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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K

              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                       FOR THE TRANSITION PERIOD FROM   TO

                         COMMISSION FILE NUMBER 0-1282-3

                            THE FORSCHNER GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                  DELAWARE                            13-2797726
          (State of incorporation)          (I.R.S. Employer Identification No.)

    ONE RESEARCH DRIVE, SHELTON, CONNECTICUT            06484
    (Address of principal executive offices)          (Zip Code)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (203) 929-6391

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                                     Name of each exchange on
             Title of each class                        which registered
            --------------------                       --------------------
                    NONE                                 NOT APPLICABLE

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                     COMMON STOCK, $.10 PAR VALUE PER SHARE
                                (Title of Class)

    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days.
                                                               Yes  X   No

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by  reference in Part III of this Form 10-K or any  amendments  to
this Form 10-K. [ ]

    The  aggregate  market  value of voting stock held by  nonaffiliates  of the
registrant on March 21, 1996, was approximately  $57,962,718.  On such date, the
closing  price of  registrant's  common stock was $12.375 per share.  Solely for
purposes of this calculation,  shares beneficially owned by directors, executive
officers and stockholders of the registrant that  beneficially own more than 10%
of the registrant's common stock have been excluded,  except shares with respect
to which  such  directors  and  officers  disclaim  beneficial  ownership.  Such
exclusion  should not be deemed a  determination  or admission by the registrant
that such individuals are, in fact, affiliates of the registrant.

    The  number  of  shares  of  Registrant's  Common  Stock,  $.10  par  value,
outstanding on March 21, 1996, was 8,186,610 shares.

 DOCUMENTS INCORPORATED BY REFERENCE:      NONE
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                                     PART I


Item 1. Business.

        The  Forschner  Group,  Inc.  ("Forschner"  or  the  "Company")  is  the
exclusive distributor in the United States, Canada (with one minor exception for
cutlery)  and the Caribbean of the  Victorinox'r' Original Swiss Army'tm' Knife,
Victorinox'r' cutlery and Victorinox'r' watches.  Forschner also markets its own
line of Swiss  Army'r'  Brand Watches and other high quality Swiss made products
under its Swiss Army Brand worldwide.  The Company has been marketing Victorinox
Original Swiss Army Knives and  Victorinox  cutlery for over fifty years and has
been the exclusive  United States  distributor  of such products  since 1972, an
arrangement  that  was  formalized  in  1983.  Forschner  added  Canada  and the
Caribbean (including Bermuda) to its exclusive territory for Victorinox Original
Swiss Army Knives in 1992 and 1993, respectively. Victorinox Original Swiss Army
Knives as well as  watches  and other  Swiss Army Brand  products  are  marketed
primarily  to  retailers  and  also to  corporate  gift  buyers  as  advertising
specialty  products.  Forschner's  cutlery line,  which also  includes  imported
products  from  Germany,  England  and  Brazil,  is sold  primarily  to the food
processing and service industries. Forschner's wholly- owned subsidiary, Cuisine
de France  Limited,  imports and  distributes  high quality French made consumer
cutlery under the Cuisine de France'r' Sabatier'r' brand.

        Sales  of   Victorinox   Original   Swiss  Army  Knives   accounted  for
approximately  39% of Forschner's  1995 sales while watches and other Swiss Army
Brand  products  accounted for  approximately  45%.  Sales of  professional  and
consumer  cutlery  accounted for  approximately  16% of Forschner's  1995 sales.
Approximately   6%  of  Forschner's   sales  in  1995  were  to  Cyrk,  Inc.,  a
Massachusetts-based  company in the business of  developing,  manufacturing  and
distributing  products  for  promotional  programs  and  custom-designed  sports
apparel and accessories. These products were purchased for a special promotional
program  by a Cyrk  customer  which  ended on March 31,  1995.  During the three
fiscal years ended December 31, 1995 no customer other than Cyrk, Inc. accounted
for more than 10% of Forschner's sales in any fiscal year. Total Forschner sales
for the calendar years 1995, 1994 and 1993 were  $126,695,000,  $144,437,000 and
$102,543,000,  respectively. Foreign operations accounted for 11%, 1% and 13% of
Forschner's  sales,  assets  and  net  income  respectively,  in  1995.  Foreign
operations were less than 10% of sales,  assets and net income in 1994 and 1993.
At December 31, 1995 Forschner had backlog orders of  approximately  $4,631,000,
compared to backlog  orders of  $12,452,000  at December 31, 1994.  1994 backlog
orders included  approximately  $7,000,000  relating to the special  promotional
program involving Cyrk, Inc.

