PETERSEN COMPANIES INC, S-1, 1997-08-07

PETERSEN COMPANIES INC
S-1, 1997-08-07
PERIODICALS: PUBLISHING OR PUBLISHING & PRINTING

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 7, 1997
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

----------------
THE PETERSEN COMPANIES, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 2721 36-4099296
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification No.)
incorporation or
organization)
----------------

6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
TELEPHONE: (213) 782-2000
(Address, including zip code, and telephone number, including
area code, of registrants' principal executive offices)

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

NEAL VITALE
PRESIDENT AND CHIEF OPERATING OFFICER
THE PETERSEN COMPANIES, INC.
6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
TELEPHONE: (213) 782-2000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
DENNIS M. MYERS STEVEN L. GROSSMAN
KIRKLAND & ELLIS O'MELVENY & MYERS LLP
200 EAST RANDOLPH DRIVE 400 SOUTH HOPE STREET
CHICAGO, ILLINOIS 60601 LOS ANGELES, CALIFORNIA 90071
(312) 861-2000 (213) 669-6000

----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF OFFERING PRICE REGISTRATION
SECURITIES TO BE REGISTERED (1)(2) FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, par value $.01 per share.... $172,500,000 $52,273
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</TABLE>
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(1) Includes shares of Class A Common Stock that the Underwriters have the
option to purchase from the Company to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457 solely for the purpose of calculating the
registration fee.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: one to be used
in connection with a United States and Canadian offering of the registrant's
Class A Common Stock (the "U.S. Prospectus") and one to be used in connection
with a concurrent international offering of the registrant's Class A Common
Stock (the "International Prospectus" and, together with the U.S. Prospectus,
the "Prospectuses"). The International Prospectus will be identical to the
U.S. Prospectus except that it will have a different front cover page. The
U.S. Prospectus is included herein and is followed by the front cover page to
be used in the International Prospectus. The front cover page for the
International Prospectus included herein has been labeled "Alternate
International Cover Page."

<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued August 7, 1997

[LOGO OF THE PETERSEN COMPANIES, INC.]

The Petersen Companies, Inc.

CLASS A COMMON STOCK

----------

ALL OF THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY
THE COMPANY. OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED
HEREBY, SHARES ARE BEING OFFERED INITIALLY IN THE UNITED STATES AND
CANADA BY THE U.S. UNDERWRITERS AND SHARES ARE BEING OFFERED INITIALLY
OUTSIDE THE UNITED STATES AND CANADA BY THE INTERNATIONAL UNDERWRITERS.
SEE "UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC
MARKET FOR THE CLASS A COMMON STOCK OF THE COMPANY. IT IS CURRENTLY
ESTIMATED THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE
BETWEEN $ AND $ . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE
FACTORS TO BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC
OFFERING PRICE.
----------
THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF THE CLASS
A COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK." HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO ONE VOTE PER
SHARE ON EACH MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. THE CLASS B
COMMON STOCK IS NON-VOTING EXCEPT UNDER CERTAIN LIMITED CIRCUMSTANCES AND
AS REQUIRED BY LAW. ALL HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE
SUCH DIVIDENDS AND DISTRIBUTIONS, IF ANY, AS MAY BE DECLARED FROM TIME
TO TIME BY THE BOARD OF DIRECTORS.

----------

APPLICATION HAS BEEN MADE TO LIST THE CLASS A COMMON STOCK ON THE NEW YORK
STOCK EXCHANGE UNDER THE SYMBOL " ."

----------

SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.

----------

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.

----------

PRICE $ A SHARE

----------

The Shares of Class A Common Stock are offered, subject to prior sale, when,
as and if accepted by the Underwriters named herein and subject to approval of
certain legal matters by O'Melveny & Myers LLP, counsel for the Underwriters.
It is expected that delivery of the Shares will be made on or about , 1997 at
the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against
payment therefor in immediately available funds.

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MORGAN STANLEY DEAN WITTER DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

ALEX. BROWN & SONS GOLDMAN, SACHS & CO.
INCORPORATED

, 1997
<PAGE>

[Inside Front Cover Page Graphics: A diagram depicting the Company's operating
structure (i.e., centralized revenue functions, seven core publishing groups and
centralized corporate functions) and a listing of the Company's 15 core titles.]
<PAGE>

[INSIDE FRONT COVER PAGE GATEFOLD GRAPHICS: PICTURES OF SAMPLE COVER PAGE OF 39
OF THE COMPANY'S MAGAZINES. THE COVER PAGES ARE ARRANGED AMONG THE COMPANY'S
SEVEN PUBLISHING GROUPS.]
<PAGE>

NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITY OTHER THAN THE CLASS A COMMON STOCK OFFERED HEREBY,
NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER
ANY CIRCUMSTANCE IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE
SUBSEQUENT TO THE DATE HEREOF.
----------------

UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
----------------

FOR INVESTORS OUTSIDE THE UNITED STATES: NO ACTION HAS BEEN OR WILL BE TAKEN
IN ANY JURISDICTION BY THE COMPANY OR BY ANY UNDERWRITER THAT WOULD PERMIT A
PUBLIC OFFERING OF THE CLASS A COMMON STOCK OR POSSESSION OR DISTRIBUTION OF
THIS PROSPECTUS IN ANY JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED,
OTHER THAN IN THE UNITED STATES. PERSONS INTO WHOSE POSSESSION THIS PROSPECTUS
COMES ARE REQUIRED BY THE COMPANY AND THE UNDERWRITERS TO INFORM THEMSELVES
ABOUT AND TO OBSERVE ANY RESTRICTIONS AS TO THE OFFERING OF THE CLASS A COMMON
STOCK AND THE DISTRIBUTION OF THIS PROSPECTUS.

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

The Company's logo and each of the titles of the Company's publications
referenced herein are trademarks of the Company. Each trade name, trademark or
service mark of any other company appearing in this Prospectus is the property
of its holder.
----------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................................................... 3
Risk Factors............................................................... 11
Use of Proceeds............................................................ 16
The Reorganization......................................................... 17
Capitalization............................................................. 18
Dividend Policy............................................................ 19
Dilution................................................................... 20
Unaudited Pro Forma Financial Data......................................... 21
Selected Historical Financial Data......................................... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................................................ 32
Industry................................................................... 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.................................................................. 41
Management................................................................ 55
Certain Relationships and Related Transactions............................ 63
Principal Stockholders.................................................... 65
Description of Capital Stock.............................................. 67
Shares Eligible for Future Sale........................................... 70
Certain Federal Income Tax Consequences to Non-United States Holders...... 71
Underwriters.............................................................. 74
Legal Matters............................................................. 77
Experts................................................................... 77
Additional Information.................................................... 78
Index to Financial Statements............................................. F-1
</TABLE>

----------------
Certain statements contained herein under "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" including, without limitation, those
concerning the Company's business and operating strategy, contain certain
forward-looking statements concerning the Company's operations, economic
performance and financial condition. Because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause such
differences include, but are not limited to, those discussed under "Risk
Factors."

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS
OFFERING, AND MAY BID FOR, AND PURCHASE, SHARES OF CLASS A COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITERS."

2
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information
contained in the Prospectus assumes no exercise of the U.S. Underwriters' over-
allotment option. On September 30, 1996, Petersen Holdings, L.L.C. through a
subsidiary acquired substantially all of the publishing assets and assumed
certain liabilities of Petersen Publishing Company (the "Acquisition"). Unless
the context otherwise requires: (i) the term "Predecessor" is used herein to
refer to the historical operations of the publishing division of Petersen
Publishing Company prior to the Acquisition; (ii) the term "Petersen" is used
herein to refer to the operations of Petersen Holdings, L.L.C. and its
consolidated subsidiaries following the Acquisition; and (iii) the term
"Company" is used herein to refer to The Petersen Companies, Inc. and its
consolidated subsidiaries after giving effect to the reorganization described
herein under the heading "The Reorganization" and their respective
predecessors. See "The Reorganization." The Class A Common Stock and Class B
Common Stock to be outstanding immediately after completion of the Offering are
collectively referred to herein as the "Common Stock."

THE COMPANY

The Company is a leading publisher of special-interest magazines with a
diverse portfolio of 78 publications, including 25 monthly, 11 bimonthly and 42
single issue or annual publications. According to Veronis, Suhler and
Associates ("VSA"), special-interest magazine publishing is the fastest growing
sector of the consumer magazine industry. The special-interest nature of the
Company's magazines creates an opportunity for its advertisers to efficiently
reach their target audience, as the Company's enthusiast readers value special-
interest magazines for both their product information as well as editorial
content.

The Company's internationally-recognized magazines include: (i) Motor Trend,
which is a leading authority on new domestic and foreign automobiles and, with
its increase in rate base (expected paid circulation on which advertising rates
are based) to 1.15 million effective January 1998, is anticipated to be the
world's leading automotive magazine in terms of paid circulation; (ii) Teen,
which has the largest paid circulation of any of the Company's magazines with
paid circulation of more than 1.8 million as of the June 1997 issue; and (iii)
Hot Rod, which is one of the largest paid circulation automotive magazines in
the world with a paid circulation of over 800,000 as of the June 1997 issue.
The Company's other core publications are Petersen's 4 Wheel & Off-Road, Guns
and Ammo, Skin Diver, Sport, Car Craft, Petersen's Hunting, Motorcyclist,
Circle Track and Racing Technology, Petersen's Photographic, Sport Truck, Dirt
Rider and Chevy High Performance. The Company's 15 core magazines average over
30 years in publication.

Based on data from Mediamark Research, Inc., the Company estimates that its
magazines are read by more adults and men than are the magazines of any other
U.S. special-interest publisher--approximately 48 million adults and 40 million
male readers each month. Of the Company's 15 core publications, nine are ranked
first in their respective markets based on paid circulation, including two
magazines that are the only national magazines published in their respective
markets.

The Company had net revenues of $227.2 and $120.1 million for the twelve
months ended December 31, 1996 and the six months ended June 30, 1997,
respectively. The Company's principal sources of revenue are from advertising
and circulation. For the six months ended June 30, 1997, approximately 61.1% of
the Company's revenues were from advertising, 35.8% from circulation and 3.1%
from other sources. For the twelve months ended December 31, 1996, 13 of the
Company's 15 core magazines each generated an operating contribution (revenue
less direct costs associated with each magazine) of more than $1.0 million.

3
<PAGE>

of the Company's core monthly publications which target a distinct special-
interest segment or specific general-interest segment (e.g., Teen and Sport).
The operations of each group are focused on delivering high-quality editorial
content, generating endemic advertising sales and developing new titles or
activities to reach such group's enthusiast readers. Each publishing group is
supported by a number of centralized corporate functions. The Company conducts
all of its non-endemic advertising, subscription and newsstand sales and
marketing activities and develops ancillary revenue through event management,
licensing arrangements and electronic publishing on a centralized basis to take
advantage of the broad reach and significant market presence of the Company's
magazine portfolio. In addition, all of the Company's production, distribution
and administrative activities are centralized to achieve economies of scale and
operating synergies. The combination of each group's focused editorial and
sales staff supported by centralized corporate functions has enabled the
Company to improve profit margins and provides a competitive advantage in the
development and launch of new titles within an existing group.

BUSINESS AND OPERATING STRATEGY

The Company's business and operating strategy is designed to provide strong
revenue growth and increase profitability by improving the performance of
existing titles, launching and acquiring additional publications and developing
ancillary revenue streams by capitalizing on its internationally-recognized
brands and efficient operations. The key elements of this strategy include:

Cross-Sell Advertising and Expand Advertiser Base. Management believes that,
in addition to maintaining a strong endemic advertising base, it will continue
to increase revenues by cross-selling advertising space across all of the
Company's magazines that reach the advertiser's target markets. In addition,
the Company is improving existing and implementing new programs that will
enable its advertisers to purchase other marketing services, such as event
sponsorships, direct marketing programs, database access and services and
point-of-purchase promotions. Management intends to increase the Company's
advertiser base by targeting new advertisers in existing and new categories,
with a focus on non-endemic categories. The Company believes that its ability
to provide effective and efficient advertising enables it to maintain
competitive and in some cases premium advertising rates.

Increase Direct Subscription Sales and Magazine Prices. Management believes
that there are numerous opportunities to increase circulation revenues by
expanding direct subscription sales. The Company has invested in new
promotional programs, including direct mail, insert cards, gift campaigns and
cover wraps, designed to increase the number of subscriptions purchased
directly from the Company. Direct subscriptions provide significantly higher
revenues than those purchased through independent subscription agents. The
Company has also developed a database that includes detailed demographic
information on approximately 16 million current and former subscribers that
will enable it to more effectively cross-sell its publications and other
products directly to subscribers. In addition, the Company recently increased
the newsstand and subscription prices on certain publications to levels
comparable to those of competitive magazines and will continue to adjust its
magazine prices in the future based on market conditions.

4
<PAGE>

Develop Business-to-Business Opportunities. The Company believes that its
experience in developing, marketing and producing targeted special-interest
magazines will enable it to expand into business-to-business activities in the
markets served by its existing magazines. Such activities include trade
magazine publishing, trade shows, directories and database marketing. For
example, the Company recently acquired the rights to produce SHOT Business, the
monthly magazine of the National Shooting Sports Foundation.

Continue to Identify and Implement Operating Improvements. The Company's
current management identified and implemented operating improvements that have
resulted in significant cost savings through personnel reductions, lower lease
costs, tighter purchasing procedures and controls and restructuring the
Company's relationships with its principal vendors. In addition, the Company
adopted a new operating policy that provides for one or more of the following
actions if any of its publications generate continued losses: (i) discontinue
or sell such magazine; (ii) merge such magazine with one of the Company's
existing magazines; or (iii) enter into strategic partnerships with third
parties. The successful implementation of these improvements has significantly
contributed to the improvement in the Company's EBITDA margin, which increased
from 10.6% for the ten month period ended September 30, 1996 to 25.0% for the
six-month period ended June 30, 1997. The Company will remain focused on
identifying additional operating improvements to further increase its operating
efficiencies and profit margins.

BACKGROUND

The Company's origins date to 1948, when its founder, Robert E. Petersen,
first began publishing and selling a specialized newsletter entitled Hot Rod.
Since that time, the Company grew into a leading publisher of special-interest
magazines, expanding principally into areas in which Mr. Petersen had a
personal interest. On September 30, 1996, an investor group led by Willis Stein
& Partners, L.P. ("Willis Stein"), James D. Dunning, Jr. and certain members of
the Company's senior management acquired, through the Company, substantially
all of the publishing assets of the Predecessor in the Acquisition. The
aggregate purchase price of the Acquisition (including expenses) was
approximately $462.8 million plus the assumption of unearned subscription
revenues and other liabilities of $49.0 million. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

The Company was incorporated in August 1996 under the laws of the State of
Delaware. The Company's principal executive offices are located at 6420
Wilshire Boulevard, Los Angeles, California 90048 and its telephone number is
(213) 782-2000.

5
<PAGE>

THE OFFERING

<TABLE>
<S> <C>
Class A Common Stock offered:
U.S. Offering................. shares
International Offering........ shares
---
Total....................... shares (1)
===
Common Stock to be outstanding
after the Offering............. shares (1)(2)
Use of proceeds................. The net proceeds to the Company from the
Offering will be used to repay certain
outstanding indebtedness under the Company's
senior credit facility, to redeem a portion
of the Preferred Units (as defined) and to
redeem a portion of the senior subordinated
notes issued by the Company's operating
subsidiary. See "Use of Proceeds" and "The
Reorganization."

Voting Rights................... Upon completion of the Offering, the Company
will have two classes of outstanding Common
Stock. The Class A Common Stock and Class B
Common Stock are substantially identical,
except with respect to voting rights. Each
holder of Class A Common Stock is entitled to
one vote per share on all matters submitted
to a vote of stockholders and each holder of
Class B Common Stock is not entitled to vote
except under certain limited circumstances
and as required by law. See "Risk Factors--
Significant Influence of Certain
Stockholders; Benefits of Offering" and
"Description of Capital Stock."
Proposed New York Stock Exchange
symbol.........................
</TABLE>
- --------
(1) Assumes the U.S. Underwriters' over-allotment option is not exercised. See
"Underwriters."

(2) Includes shares of Class B Common Stock. Does not include (i)
shares of Class A Common Stock issuable upon the exercise of options
granted under the 1997 Long-Term Equity Incentive Plan (the "1997 Incentive
Plan") or (ii) additional shares of Class A Common Stock reserved for
grants or awards under the 1997 Incentive Plan or the Employee Stock
Discount Purchase Plan (the "Stock Purchase Plan"). See "Management--1997
Long-Term Equity Incentive Plan" and "--Employee Stock Discount Purchase
Plan."

RISK FACTORS

Prospective investors should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data included
in this Prospectus in evaluating an investment in the shares of Class A Common
Stock offered hereby.

6
<PAGE>

SUMMARY HISTORICAL FINANCIAL DATA

The following table presents summary historical financial data of: (i) the
Predecessor for each of the four years in the period ended November 30, 1995
and the ten months ended September 30, 1996, which have been derived from the
audited financial statements of the Predecessor and (ii) Petersen for the three
months ended December 31, 1996 and the six months ended June 30, 1997, which
have been derived from the audited financial statements of Petersen. The
audited financial statements of the Predecessor for each of the two years in
the period ended November 30, 1995 and the ten months ended September 30, 1996
and of Petersen for the three months ended December 31, 1996 and the six months
ended June 30, 1997 appear elsewhere in this Prospectus. The summary historical
financial data of the Predecessor for the ten months ended September 30, 1995,
the three months ended December 31, 1995 and the six months ended June 30, 1996
have been derived from unaudited financial statements of the Predecessor which,
in the opinion of management, include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
for the unaudited interim period. Results for the six months ended June 30,
1997 are not necessarily indicative of results that may be expected for the
entire year. The Acquisition was accounted for using the purchase method of
accounting. Accordingly, certain of the historical financial data of the
Predecessor is not comparable to that of Petersen. The summary historical
financial data set forth below should be read in conjunction with, and are
qualified by reference to, "Selected Historical Financial Data," "Management's
Discussion and Analysis of Financial Conditions and Results of Operations" and
the financial statements and the accompanying notes thereto included elsewhere
in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR (1) PETERSEN (2) PREDECESSOR (1) PETERSEN (2)
------------------------------------------------------------------- ------------ --------------- ------------
TEN MONTHS
ENDED THREE MONTHS SIX MONTHS
YEAR ENDED NOVEMBER 30, SEPTEMBER 30, ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------------- ------------------ --------------------- ----------------------------
1992 1993 1994 1995 1995 1996 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- ------- ------------ --------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OP-
ERATIONS DATA:
Net revenues.... $181,643 $187,212 $202,792 $214,515 $179,400 $189,614 $50,938 $ 53,277 $115,040 $120,143
Production,
selling and
other direct
costs.......... 135,155 142,254 149,586 171,579 140,831 148,874 42,342 41,223 91,971 82,440
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Gross profit.... 46,488 44,958 53,206 42,936 38,569 40,740 8,596 12,054 23,069 37,703
General and
administrative
expenses....... 32,328 35,604 33,267 28,145 23,537 24,650 8,952 2,666 12,903 8,955
Amortization of
goodwill and
other
intangible
assets......... 1,235 198 421 433 355 339 111 8,992 196 18,151
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Operating income
(loss)......... 12,925 9,156 19,518 14,358 14,677 15,751 (467) 396 9,970 10,597
Interest income
(expense),
net............ 856 317 476 549 428 352 209 (11,001) 85 (15,498)
Gain (loss) on
sale of assets
and minority
member's equity
in loss of
subsidiary..... -- -- -- -- -- 1,554 13 11 1,554 (28)
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Income (loss)
before
provision for
income taxes... 13,781 9,473 19,994 14,907 15,105 17,657 (245) (10,594) 11,609 (4,929)
Provision for
income
taxes(3)....... (267) (251) (698) (549) (458) (331) (138) -- (199) --
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Net income
(loss)......... 13,514 9,222 19,296 14,358 14,647 17,326 (383) (10,594) 11,410 (4,929)
Preferred unit
dividends...... -- -- -- -- -- -- -- -- -- (15,419)
-------- -------- -------- -------- -------- -------- ------- -------- -------- --------
Net income
(loss)
attributable to
common units... $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 14,647 $ 17,326 $ (383) $(10,594) $ 11,410 $(20,348)
======== ======== ======== ======== ======== ======== ======= ======== ======== ========
Pro forma
earnings (loss)
per common
share.......... $ $
======== ========
Pro forma
weighted
average number
of common
shares
outstanding....
======== ========
OTHER DATA:
Depreciation and
amortization... $ 3,381 $ 3,137 $ 3,118 $ 3,439 $ 2,704 $ 2,704 $ 1,015 $ 9,570 $ 1,667 $ 19,106
Capital
expenditures... 1,419 4,739 2,866 4,423 3,492 768 878 -- 463 228
EBITDA (4)...... 17,162 12,610 23,112 18,346 17,809 20,546 771 10,090 11,875 30,030
</TABLE>

(footnotes appear on following page)

7
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
-------------------------
PRO FORMA
AS
ACTUAL ADJUSTED (5)
-------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 6,923 $ 6,823
Working capital (excluding current portion of
unearned subscription revenues) (6)............. 1,303 7,203
Total assets..................................... 503,586 496,847
Total long-term debt............................. 271,750 191,781
Total debt....................................... 277,750 191,781
Total equity..................................... 150,481 229,860
</TABLE>
(footnotes from previous page)
- --------
(1) The Predecessor's fiscal year ended on November 30.
(2) Petersen's fiscal year ends on December 31.
(3) Consists of state and local income taxes. As a subchapter S corporation
under the Internal Revenue Code of 1986, as amended (the "Code"), the
Predecessor was not subject to U.S. federal income taxes or most state
income taxes. Instead, such taxes were paid by the Predecessor's
stockholder. The Predecessor periodically paid dividends to its stockholder
in respect of such tax liabilities. Prior to the Reorganization, Petersen
was a limited liability company and was not subject to U.S. federal income
taxes or most state taxes. Instead, such taxes were paid by Petersen's
equity holders.
(4) "EBITDA" is defined as income before interest expense, income taxes,
depreciation and amortization and gain on sale of assets. EBITDA is not a
measure of performance under generally accepted accounting principles
("GAAP"). Such items excluded from income in calculating EBITDA are
significant components in understanding and evaluating the Company's
financial performance. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP
or as a measure of profitability or liquidity, management understands that
EBITDA is customarily used in evaluating the equity value of magazine
publishing companies. The EBITDA measures presented herein may not be
comparable to similarly titled measures of other companies.
(5) The unaudited pro forma as adjusted balance sheet data of the Company as of
June 30, 1997 gives effect to: (i) the issuance of an aggregate of
approximately 37,989 Class D Common Units in exchange for all outstanding
Class B Common Units and Class C Common Units (the "Exchange") as described
under the heading "Certain Relationships and Related Transactions"; (ii)
the transactions as described under the heading "The Reorganization"; (iii)
the Offering and the application of the net proceeds therefrom as described
under "Use of Proceeds"; and (iv) the refinancing of the Company's senior
credit facility, as if such transactions had occurred on June 30, 1997. See
"The Reorganization," "Unaudited Pro Forma Financial Data" and
"Management's Discussion and Analysis of Financial Position--Liquidity and
Capital Resources."
(6) The current portion of unearned subscription revenues of $28.8 million
represents a non-cash obligation of the Company and has, therefore, been
excluded from the calculation of working capital.

8
<PAGE>

SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA

The following summary unaudited pro forma statement of operations data of the
Company for the twelve months ended December 31, 1996 and for the six months
ended June 30, 1996 give effect to: (i) the Acquisition and the financing
transactions related thereto; (ii) the Exchange; (iii) the transactions
described under the heading "The Reorganization;" (iv) the Offering and the
application of the net proceeds therefrom as described under "Use of Proceeds;"
and (v) the refinancing of the Company's senior credit facility, each as if
they had occurred at the beginning of each such period. The summary unaudited
pro forma statement of operations for the six months ended June 30, 1997 give
effect to the transactions described in items (ii) through (v) as if such
transactions had occurred at the beginning of such period. The unaudited pro
forma balance sheet data as of June 30, 1997 give effect to the transactions
described in items (ii) through (v) above as if such transactions had occurred
on such date. This pro forma information is not necessarily indicative of the
results that would have occurred had the transactions referenced above been
completed on the dates indicated or the Company's actual or future results or
financial position. The summary pro forma statement of operations, balance
sheet and other data should be read in conjunction with the information
contained in "Unaudited Pro Forma Financial Data," "Selected Historical
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and the notes thereto
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
DECEMBER 31, SIX MONTHS ENDED SIX MONTHS ENDED
1996 (1) JUNE 30, 1996 JUNE 30, 1997
------------------- ---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............ $227,212 $115,040 $120,143
Production, selling and
other direct costs..... 175,127 89,623 82,440
-------- -------- --------
Gross profit............ 52,085 25,417 37,703
General and administra-
tive expenses (2) ..... 33,587 22,599 21,135
Amortization of goodwill
and other intangible
assets................. 36,277 18,181 18,151
-------- -------- --------
Operating loss.......... (17,779) (15,363) (1,583)
Interest expense, net
(3).................... (31,473) (23,182) (16,857)
Gain (loss) on sale of
assets................. 1,554 1,554 (33)
-------- -------- --------
Loss before provision
for income taxes....... (47,698) (36,991) (18,473)
Provision for income
taxes.................. -- -- --
-------- -------- --------
Net loss................ (47,698) (36,991) (18,473)
======== ======== ========
Pro forma loss per
share.................. $ $ $
======== ======== ========
Pro forma weighted
average number of
common shares
outstanding............
======== ======== ========
OTHER DATA:
Depreciation and amorti-
zation................. $ 38,973 $ 19,652 $ 19,106
EBITDA (4).............. 21,307 4,289 17,845
Adjusted EBITDA (5)..... 33,487 16,469 30,025
</TABLE>

<TABLE>
<CAPTION>
AS OF
JUNE 30, 1997
-------------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 6,823
Working capital (excluding current portion of unearned subscrip-
tion revenues) (6)............................................. 7,203
Total assets.................................................... 496,847
Total long-term debt............................................ 191,781
Total debt...................................................... 191,781
Total equity.................................................... 229,860
</TABLE>

(footnotes appear on following page)

9
<PAGE>

(footnotes from previous page)
- --------
(1) Includes the results of operations of the Predecessor for the nine month
period ended September 30, 1996 and the results of operations of the
Company for the three month period ended December 31, 1996 on a combined
basis.
(2) In connection with the Exchange, the Company recorded a non-recurring non-
cash compensation charge of $12.2 million, which has been reflected in each
of the periods shown.
(3) Includes amortization of deferred financing costs related to the financing
of the Acquisition in the amount of $8.5 million for the twelve months
ended December 31, 1996, $11.8 million for the six months ended June 30,
1996 and $7.8 million for the six months ended June 30, 1997.
(4) "EBITDA" is defined as income before interest expense, income taxes,
depreciation and amortization and gain on sale of assets. EBITDA is not a
measure of performance under GAAP. Such items excluded from income in
calculating EBITDA are significant components in understanding and
evaluating the Company's financial performance. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP, or as a measure of profitability or liquidity,
management understands that EBITDA is customarily used in evaluating the
equity value of magazine publishing companies. The EBITDA measures
presented herein may not be comparable to similarly titled measures of
other companies.
(5) Adjusted EBITDA excludes the non-recurring non-cash charge of $12.2 million
related to the Exchange for each of the periods shown.
(6) The current portion of unearned subscription revenues of $28.8 million
represents a non-cash obligation of the Company and has, therefore, been
excluded from the calculation of working capital.

10
<PAGE>

RISK FACTORS

This Prospectus contains certain forward-looking statements. While the
Company believes these statements are reasonable, prospective purchasers of
the Class A Common Stock offered hereby should be aware that actual results
could differ materially from those projected by such forward-looking
statements as a result of the risk factors set forth below or other factors.
Prospective investors should consider carefully the following factors as well
as the other information and data included in this Prospectus in determining
whether to purchase the Class A Common Stock offered hereby.

RISKS ASSOCIATED WITH FLUCTUATIONS IN PAPER COSTS AND POSTAL RATES

The Company's principal raw material is paper. Paper costs represented
approximately 20.7%, 25.9%, 22.8% and 20.4% of the Company's production,
selling and other direct costs for the six months ended June 30, 1997, the ten
months ended September 30, 1996 and the fiscal years ended November 30, 1994
and 1995, respectively. Certain commodity grades of paper have shown
considerable price volatility over the last decade, including the commodity
grade used by the Company. Paper prices rose sharply during the latter part of
1995, and, in response, the Predecessor purchased a large supply of paper in
anticipation of additional price increases and supply shortages continuing for
the remainder of 1995 and 1996. The increase in paper prices in late 1995 and
the Predecessor's large purchase at such increased prices materially adversely
affected the Predecessor's production, selling and other direct costs for the
year ended November 30, 1995 and the twelve months ended December 31, 1996.
Following the Acquisition, the Company entered into an agreement with a vendor
to secure sufficient paper to meet its projected raw material needs through
the end of 1997 at a fixed price. The Company is currently in discussions with
such vendor regarding the terms on which the Company will purchase paper in
1998. There can be no assurance that the Company will be able to reach
agreement with such vendor on terms favorable to the Company or that future
fluctuations in paper prices will not have a material adverse effect on the
Company's results of operations or financial condition.

The profitability of the Company's magazine publishing operations is also
affected by the cost of postage and could be materially adversely affected if
there is an increase in postal rates. The United States Postal Service has
recently requested approval for up to a 7% increase in second and third class
postal rates, which, if approved, is expected to be effective on May 1, 1998.
Future fluctuations in postal rates could have a material adverse effect on
the Company's results of operations or financial condition. No assurance can
be given that the Company can recoup paper or postal cost increases by passing
them through to its advertisers and readers. In addition, future fluctuations
in paper prices or postal rates could have an effect on quarterly comparisons
of the results of operations and financial condition of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business-Raw Materials."

RISKS RELATING TO THE IMPORTANCE OF CERTAIN PUBLICATIONS

Certain of the Company's publications have historically represented a
significant portion of the Company's net revenues and operating contribution,
and the Company expects that such publications will continue to do so in the
future. In the aggregate, Motor Trend, Teen and Hot Rod accounted for 34.2%
and 50.1% of the Company's net revenues and operating contribution,
respectively, for the twelve months ended December 31, 1996 and 37.6% and
41.7%, respectively, for the six months ended June 30, 1997. As compared to
industry standards, the Company believes it has a diversified portfolio of
special-interest publications and is not dependent on any single publication;
however, a significant decline in the performance of any of these publications
could have a material adverse effect on the Company's results of operations.

RISKS RELATING TO CONCENTRATION OF ADVERTISING REVENUES

For the twelve months ended December 31, 1996, manufacturers and retailers
of original equipment and of aftermarket parts accounted for approximately
17.0% and 25.5% of the Company's revenues, respectively. A significant decline
in the advertising spending of the automotive industry could have a material
adverse effect on the Company's results of operations, and could have an
effect on quarterly comparisons of the results of operations and financial
condition of the Company. In addition, advertising spending can be adversely
affected

11
<PAGE>

by legislation, which may affect the cost of advertising or the demand for the
products of the Company's advertisers. The Company anticipates that its
revenues from manufacturers of tobacco related products will decrease in the
future as a result of the resolution of certain litigation involving such
manufacturers.

CYCLICALITY AND SEASONALITY OF REVENUE

The Company's revenues from the publication of its magazines are principally
derived from advertising and circulation. Circulation revenues are generated
from subscription, newsstand and list rental sales. For the six months ended
June 30, 1997, approximately 61.1% of the Company's revenues were from
advertising, 35.8% were from circulation and 3.1% were from other sources.
Advertising revenues of the Company, as well as those of the consumer magazine
industry in general, are cyclical and dependent upon general economic
conditions. Historically, increases in advertising revenues have corresponded
with economic recoveries while decreases, as well as changes in advertising
mix, have corresponded with general economic downturns and regional and local
economic recessions. In addition, the Company's business is somewhat seasonal.
The Company typically experiences decreased revenue during the first and
fourth quarter of each calendar year due to the seasonal nature of activities
associated with its publications. For a discussion of the cyclical and
seasonal nature of the Company's revenues, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Industry."

CONSOLIDATION OF PRINCIPAL VENDORS

The Company's principal vendors include paper suppliers, printers,
fulfillment houses and national newsstand distributors. Each of these
industries is currently experiencing significant consolidation among their
principal participants. Such consolidation may result in (i) decreased
competition for providing such services and thus increased prices; (ii)
interruptions and delays in services provided by such vendors; and (iii)
greater dependence on certain vendors. Consolidation could adversely affect
the Company's results of operations.

In addition, the historical patterns of newsstand distribution have changed
as a result of the on-going consolidation of newsstand wholesalers and the
shifting focus of such wholesalers to servicing retail outlets instead of
geographic areas. These changes, among others, have led to a decrease in
newsstand sales on an industry-wide basis. The Company believes such changes
may have an adverse impact on its results of operations.

COMPETITION

The consumer magazine publishing business is highly competitive. The Company
principally competes for advertising and circulation revenues with publishers
of other special-interest consumer magazines. Certain of such competitors are
larger and have greater financial resources than the Company. Other such
competitors are smaller and are capable of quickly identifying a niche
publication that could compete for the Company's readers and advertisers. In
addition to other special-interest magazines, the Company also competes for
advertising revenues with general-interest magazines and other forms of media,
including broadcast and cable television, radio, newspaper, direct marketing
and electronic media. There can be no assurance that the Company will be able
to compete effectively with such other forms of advertising in the future. See
"Business--Competition."

RISKS ASSOCIATED WITH SIGNIFICANT INDEBTEDNESS

As of June 30, 1997 on a pro forma as adjusted basis, the Company would have
had outstanding indebtedness of approximately $191.8 million, representing
45.5% of the Company's total capitalization. The Company incurred significant
debt in connection with the Acquisition and, following the Offering, will
continue to have significant indebtedness. The Company's leveraged financial
position exposes it to the risks that: (i) a substantial portion of the
Company's cash flow from operations will be dedicated to the payment of
principal and interest on such indebtedness; (ii) the Company's leveraged
position may impede its ability to obtain financing in the future for working
capital, capital expenditures and general corporate purposes; and (iii) the
Company's leveraged financial position may make it more vulnerable to economic
downturns and may limit its

12
<PAGE>

ability to withstand competitive pressures. The Company believes that it will
have sufficient capital to carry on its business and will be able to meet its
scheduled debt service requirements. However, there can be no assurance that
the future cash flow of the Company will be sufficient to meet the Company's
obligations and commitments. If the Company is unable to generate sufficient
cash flow from operations in the future to service its indebtedness and to
meet its other commitments, the Company will be required to adopt one or more
alternatives, such as refinancing or restructuring its indebtedness, selling
material assets or operations or seeking to raise additional debt or equity
capital. There can be no assurance that any of these actions could be effected
on a timely basis or on satisfactory terms or that these actions would enable
the Company to continue to satisfy its capital requirements. In addition, the
terms of existing or future debt agreements may prohibit the Company from
adopting any of these alternatives. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."

The agreements governing the outstanding indebtedness of the Company impose
certain operating and financial restrictions on the Company. Specifically, the
Company's senior credit facility (the "Senior Credit Facility") and the
indenture (the "Indenture") pursuant to which the Company's 11 1/8% Senior
Subordinated Notes due 2006 (the "Notes") were issued contain certain
restrictive covenants, including but not limited to, restrictions on
incurrence of debt, dividend payments, certain asset sales, transactions with
affiliates, liens and investments. Contemporaneously with the Offering, the
Company intends to refinance its existing indebtedness under the Senior Credit
Facility with a new senior credit facility (the "New Credit Facility"). The
Company anticipates that the New Credit Facility will impose operating and
financial restrictions on the Company similar to those contained in the Senior
Credit Facility. A failure to comply with the obligations in the Senior Credit
Facility, the New Credit Facility or the Indenture, as the case may be, could
result in an event of default under such agreements, which, if not cured or
waived, would permit acceleration of the indebtedness thereunder and
acceleration of indebtedness under other instruments that may contain cross-
acceleration or cross-default provisions which could have a material adverse
effect on the Company.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the continued services of its senior management
team. In connection with the Acquisition, the Company retained the services of
certain key employees to serve as senior executives of the Company, including
D. Claeys Bahrenburg, Neal Vitale and Richard S Willis, all of whom have
significant experience in the magazine publishing industry. Messrs.
Bahrenburg, Vitale and Willis each entered into an employment agreement with
the Company, which provides for their continued employment through December
31, 2001. See "Management--Employment Contracts." Although the Company
believes it could replace such key employees in an orderly fashion should the
need arise, the loss of any such key personnel could have a material adverse
effect on the Company. The Company will not maintain key person insurance for
any of its officers and employees. See "Management--Directors, Executive
Officers and Key Employees."

SIGNIFICANT INFLUENCE OF CERTAIN STOCKHOLDERS; BENEFITS OF OFFERING TO CERTAIN
STOCKHOLDERS AND EXECUTIVE OFFICERS

Upon the completion of the Offering, Willis Stein and the other existing
stockholders will own approximately % and %, respectively, of the
outstanding Common Stock ( % and %, respectively, if the U.S.
Underwriters' over-allotment option is exercised in full). Under the terms of
a Securityholders Agreement (as defined herein), all of the existing holders
of voting securities of the Company have agreed to vote their shares in favor
of those individuals designated by Willis Stein to serve on the Board of
Directors of the Company (the "Board of Directors" or the "Board") and granted
Willis Stein the right to vote their shares on all significant corporate
changes. As a result, Willis Stein has the ability to elect all directors and
control the policies and operations of the Company. Such concentration of
ownership could also have the effect of delaying, deterring or preventing a
change in control of the Company that might otherwise be beneficial to
stockholders. See "Principal Stockholders."

13
<PAGE>

Of the net proceeds to be received by the Company from the Offering, $50
million will be used to redeem Preferred Units with an aggregate liquidation
preference and accrued and unpaid preferred yield in the same amount. As a
result of such redemption, Willis Stein will receive approximately $14.9
million, and certain directors and executive officers of the Company will
receive an aggregate of approximately $2.0 million.

POTENTIAL VOLATILITY OF FUTURE OPERATING RESULTS

The Company's operating results may fluctuate on a quarterly basis as a
result of a number of factors, including advertising and newsstand sales,
magazine start-up costs and timing and success of events. Fluctuations in
quarterly results could affect the market price of the Common Stock in a
manner unrelated to the long-term operating performance of the Company.

DIVIDEND POLICY; RESTRICTIONS ON PAYMENT OF DIVIDENDS

The Company intends to retain earnings to support its growth strategy and
reduce indebtedness and does not anticipate paying dividends in the
foreseeable future. As a holding company, the Company's ability to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its principal operating subsidiary. The payment of dividends by
such subsidiary to the Company for the purpose of paying dividends to holders
of Common Stock is prohibited by the Senior Credit Facility and is restricted
under the Indenture. The Company expects that the New Credit Facility will
likewise prohibit the payment of dividends to the Company for such purpose.
See "Dividend Policy."

