,000 2,272 2,442 2,986 2,378
-------- --------- --------- --------- --------- ---------
Operating income................................... 664 907 9,131 14,453 19,487 13,131
Net interest expense............................... (3,797) (5,453) (5,229) (5,318) (5,616) (4,373)
Net other income (expense)......................... 728 (1,655) 183 665 415 719
-------- --------- --------- --------- --------- ---------
Income (loss) before non-controlling partners'
interest in PILP and income taxes................ (2,405) (6,201) 4,085 9,800 14,286 9,477
Non-controlling partners' interest in PILP (3)..... (795) (958) (327) (879) (7,348) (3,947)
-------- --------- --------- --------- --------- ---------
Income (loss) before income taxes.................. (3,200) (7,159) 3,758 8,921 6,938 5,530
Income tax (provision) benefit..................... 426 686 (453) (1,843) (1,375) (1,095)
-------- --------- --------- --------- --------- ---------
Net income (loss).................................. $ (2,774) $ (6,473) $ 3,305 $ 7,078 $ 5,563 $ 4,435
-------- --------- --------- --------- --------- ---------
-------- --------- --------- --------- --------- ---------
Net income (loss) per share........................ $ (.18) $ (.42) $ .22 $ .46 $ .36 $ .29
-------- --------- --------- --------- --------- ---------
-------- --------- --------- --------- --------- ---------
Shares used in computation......................... 15,277 15,277 15,277 15,277 15,277 15,277

1996(2)
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental.................................... $ 62,814
Sales and lighting rental........................ 22,236
---------
Total rental revenue and sales................. 85,050
Cost of camera rental.............................. 26,980
Cost of sales and lighting rental.................. 13,099
---------
Gross margin....................................... 44,971
Selling, general and administrative expenses....... 21,684
Research and development expenses.................. 3,300
---------
Operating income................................... 19,987
Net interest expense............................... (5,589)
Net other income (expense)......................... 212
---------
Income (loss) before non-controlling partners'
interest in PILP and income taxes................ 14,610
Non-controlling partners' interest in PILP (3)..... (4,500)
---------
Income (loss) before income taxes.................. 10,110
Income tax (provision) benefit..................... (2,012)
---------
Net income (loss).................................. $ 8,098
---------
---------
Net income (loss) per share........................ $ .53
---------
---------
Shares used in computation......................... 15,277
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1991 1992 1993 1994 1995 SEPTEMBER 30, 1996
---------- ---------- ---------- ---------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets..................................... $ 150,990 $ 138,697 $ 140,075 $ 149,707 $ 165,751 $ 164,713
Total current liabilities........................ 13,238 13,017 13,419 18,230 25,162 28,784
Long-term debt................................... 137,000 134,500 131,000 127,000 124,678 110,492
Stockholders' equity (deficiency)................ (5,928) (10,481) (6,706) 922 6,456 24,158
</TABLE>

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

(1) Includes operating results of Panavision Canada Corporation, a former agent,
since its acquisition effective January 20, 1995.

(2) Includes operating results of Lee Lighting Limited since its acquisition
effective July 1, 1996.

(3) In the Recapitalization, the Company acquired the non-controlling partners'
interest in PILP effective May 8, 1996. Accordingly, there will be no
further allocation of PILP's income to non-controlling partners.

14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND
THE OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

The Company is a leading designer and manufacturer of high-precision film
camera systems, which it rents to the motion picture and television industries
through its domestic and international owned and operated facilities and agent
network. The Company also rents lighting equipment in the United Kingdom through
Lee Lighting, as well as through two of its owned and operated facilities in
Orlando and Toronto, and manufactures and sells lighting filters and other
color-correction and diffusion filters through Lee Filters.

The Company believes that its future results of operations will be affected
by (i) the number and box-office success of feature film productions in the
North American and international motion picture, television and home video
markets, (ii) the demand for episodic television programs produced on film due
to the increase in the number of cable and network channels, including FOX, WB
and UPN, which require additional original programming, and (iii) the continued
health of the U.S. and U.K. economies, and their effect on spending for
television commercial advertising.

The Company believes there are significant growth opportunities in the North
American and international feature film and commercial markets. Since 1993,
market demand for Panavision's camera systems exceeded the Company's ability to
supply them due to previously limited manufacturing capacity and credit facility
covenants which restricted capital expenditures. In order to address these
constraints, the Company effected its Recapitalization in May 1996, relocated in
June 1996 from its former 75,000 square-foot facility in Tarzana, California to
an upgraded 150,000 square-foot facility in Woodland Hills, California and began
hiring additional manufacturing personnel. The Company estimates that by the end
of 1996, it will have the capacity to manufacture 50% more camera systems
annually than in previous years. The Company is also in the process of hiring
electronic, software and mechanical research and product development personnel
to introduce new rental products more rapidly.

The Company competes in a number of motion picture and television markets
worldwide. In 1995, approximately 65%, 19% and 16% of the Company's pro forma
total revenue was generated from camera rental, lighting rental, and sales and
other revenue, respectively; and 55% and 45% of the Company's pro forma total
revenue was derived from the North American and international markets,
respectively. The chart below illustrates these markets in more detail, based on
estimates derived from the Company's records of its owned and operated
facilities and its estimates of third-party agents' revenue:

<TABLE>
<CAPTION>
PERCENTAGES OF 1995 PRO FORMA TOTAL REVENUE
- ------------------------------------------------------------------------------------------------
NORTH AMERICA INTERNATIONAL TOTAL
--------------------- ----------------- -----
<S> <C> <C> <C>
Camera rental revenue:
Feature films....................................... 22% 9% 31%
Commercials......................................... 9 6 15
Episodic television................................. 13 * 13
Movies of the week.................................. 3 * 3
Other............................................... 3 * 3
-- --
---
Sub-total......................................... 50 15 65
Lighting rental revenue............................... 3 16 19
Sales and other revenue............................... 2 14 16
-- --
---
Total revenue..................................... 55% 45% 100%
-- --
-- --
---
---
</TABLE>

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

* Less than 1%.

15
<PAGE>
In 1995, approximately 77% of the Company's camera rental revenue was
generated in North America. The Company estimates that in 1995 it provided
camera systems to 46% of the feature films produced in North America, which
generated 34% of its camera rental revenue. The television industry is comprised
of commercials, episodic or series programs and movies of the week. The Company
estimates that in 1995 it provided camera systems to 79% of the episodic
programs produced using film in North America, which generated 20% of its camera
rental revenue. The Company also provided camera systems to television
commercial productions in North America, which in 1995 generated 14% of its
camera rental revenue.

The Company also provides camera systems to feature film and television
commercial productions outside of North America primarily in the United Kingdom,
Europe and the Pacific Rim. In 1995, approximately 14% of the Company's camera
rental revenue was generated in the United Kingdom and 9% was generated in all
other territories. The Company estimates that in 1995 it supplied camera systems
to 14% of the feature film productions in the United Kingdom and Europe.

In 1995, North American and international agent camera rental revenue was
$7.5 million, or 10% of camera rental revenue, and $6.5 million, or 9% of camera
rental revenue, respectively. Agents are paid a commission equal to
approximately 40% of the rental revenue generated from their customers. In order
to increase its control over camera systems distribution, in January 1995, the
Company acquired Panavision Canada Corporation ("Panavision Canada"), its
Canadian agent, which operates facilities in Toronto and Vancouver. The Company
expects to allocate the additional camera systems it manufactures primarily to
owned and operated facilities.

In July 1996, the Company acquired Lee Lighting, the largest lighting rental
company in the United Kingdom. In 1995, on a pro forma basis, the Company
estimates that 81% of its lighting rental revenue and 17% of its total revenue
were generated by Lee Lighting. In 1995, on a pro forma basis, approximately 53%
of the Company's sales and other revenue, and 8% of its total revenue, was
generated by Lee Filters, with the remainder of its sales and other revenue
consisting primarily of sales of film stock, consummable lighting products and
Panavision logo merchandise.

Certain of the information contained in this Prospectus under the captions
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" and summaries thereof regarding the size of the
Company's share of markets in which it participates and information concerning
the definition, size and development of such markets, both domestically and
internationally, are based on estimates prepared by the Company using
information or data derived from various sources. Such information and data and
certain other information under such captions and summaries concerning the
Company's classification of camera rental revenue by market are also based on
assumptions and estimates made by the Company on the basis of its knowledge of
the markets and its business which the Company believes are reasonable.

HISTORICAL RESULTS OF OPERATIONS

The Company is a holding company that owns 100% of the non-voting Class A
and voting Class B limited partnership units of PILP. All business operations of
the Company are conducted within PILP. In May 1996, the Company effected its
Recapitalization, pursuant to which all of PILP's outstanding debt and equity
securities were acquired. Prior to the Recapitalization, the non-controlling
partners owned 70% of the non-voting Class A and 30% of the voting Class B
limited partnership units. However, since the non-controlling partners had a
deficit in their capital accounts at the formation of PILP, such deficit was
allocated entirely to the Company as the general partner of PILP. In addition,
PILP's losses for 1991 and 1992 and distributions made by PILP to various taxing
authorities on behalf of the non-controlling partners were charged to the
Company's capital account. In 1993, 1994 and 1995, as PILP generated earnings
before the non-controlling partners' interest, a portion of their interest in
those earnings was allocated to the Company's capital account to restore the
proportionate amount of the non-controlling

16
<PAGE>
partners' deficits and distributions for taxes previously charged to the
Company's capital account. The significant increase in the non-controlling
partners' interest in PILP from $0.9 million in 1994 to $7.3 million in 1995
reflects the substantial completion of the restoration of the Company's capital
account.

After the Recapitalization, no additional provision for non-controlling
partners' interest in PILP will be made in the Company's statement of
operations.

NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1995

Camera rental revenue increased $8.7 million, or 16.1%, to $62.8 million for
the nine months ended September 30, 1996 from $54.1 million for the nine months
ended September 30, 1995. The increase resulted primarily from the rental of
newly manufactured camera systems and specialty lenses to supply the increased
demand in the North American and international feature film and commercial
markets as well as the North American episodic television market. Revenue also
increased as a result of a small increase in rental rates.

Sales and lighting rental revenue increased $6.8 million, or 44.2%, to $22.2
million for the nine months ended September 30, 1996 from $15.4 million for the
nine months ended September 30, 1995. This increase was primarily due to the
acquisition of Lee Lighting in July 1996, which resulted in increased sales and
lighting rental revenue of $5.4 million, as well as increased sales of Lee
Filters through the Company's U.S. distribution operation, which contributed
revenue of approximately $1.9 million, partially offset by a decrease of $0.6
million in the North American lighting rental revenue.

Cost of camera rental increased $3.0 million, or 12.5%, to $27.0 million for
the nine months ended September 30, 1996 from $24.0 million for the nine months
ended September 30, 1995. This increase was primarily due to the increase in
maintenance, service and labor costs required to service additional rental
customers. In addition there was a small increase in third-party camera agent
rental commissions and rental asset depreciation.

Cost of sales and lighting rental increased $4.4 million, or 50.6%, to $13.1
million for the nine months ended September 30, 1996 from $8.7 million for the
nine months ended September 30, 1995. This increase was primarily due to the
acquisition of Lee Lighting in July 1996, an increase in the cost of sales
related to the increase in sales of Lee Filters and a small increase in the cost
of sales in the United Kingdom.

Gross margin increased $8.1 million, or 22.0%, to $45.0 million for the nine
months ended September 30, 1996 from $36.9 million for the nine months ended
September 30, 1995. The increase was primarily due to the factors discussed
above.

Selling, general and administrative expenses increased $0.3 million, or
1.4%, to $21.7 million for the nine months ended September 30, 1996 from $21.4
million for the nine months ended September 30, 1995. The 1996 results include a
$1.3 million increase in costs related to the addition of personnel to support
the Company's anticipated revenue growth, costs associated with the June 1996
relocation to the new Woodland Hills facility and a one-time non-cash
compensation charge of $0.6 million for shares of Common Stock issued to certain
members of senior management. Additionally, the acquisition of Lee Lighting
resulted in $0.8 million in selling, general and administrative costs. The 1995
results included non-recurring charges relating to the early lease termination
for the Company's former facility of $2.2 million and the write-down of the
carrying value of certain real property owned by the Company's U.K. rental
operation of $1.4 million.

Research and development expenses increased $0.9 million, or 37.5%, to $3.3
million for the nine months ended September 30, 1996 from $2.4 million for the
nine months ended September 30, 1995. The increase related to additional
personnel costs incurred in connection with the development of a new sync-sound
camera system and a digital video assist device. The Company expects research
and

17
<PAGE>
development costs to continue to increase as the Company hires additional
personnel to develop new specialty lenses and accessory products targeted
primarily to service the feature film and commercial markets.

Operating income increased $6.9 million, or 52.7%, to $20.0 million for the
nine months ended September 30, 1996 from $13.1 million for the nine months
ended September 30, 1995. The increase was primarily due to the factors
discussed above.

Net interest expense increased $1.2 million, or 27.3%, to $5.6 million for
the nine months ended September 30, 1996 from $4.4 million for the nine months
ended September 30, 1995. This increase was the result of additional outstanding
interest-bearing term debt as a result of the Recapitalization.

The effective tax rates for the nine months ended September 30, 1996 and
1995 were 19.9% and 19.8%, respectively, and were lower than the statutory rate
principally due to the reduction in valuation allowance for deferred tax assets.

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

Camera rental revenue increased $13.5 million, or 21.9%, to $75.1 million
for the year ended December 31, 1995 from $61.6 million for the year ended
December 31, 1994. The increase resulted primarily from the rental of newly
manufactured camera systems and specialty lenses to supply the increased demand
in the North American and United Kingdom feature film and commercial markets as
well as the North American episodic television market. The acquisition of
Panavision Canada in January 1995 resulted in increased camera rental revenue of
$3.7 million during the year. Revenue also increased as a result of a small
increase in rental rates.

Sales and lighting rental revenue increased $4.8 million, or 31.0%, to $20.3
million for the year ended December 31, 1995 from $15.5 million for the year
ended December 31, 1994. The increase was primarily due to an increase in
lighting rental revenue of $3.5 million resulting from the acquisition of
Panavision Canada. The remaining increase was primarily due to a $0.9 million
increase in sales of Lee Filters.

Cost of camera rental increased $1.4 million, or 4.5%, to $32.7 million for
the year ended December 31, 1995 from $31.3 million for the year ended December
31, 1994. The increase is primarily due to additional net operating costs
relating to Panavision Canada.

Cost of sales and lighting rental increased $1.9 million, or 19.6%, to $11.6
million for the year ended December 31, 1995 from $9.7 million for the year
ended December 31, 1994. The increase was primarily due to the $1.8 million in
additional operating costs relating to Panavision Canada and increased cost of
sales in the United Kingdom.

Gross margin increased $14.9 million, or 41.3%, to $51.0 million for the
year ended December 31, 1995 from $36.1 million for the year ended December 31,
1994. The increase was primarily due to the factors discussed above.

Selling, general and administrative expenses increased $9.3 million, or
48.4%, to $28.5 million for the year ended December 31, 1995 from $19.2 million
for the year ended December 31, 1994. The increase was partially due to
non-recurring charges in 1995 including a $1.8 million charge for the early
lease termination for the Company's former facility and a $1.7 million
write-down of the carrying value of certain real property owned by the Company's
U.K. rental operation. Additionally, the acquisition of Panavision Canada
resulted in a $1.7 million increase in selling, general and administrative
expenses. The remaining increase was due to an increase in incentive
compensation costs, the acceleration of the amortization of leasehold
improvements in the Company's former facility and increased marketing costs.

18
<PAGE>
Research and development expenses increased $0.5 million, or 20.0%, to $3.0
million for the year ended December 31, 1995 from $2.5 million for the year
ended December 31, 1994. This increase was due to the addition of staff and
other expenses related to the development of a new camera system, specialty
lenses and accessories.

Operating income increased $5.0 million, or 34.5%, to $19.5 million for the
year ended December 31, 1995 from $14.5 million for the year ended December 31,
1994. The increase was primarily due to the factors discussed above.

Net interest expense increased $0.3 million, or 5.7%, to $5.6 million for
the year ended December 31, 1995 from $5.3 million for the year ended December
31, 1994. The increase was due to interest expense related to Panavision
Canada's credit facility.

The effective tax rates for 1995 and 1994 were 19.8% and 20.7%,
respectively, and were lower than the statutory rate principally due to a change
in the valuation allowance for deferred tax assets and certain other non-taxable
and non-deductible items.

YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993

Camera rental revenue increased $7.6 million, or 14.1%, to $61.6 million for
the year ended December 31, 1994 from $54.0 million for the year ended December
31, 1993. The increase resulted primarily from the rental of newly manufactured
specialty lenses and accessories to supply the increased demand in the North
American and U.K. feature film and commercial markets as well as the North
American episodic television market. Revenue also increased as a result of a
small increase in rental rates.

Sales and lighting rental revenue increased $2.8 million, or 22.0%, to $15.5
million for the year ended December 31, 1994 from $12.7 million for the year
ended December 31, 1993. The increase was primarily due to the increased sales
of Lee Filters and sales of consumable products by the various rental
operations.

Cost of camera rental increased $2.7 million, or 9.4%, to $31.3 million for
the year ended December 31, 1994 from $28.6 million for the year ended December
31, 1993. This increase was primarily due to the increase in maintenance and
service costs required to service additional camera rental customers and
increased rental asset depreciation.

Cost of sales and lighting rental increased $1.9 million, or 24.4%, to $9.7
million for the year ended December 31, 1994 from $7.8 million for the year
ended December 31, 1993. This increase was primarily due to increases in the
cost of sales and lighting rental in the United Kingdom.

Gross margin increased $5.8 million, or 19.1%, to $36.1 million, for the
year ended December 31, 1994 from $30.3 million for the year ended December 31,
1993. This increase was primarily due to the factors discussed above.

Selling, general and administrative expenses increased $0.3 million, or
1.6%, to $19.2 million for the year ended December 31, 1994 from $18.9 million
for the year ended December 31, 1993. This small increase resulted from general
cost increases throughout the Company.

Research and development expenses increased $0.2 million, or 8.7%, to $2.5
million for the year ended December 31, 1994 from $2.3 million for the year
ended December 31, 1993. This increase was primarily due to the development of a
new sync-sound camera system.

Operating income increased $5.3 million, or 57.6%, to $14.5 million for the
year ended December 31, 1994 from $9.2 million for the year ended December 31,
1993. The increase was primarily due to the factors discussed above.

19
<PAGE>
Net interest expense increased $0.1 million, or 1.9%, to $5.3 million for
the year ended December 31, 1994 from $5.2 million for the year ended December
31, 1993. This increase was primarily due to a small increase in the interest
rates on the Company's outstanding debt.

The effective tax rates for 1994 and 1993 were 20.7% and 12.1%,
respectively. The increase in the effective rates for 1994 were primarily due to
federal tax provision which was not fully offset by a reduction in valuation
allowance for deferred tax assets.

PRO FORMA RESULTS OF OPERATIONS

The following pro forma statement of operations information is presented as
if the Recapitalization and the Lee Lighting Acquisition had occurred as of the
beginning of each period presented. The pro forma information is presented for
illustrative purposes only and may not be indicative of the results that would
have occurred if the transactions discussed above had occurred on the dates
indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------- --------------------
<S> <C> <C> <C>
1995 1995 1996
-------------- --------- ---------

<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Camera rental........................................................ $ 75,083 $ 54,055 $ 62,814
Lighting rental...................................................... 22,081 16,945 17,260
Sales and other...................................................... 17,913 13,697 15,376
-------------- --------- ---------
Total.............................................................. 115,077 84,697 95,450
Cost of camera rental.................................................. 32,721 23,959 26,980
Cost of lighting rental................................................ 15,550 11,469 11,889
Cost of sales and other................................................ 11,643 8,692 9,331
-------------- --------- ---------
Gross margin........................................................... 55,163 40,577 47,250
Selling, general and administrative expenses........................... 31,427 23,807 23,215
Research and development expenses...................................... 2,986 2,378 3,300
-------------- --------- ---------
Operating income....................................................... 20,750 14,392 20,735
Net interest expense................................................... (9,458) (7,094) (7,109)
Net other income....................................................... 483 755 220
-------------- --------- ---------
Income before income taxes............................................. 11,775 8,053 13,846
Income tax provision................................................... (1,393) (1,056) (2,766)
-------------- --------- ---------
Net income............................................................. $ 10,382 $ 6,997 $ 11,080
-------------- --------- ---------
-------------- --------- ---------
</TABLE>

PRO FORMA NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO PRO FORMA NINE
MONTHS ENDED SEPTEMBER 30, 1995

Lighting rental revenue increased $0.4 million, or 2.4%, to $17.3 million
for the nine months ended September 30, 1996 from $16.9 million for the nine
months ended September 30, 1995. The increase

20
<PAGE>
was primarily due to strong demand in the U.K. feature film and commercial
markets, partially offset by a decrease in the North American lighting rental
revenue of $0.6 million.

Sales and other revenue increased $1.7 million, or 12.4%, to $15.4 million
for the nine months ended September 30, 1996 from $13.7 million for the nine
months ended September 30, 1995. The increase was primarily due to increased
sales of Lee Filters through the Company's U.S. distribution operation.

Cost of camera rental increased $3.0 million, or 12.5%, to $27.0 million for
the nine months ended September 30, 1996 from $24.0 million for the nine months
ended September 30, 1995. This increase was primarily due to the increase in
maintenance, service and labor costs required to service additional rental
customers. In addition, there was a small increase in third-party camera agent
rental commissions and rental asset depreciation.

Cost of lighting rental increased $0.4 million, or 3.5%, to $11.9 million
for the nine months ended September 30, 1996 from $11.5 million for the nine
months ended September 30, 1995. This increase was primarily due to an increase
in the cost of lighting rental at Lee Lighting which related to the increase in
lighting rental revenue.

Cost of sales and other revenue increased $0.6 million, or 6.9%, to $9.3
million for the nine months ended September 30, 1996 from $8.7 million for the
nine months ended September 30, 1995. This increase related to the increase in
sales of Lee Filters and a small increase in cost of sales in the United
Kingdom.

Gross margin increased $6.7 million, or 16.5%, to $47.3 million for the nine
months ended September 30, 1996 from $40.6 million for the nine months ended
September 30, 1995. The increase was primarily due to the factors discussed
above.