        The Company was  incorporated  on December  12, 1974 as a successor to a
New York corporation. Forschner's principal executive offices are located at One
Research Drive,  Shelton,  Connecticut  06484 and its telephone  number is (203)
929-6391.  As of December  31,  1995,  Forschner  and its  subsidiaries  had 203
full-time  employees,  including 8 in Canada and 2 in  Switzerland,  and 2 part-
time employees.

                 Swiss Army Knives and Swiss Army Brand Products

        Forschner  is  the  exclusive  United  States,  Canadian  and  Caribbean
distributor  of Victorinox  Original  Swiss Army Knives and  Victorinox  Watches
under  agreements  with  Forschner's  principal  supplier  of pocket  knives and
cutlery,  Victorinox  Cutlery Company  ("Victorinox"),  a Swiss  corporation and
Europe's largest cutlery  producer.  Forschner also sells watches and other high
quality products under the Swiss Army Brand worldwide.


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        Victorinox  Original  Swiss Army  Knives are  multiblade  pocket  knives
containing implements capable of more functions than standard pocket knives. For
example,  Forschner's most popular Swiss Army Knife model,  the Classic,  with a
suggested  retail  price of $20,  features  a knife,  scissors,  nail  file with
screwdriver  tip,  toothpick  and  tweezers.  Forschner  markets  more  than  40
different  models of Victorinox  Original Swiss Army Knives  containing up to 30
different  implements  (with up to 40 separate  features),  ranging from a basic
knife  with a  suggested  retail  price of $10 to the  highest  priced  model at
approximately  $145 as well as a  SwissChamp'r'  Deluxe SOS kit with a suggested
retail  price of $175.  Forschner  also sells  multi-function  lock-back  knives
designed for the hunting and sporting goods market. The Company  distributes its
Victorinox  Original Swiss Army Knives throughout the United States,  Canada and
the  Caribbean  through  its direct  sales force to over 3,800  wholesalers  and
retailers, including cutlery shops, department,  specialty, jewelry and sporting
goods stores,  catalog  showrooms,  mass merchandisers and mail order houses. In
Canada and the Caribbean,  the Company distributes its Victorinox Original Swiss
Army Knives principally through independent sales representatives.  In addition,
Forschner sells  Victorinox  Original Swiss Army Knives through  distributors to
corporations and other organizations for promotional purposes, premium, employee
gift award programs and corporate  identity  catalogs.  Forschner imprints these
knives  primarily at its own facilities  with the  customer's  corporate name or
logo.

        Forschner's line of  Swiss Army Brand  products now includes nine models
of  Swiss  Army  Brand  Watches  ranging from the Renegade'tm', with a suggested
retail price of $85 to the Chronograph with a stainless steel  bracelet,  with a
suggested  retail price of $495.  Swiss Army Brand Watches are sold both through
the direct sales force which markets  Victorinox  Original Swiss Army Knives and
through a separate direct sales force selling to  approximately  550 department,
specialty  and jewelry  stores.  In  addition  to its Swiss Army Brand  Watches,
Forschner sells Swiss Army Brand Sunglasses and Compasses.  Forschner  currently
obtains a majority of its Swiss Army Brand Watches from a single Swiss supplier,
who is responsible  for the final assembly of watch  components  manufactured by
several  manufacturers.  The Company believes that alternate  suppliers would be
available if necessary  and that the loss of its current  supplier of Swiss Army
Brand  Watches  would  not  have a  material  adverse  effect  on the  Company's
business.