ABSENCE OF PRIOR PUBLIC MARKET; MARKET PRICE FLUCTUATIONS; SUBSTANTIAL
DILUTION

Prior to the Offering, there has been no public market for the Class A
Common Stock. The initial public offering price of the Class A Common Stock
will be determined by negotiations among the Company and the Representatives
(as defined) and may not be indicative of the market price for shares of the
Class A Common Stock after the Offering. For a description of factors
considered in determining the initial public offering price, see
"Underwriters." There can be no assurance that an active trading market for
the Class A Common Stock will develop or if developed, that such market will
be sustained. The market price for shares of the Class A Common Stock may be
significantly affected by such factors as quarter-to-quarter variations in the
Company's results of operations, news announcements or changes in general
market conditions. In addition, broad market fluctuation and general economic
and political conditions may adversely affect the market price of the Class A
Common Stock, regardless of the Company's actual performance. Purchasers of
the Class A Common Stock in the Offering will be subject to immediate and
substantial dilution. See "Dilution."

IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company expects to have shares of
Common Stock outstanding. Of these shares, the shares of Class A Common
Stock ( shares if the U.S. Underwriters' over-allotment option is exercised
in full) sold in the Offering will be freely tradeable without restriction
under the Securities Act of 1933, as amended (the "Securities Act"), except
any such shares which may be acquired by an "affiliate" of the Company.
Subject to certain 180-day "lock-up" agreements described herein,
approximately 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, beginning 90 days
after the date of this Prospectus. Beginning 180 days after the completion of
the Offering, the holders of an aggregate of approximately shares of Common
Stock will have certain rights to register their shares of Common Stock under
the Securities Act at the Company's expense pursuant to the Securityholders
Agreement. Future sales of the shares of Common Stock held by existing
stockholders could have an adverse effect on the price of the Class A Common
Stock. See "Shares Eligible for Future Sale."

14
<PAGE>

CERTAIN ANTI-TAKEOVER EFFECTS

Certain provisions of the Company's Certificate of Incorporation and By-laws
may inhibit changes in control of the Company not approved by the Board of
Directors. These provisions include: (i) a classified Board of Directors; (ii)
a prohibition on stockholder action through written consents; (iii) a
requirement that special meetings of stockholders be called only by the Board;
(iv) advance notice requirements for stockholder proposals and nominations;
(v) limitations requiring the affirmative vote of holders of at least 66 2/3%
of the total votes eligible to be cast in the election of directors to amend,
alter or repeal the Company's Restated Certificate of Incorporation and By-
laws; and (vi) the authority of the Board to issue preferred stock with such
terms as the Board may determine without stockholder approval. The Company
will also be afforded the protections of Section 203 of the Delaware General
Corporation Law, which could have similar effects. See "Description of Capital
Stock."

The Securityholders Agreement (as defined), provides Willis Stein with the
ability to control the vote on any significant corporate changes, such as a
merger, consolidation or sale of the Company.

In addition, the Indenture provides that upon a "change of control," (as
defined in the Indenture) each Note holder will have the right to require the
Company to purchase all or a portion of such holder's Notes at a purchase
price of 101% of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of such redemption. Such obligation, if
it arises, could have a material adverse effect on the Company. Such provision
could also delay, deter or prevent a takeover attempt.

15
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of shares of Class A
Common Stock in the Offering are estimated to be approximately $ million
($ million if the U.S. Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $ per share, the
midpoint of the range set forth on the cover page of this Prospectus. The
Company intends to use such net proceeds as follows: (i) approximately $60.0
million to repay a portion of the indebtedness incurred under the Senior
Credit Facility; (ii) $50 million to redeem Preferred Units with an aggregate
liquidation preference and accrued and unpaid preferred yield in the same
amount; and (iii) approximately $28.8 million to redeem $25.0 million
aggregate principal amount of the Notes and to pay the redemption premium and
accrued and unpaid interest thereon.

The indebtedness to be repaid under the Senior Credit Facility consists of
term loans, which have a scheduled maturity of December 31, 2002 and September
30, 2004. The Tranche A term loan generally amortizes in increasing increments
prior to maturity; the Tranche B Loan is payable primarily in balloon payments
due in 2003 and 2004. Such term loans bear interest at varying rates. The
overall effective interest rate for such indebtedness at June 30, 1997 was
approximately 8.53%. In connection with the Offering, the Company expects to
refinance its remaining indebtedness under the Senior Credit Facility after
the application of the net proceeds of the Offering as described above. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

The Company used borrowings under the Senior Credit Facility and proceeds
from a bridge financing facility (the "Bridge Financing Facility") and the
issuance of the Preferred Units to finance a portion of the Acquisition.
Proceeds from the sale of the Notes were used to repay the Bridge Financing
Facility. The Notes mature on November 15, 2006, and bear interest at the rate
of 11 1/8% per annum. The Preferred Units are entitled to a preferred yield of
12.0% per annum, compounded quarterly, and an aggregate liquidation preference
of $166.3 million (as of June 30, 1997) on any liquidation or other
distribution by Petersen.

The reduction in the Company's indebtedness as a result of the application
of the net proceeds of the Offering will enhance the Company's ability to make
acquisitions of publications and businesses complementary to the Company's
existing portfolio. See "Business--Business and Operating Strategy." The
Company, however, currently has no definitive agreement, with respect to any
acquisitions, nor can there be any assurance that the Company will make any
such acquisition in the future.

A portion of the Preferred Units to be redeemed by the Company are held by
the Company's principal stockholders and executive officers. All of the
proceeds to be received by those members of management who incurred
indebtedness to the Company and Petersen to purchase equity securities of the
Company and Petersen, will be applied to reduce a portion of such indebtedness
to the Company. See "Certain Relationships and Related Transactions."

16
<PAGE>

THE REORGANIZATION

The Company is a holding company that serves as Petersen's sole managing
member. The operations of Petersen are conducted by its operating subsidiary,
Petersen Publishing Company, L.L.C. ("Publishing"). The outstanding equity
securities of Petersen and the Company are held by a common group of investors
in the same relative proportions (other than certain equity interests of
Petersen held by management). The outstanding equity securities of Petersen
consist of one class of preferred units (the "Preferred Units") and two
classes of common units (the "Common Units"), designated as Class A and Class
D. There are five series of Class D Common Units.

Immediately prior to the consummation of the Offering, a wholly owned
subsidiary of the Company will be merged with and into Petersen, with Petersen
being the survivor (the "Merger"). As a result of the Merger: (i) Preferred
Units with an aggregate liquidation preference plus accrued and unpaid
preferred yield equal to approximately $50.0 million will be converted into
the right to receive cash in the same amount; (ii) the remaining Preferred
Units will be converted into an aggregate of shares of Class A Common Stock
(assuming an initial public offering price of $ per share, the midpoint of
the range set forth on the cover page of this Prospectus); and (iii) the Class
A and Class D Common Units will be converted into an aggregate of
and shares of Class A Common Stock, respectively (assuming an initial
public offering price of $ per share, the midpoint of the range set forth on
the cover page of this Prospectus). The number of shares of Common Stock that
will be issued as a result of the Merger to the holders of the Preferred Units
and the Common Units will be determined according to the relative preference
rankings of such securities and the initial public offering price of the Class
A Common Stock. In connection with the Merger, the Company will effect a -
for-one stock split of its existing Common Stock (the "Stock Split"). The
transactions described above that will be effected through the Merger and the
Stock Split are collectively referred to herein as the "Reorganization." The
Reorganization is conditioned upon the completion of the Offering contemplated
hereby.

The Company's authorized capital includes two classes of common stock, the
Class A Common Stock and the Class B Common Stock, which are identical in all
respects except that the Class B Common Stock is nonvoting and is convertible
to Class A Common Stock upon the occurrence of certain events. The Class B
Common Stock was issued in order to enable the original purchasers thereof,
which are affiliates of bank holding companies, to comply with regulatory
requirements applicable to them.

17
<PAGE>

CAPITALIZATION

The following table sets forth at June 30, 1997: (i) the actual
capitalization of the Company; (ii) the pro forma capitalization of the
Company after giving effect to the Exchange and the Reorganization; and (iii)
the pro forma as adjusted capitalization of the Company to reflect (a) the
sale by the Company of shares of Class A Common Stock pursuant to the
Offering, assuming an initial public offering price of $ per share (the
midpoint of the range set forth on the cover page of this Prospectus), and the
application of the net proceeds therefrom as described under "Use of Proceeds"
and (b) the refinancing of the Senior Credit Facility. This table should be
read in conjunction with "Selected Historical Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", "Unaudited Pro Forma Financial Data" and the audited financial
statements and the notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- ---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, current portion.............. $ 6,000 $ 6,000 $ --
======== ======== ========
Long-term debt, less current portion:
Senior Credit Facility..................... $171,750 $171,750 $116,781
Senior Subordinated Notes.................. 100,000 100,000 75,000
-------- -------- --------
Total long-term debt, less current por-
tion.................................... 271,750 271,750 191,781
-------- -------- --------
Due to minority members...................... 149 -- --
Members' and Stockholders' equity:
Common Units............................... 1,707 -- --
Preferred Units............................ 181,464 -- --
Preferred Stock, $0.01 par value,
shares authorized; no shares issued on an
actual, pro forma and pro forma as
adjusted basis............................ --
Common Stock, $0.01 par value, shares
authorized; no shares issued on an actual
basis; shares issued on a pro forma
basis; and shares issued on a pro
forma as adjusted basis (1)............... -- 195,500 281,469
Accumulated deficit (2).................... (30,942) (43,122) (50,361)
Less: Notes receivable from related
parties................................... (1,748) (1,748) (1,248)
-------- -------- --------
Total equity............................. 150,481 150,630 229,860
-------- -------- --------
Total capitalization................... $422,380 $422,380 $421,641
======== ======== ========
</TABLE>
- --------
(1) Does not include (i) shares of Class A Common Stock issuable upon the
exercise of options granted under the 1997 Incentive Plan or (ii)
additional shares of Class A Common Stock reserved for grants or awards
under the 1997 Incentive Plan or Stock Purchase Plan. See "Use of
Proceeds."

(2) Pro forma accumulated deficit reflects the non-recurring non-cash
compensation charge of $12.2 million related to the Exchange. Pro forma as
adjusted accumulated deficit reflects the charge discussed above, as well
as the write-off of the remaining unamortized deferred financing costs of
$4.1 million resulting from the reduction of debt and the refinancing of
the Company's Senior Credit Facility. See "Use of Proceeds."

18
<PAGE>

DIVIDEND POLICY

Since the Acquisition, the Company has not declared or paid any cash or
other dividends on its Common Stock and does not expect to pay dividends for
the foreseeable future. The Company anticipates that all of its earnings in
the foreseeable future will be used to support its growth strategy and reduce
indebtedness. As a holding company, the ability of the Company to pay
dividends in the future is dependent upon the receipt of dividends or other
payments from its principal operating subsidiary, Publishing. The payment of
dividends by Publishing to the Company for purposes of paying dividends to
holders of Common Stock is prohibited by the Senior Credit Facility and
restricted by the Indenture. The Company anticipates that the New Credit
Facility will likewise prohibit the payment of dividends by Publishing to the
Company for such purpose. Any future determination to pay dividends will be at
the discretion of the Board of Directors and will depend upon, among other
factors, the Company's results of operations, financial condition, capital
requirements and contractual restrictions. See "Risk Factors--Dividend Policy;
Restrictions on Payment of Dividends."

19
<PAGE>

DILUTION

The pro forma net tangible book value of the Company as of June 30, 1997 was
$ million, or $ per share of Class A Common Stock. Pro forma net tangible
book value per share is determined by dividing the tangible net worth of the
Company (total assets less intangible assets and total liabilities) by the
aggregate number of shares of Common Stock outstanding, assuming the
Reorganization had taken place on June 30, 1997. After giving effect to the
sale of the shares of Class A Common Stock offered hereby (at an assumed
initial public offering price of $ per share, the midpoint of the range set
forth on the cover page of this Prospectus) and the receipt and application of
the net proceeds therefrom, pro forma net tangible book value of the Company
as of June 30, 1997 would have been approximately $ million, or $ per
share. This represents an immediate increase in pro forma net tangible book
value of $ per share to the current stockholders of the Company and an
immediate dilution in pro forma net tangible book value of $ per share to
purchasers of Class A Common Stock in the Offering. The following table
illustrates this per share dilution.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $
Pro forma net tangible book value per share at June 30, 1997.......
Increase in pro forma net tangible book value per share
attributable to purchasers in the Offering........................
---
Pro forma net tangible book value per share after the Offering.....
---
Dilution in pro forma net tangible book value per share to
purchasers of Class A Common Stock in the Offering(1)............. $
===
</TABLE>
- --------
(1) Dilution is determined by subtracting pro forma net tangible book value
per share after the Offering from the initial public offering price per
share.

The following table summarizes, on a pro forma basis, as of June 30, 1997,
the number of shares purchased, the total consideration paid (or to be paid)
and the average price per share paid (or to be paid) by the existing
stockholders and the purchasers of Class A Common Stock in the Offering, at an
assumed initial public offering price of $ per share (the midpoint of the
range set forth on the cover page of this Prospectus), before deducting the
estimated offering expenses and underwriting discounts and commissions:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ---------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders... % $ % $
Purchasers of Class A
Common Stock in the Of-
fering.................
------ --------- -------- -----------
Total................. 100.0% $ 100.0%
====== ========= ======== ===========
</TABLE>

The foregoing calculations exclude an aggregate of (i) shares of Class A
Common Stock issuable upon the exercise of options granted under the 1997
Incentive Plan or (ii) additional shares of Class A Common Stock reserved
for grants or awards under the 1997 Incentive Plan or Stock Purchase Plan.

20
<PAGE>

UNAUDITED PRO FORMA FINANCIAL DATA

The following unaudited pro forma financial data (the "Unaudited Pro Forma
Financial Data") of the Company have been derived by the application of pro
forma adjustments to the historical financial statements of the Predecessor
and Petersen for the periods indicated. The adjustments are described in the
accompanying notes. The twelve month period ended December 31, 1996 includes
the operations of the Predecessor for the nine months ended September 30, 1996
and the operations of Petersen for the three months ended December 31, 1996 on
a combined basis.

The unaudited pro forma statement of operations data for the twelve months
ended December 31, 1996 and for the six months ended June 30, 1996 give effect
to: (i) the Acquisition and the financing transactions and reduced operating
costs related thereto; (ii) the Exchange; (iii) the Reorganization; (iv) the
Offering and the application of the net proceeds therefrom as described under
"Use of Proceeds"; and (v) the refinancing of the Company's Senior Credit
Facility, each as if they had occurred at the beginning of each such period.
The unaudited pro forma statement of operations data for the six months ended
June 30, 1997 give effect to the transactions described in items (ii) through
(v) above as if such transactions had occurred at the beginning of such
period. The unaudited pro forma balance sheet data as of June 30, 1997 give
effect to the transactions described in items (ii) through (v) above as if
such transactions occurred on such date. The Unaudited Pro Forma Financial
Data are provided for informational purposes only and do not purport to
represent the results of operations or financial position of the Company had
such transactions in fact occurred on such dates, nor do they purport to be
indicative of the financial position or results of operations as of any future
date or for any future period.

The Unaudited Pro Forma Financial Data and accompanying notes should be read
in conjunction with the financial statements and accompanying notes thereto
and the other financial information included elsewhere in this Prospectus.

21
<PAGE>

THE PETERSEN COMPANIES, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA

<TABLE>
<CAPTION>
PREDECESSOR PETERSEN TWELVE MONTHS ENDED DECEMBER 31, 1996
------------- ------------ -----------------------------------------------------------------------
ACTUAL PRO FORMA ADJUSTMENTS
-------------------------- ---------------------------------------------------
NINE MONTHS THREE MONTHS ACQUISITION
ENDED ENDED AND EXCHANGE
SEPTEMBER 30, DECEMBER 31, OPERATING AND OFFERING AND
1996 1996 COMBINED IMPROVEMENTS (1) REORGANIZATION (2) REFINANCING (3) PRO FORMA
------------- ------------ -------- ---------------- ------------------ --------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues........... $173,935 $ 53,277 $227,212 $ -- $ -- $-- $227,212
Production, selling and
other direct costs.... 137,301 41,223 178,524 (3,397) -- -- 175,127
-------- -------- -------- -------- -------- ------ --------
Gross profit........... 36,634 12,054 48,688 3,397 -- -- 52,085
General and
administrative
expenses.............. 22,439 2,666 25,105 (3,698) 12,180 -- 33,587
Amortization of
goodwill and other
intangible assets..... 307 8,992 9,299 26,978 -- -- 36,277
-------- -------- -------- -------- -------- ------ --------
Operating income
(loss)................ 13,888 396 14,284 (19,883) (12,180) -- (17,779)
Interest income........ 472 113 585 (472) -- -- 113
Interest expense....... (185) (11,114) (11,299) (23,514) -- 3,227 (31,586)
Gain on sale of
assets................ 1,554 -- 1,554 -- -- -- 1,554
-------- -------- -------- -------- -------- ------ --------
Income (loss) before
minority interest and
provision for income
taxes................. 15,729 (10,605) 5,124 (43,869) (12,180) 3,227 (47,698)
Minority members'
equity in loss of
subsidiary............ -- 11 11 -- (11) -- --
-------- -------- -------- -------- -------- ------ --------
Income (loss) before
provision for income
taxes................. 15,729 (10,594) 5,135 (43,869) (12,191) 3,227 (47,698)
Provision for income
taxes................. (298) -- (298) 298 -- -- --
-------- -------- -------- -------- -------- ------ --------
Net income (loss)...... 15,431 (10,594) 4,837 (43,571) (12,191) 3,227 (47,698)
Preferred unit
dividends............. -- -- -- (20,870) 20,870 -- --
-------- -------- -------- -------- -------- ------ --------
Net income (loss)
attributable to common
units................. $ 15,431 $(10,594) $ 4,837 $(64,441) $ 8,679 $3,227 $(47,698)
======== ======== ======== ======== ======== ====== ========
EBITDA (4)............. $ 16,785 $ 10,090 $ 26,875 $ 6,623 $(12,191) $ -- $ 21,307
Adjusted EBITDA (5).... 16,785 10,090 26,875 6,623 (11) -- 33,487
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations and Other Data.

22
<PAGE>

THE PETERSEN COMPANIES, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
-------------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------------------------------------
ACQUISITION
PREDECESSOR AND OPERATING EXCHANGE AND OFFERING AND
ACTUAL IMPROVEMENTS (1) REORGANIZATION (2) REFINANCING (3) PRO FORMA
----------- ---------------- ------------------ --------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net revenues............ $115,040 $ -- $ -- $ -- $ 115,040
Production, selling and
other direct costs..... 91,971 (2,348) -- -- 89,623
-------- --------- -------- ------- ---------
Gross profit............ 23,069 2,348 -- -- 25,417
General and
administrative
expenses............... 12,903 (2,484) 12,180 -- 22,599
Amortization of goodwill
and other intangible
assets................. 196 17,985 -- -- 18,181
-------- --------- -------- ------- ---------
Operating income
(loss)................. 9,970 (13,153) (12,180) -- (15,363)
Interest income......... 238 (238) -- -- --
Interest expense........ (153) (20,619) -- (2,410) (23,182)
Gain on sale of assets.. 1,554 -- -- -- 1,554
-------- --------- -------- ------- ---------
Income (loss) before
minority interest and
provision for income
taxes.................. 11,609 (34,010) (12,180) (2,410) (36,991)
Minority members' equity
in income of
subsidiary............. -- -- -- -- --
-------- --------- -------- ------- ---------
Income (loss) before
provision for income
taxes.................. 11,609 (34,010) (12,180) (2,410) (36,991)
Provision for income
taxes.................. (199) 199 -- -- --
-------- --------- -------- ------- ---------
Net income (loss)....... 11,410 (33,811) (12,180) (2,410) (36,991)
Preferred unit divi-
dends.................. -- (10,127) 10,127 -- --
-------- --------- -------- ------- ---------
Net income (loss) at-
tributable to common
units.................. $ 11,410 $ (43,938) $ (2,053) $(2,410) $ (36,991)
======== ========= ======== ======= =========
EBITDA (4).............. $ 11,875 $ 4,594 $(12,180) $ -- $ 4,289
Adjusted EBITDA (5)..... 11,875 4,594 -- -- 16,469
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations and Other Data.

23
<PAGE>

THE PETERSEN COMPANIES, INC.

UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
------------------------------------------------------
PETERSEN EXCHANGE AND OFFERING AND
ACTUAL REORGANIZATION (2) REFINANCING (3) PRO FORMA
-------- ------------------ --------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues............ $120,143 $ -- $ -- $120,143
Production, selling and
other direct costs..... 82,440 -- -- 82,440
-------- -------- ------- --------
Gross profit............ 37,703 -- -- 37,703
General and administra-
tive expenses.......... 8,955 12,180 21,135
Amortization of goodwill
and other intangible
assets................. 18,151 -- -- 18,151
-------- -------- ------- --------
Operating income
(loss)................. 10,597 (12,180) (1,583)
Interest income......... 355 -- 355
Interest expense........ (15,853) -- (1,359) (17,212)
Loss on sale of assets.. (33) -- -- (33)
-------- -------- ------- --------
Income (loss) before mi-
nority interest and
provision for income
taxes.................. (4,934) (12,180) (1,359) (18,473)
Minority members' equity
in loss of subsidiary.. 5 (5) -- --
-------- -------- ------- --------
Income (loss) before
provision for income
taxes.................. (4,929) (12,185) (1,359) (18,473)
Provision for income
taxes.................. -- -- -- --
-------- -------- ------- --------
Net income (loss)....... (4,929) (12,185) (1,359) (18,473)
Preferred unit divi-
dends.................. (15,419) 15,419 -- --
-------- -------- ------- --------
Net income (loss) at-
tributable to common
units.................. $(20,348) $ 3,234 $(1,359) $(18,473)
======== ======== ======= ========
EBITDA (4) ............. $ 30,030 $(12,185) $ -- $ 17,845
Adjusted EBITDA (5)..... 30,030 (5) -- 30,025
</TABLE>

See Notes to Unaudited Pro Forma Statement of Operations and Other Data.

24
<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
(DOLLARS IN THOUSANDS)

(1) The Acquisition occurred on September 30, 1996. As a result, transactions
associated with the Acquisition were not recorded on the books and records
of the Predecessor and are not reflected in the actual Statement of
Operations Data of the Predecessor. Therefore, the following pro forma
adjustments have been made to reflect the transactions associated with the
Acquisition for the twelve months ended December 31, 1996 and for the six
months ended June 30, 1996, as if the Acquisition had occurred at the
beginning of the period presented. The adjustments for the twelve months
ended December 31, 1996 only apply to the nine months ended September 30,
1996 since the impact of the Acquisition has been reflected in the actual
amounts for the three months ended December 31, 1996.

(a)Amortization of goodwill and other intangible assets would have
increased as follows:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ----------------
<S> <C> <C>
Goodwill............................ $17,978 $11,985
Subscriber List..................... 9,000 6,000
------- -------
Total increase in amortization of
goodwill and other intangible
assets............................. $26,978 $17,985
======= =======
</TABLE>

(b) Had the Preferred Units been issued at the beginning of the periods
presented, dividends, at 12.0% per annum compounded quarterly, would
have been $20,870 for the twelve months ended December 31, 1996 and
$10,127 for the six months ended June 30, 1996.

(c) Had the debt issued to finance the Acquisition been issued at the
beginning of the period presented, interest expense would have
increased and the deferred financing costs associated with the issuance
of the debt would have been amortized during the period. As a result of
the Acquisition, excess space was subleased to a third party. Due to
these items total interest would have increased as follows:

<TABLE>
<CAPTION>
AVERAGE
INTEREST AMOUNT TWELVE MONTHS ENDED SIX MONTHS ENDED
RATE OUTSTANDING DECEMBER 31, 1996 JUNE 30, 1996
-------- ----------- ------------------- ----------------
<S> <C> <C> <C> <C>
SENIOR CREDIT FACILITY:
Tranche A& B Loans...... 9.0% $200,000 $13,500 $ 9,000
Revolver (commitment
fee)................... .5% 60,000 225 150
Additional amortization
of deferred financing
costs.................. 755 504
SENIOR SUBORDINATED
NOTES:
Notes................... 11.125% $100,000 8,344 5,563
Additional amortization
of deferred financing
costs.................. 300 200
BRIDGE FINANCING
FACILITY:
Interest expense........ 8.0% $100,000 -- 1,980
Amortization of deferred
financing costs........ -- 2,962
IMPUTED INTEREST ON
ACCRUED RENT FOR EXCESS
SPACE.................. 390 260
------- -------
Total additional
interest expense....... $23,514 $20,619
======= =======
</TABLE>

(d) As a result of the Acquisition, cash on hand at September 30, 1996 was
retained by the Predecessor. Petersen is a limited liability company
with a minority interest owned by The Petersen Companies, Inc. These
changes result in the following pro forma adjustments for the twelve
months ended

25
<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
(DOLLARS IN THOUSANDS)

December 31, 1996 and for the six months ended June 30, 1996, as if the
Acquisition had occurred at the beginning of the period presented.

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ----------------
<S> <C> <C>
Reduction in interest income........ $472 $238
Reduction in provision for income
taxes.............................. 298 199
</TABLE>

(e) Subsequent to the Acquisition, management of Petersen implemented a
plan to reduce operating costs which included the replacement of the
Predecessor's executive management team by Petersen's executive
management team, the termination of employees in various corporate and
operating positions, a revised travel and entertainment policy and the
renegotiation of vendor contracts and the lease governing Petersen's
corporate headquarters. As a result of this plan, savings were realized
in "Production, selling and other direct costs" and "General and
administrative expenses." The following table reflects these savings as
if the plan had been implemented at the beginning of the periods
presented:

<TABLE>
<CAPTION>
TWELVE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 JUNE 30, 1996
------------------- ----------------
<S> <C> <C>
Production, selling and other
direct costs:
Renegotiated lease............... $ 322 $ 215
Employee terminations............ 2,351 1,650
Subleasing of excess space....... 516 344
Reduced travel and
entertainment................... 208 139
------- -------
Total savings of production,
selling and other direct costs.. $ 3,397 $ 2,348
======= =======
General and administrative:
Employee terminations............ $ 488 $ 343
Elimination of Predecessor's
executive management costs...... 4,543 3,029
New executive management costs... (1,958) (1,305)
Reduced travel and
entertainment................... 625 417
------- -------
Total savings of general and
administrative.................. $ 3,698 $ 2,484
======= =======
</TABLE>

(f) The Predecessor was an S corporation, and as such recorded a provision
for certain state taxes. Petersen is a limited liability company,
therefore, the obligation for federal and state taxes is that of the
members. As a result, the provision for income taxes has been
eliminated.

(2) On July 31, 1997, Petersen issued an aggregate of approximately 37,989
units of Class D Common Units in exchange for all outstanding Class B
Common Units and Class C Common Units. As a result, the Company recorded a
non-recurring non-cash compensation charge of $12.2 million which has been
reflected in each of the periods presented. See "Certain Relationships and
Related Transactions." In addition, had the Reorganization taken place at
the beginning of the period shown, the Preferred Units would have been
exchanged for Common Stock of the Company. As a result, the Preferred Unit
dividends would not have accrued.

(3) The column titled "Offering and Refinancing" reflects: (i) net proceeds
from the Offering of shares of Class A Common Stock offered hereby (at
an initial public offering price of $ per share, the midpoint of the
range set forth on the cover page of this Prospectus); (ii) the use of the
net proceeds as follows: (1) approximately $61.0 million to repay a
portion of the indebtedness incurred under the Senior Credit Facility; (2)
$50 million to redeem Preferred Units with an aggregate liquidation
preference and accrued and unpaid preferred yield in the same amount; and
(3) approximately $27.8 million to redeem $25.0 million aggregate
principal amount of the Notes and to pay the redemption premium and
accrued and unpaid interest thereon; and (iii) the refinancing of the
remaining amount outstanding under the Senior Credit Facility, as
described below, as if each of these transactions had occurred at the
beginning of the period presented. As a result, the following pro forma
adjustments are required.

26
<PAGE>

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS AND OTHER DATA
(DOLLARS IN THOUSANDS)

(a) Interest expense would have been reduced as a result of the reduction
in debt. Such reduction would be offset by the amortization of deferred
financing costs associated with the paydown of debt. The net savings in
interest expense would be as follows:

<TABLE>
<CAPTION>
SIX SIX
TWELVE MONTHS MONTHS
AVERAGE MONTHS ENDED ENDED ENDED
INTEREST AMOUNT DECEMBER 31, JUNE 30, JUNE 30,
RATE PAID 1996 1996 1997
-------- ------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Senior Credit Facility.. 9.0% $60,969 $ 5,487 $ 2,744 $ 2,744
Senior Subordinated
Notes.................. 11.125 25,000 2,781 1,391 1,391
Additional amortization
of deferred financing
costs.................. (3,149) (3,149) (2,855)
------- ------- -------
Net reduction in
interest expense
associated with debt
reductions............. $ 5,119 $ 986 $ 1,280
======= ======= =======
</TABLE>

(b) Upon completion of the Offering, the Company plans to refinance the
remaining amount outstanding under the Senior Credit Facility at a more
favorable interest rate. As a result, interest expense will be
increased due to the remaining deferred financing costs associated with
the Senior Credit Facility being amortized, offset by the interest rate
reduction. In addition, costs associated with the new credit facility
will be capitalized and amortized over the term of the new debt.

<TABLE>
<CAPTION>
REDUCTION SIX SIX
IN TWELVE MONTHS MONTHS
AVERAGE MONTHS ENDED ENDED ENDED
INTEREST AMOUNT DECEMBER 31, JUNE 30, JUNE 30,
RATE REFINANCED 1996 1996 1997
--------- ---------- ------------ -------- --------
<S> <C> <C> <C> <C> <C>
Interest rate
reduction.............. 2.25% $139,031 $ 3,128 $ 1,564 $ 1,564
Amortize remaining
deferred financing
costs.................. (4,900) (4,900) (4,143)
Amortize new deferred
financing costs........ (120) (60) (60)
------- ------- -------
Net increase in interest
expense as a result of
debt refinance......... $(1,892) $(3,396) $(2,639)
======= ======= =======
</TABLE>

(4) "EBITDA" is defined as income before interest expense, income taxes,
depreciation and amortization and gain on sale of assets. EBITDA is not a
measure of performance under generally accepted accounting principles
("GAAP"). Such items excluded from income in calculating EBITDA are
significant components in understanding and evaluating the Company's
financial performance. While EBITDA should not be considered in isolation
or as a substitute for net income, cash flows from operating activities
and other income or cash flow statement data prepared in accordance with
GAAP or as a measure of profitability or liquidity, management understands
that EBITDA is customarily used in evaluating the equity value of magazine
publishing companies. The EBITDA measures presented herein may not be
comparable to similarly titled measures of other companies.

(5) Adjusted EBITDA excludes the non-recurring non-cash charge of $12.2
million related to the Exchange.

27
<PAGE>

THE PETERSEN COMPANIES, INC.

UNAUDITED PRO FORMA BALANCE SHEET DATA

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
----------------------------------------------------------
EXCHANGE AND OFFERING AND
PETERSEN ACTUAL REORGANIZATION(1) REFINANCING(2) PRO FORMA
--------------- ----------------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 6,923 $ -- $ (100) $ 6,823
Accounts receivable,
net.................. 24,011 -- -- 24,011
Inventories........... 3,721 -- -- 3,721
Deferred direct mail
advertising costs.... 2,340 -- -- 2,340
Prepaid expenses and
other current
assets............... 653 -- -- 653
-------- --------- -------- --------
Total current assets.... 37,648 -- (100) 37,548
Property and equipment,
net.................... 3,360 -- -- 3,360
Goodwill, net........... 341,595 -- -- 341,595
Subscriber list, net.... 111,000 -- -- 111,000
Deferred financing
costs.................. 9,352 -- (6,639) 2,713
Other assets............ 631 -- -- 631
-------- --------- -------- --------
Total assets............ $503,586 $ -- $ (6,739) $496,847
======== ========= ======== ========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and
accrued liabilities.. $ 16,623 $ -- $ -- $ 16,623
Accrued payroll and
related costs........ 4,098 -- -- 4,098
Accrued interest...... 3,628 -- -- 3,628
Customer incentive
bonuses.............. 5,735 -- -- 5,735
Current portion of
unearned subscription
revenues, net........ 28,806 -- -- 28,806
Current portion of
long-term debt....... 6,000 -- (6,000) --
Other accrued expenses
and current
liabilities.......... 261 -- -- 261
-------- --------- -------- --------
Total current
liabilities............ 65,151 -- (6,000) 59,151
Unearned subscription
revenues, net.......... 7,391 -- -- 7,391
Senior credit facility.. 171,750 -- (54,969) 116,781
Senior subordinated
notes.................. 100,000 -- (25,000) 75,000
Other noncurrent
liabilities............ 8,664 -- -- 8,664
-------- --------- -------- --------
Total liabilities....... 352,956 -- (85,969) 266,987
Due to minority
members................ 149 (149) -- --
Members' equity:
Common units.......... 1,707 (1,707) -- --
Preferred units....... 181,464 (181,464) -- --
Accumulated deficit... (30,942) 30,942 -- --
Less: Notes receivable
from related
parties.............. (1,748) 1,748 -- --
-------- --------- -------- --------
Total members' equity... 150,481 (150,481) -- --
-------- --------- -------- --------
Equity:
Common stock.......... -- 195,500 85,969 281,469
Accumulated deficit... -- (43,122) (7,239) (50,361)
Less: Notes receivable
from related
parties.............. -- (1,748) 500 (1,248)
-------- --------- -------- --------
Total equity............ -- 150,630 79,230 229,860
-------- --------- -------- --------
Total liabilities and
equity................. $503,586 $ -- $ (6,739) $496,847
======== ========= ======== ========
</TABLE>

See Notes to Unaudited Pro Forma Balance Sheet Data.

28
<PAGE>

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET DATA
(DOLLARS IN THOUSANDS)

(1) In July 1997, Petersen issued approximately 37,989 Class D Common Units
in exchange for all outstanding Class B Common Units and Class C Common
Units in the Exchange. As a result, compensation expense and common
stock were increased by the $12.2 million non-recurring non-cash
compensation charge recorded in July 1997. Following the
Reorganization, the holding company will be a corporation as opposed to
a limited liability company. As a result, the members' equity of the
limited liability company is transferred into additional paid-in
capital of the Company.

(2) The column titled "Offering and Refinancing" reflects the following pro
forma adjustments as if each of the following transactions had occurred
at June 30, 1997:

(a) net proceeds from the Offering of shares of Class A Common Stock
offered hereby (at an initial public offering price of $ per
share, the midpoint of the range set forth on the cover page of
this Prospectus).

(b) the use of the net proceeds as follows: (i) approximately $61.0
million to repay a portion of the indebtedness incurred under the
Senior Credit Facility; (ii) $50 million to redeem Preferred Units
with an aggregate liquidation preference and accrued and unpaid
preferred yield in the same amount; and (iii) approximately $27.8
million to redeem $25.0 million aggregate principal amount of the
Notes and to pay the redemption premium and accrued and unpaid
interest thereon. As a result of the reduction in the Notes and the
Senior Credit Facility, deferred financing costs of $3.1 million
were written off. In addition, certain related parties repaid $.5
million of the Notes Receivable with the proceeds from the
Preferred Unit redemption.

(c) the refinancing of the remaining amount outstanding under the
Senior Credit Facility. As a result, costs of $.6 million were
incurred in association with the refinancing. In addition, a write
off of $4.1 million was recorded, representing the unamortized
deferred financing costs associated with the Senior Credit
Facility.