Selling, general and administrative expenses decreased $0.6 million, or
2.5%, to $23.2 million for the nine months ended September 30, 1996 from $23.8
million for the nine months ended September 30, 1995. The 1996 results include a
$1.3 million increase in costs related to additional personnel to support the
Company's anticipated revenue growth, costs associated with the June 1996
relocation to new facilities and a one-time non-cash compensation charge of $0.6
million for shares of Common Stock issued to certain members of senior
management. The 1995 results include non-recurring charges relating to the early
lease termination for the Company's former facility of $2.2 million and the
write-down of the carrying value of certain real property owned by the Company's
U.K. rental operation of $1.4 million.

Research and development expenses increased $0.9 million, or 37.5% to $3.3
million for the nine months ended September 30, 1996 from $2.4 million for the
nine months ended September 30, 1995. The increase related to additional
personnel costs incurred in connection with the development of a new sync-sound
camera system and a digital video assist device. The Company expects research
and development costs to continue to increase as the Company hires additional
personnel to develop new specialty lens and accessory products targeted
primarily to service the feature film and commercial markets.

Operating income increased $6.3 million, or 43.8%, to $20.7 million for the
nine months ended September 30, 1996 from $14.4 million for the nine months
ended September 30, 1995. The increase was primarily due to the factors
discussed above.

Interest expense amounts were determined using the assumptions that there
would be $110.0 million in outstanding debt as of the beginning of 1995 and
1996. The interest rates assumed were the rates in effect as of May 8, 1996, the
start of the Company's new credit facility. The same interest expense
calculation was used for each of the pro forma periods presented.

21
<PAGE>
The effective tax rate increased to 20.0% for the nine months ended
September 30, 1996 from 13.1% for the nine months ended September 30, 1995 due
to a change in the mix of North American and international revenue which are
taxed at different effective rates as well as certain non-deductible expenses in
1996 and the reduced impact of changes in valuation reserve for deferred tax
assets.

PRO FORMA YEAR 1995 VS. PRO FORMA YEAR 1994 VS. PRO FORMA YEAR 1993

Camera rental revenue increased $10.2 million, or 15.7%, to $75.1 million
for the year ended December 31, 1995 from $64.9 million for the year ended
December 31, 1994, which was an increase of $7.8 million, or 13.7%, from $57.1
million for the year ended December 31, 1993. The increase in 1995 resulted
primarily from the rental of newly manufactured camera systems and specialty
lenses to supply the increased demand in the North American and U.K. feature
film and commercial markets as well as the North American episodic television
market. The increase in 1994 resulted primarily from the rental of newly
manufactured specialty lenses and accessories to supply the increased demand in
such markets. Revenue also increased in both years as a result of a small
increase in rental prices.

Lighting rental revenue decreased $0.5 million, or 2.2%, to $22.1 million
for the year ended December 31, 1995 from $22.6 million for the year ended
December 31, 1994, which was an increase of $3.6 million, or 18.9%, from $19.0
million for the year ended December 31, 1993. The decrease in 1995 was primarily
due to a decrease in feature film revenue in the United Kingdom. The increase in
1994 was primarily due to increased feature film and commercial demand in the
U.K. and Canadian markets.

Sales and other revenue increased $1.4 million, or 8.5%, to $17.9 million
for the year ended December 31, 1995 from $16.5 million for the year ended
December 31, 1994, which was an increase of $3.0 million, or 22.2%, from $13.5
million for the year ended December 31, 1993. The increase in both years was
primarily due to the increase in sales of Lee Filters and sales of consumable
products by the various rental operations.

Cost of camera rental for 1995 and 1994 was $32.7 million, which was an
increase of $1.5 million, or 4.8%, from $31.2 million for the year ended
December 31, 1993. In 1995, the decrease in camera rental operating costs was
offset by an increase in depreciation of camera rental assets. The increase in
1994 was primarily due to increased camera rental activity in the United
Kingdom.

Cost of lighting rental increased $.6 million, or 4.0%, to $15.6 million for
the year ended December 31, 1995 from $15.0 million for the year ended December
31, 1994, which was an increase of $1.1 million, or 7.9% from $13.9 million for
the year ended December 31, 1993. The increase in both 1995 and 1994 was
primarily due to an increase in the cost of lighting rental in the United
Kingdom. The increase in 1994 was partially offset by a decrease in the cost of
lighting rental in the North American market.

Cost of sales and other revenue increased $0.5 million, or 4.5%, to $11.6
million for the year ended December 31, 1995 from $11.1 million for the year
ended December 31, 1994, which was an increase of $2.0 million, or 22.0% from
$9.1 million for the year ended December 31, 1993. The increase in 1995 was
primarily due to an increase in the cost of sales at Lee Filters in the United
Kingdom. The increase in 1994 was primarily due to an increase in the cost of
sales at Lee Filters and of consumable products in the United Kingdom.

LIQUIDITY AND CAPITAL RESOURCES

The Company has relied primarily upon cash provided by operations to finance
its operations, repay long-term indebtedness and fund capital expenditures
primarily for manufacturing camera rental systems and purchasing other rental
equipment.

In conjunction with the Company's Recapitalization, the Company used
approximately $23.0 million of its cash to repay existing debt, total debt
decreased by approximately $21.7 million and the Company obtained a new credit
facility (the "Credit Facility"), which is comprised of a term loan in the
amount of

22
<PAGE>

$100 million with two $50 million tranches ("Term Loan A" and "Term Loan B") and
a revolving credit facility (the "Revolving Facility") of $20 million.
Borrowings under the Credit Facility at October 29, 1996 were $107.0 million.
Interest is payable at rates equal to a margin, in excess of the prime rate or
LIBOR, which fluctuates directly with the Company's total debt ratio, as defined
in the Credit Facility. The prime rate margin ranges between 0% to 1.25% for the
Term Loan A and the Revolving Facility and between 1.5% to 1.75% for the Term
Loan B. The LIBOR margin ranges between 1.25% to 2.5% for the Term Loan A and
the Revolving Facility and between 2.75% to 3.0% for the Term Loan B. At October
29, 1996, the average interest rate for the borrowings outstanding under the
Credit Facility was approximately 8.37%. Principal repayments under the Credit
Facility are payable quarterly beginning March 1997 through March 2004. The
Company intends to use approximately $40.5 million of the net proceeds from the
Offerings to repay certain amounts outstanding under the Credit Facility. See
"Use of Proceeds." The Company anticipates that its Revolving Facility will be
available for future borrowings. The Company's obligations under the Credit
Facility are secured by substantially all of the Company's assets.

Under the Credit Facility, the Company entered into two interest rate
protection agreements to protect the Company from LIBOR increases. One agreement
covering a notional amount of $45,000,000 expires on June 10, 1997 and protects
the Company from LIBOR increases above 6.44%. The other agreement for a notional
amount of $50,000,000 expires on June 10, 1998 and protects the Company from
LIBOR increases above 7.37%. Since the floor for each of these interest rate
protection agreements is 5.50%, in the event of a LIBOR reduction below this
floor, there would be no benefit to the Company. The Credit Facility also
requires the Company to meet certain financial tests and contains other
restrictive covenants, including certain limitations on the Company's ability to
incur debt, pay dividends, repurchase its equity securities, sell assets and
make investments, acquisitions, dispositions and capital expenditures. The
Credit Facility also requires, upon the occurrence of certain events such as the
sale of assets, the issuance of equity securities, the generation of Excess Cash
Flow (as defined in the Credit Facility) and the incurrence of certain
indebtedness, that a portion of the loans be prepaid. The financial covenants
regarding capital expenditures are significantly less restrictive than those
included in the Company's credit facility prior to the Recapitalization. As a
result of this covenant relief and after repayment of indebtedness with proceeds
of the Offerings, the Company does not believe the covenants will materially
restrict its ability to make capital expenditures and anticipates making
additional capital expenditures to manufacture camera systems at a faster rate
in 1996 than in 1995. In 1996, the Company intends to manufacture 38 camera
systems compared to 24 manufactured in 1995.

As of October 29, 1996, the Company owes approximately $12.0 million and
$0.9 million under subordinated notes payable to Warburg, Pincus and the
Company's senior management, respectively, including accrued interest at a rate
of 6.83% per annum. The Company intends to use approximately $12.9 million of
the net proceeds from the Offerings to repay these notes together with the
interest accrued thereon.

The following table sets forth certain information from the Company's
Consolidated Statement of Cash Flows for the periods indicated:

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1995 SEPTEMBER 30,1996
------------------- -------------------
(IN THOUSANDS)
<S> <C> <C>
Net cash provided by (used in):

Operating activities............................... $ 34,317 $ 17,645
Investing activities............................... (15,699) (22,483)
Financing activities............................... (9,724) (18,226)
</TABLE>

For the nine months ended September 30, 1996, cash provided by operating
activities was $17.6 million. Net income of $8.1 million, adjusted for
depreciation and amortization of $13.7 million and the non-controlling partners'
interest in PILP of $4.5 million, provided $26.3 million, which was partially

23
<PAGE>
offset by a use of $8.2 million, resulting from the net change in non-cash
working capital items, and miscellaneous non-cash items of $0.5 million. Total
investing activities of $22.5 million were comprised of capital expenditures of
$16.6 million, offset by $1.2 million of proceeds received from the disposition
of certain equipment. The majority of the capital expenditures were used to
manufacture camera rental systems and to purchase other rental equipment, with
approximately $1.0 million incurred to complete the leasehold improvements at
the new facility. The net investing activities also reflect a benefit of $1.0
million for cash on the balance sheet of Lee Lighting which was acquired in July
1996. In addition, $8.1 million was used to acquire the non-controlling
partners' interest in PILP in connection with the Recapitalization. Cash used in
financing activities of $18.2 million was comprised of the reduction in
outstanding borrowings in connection with the Recapitalization and $1.5 million
of distributions to taxing authorities on behalf of the non-controlling partners
in PILP.

For the year ended December 31, 1995, cash provided by operating activities
was $34.3 million. Net income of $5.6 million, adjusted for depreciation and
amortization of $17.5 million, the non-controlling partners' interest in PILP of
$7.4 million and the net change in non-cash working capital items of $3.0
million, provided $33.5 million of the total. Total investing activities of
$15.7 million were comprised of capital expenditures of $19.5 million, offset by
$2.2 million of proceeds received from the disposition of certain equipment.
Approximately $15.5 million of the capital expenditures were used to manufacture
camera rental systems and to purchase other rental equipment and $3.4 million
was incurred for leasehold improvements to renovate the Company's new facility.
The net investing activities also reflect a benefit of $1.6 million for cash on
the balance sheet of Panavision Canada, which was acquired in January 1995.
Financing activities of $9.7 million were comprised of $7.5 million in
repayments of borrowings under the credit facilities existing prior to the
Recapitalization and $2.2 million of distributions to taxing authorities on
behalf of the non-controlling partners in PILP.

The Company intends to use the cash provided by operating activities to make
additional capital expenditures to manufacture camera systems and purchase other
rental equipment. The Company expects to increase capital expenditures from
$19.5 million in 1995 to approximately $25.5 million in 1996 and $31.0 million
in 1997 in order to significantly increase its production of camera systems in
1997 and to provide additional rental and capital equipment for Lee Lighting and
all other Company operations. The Company also intends to increase research and
development expenses incurred in developing new rental products from $3.0
million in 1995 to approximately $3.9 million in 1996 and $4.3 million in 1997.
The Company expects that all research and development expenses and capital
expenditures for 1996 and 1997 will be funded by cash flow from operations.

Additional cash flow provided by operating activities will be used to repay
debt outstanding under the Credit Facility. The Company has commenced
discussions with its lenders to increase its Revolving Facility. The increased
Revolving Facility will be used for general working capital purposes and
potential acquisitions.

The Company believes that its existing working capital together with net
proceeds from the Offerings, borrowings under the Credit Facility and
anticipated cash flow from operating activities will be sufficient to meet its
expected operating and capital spending requirements for at least the next
twelve months.

SEASONALITY

The Company's revenue is subject to small seasonal fluctuations experienced
primarily in the first and second calendar quarters. Feature film and commercial
production activity typically reaches its peak in the third and fourth quarters.
In North America, episodic television programs cease filming in the second
quarter for several months, and typically resume production in August.

24
<PAGE>
IMPACT OF INFLATION

The Company's results of operations and financial condition are presented
based upon historical cost. While it is difficult to accurately measure the
impact of inflation due to the imprecise nature of the estimates required, the
Company believes that the effects of inflation, if any, on its results of
operations and financial condition have been minor.

ACCOUNTING FOR LONG-LIVED ASSETS

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of" (SFAS 121). With the
exception of the impairment loss recognized in 1995 with respect to certain real
property owned by its U.K. rental operation, as discussed above, current and
prior period financial statements have not been affected by the adoption of SFAS
121.

COMPENSATION UNDER STOCK OPTIONS

In connection with the Recapitalization, the Company has granted stock
options to certain members of senior management to acquire 529,875 shares of
Common Stock at $1.22 per share. These options will vest in 1998 or 1999 only if
certain EBDIT and Free Cash Flow targets (as defined) are achieved by the
Company. Accordingly, these options are being treated as variable options and
could result in a significant non-cash compensation charge in 1998 or 1999 if
these performance targets are achieved. The per share compensation charge will
be equal to the difference between the option exercise price of $1.22 and the
quoted market value of the Common Stock in the future when the targets are
achieved.

25
<PAGE>
BUSINESS

OVERVIEW

Panavision is a leading designer and manufacturer of high-precision film
camera systems, comprising cameras, lenses and accessories, for the motion
picture and television industries. The Company's camera systems are not
available for sale and are rented exclusively through its domestic and
international owned and operated facilities and agent network.
Panavision-Registered Trademark- is recognized in the motion picture and
television industries as the preeminent brand name for cinematography equipment.
Since the Company was founded, Panavision has received two OSCARS and 17 Awards
for Scientific and Technical Achievement from the Academy of Motion Picture Arts
and Sciences. Since 1990, two-thirds of the Academy Award nominees for Best
Cinematography, and five of the six cinematographers who have won the OSCAR for
Best Cinematography, used Panavision camera systems.

In addition to manufacturing and renting camera systems, the Company also
rents lighting, lighting grip, power generation and related transportation
equipment through Lee Lighting, the largest lighting rental company in the
United Kingdom, as well as through two owned and operated facilities in Orlando
and Toronto. The Company also manufactures and sells lighting filters and other
color-correction and diffusion filters through Lee Filters.

COMPETITIVE STRENGTHS

The Company believes that it is well-positioned to address the needs of
filmmakers throughout the world due to the following competitive strengths:

CONTROL OVER ENTIRE MANUFACTURING AND DISTRIBUTION PROCESS. The Company
manufactures most of its components and products internally and rents its camera
systems directly to customers. This control over the entire process
distinguishes Panavision from its competitors and enables it to protect and
enhance its highly recognized brand name. Through its team of marketing, design,
research and manufacturing personnel, Panavision is the only company to provide
complete systems that integrate fully-compatible cameras, lenses and
accessories. This strategy also enables the Company to (i) rapidly incorporate
technological developments and filmmakers' suggestions into new products, (ii)
maintain product exclusivity and (iii) offer products with greater quality and
higher performance at a competitive price.

REPUTATION FOR QUALITY AND TECHNOLOGICALLY ADVANCED PRODUCTS. The Company
continuously works to provide its customers with the most reliable and
innovative products. This effort has resulted in Panavision's recognition as the
industry leader in the development of high quality, technologically

26
<PAGE>
advanced camera systems. The Company has developed and introduced proprietary
products throughout its history while continuing to upgrade and enhance its
existing product lines as illustrated by its introduction of the Panaflex
sync-sound camera, which won an Academy Award in 1978, and the introduction of
the PRIMO PRIME and PRIMO ZOOM lenses in 1987, which received technical awards
from the Academy of Motion Picture Arts and Sciences in 1990, 1991, 1994 and
1995. Consistent with this tradition, the Company recently introduced the
Panavision/Frazier Lens System and plans to introduce a smaller, lighter and
quieter sync-sound camera in 1997. See "--Products--Research and Product
Development" and "--Camera Systems."

CLOSE RELATIONSHIPS WITH FILMMAKERS. Located near Hollywood, the center of
the U.S. film industry, the Company often develops new product designs in
collaboration with cinematographers, directors and producers to ensure that its
technology serves the needs of its customers. In certain cases, a filmmaker's
association with the Company begins at training and education seminars for film
students that the Company sponsors at its facilities. As a result of these
relationships and its significant research and development activities,
Panavision is better able to continually upgrade its products to meet changing
market demands, thereby reducing obsolescence, achieving better control of
inventory and product availability and providing customers with access to the
latest technological advances. The Company believes that these relationships and
collaborative efforts provide it with a competitive advantage over its
manufacturing competitors, which are located in Munich and Vienna, as well as
over its rental competitors, which do not engage in substantial research and
development activities and must rely instead on third-party suppliers.

RANGE AND DEPTH OF CAMERA EQUIPMENT. The Company has the world's largest
inventory of camera systems with over 800 cameras and 5,000 lenses. It also
offers a broad range of choices, with equipment that is exclusively available
through Panavision and its agents. The Company believes that the range and depth
of its camera inventory provides it with the ability to serve larger, as well as
a greater number of, productions throughout the world than its competitors.

DEDICATION TO CUSTOMER SERVICE. The Company places special emphasis on
customer service. In order to provide filmmakers with a high level of support,
the Company sends marketing representatives and technicians to film production
sites to provide advice or immediate assistance with any equipment needs or
questions. The Company assigns to each filmmaker a sales representative who
possesses particular skills and experience appropriate to that filmmaker's needs
in an attempt to foster a strong working relationship. Many of the Company's
product development, marketing and customer service personnel have been
collaborating with the same filmmakers throughout their careers. See
"--Marketing and Customer Service."

COMPANY STRATEGY

The Company's growth strategy is to manufacture additional camera systems
and value-added proprietary accessories to rent to its existing and new domestic
and international customers. The Company intends to allocate its new camera
equipment and focus its specialized marketing and sales approach specifically to
(i) increase its leading share of the North American feature film market, (ii)
increase its share of the international feature film market with an emphasis on
Europe and (iii) increase its share of the North American and international
commercials markets. The key elements of the Company's strategy are as follows:

INCREASE AVAILABILITY OF EQUIPMENT. Since 1993, the Company's growth has
been inhibited by equipment shortages resulting from limited manufacturing
capacity and capital expenditure constraints imposed by its credit facilities.
With its relocation to a new manufacturing facility, the Recapitalization and
the repayment of indebtedness with proceeds from the Offerings, the Company
intends to significantly increase its production of camera systems. The Company
believes that this additional equipment will help it capture a larger share of
all markets that it currently serves, with particular emphasis on the feature
film and commercials markets.

27
<PAGE>
TARGET FEATURE FILM AND COMMERCIAL MARKETS. Increased inventory will allow
the Company to dedicate equipment and marketing efforts toward expanding its
share of the feature film market, both domestically and internationally. The
Company estimates that in 1995, it provided camera systems to 46% of all feature
films in North America which comprised 75% of the major studio feature films and
34% of the independent feature films. The Company estimates that in 1995 it also
supplied camera systems to 14% of all feature films made in the United Kingdom
and Europe. The Company believes that these markets offer significant growth
potential.

Increased inventory also will allow the Company to dedicate equipment and
marketing efforts toward expanding its share of the domestic and international
commercial market. In 1995, the Company provided film camera equipment for the
production of over 1,000 television commercials in the United States and over
500 television commercials internationally. The industry centers for commercial
production are located in New York, London, Paris and Tokyo, where the Company
already has a presence in the rental of film equipment. The Company believes
that, with additional inventory, the commercial market offers substantial
opportunities for the Company to increase its market share.

EXPAND NEW PRODUCT DEVELOPMENT. The Company intends to continue developing
and manufacturing the next generation of technologically superior cameras,
lenses and accessories. In particular, the Company expects to expand its
development of value-added accessories that increase the overall rental price of
the camera package while providing cinematographers and directors with
additional creative tools which are designed to provide a favorable cost/benefit
relationship. Panavision's new Woodland Hills facility has allowed the Company
to hire additional personnel and significantly increase its research and
development of new products in an effort to extend its leadership in technology
and product development and to further strengthen design collaboration with
filmmakers.

CAMERA RENTAL MARKETS

The motion picture and television industries have shown steady growth over
the past several years, and the Company expects the industries to continue to
grow for the foreseeable future. The motion picture industry is comprised of
feature films produced by major studios and independent producers; the
television industry is comprised of commercials, episodic or series programs and
movies of the week ("MOWs").

The Company rents its products through its 10 owned and operated facilities
in the United States, Canada and the United Kingdom, as well as through an agent
network in the United States, Europe, Asia, Australia and Mexico. In 1995,
approximately two-thirds of the Company's camera rental revenue was derived from
productions based in the United States and the remainder was from international
rentals, primarily in the United Kingdom and Europe. The following table depicts
the Company's 1995 camera rental revenue by market, based on estimates derived
from the Company's records of its owned and operated facilities and its
estimates of third-party agents' revenues:

28
<PAGE>
1995 PRO FORMA REVENUE
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
NORTH % OF TOTAL
AMERICA REVENUES INTERNATIONAL % OF TOTAL REVENUES TOTAL
----------- --------------- ------------- ------------------- ---------
<S> <C> <C> <C> <C> <C>
Camera rental revenue:
Feature films......................... $ 25.2 22% $ 9.9 9% $ 35.1
Commercials........................... 10.6 9 6.2 6 16.8
Episodic television................... 14.5 13 0.4 * 14.9
MOWs.................................. 4.0 3 0.1 * 4.1
Other................................. 3.6 3 0.6 * 4.2
-- --
----- ----- ---------
Sub-total........................... 57.9 50 17.2 15 75.1
Lighting rental revenue................. 4.1 3 18.0 16 22.1
Sales and other revenue................. 1.7 2 16.2 14 17.9
-- --
----- ----- ---------
Total revenue....................... $ 63.7 55% $ 51.4 45% $ 115.1
-- --
-- --
----- ----- ---------
----- ----- ---------

% OF TOTAL REVENUES
-------------------
<S> <C>
Camera rental revenue:
Feature films......................... 31%
Commercials........................... 15
Episodic television................... 13
MOWs.................................. 3
Other................................. 3

---
Sub-total........................... 65
Lighting rental revenue................. 19
Sales and other revenue................. 16

---
Total revenue....................... 100%

---
---
</TABLE>

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

* Less than 1%.