29
<PAGE>

SELECTED HISTORICAL FINANCIAL DATA

The following table presents selected historical financial data of: (i) the
Predecessor for each of the four years in the period ended November 30, 1995
and the ten months ended September 30, 1996, which have been derived from the
audited financial statements of the Predecessor and (ii) Petersen for the
three months ended December 31, 1996 and the six months ended June 30, 1997,
which have been derived from the audited financial statements of Petersen. The
audited financial statements of the Predecessor for each of the two years in
the period ended November 30, 1995 and the ten months ended September 30, 1996
and of Petersen for the three months ended December 31, 1996 and the six
months ended June 30, 1997 that appear elsewhere in this Prospectus. Each of
the audited financial statements referred to above have been audited by Ernst
& Young LLP, independent certified public accountants. The selected historical
financial data of the Predecessor for the ten months ended September 30, 1995,
the three months ended December 31, 1995 and the six months ended June 30,
1996 have been derived from unaudited financial statements which, in the
opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for
the unaudited interim period. Results for the six months ended June 30, 1997
are not necessarily indicative of results that may be expected for the entire
year. The Acquisition was accounted for using the purchase method of
accounting. Accordingly, certain of the historical financial data of the
Predecessor is not comparable to that of Petersen. The selected historical
financial data set forth below should be read in conjunction with, and are
qualified by reference to, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the
accompanying notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
PREDECESSOR (1) PETERSEN (2)
------------------------------------------------------------------- ------------
TEN MONTHS
ENDED THREE MONTHS
YEAR ENDED NOVEMBER 30, SEPTEMBER 30, ENDED DECEMBER 31,
-------------------------------------- ------------------ ---------------------
1992 1993 1994 1995 1995 1996 1995 1996
-------- -------- -------- -------- -------- -------- ------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (3):
Net revenues:
Advertising....................... $103,539 $105,991 $117,433 $124,310 $103,422 $112,525 $29,362 $ 31,912
Newsstand......................... 34,499 37,507 40,048 39,889 33,326 34,318 9,338 10,037
Subscriptions..................... 40,324 41,258 42,639 43,901 36,811 36,474 10,725 10,404
Other............................. 3,281 2,456 2,672 6,415 5,841 6,297 1,513 924
-------- -------- -------- -------- -------- -------- ------- --------
Net revenues...................... 181,643 187,212 202,792 214,515 179,400 189,614 50,938 53,277
Production, selling and other
direct costs...................... 135,155 142,254 149,586 171,579 140,831 148,874 42,342 41,223
-------- -------- -------- -------- -------- -------- ------- --------
Gross profit....................... 46,488 44,958 53,206 42,936 38,569 40,740 8,596 12,054
General and administrative
expenses.......................... 32,328 35,604 33,267 28,145 23,537 24,650 8,952 2,666
Amortization of goodwill and
other intangible assets........... 1,235 198 421 433 355 339 111 8,992
-------- -------- -------- -------- -------- -------- ------- --------
Operating income (loss)............ 12,925 9,156 19,518 14,358 14,677 15,751 (467) 396
Interest income.................... 856 317 476 549 428 537 210 113
Interest expense................... -- -- -- -- -- (185) (1) (11,114)
Gain (loss) on sale of assets
and minority members' equity
in loss of subsidiary............. -- -- -- -- -- 1,554 13 11
-------- -------- -------- -------- -------- -------- ------- --------
Income (loss) before provision
for income taxes.................. 13,781 9,473 19,994 14,907 15,105 17,657 (245) (10,594)
Provision for income taxes (4)..... (267) (251) (698) (549) (458) (331) (138) --
-------- -------- -------- -------- -------- -------- ------- --------
Net income (loss)................. 13,514 9,222 19,296 14,358 14,647 17,326 (383) (10,594)
Preferred unit dividends........... -- -- -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- ------- --------
Net income (loss) attributable
to common units................... $ 13,514 $ 9,222 $ 19,296 $ 14,358 $ 14,647 $ 17,326 $ (383) $(10,594)
======== ======== ======== ======== ======== ======== ======= ========
Pro forma earnings per share....... $
========
Pro forma weighted average
number of shares outstanding......
========
<CAPTION>
PREDECESSOR (1) PETERSEN (2)
--------------- ------------
SIX MONTHS
ENDED JUNE 30,
----------------------------
1996 1997
--------------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (3):
Net revenues:
Advertising....................... $67,397 $ 73,438
Newsstand......................... 21,281 21,249
Subscriptions..................... 21,828 21,736
Other............................. 4,534 3,720
------- --------
Net revenues...................... 115,040 120,143
Production, selling and other
direct costs...................... 91,971 82,440
------- --------
Gross profit....................... 23,069 37,703
General and administrative
expenses.......................... 12,903 8,955
Amortization of goodwill and
other intangible assets........... 196 18,151
------- --------
Operating income (loss)............ 9,970 10,597
Interest income.................... 238 355
Interest expense................... (153) (15,853)
Gain (loss) on sale of assets
and minority members' equity
in loss of subsidiary............. 1,554 (28)
------- --------
Income (loss) before provision
for income taxes.................. 11,609 (4,929)
Provision for income taxes (4)..... (199) --
------- --------
Net income (loss)................. 11,410 (4,929)
Preferred unit dividends........... -- (15,419)
------- --------
Net income (loss) attributable
to common units................... $11,410 $(20,348)
======= ========
Pro forma earnings per share....... $
========
Pro forma weighted average
number of shares outstanding......
========
</TABLE>

(footnotes appear on following page)

30
<PAGE>

<TABLE>
<CAPTION>
PREDECESSOR (1) PETERSEN (2)
----------------------------------------------------------- ------------
TEN MONTHS
ENDED THREE MONTHS
YEAR ENDED NOVEMBER 30, SEPTEMBER 30, ENDED DECEMBER 31,
---------------------------------- --------------- -------------------
1992 1993 1994 1995 1995 1996 1995 1996
------- ------- -------- ------- ------ ------- ------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Depreciation and amortization............ $ 3,381 $ 3,137 $ 3,118 $ 3,439 $2,704 $ 2,704 $1,015 $ 9,570
Capital expenditures..................... 1,419 4,739 2,866 4,423 3,492 768 878 --
EBITDA (5)............................... 17,162 12,610 23,112 18,346 17,809 20,546 771 10,090
BALANCE SHEET DATA (AT PERIOD END) (3):
Cash and cash equivalents................ $13,235 $ 8,984 $ 4,183 $ 9,938 $12,453 $ 7,761
Working capital (excluding the current
portion of unearned subscription
revenues) (6)........................... 1,591 (3,629) (11,027) 32,429 23,652 8,844
Total assets............................. 50,973 46,792 55,264 66,808 50,541 519,070
Long-term debt........................... -- -- -- -- -- 299,000
Total debt............................... -- -- -- -- -- 300,000
Total equity (capital deficiency)........ 4,126 (1,553) 361 8,627 (1,672) 154,300
<CAPTION>
PREDECESSOR (1) PETERSEN (2)
--------------- ------------
SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1997
--------------- ------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
OTHER DATA:
Depreciation and amortization............ $ 1,667 $19,106
Capital expenditures..................... 463 228
EBITDA (5)............................... 11,875 30,030
BALANCE SHEET DATA (AT PERIOD END) (3):
Cash and cash equivalents................ $ 6,923
Working capital (excluding the current
portion of unearned subscription
revenues) (6)........................... 1,303
Total assets............................. 503,586
Long-term debt........................... 271,750
Total debt............................... 277,750
Total equity (capital deficiency)........ 150,481
</TABLE>
(footnotes from previous page)
- -------
(1) The Predecessor's fiscal year ended on November 30.
(2) Petersen's fiscal year ends on December 31.
(3) Certain reclassifications have been made to the balance sheet and
statements of operation for each of the four years in the period ended
November 30, 1995 and the consolidated balance sheet and statements of
operations for the three months ended December 31, 1996 to conform their
presentation to the presentation for the six months ended June 30, 1997.
(4) Consists of state and local income taxes. As a subchapter S corporation
under the Code, the Predecessor was not subject to U.S. federal income
taxes or most state income taxes. Instead, such taxes have been paid by
the Predecessor's stockholder. The Predecessor periodically paid dividends
to its stockholder in respect of such tax liabilities. Prior to the
Reorganization, Petersen and Publishing were limited liability companies
and were not subject to U.S. federal income taxes or most state taxes.
Instead, such taxes were paid by Petersen's equity holders.
(5) "EBITDA" is defined as income before interest expense, income taxes,
depreciation and amortization and gain on sale of assets. EBITDA is not a
measure of performance under GAAP. Such items excluded in calculating
EBITDA are significant components in understanding and evaluating the
Company's financial performance. While EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, or as a measure of profitability or liquidity,
management understands that EBITDA is customarily used in evaluating the
equity value of the magazine publishing companies. The EBITDA measures
presented herein may not be comparable to similarly titled measures of
other companies.
(6) The current portion of unearned subscription revenues represents a non-
cash obligation of the Company and has, therefore, been excluded from the
calculation of working capital.

31
<PAGE>

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

OVERVIEW

The Company is a leading publisher of special-interest magazines with a
diverse portfolio of 78 publications, including 25 monthly, 11 bi-monthly and
42 single issue or annual publications. The Company operates primarily within
the expanding special-interest segment of the consumer magazine publishing
market. According to a survey by VSA of 111 general-interest and 115 special-
interest magazines, special-interest magazine publishing is the fastest
growing sector of the consumer magazine industry. The Company had net revenues
of $120.1 million for the six months ended June 30, 1997.

The Company's principal sources of revenues from the publication of its
magazines are derived from advertising and circulation. Circulation revenues
are generated from subscription, newsstand and list rental sales. For the six
months ended June 30, 1997, approximately 61.1% of the Company's revenues were
from advertising, 35.8% were from circulation (including 16.8% from
subscription sales, 17.7% from newsstand sales and 1.3% from list rentals) and
approximately 3.1% were from other sources. Advertising revenues of the
Company, as well as those of the consumer magazine industry in general, are
cyclical and dependent upon general economic conditions. As compared to
general-interest magazines publishers, however, the Company believes that its
advertising revenues are less susceptible to changes in general economic
conditions due to the diversity of its publications and the endemic nature of
its advertiser base. No single advertiser has comprised more than 5.0% of the
Company's advertising revenues during any of the last three years. In
addition, the Company's top 20 advertisers only accounted for approximately
30% of total advertising revenues for the twelve months ended December 31,
1996. The Company anticipates that its revenues from manufacturers of tobacco
related products will decrease in the future as a result of the resolution of
certain litigation involving such manufacturers. Advertising revenues from
such manufacturers were $3.9 million for the six months ended June 30, 1997.
The Company's revenues are generated predominantly from U.S. sources.

The principal components of the Company's production and selling costs are
raw materials, advertising sales, distribution, printing and binding and
editorial expenses, which represented approximately 20.7%, 16.2%, 13.6%, 11.5%
and 11.0%, respectively, of the Company's cost of sales in the six months
ended June 30, 1997. The Company's principal raw material is paper. Paper
supply and prices are subject to volatility. The supply and prices of paper
may be significantly affected by many factors, including market fluctuations
and economic, political and weather conditions. Following the Acquisition, the
Company secured sufficient paper to meet its projected raw material needs
through the end of 1997 at a fixed price. The Company is currently in
discussions regarding the terms on which the Company will purchase paper in
1998. There can be no assurance that the Company will be able to reach
agreement on terms favorable to the Company. The Company currently purchases
all of its paper requirements on an as needed basis. As a result, the Company
does not carry a significant amount of paper in inventory. The Company has a
long-term agreement with a third party to print all of its magazines. The
Company's advertising and sales expense comprises salaries, commissions,
travel and entertainment, marketing, promotions and research. In addition, the
Company believes that its editorial expenses are lower because, among other
reasons, most of its editorial staff is not located in New York City. See
"Risk Factors--Risks Associated with Fluctuations in Paper Costs and Postal
Rates" and "Business--Production and Distribution" and "--Raw Materials."

32
<PAGE>

Since the Acquisition, the Company has expended significant resources to
increase direct subscription sales, develop its subscriber database and
establish Petersen Enterprises to pursue ancillary revenue opportunities. In
addition, the Company has made improvements in its Youth Group publications,
including refocusing the editorial content and improving the design of Teen
and adding staff at All About You!. The Company believes the return on such
investments, which are expected to aggregate $9.0 million for the twelve
months ended December 31, 1997, will be realized in future periods. See
"Business--Business and Operating Strategy."

The Acquisition was accounted for using the purchase method of accounting.
As a result, the Acquisition has affected and will continue to affect the
Company's results of operations in certain significant respects. The aggregate
purchase price of the Acquisition (including expenses) was approximately
$462.8 million plus the assumption of unearned subscription revenue and other
liabilities of approximately $49.0 which has been allocated to the tangible
and intangible assets acquired and liabilities assumed by the Company based
upon their respective fair values as of the acquisition date. The allocation
of the purchase price of the assets acquired in the Acquisition has resulted
in annual depreciation and amortization expense of approximately $35.0 million
per year. The Predecessor's historical annual depreciation and amortization
expense over the past five years has been less than $4.5 million per year.

Prior to the Acquisition, the Predecessor was operated as an S corporation
under the Code. As a result, it did not incur federal and state income taxes.
Federal and state income taxes (except with respect to certain states)
attributable to the Predecessor's income during such periods were incurred and
paid directly by the Predecessor's stockholder. The Predecessor made periodic
distributions to its stockholder in respect of such tax liability. As a
limited liability company, Petersen also does not incur federal and state
income taxes. Federal and state income taxes attributable to Petersen's income
and tax benefit attributable to Petersen's losses will be incurred directly by
Petersen's equity holders. Accordingly, no discussion of income taxes is
included in "Results of Operations" below. Any tax benefit attributable to
losses generated by Petersen prior to the Reorganization will not be available
to the Company. As a C corporation, the Company is fully subject to federal
and state income taxation.

RESULTS OF OPERATIONS

The following table summarizes historical results of operations as a
percentage of net revenues of: (i) the Predecessor for (a) the years ended
November 30, 1994 and 1995, (b) the ten months ended September 30, 1995 and
1996, (c) the three months ended December 31, 1995, and (d) the six months
ended June 30, 1996; and (ii) Petersen for (a) the three months ended December
31, 1996 and (b) the six months ended June 30, 1997.

<TABLE>
<CAPTION>
PREDECESSOR PETERSEN PREDECESSOR PETERSEN
---------------------------------------------- -------- ----------- --------
YEAR ENDED TEN MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
NOVEMBER 30, SEPTEMBER 30, DECEMBER 31, JUNE 30,
-------------- ----------------- -------------------- --------------------
1994 1995 1995 1996 1995 1996 1996 1997
------ ------ ----------- ----- ----------- -------- ----------- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues:
Advertising............ 57.9% 57.9% 57.6% 59.3% 57.6 % 59.9% 58.6% 61.1%
Newsstand.............. 19.7 18.6 18.6 18.1 18.3 18.8 18.5 17.7
Subscriptions.......... 21.0 20.5 20.5 19.2 21.1 19.5 19.0 18.1
Other.................. 1.4 3.0 3.3 3.4 3.0 1.8 3.9 3.1
------ ------ ----- ----- ----- ----- ----- -----
Total net revenues..... 100.0% 100.0% 100.0% 100.0% 100.0 % 100.0% 100.0% 100.0%
Production, selling and
other direct costs.... 73.8 80.0 78.5 78.5 83.1 77.4 79.9 68.6
------ ------ ----- ----- ----- ----- ----- -----
Gross profit........... 26.2 20.0 21.5 21.5 16.9 22.6 20.1 31.4
General and
administrative
expenses.............. 16.4 13.1 13.1 13.0 17.6 5.0 11.2 7.5
Amortization of
goodwill and other
intangible assets..... .2 .2 .2 .2 .2 16.9 .2 15.1
------ ------ ----- ----- ----- ----- ----- -----
Operating income (loss)
...................... 9.6 6.7 8.2 8.3 N.A. .7 8.7 8.8
Interest expense....... -- -- -- .1 -- 20.9 .1 13.2
Net income ............ 9.5% 6.7% 8.2% 9.1% N.A. N.A. 9.9% N.A.
OTHER DATA:
EBITDA................. 11.4% 8.6% 9.9% 10.8% 1.5% 18.9% 10.3% 25.0%
</TABLE>

33
<PAGE>

PETERSEN SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO PREDECESSOR SIX MONTHS
ENDED JUNE 30, 1996

Net revenues. Net revenues increased $5.1 million, or 4.4%, to $120.1
million for the six months ended June 30, 1997 from $115.0 million for the six
months ended June 30, 1996. This increase is primarily the result of a $6.0
million, or 9.0%, increase in advertising revenues, offset by a $.1 million
decline in circulation revenues, a $.5 million decline in miscellaneous
revenues (mainly reprint revenues) and a $.3 million decline in show revenues.
The increase in advertising revenues was due principally to (i) an overall
increase in the Company's advertising rates, (ii) higher advertising revenues
by Motor Trend, Teen and Hot Rod and (iii) additional revenues from relatively
new and start-up publications. In December 1996 and June 1997, the Company
discontinued the publication of Sassy and Petersen's Golfing, respectively.
Net revenues for the period ended June 30, 1996 for those two publications
were $4.7 million (comprised of $2.9 million in advertising, $1.7 million in
subscription, and $.1 million other). Net revenues, excluding these two
discontinued publications, increased $9.8 million, or 8.9%, to $120.1 million
for the six months ended June 30, 1997 from $110.4 million for the six months
ended June 30, 1996.

Production, selling and other direct costs. Production, selling and other
direct costs decreased $9.5 million, or 10.4%, to $82.4 million for the six
months ended June 30, 1997 from $91.9 million for the six months ended June
30, 1996. Production, selling and other direct costs decreased as a percentage
of net revenues to 68.6% from 79.9% for the same periods. The successful
implementation of the Company's operating improvements significantly
contributed to the decrease in production, selling and other direct costs.
This decrease is primarily comprised of a $6.7 million, or 28.2%, decrease in
paper costs, a $1.1 million, or 10.7%, decrease in printing expenses and a
$2.5 million, or 10.0%, decrease in editorial and advertising sales expenses.

Other expenses. General and administrative expenses decreased $3.9 million,
or 30.6%, to $9.0 million for the six months ended June 30, 1997 from $12.9
million for the six months ended June 30, 1996. General and administrative
expenses decreased as a percentage of net revenues to 7.5% from 11.2% for the
same periods. The successful implementation of the Company's operating
improvements, including personnel and other operating expense reductions,
contributed to the decrease in general and administrative expenses.
Amortization of goodwill and other intangible assets increased to $18.2
million for the six months ended June 30, 1997 from $.2 million for the six
months ended June 30, 1996. This expense represents amortization of goodwill
and the subscribers list purchased in the Acquisition.

Operating income. Operating income increased $.6 million, or 6.3%, to $10.6
million for the six months ended June 30, 1997 from $10.0 million for the six
months ended June 30, 1996, for the reasons stated above. Operating income
increased as a percentage of net revenues to 8.8% from 8.7% for the same
periods.

Interest expense. Interest expense increased $15.7 million to $15.9 million
for the six months ended June 30, 1997 from $.2 million for the six months
ended June 30, 1996. This increase is the result of indebtedness incurred
under the Senior Credit Facility and the Notes in connection with the
Acquisition.

Net income (loss). The net loss was $4.9 million for the six months ended
June 30, 1997 as compared to net income of $11.4 million for the six months
ended June 30, 1996. This decrease is primarily the result of the increases in
interest and amortization expenses as stated above.

PETERSEN THREE MONTHS ENDED DECEMBER 31, 1996 COMPARED TO PREDECESSOR THREE
MONTHS ENDED DECEMBER 31, 1995.

Net Revenues. Net revenues increased $2.3 million, or 4.6%, to $53.2 million
for the three months ended December 31, 1996 from $50.9 million for the three
months ended December 31, 1995. This increase is primarily the result of a
$2.6 million or 8.7% increase in advertising revenues, offset by a $.6 million
decline in miscellaneous revenues (primarily reprint revenues). The increase
in advertising revenues was due principally to (i) an overall increase in the
Company's advertising rates; (ii) higher advertising revenues by Motor Trend,
Teen

34
<PAGE>

and Hot Rod; and (iii) additional revenues from relatively new and start-up
publications. In December 1996, the Company discontinued the publication of
Sassy. Net revenues for the period ended December 31, 1996 for this
publication were $.5 million (comprised of $.3 million in advertising and $.2
million in circulation).

Production, selling and other direct costs. Production, selling and other
direct costs decreased $1.1 million, or 2.6%, to $41.2 million for the three
months ended December 31, 1996 from $42.3 million for the three months ended
December 31, 1995. Production, selling and other direct costs decreased as a
percentage of net revenues to 77.4% from 83.1% for the same periods. The
successful implementation of the Company's operating improvements contributed
to the decrease in production, selling and other direct costs. This decrease
is primarily comprised of a $2.0 million, or 18.6%, decrease in paper costs
offset by a $1.1 million, or 84.0%, increase in circulation promotion for the
same periods.

Other expenses. General and administrative expenses decreased $6.3 million,
or 70.2%, to $2.7 million for the three months ended December 31, 1996 from
$9.0 million for the three months ended December 31, 1995. General and
administrative expenses decreased as a percentage of net revenues to 5.0% from
17.6% for the same periods. The successful implementation of the Company's
operating improvements, including personnel and other operating expense
reductions, contributed to the decrease in general and administrative
expenses. Amortization of goodwill and other intangible assets increased to
$9.0 million for the three months ended December 31, 1996 from $.1 million for
the three months ended December 31, 1995. This expense represents amortization
of goodwill and the subscribers list purchased in the Acquisition.

Operating income (loss). Operating income was $.4 million for the three
months ended December 31, 1996 as compared to an operating loss of $.5 million
for the three months ended December 31, 1995, for the reasons stated above.

Interest expense. Interest expense was $11.1 million, for the three months
ended December 31, 1996 as compared to interest expense of $0 million for the
three months ended December 31, 1995. This increase is the result of
indebtedness incurred under the Senior Credit Facility, the Bridge Facility
and the Notes in connection with the Acquisition.

Net loss. Net loss increased $10.2 million to $10.6 million for the three
months ended December 31, 1996 from $.4 million for the three months ended
December 31, 1995. This increase is primarily the result of the increased
interest and amortization expenses as stated above.

PREDECESSOR TEN MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO PREDECESSOR TEN
MONTHS ENDED SEPTEMBER 30, 1995

Net revenues. Net revenues increased $10.2 million, or 5.7%, to $189.6
million for the ten months ended September 30, 1996 from $179.4 million for
the ten months ended September 30, 1995. This increase is primarily the result
of a $9.1 million or 8.8% increase in advertising revenue and a $.7 million,
or .9%, increase in circulation revenues. The increase in advertising revenues
was due principally to (i) an overall increase in the Company's advertising
rates and (ii) higher advertising revenues generated by Motor Trend and Teen.
The increase in newsstand revenues was due principally to increased sales of
Teen and All About You!

Production, selling and other direct costs. Production, selling and other
direct costs increased $8.0 million, or 5.7%, to $148.8 million for the ten
months ended September 30, 1996 from $140.8 million for the ten months ended
September 30, 1995. Production, selling and other direct costs, as a
percentage of net revenues, remained constant at 78.5% for the same periods.
This dollar increase was primarily the result of increased paper costs and
incremental production costs. See "--Overview."

35
<PAGE>

Other expenses. General and administrative expenses increased $1.1 million,
or 4.7%, to $24.6 million for the ten months ended September 30, 1996 from
$23.5 million for the ten months ended September 30, 1995. General and
administrative expenses decreased as a percentage of net revenues to 13.0%
from 13.1% for the same periods. This increase was primarily the result of an
accrual of $.8 million for litigation expenses. This litigation remains the
responsibility of the seller under the terms of the Acquisition.

Operating income. Operating income increased $1.1 million, or 7.3%, to $15.8
million for the ten months ended September 30, 1996 from $14.7 million for the
ten months ended September 30, 1995, for the reasons stated above. Operating
income increased as a percentage of net revenues to 8.3% from 8.2% for the
same periods.

Net income. Net income increased $2.7 million or 18.3% to $17.3 million for
the ten months ended September 30, 1996 from $14.6 million for the ten months
ended September 30, 1995, for the reasons stated above. Net income increased
as a percentage of net revenues to 9.1% from 8.2% for the same periods.

PREDECESSOR YEAR ENDED NOVEMBER 30, 1995 COMPARED TO PREDECESSOR YEAR ENDED
NOVEMBER 30, 1994

Net revenues. Net revenues for the year ended November 30, 1995 increased
$11.7 million, or 5.8%, to $214.5 million from $202.8 million for the year
ended November 30, 1994. Of this increase, advertising revenue accounted for
$6.9 million, revenues generated from the newly-established trade show and
event group accounted for $2.8 million and circulation revenue accounted for
$1.1 million. The increase in advertising revenue was principally due to the
Company's acquisition of Sassy in December 1994.

Production, selling and other direct costs. Production, selling and other
direct costs increased $22.0 million, or 14.7%, to $171.6 million for the year
ended November 30, 1995 from $149.6 million for the year ended November 30,
1994. Production, selling and other direct costs as a percentage of net
revenues increased to 80.0% from 73.8% for the same period. This increase is
primarily the result of the cost of launching new magazine titles, additional
costs associated with the publication of Sassy and increases in paper prices
and postal rates.

Other expenses. General and administrative expenses decreased $5.1 million,
or 15.4%, to $28.1 million for the year ended November 30, 1995 from $33.2
million for the year ended November 30, 1994. General and administrative
expenses decreased as a percentage of net revenues to 13.2% from 16.4% for the
same period. This decrease is primarily the result of lower compensation
expense for Mr. Petersen.

Operating income. Operating income decreased $5.2 million, or 26.4%, to
$14.3 million for the year ended November 30, 1995 from $19.5 million for the
year ended November 30, 1994, for the reasons stated above. Operating income
as a percentage of net revenues decreased to 6.7% from 9.6% for the same
periods.

Net income. Net income decreased $4.9 million, or 25.6%, to $14.4 million
for the years ended November 30, 1995 from $19.3 million for the year ended
November 30, 1994 for the reasons stated above. Net income as a percentage of
net revenues decreased to 6.7% from 9.5% for the same period.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents totaled $6.9 million and working capital
(excluding the current portion of unearned subscription revenue) totaled $1.3
million at June 30, 1997. At December 31, 1996, cash and cash equivalents
totaled $7.8 million and working capital (excluding the current portion of
unearned subscription revenue) totaled $8.8 million. The decrease in working
capital from December 31, 1996 to June 30, 1997 resulted primarily from a
$22.3 million repayment of bank borrowings offset by cash generated from
operations.

The Company's net cash provided by operations was $18.1 million for the six
months ended June 30, 1997 compared to $23.8 million for the six months ended
June 30, 1996. Of this difference, $10.5 million relates to changes in
receivables and $16.5 million relates to decreased net income, offset by a
$19.1 million increase in

36
<PAGE>

depreciation and amortization and an aggregate $5.8 million increase in
accrued liabilities. Net cash provided by operations was $24.7 million, $9.6
million and $27.1 million in the ten months ended September 30, 1996 and years
ended November 30, 1995 and 1994, respectively.

The Company's net cash provided by investing activities was $2.2 million for
the six months ended June 30, 1997, as compared to $1.7 million for the six
months ended June 30, 1996, which included $2.5 million in proceeds in the
sale of its Viking Color pre-press operations. Net cash provided by (used in)
investing activities was $5.4 million, $2.3 million and $(14.5) million in the
ten months ended September 30, 1996 and years ended November 30, 1995 and
1994, respectively. The Company's operations are not capital intensive. The
Company's capital expenditures were $.2 million and $.5 million in the six
months ended June 30, 1997 and 1996, respectively, and $.8 million, $4.4
million and $2.9 million in the ten months ended September 30, 1996 and the
fiscal years ended November 30, 1995 and 1994, respectively.

The Company's net cash used in financing activities for the six months ended
June 30, 1997 was comprised of $22.3 million of repayments of borrowings under
the Senior Credit Facility. Of this amount, $21.8 million represented an early
repayment. Net cash used in financing activities in prior years, comprised
solely of distribution of Predecessor's S corporation earnings to its
stockholder and changes in advances to other divisions of Petersen, were $37.6
million and $6.1 million and $17.4 million for the ten months ended September
30, 1996 and the years ended November 30, 1995 and 1994, respectively.

The Company's EBITDA (excluding the impact of the sale of its Viking Color
pre-press operations in 1996) increased $18.1 million, or 152.9%, to $30.0
million for the six months ended June 30, 1997 from $11.9 million for the six
months ended June 30, 1996. EBITDA as a percentage of net revenues increased
to 25.0% from 10.3% for the same periods. The Company's EBITDA increased $9.3
million to $10.1 million for the three months ended December 31, 1996 from $.8
million for the three months ended December 31, 1995. EBITDA as a percentage
of net revenues increased to 18.9% from 1.5% for the same periods. The
successful implementation of the Company's operating improvements contributed
to these increases in EBITDA.

To finance the Acquisition, the Company: (i) borrowed $200 million under the
$260 million Senior Credit Facility; (ii) borrowed $100 million under the
Bridge Financing Facility; and (iii) received equity contributions of $166.1
million from an investor group led by Willis Stein, James D. Dunning, Jr. and
certain members of the Company's senior management. Following the Acquisition,
the Company issued $100 million aggregate principal amount of the Notes, the
proceeds of which were used to repay the Bridge Financing Facility.

The Senior Credit Facility consists of a $100 million Tranche A Loan and a
$100 million Tranche B Loan, maturing on December 31, 2002 and September 30,
2004, respectively. The Company has repaid $22.3 million of the $100 million
Tranche B Loan as of June 30, 1997. In addition, the Senior Credit Facility
provides borrowings under a revolving facility in the maximum principal amount
of $60 million. The Tranche A Loan generally amortizes in increasing
increments prior to maturity; the Tranche B Loan is payable primarily in
balloon payments due in 2003 and 2004. The Revolving Credit Facility becomes
due in full on December 31, 2002. The Revolving Credit Facility and the
Tranche A Loan bear interest at either LIBOR (5.688% at June 30, 1997) plus
1.375% to 2.750% based on borrowings or the prime rate of the agent bank (8.5%
at June 30, 1997) plus .125% to 1.5% based on borrowings. The Tranche B Loan
bears interest at either LIBOR plus 2.625% to 3.250% based on borrowings or
the prime rate of the agent bank plus 1.375% to 2.0% based on borrowings.
Since the Acquisition, the Company has been able to fund operations from cash
generated from operations and has not incurred borrowings under the Revolving
Credit Facility. The Senior Credit Facility contains customary restrictions
and requirements with respect to security, covenants (including financial
covenants) and events of default. The Company is in compliance with the
covenants of the Senior Credit Facility.

As of June 30, 1997, Publishing had outstanding $100 million aggregate
principal amount of the Notes. The Notes bear interest at a rate of 11 1/8%
per annum payable semi-annually in arrears on each May 15 and November 15. The
Notes are unsecured obligations of Publishing and are subordinated in right of
payment to all Senior Indebtedness of Publishing (as defined in the
Indenture). The Notes are unconditionally guaranteed, on a

37
<PAGE>

senior subordinated basis, as to payment of principal, premium, if any, and
interest, jointly and severally by Holdings and after the Merger, the Company.
The Indenture contains certain restrictive covenants, including, but not
limited to, restrictions on incurrence of debt, dividends payments, certain
assets sales, transactions with affiliates, liens and investments. The
Company, Petersen and Publishing are in compliance with the Indenture.

A portion of the consolidated debt of the Company bears interest at floating
rates; therefore, the Company's financial position is and will continue to be
affected by changes in prevailing interest rates. Effective October 7, 1996,
the Company purchased an interest rate cap on $150 million initial notional
principal amount at a fixed rate of 6.23%, which expires on October 7, 1999.
The cap is intended to provide partial protection from exposure relating to
the Company's variable rate debt instruments in the event of higher interest
rates.

The Company will use the net proceeds from the Offering as follows: (i)
approximately $60.0 million to repay a portion of the indebtedness incurred
under the Senior Credit Facility; (ii) $50 million to redeem Preferred Units
with an aggregate liquidation preference and accrued and unpaid preferred
yield of in the same amount; and (iii) approximately $28.8 million to redeem
$25.0 million aggregate principal amount of the Notes and to pay the
redemption premium and accrued and unpaid interest thereon. In connection with
the Offering, the Company expects to refinance its remaining indebtedness
under the Senior Credit Facility after the application of the net proceeds of
the Offering. The New Credit Facility is expected to be a $175 million non-
amortizing revolving credit facility maturing on September 30, 2002. The New
Credit Facility will be secured by a first priority security interest in all
assets of Publishing. In addition, the borrowings under the New Credit
Facility will be guaranteed by the Company, which will be secured by a pledge
of all of the outstanding equity interests of Publishing. The New Credit
Facility will contain customary restrictions and requirements with respect to
security, covenants (including financial covenants) and events of default,
none of which are expected to be more restrictive than those of the Senior
Credit Facility.

In the event of a change of control (as defined in the Indenture), the
Company will be required to make an offer for cash to repurchase the Notes at
101% of the principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the repurchase date. Certain events involving a change of
control will result in an event of default under the Senior Credit Facility or
other indebtedness of the Company that may be incurred in the future.
Moreover, the exercise by the holders of the Notes of their right to require
the Company to repurchase the Notes may cause an event of default under the
Senior Credit Facility or such other indebtedness, even if the change of
control does not. Finally, there can be no assurance that the Company will
have the financial resources necessary to repurchase the Notes upon a change
of control.

The Company believes that net cash provided by operations will be sufficient
to fund its future cash requirements. Excluding any acquisition activity, the
Company currently projects that it will not have to utilize the New Credit
Facility to fund operations. No assurances can be given, however, that this
will be the case. The Company expects that future cash requirements will
principally be for repayments of indebtedness, working capital requirements,
capital expenditures and other needs. The Company's future operating
performance and ability to service or refinance its current indebtedness will
be subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control. For a discussion of
certain relevant factors, see "Risk Factors."

SEASONALITY

Historically, the Company has experienced limited seasonality, with
decreased revenues during the first and fourth quarter of each calendar year
due to the seasonal nature of activities associated with its publications.

INFLATION

The Company believes that inflation has not had a material impact on its
results of operations for the periods discussed herein.

38
<PAGE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

SFAS No. 123, "Accounting for Stock-Based Compensation" encourages, but does
not require, a fair market value based method of accounting for employee stock
options or similar equity instruments. The Company has elected to continue to
measure compensation cost under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" as was previously required, and to
comply with pro forma disclosure of net income and earnings per share as if
the fair market value based method of accounting had been applied.

In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards, No. 128, "Earnings Per Share" which simplifies
the computation of earnings per share. The statement is effective for
financial statements issued for periods ending after December 15, 1997 and
requires restatement of all prior period earnings per share data presented.
The statement will be adopted in calendar year 1997 and is not expected to
significantly impact the financial statements of the Company.

39
<PAGE>

INDUSTRY

The consumer magazine market is comprised of both general-interest and
special-interest publications. General-interest magazines are characterized by
broad-based editorial content and readership, while special-interest magazines
have a more narrow editorial focus and subject-selective readership. During
the ten years ended December 31, 1995 (the latest period for which data is
available), special-interest publications targeted to niche audiences have
grown significantly and are now estimated to account for approximately one
quarter of the overall consumer magazine market in terms of total advertising
and circulation spending. In recent years, special-interest magazines have
generally exhibited stronger growth in both advertising and circulation
spending as compared to general-interest magazines. For example, based on a
VSA survey of 111 general-interest and 115 special-interest magazines,
advertising and circulation spending on special-interest publications have
grown at compound annual rates of 8.1% and 2.7%, respectively, as compared to
5.6% and 1.3%, respectively, for general-interest publications during the
period from 1990 to 1995. In addition, because special-interest magazines
target enthusiasts, the publishers are typically able to charge a higher cover
price as compared to general-interest magazines. Based on the survey noted
above, the average price of a special-interest magazine was $2.08 in 1995,
nearly 50% higher than the $1.41 average price of a general-interest magazine.
For much the same reason, the Company believes that readers of special-
interest magazines are less price-sensitive than readers of general-interest
magazines.

Magazine publishers generate the majority of their revenues from the sale of
advertising. Advertising revenues, however, tend to be cyclical and dependent
upon general economic conditions. Historically, increases in advertising
revenues have corresponded with economic recoveries while decreases have
corresponded with economic downturns.

Industry sources estimate that total advertising spending for special-
interest publications increased by approximately 13% in 1995. According to the
Publishers Information Bureau, the top ten categories of industries ranked by
consumer magazine advertising expenditures in 1996 were automotive and
automotive accessories (13%), direct response companies (11%), computers,
office equipment and stationery (10%), toiletries and cosmetics (9%), business
and consumer services (9%), foods and food products (7%), drugs and remedies
(7%), apparel, footwear and accessories (6%), travel, hotels and resorts (5%)
and retail (3%). The automotive industry has traditionally accounted for the
largest percentage of total advertising expenditures in the consumer magazine
industry. During the period from 1990 to 1995, advertising spending by the
automotive industry increased at a compound annual growth rate of 8.2%.

Circulation revenues are generated from subscription, newsstand and list
rental sales. During the fifteen years ended December 31, 1995, the aggregate
number of consumer magazines distributed through newsstand sales declined in
relation to the number distributed through subscription sales. Due to
increases in newsstand cover prices, the amount of circulation revenue
generated from newsstand sales by special-interest magazines has grown over
the ten years ended December 31, 1995. According to the VSA survey, the
average price per copy for special-interest magazines increased at a compound
annual growth rate of 2.6% for the period from 1990 to 1995. In addition, the
Company believes that newsstand sales offer an economically attractive vehicle
for launching new magazines, attracting more affluent subscribers and
generating timely feedback about its editorial content.

The historical patterns of newsstand distribution have changed as a result
of the on-going consolidation of newsstand wholesalers and the shifting focus
of such wholesalers to servicing retail outlets instead of geographic areas.
The changes, among others, have led to a decrease in newsstand sales on an
industry-wide basis.

In recent years, consumer magazine publishers have increasingly sought to
diversify their earnings and more effectively utilize their existing
publications by developing non-traditional revenue streams. In general,
magazine publishers have sought to expand the use of their magazines'
editorial content and other assets across different media formats and to
capitalize on their existing brand names.

40
<PAGE>

BUSINESS

The Company is a leading publisher of special-interest magazines with a
diverse portfolio of 78 publications, including 25 monthly, 11 bi-monthly and
42 single issue or annual publications. Based on data from Mediamark Research,
Inc., the Company estimates that its magazines are read by approximately 48
million adult readers including 40 million male readers each month. The
Company offers its advertisers the ability to reach both a targeted market
within its individual magazines as well as a larger audience by advertising
across the Company's broad portfolio of magazines. The Company's
internationally-recognized magazines include: (i) Motor Trend, which is a
leading authority on new domestic and foreign automobiles and, with its
increase in base rate (expected paid circulation on which advertising rates
are based) to 1.15 million effective January 1998, is anticipated to be the
world's leading automotive magazine in terms of paid circulation; (ii) Teen,
which has the largest paid circulation of any of the Company's magazines with
paid circulation of more than 1.8 million as of the June 1997 issue; and (iii)
Hot Rod, which is one of the largest paid circulation automotive magazines in
the world with a paid circulation of over 800,000 as of the June 1997 issue.
Of the Company's 15 core magazines, nine are ranked first in their respective
markets based on annual paid circulation in 1996, including two magazines that
are the only national magazines published in their respective markets.

The Company had net revenues of $227.2 million and $120.1 million for the
twelve months ended December 31, 1996 and the six months ended June 30, 1997,
respectively. The Company's principal sources of revenues are from advertising
and circulation. For the six months ended June 30, 1997, approximately 61.1%
of the Company's revenues were from advertising, 35.8% from circulation and
3.1% were from other sources.

The special-interest nature of the Company's magazines creates an
opportunity for its advertisers to efficiently reach their target audience, as
the Company's enthusiast readers value special-interest magazines for both
their product information and editorial content. Based on data from Mediamark
Research, Inc., the Company estimates that its magazines are read by more
adult males (ages 18 to 34) than that of any other U.S. special-interest
magazine publisher and are read by approximately one-third of all young
females (ages 12 to 19) in the United States. The adult male market is
particularly attractive to advertisers due to its size and overall purchasing
power, while the young female market provides advertisers with the opportunity
to establish brand recognition during the early stages of this important
consumer group's buying behavior. Further, the Company believes that the
endemic nature of the Company's advertiser base and the diversity of its
publications makes its advertising revenues less susceptible to changes in
general economic conditions.

The Company is organized into seven publishing groups: Automotive
Performance, Motor Trend, Youth, Outdoor, Photo/Marine, Motorcycle/Bicycle and
Sport. Each publishing group is organized around one or more of the Company's
core monthly publications which target a distinct special-interest segment or
specific general-interest segment (e.g., Teen and Sport). The operations of
each group are focused on delivering high-quality editorial content,
generating endemic advertising sales and developing new titles or activities
to reach such group's enthusiast readers. Each publishing group is supported
by a number of centralized corporate functions. The Company conducts all of
its non-endemic advertising, subscription and newsstand sales and marketing
activities and develops ancillary revenue through event management, licensing
arrangements and electronic publishing on a centralized basis to take
advantage of the broad reach and significant market presence of the Company's
magazine portfolio. In addition, all of the Company's production, distribution
and administrative activities are centralized to achieve economies of scale
and operating synergies. The combination of each group's focused editorial and
sales staff supported by centralized corporate functions has enabled the
Company to improve profit margins and provides a competitive advantage in the
development and launch of new titles within an existing group.

41
<PAGE>

The Company's 15 core magazines average over 30 years in publication and have
developed internationally-recognized brands within each of their respective
markets. For the twelve months ended December 31, 1996, 13 of the Company's 15
core magazines each generated an operating contribution of more than $1.0
million. The following table sets forth certain information regarding the
Company's 15 core magazines for the twelve months ended December 31, 1996 and
the six months ended June 30, 1997:

<TABLE>
<CAPTION>
NET
MAGAZINE TITLE REVENUES (1) TOTAL CIRCULATION (2) CIRCULATION RANK (3)
- ------------------------ --------------------- --------------------- --------------------
(AMOUNTS IN MILLIONS) (COPIES IN THOUSANDS)
<S> <C> <C> <C>
Motor Trend............. $ 32.5 1,047.7 2 of 4
Teen.................... 25.8 1,661.1 3 of 3
Hot Rod................. 19.3 780.4 1 of 2
Petersen's 4 Wheel &
Off-Road............... 13.5 365.8 1 of 3
Guns & Ammo............. 13.0 588.3 1 of 3
Skin Diver.............. 13.0 200.1 1 of 2
Sport................... 10.3 789.0 1 of 2
Car Craft............... 9.5 383.6 1 of 1
Petersen's Hunting...... 7.7 359.5 1 of 1
Motorcyclist............ 7.2 241.0 2 of 2
Circle Track and Racing
Technology............. 6.5 131.8 2 of 3
Petersen's
Photographic........... 6.4 202.9 3 of 3
Sport Truck............. 6.2 200.3 1 of 2
Dirt Rider.............. 6.1 165.6 1 of 3
Chevy High Performance.. 4.5 179.4 2 of 2
------ -------
Total................. $181.5 7,296.5
====== =======
</TABLE>
- --------
(1) Includes advertising, circulation and other revenues for the twelve months
ended December 31, 1996.
(2) Based on the average circulation (per issue) for each publication for the
six months ended June 30, 1997.
(3) Includes only national monthly publications (9 or more issues per year)
that are audited by the Audit Bureau of Circulation and believed by the
Company to directly compete with its publications, and based on average
paid circulation for the twelve months ended December 31, 1996.

BUSINESS AND OPERATING STRATEGY

Cross-Sell Advertising and Expand Advertiser Base. Management believes that,
in addition to maintaining a strong endemic advertising base, it will continue
to increase revenues by cross-selling advertising space across all of the
Company's magazines that reach the advertiser's target markets. In addition,
the Company is improving existing and implementing new programs that will
enable its advertisers to purchase other marketing services, such as event
sponsorships, direct marketing programs, database access and services and
point-of-purchase promotions. Management intends to increase the Company's
advertiser base by targeting new advertisers in existing and new categories,
with a focus on non-endemic categories. Such non-endemic categories include,
among others, apparel, footwear and accessories, cosmetics, food and beverages
and financial products. The Company believes that its ability to provide
effective and efficient advertising enables it to maintain competitive and in
some cases premium advertising rates.

Increase Direct Subscription Sales and Magazine Prices. Management believes
that there are numerous opportunities to increase circulation revenues by
expanding direct subscription sales. The Company has historically focused on
the newsstand distribution channel and has relied heavily upon agency
subscription sales

42
<PAGE>

in managing its circulation operations. The Company has invested in new
promotional programs, including direct mail, insert cards, gift campaigns and
cover wraps, designed to increase the number of subscriptions purchased
directly from the Company. A direct subscription typically generates
approximately seven times more revenue to the Company than an agency
subscription. The Company has also developed a database that includes detailed
demographic information on approximately 16 million current and former
subscribers that will enable it to more effectively cross-sell its publications
and other products directly to subscribers. In addition, the Company recently
increased the newsstand and subscription prices on certain publications to
levels comparable to those of competitive magazines and will continue to adjust
its magazine prices in the future based on market conditions.

Develop Ancillary Revenue Opportunities. The Company believes that there are
numerous opportunities to increase ancillary revenues by leveraging the
editorial content, readers and subscriber database and the internationally-
recognized brands of the Company's existing publications through domestic and
international licensing arrangements, strategic joint ventures, retail
alliances, affinity group marketing, electronic software and games and book
publishing. For the six months ended June 30, 1997, approximately 3.1% of the
Company's revenues were from ancillary sources of which 1.9% were from shows.
The Company is pursuing certain ancillary revenue opportunities afforded to it
by its well-established brand names. For example, the Company has licensed
Motor Trend and Hot Rod brand names for television shows on TNN and Hot Rod for
use in cassette and compact disc music recordings with EMI-Capital Music
Special Markets. In addition, the Company has signed letters of intent to
license Hot Rod for use as the brand name for a Los Angeles arena football team
and for computer game software.

Develop and Launch New Titles. By using its core publications as platforms
for launching new "spin-off" publications, the Company has efficiently
developed and produced a diverse and profitable portfolio of highly-specialized
publications. The Company believes that it has a competitive advantage as a
result of its editorial staff's ability to identify potential markets for new
publications and the Company's ability to gain access to newsstand distribution
channels has enabled its new publications to become established and to leverage
existing editorial and advertising personnel resources and to gain access to
newsstand distribution channels. Since the Acquisition, the Company has
launched six new multiple frequency publications, which collectively generated
approximately $3.4 million in revenues in the first six months of 1997. Since
the Acquisition, the Company has also increased frequency on four publications
from single issue to bi-monthly, and has launched or anticipates to launch 14
new single issue publications. The Company has recently signed a letter of
intent with NASCAR to produce two automotive publications. The Company plans to
continue to develop and launch new special-interest magazines that will
complement and enhance its existing portfolio.

Selectively Acquire Titles. The Company follows a disciplined acquisition
strategy designed to acquire titles that either enhance the Company's
competitive position in one of its existing special-interest segments or
establish a new cluster or group of publications that is complementary to the
Company's existing portfolio. In evaluating acquisition candidates, management
considers whether such publications have developed or have the potential to
develop a brand identity. Since the Acquisition, the Company has acquired the
exclusive right to use the name of certain individuals for the following three
publications: Richard Petty's Stock Car Magazine, Dick Vitale's College
Basketball Yearbook and Bob Griese's College Football Yearbook. The Company
believes that its efficient operating structure provides it with a competitive
advantage by reducing the operating costs of acquired titles. Management
believes that significant opportunities exist to acquire special-interest
magazines that will complement and enhance its existing portfolio.

43
<PAGE>

that provides for one or more of the following actions if any of its
publications generate continued losses: (i) discontinue or sell such magazine;
(ii) merge such magazine with the Company's existing magazines; or (iii) enter
into strategic partnerships with third parties. The successful implementation
of these improvements has contributed to the improvement in the Company's
EBITDA margin, which increased from 10.6% for the ten month period ended
September 30, 1996 to 25.0% for the six-month period ended June 30, 1997. The
Company will remain focused on identifying additional operating improvements
to further increase its operating efficiencies and profit margins.

SOURCES OF REVENUE

Substantially all of the Company's revenues are derived from advertising and
circulation sales, with lesser amounts derived from other sources such as
domestic and international licensing arrangements. Circulation revenues are
generated from subscription and newsstand sales and list rentals. The
following table sets forth the sources and amounts of the Predecessor's
revenues for the fiscal years ended November 30, 1994 and 1995 and the
Company's revenues for the twelve months ended December 31, 1996 and the six
months ended June 30, 1997 (dollars in millions):

<TABLE>
<CAPTION>
PREDECESSOR COMBINED (1) COMPANY
---------------------------------- ------------------ --------------
FISCAL YEARS ENDED NOVEMBER 30, TWELVE MONTHS SIX MONTHS
---------------------------------- ENDED ENDED
1994 1995 DECEMBER 31, 1996 JUNE 30, 1997
---------------- ---------------- ------------------ --------------
SOURCES OF REVENUE AMOUNT % AMOUNT % AMOUNT % AMOUNT %
- ------------------ ---------------- ---------------- ------------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advertising............. $ 117.4 57.9% $ 124.3 57.9% $ 135.5 59.6% $ 73.4 61.1%
Newsstand............... 40.1 19.7 39.9 18.6 42.0 18.5 21.3 17.7
Subscriptions........... 42.6 21.0 43.9 20.5 43.3 19.1 21.7 18.1
Other................... 2.7 1.4 6.4 3.0 6.4 2.8 3.7 3.1
-------- ------- -------- ------- --------- -------- ------- ------
Total................. $ 202.8 100.0% $ 214.5 100.0% $ 227.2 100.0% $ 120.1 100.0%
======== ======= ======== ======= ========= ======== ======= ======
</TABLE>
- --------
(1) Reflects the operations of the Predecessor for nine months ended September
30, 1996 and those of Petersen for the three months ended December 31,
1996 on a combined basis.

Advertising

Advertising sales accounted for approximately 59.6% and approximately 61.1%
of the Company's net revenues for the twelve months ended December 31, 1996
and the six months ended June 30, 1997, respectively. The Company's
advertising rates and rate structures vary among the Company's publications
and are based, among other things, on the circulation of the particular
publication and the size and location of the advertisement in the publication.
As compared to general-interest magazines, the Company believes that its
advertising revenues are less susceptible to changes in general economic
conditions due to the diversity of its publications and the endemic nature of
its advertiser base. In addition, the Company has a diverse advertiser base,
with its top 20 advertisers accounting for only 29.7% of the Company's
advertising revenues during the twelve months ended December 31, 1996. The
Company anticipates that its revenues from manufacturers of tobacco related
products will decrease in the future as a result of the resolution of certain
litigation involving such manufacturers. Advertising revenues from such
manufacturers were $3.9 million for the six months ended June 30, 1997.

The Company's advertising revenues are principally derived from large and
small manufacturers of products endemic to the editorial content of the
Company's magazines, such as new cars, trucks and motorcycles, aftermarket
automotive parts, hunting equipment, recreational firearms, bicycles and
bicycle accessories, diving equipment and photographic equipment and supplies.
Such manufacturers utilize the Company's magazines to efficiently advertise
their specialized products to the Company's enthusiast readership. Certain of
the Company's advertisers rely on the Company's publications as their primary
source of media advertising. In addition to revenues from endemic advertising,
the Company also derives a portion of its advertising revenues from well-known
national manufacturers of consumer products that do not directly relate to the
editorial content of the Company's magazines, such as apparel, footwear and
accessories, cosmetics and food and beverages. The

44
<PAGE>

Company derives the largest portion of its advertising revenues from the
automotive industry, which has traditionally accounted for the largest
percentage of total advertising expenditures in the consumer magazine
industry. For the twelve months ended December 31, 1996, the Company derived
approximately 17.0% and 21.5% of its advertising revenues from automotive
manufacturers of original equipment and aftermarket parts, respectively.

Newsstand

Newsstand sales accounted for approximately 18.5% and approximately 17.7% of
the Company's net revenues for the twelve months ended December 31, 1996 and
the six months ended June 30, 1997, respectively. The Company generally
receives between 40% and 50% of the cover price of an individual magazine sold
through a newsstand with the balance of such cover price going to such
magazine's distributor, wholesaler and retailer.

Subscriptions

Subscription sales accounted for approximately 18.4% and approximately 16.8%
of the Company's net revenues for the twelve months ended December 31, 1996
and the six months ended June 30, 1997, respectively. Subscriptions to the
Company's magazines are generally sold either directly by the Company or by an
independent subscription agent, such as Publishers Clearing House. Such agents
remit a percentage of the subscription price to the Company. In certain
instances, the subscription agent receives a fee from the Company in addition
to retaining the entire subscription price. In the aggregate, the Company
receives approximately 10% to 15% of the total price of subscriptions sold
through agents. In addition to utilizing subscription agents, the Company has
historically sold its subscriptions using a variety of techniques including
direct reply subscription cards, direct mail and television advertisements.

Other Circulation

The Company has developed a database that includes detailed demographic
information on approximately 16 million current or former subscribers. The
Company uses this database to, among other things, develop specific subscriber
lists for third parties including the Company's advertisers. For the six
months ended June 30, 1997, subscriber list rental income accounted for
approximately 1.9% of net revenues. The Company believes it can continue to
increase list rental income by actively marketing its subscriber database to a
broad group of potential users.

Other Revenue Sources

Prior to the Acquisition, the Company was operated as a traditional consumer
magazine company deriving substantially all of its revenues from advertising
and circulation sales. Management estimates that many consumer magazine
publishers currently derive approximately 10% to 20% of their revenues from
ancillary revenue sources while the Company derived only about 3% to 4% of its
revenues from ancillary sources prior to the Acquisition. These additional
revenues are derived primarily from domestic and international licensing
arrangements and sponsorship of special events, such as trade shows and
outdoor festivals that relate to the editorial content of the Company's
magazines. Since the Acquisition the Company has pursued the ancillary revenue
opportunities afforded to it as a result of its internationally-recognized
brands and has recently formed Petersen Enterprises and added a new senior
manager to pursue such opportunities.

The Company believes that there are significant opportunities to increase
revenues by leveraging off the editorial content, readers and subscription
database and the internationally-recognized brands of the Company's existing
publications. With the growth of electronic publishing, the Company believes
that there will be increased

45
<PAGE>

opportunities to utilize the editorial content of the Company's publications
across different formats. The Company has already established a web-site on
the Internet for Motor Trend and Bicyclist, and expects to establish a Teen
web-site in the near future. The Company believes that electronic publishing
offers opportunities to generate additional revenues through increased
advertising sales, access fees and additional subscription sales.

The Company also believes that significant opportunities exist to generate
additional revenues through affinity group marketing programs through which
the Company would sell complementary products or services in addition to
magazines directly to its subscribers. Through such programs, the Company will
seek to increase its revenues from a typical subscriber from a single magazine
subscription to a variety of related products and services. The Company
believes that its special-interest publications will provide an attractive
platform through which to pursue such programs. The Company also intends to
enter into licensing arrangements for products and services that use the
Company's internationally-recognized brands.

Because the editorial content of many of its magazines would also appeal to
readers outside the United States, management believes that significant
opportunities exist to establish international licensing agreements,
particularly in Asia, Australia, Great Britain and Western Europe. Other areas
that the Company believes it can develop additional revenue streams include
developing business-to-business publications and entering into strategic joint
ventures.

PUBLICATIONS

46
<PAGE>

The Company's portfolio includes 25 monthly, 11 bi-monthly and 42 single
issue or annual publications. The following table sets forth selected
information relating to the Company's current portfolio of monthly and bi-
monthly publications:
<TABLE>
<CAPTION>
AVERAGE
CIRCULATION
FOR THE SIX
MONTHS ENDED FREQUENCY OF YEAR OF
GROUP MAGAZINE TITLE JUNE 30, 1997 (1) PUBLICATION (2) INTRODUCTION
------------------------ ------------------------ ----------------- --------------- ------------
(COPIES IN
THOUSANDS)
<C> <S> <C> <C> <C>
Automotive Performance: Hot Rod................. 780.4 Monthly 1948
Car Craft............... 383.6 Monthly 1953
Petersen's 4 Wheel &
Off-Road................ 365.8 Monthly 1977
Sport Truck............. 200.3 Monthly 1988
Chevy High Performance.. 179.4 Monthly 1987
Circle Track and Racing
Technology.............. 131.8 Monthly 1982
Rod & Custom............ 118.0 Monthly 1955
Mustang & Fords......... 100.4 Bi-Monthly 1980
Custom Classic Trucks
(3)..................... 93.9 Bi-Monthly 1994
Hot Rod Bikes (3)....... 71.4 Monthly 1994
5.0 Mustang (3)......... 58.5 Bi-Monthly 1994
Kit Car (3)............. 72.3 Monthly 1982
Super Street (4)........ -- Monthly 1996
4x4 Power (4)........... -- Monthly 1996
VW Custom & Classic (4). -- Bi-Monthly 1997
Watercraft Power (4).... -- Monthly 1997
Motor Trend: Motor Trend............. 1,047.7 Monthly 1949
Youth: Teen.................... 1,661.1 Monthly 1957
All About You!.......... 302.9 Monthly 1995
Outdoor: Guns & Ammo............. 588.3 Monthly 1958
Petersen's Hunting...... 359.5 Monthly 1973
Handguns................ 150.3 Monthly 1987
Petersen's Bowhunting... 161.5 Bi-Monthly 1989
SHOT Business (5)....... 21.0 Monthly 1993
Petersen's Shotguns (4). -- Bi-Monthly 1997
Rifle Shooter (4)....... -- Bi-Monthly 1997
Photo/Marine: Petersen's Photographic. 202.9 Monthly 1972
Skin Diver.............. 200.1 Monthly 1951
Family Photo (4)........ -- Bi-Monthly 1997
Motorcycle/ Bicycle: Motorcyclist............ 241.0 Monthly 1912
Dirt Rider.............. 165.6 Monthly 1982
Mountain Biker.......... 124.9 Monthly 1994
Bicyclist............... 99.1 Bi-Monthly 1984
Sport Rider............. 92.2 Bi-Monthly 1993
Cruiser (4)............. -- Bi-Monthly 1997
Sport: Sport................... 789.0 Monthly 1946
</TABLE>
- -------
(1) Based on circulation information provided by the Company to the Audit
Bureau of Circulation except for SHOT Business.
(2) Magazines that are published 10 to 12 times per year are classified as
monthly publications. Magazines that are published 6 to 9 times per year
are classified as bi-monthly publications.
(3) Based on sworn average circulation for the six months ended December 31,
1996, except for Kit Car, which is for the six months ended December 31,
1995.
(4) No circulation information is available due to the publication's limited
operating history.
(5) Based on circulation information provided by BPA International for the
six-months ended June 30, 1996

47
<PAGE>

Each publishing group produces single issue publications, annuals, hard
cover books and technical volumes. These publications generally provide more
in-depth coverage of topics addressed in the Company's monthly and bi-monthly
magazines. Examples of such single issue publications include Teen's Celebs,
Sharks & Divers, Muscle Car How-To's and BMX Racer. By utilizing portions of
the editorial content previously appearing in its monthly and bi-monthly
publications, the Company is able to generate additional revenues in a cost-
effective manner through such publications. In addition, the Company utilizes
single issue publications as a means of developing and testing new
publications. Many of the Company's current monthly and bi-monthly
publications were first introduced as single issue publications. The Company
has scheduled the publication of 44 single issue publications for 1997.

The following table sets forth selected information relating to magazines
that have increased or are anticipated to increase publication frequency or
were started, acquired or licensed since the Acquisition:

<TABLE>
<CAPTION>
MONTH OF
FIRST ISSUE
PUBLISHED BY
MAGAZINE TITLE FREQUENCY COMPANY
- ------------------------------------------------------- --------- --------------
<S> <C> <C>
INCREASED PUBLICATION FREQUENCY:
Motorcycle Cruiser.................................... 6 January 1997
Family Photo.......................................... 6 Febuary 1997
Rifle Shooter......................................... 6 August 1997
Petersen's Shotguns................................... 6 September 1997

START-UPS:
4x4 Power............................................. 12 October 1996
Super Street.......................................... 12 October 1996
VW Custom & Classic................................... 6 November 1996
Watercraft Power...................................... 10 February 1997
Concealed Carry Guns.................................. 1 April 1997
Teen's Great Looks.................................... 4 May 1997
MX Racer.............................................. 6 May 1997
.22 Rimfire........................................... 1 June 1997
Sharks & Divers....................................... 1 June 1997
Test Fire............................................. 1 July 1997
Whoops!............................................... 1 July 1997
Teen's Celebs......................................... 1 September 1997
How It Works.......................................... 1 September 1997
Muscle Car How-To's................................... 1 October 1997*
Girls of Sport Truck.................................. 1 October 1997*
Chevy Small Block Engines............................. 1 November 1997*
4-Wheel Tech & How-To................................. 1 November 1997*
Teen's Guys........................................... 1 November 1997*
Build Your First Race Car............................. 1 December 1997*
BMX Racer............................................. 1 December 1997*

ACQUISITIONS OR LICENSES:
Richard Petty's Stock Car Racing...................... 4 July 1997
Bob Griese's College Football Preview................. 1 July 1997
Dick Vitale's College Basketball Preview.............. 1 October 1997*
SHOT Business......................................... 12 October 1997*
</TABLE>
- --------
* Projected

48
<PAGE>

The following sets forth a brief description of each of the Company's 15
core magazines by publishing group:

AUTOMOTIVE PERFORMANCE GROUP

Hot Rod was the first magazine launched by the Company's founder in 1948.
Hot Rod is dedicated to the sport of "hot rodding" and primarily focuses on
high performance and personalized vehicles. Hot Rod's editorial content covers
all aspects of the automobile performance industry and features the latest
trends, performance cars and trucks, custom built street rods as well as
racing vehicles of all types. Hot Rod's comprehensive coverage includes in-
depth product testing, technical articles, editorial commentary, road tests,
engine buildups and photo stories on project cars. Hot Rod is the dominant
publication in its targeted market and competes with Popular Hot Rodding. The
Company has licensed the use of the Hot Rod brand name in connection with a
television show for TNN. For the twelve months ended December 31, 1996, Hot
Rod generated approximately 8.5% of the Company's net revenues.

Petersen's 4 Wheel & Off-Road ("4 Wheel & Off-Road") is a leading magazine
for four-wheel drive enthusiasts. Established in 1978, 4 Wheel & Off-Road is
dedicated to the four-wheel drive enthusiast and industry. 4 Wheel & Off-Road
is aimed at people who: (i) are considering the purchase of a new four-wheel
drive vehicle; (ii) want to accessorize and improve their vehicle; or (iii)
frequently drive their four-wheel drive in competitive settings. 4 Wheel &
Off-Road provides its readers with a significant number of technical articles,
including tests of new products and step-by-step installation of popular
accessories such as suspension lifts and engine modifications. In addition to
a strong technical base, 4 Wheel & Off-Road also features monthly articles
which cover the nation's truck and off-road events. 4 Wheel & Off-Road
principally competes with Four Wheeler and Off-Road. For the twelve months
ended December 31, 1996, 4 Wheel & Off-Road generated approximately 5.9% of
the Company's net revenues.

Car Craft is a comprehensive do-it-yourself street performance magazine.
Established in 1953, Car Craft is devoted to knowledgeable enthusiasts
interested in obtaining maximum performance from modified street machines and
racing vehicles. Car Craft features informative monthly articles, including
technical how-to-articles, in-depth testing of new performance cars and
information regarding new performance technology. For the twelve months ended
December 31, 1996, Car Craft generated approximately 4.2% of the Company's net
revenues.

Sport Truck provides its readers with information about the street truck
marketplace. Sport Truck provides both step-by-step and technical articles
that detail the customizing process and provides complete coverage of the
products and tools involved in the customization. Sport Truck focuses on the
latest trucks on the market as well as prototypes, including both domestic and
import models. Sport Truck's principal competition is from Truckin' magazine.
For the twelve months ended December 31, 1996, Sport Truck generated
approximately 2.7% of the Company's net revenues.

Chevy High Performance is designed to be an authoritative source for
enthusiasts who are interested in buying, building, restoring and modifying
high-performance Chevrolet automobiles ("Chevys"). Chevy High Performance was
first introduced in 1987 and was converted into a monthly publication in 1995.
Chevy High Performance provides its readers with in depth, step-by-step
technical articles that show the reader how to modify, fabricate and build
high performance into their Chevys. The magazine answers readers' questions
and offers shopping tips about performance and restoration. Features also
include the latest news, profile readers' cars and highlight upcoming Chevy
events. Chevy High Performance's principal competition is from Super Chevy
magazine. For the twelve months ended December 31, 1996, Chevy High
Performance generated approximately 2.0% of the Company's net revenues.

Circle Track & Racing Technology ("Circle Track") is a leading technical
magazine for oval-track racers, fans and enthusiasts. Circle Track provides an
emphasis on how-to technical articles, in-depth discussions of engine, chassis
and racing technology, descriptive car features, behind-the-scenes event
coverage and action photography. Circle Track was introduced in 1982 and
currently competes with Stock Car Racing and Open Wheel. For the twelve months
ended December 31, 1996, Circle Track generated approximately 2.8% of the
Company's net revenues.

49
<PAGE>

MOTOR TREND GROUP

Motor Trend is recognized as a leading authority on new domestic and foreign
automobiles. Founded by the Company in 1949, Motor Trend provides
comprehensive information and guidance to new car buyers as well as car and
truck enthusiasts. Motor Trend typically tests more than 200 new cars, trucks,
minivans and sport utility vehicles annually, which the Company believes is
more than any other competitive publication. Many of these tests are conducted
in the context of multi-vehicle comparison tests, which provide the reader
with detailed technical and driving analysis in an easy-to-understand format.
Motor Trend's annual automotive industry awards (Car of the Year, Import Car
of the Year and Truck of the Year) are widely regarded as one of the most
prestigious in the industry. During the last two years, Motor Trend has been
the fastest growing magazine in the automobile field in terms of paid
circulation.

For the twelve months ended December 31, 1996, Motor Trend generated
approximately 14.3% of the Company's net revenues. In June 1996, the Company
established a Motor Trend web-site on the Internet, which currently contains
approximately 30% of the editorial content of the monthly edition. During June
1997, the web-site averaged 466,762 hits per day. The Company believes that
the Internet offers the Company additional opportunities to generate revenues
through increased advertising sales, access fees and additional subscription
sales. The Company has also licensed the use of the Motor Trend brand name in
connection with a television show for TNN. In addition, the Company published
six Motor Trend buyer's guides in 1996. Motor Trend's principal competitors
are Car and Driver, Road & Track and Automobile.

YOUTH GROUP

Teen has the largest circulation of any of the Company's magazines. Teen's
editorial content covers a broad range of topics relevant to girls aged 12 to
19, including fashion, beauty, entertainment and a wide variety of
contemporary issues. Teen places a strong emphasis on the development of self-
esteem and self-confidence among its readers. In December 1996, the Company
discontinued the publication of Sassy and provided its subscribers with a Teen
subscription in early 1997. Teen principally competes with Seventeen and YM.
For the twelve months ended December 31, 1996, Teen generated approximately
11.4% of the Company's net revenues.

Following the Acquisition, management made a number of changes to Teen
designed to increase its appeal to both readers and advertisers, including
refocusing its editorial content to attract more readers in their late teens
in an effort to increase advertising revenues from the cosmetic and fashion
apparel industries. In addition, management improved Teen's cover layout and
artwork and upgraded the paper grade used for its production. Teen's
management has recently been moved to New York City to increase its visibility
among advertisers in the fashion and cosmetic industries.

OUTDOOR GROUP

Guns & Ammo is edited for the sportsman with an interest in the practical
applications of sporting firearms, with an emphasis on their safe and proper
use. Guns & Ammo features information on current production of sporting arms
and their use, as well as technical articles on all facets of sport shooting.
Each issue of Guns & Ammo delivers an editorial mix that includes hunting,
shooting, reloading, antique and modern arms, ballistics and firearms
legislation. Natural resource protection and environmental conservation as
well as in-depth reviews of new products and new trends represent other major
editorial issues covered by internationally renowned experts. Guns & Ammo
principally competes with Shooting Times and Guns. For the twelve months ended
December 31, 1996, Guns & Ammo generated approximately 5.7% of the Company's
net revenues.

Petersen's Hunting ("Hunting") is the only U.S. national monthly publication
devoted entirely to the sport of recreational hunting. Every issue contains
instructional and entertaining articles for the hunting enthusiast. Hunting
presents in-depth coverage of the various hunting disciplines: big and small
game, waterfowl, upland game, and foreign hunting. Monthly departments focus
on the more specialized aspects of the sport and its equipment, including game
management, vehicles, gun dogs, optics, handloading, bowhunting and firearms.
Editorial coverage also includes conservation and ecological issues, the roles
played in these areas by the hunter

50
<PAGE>

and the manufacturer, and basic where-to and how-to information for all types
of recreational hunting. Hunting has no direct competitors and indirectly
competes with American Hunter, North American Hunter and Sports Afield. For
the twelve months ended December 31, 1996, Hunting generated approximately
3.4% of the Company's net revenues.

PHOTO/MARINE GROUP

Skin Diver was introduced by the Company in 1951 and is the largest diving
magazine in the world in terms of annual circulation. The magazine's editorial
focus involves three categories: (i) diving news, safety and educational
issues; (ii) dive product performance reviews; and (iii) local and overseas
dive travel. Skin Diver provides information on scuba diving equipment,
snorkeling, underwater photography, shipwreck exploration, marine life,
organized diving events, scuba education and dive travel. With global coverage
of dive travel activities, Skin Diver features in every issue dive resorts,
live-aboard dive boats and attractions in over 70 countries and islands around
the world. All topics are covered by an internal staff and contributing
editors who are among the most experienced and well trained divers in the
world. Skin Diver is the only national publication that focuses primarily on
all aspects of skin diving and competes on a limited basis with Rodale's Scuba
Diving. For the twelve months ended December 31, 1996, Skin Diver generated
approximately 5.7% of the Company's net revenues.

Petersen's Photographic ("Photographic") magazine is a how-to guide
dedicated to increasing photographic knowledge, skill and enjoyment for both
amateurs and professionals. Photographic is edited for all levels of
photography and blends equipment coverage with reports on photography
techniques, workshops, schools, photo travel and contests. Each issue includes
travel features that encourage readers to test and improve their photography
skills. Each issue also includes segments on outdoor and action photography as
well as information on travel destinations and information on how best to take
advantage of the photographic opportunities afforded by travel. Photographic
was introduced in 1972 and principally competes with American Photo and
Popular Photography. For the twelve months ended December 31, 1996,
Photographic generated approximately 2.8% of the Company's net revenues.

MOTORCYCLE/BICYCLE GROUP

Motorcyclist is the only U.S. national monthly publication that is dedicated
exclusively to street motorcycles. The magazine's editorial focus is on the
practical aspects of owning, maintaining and riding a street motorcycle.
Motorcyclist is written for the enthusiast, offering authoritative road tests
along with information on how to improve and modify the reader's current
motorcycles. Regular features include maintenance and performance-improvement
articles and safety information such as helmet comparisons and riding-
techniques. Motorcyclist principally competes with Cycle World. For the twelve
months ended December 31, 1996, Motorcyclist generated approximately 3.1% of
the Company's net revenues.

Dirt Rider is the world's largest dirt riding publication in terms of
circulation and covers all aspects of off-road motorcycling. Dirt Rider offers
readers full coverage of off-road motorcycling including new motorcycle
evaluations, technical information, riding tips and the latest in riding
accessories. The editorial content focuses on reviews of the latest machinery
and aftermarket products from the off-road riding industry. Dirt Rider
principally competes with Dirt Bike and Motocross Action. For the twelve
months ended December 31, 1996, Dirt Rider generated approximately 2.7% of the
Company's net revenues.

SPORT GROUP

Sport was acquired by the Company in 1988 and celebrated its 50th year in
publication in 1996. Sport is the largest monthly sports publication in the
market. Sport is designed to provide more in-depth and insightful coverage of
action both on and off the field than can be found through other sources of
sports news. Interviews, season previews, players and team evaluations and
behind-the-scenes reports for both professional and collegiate sports aim to
give the reader insight not available from television, newspapers or sports
weeklies. Since the Acquisition, the Company has implemented a number of
changes to Sport designed to improve its operating performance. The changes
include redirecting its editorial focus and improving its layout and graphic
quality. Sport principally competes with Inside Sports. For the twelve months
ended December 31, 1996, Sport generated approximately 4.5% of the Company's
net revenues.

51
<PAGE>

SALES AND MARKETING

The Company's sales and marketing activities are designed to implement the
Company's business and operating strategy of increasing advertising,
circulation and ancillary revenues. The Company employs a staff of 205 persons
who are engaged in sales and marketing.

Advertising

A key portion of the Company's advertising marketing strategy is designed to
increase advertising revenues from non-endemic advertisers. Non-endemic
advertising sales are currently handled by a centralized sales staff that is
managed from New York City, in order to be in close proximity to the major
non-endemic accounts. The Company also instituted a new commission plan for
salespersons in order to properly motivate the staff throughout the year and
upgraded the support staff in the areas of marketing, creative services and
research. The Company has also expanded the number of salespersons dedicated
to single, large advertising accounts, such as in the new automobile and
aftermarket fields. The Company's endemic advertising sales are made by each
publishing group.

Circulation

Prior to the Acquisition, circulation marketing was managed in Los Angeles
by a staff organized by magazine group. The department has subsequently been
moved to New York City, so it can more readily draw on experienced circulation
marketing talent, and has been reorganized along functional lines. The
Company's subscription marketing strategy is designed to increase the number
of readers who buy subscriptions directly from the Company. To implement this
strategy, the Company has instituted a number of new promotional programs such
as creating advertising testing over 70 direct mail packages, television
advertisement, and new billing advertisement renewal efforts.

Ancillary Revenues

Since the Acquisition, the Company has pursued certain ancillary revenue
opportunities afforded it by its well-established brand names and intends to
continue to do so in the future. The Company has recently added a new senior
manager as well as three new staff members to focus on such opportunities.

PRODUCTION, DISTRIBUTION AND FULFILLMENT

The Company employs a staff of professionals to manage the production and
oversee the printing, distribution and fulfillment of its magazines, which are
outsourced to third parties. Through the use of state-of-the-art design and
production technology, economies of scale in printing contracts and
efficiencies in subscription solicitation and fulfillment, the Company is able
to effectively produce and distribute all of its publications. The Company's
production system for both graphics and editing utilizes an integrated
publishing environment that is networked with satellite offices and World
Color Press, Inc. ("World Color"). Approximately 60 employees of the Company
are engaged in the production and distribution of the Company's publications.

The Company sold all of its assets relating to its pre-press operations to
World Color for approximately $2.5 million in February 1996. At the same time,
the Company entered into an agreement with World Color pursuant to which World
Color agreed to provide the Company's color separation, pre-press and related
service requirements with respect to most of the Company's publications for
the term of the agreement. Under the agreement, the Company is generally
required to use World Color for at least 85% of its pre-press and related
service requirements. This agreement with World Color expires on December 31,
2003.

All of the Company's magazines are currently printed by World Color pursuant
to an agreement that expires on December 31, 2003. The Company believes that
its relationship with World Color is good. The Company believes, however, that
other printers of similar quality could be engaged on similar terms. The
Company believes that its high volume of printing with World Color enables it
to receive favorable printing rates. In February 1997, in exchange for an
agreement to purchase additional printing services, the Company's then
existing agreements with World Color were amended to extend the terms of the
agreement and to provide more favorable pricing terms with respect to color
separation, pre-press and related services.

52
<PAGE>

The newsstand distribution of the Company's magazines is handled exclusively
by Warner Publisher Services, Inc. ("Warner") pursuant to a distribution
agreement. Such agreement will remain in effect until December 31, 1998,
subject to automatic 90-day extensions thereafter unless either party delivers
a termination notice. Warner distributes the Company's publications through a
network of marketing representatives to domestic independent wholesalers as
well as to other channels of distribution. Warner also provides the Company
with other services, including management information and promotional and
specialty marketing services. Warner's marketing representatives solicit
national, regional and local retailers in an effort to expand the number of
retail outlets for the Company titles. See "Risk Factors--Consolidation of
Principal Vendors."

The Company's subscriptions are serviced by Neodata Services, Inc.
("Neodata"), which (i) receives, verifies, balances and deposits payments from
subscribers, (ii) maintains master files on all subscribers by magazine and
issues bills and renewal notices to subscribers, (iii) issues address labels
for the magazines as directed by the Company and (iv) furnishes various
reports to monitor all aspects of the subscription operations. The Company's
existing agreement with Neodata may be terminated by either party after August
31, 1998.

RAW MATERIALS

Following the Acquisition, the Company secured sufficient paper to meet its
projected raw material needs through the end of 1997 at a fixed price. The
Company is currently in discussions relating to the terms on which the Company
will purchase paper in 1998. There can be no assurance that the Company will
be able to reach agreement on terms favorable to the Company or that future
fluctuations in paper prices will not have a material adverse effect on the
results of operations and financial condition of the Company. See "Risk
Factors--Paper Price Volatility and Postal Prices" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview."

COMPETITION

The magazine publishing business is highly competitive. The Company
principally competes for advertising and circulation revenues with publishers
of other special-interest consumer magazines with similar editorial content as
those published by the Company. Such competitors include: K-III Communications
Company, which publishes Seventeen, Automobile and Truckin'; Hachette
Filipacchi Magazines, Inc., which publishes Road and Track, Car & Driver,
Popular Photography and Cycle World; Gruner + Jahr Publishing, which publishes
YM; Rodale Press Inc., which publishes Bicycling and Rodale's Scuba Diving and
The Times Mirror Company, which publishes Outdoor Life and Field & Stream.
Certain of the Company's competitors are larger and have greater financial
resources than the Company. Most of the Company's magazines face competition
within each of their respective markets from one to three other publications.
The Company believes that it competes with other special-interest publications
based on the nature and quality of its magazines' editorial content. Of the
Company's 15 core magazines, nine are ranked first in their respective markets
based on annual circulation in 1996, including two magazines that were the
only national magazines published in their respective markets.

In addition to other special-interest magazines, the Company also competes
for advertising revenues with general-interest magazines and other forms of
media, including broadcast and cable television, radio, newspaper, direct
marketing and electronic media. In competing with general-interest magazines
and other forms of media, the Company relies on its ability to reach a
targeted segment of the population in a cost-effective manner.

53
<PAGE>

INTELLECTUAL PROPERTY

The Company believes that it has developed strong brand awareness within
each of its magazines' targeted markets. As a result, the Company regards its
branded magazine titles and logos to be valuable assets. The Company has
registered numerous trademarks, service marks and logos used in its publishing
business in the United States and foreign countries in which the Company
conducts business. In addition, each one of the Company's publications is
protected under Federal copyright laws. In connection with the Acquisition,
the Company entered into a license agreement with Mr. Petersen pursuant to
which it was granted an exclusive license to use the Petersen name in
perpetuity. The Company believes that it owns or licenses all the intellectual
property rights necessary to conduct its business.

PROPERTIES

The Company publishes its magazines and houses its corporate and
administrative staff at its headquarters located at 6420 Wilshire Boulevard,
Los Angeles, California. Information relating to the Company's corporate
headquarters and other regional sales offices, all of which are leased by the
Company, is set forth in the following table:

<TABLE>
<CAPTION>
LOCATION ADDRESS SQUARE FOOTAGE TERM EXPIRATION DESCRIPTION OF USE
- -------- ------------------------ -------------- --------------- ------------------
<S> <C> <C> <C> <C>
Los Angeles............. 6420 Wilshire Boulevard 188,309 11/30/09 Headquarters
New York................ 110 Fifth Avenue 47,304 3/31/09 Circ./Sales/Corp.
New York (1)............ 437 Madison Avenue 29,301 10/31/04 Sales Office
Chicago................. 815 North LaSalle Street 10,407 9/30/05 Sales Office
Detroit................. 333 Fort Street 6,695 12/31/03 Sales Office
Boulder................. 5350 Manhattan Circle 1,435 2/28/99 Circulation
Atlanta................. Five Concourse Parkway 3,524 4/30/98 Sales Office
Dallas (2).............. 800 West Airport Freeway 1,230 12/31/97 Sales Office
</TABLE>
- --------
(1) The Company is currently pursuing opportunities to sublease this space.

(2) This sales office was closed pursuant to management's business and
operating strategy.

The Company leases space used for its corporate headquarters and Chicago
regional sales office from Mr. Petersen. See "Certain Relationships and
Related Transactions."

EMPLOYEES

As of June 30, 1997, the Company employed approximately 600 full-time
employees, none of whom are members of a union. The Company believes that its
relations with its employees are good.

LEGAL PROCEEDINGS

The Company is a party to various litigation matters incidental to the
conduct of its business. Although management cannot predict the outcome of any
of such matters, it does not believe that the outcome of any of the matters in
which it is currently involved will have a material adverse effect on the
financial condition or results of operations of the Company.