FEATURE FILMS

The number of major studio feature films produced in North America increased
from approximately 104 in 1992 to approximately 118 in 1995. The number of
independent feature films produced in North America increased from approximately
246 in 1992 to approximately 318 in 1995. The Company estimates that during this
period feature film production activity in the United Kingdom and Europe also
increased, with approximately 500 feature film productions in 1995. Major studio
feature films are typically large-budget productions with camera rental budgets
that require greater depth of product and experienced customer service
personnel. The Company expects that the production of large-budget action films
will continue due in large part to their success in the international theater,
television and home video markets. In 1995, 31% of the Company's total revenue
and 47% of its camera rental revenue were generated from feature films. In
addition, the Company estimates that its camera rental revenue from feature
films has grown 39% since 1992. The Company believes the feature film market,
particularly independent productions, offers significant growth opportunities.

COMMERCIALS

Although commercial shoots generally last for only one to seven days, daily
rental rates for camera systems are equivalent to feature films and represent a
significant part of the camera equipment rental market. Many of the creative
people involved in the filming of commercials seek to distinguish their products
by using innovative techniques requiring technologically advanced equipment--the
ability to achieve a unique "look," which the Company believes can in many cases
only be achieved by using Panavision products. Many feature film directors and
cinematographers began their careers filming television commercials and continue
to be so involved. As such, identification with a brand name product at this
first stage of a filmmaker's professional development often gives rise to
beneficial long-term relationships in the industry. In 1995, approximately 15%
of the Company's total revenue and 22% of its camera rental revenue were
generated from commercials. The Company estimates that its camera rental revenue
from commercials has grown 47% since 1992. The Company believes this market
offers significant opportunities for growth.

EPISODIC TELEVISION

The episodic or series television market in North America is comprised
primarily of dramas, situation comedies and action programs produced on film
which are aired in both prime and non-prime time slots. These programs are
broadcast on the four major television networks as well as on the WB, UPN and

29
<PAGE>
cable networks. The number of episodic shows produced on film has increased by
approximately 67% since 1992, resulting primarily from the advent of new
broadcast networks and increased original programming on cable networks. Over
the same period, the Company believes that the use of film in episodic
television has increased over videotape because of a number of factors. Film is
an excellent storage or archival medium and may be digitally transferred to
other media, such as the evolving high definition television technologies, with
greater resolution than videotape. The image quality that film offers is very
important to television programs that will be syndicated into many markets. In
contrast, videotape may not be fully compatible with high definition television
and may deteriorate more rapidly over time.

In 1995, approximately 13% of the Company's total revenue and approximately
20% of its camera rental revenue were generated from episodic television. The
Company estimates that it provided camera systems to 79% of the episodic
productions shot on film and that its revenue has grown 38% since 1992. The
Company believes it will continue to make inroads in this market as a result of
new network programming requirements and innovative Panavision products such as
the 3-Perf System, the Pedestal Camera System and a 2,000-foot film magazine.

MOVIES OF THE WEEK

In addition to episodic television, there are also movies of the week shot
for network and cable television. The number of movies of the week productions
in North America has increased from approximately 185 in 1992 to approximately
250 in 1995. However, due to the relatively low budgets associated with these
productions, overall cost is a major factor in the selection of the camera
equipment that is used and, accordingly, the dollar size of this market is
relatively small.

In 1995, approximately 3% of the Company's total revenue and 5% of its
camera rental revenue were generated from movies of the week. The Company
estimates it supplied camera systems to over 55% of movies of the week made in
North America. The Company estimates that its camera rental revenue from movies
of the week has grown 4% since 1992. While the Company will continue to serve
this market, given its size and price sensitivity, the Company expects to focus
on higher-budget productions.

PRODUCTS

RESEARCH AND PRODUCT DEVELOPMENT

The Company is in the process of expanding its research and development
group, which currently comprises approximately 34 mechanical, software,
electronic and optical engineers, draftsmen and machinists. Additionally, the
research and development group has a dedicated machine shop that manufactures
prototype equipment. These internal capabilities enable the Company to develop
proprietary technology in collaboration with filmmakers to address their unique
requirements. Frequently, such collaborations with filmmakers develop into
widely used products such as the Pedestal Camera System, which reduces labor
requirements by combining a film camera with a video pedestal system. Other
examples of such collaboration include an underwater, deep sea camera developed
for the filming of TITANIC, the Panavision/Frazier Lens which allows previously
impossible shots to be made, a system developed for JFK which allow cameras to
be mounted on the hoods and fenders of cars and trucks and digital encoders used
to control pan and tilt motion which facilitated the filming of special effects
in BATMAN FOREVER.

The Company has long been a leader in the research and development of film
camera lenses. Since the first Panavision lens was introduced in 1957, the
Company has introduced many innovative spherical and anamorphic lenses,
including the PRIMO series which won Academy Awards in 1990, 1991, 1994 and
1995. During 1997, the Company expects to complete the development of a new
macro close-focus, wide-angle zoom lens. This new lens is designed to address
the need within the commercial market for a compact lens with the ability to
operate in low light environments and maintain focus at extremely close ranges
(E.G., table-top or other close-up work). In 1997, the Company also plans to
introduce a new

30
<PAGE>
sync-sound camera which is smaller, lighter and quieter than current Panavision
cameras and incorporates enhanced viewfinding and video monitoring capabilities.
In addition, the Company is in the process of developing a digital video assist
device.

CAMERA SYSTEMS

The Company is the only provider of camera systems with an integrated design
that provides customers with compatible products that are available worldwide.
The Company maintains the largest inventory of motion picture cameras in the
world, with over 800 cameras and 5,000 lenses.

Each camera package is comprised of a number of camera systems, each of
which includes cameras, lenses and accessories. A cinematographer's needs may
include a sync-sound camera, such as the Platinum Panaflex, as well as a
hand-held camera, and a Panastar camera for special effects. Each camera's
rental price includes a variety of accessories such as eyepieces, viewfinders,
cables, brackets and grips. The weekly rental cost of the most popular Panaflex
cameras ranges from approximately $1,000 to $2,000. A number of other
accessories which are considered integral to the camera's operation, such as
magazines, specialized eye-pieces and video-assists, are also available. Rental
prices for these individual accessories range from approximately $100 to $900
per week. Most importantly, each camera system is comprised of a variety of
lenses which will usually include a number of PRIMO PRIME and PRIMO ZOOM lenses.
The rental costs of the PRIMO lenses range from approximately $100 to $1,000 per
week.

CAMERAS. There are two basic types of motion picture cameras--Synchronous,
or "sync-sound," and Mit Out Sound ("MOS"). Sync-sound cameras are used to shoot
pictures while recording dialogue. MOS cameras are used primarily to shoot
high-speed footage and special effects and may also be used as backup cameras in
situations where dialogue is not being recorded. The Company's camera inventory
consists of both sync-sound and MOS cameras with various features and at a range
of prices. While the majority of the Company's sync-sound cameras are 35mm
cameras, the Company also manufactures 16mm cameras, which are used primarily on
episodic television shows, and 65mm cameras, which are used primarily for
special effects and special venue presentations. Panavision has consistently set
industry standards in the design and refinement of cinematography equipment.

The following is a representative listing and description of significant
35mm Panavision cameras:

<TABLE>
<S> <C>
PLATINUM PANAFLEX As the flagship of the Panavision camera line, the
PLATINUM PANAFLEX is used primarily for large-budget
feature films and commercial productions.
GOLDEN PANAFLEX II As the workhorse of the Panavision camera line, the
GOLDEN PANAFLEX II is used across all markets.
GOLDEN PANAFLEX The GOLDEN PANAFLEX is used primarily for episodic
television, movies of the week and low-budget feature
films.
PANASTAR The PANASTAR is a high-speed MOS special effects and
commercial camera.
</TABLE>

The Company's inventory also includes a limited number of non-Panavision
cameras which are used to supplement the Company's product line. Due to its
ability to purchase non-Panavision cameras if there is a business need to do so,
the Company is able to compete with independent renters of cinematography
equipment on the same level and with the same equipment. Its competitors, on the
other hand, do not have a corresponding ability, as Panavision equipment is not
available to rental companies other than the Company's agents.

31
<PAGE>
LENSES. Panavision develops, designs and manufactures its own prime (fixed
focal length) and zoom lenses, the most critical component affecting picture
quality and an important consideration for the filmmaker. For many years, the
Company specialized in anamorphic lenses, which are used for the wide-screen
movie format. While the Company remains the world's leading supplier of these
lenses, in 1985 a strategic decision was made to design and develop a new series
of prime and zoom lenses specifically for cinematography applications.
Accordingly, the Company created a line of revolutionary spherical lenses for
the non-wide screen format, producing its proprietary PRIMO PRIME and PRIMO ZOOM
lenses. The PRIMO lenses have performance characteristics that exceed the other
lenses available in the marketplace.

The following table describes the most important lenses developed and
manufactured by the Company:

<TABLE>
<S> <C>
PRIMO PRIMES PRIMO PRIME lenses are color-matched, high-contrast and
resolution spherical lenses ranging from 10mm to 150mm.
They are also available in anamorphic lenses.
PRIMO ZOOMS: PRIMO ZOOM lenses have performance equal to the PRIMO
PRIMO 3:1 ZOOM LENS PRIMES, enabling seamless intercutting. Due to the PRIMO
PRIMO 4:1 ZOOM LENS ZOOM lenses' flexibility, they are suitable for virtually
PRIMO 11:1 ZOOM LENS any type of production.

PANAVISION/FRAZIER LENS This new lens system is extremely versatile and enables a
SYSTEM continual image rotation while the camera system remains
stationary in extreme depth of field, allowing previously
impossible camera shots and placements to be made.
</TABLE>

ACCESSORIES. In order to provide its customers with a fully integrated
camera system, the Company frequently introduces new camera accessories and
currently offers an extensive range of products requested by and developed in
conjunction with filmmakers. Certain accessories may reduce overall production
costs by lowering the labor intensiveness of the production process and thereby
decreasing the shooting days. Moreover, an accessory product often achieves such
widespread acceptance among the Company's customers that the Company
incorporates it into the base camera package, thereby increasing the overall
package price.

The following list and descriptions provide a sample of the hundreds of
accessories the Company offers as part of its camera systems and illustrate the
range of accessories available:

<TABLE>
<S> <C>
PANAVISION COLOR VIDEO The PANAVISION COLOR VIDEO ASSIST captures a video image
ASSIST of the scene being filmed, which can be simultaneously
monitored by the director. It comes in a compact package
utilizing the latest technology in video cameras and
processing.
PEDESTAL CAMERA SYSTEM The PEDESTAL CAMERA SYSTEM was developed to shoot multi-
camera television shows enabling a single operator to
control the entire camera system.
FTZSAC FTZSAC, or Focus, T-Stop, Zoom, Speed Aperture Control,
is a digital remote control system.
SUPER PANAHEAD The camera body is mounted to a SUPER PANAHEAD (geared
head), which is used to control the panning and tilt
motion of the camera.
MAGAZINES Magazines are used with every camera system to hold film
and are available in 250, 500, 1,000 and 2,000 foot
sizes.
</TABLE>

32
<PAGE>
EQUIPMENT INVENTORY MANAGEMENT

The Company developed and uses a proprietary computerized inventory control
and management system to track its camera equipment. Each camera, lens and
accessory is serialized for identification purposes and bar coded to initiate
and expedite the billing process. This system enables the Company to locate its
camera equipment at all times anywhere in the world. Camera equipment
utilization is centrally monitored at the Company's headquarters to determine
(i) which products are in highest demand in various geographic markets and
whether certain equipment should be relocated to increase utilization and
revenue, (ii) whether product shortages that require the production of
additional units exist and (iii) whether current pricing is at the appropriate
level for a particular camera system or an individual value-added product.

The maximum utilization rates of the Company's equipment are affected by
production scheduling requirements of the motion picture and television
industries. Utilization rates are also limited by the need for maintenance and
service, time required by film crews to "prep" their camera systems and shipping
time. The Company's inventory control system helps the Company maximize its
utilization rates in light of these factors in order to satisfy customer
requirements while maximizing revenue.

MANUFACTURING AND ASSEMBLY

The Company manufactures and assembles its products in Woodland Hills,
California. The Company develops and designs all the critical components for its
camera systems, including the camera movement and lens. An entire camera system
consists of hundreds of parts, each carefully produced, assembled and tested.
The manufacturing process takes up to four months and primarily involves the
fabrication and assembly of camera and lens components by over 100 highly
skilled workers, each of whom generally has an area of specialization. Following
the assembly process, each camera system is rigorously tested to achieve the
high standard of performance that customers expect from Panavision.

While the Company manufactures most of the components internally, certain
components and sub-assembly work, including glass grinding, lens element
polishing and die casting, are outsourced to selected suppliers. The Company has
developed long-term relationships with its significant suppliers and believes
that they will continue to supply high-quality products in quantities sufficient
to satisfy its requirements. Since certain components, particularly the lens
element, require long lead times, precise production schedules are critical.
Inventory levels are determined based on input from marketing, operations and
the agent network. The Company maintains a fairly constant production schedule
in order to efficiently utilize its resources and service its customers'
requirements.

MARKETING AND CUSTOMER SERVICE

The principal decisionmakers in the selection of camera packages are
cinematographers, directors and producers, who view their cameras and related
equipment as critical artistic tools. Camera packages typically comprise a very
small percentage of a production budget, ranging on average from approximately
4% for commercials to less than 1% for large-budget action films. Accordingly,
absent budget constraints, the selection of equipment is driven by its
suitability, technological capabilities and reliability, as well as by the
degree to which the manufacturer or renter is able to rapidly service the
technical needs of the filmmaker, both before and during film production.

The Company's skilled sales representatives have established close working
relationships with numerous filmmakers. To cultivate these relationships, the
Company assigns each filmmaker a sales representative who possesses the
experience and skills that match the needs of the filmmaker. Based on
discussions with the filmmaker, the sales representative recommends a camera
package tailored to achieve the filmmaker's desired visual effect and meet the
production budget. In addition, sales representatives provide further advice and
support by visiting film production sites. As a result of providing high-quality
customer service, many of the Company's representatives have been working with
the

33
<PAGE>
same filmmakers throughout their careers and in some instances the collaborative
effort with a filmmaker has led to new product designs.

After preliminary decisions have been made with respect to the proper camera
systems, the camera equipment will be delivered to a preparation room reserved
for that filmmaker. The filmmaker, together with his own and Panavision's
representatives, may then inspect the equipment as well as test and experiment
with its use at the facility's prep floor, sound stage, filming studio and
screening room.

DISTRIBUTION

Camera packages are rented to the motion picture and television industries
through rental houses owned and operated by the manufacturer as well as by
independent agents. These rental houses serve as a single point of contact for
the cinematographers and often provide services including maintenance and
technical advice. Panavision is the only manufacturer to have a significant
portion of its revenue generated through owned and operated rental houses,
primarily because of the Company's choice not to sell its equipment. The Company
does not currently intend to begin selling its camera systems.

Panavision owns and operates camera rental facilities domestically in
Woodland Hills and Hollywood, California, Orlando, Florida and Wilmington, North
Carolina and internationally, in Toronto and Vancouver, Canada, Dublin, Ireland
and London (two) and Manchester, United Kingdom. The Orlando and Toronto
facilities also provide lighting, lighting grip and power generation equipment.

In addition to its owned and operated facilities, the Company serves its
customers through a network of domestic and international third-party agents who
are responsible for the rental of the Company's equipment in locations that are
not serviced by the owned and operated facilities. Agents pay approximately 60%
of their rental revenue to the Company and retain the approximately 40% balance,
which is charged as a commission expense in the Company's statement of
operations. The Company uses 11 third-party agents to facilitate the rental of
its products, accounting for approximately 12% of the Company's revenue in 1995.
All of the Company's agents are well-versed in the use of Panavision equipment
and are supported by the Company's technical staff.

The Company's domestic third-party agent network includes agents in Atlanta,
Chicago, Dallas, Miami, New York and San Francisco. In addition, the Company has
an international agent network that includes agents in Canada, Mexico, France,
Italy, Spain, Australia, Hong Kong, Japan and South Africa. The Hong Kong agent
has offices in China, Thailand, Malaysia and the Philippines, while the
Australian agent also maintains an office in New Zealand.

For information as to the Company's operations in different geographical
areas, see Note 9 of Notes to the Consolidated Financial Statements of the
Company.

COMPETITION

The market for high-precision cinematography equipment is highly
competitive, primarily driven by technology, customer service and, to a lesser
extent, price. As a manufacturer of cinematography equipment, the Company's
primary competitors are Arriflex, based in Munich, Germany, and Moviecam, based
in Vienna, Austria. Both of these companies manufacture only cameras and certain
accessories, primarily for sale to rental houses and individuals, who are not
the end users. Because it manufactures lenses, cameras, and a full range of
accessories, has close relationships with filmmakers and has in-house design and
manufacturing capabilities, the Company believes that it is better able to
provide the innovative camera systems demanded by its customers.

As a renter of cinematography equipment, the Company competes with numerous
rental facilities which must purchase their equipment from other manufacturers
and then rent that equipment to their

34
<PAGE>
customers. While the overall rental business is price competitive and subject to
discounting, the Company has chosen to compete on the basis of its large
inventory base, technologically advanced proprietary products, broad product
line, extensive sales and marketing force and commitment to customer service.
The Company believes that, as the manufacturer, it is able to respond to many
user requests on shorter notice than its rental competitors.

In addition to its existing competitors, the Company may encounter
competition from new competitors, as well as from new types of equipment. There
can be no assurance that the Company will be able to continue to develop,
manufacture and market its products successfully against existing or new
competitors.

LIGHTING RENTAL

The Company rents lighting, lighting grip, transportation and distribution
equipment and mobile generators used in the production of feature films,
television programs and commercials, outside broadcasts and other events from
its operations located in the United Kingdom, Canada and Florida. In addition,
the Company sells consumable products including lighting filters, light bulbs
and gaffer tape, which are used in all types of production. Effective July 1,
1996, the Company owns Lee Lighting, which in 1995 had revenue of approximately
$19.7 million. The Company's other lighting rental operations in Canada and
Florida had combined 1995 revenue of approximately $4.8 million.

LEE LIGHTING

Lee Lighting is the largest lighting rental operation (based on equipment
rental inventory) in the United Kingdom. Lee Lighting purchases lighting
equipment, lighting grip equipment and generators from independent manufacturers
to maintain and build its rental asset base. Lee Lighting currently has the
largest inventory of lampheads, the core element of lighting equipment used by
filmmakers in all areas of the industry, in the United Kingdom. This large
rental asset base and Lee Lighting's experienced management and electricians
allow it to service a number of films which may be shooting concurrently. Lee
Lighting operates lighting rental operations in London, Bristol, Manchester and
Glasgow, which have their own rental inventories. From these four locations, Lee
Lighting is able to service any production in England, Wales or Scotland. In
addition, Lee Lighting maintains a rental base at Shepperton Studios, the second
largest studio complex in the United Kingdom for the production of feature
films.

Lee Lighting also supplies equipment to any U.K.-based production crew which
desires to shoot all or part of a production in Europe, South America or Africa.
Typically, Lee Lighting does not service locally based productions outside of
the United Kingdom, except occasionally in Ireland. Recently, Lee Lighting has
supplied the entire lighting needs of such major feature films as FOUR WEDDINGS
AND A FUNERAL, JUDGE DREDD, ROB ROY, MISSION: IMPOSSIBLE and, scheduled to be
released later in 1996, 101 DALMATIANS, EVITA and THE SAINT.

In addition to providing lighting equipment, Lee Lighting also supplies
power generation and power distribution equipment, which is customized by the
Company's in-house electricians. Industry demand has resulted in smaller
generators capable of producing power more than or comparable to larger models
due to space limitations in many filming locations. Lee Lighting has been very
responsive to this need and recently customized a set of twin 220 kilowatt
generators able to be transported to a film location on a single truck.

COMPETITIVE STRENGTHS. The Company believes Lee Lighting is well-positioned
in the U.K. lighting rental industry because of the following competitive
strengths:

REPUTATION FOR OUTSTANDING SERVICE. Over the last two decades Lee Lighting
has developed a reputation among U.K. producers of feature films, television
programs and commercials for providing outstanding service. Lee Lighting is
the only lighting company in the United Kingdom which

35
<PAGE>
supplies its own electricians in connection with the rental of its
equipment. Many of the major U.K. feature film producers regularly use Lee
Lighting's equipment and the services of its skilled gaffers and
electricians. This service force is on call 24 hours a day, seven days a
week and is supplemented by freelance labor when required. This affords Lee
Lighting the competitive advantage of providing customers with a higher
quality and more consistent service, critical to success in capturing
feature film work. Many of Lee Lighting's technicians are considered to be
among the best in the film industry and their services are requested by some
of the world's leading cinematographers.

DEPTH OF INVENTORY. Lee Lighting maintains the largest rental asset base of
lighting equipment, transport, mobile generators and power distribution
equipment in the United Kingdom. This permits Lee Lighting to service as
many as 15 feature films at the same time. The Company believes that its
extensive inventory of equipment provides it with an important competitive
advantage. Its substantial inventory enables Lee Lighting to service
projects with large-scale equipment and personnel requirements, such as
feature films and outside broadcasts, while still maintaining sufficient
capacity to simultaneously service other projects. Lee Lighting believes
that its position as the inventory market leader makes it the only source
for certain large-scale projects. Lee Lighting intends to add to its rental
asset base while actively pursuing opportunities to increase its share in
the U.K. feature film market as well as the television market, including
commercials and television broadcasts.

EXPERIENCED MANAGEMENT. Lee Lighting currently employs senior management
who have developed important contacts in the U.K. motion picture and
television industries over many years. Under this management there is a
sizable field force of gaffers and electricians who work exclusively for Lee
Lighting.

INDUSTRY BACKGROUND AND COMPETITION. Lee Lighting services both the motion
picture and television industries, including studio programs, outside
broadcasts, commercials and made-for-television movies (equivalent to movies of
the week). These markets require a similar range of lighting products and
related support equipment; however, feature films and episodic television
programs generally require larger equipment packages than commercials. Equipment
packages are frequently determined by the producer, director or cinematographer,
who may desire a specific type of image or lighting effect.

Although Lee Lighting is the largest lighting rental company in the United
Kingdom, the rental lighting market is price competitive. Lee Lighting estimates
that it and three other companies comprised a substantial majority of the
aggregate market share in the United Kingdom in 1995; the remainder of the
market is shared among many smaller companies.

LEE FILTERS

Lee Filters is a manufacturer of light control media for the motion picture,
television and theater industries. Sales of filters or gels used by lighting
directors to control or correct lighting conditions during productions comprise
80% of Lee Filters' business. The balance consists of photographic filters and
related products. In 1995, Lee Filters' revenue was approximately $10.0 million.

Lee Filters' lighting filters are available in a wide range of colors and
applications. These lighting filters are made either from polyester or
polycarbonate film purchased from U.K. and European petrochemical companies. Lee
Filters' range of light control filters includes tungsten conversion, daylight
conversion, arc correction, fluorescent, diffusion and ultraviolet grades. The
film base is impervious to water, is totally transparent and has a high melting
point, making it ideal for the manufacture of filter systems. Rolls of film are
coated on both sides with specially prepared lacquers which give them exactly
the color or light management properties demanded by the user. The color
formulas are proprietary to Lee Filters and are computer filed to ensure exact
reproduction from one batch to the next.

36
<PAGE>
Lee Filters also makes still photographic resin and polyester filters and a
camera filter holder system for amateur stills photographers, and produces
bellows for still camera manufacturers.

Lighting filter distribution is handled primarily through a network of third
party dealers who have been selected because of their specific knowledge of the
filters market in their respective countries. Approximately 60% of Lee Filters'
sales are in the United Kingdom and Europe. In the United Kingdom, Lee Filters
sells on a direct basis to end users and rental houses as well as to
distributors and dealers. In Europe, Lee Filters has distributors in France,
Germany, Italy, Spain, Benelux, Portugal, Scandinavia and Switzerland.

Approximately 25% of Lee Filters' sales are generated in North America where
it has established distribution operations in Burbank, California and Teterboro,
New Jersey to service U.S. dealers. A third party distributor has been
established in Toronto to serve the Canadian market. The remaining 15% of sales
are generated primarily in Japan, Hong Kong, Singapore and Australia.

COMPETITIVE STRENGTHS

WIDE RANGE OF FILTER TYPES AND COLORS. Lee Filters believes it manufactures
more types of filters and a wider range of colors than its competitors and is
the only company which does not sell on a private label basis to others. Lee
Filters does not resell filters made by other manufacturers, thereby enabling it
to maintain better quality control.

LARGE INVENTORY. Lee Filters maintains a sizable inventory of filters in
three locations in order to provide same-day service to production companies.
This is especially important in servicing feature films while on location.
Quality and availability of product are the principal reasons Lee Filters is a
preeminent supplier to the U.K., European and U.S. feature film industry.

Lee Filters intends to expand its position in lighting filters for the film,
television and theater markets by improving its distribution and dealer network,
particularly in North and South America and in the Far East. In addition, it
plans to increase its product offerings on a selective basis to the stills
photography market in the United Kingdom and the United States.

COMPETITION

Lee Filters has one principal competitor and several smaller competitors.
Some of these competitors are contract processors or coaters who supply the end
user through other distributors, and some are sales companies which usually
purchase and resell filters. Its principal competitor offers a full range of
filters, some of which are made in-house and some of which are purchased.

INTELLECTUAL PROPERTY

The Company owns or otherwise has rights to patents and trademarks used in
conjunction with the manufacture and rental of its products, including
Panavision-Registered Trademark-, PRIMO ZOOM-Registered Trademark-,
Panaflex-Registered Trademark-, Panahead-Registered Trademark-,
3-Perf-Registered Trademark- and Panastar-Registered Trademark-. Proprietary
protection for the Company's products and know-how is important to the Company's
business. Accordingly, the Company's policy is to prosecute and enforce its
patents and proprietary technology. The Company intends to continue to file
patent applications to protect technology, inventions and improvements that are
considered important to the development of its business. In addition, the
Company relies upon trade secrets, know-how, continuing technological innovation
and licensing opportunities to develop and maintain its competitive position. To
the Company's knowledge, there are no claims or suits threatened, pending or
contemplated against it for infringement of any patents or trademarks.

37
<PAGE>
PROPERTIES

The Company's headquarters is located at its 150,000 square-foot facility in
Woodland Hills. In addition, the Company operates rental facilities in Woodland
Hills and Hollywood, California, Orlando, Florida and Wilmington, North
Carolina. The Company is in the process of expanding its Hollywood facility,
which it expects to complete by the end of 1996. To service its international
markets, the Company operates rental facilities in Toronto and Vancouver,
Canada, Dublin, Ireland and London (two) and Manchester, England. Lee Lighting
operates rental facilities in London, Bristol and Manchester, England and
Glasgow, Scotland. Lee Filters' manufacturing facility is located in Andover,
England. All of the Company's facilities are leased, with the exception of two
of the Company's greater London facilities and its facility in Glasgow, which
are owned.

ENVIRONMENTAL MATTERS

The Company's manufacturing operations are subject to foreign, federal,
state and local environmental laws and the Company has made, and will continue
to make, expenditures to comply with those laws. In addition, environmental laws
can impose liability on present and former real property owners or operators,
without regard to fault or legality of the original actions, for the cost of
cleaning up or removing contamination caused by hazardous or toxic substances.
The Company expects to spend approximately $2.0 million at its Andover, England
facility during 1997 and 1998 to meet anticipated air emissions requirements in
the United Kingdom. Although no other material capital or operating expenditures
relating to environmental controls or other environmental matters are currently
anticipated, there can be no assurance that the Company will not be required to
make material expenditures in the future relating to environmental matters.

EMPLOYEES

As of September 30, 1996, the Company had a total of approximately 782
full-time employees, consisting of 357 employees based in the United States, 61
employees based in Canada, 356 employees based in the United Kingdom and eight
employees based in France. The Company is not a party to any collective
bargaining agreements. The Company believes that its relationships with its
employees are good.

LITIGATION

The Company is not engaged in any legal proceedings other than ordinary
routine litigation incidental to its business.

38
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and directors of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------- --- -------------------------------------------
<S> <C> <C>
William C. Scott........................... 62 Chairman of the Board of Directors and
Chief Executive Officer
John S. Farrand............................ 52 President, Chief Operating Officer and
Director
Jeffrey J. Marcketta....................... 41 Executive Vice President, Chief Financial
Officer and Treasurer
Christopher M.R. Phillips.................. 37 Controller and Secretary
Sidney Lapidus............................. 59 Director
Martin D. Payson........................... 60 Director*
Joanne R. Wenig............................ 41 Director
</TABLE>

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

*Mr. Payson is not yet a director but has agreed to become a director upon
completion of the Offerings.

WILLIAM C. SCOTT has been the Chairman and Chief Executive Officer of the
Company since 1988. From 1972 until 1987, Mr. Scott was President and Chief
Operating Officer of Western Pacific Industries Inc., a company listed on the
NYSE. Prior to 1972, Mr. Scott was a Group Vice President of Cordura Corporation
(a business information company) for three years, a Vice President of Booz Allen
& Hamilton Inc. (management consulting firm) for five years and an
owner/operator of several small businesses for eight years.

JOHN S. FARRAND has been the President and Chief Operating Officer of the
Company since 1985 and a director of the Company since October 1996. From 1980
to 1985, Mr. Farrand was employed by Warner Communications Inc. in several
senior executive positions. He was President of their Atari Coin-Operated Games
Division and subsequently was appointed President and Chief Operating Officer of
Atari Holdings, Inc. Prior to 1980, Mr. Farrand spent 14 years with Music Hire
Group Limited, a U.K. company specializing in coin-operated music systems (juke
boxes), and since 1973 served as Managing Director. Mr. Farrand is a member of
the Academy of Motion Picture Arts and Sciences, a member of the Society of
Motion Picture and Television Engineers and an associate member of the American
Society of Cinematographers.

JEFFREY J. MARCKETTA has been Executive Vice President and Chief Financial
Officer of the Company since 1993 and Treasurer since 1996. From 1991 to 1993,
Mr. Marcketta served as the President of Panavision Europe Limited, a wholly
owned subsidiary of the Company, and was responsible for the general management
of the Company's European operations. From 1989 until 1991, he was Vice
President of Corporate Development, assisting the Chief Executive Officer in the
restructuring and rationalization of the Company's business operations. Prior to
joining the Company in 1989, he worked for Ernst & Young LLP for almost ten
years, the last three of which were spent in the Mergers and Acquisitions
Consulting Group of the New York office.

CHRISTOPHER M.R. PHILLIPS has served as Controller of the Company since 1993
and Secretary since 1996. Mr. Phillips was the controller for the domestic
operations of the Company from 1989 to 1993 and the assistant controller for the
domestic operations of the Company from 1986 to 1989.

SIDNEY LAPIDUS has been a director of the Company since 1990. Mr. Lapidus
has been employed since 1967 by E.M. Warburg, Pincus & Co., Inc., a private
investment firm, where he has served as a Managing Director since 1982. He is
also a director of Renaissance Communications Corp., Pacific Greystone
Corporation, Caribiner International, Inc. and a number of privately held
companies.

39
<PAGE>

MARTIN D. PAYSON will serve as a director of the Company upon completion of
the Offerings. Mr. Payson has been active in investment and philanthropic
activities since December 1992. From January 1990 to December 1992, he was Vice
Chairman of the Board of Directors of Time Warner, Inc., and from 1970 to
December 1990, he was an executive officer of Warner Communications Inc. Mr.
Payson is a director of Ithaca Holdings, Inc., Meridian Sports, Inc., Delta
Financial Corporation and Renaissance Communications Corp.

JOANNE R. WENIG has served as a director of the Company since 1990. Ms.
Wenig has been employed since 1986 by E.M. Warburg, Pincus & Co., Inc., a
private investment firm, where she has served as a Managing Director since 1991.
She is also a director of Renaissance Communications Corp. and a number of
privately held companies.

The Company expects to appoint one additional independent director.

Each director serves until the expiration of his or her term and thereafter
until his or her successor is duly elected and qualified. Pursuant to a
stockholders agreement, Warburg, Pincus and management have the right to
designate five persons to be appointed or nominated to the Company's Board of
Directors. See "--Stockholders Agreement." Executive officers of the Company are
elected annually by the Board of Directors and serve at its discretion or until
their successors are duly elected and qualified.

OTHER KEY EMPLOYEES

The following individuals are key employees within the Company's Woodland
Hills division. A brief description of their responsibilities is provided below.

PHILIP RADIN has been Executive Vice President Marketing for the Woodland
Hills division of the Company since 1989. Mr. Radin joined Panavision as a
trainee in 1975. During his first five years with the Company, he was
responsible for instructing film crews on the use and benefits of Panavision
products. In 1980, he became the manager of the camera rental department and in
1986 became a Vice President Marketing.

ROBERT HARVEY has served as Vice President Sales for the Woodland Hills
division of the Company since he joined Panavision in 1985. He has managed the
expansion into new markets, including independent feature films, television
movies and syndicated projects for television. From 1979 through 1985, Mr.
Harvey worked as Director of Sales for the Atari Coin-Operated Games Division.
Mr. Harvey is a member of the Screen Actors Guild and has served on numerous
industry boards and steering committees.

LARRY HEZZELWOOD has been Vice President Marketing & Operations for the
Woodland Hills division of the Company since 1991. He joined Panavision in 1975
where he worked in Panavision's camera rental department for five years before
moving to Paramount Pictures Corporation to manage its camera department. In
1985, Mr. Hezzelwood became a freelance assistant cameraman. In 1989 Mr.
Hezzelwood returned to Panavision, and he assumed his current position of Vice
President Marketing and Operations in 1991.

IAIN NEIL has served as Senior Vice President Optics for the Woodland Hills
division of the Company since he joined Panavision in 1986 after spending two
years with Hughes ELCAN Optical Technologies in Toronto and eight years at Barr
& Stroud Limited in Scotland as head of optical design. Mr. Neil holds over 150
existing worldwide patents and is the recipient of six awards for lenses and
optical systems from the Academy of Motion Picture Arts and Sciences. He is
currently a member of the International Society for Optical Engineering, the
Optical Society of America, the American Society of Cinematographers and the
Academy of Motion Picture Arts and Sciences.

40
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS

After the completion of the Offerings, the Board of Directors of the Company
will have three standing committees: the Audit Committee, the Compensation
Committee and the Stock Option Committee.

The Audit Committee will have general responsibility for supervision of
financial controls, as well as for accounting and audit activities of the
Company. The Audit Committee will annually review the qualifications of the
Company's independent certified public accountants, make recommendations to the
Board of Directors as to their selection and review the planning, fees and
results of their audit. The Audit Committee will consist solely of certain
independent directors as and when elected. The Compensation Committee will make
recommendations regarding the compensation and benefit polices and procedures of
the Company. The Stock Option Committee will determine grants under the
Company's stock option plan. See "--Compensation Pursuant to Plans."

DIRECTORS' ANNUAL COMPENSATION

During 1995, members of the Board of Directors received no directors' fees.
The Company is obligated to reimburse its Board members for all reasonable
expenses incurred in connection with their attendance at directors' meetings.
Following the Offerings, independent directors will receive an annual fee of
$20,000 and a meeting fee of $1,000 for each committee meeting held separately.
All directors will be reimbursed for out-of-pocket expenses. Under the Stock
Option Plan, the Company may, from time to time and in the sole discretion of
the Board of Directors, grant options to directors.

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following table sets forth information
regarding the compensation of the Company's Chief Executive Officer and its
other executive officers for the fiscal year 1995:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------
<S> <C> <C> <C> <C>
OTHER ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2)
- ---------------------------------------------------------- --------- ----------- ------------- -----------------
William C. Scott.......................................... 1995 $ 600,000 $ 1,172,000 $ 6,930
Chairman of the Board of
Directors and Chief
Executive Officer
John S. Farrand........................................... 1995 400,000 785,000 6,930
President and Chief
Operating Officer
Jeffrey J. Marcketta...................................... 1995 218,769 314,000 6,930
Executive Vice President
and Chief Financial Officer
Christopher M.R. Phillips................................. 1995 88,077 45,000 4,842
Controller
</TABLE>

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

(1) Paid pursuant to the Company's Executive Incentive Compensation Plan. See
"--Compensation Pursuant to Plans--Executive Incentive Compensation Plan."

(2) Consists of matching contributions by the Company under its 401(k) plan.

41
<PAGE>
COMPENSATION PURSUANT TO PLANS

STOCK OPTION PLAN

In connection with the Recapitalization, the Board of Directors adopted and
the stockholders approved the Company's stock option plan (the "Stock Option
Plan"). The Stock Option Plan is open to participation by directors, officers,
consultants, other key employees of the Company or of its subsidiaries and
certain other key persons who the Stock Option Committee determines shall
receive options under the Stock Option Plan, except members of the Stock Option
Committee.

The Stock Option Plan authorizes (i) the grant of options to purchase Common
Stock intended to qualify as incentive stock options ("Incentive Options"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) the grant of options that do not so qualify ("Non-Statutory
Options"). The number of shares of Common Stock reserved for issuance under the
Stock Option Plan is 2,190,150 shares. As of November 20, 1996, options to
purchase an aggregate of 1,766,250 shares having an average exercise price of
$1.22 per share and options to purchase an aggregate of 369,000 shares at an
exercise price per share equal to the initial public offering price set forth on
the cover page of this Prospectus were outstanding under the Stock Option Plan.
In connection with the Recapitalization, Messrs. Scott, Farrand, Marcketta and
Phillips received options to purchase 576,681, 726,812, 224,314 and 19,076
shares, respectively, at an exercise price of $1.22 per share. No stock options
were granted in 1995. No options have been exercised under the Stock Option
Plan, and options to purchase 54,900 shares were available for grant under the
Stock Option Plan. The Stock Option Plan expires in 2006.

The exercisability of certain options granted to the Company's officers is
subject to vesting conditions, which may be accelerated upon satisfaction of
certain performance conditions as described below. Options for 1,236,375 shares
will vest at the end of eight years from the date of grant. Of these options,
options for 353,250 shares will vest upon the completion of the Offerings and
options for up to 300,263, 300,263 and 282,600 shares will vest if the Company
achieves earnings before depreciation, interest and taxes ("EBDIT") of $46.2
million, $50.4 million and $55.2 million, respectively, or Free Cash Flow (as
defined) of $27.3 million, $30.7 million and $34.0 million, respectively, during
its years ending December 31, 1996, 1997 and 1998, respectively. Additional
options for 529,875 shares will vest only if the Company achieves EBDIT (as
defined) of $62.0 million in its year ending December 31, 1998 or the lower
amount of $65.0 million or a 10% increase of its actual 1998 EBDIT in its year
ending December 31, 1999. Additional options for 369,000 shares, including
24,000 shares held by Mr. Phillips, vest at an annual rate of 20% per year
commencing on the first anniversary of the Offerings. The vesting of certain
options granted under the Stock Option Plan will also be accelerated upon a
change of control of the Company. See Note 7 of Notes to Consolidated Financial
Statements.

The Stock Option Plan is administered by a Stock Option Committee appointed
by the Board of Directors of the Company. The Stock Option Committee has the
sole authority, in its absolute discretion: (i) to determine which of the
eligible employees of the Company and its subsidiaries shall be granted options,
(ii) to authorize the granting of both Incentive Options and Non-Statutory
Options, (iii) to determine the times when options shall be granted and the
number of shares to be optioned, (iv) to determine the option price of the
shares subject to each option, which price shall be not less than the fair
market value of the Common Stock at the time the option was granted, (v) to
determine the time or times when each option becomes exercisable, the duration
of the exercise period and any other restrictions on the exercise of options
issued under the Stock Option Plan, (vi) to prescribe the form or forms of the
option agreements under the Stock Option Plan, (vii) to adopt, amend and rescind
such rules and regulations as, in its opinion, may be advisable in the
administration of the Stock Option Plan and (viii) to construe and interpret the
Stock Option Plan, the rules and regulations and the option agreements under the
Stock Option Plan and to make all other determinations deemed necessary or
advisable for

42
<PAGE>
the administration of the Stock Option Plan. All decisions, determinations and
interpretations of the Stock Option Committee are final and binding on all
optionees.

Incentive Options may be granted to officers and other key employees of the
Company or its subsidiaries. Non-Statutory Options may be granted to directors,
consultants, or other key persons.

No option may be exercised after the date ten years from the date of grant
of such option (five years in the case of Incentive Options of individuals
holding more than ten percent of the total combined voting power of all classes
of stock of the Company or of any parent or subsidiary thereof
("greater-than-ten-percent-stockholders")) (the "Termination Date"). The
exercise price for Incentive Options may not be less than 110% of fair market
value of the Common Stock on the date of grant in the case of a greater-
than-ten-percent-stockholder. The aggregate fair market value (determined as of
the time the option is granted) of the Common Stock with respect to which any
Incentive Options may be exercisable for the first time by the optionee in any
calendar year (under the Stock Option Plan or any other stock option plan of the
Company or any parent or subsidiary thereof) shall not exceed $100,000.

Options are non-transferable except by will or the laws of descent and
distribution. Generally, options granted under the Stock Option Plan terminate
upon the earliest of: (i) the expiration date of the option, (ii) the date of
voluntary termination of the optionee's employment by the optionee, (iii) the
date of termination of the optionee's employment by the Company for cause, (iv)
three months after the date of termination of the optionee's employment by the
Company without cause, (v) one year after the cessation of the optionee's
employment by reason of a disability within the meaning of Section 22(e)(3) of
the Code and (vi) one year after the death of an optionee prior to the
Termination Date and while employed by the Company or a subsidiary thereof or
while entitled to exercise an option pursuant to (v) above (such option shall be
exercisable by the person to whom the optionee's rights under the option pass by
will or the applicable laws of descent and distribution). If an option may be
exercised during any period after the termination of an optionee's employment
with the Company, such option may be exercised only to the extent that the
optionee was entitled to exercise such option at the time of such termination.

EXECUTIVE INCENTIVE COMPENSATION PLAN

The Company maintains an Executive Incentive Compensation Plan in which the
Chairman and Chief Executive Officer is eligible to participate, as well as
other employees selected by the Chief Executive Officer. The plan allows
participants to earn bonuses up to a stated percentage of their base salary. The
bonuses are paid in part based on the Company's achievement of operating
results, and in part based on achievement of individual goals established for
the participant. The Company presently intends to continue the bonus plan for
1996 and future years.

EMPLOYMENT AGREEMENTS

Pursuant to an employment agreement with the Company, William C. Scott
agreed to serve as Chairman of the Board of Directors and Chief Executive
Officer of the Company for an annual salary of $800,000, subject to annual
increases as determined by the Company. The employment agreement provides that
Mr. Scott shall be granted bonuses pursuant to the Executive Incentive
Compensation Plan and Non-Statutory Options pursuant to the terms of the Stock
Option Plan. The employment agreement expires on June 11, 1999. The Company may
terminate the employment agreement for cause. In the event of Mr. Scott's
voluntary termination (except during the six-month period commencing six months
after a change of control) or termination for cause by the Company, the Company
shall pay Mr. Scott only an amount equal to his base salary and all previously
unreimbursed expenses. Upon a voluntary termination by Mr. Scott during such
six-month period commencing six months after a change of control through the
date of termination. Mr. Scott is entitled to the greater of (x) $1,600,000 or
(y) twice his annual base salary, and all accrued but previously unpaid salary,
bonuses and unreimbursed expenses through

43
<PAGE>
the date of termination. Upon a termination of Mr. Scott by death or disability,
the Company shall make a lump sum payment equal to the greater of $800,000 or
Mr. Scott's base salary currently then in effect, as well as all accrued but
previously unpaid salary, bonuses and unreimbursed expenses through the date of
termination.

The employment agreement contains a covenant prohibiting the improper
disclosure and use of the Company's confidential information. In addition, the
employment agreement contains a covenant prohibiting Mr. Scott from directly or
indirectly competing with Company. This covenant expires two years following Mr.
Scott's voluntary termination.

The Company also has entered into agreements with Messrs. Farrand and
Marcketta pursuant to which they are entitled to receive, upon termination of
their employment by the Company (other than for cause or upon their death or
disability), severance payments equal to the greater of (i) $600,000 and
$237,500, respectively, and (ii) their annual base salary in effect at the time.