54
<PAGE>

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth certain information (ages as of June 15,
1997) with respect to the persons who are members of the Board of Directors,
executive officers or key employees of the Company.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
James D. Dunning, Jr. .. 50 Chairman of the Board and Chief Executive Officer
D. Claeys Bahrenburg.... 50 Vice Chairman of the Board and Chairman of the Executive Committee
Neal Vitale............. 43 President, Chief Operating Officer and Director
Richard S Willis........ 36 Executive Vice President, Chief Financial Officer and Director
Laurence H. Bloch....... 43 Vice Chairman of the Board
Avy H. Stein............ 42 Director
Daniel H. Blumenthal.... 33 Director
Stuart Karu............. 50 Director
John R. Willis.......... 47 Director
Michael Borchetta....... 32 Vice President, Circulation
James Guthrie........... 56 Executive Vice President, Marketing and Sales
Justin McCormack........ 37 President, Petersen Enterprises
John Dianna............. 54 President, Automotive Performance Group
Ken Elliott............. 57 Vice President, Executive Publisher, Outdoor Group
Lee Kelley.............. 55 President, Motor Trend Group
Richard P. Lague........ 53 Vice President, Executive Publisher, Motorcycle/Bicycle Group
Charlotte Anne Perkins.. 42 President, Sport Group
Paul J. Tzimoulis....... 60 Vice President, Executive Publisher, Photo/Marine Group
Amy P. Wilkins.......... 34 President, Youth Group
</TABLE>

DIRECTORS AND EXECUTIVE OFFICERS.

James D. Dunning, Jr. has served as the Chairman of the Board and Chief
Executive Officer of the Company since the Acquisition. Since 1993, Mr.
Dunning has been Chairman and Chief Executive Officer of TransWestern
Publishing Company, L.P. ("TransWestern"), the largest independent publisher
of yellow pages in the United States and is currently Chairman and Chief
Executive Officer of The Dunning Group, Inc. Mr. Dunning was formerly Chairman
of SRDS Media Information, L.P. ("SRDS"), a media information and database
publisher. From 1987 to 1992, Mr. Dunning was Chairman, Chief Executive
Officer and President of Multi-Local Media Information Group, Inc. ("MLM"), a
yellow pages and database company. From 1985 to 1986, he served as Executive
Vice President of Ziff Communications, a consumer and trade publisher. From
1982 to 1984, Mr. Dunning was Senior Vice President and Director of Corporate
Finance at Thomson McKinnon Securities, Inc. ("Thomson McKinnon"), an
investment banking firm. Mr. Dunning served as President of Rolling Stone
Magazine from 1977 to 1982.

D. Claeys Bahrenburg currently serves as Vice Chairman and Chairman of the
Executive Committee of the Company and has served as a Director of the Company
and as Chief Executive Officer of Publishing since the Acquisition. From 1989
to 1995, Mr. Bahrenburg served as President of the Magazine Publishing
Division of The Hearst Corporation ("Hearst"), the largest publisher of
monthly magazines in the world. From 1986 to 1989, Mr. Bahrenburg served as
Executive Vice President and Group Publishing Director at Hearst, where his
responsibilities included overseeing 12 publications, new magazine development
and brand development. From 1981 to 1986, Mr. Bahrenburg held the position of
Publisher of both House Beautiful and Cosmopolitan.

Neal Vitale currently serves as the President and Chief Operating Officer of
the Company and has served as a Director of the Company and President and
Chief Operating Officer of Publishing since the Acquisition. From 1989 to
1996, Mr. Vitale was employed by Cahners Publishing Company ("Cahners"), a
division of Reed Elsevier, Inc. and a leading business-to-business publisher,
in a variety of managerial capacities, including Vice President of Consumer
Publishing, Vice President/General Manager of Variety and, most recently, as
Group Vice

55
<PAGE>

President, Entertainment, where he was responsible for the publications of
Variety, Daily Variety, Broadcasting & Cable, Moving Pictures International,
On Production and Tradeshow Week. From 1984 to 1989, Mr. Vitale was a partner
at McNamee Consulting Company, Inc., a management consulting firm specializing
in publishing and direct marketing.

Richard S Willis currently serves as Executive Vice President, and Chief
Financial Officer of the Company and has served as a Director of the Company
since December 1996 and has served as Executive Vice President and Chief
Financial Officer of Publishing since the Acquisition. Prior to the
Acquisition, Mr. Willis served as the Vice President, Finance of the
Predecessor since October 1995. From 1993 to 1995, Mr. Willis served as the
Executive Vice President and Chief Financial Officer of two divisions of World
Color and from 1990 to 1993 as the Chief Financial Officer and Secretary of
Aster Publishing Company. From 1987 to 1990, Mr. Willis served as the Chief
Financial Officer and Vice President of Finance and Administration of the
consumer magazine group of Cowles Media Company. Prior thereto, Mr. Willis
held various financial and managerial positions with Capital Cities/ABC,
including the Chief Financial Officer of its consumer magazine division. Mr.
Willis is not affiliated with Willis Stein.

Laurence H. Bloch has served as the Vice Chairman of the Company since the
Acquisition. Mr. Bloch also serves as Vice Chairman and Chief Financial
Officer of TransWestern, which he joined in 1993. From 1990 to 1992, Mr. Bloch
was Senior Vice President and Chief Financial Officer of Lanxide Corporation,
a materials technology company. Between 1980 and 1990, Mr. Bloch was an
investment banker, initially with Thomson McKinnon and later as a Managing
Director of Smith Barney. Mr. Bloch is a director of TransWestern and was
formerly a director of SRDS and MLM.

Avy H. Stein has served as a Director of the Company since the Acquisition.
Mr. Stein is a founder and Managing Director of Willis Stein. Prior to
founding Willis Stein, Mr. Stein served as a Managing Director of Continental
Illinois Venture Corporation ("CIVC"), a venture capital investment firm, from
1989 through 1994. Prior to his tenure at CIVC, Mr. Stein served as a special
consultant for mergers and acquisitions to the Chief Executive Officer of NL
Industries, Inc.; as the Chief Executive Officer and principal shareholder of
Regent Corporation; as President of Cook Energy Corporation and as an attorney
with Kirkland & Ellis, a national law firm. Mr. Stein also serves as a
director of TransWestern, Tremont Corporation, Racing Champions Corporation,
UC Television Network Corp. and a number of privately-held companies.

Daniel H. Blumenthal has served as a Director of the Company since the
Acquisition. Mr. Blumenthal is a founder and Managing Director of Willis
Stein. Prior to founding Willis Stein, Mr. Blumenthal served as Vice President
of CIVC from 1993 through 1994. Prior to his tenure at CIVC, Mr. Blumenthal
was a corporate tax attorney with Latham & Watkins, a national law firm, from
1988 to 1993. Mr. Blumenthal also serves as a director of a number of
privately-held companies.

Stuart Karu has served as a Director of the Company since the Acquisition.
Mr. Karu currently is a private investor. From 1994 to 1995, Mr. Karu served
as Vice Chairman of SRDS and in 1995 he served as the interim Chief Executive
Officer of SRDS. From 1992 to 1994, Mr. Karu was the Chief Executive Officer
and major shareholder of Balsam Spring Water. From 1979 to 1989, Mr. Karu was
the Chief Executive Officer and principal shareholder of Henry S. Kaufman,
Inc., a national advertising and public relations firm. Mr. Karu serves as a
director of TransWestern and was formerly a director of SRDS and MLM.

John R. Willis has served as a Director of the Company since December 1996.
Mr. Willis is a founder and Managing Director of Willis Stein. Prior to
founding Willis Stein, Mr. Willis served as President of CIVC from 1989
through 1994. Prior to his tenure at CIVC, Mr. Willis founded and served as a
Managing Director of Continental Mezzanine Investment Group, following his
serving in various senior lending positions at Continental Bank which he
joined in 1974. Mr. Willis also serves as a director of TransWestern and a
number of other privately-held companies.

Executive officers of the Company are duly elected by the Board of
Directors to serve until their respective successors are elected and
qualified. There are no family relationships between any of the Directors or
executive officers of the Company.

56
<PAGE>

CERTAIN KEY EMPLOYEES

Michael Borchetta has served as Vice President, Circulation of the Company
since the Acquisition. Prior to joining the Company, Mr. Borchetta served as
Circulation Director of Cahners since 1989. Mr. Borchetta has also held
positions with Act III Communications and Cowles Media Company.

James Guthrie has served as Executive Vice President, Marketing and Sales
since April 1997. From November 1987 to March 1997, Mr. Guthrie served as
Executive Vice President-Marketing Development at Magazine Publishers of
America ("MPA"). Prior to joining MPA, Mr. Guthrie was President and Chief
Operating Officer of the advertising agency John Emmerling, Inc. for six
years.

Justin McCormack has served as President, Petersen Enterprises since March
1997. From February 1993 to March 1997, Mr. McCormack served as Executive Vice
President of Marvel Characters, Inc. where he oversaw advertising, licensing
and merchandising for the Marvel Entertainment Group. From June 1991 to
February 1993, Mr. McCormack served as President and owner of the Nicholas
James Group, a consultant and supplier to entertainment and publishing
companies for special promotions, merchandising and new product development.

John Dianna currently serves as President, Automotive Performance Group of
Petersen. Mr. Dianna served with the Predecessor for over 27 years, and served
as Vice-President, Executive Publisher, Automotive Performance Group since
August 1991. Mr. Dianna is primarily responsible for the publication of Hot
Rod, 4 Wheel & Off-Road, Car Craft, Sport Truck, Circle Track and related
publications.

Ken Elliott currently serves as Vice President, Executive Publisher, Outdoor
Group of Petersen. Mr. Elliott served with the Predecessor for over 22 years,
and served as Vice President, Executive Publisher, Outdoor Group since October
1995. Mr. Elliott served as Group Publisher from December 1991 to October
1995. Mr. Elliott is primarily responsible for the publication of Guns & Ammo,
Hunting, Bowhunting and related publications.

Lee Kelley currently serves as President, Motor Trend Group of Petersen. Mr.
Kelley served with the Predecessor for over 20 years, and served as Vice-
President, Executive Publisher, Motor Trend Group since October 1991. Mr.
Kelley is primarily responsible for the publication of Motor Trend and related
publications.

Richard P. Lague currently serves as Vice President, Executive Publisher,
Motorcycle/Bicycle Group of Petersen. Mr. Lague served with the Predecessor
for approximately 20 years, and served as Vice President, Executive Publisher
Motorcycle/Bicycle Group since February 1992. From August 1991 to February
1992, Mr. Lague served as Vice President Motorcycle/Bicycle Group. Mr. Lague
is primarily responsible for the publication of Motorcyclist and motorcycle
related publications, Bicycle Guide and Mountain Biker.

Charlotte Anne Perkins has served as President, Sport Group since March 1997
and is responsible for Sport and its special-interest publications. Prior to
joining the Company, Ms. Perkins published Sport Traveler magazine, which she
founded in 1992, and held various positions at Hearst and Hachette.

Paul J. Tzimoulis currently serves as Vice President, Executive Publisher,
Photo/Marine Group of Petersen. Mr. Tzimoulis served with the Predecessor for
over 25 years, and has served as Vice President, Executive Publisher,
Photo/Marine Group since August 1991. Mr. Tzimoulis is responsible for the
publication of Skin Diver and Photographic.

Amy P. Wilkins has served as President, Youth Group since May 1997 and is
responsible for Teen and its special-interest publications. From 1995 to 1997,
Ms. Wilkins served as Publisher of Health magazine (published by Time Warner,
Inc.) after serving in various positions with Health since 1989.

BOARD COMPOSITION

The Board of Directors will consist of ten members following the Offering,
which will include the nine current members of the Board plus one additional
"independent director" (within the meaning of the NYSE). It is expected that
the new director will be approved to the Board within three months following
the closing of the

57
<PAGE>

Offering. All of the current members of the Board were designated by Willis
Stein pursuant to the terms of the Securityholders Agreement. See "Principal
Stockholders--Securityholders Agreement." Directors of the Company are
currently elected annually by its stockholders to serve during the ensuing
year or until their respective successors are duly elected and qualified.

Prior to the completion of the Offering, the Board will be divided into
three classes, as nearly equal in number as possible, with each Director
serving a three-year term and one class being elected at each year's annual
meeting of stockholders. The Company's By-laws provide that Directors shall be
elected by a plurality vote, with no cumulative voting. Messrs. R. Willis, J.
Willis and Karu will be in the class of directors whose term expires at the
1998 annual meeting of the Company's stockholders. Messrs. Bahrenburg,
Blumenthal and Bloch will be in the class of directors whose term expires at
the 1999 annual meeting of the Company's stockholders. Messrs. Vitale, Stein
and Dunning will be in the class of directors whose term expires at the 2000
annual meeting of the Company's stockholders. At each annual meeting of the
Company's stockholders, successors to the class of directors whose term
expires at such meeting will be elected to serve for three-year terms, and
until their respective successors are elected and qualified. The Company
intends to hold its first annual meeting of stockholders following the
completion of the Offering in 1998.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors currently has two committees: (i) an Audit Committee
and (ii) a Compensation Committee. Immediately prior to the completion of the
Offering, the Board will establish an Executive Committee.

The Audit Committee is currently comprised of Messrs. J. Willis, Bloch and
Karu. The Audit Committee reviews and recommends to the Board, as it deems
necessary, the internal accounting and financial controls for the Company and
the accounting principles and auditing practices and procedures to be employed
in preparation and review of financial statements of the Company. The Audit
Committee makes recommendations to the Board concerning the engagement of
independent public accountants and the scope of the audit to be undertaken by
such accountants. Ernst & Young LLP presently serves as the independent
auditors of the Company.

The Compensation Committee is currently comprised of Messrs. Stein, Dunning
and Blumenthal. The Compensation Committee reviews and, as it deems
appropriate, recommends to the Board policies, practices and procedures
relating to the compensation of the officers and other managerial employees
and the establishment and administration of employee benefit plans. The
Compensation Committee exercises all authority under any employee stock option
plans of the Company as the Committee therein specified (unless the Board
resolution appoints any other committee to exercise such authority), and
advises and consults with the officers of the Company as may be requested
regarding managerial personnel policies. The Compensation Committee will have
such additional powers and be granted additional authority as may be conferred
upon it from time to time by the Board.

The Executive Committee will be comprised of Messrs. Bahrenburg, Dunning and
Stein. The Executive Committee will be authorized, subject to certain
limitations, to exercise all of the powers of the Board of Directors during
periods between Board meetings. The Board may also establish other committees
to assist in the discharge of its responsibilities.

COMPENSATION OF DIRECTORS

Each of the Directors of the Company (other than Messrs. Bahrenburg, Vitale
and R. Willis) is paid annual compensation of $35,000, plus reimbursement for
out-of-pocket expenses incurred in connection with attending Board meetings.

58
<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS

The following Summary Compensation Table includes individual compensation
information for the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company in the year ended December
31, 1996 (collectively, the "Named Executive Officers") for services rendered
in all capacities to the Company during the twelve months ended December 31,
1996. In certain circumstances, the amounts shown in the table combine the
compensation received for services that were provided to the Predecessor from
January 1, 1996 through September 30, 1996, and to the Company from October 1,
1996 through December 31, 1996. There were no stock options exercised during
the Company's last fiscal year nor were any options outstanding at the end of
the Company's last fiscal year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ -------------
STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) AWARDS($) (1) COMPENSATION(S)
------------------ ---- ---------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
James D. Dunning,
Jr. (2)................ 1996 $ 25,000 $ -- $37,085 $ 8,750 (3)
Chairman and Chief Ex-
ecutive Officer
D. Claeys Bahrenburg
(2).................... 1996 133,333 -- 23,180 --
Vice Chairman and
Chairman of
Executive Committee
Neal Vitale(2).......... 1996 111,133 25,000 23,180 --
President and Chief Op-
erating Officer
Richard S Willis........ 1996 181,791 50,000 4,635 115,875 (4)
Executive Vice Presi-
dent and Chief
Financial Officer
Robert E. Petersen (5).. 1996 1,175,000 -- -- --
Chairman Emeritus
</TABLE>
- --------
(1) Represents the estimated fair market value at the time of issuance of the
Class A, B and C Common Units of Petersen. Each of the Class A, B and C
Common Units issued to such executive officers were subject to vesting over
a five-year period and the Class B and C Common Units were not eligible to
participate in any distributions by Petersen until the original purchasers
of the Preferred Units and the remaining Class A Common Units achieved a
specified rate of return on their total investment in Petersen. The Class A
Common Units so issued were valued at $4.50 per unit, the price paid
therefor by the investors in connection with the Acquisition. Because of
the terms applicable to the Class B and C Common units, the fair market
value of such Class B and C Common Units was determined by the Board of
Directors to be zero at the time of issuance. At the end of the Company's
last fiscal year, Messrs. Dunning, Bahrenburg, Vitale and R. Willis held an
aggregate of 8,241; 5,151; 5,151; and 1,030 Class A Common Units,
respectively. As a result of the Reorganization, these will convert into
, , and shares of Class A Common Stock, respectively. At the end
of the Company's last fiscal year, the value of such Common Units was
determined to be . See "Certain Relationships and Related Transactions."
(2) Executive's employment with the Company commenced on September 30, 1996.
See "--Employment Agreements."
(3) Represents amounts received as payment of director's fees.
(4) Represents payment made to Mr. Willis pursuant to the terms of his
Employment Agreement to reimburse him for losses incurred in connection
with the sale of his principal residence.
(5) Mr. Petersen served as Chief Executive Officer of the Predecessor prior to
the Acquisition.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee was established in December 1996 and is
comprised of Messrs. Blumenthal, Dunning and Stein. Messrs. Blumenthal and
Stein are each Managing Directors of Willis Stein, which is a principal
stockholder of Company. See "Principal Stockholders."

59
<PAGE>

EMPLOYMENT AGREEMENTS

In connection with the Acquisition, Messrs. Bahrenburg, Vitale and R. Willis
each entered into an Executive Securities Purchase and Employment Agreement
(the "Employment Agreements") with the Company. The Employment Agreements
provide for the continued employment of Mr. Bahrenburg as the Chief Executive
Officer of Publishing, Mr. Vitale as the President of Publishing and Mr.
Willis as the Chief Financial Officer of Publishing until December 31, 2001,
unless terminated earlier as provided in the respective Employment Agreement.
The Employment Agreements of Messrs. Bahrenburg, Vitale and Willis provide
for: (i) an annual base salary of $500,000, $325,000, and $200,000
respectively (subject to annual increases based on the consumer price index);
(ii) annual bonuses of up to half base salary of such person based on the
achievement of certain EBITDA targets; and (iii) a deferred bonus payable upon
the first to occur of: (a) a sale of the Company or (b) the fifth anniversary
of the date of such agreements. Each executive's employment may be terminated
by the Company at any time with or without cause. If such executive is
terminated by the Company with "cause" or resigns other than for "good reason"
(each as defined in such agreements), the executive will be entitled to his
base salary and fringe benefits until the date of termination, but will not be
entitled to any unpaid bonus. Each of Messrs. Bahrenburg, Vitale and Willis is
entitled to his base salary and fringe benefits and any accrued bonus for a
period of twelve months following his termination in the event such executive
is terminated without cause or resigns with good reason. Pursuant to the
Employment Agreements, Messrs. Bahrenburg, Vitale and Willis each has agreed
not to compete with the Company during the employment period and for one year
thereafter. The Employment Agreements also provide each executive with
customary fringe benefits and vacation periods. "Cause" is generally defined
in the Employment Agreements to mean: (i) the commission of a felony or a
crime involving moral turpitude; (ii) the commission of any other act or
omission involving dishonesty, disloyalty or fraud; (iii) the substantial and
repeated failure to perform duties as reasonably directed by the Board or
Chairman; (iv) gross negligence or willful misconduct with respect to the
Company or any subsidiary; (v) any other material breach of the Employment
Agreement or Company policy established by the Board, which breach, if
curable, is not cured within 15 days after written notice thereof to the
executive or (vi) the failure by the Company to generate a specified level of
EBITDA in any fiscal year. "Good reason" is defined to mean the occurrence,
without such executive's consent, of any of the following: (i) the assignment
to the executive of any significant duties materially inconsistent with the
executive's status as a senior executive officer of the Company or a
substantial diminution in the nature or status of the executive's
responsibilities; (ii) a reduction by the Company in the executive's annual
base salary as in effect on the date of such Employment Agreements, except for
across-the-board salary reductions similarly affecting all senior executives
of the Company or (iii) the Board requires the executive to relocate from the
New York area in the case of Mr. Bahrenburg or the Los Angeles area in the
case of Mr. Vitale and Mr. Willis. The Employment Agreements also provided for
the purchase by Messrs. Bahrenburg, Vitale and Willis of Preferred Units,
Common Units and Common Stock for a combination of cash and notes. The Company
has agreed to nominate Messrs. Bahrenburg and Vitale to the Board of Directors
in accordance with their employment agreements. See "Certain Relationships and
Related Transactions."

Mr. Dunning receives an annual salary of $200,000 per annum for serving as
Chairman of Petersen and Mr. Bloch receives an annual salary of $100,000 per
annum for serving as Vice Chairman of Petersen. Beginning in 1998, each will
also be entitled, subject to approval of the Board, to receive an annual bonus
upon the Company achieving certain financial targets.

In connection with the Acquisition, the Company entered into an employment
agreement with Robert E. Petersen pursuant to which Mr. Petersen agreed to
serve as Chairman Emeritus of the Company for a five-year period in exchange
for annual compensation of $200,000 per annum. Under such agreement, Mr.
Petersen has agreed to, among other things, act as a public spokesperson and
representative of the Company at public functions and participate in
significant meetings of the key executives of the Company concerning marketing
and sales strategies, important personnel decisions and similar activities so
required by the Chairman of the Board. The employment agreement entitles Mr.
Petersen to certain fringe benefits and perquisites and severance payments
equal to his annual salary for the remaining unexpired term of the agreement
in the event he is terminated by the Company without cause or suffers a
"constructive termination," which is defined to include (i) the relocation of
Mr. Petersen from the Company's current principal executive office; (ii) any
material breach

60
<PAGE>

of the employment agreement by the Company; or (iii) the assignment of Mr.
Petersen to a significantly lower position in the Company in terms of
responsibility, authority and status.

1997 LONG-TERM EQUITY INCENTIVE PLAN

In July 1997, the Board of Directors, acting as managing member of Petersen,
adopted the Petersen Holdings, L.L.C. 1997 Long-Term Equity Incentive Plan
(the "1997 Incentive Plan"). The 1997 Incentive Plan authorizes the grant of
options to those officers, key employees of, and other key individuals
performing services for, Petersen and its subsidiaries as selected by the
Board of Directors or a committee of the Board (if the Board has delegated the
administration of the 1997 Incentive Plan to such committee). The 1997
Incentive Plan authorizes the granting of options to purchase up to 10,000
Class A Common Units, subject to adjustment upon the occurrence of certain
events. The price per Class A Common Unit payable upon the exercise of each
option granted under the 1997 Incentive Plan as well as the terms under which
the options may be exercised will be determined by the Board or Committee, as
the case may be, in its sole discretion at the time of grant.

To date, the Board, acting as managing member of Petersen has granted
options to purchase an aggregate of approximately 8,867 Class A Common Units
under the 1997 Incentive Plan. Such options vest and become exercisable on the
fifth anniversary of the grant date, provided that the optionee has been
continuously employed by Petersen through such date. In the event of an
initial public offering (an "IPO"), the Accelerated Portion (as defined) of
the option becomes fully vested and exercisable and the remaining portion
vests and becomes exercisable ratably, on a daily basis, over the period from
the date of the completion of the IPO through December 31, 1999, until the
employee ceases to be employed by Petersen. The "Accelerated Portion" means a
fraction, the numerator of which is the number of days from and after January
1, 1997 through the IPO completion date, and the denominator of which is
1,096. In addition, such options become immediately vested and exercisable
upon the sale of Petersen. In the event an optionee's employment with Petersen
is terminated for any reason, Petersen has the right to repurchase the Class A
Common Units issued or issuable upon the exercise of such option at a price
equal to fair market value. All of the outstanding options have an exercise
price equal per Class A Common Unit to the fair market value of a Class A
Common Unit on the date of grant.

Upon consummation of the Reorganization (i) each option outstanding under
the 1997 Incentive Plan will cease to be exercisable for Class A Common Units
and will become exercisable instead for the number of shares of Class A Common
Stock into which the number of Class A Common Units previously subject to such
option is converted in the Merger, (ii) the exercise price of each such option
is proportionately adjusted, and (iii) the Company will assume Petersen's
obligations and succeed to the rights of Petersen under the 1997 Incentive
Plan.

Upon consummation of the Offering, the Board and stockholders of the Company
are expected to amend and restate the 1997 Incentive Plan (as assumed from
Petersen and as amended and restated, the "New Incentive Plan"). The New
Incentive Plan will be administered by the Compensation Committee of the Board
of Directors (the "Committee") composed of at least two non-employee directors
(as that term is defined in Rule 16b-3 under the Exchange Act), who will be
appointed by the Board. In addition to holders of options previously issued
under the 1997 Incentive Plan, certain employees, advisors and consultants of
the Company will be eligible to participate in the New Incentive Plan (a
"Participant"). The Committee will be authorized under the New Incentive Plan
to select the Participants and determine the terms and conditions of the
awards under the New Incentive Plan. The New Incentive Plan will provide for
the issuance of the following types of incentive awards: stock options, stock
appreciation rights, restricted stock, performance grants and other types of
awards that the Compensation Committee deems consistent with the purposes of
the New Incentive Plan. An aggregate of shares of Class A Common Stock of
the Company have been reserved for issuance under the New Incentive Plan
(including the shares of Class A Common reserved for issuance under the
options previously issued under the 1997 Incentive Plan), subject to certain
adjustments reflecting changes in the Company's capitalization. The New
Incentive Plan will provide that Participants will be limited to receiving
awards relating to no more than shares of Class A Common Stock per year.

Options granted under the New Incentive Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs")
as the Committee may determine. ISOs are intended to qualify as "incentive
stock options" within the meaning of Section 422 of the Code. The exercise
price of (i) an ISO

61
<PAGE>

granted to an individual who owns shares possessing more than 10% of the total
combined voting power of all classes of stock of the Company (a "10% Owner")
will be at least 110% of the fair market value of a share of common stock on
the date of grant and (ii) an ISO granted to an individual other than a 10%
Owner will be at least 100% of the fair market value of a share of Class A
Common Stock on the date of grant.

Options granted under the New Incentive Plan may be subject to time vesting
and certain other restrictions at the sole discretion of the Committee. Subject
to certain exceptions, the right to exercise an option generally will terminate
at the earlier of (i) the first date on which the initial grantee of such
option is not employed by the Company for any reason other than termination
without cause, death or permanent disability or (ii) the expiration date of the
option. If the holder of an option dies or suffers a permanent disability while
still employed by the Company, the right to exercise all unexpired installments
of such option shall be accelerated and shall vest as of the latest of the date
of such death, the date of such permanent disability and the date of the
discovery of such permanent disability, and such option shall be exercisable,
subject to certain exceptions, for days after such date. If the holder of
an option is terminated without cause, to the extent the option has vested,
such option will be exercisable for days after such date.

All outstanding awards under the New Incentive Plan will terminate
immediately prior to consummation of a liquidation or dissolution of the
Company, unless otherwise provided by the Board. In the event of the sale of
all or substantially all of the assets of the Company or the merger of the
Company with another corporation, all restrictions on any outstanding awards
will terminate and Participants will be entitled to the full benefit of their
awards immediately prior to the closing date of such sale or merger, unless
otherwise provided by the Board.

The Board generally will have the power and authority to amend the New
Incentive Plan at any time without approval of the Company's stockholders,
subject to applicable federal securities and tax laws limitations (including
regulations of the NYSE).

EMPLOYEE STOCK DISCOUNT PURCHASE PLAN

The Petersen Companies, Inc. Employee Stock Discount Purchase Plan (the
"Employee Stock Purchase Plan") will be approved by the Board and the existing
stockholders prior to the consummation of the Offering. The Employee Stock
Purchase Plan will be established to give employees desiring to do so a
convenient means of purchasing shares of Class A Common Stock through payroll
deductions. The Employee Stock Purchase Plan will provide an incentive to
participate by permitting certain purchases at a discounted price equal to 85%
of fair market value of the Class A Common Stock on the date of purchase. The
Company believes that ownership of stock by employees will foster greater
employee interest in the success, growth and development of the Company.

62
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company is party to a lease with a trust controlled by Mr. Petersen and
his wife pursuant to which the Company leases office space for its corporate
headquarters. The lease expires on November 30, 2009. In connection with the
Acquisition, the lease was amended to provide for lease payments of $341,951
for each monthly period ending before November 30, 1996. For each fiscal year
thereafter, the monthly lease payments will be increased at an annual rate of
approximately 1.75%.

On October 1, 1996, the Company entered into a lease with Mr. Petersen with
respect to the Company's office space located at 815 North LaSalle Street in
Chicago, Illinois. The lease expires on September 30, 2005 and provides for
monthly lease payments of: (i) $16,500 for the period from October 1, 1996 to
September 30, 1999; (ii) $17,500 for the period from October 1, 1999 to
September 30, 2002; and (iii) $18,500 from October 1, 2002 through the end of
the term of the lease.

In connection with the Acquisition, Messrs. Dunning, Bahrenburg, Bloch and
Karu, Willis Stein, Petersen Properties Company, BankAmerica Investment
Corporation ("BAIC") and others entered into a securities purchase agreement
(the "Securities Purchase Agreement") with Petersen and the Company pursuant
to which they purchased Preferred Units and Common Units of Petersen and Class
A Common Stock of the Company for cash. The following table sets forth the
securities purchased by such persons pursuant to the Securities Purchase
Agreement and the aggregate consideration paid for such securities:

<TABLE>
<CAPTION>
PETERSEN
---------------------- COMPANY
DIRECTOR, EXECUTIVE OFFICER OR CLASS A PREFERRED COMMON AGGREGATE
10% OWNER COMMON UNITS UNITS STOCK CONSIDERATION
- ------------------------------ ------------ --------- ------- -------------
<S> <C> <C> <C> <C>
James D. Dunning, Jr (1)(2)...... 4,840 4,840 44 $ 2,200,000
D. Claeys Bahrenburg............. 1,100 1,100 10 500,000
Laurence H. Bloch (1)............ 2,200 2,200 20 1,000,000
Stuart Karu (1).................. 2,200 2,200 20 1,000,000
Willis Stein & Partners, L.P..... 110,000 110,000 1,000 50,000,000
Petersen Properties Company...... 55,000 55,000 500 25,000,000
BankAmerica Investment Corpora-
tion (3)........................ 44,000 44,000 400 20,000,000
</TABLE>
- --------
(1) Pursuant to the Securities Purchase Agreement, Petersen also issued to
Messrs. Dunning, Bloch and Karu the following securities: Mr. Dunning--
8,278.627 Class A Common Units, 1,000 Class B Common Units and 1,000 Class
C Common Units; Mr. Bloch--6,208.970 Class A Common Units, 750 Class B
Common Units and 750 Class C Common Units and Mr. Karu--4,139.313 Class A
Common Units, 500 Class B Common Units and 500 Class C Common Units.
(2) Includes 220 Class A Common Units, 220 Preferred Units and 2 shares of
Common Stock held in a trust for which Mr. Dunning serves as trustee.
(3) Includes 40 shares of Common Stock, 4,400 Class A Common Units and 4,400
Preferred Units held by CIVC Partners II, a partnership of which all of
the partners are employees of BAIC or an affiliate thereof.

Pursuant to his Employment Agreement, Mr. Bahrenburg purchased 20 shares of
Class A Common Stock at a price of $500.00 per share, 2,200 Class A Common
Units at a price of $4.50 per unit and 2,200 Preferred Units at a price of
$445.50 per unit. Mr. Bahrenburg paid for these securities with promissory
notes in the aggregate amount of $1,000,000. Of this amount, $200,000 was paid
on March 1, 1997 and $800,000 will become due and payable on the earlier to
occur of: (i) December 31, 2001; (ii) the termination of Mr. Bahrenburg's
employment with the Company; or (iii) a sale of the Company. Such promissory
notes bear interest at a rate equal to the Company's weighted average cost of
borrowing as determined by the Board. Mr. Bahrenburg's obligations under such
notes are secured by a pledge of the securities purchased therewith. In
addition, pursuant to the Employment Agreement, the Company and Holdings
issued to Mr. Bahrenburg 5,174.142 Class A Common Units, 625 Class B Common
Units and 625 Class C Common Units for no additional consideration.

Pursuant to his Employment Agreement, Mr. Vitale purchased 15 shares of
Class A Common Stock at a price of $500.00 per share, 1,650 Class A Common
Units at a price of $4.50 per unit and 1,650 Preferred Units at a price of
$445.50 per unit. Mr. Vitale paid for these securities with promissory notes
in the aggregate amount of $750,000. Such promissory notes will bear interest
at a rate equal to the Company's weighted average cost of

63
<PAGE>

borrowing as determined by the Board and will become due and payable on the
earlier to occur of: (i) December 31, 2001; (ii) the termination of Mr.
Vitale's employment with the Company or (iii) a sale of the Company. Mr.
Vitale's obligations under such notes are secured by a pledge of the securities
purchased therewith. In addition, pursuant to the Employment Agreement, the
Company and Holdings issued to Mr. Vitale 5,174.192 Class A Common Units, 625
Class B Common Units and 625 Class C Common Units for no additional
consideration.

Pursuant to his Employment Agreement, Mr. Willis purchased 6 shares of Class
A Common Stock at a price of $500.00 per share, 660 Class A Common Units at a
price of $4.50 per unit and 660 Preferred Units at a price of $445.50 per unit.
Mr. Willis paid for these securities with $100,000 in cash and promissory notes
in the aggregate amount of $200,000. Such promissory notes bear interest at a
rate equal to the Company's weighted average cost of borrowing as determined by
the Board and will become due and payable on the earlier to occur of: (i)
December 31, 2001; (ii) the termination of Mr. Willis' employment with the
Company or (iii) a sale of the Company. Mr. Willis' obligations under such
notes are secured by a pledge of the securities purchased therewith. In
addition, pursuant to the Employment Agreement, the Company and Holdings issued
to Mr. Willis 1,034.828 Class A Common Units, 125 Class B Common Units and 125
Class C Common Units for no additional consideration.

A portion of the securities issued to Messrs. Bahrenburg, Vitale and Willis
pursuant to the Employment Agreements will be subject to repurchase by the
Company in the event such executive leaves the Company's employ under certain
circumstances. If such executive is terminated by the Company with cause or
resigns without good reason (each as defined in their respective employment
agreements), the purchase price for any unvested securities will be the lesser
of their original cost or their fair market value and the purchase price for
any vested securities will be the fair market value of such securities. If such
executive is terminated by the Company without cause or resigns with good
reason, the Company can only repurchase such executive's unvested securities at
a price equal to the lesser of their original cost or their fair market value.

On July 31, 1997, Petersen and all of the holders of Class A, B and C Common
Units entered into an agreement whereby all of the outstanding Class B and C
Common Units were converted into five series of Class D Common Units in the
Exchange. The Class D Common Units for Messrs. Bahrenburg, Vitale and Willis
are subject to vesting and scheduled to vest on the fifth anniversary of their
issue date provided that the holder thereof has been continuously employed by
the Company through such date. Vesting accelerates upon death or disability of
such holder or the sale of Petersen. In the event of an IPO, vesting of such
Class D Units will accelerate as follows so long as the holder is continuously
employed through the date of such IPO: (i) if the holder ceases to be employed
on the first, second or third anniversary of the IPO date such that 33 1/3%
will vest upon each of the first, second and third anniversaries of the IPO
date and (ii) if the holder ceases to be employed on a date other than such an
anniversary, such that a pro rata portion will vest since the later of the IPO
date and the last anniversary of the IPO date. The following table sets forth
the number of Class D Common Units held by each of the executive officers of
the Company:

<TABLE>
<CAPTION>
NUMBER OF
CLASS D
NAME COMMON UNITS
---- ------------
<S> <C>
James D. Dunning, Jr............................................ 10,479.82
D. Claeys Bahrenburg ........................................... 6,549.89
Laurence H. Bloch............................................... 7,859.86
Stuart Karu..................................................... 5,239.91
Neal Vitale..................................................... 6,549.89
Richard S Willis................................................ 1,309.98
</TABLE>

As a result of the Reorganization, these will convert into , , ,
, and shares of Class A Common Stock, respectively.

Willis Stein, a significant stockholder of the Company, owns approximately
18.0% of the equity securities of Racing Champions Corporation ("Racing
Champions") and has two representatives on Racing Champions' board of
directors. The Company has entered into licensing and marketing arrangements
with Racing Champions in connection with the Racing Champions Mint and Racing
Champions Hot Rod Collection. The Company has received payments of
approximately $45,000 in 1997 from Racing Champions in connection with these
licenses.

64
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the equity securities of the Company by: (i) each of the
Directors and the Named Executive Officers; (ii) all Directors and executive
officers as a group; and (iii) each owner of more than 5% of any class of
equity securities of the Company ("5% Owners"). Unless otherwise noted, the
address for each executive officer of the Company is c/o the Company, 6420
Wilshire Boulevard, Los Angeles, California 90048.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK (1) CLASS B COMMON STOCK (1)
------------------------- -------------------------
PERCENT OF CLASS PERCENT OF CLASS
------------------ ------------------
FOLLOWING FOLLOWING
NO. OF PRIOR TO THE NO. OF PRIOR TO THE
SHARES OFFERING OFFERING SHARES OFFERING OFFERING
------ -------- --------- ------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND NAMED EXECU-
TIVE OFFICERS:
James D. Dunning, Jr. (2). 44 2.0% -- -- %
D. Claeys Bahrenburg ..... 30 1.4 -- --
Neal Vitale .............. 15 * -- --
Richard S Willis ......... 6 * -- --
Laurence H. Bloch (3)..... 20 * -- --
Avy H. Stein (4).......... 1,000 46.2 -- --
Daniel H. Blumenthal (4).. 1,000 46.2 -- --
Stuart Karu............... 20 * -- --
John R. Willis (4)........ 1,000 46.2 -- --
All Directors and
executive officers as a
group (9 persons)........ 1,135 52.5 -- --
5% OWNERS:
Willis Stein & Partners,
L.P. (5)................. 1,000 46.2 -- --
Robert E. Petersen (6).... 500 23.1 -- --
BankAmerica Investment
Corporation (7).......... -- -- 400 33.3
Chase Equity Associates,
L.P. (8)................. -- -- 300 25.0
Allstate Insurance
Company (9).............. 300 13.9 -- --
First Union Investors,
Inc. (10)................ -- -- 250 20.8
CIBC WG Argosy Merchant
Fund 2, L.L.C. (11)...... -- -- 250 20.8
</TABLE>
- --------
* Represents less than one percent.
(1) The Company has two classes of outstanding Common Stock, the Class A
Common Stock and the Class B Common Stock, which are identical in all
respects except that the Class B Common Stock is nonvoting and is
convertible to Class A Common Stock upon the occurrence of certain
events. See "Description of Capital Stock."
(2) Includes 2 shares of Common Stock held in a trust for which Mr. Dunning
serves as trustee.
(3) Includes shares of Common Stock held in a trust for which Mr. Bloch
serves as trustee.
(4) Includes 1,000 shares of the Common Stock of the Company beneficially
owned by Willis Stein. Such persons disclaim beneficial ownership of all
such shares beneficially owned by Willis Stein. Such person's address is
c/o Willis Stein, 227 West Monroe Street, Suite 4300, Chicago, Illinois
60606.
(5) Willis Stein's interests in the Company are owned through Petersen
Investment Corp. The address of Willis Stein and Petersen Investment
Corp. is 227 West Monroe Street, Suite 4300, Chicago, Illinois 60606.
(6) Mr. Petersen's interests in the Company are owned through Petersen
Properties Company.
(7) Such person's address is c/o BankAmerica Investment Corporation, 231 S.
LaSalle Street, Chicago, Illinois 60697. Also includes shares of Class B
Common Stock held by CIVC Partners II, a partnership all of the partners
of which are employees of BAIC or an affiliate thereof.
(8) Such person's address is 380 Madison Avenue, 12th Floor, New York, New
York 10017-2951.
(9) Such person's address is 3075 Sanders Road, Suite G5D, Northbrook.
Illinois 60062-7127.
(10) Such person's address is c/o First Union Capital Partners, Inc., One
First Union Center, 301 S. College Street, 5th Floor, Charlotte, North
Carolina 28288.
(11) Such person's address is 425 Lexington Avenue, 3rd Floor, New York, New
York 10017.