STOCKHOLDERS AGREEMENT

Under a stockholders agreement (the "Stockholders Agreement") among the
Company and its existing stockholders, the parties have agreed to cause the
Board of Directors of the Company to include (i) three persons designated by
Warburg, Pincus, (ii) William C. Scott or, if he is not an employee of the
Company or is otherwise unavailable, one person designated by the holders of a
majority of the shares of Common Stock held by management who are then employed
by the Company and (iii) John S. Farrand or, if he is not an employee of the
Company or is otherwise unavailable, one person designated by the holders of a
majority of the shares of Common Stock held by management who are then employed
by the Company. The Stockholders Agreement imposes certain restrictions on the
transfer of shares of Common Stock by the management stockholders prior to the
second anniversary of the Offerings. The Stockholders Agreement also provides
such stockholders with certain registration rights. See "Description of Capital
Stock--Registration Rights."

The Stockholders Agreement terminates on the date which Warburg, Pincus and
its affiliates beneficially own less than 5% of the outstanding shares of Common
Stock of the Company.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company did not have a compensation committee during 1995. Officers'
compensation was determined by the Board of Directors.

44
<PAGE>
CERTAIN TRANSACTIONS

In May 1996, the Company effected the Recapitalization, pursuant to which it
acquired all of the equity interests in PILP it did not previously own and
retired all of PILP's outstanding debt securities for a total of $126.1 million
in cash. As part of the Recapitalization:

(i) Warburg, Pincus and Messrs. Scott, Farrand and Marcketta
contributed $11,608,000, $580,400, $165,829 and $82,914, respectively, to
the Company for subordinated demand notes which bear interest at a rate of
6.83% per annum and rank pari passu with each other. The notes to Messrs.
Scott, Farrand and Marcketta were issued on May 8, 1996. The notes to
Warburg, Pincus were issued on May 8, July 16 and July 31, 1996;

(ii) Mr. Scott exchanged his interests in PILP for 989,100 shares of
Common Stock;

(iii) Messrs. Farrand and Marcketta were issued 282,600 and 141,300
shares of Common Stock, respectively; and

(iv) the Company, Warburg, Pincus and Messrs. Scott, Farrand and
Marcketta entered into the Stockholders Agreement. For terms of the
Stockholders Agreement, see "Management--Stockholders Agreement" and
"Description of Capital Stock--Registration Rights."

Effective July 1, 1996, Warburg, Pincus acquired substantially all of the
assets of Lee Lighting for approximately $8.0 million and contributed those
assets to the Company. The purchase price equalled the book value of the
acquired assets.

Mr. Farrand, an executive officer of the Company, is the obligor in respect
of a promissory demand note issued to the Company in January 1987. The principal
amount of and accrued interest on this note were $540,000 and $76,000,
respectively, as of September 30, 1996. The note accrues interest at a rate of
7.04% per annum, and, as of September 30, 1996, no payments of principal had
been paid. Mr. Farrand may pre-pay the note at any time. This note was
originally issued in connection with Mr. Farrand's purchase of a residence and
is secured by a mortgage thereon.

Certain executive management services have been provided by the Company to
Lee International, Inc. ("LII"), an indirect, wholly owned subsidiary of
Warburg, Pincus. The amount received by the Company from LII was $996,000,
$854,000 and $687,000 for the years ended December 31, 1993, 1994 and 1995 and
$489,000 and $510,000 for the nine months ended September 30, 1995 and 1996,
respectively. The amounts received have been offset against selling, general and
administrative expenses in the Company's consolidated statement of income. The
agreement with LII expired on September 30, 1996.

45
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth certain information with regard to the
beneficial ownership of the Common Stock as of November 20, 1996 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby, by (i) each
person known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and executive officer and (iii) all
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)(2)
--------------------------
<S> <C> <C> <C>
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) OFFERINGS OFFERINGS(3)
- ------------------------------------------------------------- --------------------- ----------- -------------
Warburg, Pincus Capital Company, L.P.(4)..................... 12,717,000 90.0% 72.1%
466 Lexington Avenue
New York, New York 10017
William C. Scott............................................. 989,100 7.0 6.2
Panavision Inc.
140 East 45th Street
New York, New York 10017
John S. Farrand.............................................. 282,600 2.0 2.4
Jeffrey J. Marcketta......................................... 141,300 1.0 1.0
Christopher M.R. Phillips.................................... -- * *
Sidney Lapidus(5)............................................ 12,717,000 90.0 72.1
Joanne R. Wenig(5)........................................... 12,717,000 90.0 72.1
All directors and executive officers
as a group (6 persons)..................................... 14,130,000 100.0 80.5
</TABLE>

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

* Less than 1%.

(1) Except as otherwise indicated, the persons in this table have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and subject to the information contained in the footnotes to this
table.

(2) Based upon 14,130,000 shares of Common Stock outstanding prior to the
Offerings and 17,630,000 shares of Common Stock outstanding after the
Offerings. Shares not outstanding but deemed beneficially owned by virtue of
the right of a person or group to acquire them within 60 days are treated as
outstanding only for purposes of determining the number of and percent owned
by such person or group.

(3) Amounts shown for each stockholder include all shares of Common Stock
subject to stock options granted to Messrs. Scott, Farrand, Marcketta and
Phillips exercisable within 60 days. Not included are additional shares of
Common Stock subject to options granted to Messrs. Scott, Farrand, Marcketta
and Phillips that are not exercisable within 60 days.

(4) The sole general partner of Warburg, Pincus Capital Company, L.P. ("WPCC")
is Warburg, Pincus & Co., a New York general partnership ("WP"). Lionel I.
Pincus is the managing partner of WP and may be deemed to control it. E.M.
Warburg, Pincus & Co., Inc. ("EMW") manages WPCC. WP owns all of the
outstanding stock of EMW and, as the sole general partner of WPCC, has a 20%
interest in the profits of WPCC. EMW owns 0.9% of the limited partnership
interests in WPCC.

(5) All of the shares indicated as owned by Mr. Lapidus and Ms. Wenig are owned
by Warburg, Pincus and are included because of their affiliation with
Warburg, Pincus. Mr. Lapidus and Ms. Wenig disclaim "beneficial ownership"
of these shares within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934. The address of Mr. Lapidus and Ms. Wenig is c/o
Warburg, Pincus Capital Company, L.P., 466 Lexington Avenue, New York, NY
10017.

46
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company and certain
provisions of the Company's Restated Certificate of Incorporation (the
"Certificate") and By-laws (the "By-laws") is a summary and is qualified in its
entirety by the provisions of the Certificate and By-laws, copies of which have
been filed as exhibits to the Registration Statement of which this Prospectus is
a part.

Upon completion of the Offerings, the authorized capital stock of the
Company will consist of (i) 50,000,000 shares of Common Stock, par value $.01
per share, of which 17,630,000 shares will be outstanding and (ii) 2,000,000
shares of Preferred Stock, par value $.01 per share ("Preferred Stock"), of
which no shares will be outstanding.

COMMON STOCK

Holders of Common Stock are entitled to one vote per share in all matters to
be voted on by the stockholders of the Company and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Subject to preferences that may be applicable
to any Preferred Stock outstanding at the time, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities and the liquidation preference, if any, of any
outstanding Preferred Stock. Holders of shares of Common Stock have no
preemptive, subscription, redemption or conversion rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All of the
outstanding shares of Common Stock are, and the shares offered by the Company in
the Offerings will be, when issued and paid for, fully paid and non-assessable.
The rights, preferences and privileges of holders of Common Stock are subject
to, and may be adversely affected by, the rights of the holders of shares of any
series of Preferred Stock which the Company may designate and issue in the
future.

PREFERRED STOCK

The Board of Directors is authorized to issue Preferred Stock without
stockholder approval and upon such terms as the Board of Directors may
determine. This amendment could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from acquiring or
making a proposal to acquire, a majority of the outstanding stock of the
Company. The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of holders of Preferred Stock that may be
issued in the future. The Company has no present plans to issue any shares of
Preferred Stock. See "Risk Factors--Anti-Takeover Effect of Certain Charter and
By-Law Provisions."

REGISTRATION RIGHTS

Under the Stockholders Agreement, the Company granted certain rights with
respect to the registration of an aggregate of 14,130,000 shares of Common Stock
(together with other shares of Common Stock that may be acquired by such
stockholders, "Registrable Shares") to the stockholders thereunder. At any time
after the completion of the Offerings (subject to the "lock-up" provisions
described herein under the heading "Underwriting"), Warburg, Pincus is entitled
to request that the Company file a registration statement under the Securities
Act covering the sale of some or all of the Registrable Shares held by Warburg,
Pincus, subject to certain conditions. The Company is required to effect no more
than two such registrations. Messrs. Scott, Farrand and Marcketta, pursuant to
the Stockholders Agreement, may request inclusion in such registration and shall
have the right to include such shares in the registration, subject to certain
conditions, including that the underwriter of any such offering shall have the
right, subject to certain conditions, to limit the number of Registrable Shares
included in the

47
<PAGE>
registration. In addition, commencing two years after the closing of the
Offerings, and at any time thereafter, the parties to the Stockholders Agreement
have certain rights to include their shares whenever the Company proposes to
file a registration statement.

LIMITATIONS ON DIRECTORS' LIABILITY

The Certificate and By-laws limit the liability of directors and officers to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, including gross negligence,
except liability for (i) breach of the directors' and officers' duty of loyalty,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) the unlawful payment of a dividend or
unlawful stock purchase or redemption and (iv) any transaction from which the
director or officer derives an improper personal benefit. Delaware law does not
permit a corporation to eliminate a director's or an officer's duty of care, and
this provision of the Company's Certificate has no effect on the availability of
equitable remedies, such as injunction or rescission, based upon a director's
breach of the duty of care.

These provisions will not limit liability under state or federal securities
laws. The Company believes that these provisions will assist the Company in
attracting and retaining qualified individuals to serve as directors.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Under Section 203, certain "business
combinations" between a Delaware corporation whose stock generally is publicly
traded or held of record by more than 2,000 stockholders and an "interested
stockholder" are prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless (i) the corporation has
elected in its original certificate of incorporation not to be governed by
Section 203 (the Company did not make such an election), (ii) the business
combination was approved by the Board of Directors of the corporation before the
other party to the business combination became an interested stockholder, (iii)
upon consummation of the transaction that made it an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the commencement of the transaction (excluding voting stock owned
by directors who are also officers or held in employee benefit plans in which
the employees do not have a confidential right to tender or vote stock held by
the plan) or (iv) the business combination was approved by the Board of
Directors of the corporation and ratified by two-thirds of the voting stock
which the interested stockholder did not own. The three-year prohibition also
does not apply to certain business combinations proposed by an interested
stockholder following the announcement or notification of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of the majority of the corporation's
directors. The term "business combination" is defined generally to include
mergers or consolidations between a Delaware corporation and an "interested
stockholder," transactions with an "interested stockholder" involving the assets
or stock of the corporation or its majority-owned subsidiaries and transactions
which increase an interested stockholder's percentage ownership of stock. The
term "interested stockholder" is defined generally as a stockholder who,
together with affiliates and associates, owns (or, within three years prior, did
own) 15% or more of a Delaware corporation's voting stock. Section 203 could
prohibit or delay a merger, takeover or other change in control of the Company
and therefore could discourage attempts to acquire the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar of the Common Stock is ChaseMellon
Shareholder Services, L.L.C.

48
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings there has been no market for the shares of the Common
Stock. The Company can make no predictions as to the effect, if any, that sales
of shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of significant amounts of the
Common Stock in the public market, or the perception that such sales may occur,
could adversely affect prevailing market prices. See "Risk Factors--Shares
Eligible for Future Sale; Potential for Adverse Effect on Stock Price;
Registration Rights."

Upon completion of the Offerings, the Company expects to have 17,630,000
shares of Common Stock outstanding, assuming no exercise of the Underwriters'
over-allotment option. Of these shares, the 3,500,000 shares of Common Stock
sold in the Offerings will be freely tradeable without restriction under the
Securities Act, except for any such shares which may be acquired by an
"affiliate" of the Company (an "Affiliate") as that term is defined in Rule 144
under the Securities Act, which shares will be subject to the resale limitations
of Rule 144.

An aggregate of approximately 14,130,000 shares of Common Stock held by
existing stockholders upon completion of the Offerings will be "restricted
securities" (as that phrase is defined in Rule 144) and may not be resold in the
absence of registration under the Securities Act or pursuant to exemptions from
such registration, including among others, the exemption provided by Rule 144
under the Securities Act. Except as described below, approximately 12,717,000
shares will be eligible for sale in the public market under Rule 144, subject to
the volume limitations and other restrictions described below, and an additional
1,413,000 shares will be eligible for sale under Rule 144 in June 1998.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least two years has elapsed since
the later of the date the "restricted securities" were acquired from the Company
and the date they were acquired from an Affiliate, then the holder of such
restricted securities (including an Affiliate) is entitled to sell a number of
shares within any three-month period that does not exceed the greater of 1% of
the then outstanding shares of the Common Stock (17,630,000 shares immediately
after the Offerings) or the average weekly reported volume of trading of the
Common Stock on the NYSE during the four calendar weeks preceding such sale. The
holder may only sell such shares through unsolicited brokers' transactions.
Sales under Rule 144 are also subject to certain requirements pertaining to the
manner of such sales, notices of such sales and the availability of current
public information concerning the Company. Affiliates may sell shares not
constituting restricted shares in accordance with the foregoing volume
limitations and other requirements but without regard to the two-year holding
period. Under Rule 144(k), if a period of at least three years has elapsed
between the later of the date restricted securities were acquired from the
Company and the date they were acquired from an Affiliate, as applicable, a
holder of such restricted securities who is not an Affiliate at the time of the
sale and has not been an Affiliate for at least three months prior to the sale
would be entitled to sell the shares immediately without regard to the volume
limitations and other conditions described above.

The Commission has proposed certain amendments to Rule 144 that would reduce
by one year the holding periods required for shares subject to Rule 144 to
become eligible for resale in the public market. No assurance can be given
concerning whether or when the proposal will be adopted by the Commission.

Any employee of the Company who purchased his or her shares of Common Stock
pursuant to a written compensation plan or contract may be entitled to rely on
the resale provisions of Rule 701 under the Securities Act, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
current public information, holding period, volume limitation or notice
provision of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with Rule 144's holding period restrictions.

49
<PAGE>

The Company intends to file as soon as practicable after the closing of this
offering a registration statement on Form S-8 under the Securities Act to
register approximately 2,190,150 shares of Common Stock reserved for issuance
under the Stock Option Plan, including, in some cases, shares for which an
exemption under Rule 144 or Rule 701 would also be available, thus permitting
the resale of shares issued under the Stock Option Plan by non-affiliates in the
public market without restriction under the Securities Act. Such registration
statement is expected to become effective immediately upon filing, whereupon
shares registered thereunder will become eligible for sale in the public market,
subject to vesting and, in certain cases, subject to the lock-up agreements
described below. At the date of this Prospectus, options to purchase an
aggregate of 2,135,250 shares of Common Stock are outstanding under the Stock
Option Plan.

Notwithstanding the foregoing, in connection with the Offerings, the Company
has agreed 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,
not to offer, sell, contract to sell or otherwise dispose of any securities of
the Company (other than pursuant to employee stock option 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 Common Stock or which are convertible or exchangeable into
securities which are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co., except for the shares
of Common Stock offered in connection with the Offerings. The Company's
executive officers and directors and Warburg, Pincus, who will hold in the
aggregate 14,130,000 shares of Common Stock following this offering, have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or other securities of Panavision Inc. that are substantially
similar to the shares of Common Stock (including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, shares of Common Stock or any such substantially similar
securities) for a period of 180 days after the date of this Prospectus without
the prior written consent of Goldman, Sachs & Co.

The holders of approximately 14,130,000 shares are entitled to certain
registration rights with respect to their shares. See "Description of Capital
Stock--Registration Rights."

50
<PAGE>
LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Willkie Farr & Gallagher,
New York, New York. Certain legal matters relating to the Offerings will be
passed upon for the Underwriters by Davis Polk & Wardwell, New York, New York.

EXPERTS

The consolidated financial statements of Panavision Inc. at December 31,
1994 and 1995, and for each of the three years in the period ended December 31,
1995, appearing in this Prospectus and Registration Statement 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 such firm as experts in accounting and auditing. The
financial statements of Lee Lighting Limited at December 31, 1995 and for the
year then ended, appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young, 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 such firm as experts in accounting and
auditing.

51
<PAGE>
INDEX TO FINANCIAL STATEMENTS

PANAVISION INC.

<TABLE>
<CAPTION>
PRO FORMA
<S> <C>
Unaudited Pro Forma Condensed Consolidated Financial Statements...................... F-2
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months
Ended September 30, 1996........................................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Nine Months
Ended September 30, 1995........................................................... F-4
Unaudited Pro Forma Condensed Consolidated Statement of Income for the Year Ended
December 31, 1995.................................................................. F-5

HISTORICAL
Report of Independent Auditors....................................................... F-6
Consolidated Statements of Income.................................................... F-7
Consolidated Balance Sheets.......................................................... F-8
Consolidated Statements of Stockholders' Equity...................................... F-9
Consolidated Statements of Cash Flows................................................ F-10
Notes to Consolidated Financial Statements........................................... F-11

LEE LIGHTING LIMITED
Report of Independent Auditors....................................................... F-24
Group Profit and Loss Account........................................................ F-25
Group Balance Sheet.................................................................. F-26
Group Statement of Cash Flows........................................................ F-27
Notes to the Accounts................................................................ F-28
</TABLE>

F-1
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS

As more fully described in the notes to the Panavision Inc. historical
consolidated financial statements, the Company effected a recapitalization
transaction (the Recapitalization) in May 1996, and the Company's parent
acquired and contributed to the capital of the Company, substantially all of the
assets of Lee Lighting Limited (Lee Lighting) effective July 1, 1996 (the Lee
Lighting Acquisition). The Lee Lighting Acquisition has been recorded under the
purchase method of accounting, and accordingly, Lee Lighting's operating results
have been included in the Company's financial statements from the acquisition
date (July 1, 1996).

The following unaudited pro forma condensed consolidated statements of
income for the nine months ended September 30, 1996 and 1995 and for the year
ended December 31, 1995 have been prepared to illustrate the effects of the
Recapitalization and of the Lee Lighting Acquisition, as if they had occurred at
the beginning of each period presented. The pro forma adjustments and the
assumptions on which they are based are described in the accompanying notes.

The amounts for Lee Lighting included in the accompanying unaudited pro
forma condensed consolidated financial statements are based on Lee Lighting's
historical financial statements included elsewhere in this Registration
Statement and have been converted into US dollars at the appropriate exchange
rates (after adjustment for minor differences between the UK and the US
generally accepted accounting principles, as more fully described in Note 18 to
Lee Lighting's financial statements). The purchase price equaled Lee Lighting's
carrying value of the acquired assets and assumed liabilities and has been
recorded by the Company as an additional capital contribution from the parent.
The Company is of the opinion that the carrying value of the net assets acquired
approximates their fair market value and therefore no additional purchase price
allocation adjustments are considered necessary.

These unaudited pro forma condensed consolidated financial statements are
presented for illustrative purposes only and may not be indicative of the
results that would have occurred if the above transactions had occurred on the
dates indicated or which may be obtained in the future. The unaudited pro forma
condensed consolidated financial statements, including the Notes thereto, should
be read in conjunction with the historical consolidated financial statements of
Panavision Inc. and Lee Lighting, which are included elsewhere in this
Prospectus.

F-2
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Interest income................ 638 9 (425)(3) 222
Interest expense............... (6,227) (2,784) 2,784(4) (1,104)(5) (7,331)
Foreign exchange loss.......... (101) -- (101)
Other, net..................... 313 8 321
----------- ----------- ------------- ------- -----------
Income before non-controlling
partners' interest in PILP
and income taxes............. 14,610 (1,879) 2,784 (1,669) 13,846
Non-controlling partners'
interest in PILP............. (4,500) -- 4,500(6) --
----------- ----------- ------------- ------- -----------
Income before income taxes..... 10,110 (1,879) 2,784 2,831 13,846
Income tax provision........... (2,012) -- (300)(7) (454)(7) (2,766)
----------- ----------- ------------- ------- -----------
Net income (loss).............. $ 8,098 $ (1,879) $ 2,484 $ 2,377 $ 11,080
----------- ----------- ------------- ------- -----------
----------- ----------- ------------- ------- -----------
Net income per common share.... $ .53 $ .73
----------- -----------
----------- -----------
Shares used in computation..... 15,277 15,277
</TABLE>

- ------------------------
(1) Represents Lee Lighting's operating results for the six months ended June
30, 1996. Operating results of Lee Lighting have been included with the
Company's historical operating results under the Panavision Inc. historical
column since the effective date of the acquisition (July 1, 1996).
(2) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.

(3) To reflect lower interest income earned due to the use of cash in the
Recapitalization.

(4) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.

(5) To reflect higher interest expense due to additional borrowings required for
the Recapitalization. The pro forma interest expense is computed as follows:

<TABLE>
<S> <C>
Credit Facility:
$50 million at 8.4375%..................................................... $ 4,219
$60 million at 7.9375%..................................................... 4,763
Notes to Affiliates:
$11.6 million at 6.83%..................................................... 792
---------
9,774
Represents nine months of the year........................................... 75%
---------
Pro forma interest expense................................................... $ 7,331
---------
---------
</TABLE>

(6) To reflect the elimination of non-controlling partners' interest in PILP.

(7) To adjust the pro forma tax provision to reflect the tax effect of the pro
forma adjustments including the recognition of tax benefits which had
previously been allocated to the non-controlling partners in PILP.

F-3
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

Interest income.................. 1,144 34 (941)(2) 237
Interest expense................. (5,517) (4,066) 4,066(3) (1,814)(4) (7,331)
Foreign exchange gain............ 408 -- 408
Other, net....................... 311 36 347
----------- ----------- ------------- ------- -----------
Income before non-controlling
partners' interest in PILP and
income taxes................... 9,477 (2,420) 4,066 (3,070) 8,053
Non-controlling partners'
interest in PILP............... (3,947) -- 3,947(5) --
----------- ----------- ------------- ------- -----------
Income before income taxes....... 5,530 (2,420) 4,066 877 8,053
Income tax provision............. (1,095) -- (543)(6) 582(6) (1,056)
----------- ----------- ------------- ------- -----------
Net income (loss)................ $ 4,435 $ (2,420) $ 3,523 $ 1,459 $ 6,997
----------- ----------- ------------- ------- -----------
----------- ----------- ------------- ------- -----------
Net income per common share...... $ .29 $ .46
----------- -----------
----------- -----------
Shares used in computation....... 15,277 15,277
</TABLE>

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

(1) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.

(2) To reflect lower interest income earned due to the use of cash in the
Recapitalization.

(3) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.

(4) To reflect higher interest expense due to additional borrowings required for
the Recapitalization. The pro forma interest expense is computed as follows:

(5) To reflect the elimination of non-controlling partners' interest in PILP.

(6) To adjust the pro forma tax provision to reflect the tax effect of the pro
forma adjustments including the recognition of tax benefits which had
previously been allocated to the non-controlling partners in PILP.

F-4
<PAGE>
PANAVISION INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ADJUSTMENTS
------------------------ --------------------------------
<S> <C> <C> <C> <C> <C>
PANAVISION LEE LEE LIGHTING PRO FORMA
INC. LIGHTING ACQUISITION RECAPITALIZATION ADJUSTED
----------- ----------- ------------- ----------------- -----------
Camera rental........................... $ 75,083 $ $ $ $ 75,083
Lighting rental......................... 4,121 17,960 22,081
Sales and other......................... 16,124 1,789 17,913
----------- ----------- ------------- ------- -----------
Total rental revenue and sales.......... 95,328 19,749 115,077
Cost of camera rental................... 32,721 -- 32,721
Cost of lighting rental................. 1,687 13,863 15,550
Cost of sales and other................. 9,961 1,682 11,643
----------- ----------- ------------- ------- -----------
Gross margin............................ 50,959 4,204 55,163
Selling, general and administrative
expenses.............................. 28,486 2,521 420(1) 31,427
Research and development expenses....... 2,986 -- 2,986
----------- ----------- ------------- ------- -----------
Operating income........................ 19,487 1,683 (420) 20,750
Interest income......................... 1,597 46 (1,327)(2) 316
Interest expense........................ (7,213) (5,396) 5,396(3) (2,561)(4) (9,774)
Foreign exchange loss................... (32) -- (32)
Other, net.............................. 447 68 515
----------- ----------- ------------- ------- -----------
Income before non-controlling partners'
interest in PILP and income taxes..... 14,286 (3,599) 5,396 (4,308) 11,775
Non-controlling partners' interest in
PILP.................................. (7,348) -- 7,348(5) --
----------- ----------- ------------- ------- -----------
Income before income taxes.............. 6,938 (3,599) 5,396 3,040 11,775
Income tax provision.................... (1,375) -- (593)(6) 575(6) (1,393)
----------- ----------- ------------- ------- -----------
Net income (loss)....................... $ 5,563 $ (3,599) $ 4,803 $ 3,615 $ 10,382
----------- ----------- ------------- ------- -----------
----------- ----------- ------------- ------- -----------
Net income per common share............. $ .36 $ .68
----------- -----------
----------- -----------
Shares used in computation.............. 15,277 15,277
</TABLE>

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

(1) To reflect amortization of deferred financing costs incurred in connection
with the Recapitalization.

(2) To reflect lower interest income earned due to the use of cash in the
Recapitalization.

(3) To reflect the elimination of Lee Lighting's historical interest expense as
the underlying borrowing was not assumed by the Company.

(4) To reflect higher interest expense due to additional borrowings required for
the Recapitalization. The pro forma interest expense is computed as follows:

<TABLE>
<S> <C>
Credit Facility:
$50 million at 8.4375%..................................................... $ 4,219
$60 million at 7.9375%..................................................... 4,763
Notes to Affiliates:
$11.6 million at 6.83%..................................................... 792
---------
Pro forma interest expense................................................... $ 9,774
---------
---------
</TABLE>

(5) To reflect the elimination of non-controlling partners' interest in PILP.

F-5
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Panavision Inc.

We have audited the accompanying consolidated balance sheets of Panavision
Inc. as of December 31, 1994 and 1995, and the related consolidated statements
of income, stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Panavision Inc.
at December 31, 1994 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Los Angeles, California
March 4, 1996, except for Note 13, as
to which the date is November 19, 1996

F-6
<PAGE>
PANAVISION INC.

CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Camera rental............................... $ 54,031 $ 61,642 $ 75,083 $ 54,055 $ 62,814
Sales and lighting rental................... 12,679 15,458 20,245 15,423 22,236
--------- --------- --------- --------- ---------
Total rental revenue and sales.............. 66,710 77,100 95,328 69,478 85,050
Cost of camera rental....................... 28,600 31,293 32,721 23,959 26,980
Cost of sales and lighting rental........... 7,832 9,702 11,648 8,659 13,099
--------- --------- --------- --------- ---------
Gross margin................................ 30,278 36,105 50,959 36,860 44,971
Selling, general and administrative
expenses.................................. 18,875 19,210 28,486 21,351 21,684
Research and development expenses........... 2,272 2,442 2,986 2,378 3,300
--------- --------- --------- --------- ---------
Operating income............................ 9,131 14,453 19,487 13,131 19,987
Interest income............................. 487 725 1,597 1,144 638
Interest expense............................ (5,716) (6,043) (7,213) (5,517) (6,227)
Foreign exchange gain (loss)................ (723) 597 (32) 408 (101)
Other, net.................................. 906 68 447 311 313
--------- --------- --------- --------- ---------

Income before non-controlling partners'
interest in PILP and income taxes......... 4,085 9,800 14,286 9,477 14,610
Non-controlling partners' interest in
PILP...................................... (327) (879) (7,348) (3,947) (4,500)
--------- --------- --------- --------- ---------
Income before income taxes.................. 3,758 8,921 6,938 5,530 10,110
Income tax provision........................ (453) (1,843) (1,375) (1,095) (2,012)
--------- --------- --------- --------- ---------
Net income.................................. $ 3,305 $ 7,078 $ 5,563 $ 4,435 $ 8,098
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per common share................. $ .22 $ .46 $ .36 $ .29 $ .53
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Shares used in computation.................. 15,277 15,277 15,277 15,277 15,277
</TABLE>

See accompanying notes.

F-7
<PAGE>
PANAVISION INC.

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
<S> <C> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................... $ 22,734 $ 31,685 $ 8,643
Accounts receivable (net of allowance of $1,772 in
1994, $2,043 in 1995 and $2,294 in September of
1996)............................................. 11,036 13,480 18,653
Inventories......................................... 2,955 4,379 5,271
Prepaid expenses and other current assets........... 1,546 1,621 1,820
--------- --------- --------------
Total current assets.............................. 38,271 51,165 34,387

Property, plant and equipment, net.................... 108,197 111,801 123,254
Deferred income tax assets............................ -- -- 1,347
Other................................................. 3,239 2,785 5,725
--------- --------- --------------
Total assets...................................... $ 149,707 $ 165,751 $ 164,713
--------- --------- --------------
--------- --------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................... $ 4,278 $ 9,339 $ 5,191
Accrued liabilities................................. 9,558 11,042 14,059
Current maturities of long-term debt................ 4,000 4,274 9,000
Other current liabilities........................... 394 507 534
--------- --------- --------------
Total current liabilities......................... 18,230 25,162 28,784

Notes payable to affiliates........................... 7,920 7,263 12,492
Long-term debt........................................ 119,080 117,415 98,000
Deferred income tax liabilities....................... 1,788 2,409 --
Other liabilities..................................... 1,767 1,897 1,279
Non-controlling partners' interest in PILP............ -- 5,149 --

Commitments and Contingencies

Stockholders' equity:
Preferred stock, $.01 par value; 2,000 shares
authorized; no shares issued and outstanding...... -- -- --
Common stock, $.01 par value; 50,000 shares
authorized; 13,706 shares issued and outstanding
at December 31, 1994 and 1995, and 14,130 shares
issued and outstanding at September 30, 1996...... 137 137 141
Additional paid-in capital.......................... 4,863 4,863 14,259
Retained earnings (accumulated deficit)............. (3,859) 1,704 9,802
Foreign currency translation adjustment............. (219) (248) (44)
--------- --------- --------------
Total stockholders' equity........................ 922 6,456 24,158
--------- --------- --------------
Total liabilities and stockholders' equity........ $ 149,707 $ 165,751 $ 164,713
--------- --------- --------------
--------- --------- --------------
</TABLE>

See accompanying notes.

F-8
<PAGE>
PANAVISION INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK CUMULATIVE
---------------------------- RETAINED FOREIGN
SHARES ISSUED ADDITIONAL EARNINGS CURRENCY STOCKHOLDERS'
AND PAID-IN (ACCUMULATED TRANSLATION EQUITY
OUTSTANDING AMOUNT CAPITAL DEFICIT) ADJUSTMENT (DEFICIENCY)
--------------- ----------- ----------- -------------- ------------- --------------

<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1992.................... 13,706 $ 137 $ 4,863 $ (14,242) $ (1,239) $ (10,481)
Net income................ -- -- -- 3,305 -- 3,305
Foreign currency
translation
adjustment.............. -- -- -- -- 470 470
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1993.................... 13,706 137 4,863 (10,937) (769) (6,706)
Net income................ -- -- -- 7,078 -- 7,078
Foreign currency
translation
adjustment.............. -- -- -- -- 550 550
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1994.................... 13,706 137 4,863 (3,859) (219) 922
Net income................ -- -- -- 5,563 -- 5,563
Foreign currency
translation
adjustment.............. -- -- -- -- (29) (29)
------- ----------- ----------- -------------- ------------- --------------
Balance at December 31,
1995.................... 13,706 137 4,863 1,704 (248) 6,456
Net income (UNAUDITED).... -- -- -- 8,098 -- 8,098
Compensation recorded in
connection with shares
issued to officers
(UNAUDITED)............. 424 4 626 -- -- 630
Contribution of Lee
Lighting assets
(UNAUDITED)............. -- -- 8,000 -- -- 8,000
Contribution from parent
(UNAUDITED)............. -- -- 770 -- -- 770
Foreign currency
translation adjustment
(UNAUDITED)............. -- -- -- -- 204 204
------- ----------- ----------- -------------- ------------- --------------
Balance at September 30,
1996 (UNAUDITED)........ 14,130 $ 141 $ 14,259 $ 9,802 $ (44) $ 24,158
------- ----------- ----------- -------------- ------------- --------------
------- ----------- ----------- -------------- ------------- --------------
</TABLE>

See accompanying notes.

F-9
<PAGE>
PANAVISION INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31,
SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------

<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 3,305 $ 7,078 $ 5,563 $ 4,435 $ 8,098
Adjustments to derive net cash provided by
operating activities:
Depreciation and amortization................. 14,596 15,031 17,479 12,765 13,739
Deferred interest............................. 396 (44) (264) (198) (88)
Deferred income taxes......................... 233 1,241 620 (44) (186)
(Gain) loss on sale of property and
equipment................................... (475) (647) 597 490 (840)
Non-controlling partners' interest in PILP.... 327 879 7,348 3,947 4,500
Stock compensation expense.................... -- -- -- -- 630
Changes in operating assets and liabilities:
Accounts receivable......................... 1,240 (2,286) (1,498) (1,228) (5,173)
Inventories................................. 1 (318) (1,138) (687) (236)
Prepaid expenses and other current assets... (488) 909 17 (50) 399
Accounts payable............................ 254 947 3,629 (1,257) (4,981)
Accrued liabilities......................... (954) 3,355 1,484 2,915 1,099
Other, net.................................... 869 234 480 58 684
--------- --------- --------- --------- ---------
Net cash provided by operating activities....... 19,304 26,379 34,317 21,146 17,645

INVESTING ACTIVITIES
Acquisition of non-controlling partners'
interest in PILP.............................. -- -- -- -- (8,126)
Capital expenditures............................ (12,678) (16,251) (19,454) (11,060) (16,641)
Proceeds from dispositions of equipment......... 1,234 1,252 2,139 1,762 1,258
Cash acquired in Panavision Canada Corp.
acquisition................................... -- -- 1,616 1,616 --
Cash acquired in Lee Lighting acquisition....... -- -- -- -- 1,026
Other........................................... -- (450) -- -- --
--------- --------- --------- --------- ---------
Net cash used in investing activities........... (11,444) (15,449) (15,699) (7,682) (22,483)

FINANCING ACTIVITIES
Deferred financing costs........................ -- -- -- -- (2,814)
Distributions to non-controlling partners in
PILP.......................................... (327) (879) (2,199) (3,182) (1,523)
Borrowings under notes payable.................. -- -- -- -- 110,000
Repayments of notes payable..................... (2,500) (3,500) (7,525) (2,901) (129,166)
Deferred offering costs......................... -- -- -- -- (452)
Contribution from parent........................ -- -- -- -- 770
Notes payable to affiliates..................... -- -- -- -- 4,959
--------- --------- --------- --------- ---------
Net cash used in financing activities........... (2,827) (4,379) (9,724) (6,083) (18,226)
Effect of exchange rate changes on cash......... (54) 65 57 94 22
--------- --------- --------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... 4,979 6,616 8,951 7,475 (23,042)
Cash and cash equivalents at beginning of
period........................................ 11,139 16,118 22,734 22,734 31,685
--------- --------- --------- --------- ---------
Cash and cash equivalents at end of period...... $ 16,118 $ 22,734 $ 31,685 $ 30,209 $ 8,643
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the period................. $ 5,372 $ 5,892 $ 7,490 $ 5,650 $ 4,748
Income taxes paid during the period............. $ 304 $ 565 $ 1,075 $ 1,158 $ 2,457
</TABLE>

See accompanying notes.

F-10
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(INFORMATION FOR THE PERIOD ENDED SEPTEMBER 30, 1995 AND SUBSEQUENT
TO DECEMBER 31, 1995 IS UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Panavision Inc. (formerly WP/GP, Inc.) (Panavision or the Company), a
majority owned subsidiary of Warburg, Pincus Capital Company L.P. (Warburg,
Pincus), commenced operations effective June 1, 1991. Prior to the May 1996
recapitalization transaction described below, Panavision owned 100% of the
general partnership interests, 30% of the non-voting Class A limited partnership
interests and 70% of the voting Class B limited partnership interests in
Panavision International, L.P. (PILP), a Delaware limited partnership. PILP was
formed effective June 1, 1991 to own and operate the camera rental and lighting
filters business previously owned by Lee International Inc. (LII), an affiliated
company. This transaction was recorded on a historical cost basis. All of the
Company's operations are conducted through PILP and its subsidiaries.

The consolidated financial statements include the accounts of Panavision,
PILP and PILP's majority owned subsidiaries. All significant intercompany
amounts and transactions have been eliminated.

Panavision is a leading designer and manufacturer of high-precision motion
picture camera systems, including lenses and accessories, for use in the motion
picture and television industries. The Company rents its products through its
owned and operated facilities in the United States, Canada, United Kingdom and a
worldwide agent network. In addition to manufacturing and renting camera
systems, the Company also sells lighting filters under the Lee Filters name.

RECAPITALIZATION

In May 1996, the Company effected a recapitalization (the Recapitalization),
pursuant to which it acquired all of PILP's limited partnership units it did not
previously own and retired all of PILP's outstanding debt securities, for a
total of $126.1 million in cash. As part of the Recapitalization, Warburg,
Pincus and management contributed to the Company $12.5 million in the form of
subordinated debt, and the Company borrowed $110 million through a credit
arrangement (See Note 6). The balance of the funds required came from the
Company's cash on hand. As a result of the Recapitalization, the Company owns
all of the general and limited partnership units in PILP.

NON-CONTROLLING PARTNERS' INTEREST IN PILP

The non-controlling partners' interest in PILP represents 70% of the
non-voting Class A limited partnership units and the 30% of the voting Class B
limited partnership units which Panavision did not own prior to the
Recapitalization. The PILP partnership agreement included provisions for the
allocation of the partnership earnings and losses between Panavision and the
non-controlling partners. However, since the non-controlling partners had a
deficit in the partnership capital accounts as of the inception of PILP, such
deficit was allocated to Panavision, as were PILP's losses for 1991 and 1992.
Certain other distributions made by PILP in each year for tax payments, have all
been charged against Panavision's interest in PILP and as a reduction of income
in the accompanying financial statements. Accordingly, as required under
generally accepted accounting principles, the non-controlling partners' share of
PILP's income for 1993, 1994 and 1995 has been reduced to the extent of such
deficit, losses and distributions. As previously described, in connection with
the Recapitalization, Panavision has acquired the non-controlling partners'
equity in PILP.

F-11
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
TRANSLATION OF FOREIGN CURRENCIES

The functional currency for the Company's foreign subsidiaries is the local
currency. All assets and liabilities denominated in foreign functional
currencies are translated into U.S. dollars at rates of exchange in effect at
the balance sheet date. Income statement items are translated at the average
rate of exchange prevailing during the period. Translation gains and losses are
recorded as a separate component of stockholders' equity. Gains and losses
resulting from transactions in other than functional currencies are reflected in
net income.

CASH EQUIVALENTS

The Company considers all highly liquid debt instruments purchased with
original maturity dates of three months or less and investments in money market
funds to be cash equivalents. The carrying amount reported in the balance sheet
for cash and cash equivalents approximates fair value.

INVENTORIES

Inventories are valued at the lower of cost or market value and are
determined principally under the first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, including rental equipment, are stated at
cost. Maintenance and repairs are charged to expense as incurred. Additions,
improvements and replacements that extend asset life are capitalized.

Depreciation is provided on a straight-line basis over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of
the useful life of the related asset or the remaining lease term. Cost and
accumulated depreciation applicable to assets retired or otherwise disposed of
are eliminated from the accounts, and any gain or loss on such disposition is
reflected in income.

Depreciation is provided principally over the following useful lives:

<TABLE>
<S> <C>
Buildings and improvements..................................... 10-30 years
Rental assets.................................................. 5-15 years
Machinery and equipment........................................ 5-10 years
Furniture and fixtures......................................... 5-10 years
</TABLE>

INTANGIBLE ASSETS

Intangible assets, consisting primarily of trade names and patents, are
amortized on a straight-line basis over their estimated economic lives ranging
from 5 to 10 years. Amortization expense amounted to $682,000, $694,000 and
$629,000 for the years ended December 31, 1993, 1994 and 1995, respectively, and
$526,000 and $201,000 for the nine month periods ended September 30, 1995 and
1996, respectively. At December 31, 1994 and 1995, and September 30, 1996,
accumulated amortization amounted to $4,373,000, $5,002,000 and $5,203,000,
respectively.

F-12
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES

Income taxes are accounted for using the liability method in accordance with
Statement of Financial Accounting Standard No. 109, "Accounting for Income
Taxes" (Note 5). Under this method, deferred tax liabilities and assets are
recognized for the expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.

CONCENTRATION OF CREDIT RISK

Most of the Company's customers are in the entertainment industry. The
Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. The Company does not generally require
collateral. Actual losses and allowances have been within management's
expectations.

REVENUE RECOGNITION

Rental revenue is recognized over the related equipment rental period. Sales
revenue is recognized upon shipment. Returns and allowances, which have not been
significant, are provided for in the period of sale.

ACCOUNTING FOR LONG-LIVED ASSETS

Prior to the adoption of the Statement of Financial Accounting Standard No.
121. "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" (SFAS 121), the Company recorded an impairment loss of
$1.7 million during the year ended December 31, 1995 with respect to certain
real property owned by its U.K. rental operation. This amount was previously
estimated to be $1.4 million and therefore the impairment loss recognized during
the nine months ended September 30, 1995 was $1.4 million. Effective January 1,
1996, the Company has adopted SFAS 121. Long-lived assets, such as buildings,
equipment and identifiable intangibles, are reviewed for impairment whenever
events or changes in circumstances indicate that the net book value of these
assets may not be recoverable. With the exception of the impairment loss
recognized during 1995 as described above, current and prior period financial
statements have not been affected by the adoption of SFAS 121.

EARNINGS PER SHARE

Earnings per share is computed using the average number of common stock
outstanding. Additionally, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, all common and common equivalent shares issued by
the Company at an exercise price below the initial public offering price during
the twelve-month period prior to the offering have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method at an initial public offering price of $17.00 per share
for stock options). Variable options for 529,875 shares which vest only if
certain EBDIT targets (as defined) are achieved in 1998 or 1999 have been
excluded from the computation because their inclusion would be antidilutive.

STOCK-BASED BENEFITS

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), must be adopted no later than January 1,
1996. SFAS 123 requires that stock awards

F-13
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
granted subsequent to January 1, 1995 be recognized as compensation expense
based on their fair value at the date of grant. Alternatively, a company may use
APB 25, "Accounting for Stock Issued to Employees," and disclose the pro forma
income amount which would have resulted from recognizing such awards at their
fair value. The Company will continue to account for stock-based compensation
expense under APB 25 and make the required pro forma disclosures for
compensation.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements at September
30, 1996 and for the nine month periods ended September 30, 1995 and September
30, 1996 have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, include all adjustments
(consisting only of normal and recurring accruals) necessary to present fairly
the consolidated financial information set forth therein, in accordance with
generally accepted accounting principles. The results of operations for the nine
month period ended September 30, 1996 are not necessarily indicative of the
results to be expected for the entire fiscal year.

USE OF ESTIMATES AND ASSUMPTIONS

The preparation of 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 such estimates.

2. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- --------------
<S> <C> <C> <C>
(UNAUDITED)
Land.................................. $ 783 $ 777 $ 783
Buildings and improvements............ 8,850 6,944 8,175
Rental assets......................... 169,319 185,986 207,939
Machinery and equipment............... 7,737 8,350 10,481
Furniture and fixtures................ 2,562 2,704 3,408
Construction-in-progress.............. -- 3,390 --
Other................................. 720 791 809
--------- --------- --------------
189,971 208,942 231,595
Less accumulated depreciation and
amortization........................ 81,774 97,141 108,341
--------- --------- --------------
$ 108,197 $ 111,801 $ 123,254
--------- --------- --------------
--------- --------- --------------
</TABLE>

Construction-in-progress represents assets constructed in conjunction with
the Company's relocation of its primary operating facilities in June 1996.