65
<PAGE>

SECURITYHOLDERS AGREEMENT

At the time of the Acquisition, the Company, Petersen, Petersen Investment
Corp. and the other investors named therein (collectively, the "Investors")
entered into a securityholders agreement (the "Securityholders Agreement"),
providing for: (i) the composition of the Board of Directors; (ii)
restrictions on the transfer of equity securities of Petersen, the Company and
Petersen Investment Corp. (the "Equity Securities"); (iii) registration rights
relating to the Equity Securities; (iv) obligations of the Investors upon a
sale of the Company; and (v) preemptive rights in favor of the non-Willis
Stein Investors in connection with issuances of equity to Willis Stein. Under
the terms of the Securityholders Agreement, all of the stockholders of the
Company have agreed to vote their shares in favor of those individuals
designated by Willis Stein to serve on the Board of Directors. Willis Stein
also has the right to control the vote on any significant corporate changes,
such as a merger, consolidation or sale of the Company until such time as the
Company consummates an initial public offering of its equity securities
resulting in the receipt by the Company of at least $75.0 million of gross
proceeds and which indicates a market capitalization of the Company without
giving effect to any issuances of equity securities following its initial
capitalization of at least $330.0 million (a "Qualified IPO"). The
Securityholders Agreement generally restricts the transfer of Equity
Securities, other than in a public sale. Any proposed transfer of Equity
Securities is subject to a right of first refusal in favor of the Company or
the other Investors and "tag-along" rights in favor of the other Investors.
All of the Investors have agreed that Willis Stein (through the Company) may
control the circumstances under which a sale of Petersen may take place, and
that each Investor will consent to such transaction on the terms negotiated by
Willis Stein. Willis Stein may also control the circumstances under which a
public offering of Holdings' or the Company's equity securities may take
place. The Securityholders Agreement provides for up to four long-form and
unlimited short-form demand registrations in favor of Willis Stein, two short-
form demand registrations in favor of a majority of the non-Willis Stein
Investors at such time as the Company is eligible to use a short-form
registration statement and unlimited "piggyback" registrations in favor of the
Investors.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

GENERAL MATTERS

At the time of the Offering, the total amount of authorized capital stock of
the Company will consist of shares of Class A Common Stock, par value
$0.01 per share, shares of Class B Common Stock, par value $0.01 per share
and shares of preferred stock, par value $0.01 per share (the "Preferred
Stock"). Upon completion of the Offering, shares of Class A Common Stock
will be issued and outstanding shares of Class B Common Stock and no
shares of Preferred Stock will be issued and outstanding. As of June 30, 1997,
there were 2,162.7 shares of Class A Common Stock and 1,200 shares of Class B
Common Stock outstanding, which were held by 27 and 5 holders of record,
respectively. The discussion herein describes the Company's capital stock, the
Restated Certificate of Incorporation and By-laws as anticipated to be in
effect upon consummation of the Offering. The following summary of certain
provisions of the Company's capital stock describes all material provisions
of, but does not purport to be complete and is subject to, and qualified in
its entirety by, the Restated Certificate of Incorporation and the By-laws of
the Company that are included as exhibits to the Registration Statement of
which this Prospectus forms a part and by the provisions of applicable law.

The Restated Certificate of Incorporation and By-laws will contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved
by the Board of Directors.

CLASS A COMMON STOCK

The issued and outstanding shares of Class A Common Stock are, and the
shares of Class A Common Stock being offered by the Company will be upon
payment therefor, validly issued, fully paid and nonassessable. Subject to the
prior rights of the holders of any Preferred Stock, the holders of outstanding
shares of Class A Common Stock are entitled to receive dividends out of assets
legally available therefor at such time and in such amounts as the Board of
Directors may from time to time determine. See "Dividend Policy." The shares
of Common Stock are not convertible and the holders thereof have no preemptive
or subscription rights to purchase any securities of the Company. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock are entitled to receive pro rata the assets of the Company which are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding. Each outstanding share of Class A Common Stock is entitled
to one vote on all matters submitted to a vote of stockholders. There is no
cumulative voting. Except as otherwise required by law or the Restated
Certificate of Incorporation, the Class A Common Stock will vote on all
matters submitted to a vote of the stockholders, including the election of
directors.

CLASS B COMMON STOCK

Under the Restated Certificate of Incorporation, holders of Class B Common
Stock have no right to vote on matters submitted to a vote of stockholders,
except (i) as otherwise required by law and (ii) that the holders of Class B
Common Stock shall have the right to vote as a class on any amendment, repeal
or modification to the Certificate of Incorporation that adversely affects the
powers, preferences or special rights of the holders of the Class B Common
Stock. Though not convertible by the original purchasers thereof, the shares
of Class B Common Stock are convertible by certain transferees of such shares
into an equal number of shares of Class A Common Stock.

PREFERRED STOCK

The Board of Directors may, without further action by the Company's
stockholders, from time to time, direct the issuance of shares of Preferred
Stock in series and may, at the time of issuance, determine the rights,
preferences and limitations of each series. Satisfaction of any dividend
preferences of outstanding shares of Preferred Stock would reduce the amount
of funds available for the payment of dividends on shares of Common

67
<PAGE>

Stock. Holders of shares of Preferred Stock may be entitled to receive a
preference payment in the event of any liquidation, dissolution or winding-up
of the Company before any payment is made to the holders of shares of Common
Stock. Under certain circumstances, the issuance of shares of Preferred Stock
may render more difficult or tend to discourage a merger, tender offer or
proxy contest, the assumption of control by a holder of a large block of the
Company's securities or the removal of incumbent management. Upon the
affirmative vote of a majority of the total number of directors then in
office, the Board of Directors, without stockholder approval, may issue shares
of Preferred Stock with voting and conversion rights which could adversely
affect the holders of shares of Common Stock. Upon consummation of the
Offering, there will be no shares of Preferred Stock outstanding, and the
Company has no present intention to issue any shares of Preferred Stock.

CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS

The Restated Certificate of Incorporation provides for the Board to be
divided into three classes, as nearly equal in number as possible, serving
staggered terms. Approximately one-third of the Board will be elected each
year. See "Management." Under the Delaware General Corporation Law, directors
serving on a classified board can only be removed for cause. The provision for
a classified board could prevent a party who acquires control of a majority of
the outstanding voting stock from obtaining control of the Board until the
second annual stockholders meeting following the date the acquiror obtains the
controlling stock interest. The classified board provision could have the
effect of discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company and could increase the
likelihood that incumbent directors will retain their positions.

The Restated Certificate of Incorporation provides that stockholder action
can be taken only at an annual or special meeting of stockholders and cannot
be taken by written consent in lieu of a meeting. The Restated Certificate of
Incorporation and the By-laws provides that, except as otherwise required by
law, special meetings of the stockholders can only be called pursuant to a
resolution adopted by a majority of the Board of Directors or by the chief
executive officer of the Company. Stockholders will not be permitted to call a
special meeting or to require the Board to call a special meeting.

The By-laws establish an advance notice procedure for stockholder proposals
to be brought before an annual meeting of stockholders of the Company,
including proposed nominations of persons for election to the Board.

Stockholders at an annual meeting may only consider proposals or nominations
specified in the notice of meeting or brought before the meeting by or at the
direction of the Board or by a stockholder who was a stockholder of record on
the record date for the meeting, who is entitled to vote at the meeting and
who has given to the Company's Secretary timely written notice, in proper
form, of the stockholder's intention to bring that business before the
meeting. Although the By-laws do not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the By-laws may have
the effect of precluding the conduct of certain business at a meeting if the
proper procedures are not followed or may discourage or deter a potential
acquiror from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company.

The Restated Certificate of Incorporation and By-laws provide that the
affirmative vote of holders of at least 66 2/3% of the total votes eligible to
be cast in the election of directors is required to amend, alter, change or
repeal certain of their Provisions. This requirement of a super-majority vote
to approve amendments to the Restated Certification of Incorporation and By-
laws could enable a minority of the Company's stockholders to exercise veto
power over any such amendments.

CERTAIN PROVISIONS OF DELAWARE LAW

Following the consummation of the Offering, the Company will be subject to
the "Business Combination" provisions of the Delaware General Corporation Law.
In general, such provisions prohibit a publicly held Delaware corporation from
engaging in various "business combination" transactions with any "interested

68
<PAGE>

stockholder" for a period of three years after the date of the transaction
which the person became an "interested stockholder," unless (i) the
transaction is approved by the Board of Directors prior to the date the
"interested stockholder" obtained such status, (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," the "interested stockholder," owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced,
excluding for purposes of determining the number of shares outstanding those
shares owned by (a) persons who are directors and also officers and (b)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to such date
the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the affirmative
vote of at least 66 2/3% of the outstanding voting stock winch is not owned by
the "interested stockholder." A "business combination" is defined to include
mergers, asset sales and other transactions resulting in financial benefit to
a stockholder. In general, an "interested stockholder" is a Person who,
together with affiliates and associates, owns (or within three years, did own)
15% or more of a corporation's voting stock. The statute could prohibit or
delay mergers or other takeover or change in control attempts with respect to
the Company and, accordingly, may discourage attempts to acquire the Company.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Restated Certificate of Incorporation limits the liability of Directors
to the fullest extent permitted by the Delaware General Corporation Law. In
addition, the Restated Certificate of Incorporation will provide that the
Company shall indemnify Directors and officers of the Company to the fullest
extent permitted by such law. The Company anticipates entering into separate
indemnification agreements with its current Directors and executive officers
prior to the completion of the Offering which will have the effect of
providing such persons indemnification protection in the event the Restated
Certificate of Incorporation is subsequently amended.

LISTING
The Company has applied to have the Class A Common Stock approved for trading
on the NYSE under the symbol "--------."

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for the Class A Common Stock is BankBoston,
N.A.

69
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offering, there has been no market for the Common Stock of the
Company. 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--Impact of Shares Eligible for Future Sale."

Upon completion of the Offering, the Company expects to have shares of
Common Stock outstanding. Of the shares outstanding after the Offering, the
shares of Class A Common Stock ( shares if the U.S. Underwriters' over-
allotment is exercised in full) sold in the Offering 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 volume limitations of Rule 144.

An aggregate of shares of Common Stock held by existing stockholders
upon completion of the Offering 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. Ninety days after the date of this Prospectus,
approximately shares of Common Stock will be eligible for sale in the
public market pursuant to Rule 144, subject to the volume limitations and
other restrictions described below.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, if a period of at least one year 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
(approximately shares immediately after the Offering) or the average
weekly reported volume of trading of the Class A 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; without regard to any holding period.
Under Rule 144(k), if a period of at least two 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 restrictions described above.

Any employee of the Company who purchased his or her shares of Common Stock
or received an option to purchase Common Stock pursuant to a written
compensation plan or contract while the Company was not subject to the
reporting requirements of the Exchange Act 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
provisions of Rule 144 and permits Affiliates to sell their Rule 701 shares
without having to comply with the holding period provision of Rule 144, in
each case beginning 90 days after the Company became subject to the reporting
requirements of the Exchange Act.

Notwithstanding the foregoing, in connection with the Offering, the
Company's executive officers, Directors and certain existing stockholders of
the Company, who own in aggregate approximately shares of Common Stock
(including shares which can be acquired through currently exercisable
options), have agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, they will not (a)
offer, pledge, loan, sell contract to sell, sell any option or contract to
purchase,

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purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock (whether such shares or any such securities are
then owned by such person or are thereafter acquired directly from the
Company), or (b) enter into any swap or similar agreement that transfers, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (a) or (b) of this
paragraph is to be settled by delivery of such Common Stock or such other
securities, in cash or otherwise, for a period of 180 days after the date of
this Prospectus, other than (i) the sale to the Underwriters of the shares of
Common Stock under the Underwriting Agreement (as defined) or (ii) the
issuance by the Company of shares of Common Stock upon the exercise of an
option sold or granted pursuant to an existing benefit plan of the Company and
outstanding on the date of this Prospectus.

The Securityholders Agreement provides for up to four long-form and
unlimited short-form demand registrations in favor of Willis Stein, two short-
form demand registrations in favor of a majority of the non-Willis Stein
Investors at such time as the Company is eligible to use a short-form
registration statement and unlimited "piggyback" registrations in favor of the
Investors, in each case at the Company's expense. As a result of such
agreement, holders of an aggregate of shares of Common Stock will
have the right to register their shares of Common Stock under the Securities
Act at the Company's expense beginning 180 days after the completion of the
Offering.

CERTAIN FEDERAL INCOME TAX
CONSEQUENCES TO NON-UNITED STATES HOLDERS

GENERAL

The following is a general discussion of certain United States federal
income and estate tax consequences of the ownership and disposition of Class A
Common Stock by a Non-U.S. Holder. For this purpose, the term "Non-U.S.
Holder" is defined as any person or entity that is, for United States federal
income tax purposes, a foreign corporation, a non-resident alien individual, a
foreign partnership or a non-resident fiduciary of a foreign estate or trust.
This discussion does not address all aspects of United States federal income
and estate taxes and does not deal with foreign, state and local consequences
that may be relevant to such Non-U.S. Holders in light of their personal
circumstances nor does it discuss certain tax provisions which may apply to
individuals who relinquish their U.S. citizenship or residence. Furthermore,
this discussion is based on provisions of the Code, existing and proposed
regulations promulgated thereunder and administrative and judicial
interpretations thereof, as of the date hereof, all of which are subject to
change either retroactively or prospectively. EACH PROSPECTIVE PURCHASER OF
CLASS A COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO
CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF ACQUIRING, HOLDING AND
DISPOSING OF CLASS A COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY
ARISE UNDER THE LAWS OF ANY U.S. STATE, MUNICIPALITY OR OTHER TAXING
JURISDICTION.

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

DIVIDENDS

The Company currently does not intend to pay dividends on the Common Stock.
See "Dividend Policy." In the event that dividends are paid on shares of Class
A Common Stock, dividends paid to a Non-U.S. Holder of Class A Common Stock
will be subject to withholding of United States federal income tax at a 30%
rate or such lower rate as may be specified by an applicable income tax
treaty. However, unless the dividends are effectively connected with the
conduct of a trade or business of the Non-U.S. Holder within the United States
and an Internal Revenue Service Form 4224 is filed with the payor, dividends
that are effectively connected with

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<PAGE>

the conduct of a trade or business by the Non-U.S. Holder within the United
States and, where a tax treaty applies, are attributable to a United States
permanent establishment of the Non-U.S. Holder, are not subject to the
withholding tax, but instead are subject to United States federal income tax
on a net income basis at applicable graduated individual or corporate rates.
Any such effectively connected dividends received by a foreign corporation
may, under certain circumstances, be subject to an additional "branch profits
tax" at a rate of 30% or such lower rate as may be specified by an applicable
income tax treaty.

Dividends paid to an address outside the United States are presumed to be
paid to a resident of such country (unless the payer has knowledge to the
contrary) for purposes of the withholding discussed above and for purposes of
determining the applicability of a tax treaty rate. However, under proposed
regulations, in the case of dividends paid after December 31, 1997 (December
31, 1999 in the case of dividends paid to accounts in existence on or before
the date that is 60 days after the proposed regulations are published as final
regulations), a Non-U.S. Holder generally would be subject to United States
withholding tax at a 31% rate under the backup withholding rules described
below, rather than at a 30% rate or at a reduced rate under an income tax
treaty, unless certain certification procedures (or, in the case of payments
made outside the United States with respect to an offshore account, certain
documentary evidence procedures) are complied with, directly or through an
intermediary. Currently, certain certification and disclosure requirements
must be complied with in order to be exempt from withholding under the
effectively connected income exemption discussed above.

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

GAIN ON DISPOSITION OF COMMON STOCK

A Non-U.S. Holder will generally not be subject to United States federal
income tax with respect to gain recognized on a sale or other disposition of
Class A Common Stock unless (i) the gain is effectively connected with a trade
or business of the Non-U.S. Holder in the United States and, where a tax
treaty applies, is attributable to a United States permanent establishment of
the Non-U.S. Holder, (ii) in the case of a Non-U.S. Holder who is an
individual and holds the Class A Common Stock as a capital asset, such holder
is present in United States for 183 or more days in the taxable year of the
sale or other disposition and certain other conditions are met, or (iii) the
Company is or has been a "U.S. real property holding corporation" for United
States federal income tax purposes. The Company believes it is not and does
not anticipate becoming a "U.S. real property holding corporation" for United
States federal income tax purposes.

If an individual Non-U.S. Holder falls under clause (i) above, he will
unless an applicable treaty provides otherwise, be taxed on his net gain
derived from the sale under regular graduated United States federal income tax
rates. If an individual Non-U.S. Holder falls under clause (ii) above, he will
be subject to a flat 30% tax on the gain derived from the sale, which may be
offset by certain United States capital losses.

If a Non-U.S. Holder that is a foreign corporation falls under clause (i)
above, he will be taxed on his gain under regular graduated United States
federal income tax rates and may be subject to an additional branch profits
tax equal to 30% of his effectively connected earnings and profits within the
meaning of the Code for the taxable year, as adjusted for certain items,
unless he qualifies for a lower rate under an applicable income tax treaty.

FEDERAL ESTATE TAX

Class A Common Stock held by an individual Non-U.S. Holder at the time of
death will be included in such holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides
otherwise.

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<PAGE>

INFORMATION REPORTING AND BACKUP WITHHOLDING TAX

Under Treasury regulations, the Company must report annually to the IRS and
to each Non-U.S. Holder the amount of dividends paid to such holder and the
tax withheld with respect to such dividends, regardless of whether withhold
was required. Copies of the information returns reporting such dividends and
withholding may also be made available to the tax authorities in the country
in which the Non-U.S. Holder resides under the provisions of an applicable
income tax treaty.

A backup withholding tax is imposed at the rate of 31% on certain payments
to persons that fail to furnish certain identifying information to the payer.
Backup withholding generally will not apply to dividends paid to a Non-U.S.
Holder at an address outside the United States (unless the payer has knowledge
that the payee is a U.S. person). However, under proposed regulations, in the
case of dividends paid after December 31, 1997 (December 31, 1999 in the case
of dividends paid to accounts in existence on or before the date that is 60
days after the proposed regulations are published as final regulations), a
Non-U.S. Holder generally would be subject to withholding tax at a 31% rate,
unless certain certification procedures (or, in the case of payments made
outside the United States with respect to an offshore account, certain
documentary evidence procedures) are complied with, directly or through an
intermediary. Backup withholding and information reporting generally will also
apply to dividends paid on Class A Common Stock at addresses inside the United
States to Non-U.S. Holders that fail to provide certain identifying
information in the manner required.

Payment of the proceeds of a sale of Class A Common Stock by or through a
United States office of a broker is subject to both backup withholding and
information reporting unless the beneficial owner provides the payer with its
name and address and certifies under penalties of perjury that it is a Non-
U.S. Holder, or otherwise establishes an exemption. In general, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of Class A Common Stock by or through a foreign office of a
broker. If, however, such broker is, for United States federal income tax
purposes, a U.S. person, a controlled foreign corporation, or a foreign person
that derives 50% or more if its gross income for certain periods from the
conduct of a trade or business in the United States, such payments will be
subject to information reporting, but not backup withholding, unless (i) such
broker has documentary evidence in its records that the beneficial owner is a
Non-U.S. Holder and certain other conditions are met, or (ii) the beneficial
owner otherwise establishes an exemption. Proposed regulations would, if
adopted, alter the foregoing rules in certain respects. Among other things,
the proposed regulations would provide certain presumptions under which a Non-
U.S. Holder would be subject to backup withholding and information reporting
unless the Company receives certification from the holder of a non-U.S.
status.

Any amounts withheld under the backup withholding rules generally will be
allowed as a refund or a credit against such holder's U.S. federal income tax
liability provided the required information is furnished in a timely manner to
the IRS.

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<PAGE>

UNDERWRITERS

Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the U.S.
Underwriters named below for whom Morgan Stanley & Co. Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, Alex. Brown & Sons
Incorporated and Goldman, Sachs & Co. are acting as U.S. Representatives, and
the International Underwriters named below for whom Morgan Stanley & Co.
International Limited, Donaldson, Lufkin & Jenrette International, Alex. Brown
& Sons Incorporated and Goldman Sachs International are acting as
International Representatives, have severally agreed to purchase, and the
Company has agreed to sell to them the respective number of shares of Class A
Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
U.S. Underwriters:
Morgan Stanley & Co. Incorporated...................................
Donaldson, Lufkin & Jenrette Securities Corporation.................
Alex. Brown & Sons Incorporated.....................................
Goldman, Sachs & Co.................................................
---
Subtotal..........................................................
---
International Underwriters:
Morgan Stanley & Co. International Limited..........................
Donaldson, Lufkin & Jenrette International..........................
Alex. Brown & Sons Incorporated.....................................
Goldman Sachs International.........................................
---
Subtotal..........................................................
---
Total...........................................................
===
</TABLE>

The U.S. Underwriters and the International Underwriters, and the U.S.
Representatives and the International Representatives, are collectively
referred to as the "Underwriters" and the "Representatives," respectively. The
Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Class A Common
Stock offered hereby are subject to the approval of certain legal matters by
their counsel and to certain other conditions. The Underwriters are obligated
to take and pay for all of the shares of Class A Common Stock offered hereby
(other than those covered by the U.S. Underwriters' over-allotment option
described below) if any such shares are taken.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented and agreed that, with certain exceptions: (i)
it is not purchasing any Shares (as defined herein) for the account of anyone
other than a United States or Canadian Person (as defined herein) and (ii) it
has not offered or sold, and will not offer or sell, directly or indirectly,
any Shares or distribute any prospectus relating to the Shares outside the
United States or Canada or to anyone other than a United States or Canadian
Person. Pursuant to the Agreement between U.S. and International Underwriters,
each International Underwriter has represented and agreed that, with certain
exceptions: (i) it is not purchasing any Shares for the account of any United
States or Canadian Person and (ii) it has not offered or sold, and will not
offer or sell, directly or indirectly, any Shares or distribute any prospectus
relating to the Shares in the United States or Canada or to any United States
or Canadian Person. With respect to any Underwriter that is a U.S. Underwriter
and an International Underwriter, the foregoing representations and agreements
(i) made by it in its capacity as a U.S. Underwriter apply only to it in its
capacity as a U.S. Underwriter and (ii) made by it in its capacity as an
International Underwriter apply only to it in its capacity as an International
Underwriter. The foregoing limitations do not apply to stabilization
transactions or to certain other transactions specified in the Agreement
between U.S. and International Underwriters. As used herein, "United States or
Canadian Person" means any national or resident of the United States or
Canada, or any corporation, pension, profit-sharing or other trust or other
entity organized under the

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<PAGE>

laws of the United States or Canada or of any political subdivision thereof
(other than a branch located outside the United States and Canada of any
United States or Canadian Person), and includes any United States or Canadian
branch of a person who is otherwise not a United States or Canadian Person.
All shares of Class A Common Stock to be purchased by the Underwriters under
the Underwriting Agreement are referred to herein as the "Shares."

Pursuant to the Agreement between U.S. and International Underwriters, sales
may be made between the U.S. Underwriters and International Underwriters of
any number of Shares as may be mutually agreed. The per share price of any
Shares sold shall be the public offering price set forth on the cover page
hereof, in United States dollars, less an amount not greater than the per
share amount of the concession to dealers set forth below.

Pursuant to the Agreement between U.S. and International Underwriters, each
U.S. Underwriter has represented that it has not offered or sold, and has
agreed not to offer or sell, any Shares, directly or indirectly, in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and has represented that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made.
Each U.S. Underwriter has further agreed to send to any dealer who purchases
from it any of the Shares a notice stating in substance that, by purchasing
such Shares, such dealer represents and agrees that it has not offered or
sold, and will not offer or sell, directly or indirectly, any of such Shares
in any province or territory of Canada or to, or for the benefit of, any
resident of any province or territory of Canada in contravention of the
securities laws thereof and that any offer or sale of Shares in Canada will be
made only pursuant to an exemption from the requirement to file a prospectus
in the province or territory of Canada in which such offer or sale is made,
and that such dealer will deliver to any other dealer to whom it sells any of
such Shares a notice containing substantially the same statement as is
contained in this sentence.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has represented and agreed that (i) it has not
offered or sold and, prior to the date six months after the closing date for
the sale of the Shares to the International Underwriters, will not offer or
sell, any Shares to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or disposing
of investments (as principal or agent) for the purposes of their businesses or
otherwise in circumstances which have not resulted and will not result in an
offer to the public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995; (ii) it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document received by it
in connection with the offering of the Shares to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1996 or is a person to whom such document
may otherwise lawfully be issued or passed on.

Pursuant to the Agreement between U.S. and International Underwriters, each
International Underwriter has further represented that it has not offered or
sold, and has agreed not to offer or sell, directly or indirectly, in Japan or
to or for the account of any resident thereof, any of the Shares acquired in
connection with the distribution contemplated hereby, except for offers or
sales to Japanese International Underwriters or dealers and except pursuant to
any exemption from the registration requirements of the Securities and
Exchange Law and otherwise in compliance with applicable provisions of
Japanese law. Each International Underwriter has further agreed to send to any
dealer who purchases from it any of the Shares a notice stating in substance
that, by purchasing such Shares, such dealer represents and agrees that it has
not offered or sold, and will not offer or sell, any of such Shares, directly
or indirectly, in Japan or to or for the account of any resident thereof
except for offers or sales to Japanese International Underwriters or dealers
and except pursuant to any exemption from the registration requirements of the
Securities and Exchange Law and otherwise in compliance with applicable
provisions of Japanese law, and that such dealer will send to any other dealer
to whom it sells any of such Shares a notice containing substantially the same
statement as is contained in this sentence.

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<PAGE>

The Underwriters initially propose to offer part of the shares of Class A
Common Stock directly to the public at the public offering price set forth on
the cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in
excess of $ a share to other Underwriters or to certain other dealers.
After the initial offering of the shares of Class A Common Stock, the offering
price and other selling terms may from time to time be varied by the
Representatives.

Pursuant to the Underwriting Agreement, the Company has granted to the U.S.
Underwriters an option, exercisable for 30 days from the date of this
Prospectus, to purchase up to an aggregate of additional shares of Class A
Common Stock at the public offering price set forth on the cover page hereof,
less underwriting discounts and commissions. The U.S. Underwriters may
exercise such option to purchase solely for the purpose of covering over-
allotments, if any, made in connection with the offering of the shares of
Class A Common Stock offered hereby. To the extent such option is exercised,
each U.S. Underwriter will become obligated, subject to certain conditions, to
purchase approximately the same percentage of such additional shares of Class
A Common Stock as the number set forth next to such U.S. Underwriter's name in
the preceding table bears to the total number of shares of Class A Common
Stock set forth next to the names of all U.S. Underwriters in the preceding
table.

The Company has applied to have the Class A Common Stock approved for
listing on the NYSE under the symbol " ." In order to meet the requirements
for listing the Class A Common Stock on the NYSE, the Underwriters have
undertaken to meet the NYSE's minimum distribution, issuance and market value
requirements.

Each of the Company, the Company's executive officers and Directors and
certain other stockholders of the Company have agreed that, without the prior
written consent of Morgan Stanley & Co. Incorporated, they will not during the
period ending 180 days after the date of this Prospectus, (i) offer, pledge,
loan, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Class A Common Stock or any securities convertible into or
exercisable or exchangeable for Class A Common Stock (whether such shares or
any such securities are then owned by such person or are thereafter acquired
directly from the Company), or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Class A Common Stock, whether any such
transaction described in clause (i) or (ii) of this paragraph is to be settled
by delivery of Class A Common Stock or such other securities, in cash or
otherwise. The restrictions described in this paragraph do not apply to (a)
the sale to the Underwriters of the shares of Class A Common Stock under the
Underwriting Agreement or (b) the issuance by the Company of shares of Class A
Common Stock upon the exercise of an option or warrant sold or granted
pursuant to an existing employee benefit plan of the Company and outstanding
on the date of this Prospectus.

At the request of the Company, the Underwriters have reserved shares of
Class A Common Stock offered hereby for sale, at the initial public offering
price, up to shares to be issued by the Company and offered hereby for
Directors, officers, employees, business associates and related persons of the
Company. The number of shares of Class A Common Stock available for sale to
the general public will be reduced to the extent such persons purchase such
reserved shares. Any reserved shares which are not so purchased will be
offered by the Underwriters to the general public on the same basis as the
other shares offered hereby.

The Underwriters have informed the Company that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
Class A Common Stock offered by them.

In order to facilitate the offering of the Class A Common Stock, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Class A Common Stock. Specifically, the Underwriters
may over-allot in connection with the Offering, creating a short position in
the Class A Common Stock for their own account. In addition, to cover
overallotments or to stabilize the price of the Class A Common Stock, the
Underwriters may bid for, and purchase, shares of Class A Common Stock in the
open market. Finally,

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<PAGE>

the underwriting syndicate may reclaim selling concessions allowed to an
Underwriter or a dealer for distributing the Class A Common Stock in the
Offering, if the syndicate repurchases previously distributed Class A Common
Stock in transactions to cover syndicate short positions, in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Class A Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
any of these activities at any time.

The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.

PRICING OF THE OFFERING

Prior to the Offering, there has been no public market for the Common Stock.
Consequently, the initial public offering price will be determined by
negotiations between the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price will be the
Company's record of operations, the Company's current financial position and
future prospects, the experience of its management, the economies of the
industry in general, the general condition of the equity securities market,
sales, earnings and certain other financial operating information of the
Company in recent periods, the price-earnings ratios, price-sales ratios,
market prices of securities and certain financial and operating information of
companies engaged in activities similar to those of the Company. The estimated
initial public offering price range set forth on the cover page of this
preliminary Prospectus is subject to change as a result of market conditions
and other factors. There can be no assurance that a regular trading market for
the shares of Class A Common Stock will develop after the offering or, if
developed, that a public trading market can be sustained. There can be no
assurance that the prices at which the Class A Common Stock will sell in the
public market after the Offering will not be lower than the prices at which it
is offered by the Underwriters in the Offering.

LEGAL MATTERS

The validity of the Class A Common Stock offered hereby will be passed upon
for the Company by Kirkland & Ellis, Chicago, Illinois (a partnership which
includes professional corporations). Certain legal matters will be passed upon
for the Underwriters by O'Melveny & Myers LLP, Los Angeles, California.

EXPERTS

The financial statements of The Petersen Companies, Inc. as of December 31,
1996 and June 30, 1997 and for the period from August 15, 1996 (inception) to
December 31, 1996 and the six months ended June 30, 1997, the consolidated
financial statements of Petersen Holdings, L.L.C. as of December 31, 1996 and
June 30, 1997 and for the three months ended December 31, 1996 and the six
months ended June 30, 1997 and the financial statements of the publishing
division of Petersen Publishing Company as of November 30, 1995 and September
30, 1996 and for each of the two years in the period ended November 30, 1995
and the ten months ended September 30, 1996 included in this Prospectus have
been audited by Ernst & Young LLP, independent auditors, as stated in their
reports appearing herein and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.

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<PAGE>

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement," which term shall encompass all amendments,
exhibits, annexes and schedules thereto) pursuant to the Securities Act, and
the rules and regulations promulgated thereunder, with respect to the Class A
Common Stock being offered in the Offering. This Prospectus does not contain
all the information set forth in the Registration Statement. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement. Statements made in this
Prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the
document or matter involved, and each such statement shall be deemed qualified
in its entirety by such reference. The Registration Statement, including the
exhibits thereto, can be inspected and copied at the public reference
facilities maintained by the Commission referred to below.

Upon completion of the Offering, the Company will become subject to the
informational requirements of the Exchange Act, and in accordance therewith
will be required to file periodic reports and other information with the
Commission. The Company's principal operating subsidiary is currently subject
to the informational requirements of the Exchange Act as result of the
effectiveness of its Registration Statement on Form S-4 (Registration No. 333-
18017) and in accordance therewith files periodic reports and other
information with the Commission. Such reports and other information regarding
the Company or its operating subsidiary may be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, at the Regional Offices of the
commission at Seven World Trade Center, 13th Floor, New York, New York 10048
and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such materials can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web site that contains
reports, proxy, information statements and other information regarding
registrants that file electronically with the Commission. The address of such
site is http://www.sec.gov.

The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by independent certified
public accountants.

78
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGES
-----
<S> <C>
THE PETERSEN COMPANIES, INC.
Report of Ernst & Young LLP, Independent Auditors...................... F-2
Balance Sheets at December 31, 1996 and June 30, 1997.................. F-3
Statements of Operations for the period from August 15, 1996
(inception) to December 31, 1996 and the six months ended June 30,
1997.................................................................. F-4
Statements of Shareholders' Equity for the period from August 15, 1996
(inception) to December 31, 1996 and the six months ended June 30,
1997.................................................................. F-5
Statements of Cash Flows for the period from August 15, 1996
(inception) to December 31, 1996 and the six months ended June 30,
1997.................................................................. F-6
Notes to Financial Statements.......................................... F-7
PETERSEN HOLDINGS, LLC
Report of Ernst & Young LLP, Independent Auditors...................... F-10
Consolidated Balance Sheets at December 31, 1996 and June 30, 1997..... F-11
Consolidated Statements of Operations for the three months ended
December 31, 1996 and the six months ended June 30, 1997.............. F-12
Consolidated Statements of Members' Equity for the three months ended
December 31, 1996 and the six months ended June 30, 1997.............. F-13
Consolidated Statements of Cash Flows for the three months ended
December 31, 1996 and the six months ended June 30, 1997.............. F-14
Notes to Consolidated Financial Statements............................. F-15
PETERSEN PUBLISHING COMPANY PUBLISHING DIVISION
Report of Ernst & Young LLP, Independent Auditors...................... F-23
Balance Sheets at November 30, 1995 and September 30, 1996............. F-24
Statements of Operations and Divisional Equity for the years ended
November 30, 1994 and 1995, the six months ended June 30, 1996
(unaudited) and the ten months ended September 30, 1996............... F-25
Statements of Cash Flows for the years ended November 30, 1994 and
1995, the six months ended June 30, 1996 (unaudited) and the ten
months ended September 30, 1996....................................... F-26
Notes to Financial Statements.......................................... F-27
</TABLE>

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
BrightView Communications Group, Inc.

We have audited the accompanying balance sheets of The Petersen Companies,
Inc. (formerly known as BrightView Communications Group, Inc.), as of December
31, 1996 and June 30, 1997, and the related statements of operations and
shareholders' equity and cash flows for the period from August 15, 1996
(inception) to December 31, 1996 and the six months ended June 30, 1997. 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 financial position of The Petersen Companies,
Inc., at December 31, 1996 and June 30, 1997, and the results of its
operations and its cash flows for the period from August 15, 1996 (inception)
to December 31, 1996 and the six months ended June 30, 1997, in conformity
with generally accepted accounting principles.

Ernst & Young LLP
Los Angeles, California
August 7, 1997, except as to Note 7 as to
which the date is

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

The foregoing report is in the form that will be signed upon the completion
of the reorganization of the Company and the conversion of Class A and Class B
Common Stock described in Note 7 to the financial statements.

/s/ Ernst & Young LLP
Los Angeles, California
, 1997

F-2
<PAGE>

THE PETERSEN COMPANIES, INC.

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
ASSETS
Investment in Petersen Publishing, L.L.C. ............... $ 154 $ 149
Investment in Petersen Holdings, L.L.C. ................. 1,506 1,513
------ ------
Total assets............................................. $1,660 $1,662
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities.............................................. $ -- $ --
Commitments and contingencies
Shareholders' equity:
Class A Shares, $0.01 par value, 10,000 shares
authorized; 2,163.5 shares issued and outstanding..... 1,073 1,082
Class B Shares, $0.01 par value, 10,000 shares
authorized; 1,200 shares issued and outstanding....... 600 600
Accumulated deficit.................................... (11) (18)
------ ------
1,662 1,664
Notes receivable from related parties.................. (2) (2)
------ ------
Total liabilities and shareholders' equity............... $1,660 $1,662
====== ======
</TABLE>

See accompanying notes.

F-3
<PAGE>

THE PETERSEN COMPANIES, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
AUGUST 15, 1996 SIX MONTHS
(INCEPTION) TO ENDED
DECEMBER 31, JUNE 30,
1996 1997
--------------- ----------
<S> <C> <C>
Net revenues....................................... $ -- $ --
General and administrative expenses................ -- 2
----- -----
Loss from operations............................... -- (2)
Equity in loss of subsidiary....................... (11) (5)
----- -----
Net loss........................................... $ (11) $ (7)
===== =====
Pro forma loss per share........................... $ $
===== =====
Pro forma weighted average number of common shares
outstanding.......................................
===== =====
</TABLE>

See accompanying notes.

F-4
<PAGE>

THE PETERSEN COMPANIES, INC.

STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NOTES
RECEIVABLE
CLASS A COMMON CLASS B COMMON FROM TOTAL
--------------- ---------------- ACCUMULATED RELATED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT PARTIES EQUITY
------- ------- ------- ------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of August 15,
1996 (inception)....... -- $ -- -- $ -- $ -- $ -- $ --
Contributed capital..... 2,145 1,073 1,200 600 -- -- 1,673
Loans to related
parties................ -- -- -- -- -- (2) (2)
Net loss................ -- -- -- -- (11) -- (11)
------ ------- ------- ------- ----- ----- ------
Balance as of December
31, 1996............... 2,145 1,073 1,200 600 (11) (2) 1,660
Contributed capital..... 18 9 -- -- -- -- 9
Net loss................ -- -- -- -- (7) -- (7)
------ ------- ------- ------- ----- ----- ------
Balance as of June 30,
1997................... 2,163 $1,082 1,200 $600 $ (18) $ (2) $1,662
====== ======= ======= ======= ===== ===== ======
</TABLE>

See accompanying notes.

F-5
<PAGE>

THE PETERSEN COMPANIES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
AUGUST 15, 1996 SIX MONTHS
(INCEPTION) TO ENDED
DECEMBER 31, JUNE 30,
1996 1997
--------------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss........................................... $ (11) $ (7)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Equity in loss of subsidiary...................... 11 5
------- ------
Net cash used in operating activities.............. -- (2)
INVESTING ACTIVITIES
Investment in Petersen Publishing Company,
L.L.C. ........................................... (165) 1
Investment in Petersen Holdings, L.L.C. ........... (1,505) (9)
------- ------
Net cash used in investing activities.............. (1,670) (8)
FINANCING ACTIVITIES
Proceeds from issuance of stock.................... 1,670 10
------- ------
Net cash provided by financing activities.......... 1,670 10
------- ------
Increase (decrease) in cash........................ -- --
Cash at beginning of period........................ -- --
------- ------
Cash at end of period.............................. $ -- $ --
======= ======
</TABLE>

See accompanying notes.

F-6
<PAGE>

THE PETERSEN COMPANIES, INC.

NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

BrightView Communications Group, Inc. ("BrightView") is a Delaware
corporation. BrightView owns 1.0% of Petersen Holdings, L.L.C. ("Holdings")
and .1% of Petersen Publishing Company, L.L.C. ("Petersen"). BrightView has no
business operations other than the investment in Holdings and Petersen.
BrightView was organized in August 1996 for the principal purpose of investing
in Holdings and Petersen. BrightView is Holdings' managing member and as such
controls the policies and operations of Holdings and of Petersen through
Holdings.

Basis of Presentation

The financial statements reflect the activity of BrightView for the period
from August 15, 1996 (inception) through December 31, 1996 and for the six
month period ended June 30, 1997, after elimination of intercompany
transactions. BrightView reflects its investment in both Holdings and Petersen
on the equity method of accounting.

2. LONG-TERM DEBT

Senior Credit Facility:

On September 30, 1996, Petersen entered into a Senior Credit Facility with
First Union National Bank of North Carolina and CIBC Inc. (the "Lenders")
pursuant to which the Lenders agreed to loan Petersen up to $260,000,000. Such
amount was allocated among a revolving credit facility for up to $60,000,000
(the "Revolver"), of which up to $10,000,000 can be in the form of letters of
credit; a tranche A term loan for up to $100,000,000 (the "Tranche A Loan");
and a tranche B term loan for up to $100,000,000 (the "Tranche B Loan").

The Revolver and the Tranche A Loan bear interest at either LIBOR (5.688% at
June 30, 1997), plus 1.375% to 2.750%, based on borrowings or the prime rate
of the agent bank (8.5% at June 30, 1997), plus .125% to 1.5%, based on
borrowings. As of December 31, 1996 and June 30, 1997, Petersen had no
borrowings outstanding under the Revolver. However, a letter of credit for
$1,600,000 issued in January 1997 reduces the amount available under the
Revolver. The letter of credit expires in January 1998. Any future borrowings
under the Revolver will mature on December 31, 2002. As of December 31, 1996,
Petersen had $100,000,000 outstanding under the Tranche A Loan at a weighted
average interest rate of 8.375%. As of June 30, 1997, Petersen had $89,000,000
outstanding under the Tranche A Loan at a weighted average interest rate of
8.277%.

The Tranche B Loan bears interest at either LIBOR (5.688% at June 30, 1997),
plus 2.625% to 3.250%, based on borrowings or the prime rate of the agent bank
(8.5% at June 30, 1997), plus 1.375% to 2.0% based on borrowings. As of
December 31, 1996, Petersen had $100,000,000 outstanding under the Tranche B
Loan at a weighted average interest rate of 8.875%. As of June 30, 1997,
Petersen had $88,750,000 outstanding under the Tranche B Loan at a weighted
average interest rate of 8.777%.

F-7
<PAGE>

THE PETERSEN COMPANIES, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

The Revolver and Tranche A Loan mature on December 31, 2002 and Tranche B
Loan matures on September 30, 2004. Minimum annual repayment commitments for
the Tranche A Loan and Tranche B Loan are as follows:

<TABLE>
<CAPTION>
TRANCHE A LOAN TRANCHE B LOAN
-------------- --------------
<S> <C> <C>
1997 (6 months)................................ $ -- $ 500
1998........................................... 10,000 1,000
1999........................................... 15,000 1,000
2000........................................... 20,000 1,000
2001........................................... 25,000 1,000
Thereafter..................................... 19,000 84,250
------- -------
Total........................................ $89,000 $88,750
======= =======
</TABLE>

The Revolver is required to be permanently reduced and the Tranche A Loan
and Tranche B Loan are required to be prepaid with (i) 75% of excess cash flow
(as defined in the Senior Credit Facility), (ii) proceeds from asset sales or
other dispositions of property, (iii) proceeds from the issuance of certain
debt obligations or equity securities. In the six months ended June 30, 1997,
Petersen repaid $22,250,000 of the borrowings under the Senior Credit
Facility, including a prepayment of $11,000,000 on the Tranche A Loan and a
prepayment of $10,750,000 on the Tranche B Loan.

The Senior Credit Facility contains certain restrictive covenants including
but not limited to restrictions on capital expenditures, payments of
dividends, liens, investments and disposals of assets, as well as financial
covenants including a maximum leverage ratio, minimum interest coverage ratio
and minimum fixed charge coverage ratio, all as defined in the Senior Credit
Facility. As of June 30, 1997, Petersen was in compliance with the covenants
of the Senior Credit Facility.

The Senior Credit Facility is guaranteed by Holdings and the Company.

Petersen estimates that the book value of the Senior Credit Facility
approximates its fair value.

Bridge Notes:

In August 1996, Petersen entered into a Bridge Commitment Agreement whereby
First Union Corporation and CIBC Inc. agreed to lend Petersen up to
$100,000,000 aggregate amount of senior subordinated increasing rate notes
(the "Bridge Notes"). The Bridge Notes bore interest at the prime rate (as
announced from time to time by First Union National Bank of North Carolina)
plus 425 basis points, with a maximum of 12.5% per annum. The interest rate
would increase by an additional 50 basis points under certain circumstances.

In December 1996, Petersen repaid the Bridge Notes in full.

F-8
<PAGE>

THE PETERSEN COMPANIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

4. INVESTMENTS IN HOLDINGS AND PETERSEN

In August 1996, the Company issued shares of Class A and Class B Common
stock in exchange for proceeds aggregating $1,672,500. At the same time,
BrightView invested $1,505,250 in 1.0% of Holdings and $167,250 in .1% of
Petersen. BrightView reflects their proportionate share of the loss in both
Holdings and Petersen each period.

5. INCOME TAXES

No provision or liability for federal or state income taxes is included in
the accompanying financial statements. The difference between the tax bases
and the reported amounts of the Company's assets and liabilities is not
material at December 31, 1996 and June 30, 1997. The Company had no deferred
tax assets and liabilities at December 31, 1996 or June 30, 1997.

6. CONTINGENCIES

The Company is a party to various legal actions and disputes arising in the
ordinary course of business. Management believes, based on the advice of
counsel, that any resulting liabilities from these actions will not have a
material adverse effect on the financial position of the company.

7. EVENTS SUBSEQUENT TO JUNE 30, 1997

On August 5, 1997, the Board of Directors of the Company authorized the
filing with the Securities and Exchange Commission of a registration statement
for the sale by the Company of shares of its Class A Common Stock to the
public. It is contemplated that in connection with the offering, (i) Holdings
will pay $50,000,000 to redeem preferred units with an aggregate liquidation
preference and accrued preferred yield of $50,000,000, (ii) a newly formed
subsidiary of the Company will merge with and into Holdings and (iii) all of
the Holdings common units and the balance of the preferred units (i.e., other
than those to be redeemed) will be converted into an aggregate of shares
of Class A Common Stock and shares of Class B Common Stock.

F-9
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
Petersen Holdings, L.L.C.

We have audited the accompanying consolidated balance sheets of Petersen
Holdings, L.L.C., as of December 31, 1996 and June 30, 1997, and the related
consolidated statements of operations, members' equity and cash flows for the
three months ended December 31, 1996 and the six months ended June 30, 1997.
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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Petersen
Holdings, L.L.C., at December 31, 1996 and June 30, 1997, and the consolidated
results of its operations and its cash flows for the three months ended
December 31, 1996 and the six months ended June 30, 1997, in conformity with
generally accepted accounting principles.

Ernst & Young LLP
Los Angeles, California
July 31, 1997, except as to Note 12 as to
which the date is

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

/s/ Ernst & Young LLP
Los Angeles, California
, 1997

F-10
<PAGE>

PETERSEN HOLDINGS, L.L.C.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 7,761 $ 6,923
Accounts receivable, less allowance for doubtful
accounts of $1,604 (1996) and $1,722 (1997)......... 20,141 24,011
Inventories.......................................... 4,408 3,721
Deferred direct mail advertising costs, net of
accumulated amortization of $307 (1997)............. -- 2,340
Other prepaid expenses and current assets............ 730 653
--------- ---------
Total current assets................................... 33,040 37,648
Property and equipment, net of accumulated depreciation
of $560 (1996) and $1,501 (1997)...................... 4,152 3,360
Goodwill, net of accumulated amortization of $5,992
(1996) and $17,979 (1997)............................. 353,556 341,595
Subscriber list and established work force, net of
accumulated amortization of $3,000 (1996) and $9,000
(1997)................................................ 117,000 111,000
Deferred financing costs, net of accumulated
amortization of $3,276 (1996) and $4,659 (1997)....... 10,735 9,352
Other assets........................................... 587 631
--------- ---------
Total assets........................................... $ 519,070 $ 503,586
========= =========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities............. $ 13,288 $ 16,623
Accrued payroll and related costs.................... 1,963 4,098
Accrued interest on long-term debt................... 2,041 3,628
Customer incentives payable.......................... 5,785 5,735
Current portion of unearned subscription revenues,
net of deferred subscription acquisition costs of
$43,835 (1996) and $40,711 (1997)................... 27,328 28,806
Current portion of long-term debt.................... 1,000 6,000
Other accrued expenses and current liabilities....... 119 261
--------- ---------
Total current liabilities.............................. 51,524 65,151
Unearned subscription revenues, net of deferred
subscription acquisition costs of $41,168 (1996) and
$44,680 (1997)........................................ 6,440 7,391
Long-term debt......................................... 299,000 271,750
Other noncurrent liabilities........................... 7,652 8,664
Due to minority member................................. 154 149
Members' equity:
Common units......................................... 1,671 1,707
Preferred units...................................... 165,171 181,464
Accumulated deficit.................................. (10,594) (30,942)
--------- ---------
156,248 152,229
Less: Notes receivable from related parties.......... (1,948) (1,748)
--------- ---------
Total members' equity.................................. 154,300 150,481
--------- ---------
Total liabilities and members' equity.................. $ 519,070 $ 503,586
========= =========
</TABLE>

See accompanying notes.

F-11
<PAGE>

PETERSEN HOLDINGS, L.L.C.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PETERSEN HOLDINGS,
L.L.C.
-----------------------
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
Net revenues:
Advertising.......................................... $ 31,912 $ 73,438
Newsstand............................................ 10,037 21,249
Subscriptions........................................ 10,404 21,736
Other................................................ 924 3,720
--------- --------
Total net revenues..................................... 53,277 120,143
Production, selling and other direct costs (including
rent paid to a related party of $1,032 and $2,187, for
the three months ended December 31, 1996 and the six
months ended June 30, 1997, respectively)............. 41,223 82,440
--------- --------
Gross profit........................................... 12,054 37,703
General and administrative expenses.................... 2,666 8,955
Amortization of goodwill and other intangible assets... 8,992 18,151
--------- --------
Income from operations................................. 396 10,597
Other income (expense):
Interest income...................................... 113 355
Interest expense..................................... (11,114) (15,853)
Loss on sale of assets............................... -- (33)
--------- --------
Loss before minority interest.......................... (10,605) (4,934)
Minority members' equity in loss of subsidiary......... 11 5
--------- --------
Net loss............................................... (10,594) (4,929)
Preferred unit dividends............................... -- (15,419)
--------- --------
Net loss attributable to common units.................. $ (10,594) $(20,348)
========= ========
</TABLE>

See accompanying notes.

F-12
<PAGE>

PETERSEN HOLDINGS, L.L.C.

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)

<TABLE>
<CAPTION>
NOTES
RECEIVABLE
COMMON UNITS PREFERRED UNITS FROM TOTAL
-------------- ---------------- ACCUMULATED RELATED MEMBERS'
UNITS AMOUNT UNITS AMOUNTS DEFICIT PARTIES EQUITY
------- ------ ------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of September
30, 1996............... -- $ -- -- $ -- $ -- $ -- $ --
Contributed capital, net
of costs............... 413,550 1,671 371,295 165,171 -- -- 166,842
Loans to related
parties................ -- -- -- -- -- (1,948) (1,948)
Net loss................ -- -- -- -- (10,594) -- (10,594)
------- ------ ------- -------- -------- ------- --------
Balance as of December
31, 1996............... 413,550 1,671 371,295 165,171 (10,594) (1,948) 154,300
Contributed capital..... 4,061 36 1,960 874 -- -- 910
Preferred unit
dividend............... -- -- -- 15,419 (15,419) -- --
Payments against notes
receivable from related
parties................ -- -- -- -- -- 200 200
Net loss................ -- -- -- -- (4,929) -- (4,929)
------- ------ ------- -------- -------- ------- --------
Balance as of June 30,
1997................... 417,611 $1,707 373,255 $181,464 $(30,942) $(1,748) $150,481
======= ====== ======= ======== ======== ======= ========
</TABLE>

See accompanying notes.

F-13
<PAGE>

PETERSEN HOLDINGS, L.L.C.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $ (10,594) $ (4,929)
Adjustment to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization......................... 12,849 20,791
Allowance for doubtful accounts....................... -- 828
Loss on sale of assets................................ -- 33
Changes in operating assets and liabilities:
Accounts receivable................................... (2,092) (4,698)
Inventories........................................... 6,017 687
Deferred direct mail advertising costs................ -- (2,647)
Accounts payable and accrued liabilities.............. 9,102 2,848
Accrued payroll and related costs..................... (3,677) 2,135
Accrued interest on long-term debt.................... 2,041 1,587
Customer incentives payable........................... 411 (50)
Unearned subscription revenues, net................... 779 2,429
Other current assets, net............................. 34 619
Other noncurrent liabilities.......................... 7,506 (1,514)
--------- --------
Total adjustments..................................... 32,970 23,048
--------- --------
Net cash provided by operating activities.............. 22,376 18,119

INVESTING ACTIVITIES
Decrease in minority interest.......................... -- (5)
Purchases of property and equipment.................... -- (228)
Purchases of magazines................................. -- (122)
Proceeds from sale of assets........................... -- 38
Acquisition of assets of publishing division of
Petersen Publishing Company, including liabilities
assumed and net of costs associated with the
acquisition........................................... (465,652) 2,500
--------- --------
Net cash (used in) provided by investing activities.... (465,652) 2,183
--------- --------
FINANCING ACTIVITIES
Proceeds from bank borrowings.......................... 200,000 --
Repayment of bank borrowings........................... -- (22,250)
Proceeds from issuance of Senior Subordinated Notes.... 100,000 --
Increase in deferred financing costs................... (14,011) --
Proceeds from issuance of members units................ 165,135 910
Reduction in notes receivable, related party........... -- 200
Costs associated with capital contributions............ (241) --
Cash contribution by minority member................... 154 --
--------- --------
Net cash provided by (used in) financing activities.... 451,037 (21,140)
--------- --------
Increase in cash and cash equivalents.................. 7,761 (838)
Cash and cash equivalents at beginning of period....... -- 7,761
--------- --------
Cash and cash equivalents at end of period............. $ 7,761 $ 6,923
========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during period for:
Interest.............................................. $ 5,576 $ 10,842
========= ========
Taxes................................................. $ -- $ 12
========= ========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During the three months ended December 31, 1996, the Company extended a loan
to related parties of $1,948 in exchange for Common and Preferred Units.
During the six months ended June 30, 1997, the Company increased goodwill and
accrued liabilities by $2,526,000 representing adjustments to the allocation
of the purchase price of the Acquisition. Additionally, the Company accrued
the cumulative Preferred Unit dividend of $15,419 during the six months ended
June 30, 1997.

See accompanying notes.

F-14
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Petersen Holdings, L.L.C. ("Holdings") is a Delaware limited liability
company. Holdings owns 99.9% of Petersen Publishing Company, L.L.C. (the
"Company"). Holdings has no business operations other than those of the
Company. The remaining 0.1% of the Company is owned by BrightView
Communications Group, Inc. ("BrightView"). The Company was organized in 1996
for the principal purpose of completing the acquisition (the "Acquisition") of
substantially all of the assets and assuming certain liabilities of the
Publishing Division of Petersen Publishing Company ("Petersen") (see Note 2).
The Company is engaged in the publishing business with revenues generated
primarily from the publication of various special interest magazines and the
sale of related advertising, principally within the United States.

Basis of Presentation

The consolidated financial statements reflect the consolidated activity of
Holdings and the Company from October 1, 1996 through December 31, 1996 and
the six month period ended June 30, 1997, after elimination of intercompany
transactions and segregation of minority interest.

Certain reclassifications have been made to the consolidated balance sheets
and statements of operations for the three months ended December 31, 1996 to
conform to the presentation for the six months ended June 30, 1997.

Cash Equivalents

Cash equivalents consist primarily of debt instruments with maturities of
three months or less at the acquisition date. The carrying amounts of cash and
cash equivalents reported in the balance sheet approximate its fair value.

Inventories

Inventories, consisting of paper held at a printing company, are stated at
the lower of cost, which approximates the first-in, first-out method, or
market.

Deferred Subscription Acquisition Costs

Deferred subscription acquisition costs consist primarily of agency
commissions paid to obtain subscriptions and are amortized over the life of
the related subscriptions.

Depreciation and Amortization

Depreciation is provided on the straight-line method over the estimated
useful lives of the assets ranging from 3 to 5 years except for leasehold
improvements which are amortized over the lesser of 10 years or the life of
the lease.

Goodwill and Other Intangible Assets

Goodwill resulting from the Acquisition will be amortized using the
straight-line method over its estimated useful life of 15 years. Other
intangible assets (consisting mainly of subscriber lists and established work
force) will be amortized over their estimated useful lives of ten years.
Deferred financing costs will be amortized over the term of the debt: ten
years for the Senior Subordinated Notes and an average of seven years for the
Senior Credit Facility.

F-15
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Income Taxes

As a limited liability company, Holdings is not subject to U.S. federal
income taxes or state income taxes.

Revenue Recognition

Advertising revenue, net of provisions for related rebates and discounts, is
recognized at the "on sale" date of the publication containing the
advertisement. Subscription revenue is deferred and recognized pro rata as
fulfilled over the terms of such subscriptions and is recorded net of related
agency commissions. Sales of magazines intended for retail distribution on
newsstands are recorded at the time such publications are available for sale
by distributors to the public and are reduced by an estimated provision for
returns.

Use of Estimates

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

Revenues

No customer accounted for over 10% of the Company's revenues. The Company's
activities occur principally in the United States and revenues from outside
the United States are less than 10% of the Company's revenues.

Advertising Expenses

The Company began a new mailing program in 1997 and correspondingly
capitalizes direct mail advertising costs. Such capitalized costs totaled
$2,647,000 at June 30, 1997 and will be amortized over twelve months,
beginning two months after mailing. No direct mail advertising costs were
capitalized at December 31, 1996. Amortization of direct mail advertising
costs was $307,000 for the six months ended June 30, 1997.

The Company expenses all other costs of advertising as incurred. Advertising
expense for the three months ended December 31, 1996 and the six months ended
June 30, 1997 were $23,000, and $946,000, respectively.

2. ACQUISITION OF THE PUBLISHING DIVISION OF PETERSEN PUBLISHING COMPANY

In August 1996, BrightView entered into an Asset Purchase Agreement to
purchase substantially all of the assets of the publishing division of
Petersen. BrightView assigned its rights under such agreement to the Company
and the Company assumed all of BrightView's obligations thereunder. The
aggregate purchase price (including expenses) was $462,800,000 (including
costs associated with the Acquisition), plus the assumption of unearned
subscription revenues and other certain liabilities totaling approximately
$49,000,000. The Acquisition was completed on September 30, 1996. In
connection with the Acquisition, the Company recorded goodwill of
approximately $360,000,000 and other intangible assets of approximately
$120,000,000. Goodwill amortization expense for the three months ended
December 31, 1996 and the six months ended June 30, 1997 was $5,992,000 and
$12,109,000, respectively. Amortization of other intangible assets was
$3,000,000 and $6,000,000 for the three months ended December 31, 1996 and the
six months ended June 30, 1997, respectively.

In order to finance the Acquisition, the Company entered into a Senior
Credit Facility for up to $260,000,000, issued 11 1/8% Senior Subordinated
Notes for $100,000,000 and Holdings issued equity securities for $165,000,000.
See Notes 5 and 8 for a more comprehensive discussion of the debt and equity
issuances.

F-16
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

3. INVENTORIES

Inventories consist of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Paper.................................................. $ 611 $ 1,562
Magazines in process................................... 3,797 2,159
------- -------
$ 4,408 $ 3,721
======= =======
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consists of (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1996 1997
------------ --------
<S> <C> <C>
Leasehold improvements................................. $ 283 $ 283
Machinery and equipment................................ 2,230 2,379
Office furniture and equipment......................... 2,199 2,199
------- -------
4,712 4,861
Less accumulated depreciation and amortization......... 560 1,501
------- -------
$ 4,152 $ 3,360
======= =======
</TABLE>

In March 1995, the Financial Accounting Standards Board issued 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 No.
121"), which became effective for the Company in 1996. The adoption of SFAS
No. 121 did not have a material impact on the Company's financial position or
results of operations.

5. LONG-TERM DEBT

Senior Credit Facility:

On September 30, 1996, the Company entered into a Senior Credit Facility
with First Union National Bank of North Carolina and CIBC Inc. (the "Lenders")
pursuant to which the Lenders agreed to loan the Company up to $260,000,000.
Such amount was allocated among a revolving credit facility for up to
$60,000,000 (the "Revolver"), of which up to $10,000,000 can be in the form of
letters of credit; a tranche A term loan for up to $100,000,000 (the "Tranche
A Loan"); and a tranche B term loan for up to $100,000,000 (the "Tranche B
Loan").

The Revolver and the Tranche A Loan bear interest at either LIBOR (5.688% at
June 30, 1997), plus 1.375% to 2.750%, based on borrowings or the prime rate
of the agent bank (8.5% at June 30, 1997), plus .125% to 1.5%, based on
borrowings. As of December 31, 1996 and June 30, 1997, the Company had no
borrowings outstanding under the Revolver. However, a letter of credit for
$1,600,000 issued in January 1997 reduces the amount available under the
Revolver. The letter of credit expires in January 1998. Any future borrowings
under the Revolver will mature on December 31, 2002. As of December 31, 1996,
the Company had $100,000,000 outstanding under the Tranche A Loan at a
weighted average interest rate of 8.375%. As of June 30, 1997, the Company had
$89,000,000 outstanding under the Tranche A Loan at a weighted average
interest rate of 8.277%.

F-17
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

borrowings. As of December 31, 1996, the Company had $100,000,000 outstanding
under the Tranche B Loan at a weighted average interest rate of 8.875%. As of
June 30, 1997, the Company had $88,750,000 outstanding under the Tranche B
Loan at a weighted average interest rate of 8.777%.

The Revolver is required to be permanently reduced and the Tranche A Loan
and Tranche B Loan are required to be prepaid with (i) 75% of excess cash flow
(as defined in the Senior Credit Facility), (ii) proceeds from asset sales or
other dispositions of property, (iii) proceeds from the issuance of certain
debt obligations or equity securities. In the six months ended June 30, 1997,
the Company repaid $22,250,000 of the borrowings under the Senior Credit
Facility, including a prepayment of $11,000,000 on the Tranche A Loan and a
prepayment of $10,750,000 on the Tranche B Loan.

The Senior Credit Facility contains certain restrictive covenants including
but not limited to restrictions on capital expenditures, payments of
dividends, liens, investments and disposals of assets, as well as financial
covenants including a maximum leverage ratio, minimum interest coverage ratio
and minimum fixed charge coverage ratio, all as defined in the Senior Credit
Facility. As of June 30, 1997, the Company was in compliance with the
covenants of the Senior Credit Facility.

The Senior Credit Facility is guaranteed by Holdings and BrightView.

The Company estimates that the book value of the Senior Credit Facility
approximates its fair value.

The Company incurred costs of approximately $7,000,000 in connection with
the Senior Credit Facility. These costs have been included in Deferred
Financing Costs and are being amortized over the term of the loans. During the
three months ended December 31, 1996 and the six months ended June 30, 1997,
the Company amortized approximately $250,000 and $1,183,000, respectively, of
such deferred financing costs. As a result of the early repayments, during the
six months ended June 30, 1997 the Company recorded additional amortization of
deferred financing costs of approximately $687,000.

11 1/8% Senior Subordinated Notes due 2006:

Holdings, the Company and its wholly-owned subsidiary, Petersen Capital
Corp. (together, the "Issuers"), issued $100,000,000 in 11 1/8% Senior
Subordinated Notes due 2006 (the "Notes") pursuant to an Offering Memorandum
dated November 20, 1996. The Notes bear interest at 11 1/8% per annum, payable
semi-annually on November 15 and May 15, commencing May 15, 1997. The Notes
will mature on November 15, 2006 and will not be subject to any sinking fund
requirement. The Notes are redeemable at the option of the Issuers, in whole
or in part, at any time on or after November 15, 2001, at the redemption
prices set forth in the Notes

F-18
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Purchase Agreement, plus accrued and unpaid interest to the date of
redemption. Under certain circumstances, prior to November 15, 1999, the
Issuers, at their option, may redeem in the aggregate up to 25% of the
original principal amount of the Notes at 111.125% of the aggregate principal
amount so redeemed, plus accrued and unpaid interest.

The Notes are general unsecured obligations of the Issuers and are
subordinated in right of payment to all existing and future senior
indebtedness of the Issuers. The Notes are guaranteed by Holdings.

The Indenture governing the Notes (the "Indenture") contains certain
restrictive covenants, including but not limited to, restrictions on
incurrence of debt, dividend payments, certain asset sales, transactions with
affiliates, liens and investments. As of June 30, 1997, the Company was in
compliance with the covenants contained in the Indenture.

The Company incurred costs of approximately $4,000,000 in connection with
the issuance of the Notes. These costs have been included in Deferred
Financing Costs and are being amortized over the term of the Notes. During the
three months ended December 31, 1996, and the six months ended June 30, 1997
the Company amortized approximately $67,000 and $200,000, respectively, of
such deferred financing costs.

On March 11, 1997, the Company exchanged all of the outstanding Notes for
substantially identical notes that were registered pursuant to a registration
statement on Form S-4 under the Securities Act of 1933.

The Company estimates that the book value of the Senior Subordinated Notes
approximates their fair value.

Bridge Notes:

In August 1996, the Company entered into a Bridge Commitment Agreement
whereby First Union Corporation and CIBC Inc. agreed to lend the Company up to
$100,000,000 aggregate amount of senior subordinated increasing rate notes
(the "Bridge Notes"). The Bridge Notes bore interest at the prime rate (as
announced from time to time by First Union National Bank of North Carolina)
plus 425 basis points, with a maximum of 12.5% per annum. The interest rate
would increase by an additional 50 basis points under certain circumstances.

In December 1996, with proceeds from the issuance of the Notes, the Company
repaid the Bridge Notes in full, together with accrued interest of
approximately $1,980,000. In addition to this interest expense, the Company
incurred approximately $3,000,000 in costs associated with the Bridge Notes.
This amount is included in amortization of Deferred Financing Costs for the
three months ended December 31, 1996.

6. INCOME TAXES

The liability for federal and state income taxes of a limited liability
company is the obligation of the members. Therefore, no provision or liability
for federal or state income taxes is included in the accompanying financial
statements. The difference between the tax bases and the reported amounts of
the Company's assets and liabilities is not material at December 31, 1996 and
June 30, 1997. The Company had no deferred tax assets and liabilities at
December 31, 1996 or June 30, 1997.

Both the Senior Credit Facility and the Indenture governing the Notes
generally limit the Company's ability to pay cash distributions to Holdings
and BrightView other than distributions in amounts approximately equal to the
income tax liability of such members of the Company (or, in the case of
Holdings, the income tax liability it would have had if it were required to
pay income taxes) resulting from the taxable income of the Company ("Tax
Distributions"). Tax Distributions will be based on the approximate highest
combined tax rate that applies to any one of the members of the Company.

F-19
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

7. MEMBERS' EQUITY

The Company and Holdings are each limited liability companies organized
under the Delaware Limited Liability Company Act (the "LLC Act"). Holdings is
the Company's managing member and as such controls the policies and operations
of the Company. Holdings is governed by a limited liability company agreement
(the "LLC Agreement") among Willis Stein & Partners, L.P. (through Petersen
Investment Corp.), Petersen, certain members of the Company's management and
other investors (collectively the "Members"). As a limited liability company
organized under Delaware law, members of Holdings are not liable for debts or
other obligations of Holdings. The LLC Agreement governs the relative rights
and duties of the Members. BrightView is Holdings' managing member and as such
controls the policies and operations of Holdings and of the Company through
Holdings.

The ownership interests of the Members in Holdings consist of Preferred
Units and Common Units. The Preferred Units are entitled to a preferred yield
of 12.0% per annum, compounded quarterly, and an aggregate liquidation
preference of $166.3 million (net of any prior repayments of Preferred Units)
plus any accrued and unpaid preferred yield (collectively, the "Preference
Amount") on any liquidation or other distribution by Holdings. The Common
Units represent the common equity of Holdings and consist of Class A Common
Units, Class B Common Units and Class C Common Units. After payment of the
Preference Amount, holders of Class A Common Units are entitled to share in
any remaining proceeds of any liquidation or other distribution by Holdings
pro rata according to the number of Class A Common Units held. After the
holders of the Preferred Units and Class A Common Units have received an
internal rate of return of 30%, inclusive of the Preference Amount, on their
total investment, holders of Class B Common Units will be entitled to
participate with the holders of Class A Common Units in any subsequent
distributions. Similarly, after the holders of the Preferred Units and Class A
Common Units have received an internal rate of return of 35% on their total
investment, holders of Class C Common Units will be entitled to participate
with the holders of Class A Common Units and the holders of Class B Common
Units in any subsequent distributions. The Class B Common Units and Class C
Common Units were issued to members of management to provide them with equity
incentives. The LLC Agreement grants BrightView broad authority in
establishing the magnitude and terms of management's equity participation in
the Company. See Note 11 for information as to the subsequent conversion of
Class B and Class C Common Units.

The LLC Agreement, and therefore Holdings' existence, will continue in
effect until the earlier to occur of: (i) December 3, 2026; (ii) a unanimous
vote to that effect of its Members or their successors in interest; (iii) a
resolution to that effect of the managing member; (iv) the incapacity or
expulsion of the managing member or any other event under the LLC Act which
terminates Holdings unless the Members vote within 90 days to continue
Holdings' existence or (v) the entry of a decree of judicial dissolution under
the LLC Act. Other than as described in (iv) above, the death, retirement,
resignation, expulsion, incapacity, bankruptcy or dissolution of a Member will
not cause a dissolution of Holdings. The Company's limited liability company
agreement contains similar terms governing the Company's continued existence.

During the six months ended June 30, 1997, Holdings received $910,000 in
exchange for the issuance of additional Preferred Units and Common Units. See
Note 9 for a discussion of other transactions concerning Members' Equity.
Additionally, Holdings accrued $15,419,000 for the preferred yield on the
Preferred Units which represents the cumulative compounded yield through June
30, 1997.

8. PROFIT-SHARING RETIREMENT PLAN

Petersen had a profit-sharing retirement plan (the "Plan") for employees,
which was qualified for tax exempt status by the Internal Revenue Service.
Under the Plan, Petersen, at its discretion, made annual contributions for all
eligible employees not to exceed 15% of their aggregate annual compensation.
In November

F-20
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

1996, Petersen and the Company entered into an amendment to the Plan, whereby
the Company became a sponsor of the Plan. Both Petersen and the Company agreed
to make contributions to the Plan on behalf of their respective employees
based on compensation paid by each company. However, in connection with the
Acquisition, the Company agreed to make the contribution to the Plan for 1996.
In December 1996, the Company contributed $1,300,000 to the Plan. No
contributions were made during the six months ended June 30, 1997 to the Plan.
In June 1997, the Company agreed to transfer the assets of the Plan into a new
401K Plan (the "New Plan"). Under the New Plan, the Company shall make
matching contributions equal to 50% of the first 6% of the participants' basic
compensation. As of June 30, 1997, $44,000 had been paid representing the
Company's matching contribution.

9. RELATED PARTY TRANSACTIONS

In connection with the Acquisition, the Company entered into employment
agreements with three officers of the Company. Pursuant to these employment
agreements, the officers purchased Common Units and Preferred Units with
promissory notes aggregating approximately $1,950,000. Of this amount,
$200,000 was paid on March 1, 1997 and the balance of each promissory note
will be due and payable on the earlier to occur of: (i) December 31, 2001;
(ii) the termination of the employment with the Company of the officers or
(iii) a sale of the Company. Such promissory notes bear interest at a rate
equal to the Company's weighted average cost of borrowings. In addition,
Holdings issued to each of the officers additional Common Units without
additional consideration. Such Common Units vest ratably over a period of five
years.

See Note 10 for additional related party transactions.

10. COMMITMENTS AND CONTINGENCIES

Leases

Rent expense includes amounts charged to the Company by a member of Holdings
(the "Member") for the use of various office facilities, including its
corporate headquarters, owned by the Member. The lease governing the corporate
headquarters building had an initial term of 15 years and expires November 30,
2009. In connection with the Acquisition, the Company assumed this lease,
subject to certain reductions to the annual rental amounts and will continue
to pay rent to the Member. The lease provides for lease payments of $341,951
for each monthly period ended before November 30, 1996. For each fiscal year
thereafter, the monthly lease payments will be increased at an annual rate of
approximately 1.75%.

On October 1, 1996, the Company entered into another lease with the Member
for office space located in Chicago, Illinois. The lease expires on September
30, 2005 and provides for monthly lease payments of: (i) $16,500 for the
period from October 1, 1996 to September 30, 1999; (ii) $17,500 for the period
from October 1, 1999 to September 30, 2002 and (iii) $18,500 for October 1,
2002 through the end of the term of the lease. The Company believes such lease
provides for lease payments at a market rate and for terms as favorable to the
Company as could have been negotiated with a third party at arm's length.

In addition to the lease for its corporate headquarters, the Company assumed
other leases for sales offices throughout the United States. In addition to
the annual rentals, certain of these leases include renewal options and
require payments of real estate taxes, insurance and other expenses.

Rent expense is as follows (in thousands):

<TABLE>
<CAPTION>
RELATED
PARTY OTHERS TOTAL
------- ------ ------
<S> <C> <C> <C>
Three months ended December 31, 1996.................. $1,032 $452 $1,484
Six months ended June 30, 1997........................ 2,187 714 2,901
</TABLE>

F-21
<PAGE>

PETERSEN HOLDINGS, L.L.C.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

At June 30, 1997, minimum future annual rentals under long-term leases are
as follows (in thousands):

<TABLE>
<CAPTION>
RELATED
PARTY OTHERS TOTAL
------- ------- -------
<S> <C> <C> <C>
1997 (6 months)...................................... $ 2,193 $ 735 $ 2,928
1998................................................. 4,452 1,348 5,800
1999................................................. 4,530 1,281 5,811
2000................................................. 4,614 1,277 5,891
2001................................................. 4,691 1,277 5,968
Thereafter to 2009................................... 39,181 11,831 51,012
------- ------- -------
Total.............................................. $59,661 $17,749 $77,410
======= ======= =======
</TABLE>

Contingencies

11. EVENTS SUBSEQUENT TO JUNE 30, 1997

In July 1997, Holdings' limited liability company agreement was amended to
create new classes of equity securities. The new units (collectively, the
"Class D Common Units") were issued to the holders of the Class B Common Units
and Class C Common Units pro rata according to ownership of the Class B Common
Units and Class C Common Units. In connection with the issuance of the Class D
Common Units in such exchange, Holdings recognized a non-recurring, non-cash
compensation charge of approximately $12.2 million in July 1997.

Additionally, in July 1997 Holdings established the Petersen Holdings,
L.L.C. 1997 Long-Term Equity Incentive Plan (the "Incentive Plan") pursuant to
which Holdings granted, to certain of the Company's employees, options to
purchase Class A Common Units. Such options vest on the fifth year after the
date of issuance. Should certain events occur (including an initial public
offering of the BrightView's common stock pursuant to a registration statement
filed with the Securities and Exchange Commission), the vesting period would
accelerate to an approximate three year vesting period. The exercise price for
each option is $320.685 per Class A Common Unit, which is equal to the fair
market value of each Class A Common Unit as determined by the Board of
Directors of BrightView, acting as Holdings' managing member, at the date of
grant of the options. Holdings is authorized to issue up to 10,000 Class A
Common Units under the Incentive Plan and in July 1997 granted to Company
employees, options to purchase an aggregate of 8,867 Class A Common Units.

12. EVENTS SUBSEQUENT TO JUNE 30, 1997

On August 5, 1997, the Board of Directors of BrightView authorized the
filing with the Securities and Exchange Commission of a registration statement
for the sale by BrightView of shares of its Class A Common Stock to the
public. It is contemplated that in connection with the offering, (i) Holdings
will pay $50,000,000 to redeem Preferred Units with an aggregate liquidation
preference and accrued preferred yield of $50,000,000, (ii) a newly formed
subsidiary of BrightView will merge with and into Holdings and (iii) all of
the Holdings common units and the balance of the Preferred Units (i.e., other
than those to be redeemed) will be converted into an aggregate of shares
of Class A Common Stock and shares of Class B Common Stock.

F-22
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
Petersen Publishing Company

We have audited the accompanying balance sheets of Petersen Publishing
Company, Publishing Division, as of November 30, 1995 and September 30, 1996,
and the related statements of operations and divisional equity, and cash flows
for each of the two years in the period ended November 30, 1995 and for the
ten months ended September 30, 1996. 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.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Petersen Publishing
Company, Publishing Division, at November 30, 1995 and September 30, 1996, and
the results of its operations and its cash flows for each of the two years in
the period ended November 30, 1995 and the ten months ended September 30,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
December 16, 1996

F-23
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 9,938 $12,453
Short-term investments............................ 3,744 55
Accounts receivable, less allowance for doubtful
accounts of $2,220 (1995) and $1,871 (1996)...... 18,535 18,777
Inventories....................................... 21,347 8,518
Other prepaid expenses and current assets......... 1,213 1,431
------- -------
Total current assets................................ 54,777 41,234
Property and equipment, net......................... 7,784 5,241
Goodwill, net of accumulated amortization of $1,127
(1995) and $1,442 (1996)........................... 3,210 2,924
Other assets........................................ 1,037 1,142
------- -------
Total assets........................................ $66,808 $50,541
======= =======
LIABILITIES AND DIVISIONAL EQUITY (CAPITAL
DEFICIENCY)
Current liabilities:
Accounts payable.................................. $10,436 $ 5,907
Accrued payroll and related costs................. 6,116 5,614
Customer incentives payable....................... 5,204 5,374
Current portion of unearned subscription revenues,
net of deferred subscription acquisition costs of
$38,161 (1995) and $40,313 (1996)................ 26,669 26,443
Other accrued expenses and current liabilities.... 592 687
------- -------
Total current liabilities........................... 49,017 44,025
Unearned subscription revenues, net of deferred
subscription acquisition costs of $31,834 (1995)
and $33,629 (1996)................................. 7,183 6,546
Deferred state income taxes......................... 1,321 1,494
Other noncurrent liabilities........................ 660 148
------- -------
Total liabilities................................... 58,181 52,213
Commitments and contingencies
Divisional equity (capital deficiency).............. 8,627 (1,672)
------- -------
Total liabilities and divisional equity (capital
deficiency)........................................ $66,808 $50,541
======= =======
</TABLE>

See accompanying notes.