F-14
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
<S> <C> <C> <C>
(UNAUDITED)
Finished goods............................. $ 1,111 $ 1,853 $ 2,471
Work-in-process............................ 71 61 105
Component parts............................ 892 1,236 1,229
Supplies................................... 881 1,229 1,466
--------- --------- -------
$ 2,955 $ 4,379 $ 5,271
--------- --------- -------
--------- --------- -------
</TABLE>

4. ACCRUED LIABILITIES

Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
<S> <C> <C> <C>
(UNAUDITED)
Interest payable......................... $ 727 $ 675 $ 2,275
Professional fees........................ 916 809 745
Taxes other than income taxes............ 280 330 1,766
Payroll and related costs................ 3,106 5,058 4,587
Customer deposits........................ 97 64 723
Accrued marketing and other.............. 4,432 4,106 3,963
--------- --------- ---------------
$ 9,558 $ 11,042 $ 14,059
--------- --------- ---------------
--------- --------- ---------------
</TABLE>

F-15
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES

The provision for income taxes includes the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- NINE MONTHS ENDED
1993 1994 1995 SEPTEMBER 30, 1996
--------- --------- --------- ---------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Current provision:
Federal.............................. $ 114 $ 300 $ 515 $ 1,500
State................................ 47 107 154 500
Foreign.............................. 59 195 86 198
--------- --------- --------- -------
Total current provision................ 220 602 755 2,198
--------- --------- --------- -------
Deferred provision (benefit):
Federal.............................. (114) 711 537 (272)
State................................ 434 195 83 86
Foreign.............................. (87) 335 -- --
--------- --------- --------- -------
Total deferred provision............... 233 1,241 620 (186)
--------- --------- --------- -------
$ 453 $ 1,843 $ 1,375 $ 2,012
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>

A reconciliation from the provision for income taxes based on the federal
statutory rate of 35% to the actual rate follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------- NINE MONTHS ENDED
1993 1994 1995 SEPTEMBER 30, 1996
--------- --------- --------- ---------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
Statutory rate applied to income before
income taxes......................... 35.0% 35.0% 35.0% 35.0%
State income taxes, net of federal
income tax benefit................... 7.2 5.1 2.2 3.7
Reduction of valuation allowance....... (34.8) (29.5) (3.7) (21.9 )
Non-deductible (non-taxable)
differences in allocation of earnings
to non-controlling partners.......... 3.0 3.4 (14.9) --
Other non-deductible expenses.......... 2.6 5.8 1.2 3.1
Other, net............................. (0.9) 0.9 -- --
--------- --------- --------- -------
12.1% 20.7% 19.8% 19.9%
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>

Deferred income taxes reflect the net tax effects of net operating loss
carryforwards and temporary differences between the carrying amounts of assets
and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of the Company's deferred tax

F-16
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)
assets and liabilities as of December 31, 1994, 1995 and September 30, 1996 are
as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- ---------------
<S> <C> <C> <C>
(UNAUDITED)
Deferred tax assets:
Domestic net operating loss carryforwards...... $ 1,987 $ 1,169 $ 3,735
Foreign net operating loss carryforwards....... 3,720 3,464 2,322
Tax credit carryforwards (primarily alternative
minimum tax credits)......................... 1,090 1,830 10,228
Expense accruals............................... 853 1,613 1,526
Other.......................................... -- 76 66
State income taxes............................. 78 115 --
--------- --------- ---------------
Total deferred tax assets........................ 7,728 8,267 17,877
Valuation allowance.............................. (4,727) (4,471) (10,112)
--------- --------- ---------------
Net deferred tax assets.......................... 3,001 3,796 7,765

Deferred tax liabilities:
Fixed assets................................... (2,175) (3,067) (6,085)
Differences in allocations of income to non-
controlling partners......................... (2,614) (3,138) --
State income taxes............................. -- -- (333)
--------- --------- ---------------
Total deferred tax liabilities................... (4,789) (6,205) (6,418)
--------- --------- ---------------
Net deferred tax (liabilities) assets............ $ (1,788) $ (2,409) $ 1,347
--------- --------- ---------------
--------- --------- ---------------
</TABLE>

The net decrease in the valuation allowance for deferred tax assets during
the years ended December 31, 1994 and 1995 was $2,638,000 and $256,000,
respectively. The change primarily relates to the realization of net operating
loss carryforwards and management's judgment that certain deferred assets had
become realizable.

At December 31, 1995, the Company had operating loss carryforwards available
to reduce future federal income of $3,170,000 which expire from 2006 to 2009.

At December 31, 1995, the Company had alternative minimum tax (AMT) credit
carryforwards of $1,444,000, which may be used indefinitely, and foreign tax
credit (FTC) carryforwards of $317,000 which expire in 1996 to 2000.

In connection with the Recapitalization, additional federal net operating
loss carryforwards of $11,343,000, which expire from 2006 to 2009, AMT credit
carryforwards of $3,444,000, which may be used indefinitely, and FTC
carryforwards of $956,000, which expire from 1996 to 2000, became available to
the Company. All such tax attributes are subject to annual limitations under
Internal Revenue Code (the Code) Section 382.

The Company has assessed the realizability of all of its tax attributes,
including those which became available as a result of the Recapitalization, and
has accordingly adjusted the valuation allowance as of

F-17
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. INCOME TAXES (CONTINUED)
September 30, 1996. The Company's assessment took into account the limitations
on the deductibility of tax attributes under Section 382 and the alternative
minimum tax provisions of the Code, as well as the uncertainty of realizing
taxable income in certain foreign jurisdictions.

Additional deferred tax assets in the amount of $3,572,000 (net of related
valuation allowance) were recognized in connection with the Recapitalization.

It is the Company's policy to not provide U.S. federal income taxes on
undistributed earnings of foreign subsidiaries, as such earnings, if any, are
intended to be permanently reinvested in those operations. As of September 30,
1996, there are no accumulated foreign earnings. The Company's pretax income
(loss) from foreign operations for 1993, 1994 and 1995 and the nine months ended
September 30, 1996 were ($2,122,000), $1,106,000, $2,719,000 and $3,461,000,
respectively.

6. LONG-TERM DEBT

As part of the Company's Recapitalization, as described in Note 1, effective
May 1996, all of the Company's then outstanding notes to banks were repaid for a
total of $126.1 million in cash. Such notes had average effective interest rates
ranging from 0% to 8% and original scheduled maturity dates ranging from June
1999 through June 2001.

In conjunction with the Recapitalization, the Company obtained a credit
agreement (the Credit Agreement) which provides for a term loan in the amount of
$100 million (Term Loan A and Term Loan B for $50 million each) and a revolving
credit loan (Revolving Loan) of up to $20 million. Borrowings under the Credit
Agreement at September 30, 1996 were $107 million. Interest is payable at rates
equal to a margin in excess of the prime rate or LIBOR. The amount of this
margin fluctuates directly with the Company's "total debt ratio", as defined.
The prime rate margin ranges are from 0% to 1.25% for Term Loan A and the
Revolving Loan and from 1.50% to 1.75% for Term Loan B. LIBOR margin ranges are
from 1.25% to 2.5% for Term Loan A and the Revolving Loan and 2.75% to 3.00% for
Term Loan B. Principal repayments under the Credit Agreement are payable
quarterly beginning March 1997 through March 2004. At September 30, 1996, the
interest rate under the Credit Agreement was 8.5%. The Company believes the
carrying value of its amounts payable under the Credit Agreement approximate
fair value based upon current yields for debt issues of similar quality and
terms.

The following sets forth the aggregate principal maturities of the Company's
debt during the twelve month periods ending September 30 (in thousands):

<TABLE>
<S> <C>
1997.......................................................... $ 9,000
1998.......................................................... 8,000
1999.......................................................... 9,000
2000.......................................................... 10,000
2001.......................................................... 11,000
Thereafter.................................................... 60,000
------------
$ 107,000
------------
------------
</TABLE>

The Company's obligations under the Credit Agreement are secured by
substantially all of the Company's assets. The Credit Agreement requires that
the Company meet certain financial tests and contains other restrictive
covenants including certain limitations on the Company's ability to incur debt,

F-18
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG-TERM DEBT (CONTINUED)
pay dividends and make capital expenditures and requires the Company to maintain
certain total debt and interest coverage ratio levels. At September 30, 1996,
the Company was in compliance with the tests and covenants under the Credit
Agreement.

Under the Credit Agreement, the Company entered into two interest rate
protection agreements to guard the Company from LIBOR increases. One agreement
covering a notional amount of $45,000,000 expires on June 10, 1997 and protects
the Company from LIBOR increases above 6.44%. The other agreement for a notional
amount of $50,000,000 expires on June 10, 1998 and protects the Company from
LIBOR increases above 7.37%. Since the floor for each of these interest rate
protection agreements is 5.50%, in the event of a LIBOR reduction below this
floor, there would be no benefit to the Company.

Notes payable to affiliates consist of amounts due to Warburg, Pincus and
the Company's senior management and bear interest at 6.83%. The notes are due on
demand; however, the noteholders have indicated that they do not intend to
demand payment prior to December 31, 1997. It is the Company's intent to repay
these notes in full upon the successful completion of the Company's proposed
initial public offering of common stock.

7. STOCKHOLDERS' EQUITY

COMMON STOCK

In May 1996, the Board of Directors declared a 90:1 stock split of the
Company's common stock. All applicable share and per share amounts have been
adjusted for this stock split.

STOCK OPTION PLAN

In connection with the Recapitalization, the Board of Directors adopted a
stock option plan (the Plan) which is open to participation by directors,
officers, consultants, other key employees of the Company or of its subsidiaries
and certain other key persons. The Plan provides for the issuance of incentive
and nonqualified stock options under the Code. An aggregate of 2,190,150 shares
of common stock are reserved for issuance under the Plan. No options have been
exercised under the Plan as of September 30, 1996. The options may be granted
for a term of up to ten years, five years in the case of incentive options. If
an incentive stock option is granted to an individual owning more than 10% of
the total combined voting power of all stock, the exercise price of the option
may not be less than 110% of the fair market value of the underlying shares on
the date of grant and the term of the option may not exceed five years.

The Plan provides that the aggregate fair market value (determined as of the
time the option is granted) of the common stock with respect to which incentive
stock options are exercisable for the first time by an optionee during any
calendar year shall not exceed $100,000.

In connection with the Recapitalization, certain members of management were
granted nonqualified options for an aggregate of 1,766,250 shares of common
stock exercisable at $1.22 per share.

Options for 1,236,375 shares will vest at the end of eight years from the
date of grant and could vest sooner if certain performance targets are met as
described below:

- Options for 353,250 shares will vest if the Company successfully completes
an initial public offering of its common stock by May 31, 1997.

F-19
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCKHOLDERS' EQUITY (CONTINUED)

- Options for up to 300,263 shares, 300,263 shares, and 282,600 shares will
vest if the Company achieves EBDIT (as defined) of $46.2 million, $50.4
million and $55.2 million, respectively, or Free Cash Flow (as defined) of
$27.3 million, $30.7 million and $34.0 million, respectively, during its
years ending December 31, 1996, 1997 and 1998, respectively.

The exercise price of these options was less than the deemed fair market
value of the Company's common stock on the date of grant and accordingly the
Company will record an aggregate non-cash compensation charge of $280,000 which
will be amortized over the vesting period. Compensation expense of $15,000 was
recorded during the nine months ended September 30, 1996.

Options for 529,875 shares will only vest if the Company achieves EBDIT (as
defined) of $62 million in its year ending December 31, 1998 or the lower amount
of $65 million or a 10% increase of its actual 1998 EBDIT in its year ending
December 31, 1999. These options are being accounted for as variable options,
and the Company will record additional non-cash compensation charges in 1998 or
1999 if the achievement of these performance targets becomes probable. The per
share compensation charge will be equal to the difference between the option
exercise price of $1.22 and the quoted market value of the Common Stock in the
future when the targets are achieved.

In connection with the Recapitalization (see Note 1), the Company issued
423,900 shares of common stock to certain members of management. The Company has
recorded compensation expense in the amount of $615,000 during the nine months
ended September 30, 1996. The compensation expense represents the Company's best
estimate of the fair market value of the stock as of the date of issuance, based
in part on value attributed to the equity securities of PILP which were acquired
in the Recapitalization, in an arms-length transaction.

8. EMPLOYEE BENEFIT PLANS

The Company sponsors a defined contribution 401(k) plan covering a majority
of its domestic employees. Eligible employees may contribute from 1% to 16% of
their base compensation. The Company makes matching contributions equal to 75%
of employee before-tax contributions from 1% to 6%. For the years ended December
31, 1993, 1994 and 1995 and the nine months ended September 30, 1995 and 1996,
the Company contributed $225,000, $453,000, $503,000, $365,000 and $430,000
respectively, to the Plan.

In addition, the Company sponsors a defined contribution retirement plan,
which covers certain foreign employees. Participating employees contribute from
5% to 15% of their base compensation. The Company contributes 13.4% of base
compensation for participating employees regardless of their level of
contribution. For the years ended December 31, 1993, 1994 and 1995 and the
nine-months ended September 30, 1995 and 1996, the Company expensed $112,000,
$136,000, $189,000, $176,000 and $277,000, respectively, representing the
Company's contributions.

F-20
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. GEOGRAPHICAL INFORMATION

Information as to the Company's operations in different geographical areas
is as follows (in thousands):

<TABLE>
<CAPTION>
UNITED UNITED
STATES KINGDOM OTHER(1) ELIMINATIONS TOTAL
--------- ----------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1993
Revenue............................ $ 52,022 $ 14,747 $ 2,432 $ (2,491) $ 66,710
Operating income (loss)............ 10,694 1,159 (588) (2,134) 9,131
Identifiable assets................ 129,523 19,889 1,303 (10,640) 140,075

DECEMBER 31, 1994
Revenue............................ 58,389 20,523 2,180 (3,992) 77,100
Operating income (loss)............ 14,350 3,724 (20) (3,601) 14,453
Identifiable assets................ 137,845 23,868 1,093 (13,099) 149,707

DECEMBER 31, 1995
Revenue............................ 68,102 23,004 14,227 (10,005) 95,328
Operating income................... 17,996 3,492 5,877 (7,878) 19,487
Identifiable assets................ 145,300 17,708 10,420 (7,677) 165,751
</TABLE>

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

(1) The 1995 amounts are principally comprised of Panavision Canada, which was
acquired in January 1995.

10. COMMITMENTS AND CONTINGENCIES

The Company leases real estate, equipment, and vehicles under noncancelable
operating leases. Future minimum payments under noncancelable operating leases
with initial or remaining terms of one year or more are presented below (in
thousands):

<TABLE>
<S> <C>
1996....................................................... $ 2,920
1997....................................................... 1,112
1998....................................................... 1,508
1999....................................................... 1,414
2000....................................................... 1,407
Thereafter................................................. 19,864
---------------
$ 28,225
---------------
---------------
</TABLE>

In June 1995, the Company entered into a 16-year lease for its principal
operating facility in Woodland Hills, California; the Company relocated to this
facility during June 1996. The above table reflects the Company's commitment for
the entire 16-year lease term. In connection with this new lease, the Company
negotiated a settlement for its existing leases covering its prior operating
facility and recorded a $1,800,000 liability representing the cost of the
settlement. The liability was paid in January 1996.

During the years ended December 31, 1993, 1994 and 1995, rental expense
under operating leases was $1,789,000, $1,811,000 and $2,274,000, respectively,
and $1,863,000 and $2,214,000 for the nine months ended September 30, 1995 and
1996, respectively.

F-21
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company and its subsidiaries are defendants in actions for matters
arising out of normal business operations. The Company does not believe that any
such proceedings currently pending will have a materially adverse effect on its
consolidated financial position or results of operations.

11. RELATED PARTY TRANSACTIONS

In accordance with an agreement, certain executive management services have
been provided by the Company to LII. The amount received by the Company from LII
was $996,000, $854,000 and $687,000 for the years ended December 31, 1993, 1994
and 1995, respectively, and $489,000 and $510,000 for the nine-month periods
ended September 30, 1995 and 1996, respectively. The amounts received have been
offset against selling, general and administrative expenses in the accompanying
consolidated statements of income. The agreement with LII expired on September
30, 1996.

Included in other assets at December 31, 1994 and 1995 is a loan receivable
of $450,000, which bears interest at 9%, from Pany Rental, Inc. (dba Panavision
New York), an agent in which the Company acquired a one-third interest during
1994.

The Company also has a note due from an officer in the amount of $540,000
plus accrued interest of $76,000 as of September 30, 1996 which is included as a
component of other assets. This amount, which is due upon demand, is secured by
real property and bears interest at 7.04% per annum.

12. BUSINESS COMBINATIONS

On January 20, 1995, the Company completed its acquisition of all of the
outstanding stock of Panavision Canada Corporation (Panavision Canada), a former
agent, for $177,000. The assignment of the purchase price among identifiable
tangible and intangible assets was based on analysis of fair values of those
assets. The fair values of the identifiable tangible and intangible assets
acquired, net of liabilities assumed, exceeded the purchase price, and
accordingly the values of fixed assets were reduced on a PRO RATA basis. This
business combination has been accounted for using the purchase method.
Therefore, the operating results of Panavision Canada are included in the
consolidated financial statements from January 20, 1995. Unaudited revenue, net
income, and net income per share for the Company in 1994 would have increased by
$7,535,000, $1,608,000 and $.11 respectively, on a pro forma basis if Panavision
Canada had been acquired at the beginning of that year.

Effective July 1, 1996, the Company's parent acquired substantially all of
the assets of Lee Lighting Limited (Lee Lighting) and contributed them to
Panavision. The purchase price of the acquisition, $8 million, approximates the
net book value of the assets acquired. Lee Lighting rents lighting equipment,
mobile generators and distribution equipment and sells lighting consumables for
the production of feature films, television programs and other filmed
entertainment. Lee Lighting had revenue of approximately $19,700,000 and
$10,400,000 for the year ended December 31, 1995 and the six months ended June
30, 1996, respectively.

The acquisition of Lee Lighting has been recorded under the purchase method
of accounting and its operating results have been included in the Company's
consolidated financial statements since the

F-22
<PAGE>
PANAVISION INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. BUSINESS COMBINATIONS (CONTINUED)
acquisition date of July 1, 1996. The purchase price has been allocated to the
following net assets acquired based on their respective fair market values (in
thousands):

<TABLE>
<S> <C>
Cash and equivalents............................................... $ 1,026
Inventories........................................................ 656
Prepaids and other................................................. 598
Property and equipment............................................. 8,671
Accounts payable and accrued liabilities........................... (2,951)
---------
$ 8,000
---------
---------
</TABLE>

Unaudited revenue, net income, and net income per share for the Company
would have increased by $19,749,000, $1,204,000 and $.08, respectively for 1995
and $10,400,000, $605,000 and $.04, respectively, for the nine months ended
September 30, 1996, on a pro forma basis if the Lee Lighting acquisition had
been made as of January 1, 1995. This unaudited pro forma information is
presented for illustrative purposes only and may not be indicative of the
results that would have occurred or which may be obtained in the future.

13. SUBSEQUENT EVENT

On November 19, 1996, the Company's Board of Directors authorized the filing
of a registration statement with the Securities and Exchange Commission,
relating to an initial public offering of 3,500,000 shares of the Company's
unissued common stock at an expected offering price ranging from $16.00 to
$18.00. The Board also authorized 2,000,000 shares of preferred stock, approved
an increase in the authorized shares of common stock to 50,000,000 shares and
declared a 1,413:1 stock split of the common stock. All applicable share and per
share amounts have been adjusted for this stock split.

F-23
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Directors
Lee Lighting Limited

We have audited the accompanying balance sheet of Lee Lighting Limited as of
December 31, 1995 and the related profit and loss account and statement of cash
flows for the year then ended. These financial statements are the responsibility
of the Company's directors. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with United Kingdom auditing standards
which do not differ in any significant respect from United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurances 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 audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lee Lighting Limited as of
December 31, 1995 and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United Kingdom which differ in certain respects from those followed in the
United States (see note 18 of the notes to the financial statements).

ERNST & YOUNG
Chartered Accountants
Registered Auditor

London, United Kingdom
5 September 1996

F-24
<PAGE>
LEE LIGHTING LIMITED

GROUP PROFIT AND LOSS ACCOUNT

(IN THOUSANDS OF BRITISH POUNDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
--------------- ----------------------------
1995 1995 1996
--------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Turnover.......................................... 12,516 5,927 6,746
Cost of sales..................................... (9,869) (4,726) (5,284)
------- ------ ------
Gross profit...................................... 2,647 1,201 1,462
Selling, general and administration expenses...... (1,601) (802) (905)
------- ------ ------
1,046 399 557
Other operating income............................ 38 19 5
------- ------ ------
Operating profit.................................. 1,084 418 562
Interest income................................... 29 13 6
Interest expense.................................. (3,420) (1,710) (1,806)
------- ------ ------
Loss on ordinary activities before taxation....... (2,307) (1,279) (1,238)
Tax on loss on ordinary activities................ 69 -- 112
------- ------ ------
Loss attributable to the members of the parent
undertaking..................................... (2,238) (1,279) (1,126)
------- ------ ------
------- ------ ------

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
</TABLE>

There are no recognised gains or losses other than the loss attributable to
the shareholders of the company of L2,238 in the year ended December 1995.

See accompanying notes.

F-25
<PAGE>
LEE LIGHTING LIMITED

GROUP BALANCE SHEET

(IN THOUSANDS OF BRITISH POUNDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1995
--------------- JUNE 30,
1996
-------------
(UNAUDITED)
<S> <C> <C>
FIXED ASSETS
Tangible assets............................................... 5,346 5,587
------- -------------

CURRENT ASSETS
Stock......................................................... 405 423
Debtors....................................................... 1,495 1,910
Cash at bank and in hand...................................... 413 661
Prepayments and other current assets.......................... 233 385
------- -------------
2,546 3,379
CREDITORS: amounts falling due within one year................ (39,455) (41,767)
------- -------------
NET CURRENT LIABILITIES....................................... (36,909) (38,388)
------- -------------
TOTAL ASSETS LESS CURRENT LIABILITIES......................... (31,563) (32,801)
------- -------------
CREDITORS: amounts falling due after more than one year....... (90) (90)
PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation............................................. (112) --
------- -------------
(202) (90)
------- -------------
(31,765) (32,891)
------- -------------
------- -------------

CAPITAL AND RESERVES
Called up share capital....................................... 568 568
Merger reserve................................................ 1,133 1,133
Revaluation reserve........................................... 185 166
Profit and loss account....................................... (33,651) (34,758)
------- -------------
(31,765) (32,891)
------- -------------
------- -------------
</TABLE>

See accompanying notes.