F-24
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

STATEMENTS OF OPERATIONS AND DIVISIONAL EQUITY (CAPITAL DEFICIENCY)
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS TEN MONTHS
NOVEMBER 30, ENDED ENDED
------------------ JUNE 30, SEPTEMBER 30,
1994 1995 1996 1996
-------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenues:
Advertising.................... $117,433 $124,310 $ 67,397 $112,525
Newsstand...................... 40,048 39,889 21,281 34,318
Subscriptions.................. 42,639 43,901 21,828 36,474
Other.......................... 2,672 6,415 4,534 6,297
-------- -------- -------- --------
Total net revenues.............. 202,792 214,515 115,040 189,614
Production, selling and other
direct costs (including rent
paid to a related party of
$3,939, $3,875, $2,298, and
$3,778 in years ended 1994,
1995, the six months ended June
30, 1996 and the ten months
ended September 30, 1996,
respectively .................. 149,586 171,579 91,971 148,874
-------- -------- -------- --------
Gross profit.................... 53,206 42,936 23,069 40,740
General and administrative
expenses....................... 33,267 28,145 12,903 24,650
Amortization of goodwill and
other intangible assets........ 421 433 196 339
-------- -------- -------- --------
Income from operations.......... 19,518 14,358 9,970 15,751
Interest income................. 476 549 238 537
Interest expense................ -- -- (153) (185)
Gain on sale of assets.......... -- -- 1,554 1,554
-------- -------- -------- --------
Income before provision for
income taxes................... 19,994 14,907 11,609 17,657
Provision for state income
taxes.......................... (698) (549) (199) (331)
-------- -------- -------- --------
Net income...................... 19,296 14,358 11,410 17,326
Divisional equity (capital
deficiency) at beginning of
period......................... (1,553) 361 (8,379) 8,627
Distribution of S corporation
earnings....................... (26,400) (3,391) (1,950) (21,470)
Net change in advances to other
divisions of the Company....... 9,018 (2,701) (474) (6,155)
-------- -------- -------- --------
Divisional equity (capital
deficiency) at end of period... $ 361 $ 8,627 $ 607 $ (1,672)
======== ======== ======== ========
</TABLE>

See accompanying notes.

F-25
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS TEN MONTHS
NOVEMBER 30, ENDED ENDED
------------------ JUNE 30, SEPTEMBER 30,
1994 1995 1996 1996
-------- -------- ----------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................... $ 19,296 $ 14,358 $ 11,609 $ 17,326
Adjustments to reconcile net
cash provided by operating
activities:
Depreciation and amortization.. 3,118 3,439 1,667 2,704
Allowance for doubtful
accounts...................... 825 900 376 45
Gain on sale of assets......... -- -- (1,554) (1,554)
Deferred state income taxes.... 416 406 209 173
Changes in operating assets and
liabilities:
Accounts receivable........... (1,758) (197) (5,215) (287)
Inventories................... (1,204) (11,846) 11,148 12,829
Other prepaid expenses and
current assets............... (162) (84) (84) (217)
Other assets.................. 385 (255) 6 (158)
Accounts payable.............. 2,116 2,205 104 (4,529)
Accrued payroll and related
costs........................ 842 (602) 660 (502)
Customer incentives payable... 830 355 353 170
Unearned subscription
revenues, net................ 1,542 2,910 3,166 (863)
Other accrued expenses and
current liabilities.......... 1,111 (2,294) 1,455 95
Other noncurrent liabilities.. (298) 298 (92) (513)
-------- -------- -------- --------
Net cash (used in) provided by
operating activities........... 27,059 9,593 23,808 24,719

INVESTING ACTIVITIES
Purchases of property and
equipment...................... (2,866) (4,423) (463) (768)
Purchases of magazines.......... (1,300) -- -- --
Sales of investments............ 7,000 6,677 -- 3,689
Purchases of investments........ (17,312) -- (333) --
Proceeds from sale of assets.... -- -- 2,500 2,500
-------- -------- -------- --------
Net cash (used in) provided by
investing activities........... (14,478) 2,254 1,704 5,421

FINANCING ACTIVITIES
Proceeds from bank borrowing.... -- -- -- 10,000
Repayment of bank borrowing..... -- -- -- (10,000)
Distribution of S corporation
earnings....................... (26,400) (3,391) (1,950) (21,470)
Net change in advances to other
divisions of the Company....... 9,018 (2,701) (475) (6,155)
-------- -------- -------- --------
Net cash used in financing
activities..................... (17,382) (6,092) (2,425) (27,625)
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents............... (4,801) 5,755 23,087 2,515
Cash and cash equivalents at
beginning period............... 8,984 4,183 (13,663) 9,938
-------- -------- -------- --------
Cash and cash equivalents at end
of period...................... $ 4,183 $ 9,938 $ 9,424 $ 12,453
======== ======== ======== ========
Supplemental information:
Income taxes paid.............. $ 342 $ 263 $ -- $ 40
Interest received.............. 350 741 238 538
Interest paid.................. -- -- -- 185
</TABLE>

See accompanying notes.

F-26
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

NOTES TO FINANCIAL STATEMENTS
(Information Related to the Six Months Ended June 30, 1996 is Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Petersen Publishing Company (the "Petersen Company") is a California
corporation which is wholly-owned by the R.E. & M.M. Petersen Living Trust.
The Publishing Division of the Petersen Company ("Petersen") is engaged in the
publishing business with revenues generated primarily from the publication of
various special interest magazines and the sale of related advertising,
principally within the United States. The Petersen Company's other major
division, which is excluded from these financial statements, rents and manages
commercial real estate properties and operates ranch properties.

The Petersen Company has elected to be taxed as an S corporation for federal
and state income tax purposes.

Basis of Presentation

On August 15, 1996, the Company entered into an asset purchase agreement to
sell substantially all of the assets of the Publishing Division to BrightView
Communications Group, Inc. ("BrightView") for approximately $462,800,000
(including costs associated with the Acquisition), plus the assumption of
certain liabilities totaling approximately $49,000,000. The acquisition was
consummated on September 30, 1996.

Although these financial statements present the Publishing Division's
balance sheet as of the time of the sale, these financial statements have been
prepared as if the Publishing Division will continue as a going concern and as
a division of the Company. No adjustments have been made to reflect the
purchase of assets, the assumption of liabilities by BrightView or the
expenses incurred by Petersen Company related to the sale of Petersen.

Certain reclassifications have been made to the 1995 financial statements to
conform to the 1996 presentation.

Cash Equivalents and Short-Term Investments

Cash equivalents consist primarily of debt instruments with maturities of
three months or less at the acquisition date. Short-term investments consist
of state and local government debt securities (considered available-for-sale
securities) with maturities greater than 90 days; however, none of Petersen's
investments have maturities greater than one year. Petersen has no investments
in equity securities. Short-term investments are carried at fair value which
approximates cost.

Inventories

Inventories consist of paper held at a printing company and are stated at
the lower of cost, which approximates the first-in, first-out method, or
market.

Deferred Subscription Acquisition Costs

Deferred subscription acquisition costs consist primarily of agency
commissions paid to obtain subscriptions and are amortized over the life of
the related subscriptions.

Depreciation and Amortization

Goodwill

Goodwill is amortized using the straight-line method over its useful life of
15 years and resulted from the acquisitions of Sport, Bicycle Guide, and Sassy
during fiscal years 1988, 1993, and 1994, respectively.

F-27
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(Information Related to the Six Months Ended June 30, 1996 is Unaudited)

Income Taxes

The Petersen Company has elected to be taxed as an S corporation for federal
and state income tax purposes. As such, the Petersen Company is not subject to
U.S. federal income taxes or most state income taxes. Petersen reports the
state income taxes to which it is subject under the liability method as
required by Statement No. 109, "Accounting for Income Taxes," issued by the
Financial Accounting Standards Board ("FASB"). Under this method, deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

Revenue Recognition

Use of Estimates

Revenues

No customer accounted for over 10% of Petersen's revenues. Petersen's
activities occur principally in the United States and revenues from outside
the United States are less than 10% of Petersen's revenues.

Advertising Expenses

Petersen expenses the costs of advertising as incurred. Advertising expense
(in thousands) for the years ended November 30, 1994 and 1995, the six months
ended June 30, 1996 and the ten months ended September 30, 1996, were $495,
$732, $351 and $700, respectively.

General and Administrative Expenses

General and administrative expenses incurred by the Petersen Company were
allocated between Petersen and the Real Estate Division with the Real Estate
Division's portion equal to 3% of that Division's revenue which, in the
opinion of Petersen's management, approximates the portion of such expenses
which apply to the Real Estate Division.

2. FAIR VALUE OF FINANCIAL INSTRUMENTS

In accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments,"
the following methods and assumptions were used by Petersen in estimating its
fair value disclosures for financial instruments:

Cash and Cash equivalents: The carrying amounts reported in the balance
sheets approximate its fair value.

Short-term investments: The carrying amounts reported in the balance
sheets approximate their fair value based upon quoted market prices.

F-28
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(Information Related to the Six Months Ended June 30, 1996 is Unaudited)

3. INVENTORIES

Inventories consist of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Paper........................................... $16,330 $3,933
Magazines in process............................ 5,017 4,585
------- ------
$21,347 $8,518
======= ======
</TABLE>

4. PROPERTY AND EQUIPMENT

Property and equipment consists of (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Buildings..................................... $ 518 $ 436
Machinery and equipment....................... 14,164 12,057
Office furniture and fixtures................. 6,447 6,189
------- -------
21,129 18,682
Less accumulated depreciation and
amortization................................. 13,345 13,441
------- -------
$ 7,784 $ 5,241
======= =======
</TABLE>

In February 1996, Petersen sold all of its assets relating to its pre-press
operations for approximately $2,500,000 in cash, resulting in a gain of
$1,554,000.

In March 1995, the Financing Accounting Standards Board issued 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 No.
121"), which became effective for the Company in 1996. The Company does not
expect the adoption of SFAS No. 121 to have a material impact on the Company's
financial position or results of operations.

5. NOTES PAYABLE

As of November 30, 1995, the Petersen Company had $3,000,000 available under
an unsecured revolving line of credit (the "Agreement"). During the ten months
ended September 30, 1996, the Company renegotiated the terms of the Agreement
increasing the amount available under the line to $10,000,000 and borrowed
$10,000,000. The Agreement expires on December 27, 1996 and provides for
interest at a fluctuating rate equal to the London Inter-bank Offered Rate
plus 1.0% and is payable quarterly. The Agreement contains certain financial
and nonfinancial covenants. The borrowings were repaid in full in March 1996.

6. INCOME TAXES

The liability for federal income taxes of an S corporation is the obligation
of the Petersen Company's stockholder. Therefore, no provision or liability
for federal income taxes is included in the accompanying financial statements.
The provision for income taxes is comprised of California franchise taxes at a
rate of 1.5%, which is the rate applicable to taxable income of S
corporations, and provisions for income taxes in certain other states in which
Petersen has operations.

F-29
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(Information Related to the Six Months Ended June 30, 1996 is Unaudited)

The provision for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS TEN MONTHS
NOVEMBER 30, ENDED ENDED
------------- JUNE 30, SEPTEMBER 30,
1994 1995 1996 1996
------ ------ ---------- -------------
<S> <C> <C> <C> <C>
State:
Current........................... $ 282 $ 143 $ 95 $158
Deferred.......................... 416 406 104 173
------ ------ ---- ----
$ 698 $ 549 $199 $331
====== ====== ==== ====
</TABLE>

A reconciliation of the provision for income taxes computed by applying the
federal statutory rate of 34% to income before income taxes and the reported
provision for income taxes is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS TEN MONTHS
NOVEMBER 30, ENDED ENDED
---------------- JUNE 30, SEPTEMBER 30,
1994 1995 1996 1996
------- ------- ---------- -------------
<S> <C> <C> <C> <C>
Income tax provision computed
at statutory federal income
tax rate.................... $ 6,798 $ 5,068 $ 3,947 $ 6,003
State income taxes........... 698 549 199 331
Effect of S Corporation
election.................... (6,798) (5,068) (3,947) (6,003)
------- ------- ------- -------
Total provision............ $ 698 $ 549 $ 199 $ 331
======= ======= ======= =======
</TABLE>

Petersen had deferred tax assets and liabilities as follows (in thousands):

<TABLE>
<CAPTION>
NOVEMBER 30, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Deferred tax asset:
Accrued liabilities........................... $ 220 $ 205
Deferred tax liabilities:
Subscription acquisition costs................ (1,541) (1,699)
------- -------
Total deferred income tax liability......... $(1,321) $(1,494)
======= =======
</TABLE>

7. PROFIT-SHARING RETIREMENT PLAN

The Petersen Company has a profit-sharing retirement plan (the "Plan") for
employees, which has been qualified for tax exempt status by the Internal
Revenue Service. Under the Plan, the Petersen Company may, at its discretion,
make annual contributions for all eligible employees not to exceed 15% of
their aggregate annual compensation. Petersen's contributions (in thousands)
to the Plan for the years ended November 30, 1994 and 1995, the six months
ended June 30, 1996 and the ten months ended September 30, 1996 were $3,271
$1,294, none and $1,083, respectively.

F-30
<PAGE>

PETERSEN PUBLISHING COMPANY
PUBLISHING DIVISION

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(Information Related to the Six Months Ended June 30, 1996 is Unaudited)

8. COMMITMENTS AND CONTINGENCIES

Leases

Rent expense through November 30, 1994 includes amounts charged by the
Petersen Company's Real Estate Division to Petersen for the use of various
office facilities owned by the Petersen Company which were used by Petersen
for its principal operating and corporate headquarters. As of that date, the
Petersen Company sold its corporate headquarters building, which was first
occupied by Petersen in March 1993, to its stockholder and subsequent thereto
Petersen's rent for this facility has been paid to the Petersen Company's
stockholder in accordance with a lease which had an initial term of 15 years
and expires November 30, 2009.

In addition to the annual rentals, certain of the leases include renewal
options and require payments of real estate taxes, insurance and other
expenses.

Rent expense is as follows (in thousands):

<TABLE>
<CAPTION>
REAL ESTATE
DIVISION OR
SHAREHOLDER OTHERS TOTAL
----------- ------ ------
<S> <C> <C> <C>
Year ended November 30:
1994........................................... $3,939 $1,130 $5,069
1995........................................... 3,875 1,575 5,450
Six months ended June 30, 1996................... 2,298 606 2,904
Ten months ended September 30, 1996.............. 3,778 1,627 5,405
</TABLE>

At September 30, 1996, minimum future annual rentals under long-term leases
are as follows (in thousands):

<TABLE>
<CAPTION>
SHAREHOLDER OTHERS TOTAL
----------- ------ -------
<S> <C> <C> <C>
1996 (Two months ended November 30)............ $ 766 $ 195 $ 961
1997........................................... 4,676 1,101 5,777
1998........................................... 4,758 906 5,664
1999........................................... 4,841 850 5,691
2000........................................... 4,926 850 5,776
2001........................................... 5,012 850 5,862
Thereafter to 2009............................. 43,387 2,337 45,724
------- ------ -------
$68,366 $7,089 $75,455
======= ====== =======
</TABLE>

Contingencies

Petersen is a party to various legal actions and disputes arising in the
ordinary course of business. Management believes, based on the advice of
counsel, that any resulting liabilities from these actions will not have a
material adverse effect on the financial position of Petersen.

F-31
<PAGE>

[INSIDE BACK COVER PAGE GRAPHICS: PICTURES OF VARIOUS TRADEMARKS OF THE COMPANY
INCLUDING A SAMPLE PAGE FROM THE MOTOR TREND INTERNET WEB SITE AND A SAMPLE
TELEVISION SCREEN FROM THE MOTOR TREND TELEVISION SHOW.]
<PAGE>

[LOGO OF THE PETERSEN COMPANIES, INC.]
<PAGE>

PROSPECTUS (Subject to Completion)
Issued August 7, 1997

[LOGO OF THE PETERSEN COMPANIES, INC.]

The Petersen Companies, Inc.

CLASS A COMMON STOCK
----------
ALL OF THE SHARES OF CLASS A COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY
THE COMPANY. OF THE SHARES OF CLASS A COMMON STOCK BEING OFFERED
HEREBY, SHARES ARE BEING OFFERED INITIALLY OUTSIDE THE UNITED STATES AND
CANADA BY THE INTERNATIONAL UNDERWRITERS AND SHARES ARE BEING OFFERED
INITIALLY IN THE UNITED STATES AND CANADA BY THE U.S. UNDERWRITERS. SEE
"UNDERWRITERS." PRIOR TO THE OFFERING, THERE HAS BEEN NO PUBLIC MARKET
FOR THE CLASS A COMMON STOCK OF THE COMPANY. IT IS CURRENTLY ESTIMATED
THAT THE INITIAL PUBLIC OFFERING PRICE PER SHARE WILL BE BETWEEN
$ AND $ . SEE "UNDERWRITERS" FOR A DISCUSSION OF THE FACTORS TO
BE CONSIDERED IN DETERMINING THE INITIAL PUBLIC OFFERING PRICE.
----------
THE COMPANY HAS TWO CLASSES OF AUTHORIZED COMMON STOCK CONSISTING OF THE CLASS
A COMMON STOCK OFFERED HEREBY AND CLASS B COMMON STOCK. SEE "DESCRIPTION OF
CAPITAL STOCK." HOLDERS OF CLASS A COMMON STOCK ARE ENTITLED TO ONE VOTE PER
SHARE ON EACH MATTER SUBMITTED TO A VOTE OF STOCKHOLDERS. THE CLASS B
COMMON STOCK IS NON-VOTING EXCEPT UNDER CERTAIN LIMITED CIRCUMSTANCES AND
AS REQUIRED BY LAW. ALL HOLDERS OF COMMON STOCK ARE ENTITLED TO RECEIVE
SUCH DIVIDENDS AND DISTRIBUTIONS, IF ANY, AS MAY BE DECLARED FROM TIME
TO TIME BY THE BOARD OF DIRECTORS.
----------
APPLICATION HAS BEEN MADE TO LIST THE CLASS A COMMON STOCK ON THE NEW YORK
STOCK EXCHANGE UNDER THE SYMBOL " ."
----------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
----------
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.
----------
PRICE $ A SHARE

----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS (1) COMPANY (2)
-------- --------------- -----------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total(3)................................... $ $ $
</TABLE>
- -----
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriters."
(2) Before deducting expenses payable by the Company, estimated at $ .
(3) The Company has granted to the U.S. Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
additional Shares of Class A Common Stock at the Price to Public less
Underwriting Discounts and Commissions, for the purpose of covering
over-allotments, if any. If the U.S. Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriters."
----------
The Shares of Class A Common Stock are offered, subject to prior sale, when,
as and if accepted by the Underwriters named herein and subject to approval of
certain legal matters by O'Melveny & Myers LLP, counsel for the Underwriters.
It is expected that delivery of the Shares will be made on or about , 1997 at
the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against
payment therefor in immediately available funds.

----------

MORGAN STANLEY DEAN WITTER DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL

ALEX. BROWN & SONS GOLDMAN SACHS INTERNATIONAL
INTERNATIONAL

, 1997
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a statement of estimated expenses, to be paid solely by the
Company, of the issuance and distribution of the securities being registered:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $52,273
NASD filing fee.................................................... 17,750
NYSE original listing fee.......................................... *
Blue Sky fees and expenses (including attorneys' fees and ex-
penses)........................................................... *
Printing expenses.................................................. *
Accounting fees and expenses....................................... *
Transfer agent's fees and expenses................................. *
Legal fees and expenses............................................ *
Miscellaneous expenses............................................. *
-------
Total............................................................ $ *
=======
</TABLE>
- --------
* To be provided by Amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The Company is incorporated under the laws of the State of Delaware. Section
145 of the General Corporation Law of the State of Delaware, inter alia,
("Section 145") provides that a Delaware corporation may indemnify any persons
who were, are or are threatened to be made, parties to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
such corporation), by reason of the fact that such person is or was an
officer, director, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer employee or agent of
another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, provided such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's
best interests and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was illegal. A Delaware
corporation may indemnify any persons who are, were or are threatened to be
made, a party to any threatened, pending or completed action or suit by or in
the right of the corporation by reasons of the fact that such person was a
director, officer, employee or agent of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit, provided
such person acted in good faith and in a manner he reasonably believed to be
in or not opposed to the corporation's best interests, provided that no
indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him against the expenses which such officer or director has actually
and reasonably incurred.

The Company's Certificate of Incorporation provides that, to the fullest
extent permitted by the General Corporation Law of the State of Delaware as
the same exists or may hereafter be amended, a director of the Company shall
not be liable to the Company or its stockholders for monetary damages for a
breach of fiduciary duty as a director.

Article V of the By-laws of the Company ("Article V") provides, among other
things, that each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding,

II-1
<PAGE>

whether civil, criminal, administrative or investigative, by reason of the
fact that he or a person of whom he is the legal representative, is or was a
director or officer, of the corporation or is or was serving at the request of
the Company as a director, officer, employee, fiduciary, or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless by the Company to the fullest extent
which it is empowered to do so by the General Corporation Law of the State of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits the Company
to provide broader indemnification rights than said law' permitted the Company
to provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees actually and reasonably incurred by such person in
connection with such proceeding, and such indemnification shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, the Company shall indemnify any such person seeking indemnification in
connection with a proceeding initiated by such person only if such proceeding
was authorized by the board of directors of the Company.

Article V also provides that persons who are not covered by the foregoing
provisions of Article V and who are or were employees or agents of the
Company, or who are or were serving at the request of the Company as employees
or agents of another corporation, partnership, joint venture, trust or other
enterprise, may be indemnified to the extent authorized at any time or from
time to time by the board of directors.

Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation
or enterprise, against any liability asserted against him and incurred by him
in any such capacity, arising out of his status as such, whether or not the
corporation would otherwise have the power to indemnify him under Section 145.

Article V further provides that the Company may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the Company or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him or her and incurred by him or her
in any such capacity, whether or not the Company would have the power to
indemnify such person against such liability under Article V.

Under the Securityholders Agreement, the Company agrees to indemnify certain
of its directors and officers against certain liabilities, including
liabilities under the Securities Act.

II-2
<PAGE>

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

On September 30, 1996, the Company sold an aggregate of 2,106 shares of
Class A Common Stock and 1,200 shares of Class B Common Stock for $500.00 per
share pursuant to the terms of a Securities Purchase Agreement dated as of the
date thereof. The following persons purchased such shares in the amounts set
forth opposite their names:

<TABLE>
<CAPTION>
CLASS A COMMON STOCK CLASS B COMMON STOCK
-------------------- --------------------
NAME SHARES NAME SHARES
---- ------ ---- ------
<S> <C> <C> <C>
Willis Stein & Partners
L.P. .................. 1,000 Chase Equity Associates, L.P. ........... 300
Petersen Properties Com-
pany................... 500 BankAmerica Investment Corporation ...... 360
Allstate Insurance Com-
pany................... 300 CIVC Partners II......................... 40
Norwest Equity Capital,
L.L.C. ................ 100 CIBC WG Argosy Merchant Fund 2, L.L.C. .. 250
Nassau Capital Partners
II, L.P. .............. 99.506 FUI, Inc. ............................... 250
NAS Partners I,
L.L.C. ................ 0.494
James D. Dunning, Jr. .. 42
The Laurence and Cindy
Bloch Trust............ 20
Stuart Karu............. 20
Thomas J. Strauss....... 1
Irwin Bard.............. 10
Bernard Shavitz......... 3
D. Claeys Bahrenburg.... 10
------ -----
Total................. 2,106 1,200
====== =====
</TABLE>

In connection with the execution of their respective Employment Agreements
on September 30, 1996, the Company sold an aggregate of 41 shares of Class A
Common Stock at a price of $500.00 per share to the following executive
officers:

<TABLE>
<CAPTION>
NAME SHARES
---- ------
<S> <C>
D. Claeys Bahrenburg............................................ 20
Neal Vitale..................................................... 15
Richard S Willis................................................ 6

On February 10, 1997, the Company sold an aggregate of 8.2 shares of Class A
Common Stock at a price of $500.00 per share to the following employees of the
Company:

<CAPTION>
NAME SHARES
---- ------
<S> <C>
Richard P. Lague................................................ 2
John Dianna..................................................... 2
Lee Kelley...................................................... 0.2
Paul J. Tzimoulis............................................... 2
David Myers..................................................... 1
Ken Elliott..................................................... 1

On June 13, 1997, the Company sold an aggregate of 6 shares of Class A
Common Stock at a price of $550.00 per share to the following employees of the
Company:

<CAPTION>
NAME SHARES
---- ------
<S> <C>
James Guthrie................................................... 2
Charlotte A. Perkins............................................ 1
Amy P. Wilkins.................................................. 1
Justin McCormack................................................ 2
</TABLE>

II-3
<PAGE>

Immediately prior to and contingent upon the consummation of the Offering,
the Company will effect the Reorganization whereby, among other things, a
wholly owned subsidiary of the Company will be merged with and into Petersen
Holdings L.L.C. (the "Merger"). As a result of such Merger, the existing
securityholders of Petersen Holdings L.L.C. will receive an aggregate
of shares of Common Stock of the Company (assuming an initial public
offering price of $ per share).

Except as set forth above, the Company has not sold any securities. All of
the transactions described above were effected in reliance upon the exemption
from the registration requirement of the Securities Act contained in Section
4(2) of the Securities Act and Regulation D and Rule 701 promulgated
thereunder on the basis such transactions did not involve any public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS.

<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreements.
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 Amended and Restated By-Laws of the Company.
+4.1 Indenture, dated as of November 15, 1996, by and among Petersen,
Holdings, Capital and United States Trust Company of New York, as
trustee.
+4.2 Forms of 11 1/8% Senior Subordinated Notes and Series B 11 1/8%
Senior Subordinated Notes.
+4.3 Securities Purchase Agreement, dated November 20, 1996, by and among
Petersen, Capital, Holdings and the Initial Purchasers.
+4.4 Credit Agreement, dated as of September 30, 1996, by and among
Petersen, the Lenders named therein, First Union National Bank of
North Carolina ("First Union"), as Administrative Agent and
Syndication Agent and CIBC, Inc., as Documentation Agent.
+4.5 Pledge and Security Agreement, dated as of September 30, 1996, by and
between Petersen and First Union, as Administrative Agent.
+4.6 Pledge and Security Agreement, dated as of September 30, 1996, by and
among the Company, Holdings and First Union, as Administrative Agent.
+4.7 Guaranty, dated as of September 30, 1996, by and among the Company,
Holdings and First Union, as Administrative Agent.
+4.8 Senior Subordinated Credit Agreement, dated as of September 30, 1996,
among Petersen, the guarantors named therein, the Lenders named
therein and First Union, as Agent.
+4.9 Registration Rights Agreement, dated November 20, 1996, by and among
Petersen, Capital and the Initial Purchasers named therein.
*4.10 Specimen of Class A Common Stock
*5.1 Opinion and consent of Kirkland & Ellis.
+10.1 License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen, the Company and the Seller.
+10.2 Employment Agreement, dated as of August 15, 1996, by and between the
Company and Robert E. Petersen.
+10.3 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among the Company, Holdings, Petersen and
D. Claeys Bahrenburg.
+10.4 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among the Company, Holdings, Petersen and
Neal Vitale.
+10.5 Securities Purchase Agreement, dated as of September 30, 1996, made
by and among Holdings, Petersen Investment Corp., the Company, the
Seller, Willis Stein & Partners, L.P., and the other Persons set
forth on Schedule A thereto.
+10.6 Securityholders Agreement, dated as of September 30, 1996, among
Petersen Investment Corp., Holdings, the Company and the other
parties thereto.
+10.7 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of the Company in the amount of $8,000.
+10.8 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of the Company in the amount of $2,000.
</TABLE>

II-4
<PAGE>

<TABLE>
<C> <S>
+10.9 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $891,000.
+10.10 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $99,000.
+10.11 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of the Company in the amount of $7,500.
+10.12 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of Holdings in the amount of $742,500.
+10.13 Asset Purchase Agreement, dated as of August 15, 1996, by and between
the Company (formerly known as BrightView Communications Group, Inc.)
and Petersen Publishing Company (the "Seller"), as amended by the
Letter Agreement, dated as of September 30, 1996, by and among the
Seller, the Company, Petersen and Holdings.
*10.14 1997 Long-Term Equity Incentive Plan.
*10.15 Employee Stock Discount Purchase Plan
*11.1 Calculation of Earnings Per Share.
*21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young L.L.P.
*23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Incorporated by reference to the same numbered exhibit to the Registration
Statement on S-4 (Registration No. 333-18017) of Petersen, Publishing and
Petersen Capital Corp.

(B) FINANCIAL STATEMENT SCHEDULES.

Schedule II--Petersen Holdings, L.L.C.--Valuation and Qualifying Accounts.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes to provide to the underwriter
at closing specified in the underwriting agreement certificates in such
denominations and registered in such names as requested by the Underwriter to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

II-5
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE PETERSEN
COMPANIES, INC., HAS DULY CAUSED THIS REGISTRATION STATEMENT ON FORM S-1 TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
CITY OF LOS ANGELES, STATE OF CALIFORNIA, ON AUGUST 7, 1997.

THE PETERSEN COMPANIES, INC.

By: /s/ Neal Vitale

---------------------------------
NEAL VITALE
PRESIDENT
* * * *

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:

SIGNATURE CAPACITY DATE
--------- -------- -----

* Chairman of the Board August 7, 1997
- ------------------------------------- and Chief Executive
JAMES D. DUNNING, JR. Officer (Principal
Executive Officer)

/s/ Richard S Willis Executive Vice August 7, 1997
- ------------------------------------- President--Chief
RICHARD S WILLIS Financial Officer and
Director (Principal
Financial and
Accounting Officer)

* Director August 7, 1997
- -------------------------------------
D. CLAEYS BAHRENBERG

/s/ Neal Vitale Director August 7, 1997
- -------------------------------------
NEAL VITALE

* Director August 7, 1997
- -------------------------------------
LAURENCE H. BLOCH

* Director August 7, 1997
- -------------------------------------
AVY H. STEIN

* Director August 7, 1997
- -------------------------------------
DANIEL H. BLUMENTHAL

* Director August 7, 1997
- -------------------------------------
STUART KARU

* Director August 7, 1997
- -------------------------------------
JOHN A. WILLIS

* The undersigned, by signing his name hereto, does sign and execute this
Registration Statement pursuant to the Power of Attorney executed by the
above-named officers and Directors and filed with the Securities and Exchange
Commission on behalf of such officers and Directors.

/s/ Neal Vitale
- -------------------------------------
NEAL VITALE, ATTORNEY-IN-FACT

II-6
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We have audited the consolidated financial statements of Petersen Holdings,
LLC as of December 31, 1996 and June 30, 1997, and for the three months ended
December 31, 1996 and the six months ended June 30, 1997, and have issued our
report thereon dated July 31, 1997 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed
in Item 16(b) of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

S-1
<PAGE>

PETERSEN HOLDINGS, L.L.C.

SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C--ADDITIONS COLUMN D COLUMN E
- --------------------------- ---------- ------------------- ---------- ---------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- --------------------------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Reserves and allowances
deducted from assets
accounts:
Allowance for doubtful
accounts of Petersen
Holdings, L.L.C.:
Three months ended Decem-
ber 31, 1996............ $1,871 -- -- $(267)(a) $1,604
Six months ended June 30,
1997.................... $1,604 $828 -- $(710)(a) $1,722
</TABLE>
- --------
(a) Represents amounts written-off against the allowance for doubtful accounts,
net of recoveries.

S-2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
*1.1 Form of Underwriting Agreements.
*3.1 Restated Certificate of Incorporation of the Company.
*3.2 Amended and Restated By-Laws of the Company.
+4.1 Indenture, dated as of November 15, 1996, by and among Petersen,
Holdings, Capital and United States Trust Company of New York, as
trustee.
+4.2 Forms of 11 1/8% Senior Subordinated Notes and Series B 11 1/8% Senior
Subordinated Notes.
+4.3 Securities Purchase Agreement, dated November 20, 1996, by and among
Petersen, Capital, Holdings and the Initial Purchasers.
+4.4 Credit Agreement, dated as of September 30, 1996, by and among
Petersen, the Lenders named therein, First Union National Bank of
North Carolina ("First Union"), as Administrative Agent and
Syndication Agent and CIBC, Inc., as Documentation Agent.
+4.5 Pledge and Security Agreement, dated as of September 30, 1996, by and
between Petersen and First Union, as Administrative Agent.
+4.6 Pledge and Security Agreement, dated as of September 30, 1996, by and
among the Company, Holdings and First Union, as Administrative Agent.
+4.7 Guaranty, dated as of September 30, 1996, by and among the Company,
Holdings and First Union, as Administrative Agent.
+4.8 Senior Subordinated Credit Agreement, dated as of September 30, 1996,
among Petersen, the guarantors named therein, the Lenders named
therein and First Union, as Agent.
+4.9 Registration Rights Agreement, dated November 20, 1996, by and among
Petersen, Capital and the Initial Purchasers named therein.
*4.10 Specimen of Class A Common Stock.
*5.1 Opinion and consent of Kirkland & Ellis.
+10.1 License Agreement, dated as of August 15, 1996, by and between Robert
E. Petersen, the Company and the Seller.
+10.2 Employment Agreement, dated as of August 15, 1996, by and between the
Company and Robert E. Petersen.
+10.3 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among the Company, Holdings, Petersen and
D. Claeys Bahrenburg.
+10.4 Executive Securities Purchase and Employment Agreement, dated as of
September 30, 1996, by and among the Company, Holdings, Petersen and
Neal Vitale.
+10.5 Securities Purchase Agreement, dated as of September 30, 1996, made by
and among Holdings, Petersen Investment Corp., the Company, the
Seller, Willis Stein & Partners, L.P., and the other Persons set forth
on Schedule A thereto.
+10.6 Securityholders Agreement, dated as of September 30, 1996, among
Petersen Investment Corp., Holdings, the Company and the other parties
thereto.
+10.7 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of the Company in the amount of $8,000.
+10.8 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of the Company in the amount of $2,000.
+10.9 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $891,000.
+10.10 Promissory Note, dated as of September 30, 1996, from D. Claeys
Bahrenburg in favor of Holdings in the amount of $99,000.
+10.11 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of the Company in the amount of $7,500.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
+10.12 Promissory Note, dated as of September 30, 1996, from Neal Vitale in
favor of Holdings in the amount of $742,500.
+10.13 Asset Purchase Agreement, dated as of August 15, 1996, by and between
the Company (formerly known as BrightView Communications Group, Inc.)
and Petersen Publishing Company (the "Seller"), as amended by the
Letter Agreement, dated as of September 30, 1996, by and among the
Seller, the Company, Petersen and Holdings.
*10.14 1997 Long-Term Equity Incentive Plan.
*10.15 Employee Stock Discount Purchase Plan.
*11.1 Calculation of Earnings Per Share.
*21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young L.L.P.
*23.3 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
+ Incorporated by reference to the same numbered exhibit to the Registration
Statement on S-4 (Registration No. 333-18017) of Petersen, Publishing and
Petersen Capital Corp.

<PAGE>

EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Selected
Historical Financial Data" and "Experts" and to the use of our reports dated
August 7, 1997 for The Petersen Companies, Inc., July 31, 1997 (except Note
12, as to which the date is , 1997) for Petersen Holdings, L.L.C. and
December 16, 1996 for Petersen Publishing Company, Publishing Division, in the
Registration Statement (Form S-1 No. 33- ) and related Prospectus of The
Petersen Companies, Inc. for the registration of shares of its Class A
Common Stock.

Ernst & Young LLP

Los Angeles, California
August 7, 1997

The foregoing consent is in the form that will be signed upon the completion
of the restatement of capital accounts described in Note 12 to the
consolidated financial statements of Petersen Holdings, L.L.C.

/s/ Ernst & Young LLP

Los Angeles, California
, 1997

<PAGE>

EXHIBIT 24.1

BRIGHTVIEW COMMUNICATIONS GROUP, INC.

POWER OF ATTORNEY

REGISTRATION STATEMENT ON FORM S-1
----------------------------------

KNOW ALL MEN BY THESE PRESENTS, that BrightView Communications Group, Inc.
(the "Company"), and each of the undersigned officers and directors of the
Company, hereby appoint Neal Vitale, Richard S. Willis or Daniel H.
Blumenthal, and each of them, as attorneys-in-fact for the undersigned and for
each of them (with full power of substitution and resubstitution, for and in
the name, place and stead of each of the Company and undersigned officers and
directors, to sign and file with the Securities and Exchange Commission under
the Securities Act of 1933, a Registration Statement on Form S-1, for the
purposes of registering shares of Common Stock, par value $.01 per share
("Common Stock"), of the Company and any and all amendments, supplements and
exhibits to any such Registration Statement, including post-effective
amendments and registration statements filed pursuant to Rule 462(b) under the
Securities Act, and any and all applications or other documents in connection
with the inclusion of the Company's Common Stock on the New York Stock
Exchange, and any and all documents required to be filed with any state
securities regulating board or commission pertaining to such Registration
Statement or securities covered thereby, hereby granting unto said attorneys-
in-fact, and each of them, full power and authority to do and perform each and
every act and thing necessary or desirable to be done in order to effectuate
the same as fully and to all intents and purposes as each of the undersigned
might or could do if personally present, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or any of their
substitutes, may do or cause to be done by virtue hereof.

* * *
<PAGE>

EXECUTED as of the 7th day of August, 1997.

BrightView Communications Group,
Inc.

By: /s/ Neal Vitale /s/ Avy H. Stein
----------------------------------- -------------------------------------
Name: Neal Vitale Avy H. Stein
Title: President
/s/ Daniel H. Blumenthal
-------------------------------------
Daniel H. Blumenthal

/s/ D. Claeys Bahrenburg
-------------------------------------
D. Claeys Bahrenburg

/s/ Neal Vitale
-------------------------------------
Neal Vitale

/s/ James D. Dunning, Jr.
-------------------------------------
James D. Dunning, Jr.

/s/ Stuart Karu
-------------------------------------
Stuart Karu

/s/ Laurence H. Bloch
-------------------------------------
Laurence H. Bloch

/s/ Richard S Willis
-------------------------------------
Richard S Willis

/s/ John R. Willis
-------------------------------------
John R. Willis

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,662
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 1,682
<OTHER-SE> (20)
<TOTAL-LIABILITY-AND-EQUITY> 1,662
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>