F-26
<PAGE>
LEE LIGHTING LIMITED

GROUP STATEMENT OF CASH FLOWS

(IN THOUSANDS OF BRITISH POUNDS)

<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------- ----------------------------------------
1995 1995 1996
----------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES.... 2,052 1,131 978
------ ----- ---
RETURNS FROM INVESTMENTS AND SERVICING OF
FINANCE
Interest received.......................... 29 13 6
Interest paid.............................. (1,500) (500) --
------ ----- ---
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE................... (1,471) (487) 6
------ ----- ---
TAXATION
Corporation tax............................ -- -- --
------ ----- ---
INVESTING ACTIVITIES
Payments to acquire tangible fixed
assets..................................... (939) (601) (746)
Receipts from sales of tangible fixed
assets..................................... 46 32 10
------ ----- ---
NET CASH OUTFLOW FROM INVESTING ACTIVITIES... (893) (569) (736)
------ ----- ---
NET CASH (OUT)/INFLOW BEFORE FINANCING
ACTIVITIES................................. (312) 75 248
------ ----- ---
NET CASH INFLOW FROM FINANCING ACTIVITIES.... -- -- --
------ ----- ---
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS................................ (312) 75 248
------ ----- ---
------ ----- ---
RECONCILIATION OF OPERATING PROFIT TO NET
CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit........................... 1,084 418 562
Depreciation charge........................ 961 452 493
(Profit)/loss on sale of tangible fixed
assets..................................... (16) (14) 2
Balance of unfunded pension obligation..... (5) (5) --
Decrease/(increase) in debtors............. 48 (183) (572)
Increase in creditors...................... 37 538 511
(Increase)/decrease in stock............... (57) (75) (18)
------ ----- ---
NET CASH INFLOW FROM OPERATING ACTIVITIES.... 2,052 1,131 978
------ ----- ---
------ ----- ---
</TABLE>

See accompanying notes.

F-27
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

(INFORMATION FOR THE PERIOD ENDED JUNE 30, 1995 AND

SUBSEQUENT TO DECEMBER 31, 1995 IS UNAUDITED)

1. ACCOUNTING POLICIES

ACCOUNTING CONVENTION

The accounts are prepared under the historical cost convention as modified
to include the revaluation of rental assets and in accordance with applicable
accounting standards.

BASIS OF CONSOLIDATION

The group accounts consolidate Lee Lighting Limited (the Company) and all
its subsidiary undertakings drawn up to 31 December each year.

DEPRECIATION

Depreciation is provided on all tangible fixed assets at rates calculated to
write off the cost or valuation, less estimated residual value, of each asset
over its useful economic life, as follows:

<TABLE>
<S> <C>
Leasehold buildings.................. 10 years
Motor vehicles....................... 20% on written down value
Furniture, fixtures and equipment.... 15% on written down value
Computer equipment................... 3 years
Rental assets........................ 15-20% on written down value
</TABLE>

STOCKS

Stocks are stated at the lower of cost and net realisable value.

DEFERRED TAXATION

Deferred taxation is provided on the liability method on all timing
differences which are expected to reverse in the future calculated at the rate
at which it is estimated that tax will be payable.

FOREIGN CURRENCIES

Transactions in foreign currencies are recorded at the rate ruling at the
date of the transaction.

Monetary assets and liabilities denominated in foreign currency are
retranslated at the rate of exchange ruling at the balance sheet date.

All differences are taken to the profit and loss account.

LEASING AND HIRE PURCHASE CONSULTANTS

Assets obtained under finance leases and hire purchase contracts are
capitalized in the balance sheet and are depreciated over their useful lives.

The interest element of the rental obligations is charged to the profit and
loss account over the period of the lease and represents a constant proportion
of the balance of capital repayments outstanding.

F-28
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

1. ACCOUNTING POLICIES (CONTINUED)

Rentals paid under operating leases are charged to income on a straight line
basis over the lease term.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited consolidated financial statements at June 30,
1996 and for the six month periods ended June 30, 1995 and June 30, 1996 have
been prepared on the same basis as the audited financial statements and, in the
opinion of management, include all adjustments (consisting only of normal and
recurring accruals) necessary to present fairly the financial information set
forth therein, in accordance with accounting principles generally accepted in
the United Kingdom which differ in certain respects from those followed in the
United States (see note 18). The results of operations for the six month period
ended June 30, 1996 are not necessarily indicative of the results to be expected
for the entire fiscal year.

2. TURNOVER

Turnover, which is stated net of value added tax, represents amounts
invoiced to third parties in respect of the provision of services and equipment
to the film, television and allied industries. An analysis of turnover by
geographical market is given below (in thousands of British pounds):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
UK......................................................................... 12,019
All other.................................................................. 497
-------
12,516
-------
-------
</TABLE>

3. OPERATING PROFIT

This is stated after charging/(crediting) (in thousands of British pounds):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-------------------
<S> <C>
Auditors' remuneration--audit services..................................... 32
Depreciation of owned fixed assets......................................... 1,034
Profit on disposals of fixed assets........................................ (16)
Operating lease rentals--land and buildings................................ 413
-----
-----
</TABLE>

4. DIRECTORS' REMUNERATION

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Other emoluments, including pension contributions (in thousands of British
pounds)................................................................... 170
-------
-------
</TABLE>

F-29
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

4. DIRECTORS' REMUNERATION (CONTINUED)
The emoluments of the chairman, excluding pension contributions, were Lnil.
The emoluments of the highest paid director, excluding pension contributions,
were L93,000. Directors' emoluments excluding pension contributions fell within
the following ranges:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
NO.
Lnil - L5,000.............................................................. 3
L75,001 - L80,000.......................................................... 1
L90,001 - L95,000.......................................................... 1
</TABLE>

5. STAFF COSTS

Staff costs were as follows (in thousands of British pounds):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Wages and salaries......................................................... 6,021
Social security costs...................................................... 618
Other pension costs........................................................ 150
-------
6,789
-------
-------
</TABLE>

The Company contributes to a number of defined contribution pension schemes
on behalf of its employees. The assets of the schemes are held separately from
those of the Company in independently administered funds. The pension cost
charge represents contributions payable by the Company to the funds and amounted
to L150,000.

The average weekly number of employees during the year was made up as
follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Electricians and generator operators....................................... 103
Maintenance and support.................................................... 49
Selling and distribution................................................... 2
Administration............................................................. 28
-------
182
-------
-------
</TABLE>

6. INTEREST EXPENSE

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Loan from parent undertaking (in thousands of British pounds).............. 3,420
-------
-------
</TABLE>

7. TAX ON LOSS ON ORDINARY ACTIVITIES

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
<S> <C>
Based on the loss for the year:
Deferred taxation (in thousands of British pounds)......................... (69)
-------
-------
</TABLE>

F-30
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

8. TANGIBLE FIXED ASSETS

The analysis of tangible fixed assets is as follows (in thousands of British
pounds):

<TABLE>
<CAPTION>
LEASEHOLD, FURNITURE,
LAND AND MOTOR FIXTURES AND
BUILDINGS VEHICLES EQUIPMENT RENTAL ASSETS TOTAL
----------- ----------- --------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Cost or valuation:
At January 1, 1995................................ 1,213 151 879 10,682 12,925
Additions......................................... -- 76 -- 864 940
Disposals......................................... -- (56) -- (111) (167)
----- --- --- ------------- ---------
At December 31, 1995.............................. 1,213 171 879 11,435 13,698
----- --- --- ------------- ---------
Depreciation:
At January 1, 1995................................ 637 38 749 6,105 7,529
Charge for the year............................... 120 30 26 784 960
Disposals......................................... -- (41) -- (96) (137)
----- --- --- ------------- ---------
At December 31, 1995.............................. 757 27 775 6,793 8,352
----- --- --- ------------- ---------
Net book value
At January 1, 1995................................ 576 113 130 4,577 5,396
----- --- --- ------------- ---------
----- --- --- ------------- ---------
At December 31, 1995.............................. 456 144 104 4,642 5,346
----- --- --- ------------- ---------
----- --- --- ------------- ---------
</TABLE>

Certain lighting rental equipment was revalued at 31 December 1987 by the
directors, based on depreciated replacement cost. The figures disclosed above
for rental assets included the following amounts in respect of revalued lighting
rental equipment (in thousands of British pounds):

<TABLE>
<CAPTION>
HISTORICAL
COST VALUATION
----------- -----------
<S> <C> <C>
Cost or valuation:
At January 1, 1995...................................................................... 7,756 5,209
----- -----
At December 31, 1995.................................................................... 7,598 5,098
----- -----
Accumulated depreciation:
At January 1, 1995...................................................................... 6,311 3,539
----- -----
At December 31, 1995.................................................................... 6,394 3,709
----- -----
Charge for the year..................................................................... 211 250
----- -----
</TABLE>

9. STOCKS

<TABLE>
<CAPTION>
DECEMBER 31,
1995 JUNE 30, 1996
--------------- ---------------
<S> <C> <C>
(UNAUDITED)
Materials and consumables (in thousands of British pounds)......................... 405 423
--- ---
--- ---
</TABLE>

F-31
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

10. CREDITORS

Amounts falling due within one year were as follows (in thousands of British
pounds):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------- -----------
<S> <C> <C>
(UNAUDITED)
Trade creditors............................................... 300 537
Other taxes and social security costs......................... 476 785
Accrued income taxes.......................................... 120 120
Other creditors............................................... 13 24
Accruals...................................................... 501 450
Amounts owed to parent undertakings........................... 1,196 1,196
Amounts owed to other group undertakings...................... 730 730
Loan from parent undertaking.................................. 36,119 37,925
------------- -----------
39,455 41,767
------------- -----------
------------- -----------
</TABLE>

The loan from the parent undertaking is a loan note of L21,396,095 together
with deferred interest thereon of L14,723,268. The loan is secured on the assets
of the Company and its subsidiaries.

The principal terms are as follows:

1. Interest is chargeable at 10% per year on the outstanding principal
and deferred interest.

2. The prinicpal is repayable on June 30, 1996 together with any
deferred interest. However since the audited balance sheet date the
repayment date for prinicpal and deferred interest has been extended to June
30, 1997.

3. Interest may be deferred to the extent that, in the opinion of the
directors, the Company has insufficient resources to make any interest
payments. Any interest so deferred is subject to interest commencing at the
start of the financial year following that in which the deferral was made.

The principal and interest on this loan note become payable immediately in
the event of a default which may arise, inter alia, by failure to pay any amount
due under the agreement or by failure to pay other debts as they fall due.

While no discussions have taken place regarding the renewal of the loan
facility beyond June 30, 1997 the directors are confident that agreement could
be reached to provide adequate facilities for the Company to continue trading
for the foreseeable future, although as detailed in note 17, the intention of
the directors is to place the Company into liquidation following the transfer of
the business and certain trading assets as of July 1, 1996.

If adequate facilities are not available, the going concern basis, upon
which these financial statements are prepared, may not be appropriate and
adjustments would have to be made to reduce the value of assets to their
recoverable amount, to provide for any further liabilities that might arise and
to reclassify fixed assets as current assets and long-term liabilities as
current liabilities.

Amounts falling due after one year was comprised of a provision for unfunded
pension obligations of L90,000.

F-32
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

11. OBLIGATIONS UNDER OPERATING LEASES

The annnual commitments under non-cancellable operating leases are as
follows (in thousands of British pounds):

<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------
<S> <C>
Operating leases which expire:
In one year................................................................ 230
Within the second to fifth years........................................... 183
---
413
---
---
</TABLE>

12. DEFERRED TAXATION

Deferred taxation provided in the accounts and the amounts not provided are
as follows (in thousands of British pounds):

<TABLE>
<CAPTION>
PROVIDED NOT PROVIDED
DECEMBER 31, DECEMBER 31,
1995 1995
--------------- -------------
<S> <C> <C>
Accelerated capital allowances................................... 187 --
Accrued interest................................................. -- (4,859)
Other timing differences......................................... (30) --
Losses........................................................... (45) --
--- ------
112 (4,859)
--- ------
--- ------
</TABLE>

13. SHARE CAPITAL

Share capital allotted, called up, authorised and fully paid consisted of
600,000 ordinary shares of L1 each.

14. RECONCILIATION OF SHAREHOLDERS' FUNDS AND MOVEMENTS ON RESERVES

The reconciliation is as follows (in thousands of British pounds):

<TABLE>
<CAPTION>
PROFIT AND
SHARE MERGER REVALUATION LOSS
CAPITAL RESERVE RESERVE ACCOUNT TOTAL
----------- ----------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995................................ 568 1,133 224 (31,452) (29,527)
Loss for the year......................................... -- -- -- (2,238) (2,238)
Release of revaluation reserve............................ -- -- (39) 39 --
--- ----- --- ----------- ---------
Balance at December 31, 1995.............................. 568 1,133 185 (33,651) (31,765)
Loss for the period (unaudited)........................... -- -- -- (1,126) (1,126)
Release of revaluation reserve (unaudited)................ -- -- (19) 19 --
--- ----- --- ----------- ---------
Balance at June 30, 1996 (unaudited)...................... 568 1,133 166 (34,758) (32,891)
--- ----- --- ----------- ---------
--- ----- --- ----------- ---------
</TABLE>

F-33
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

15. CASH FLOW STATEMENT

(a) Analysis of changes in cash and cash equivalents during the year (in
thousands of British pounds):

<TABLE>
<CAPTION>
1995
-------------
<S> <C>
Balance at 1 January............................................................ 725
Net cash (outflow).............................................................. (312)
-------------
413
-------------
-------------
</TABLE>

(b) Analysis of cash and short term deposits as shown in the balance sheet:

<TABLE>
<CAPTION>
DECEMBER 31,
1995
-------------
<S> <C>
Cash at bank and in hand (in thousands of British pounds):...................... 413
-------------
-------------
</TABLE>

(c) Analysis of changes in financing during the year - parent undertaking
loan (note 10) (in thousands of British pounds):

<TABLE>
<S> <C>
Balance as of 1 January 1995.................................... 34,199
Interest paid................................................... (1,500)
Interest charge................................................. 3,420
-----------
Balance as of 31 December 1995.................................. 36,119
-----------
-----------
</TABLE>

16. CAPITAL COMMITMENTS

Amounts contracted for but not provided in the financial statements amounted
to L69,520.

F-34
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

17. EVENTS SINCE THE BALANCE SHEET DATE

With effect from July 1, 1996, the business and substantially all trading
assets of the Company were sold at net book value and it is planned to place the
Company into liquidation.

18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES

The financial statements are prepared under accounting principles generally
accepted in the United Kingdom (UK GAAP) which differ in certain respects from
United States generally accepted principles (US GAAP). Differences estimated to
have a significant effect on net income and shareholders' equity are set out
below.

REVALUATION OF RENTAL ASSETS

Certain rental assets were revalued in 1987 on the basis of their value to
the business and they are included in these financial statements at that value
less subsequent depreciation. Under US GAAP, such revaluations would not be
reflected in the financial statements. Rental assets would be included at
historical cost under US GAAP with depreciation computed on such cost.

DEFERRED TAXATION

Provision is made for deferred taxation using the liability method on all
material timing differences to the extent that it is probable that the
liabilities will crystallise in the foreseeable future. Under US GAAP, as set
out in Statements of Financial Accounting Standards No. 109 "Accounting for
Income Taxes", deferred taxation is generally provided on a full liability basis
on all temporary differences. However, as the unprovided UK GAAP amount
represents a deferred taxation asset which is not anticipated to be realised in
the foreseeable future, there would be no significant impact on net income or
shareholders' equity from the adoption of a US GAAP treatment.

F-35
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
The following is a summary of the effect of the above differences on the
reported amounts (in thousands of British pounds):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
(UNAUDITED)
NET INCOME
Loss for the period............................................................. (2,238) (1,126)
ADJUSTMENTS
Depreciation adjustment as a result of revaluation.............................. 39 19
Adjustment on disposal of revalued asset........................................ 5 --
------- -------------
Net income as adjusted to accord with US GAAP................................... (2,194) (1,107)
------- -------------
------- -------------
SHAREHOLDERS' EQUITY
Shareholders' equity as reported................................................ (31,765) (32,891)
ADJUSTMENTS
Revaluation reserve............................................................. (185) (166)
------- -------------
Shareholders' equity as adjusted to accord with US GAAP......................... (31,950) (33,057)
------- -------------
------- -------------
</TABLE>

STATEMENTS OF CASH FLOWS

The statements of cash flows prepared in accordance with UK GAAP present
substantially the same information as that required under US GAAP. UK and US
GAAP differ, however, with regard to the classification of items within the
statements and as regards the definition of cash and cash equivalents.

Under UK GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, investing activities
and financing activities. US GAAP, however, requires only three categories of
cash flow activity to be reported: operating, investing and financing. Cash
flows from taxation and returns on investments and servicing of finance shown
under UK GAAP would be included as operating activities under US GAAP.

Under US GAAP, cash and cash equivalents would not include bank overdrafts
and borrowings with initial maturities of less than three months.

F-36
<PAGE>
LEE LIGHTING LIMITED

NOTES TO THE ACCOUNTS

18. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED
KINGDOM AND THE UNITED STATES (CONTINUED)
The categories of cash flow activity under US GAAP can be summarized as
follows (in thousands of British pounds):

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 JUNE 30, 1996
------------------- ---------------
<S> <C> <C>
(UNAUDITED)
Cash inflow from operating activities........................................... 581 984
Cash outflow on investing activities............................................ (893) (736)
Cash inflow from financing activities........................................... -- --
--- ---
(Decrease)/increase in cash and cash equivalents................................ (312) 248
Cash and cash equivalents at January 1.......................................... 725 413
--- ---
Cash and cash equivalents at December 31/June 30................................ 413 661
--- ---
--- ---
</TABLE>

F-37
<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., Schroder Wertheim
& Co. Incorporated and Cowen & Company are acting as representatives
(collectively, the "Representatives"), has severally agreed to purchase from the
Company, the respective number of shares of Common Stock set forth opposite its
name below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------- -----------
<S> <C>
Goldman, Sachs & Co.................................................... 563,334
Schroder Wertheim & Co. Incorporated................................... 563,333
Cowen & Company........................................................ 563,333
Alex. Brown & Sons Incorporated........................................ 98,000
Chase Securities Inc................................................... 98,000
Crowell, Weedon & Co................................................... 53,000
Dean Witter Reynolds Inc............................................... 98,000
Donaldson, Lufkin & Jenrette Securities Corporation.................... 98,000
Fahnestock & Co. Inc................................................... 53,000
Furman Selz LLC........................................................ 53,000
J.J.B. Hilliard, W.L. Lyons, Inc....................................... 53,000
Edward D. Jones & Co., L.P............................................. 53,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated..................... 98,000
Oppenheimer & Co., Inc................................................. 98,000
PaineWebber Incorporated............................................... 98,000
Raymond James & Associates, Inc........................................ 53,000
Scott & Stringfellow, Inc.............................................. 53,000
Unterberg Harris....................................................... 53,000
-----------
Total.............................................................. 2,800,000
-----------
-----------
</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 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 securities dealers at such
price less a concession of $0.65 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 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 700,000 shares of Common Stock in an international offering outside the
United States. The offering price and aggregate underwriting discounts per share
for the two 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, J. Henry Schroder & Co. Limited and Cowen & Company.

Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two 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

U-1
<PAGE>
offer, sell or deliver the shares of 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
part of the International Offering and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of 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.

Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
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 420,000
additional shares of 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
2,800,000 shares of Common Stock offered hereby. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
105,000 additional shares of Common Stock.

The Company has agreed 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, not to offer, sell, contract to sell or otherwise dispose of
any securities of the Company (other than pursuant to employee stock option
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 Common Stock or which are convertible or exchangeable
into securities which are substantially similar to the shares of Common Stock,
without the prior written consent of Goldman, Sachs & Co., except for the shares
of Common Stock offered in connection with the Offerings. The Company's
executive officers and directors and Warburg, Pincus, who will hold in the
aggregate 14,130,000 shares of Common Stock following this offering, have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or other securities of Panavision Inc. that are substantially
similar to the shares of Common Stock (including but not limited to any
securities that are convertible into or exchangeable for, or that represent the
right to receive, shares of Common Stock or any such substantially similar
securities) for a period of 180 days after the date of this Prospectus without
the prior written consent of Goldman, Sachs & Co. See "Shares Eligible for
Future Sale."

Since the partial repayment of the Credit Facility will cause a substantial
portion of the proceeds from the Offerings to be paid to affiliates of members
of the National Association of Securities Dealers, Inc. (the "NASD") which
members may participate in the U.S. Offering, the U.S. Offering is being
conducted in accordance with the requirements of Rule 2710(c)(8) of the NASD
Conduct Rules. The initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
Accordingly, Goldman, Sachs & Co. will serve in such role and will receive
compensation from the Company in the amount of $10,000 for serving in such
capacity. In connection with the U.S. Offering, Goldman, Sachs & Co. in its role
as qualified independent underwriter has performed due diligence investigations
and reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus forms a part.

U-2
<PAGE>
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
Common Stock offered by them.

Prior to the Offerings, there has been no public market for the Common
Stock. The initial 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 Common Stock, in addition to prevailing market conditions, are 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 the market valuation of
companies in related businesses.

The Common Stock has been approved for listing on the NYSE under the symbol
"PVI," subject to notice of issuance. In order to meet one of the requirements
for listing the 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.

This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Common Stock, including shares initially sold in the
International Offering, to persons located in the United States.

U-3
<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>
Additional Information....................... 2
Prospectus Summary........................... 3
Risk Factors................................. 7
Use of Proceeds.............................. 10
Dividend Policy.............................. 10
Capitalization............................... 11
Dilution..................................... 12
The Recapitalization......................... 13
Selected Consolidated Financial Data......... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................. 15
Business..................................... 26
Management................................... 39
Certain Transactions......................... 45
Principal Stockholders....................... 46
Description of Capital Stock................. 47
Shares Eligible for Future Sale.............. 49
Legal Matters................................ 51
Experts...................................... 51
Index to Financial Statements................ F-1
Underwriting................................. U-1
</TABLE>

THROUGH AND INCLUDING DECEMBER 15, 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS 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.

3,500,000 SHARES
PANAVISION INC.
COMMON STOCK
(PAR VALUE $0.01 PER SHARE)

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

[LOGO]

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

GOLDMAN, SACHS & CO.
SCHRODER WERTHEIM & CO.
COWEN & COMPANY
REPRESENTATIVES OF THE UNDERWRITERS

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