        Although the Company is the largest  United  States seller of Swiss Army
Knives it faces competition from Precise Imports Corp.  ("Precise"),  the United
States and Canadian distributor of Swiss Army Knives manufactured by Wenger S.A.
("Wenger"),  the only company other than Victorinox  supplying  pocket knives to
the Swiss armed forces. Precise imports a substantially smaller number of knives
into the United States than does Forschner.  The Company also faces  competition
from the manufacturers and importers of other multiblade knives and multi-tools.
Forschner is unable to determine  its  competitive  position with respect to the
estimated  seven major  competitors  in the general  United  States pocket knife
market.  Forschner's direct competitors in the specialty  advertising market are
manufacturers of name brand products of similar price and quality. Forschner has
many competitors in the sale of watches and sunglasses at all price points. Many
of these competitors have market shares and resources substantially greater than
those of Forschner.

        In 1992, in connection  with the settlement of litigation  with Precise,
Forschner granted Precise a perpetual  worldwide royalty free license to use the
trademark Swiss Army in connection with Swiss made non-knife  goods,  other than
time  pieces,   sunglasses  and  compasses.   Under  this   agreement,   Precise
acknowledges  Forschner's  exclusive  rights to the  Swiss  Army  trademark  for
non-knife products including time pieces, compasses and sunglasses.

        The Company is the owner of United States and certain foreign  trademark
registrations  for "Swiss Army",  as applied to watches and  sunglasses  and has
successfully defended this trademark in lawsuits in


                                      - 3 -

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Federal courts.  Although the Company's  registrations have been challenged,  on
the basis of the advice of its trademark  counsel,  Forschner expects to prevail
in those  proceedings.  The Company is  dedicated to a vigorous  enforcement  of
these exclusive trademark rights.

        No U.S.  trademark  registrations have ever been issued for "Swiss Army"
as applied to multi-bladed  knives.  In 1994, in a case  originally  brought by
Forschner  against Arrow Trading Co.,  Inc.  ("Arrow") in September  1992 in the
District Court for the Southern  District of New York, the U.S. Court of Appeals
for the Second Circuit  reversed a judgment  originally  issued in the Company's
favor and held that the use of "Swiss  Army" on Chinese made knives could not be
enjoined on grounds of geographic  misdescriptiveness.  On remand,  the District
Court ruled that Arrow had violated Section 43(a) of the Lanham Act and New York
common law in connection with its sale of Chinese-made multi-bladed pocketknives
which Arrow  called  "Swiss Army  Knives."  The court found that  Forschner  had
proved its  contention  that Arrow engaged in unfair  competition  and held that
"Arrow,  although  free to use the phrase  'Swiss Army Knife' to  designate  its
product,  must amply  distinguish  it from the Forschner  product." The court is
considering the scope of an order  determining how Arrow must  differentiate its
product.  The Company  intends to utilize all reasonable  means to safeguard the
public from being misled by inferior imitation products.

        On January 17, 1995, Victorinox and Wenger confirmed and memorialized in
writing  the grant of  separate  trademark  licenses of Swiss Army as applied to
multifunction pocket knives to each of Forschner and Precise. The license to the
Company is royalty free and continues so long as Forschner is a  distributor  of
Victorinox.

        If  the  Company's  efforts  to  protect  its  trademarks  prove  to  be
unsuccessful,  the Company may incur increased  competition  from non-Swiss made
knives and other products sold under the "Swiss Army" name. No assurances can be
given  that such  competition  from  non-Swiss  made  products  would not have a
material adverse effect on the business and prospects of the Company.

        Sales of Swiss Army Knives and Swiss Army Brand  products  are  seasonal
with sales typically stronger during July through December.

                        Professional and Consumer Cutlery

        The  majority of  Forschner's  professional  cutlery  products,  made of
stainless  steel,  are  manufactured  by Victorinox  and by other  manufacturers
located in Germany,  England and Brazil.  Although the  majority of  Forschner's
professional cutlery products are marketed under the trademarks  "Forschner" and
"R.H.  Forschner,"  the Company also has a private label  business.  Forschner's
customers for professional  cutlery include  distributors of hotel,  restaurant,
butcher,  institutional,  commercial  fishing and  slaughterhouse  supplies  and
retail  cutlery  stores  located  throughout  the United  States and Canada.  In
addition,  Forschner  markets the Victorinox  line of floral knives to wholesale
florists.  Except  for retail  sales  made by the  Company's  sales  force,  the
majority of Forschner's cutlery is sold through  manufacturers'  representatives
and can be obtained from approximately 2,500 dealers.

        Professional  cutlery imported from Switzerland and Germany is generally
more expensive than domestic United States products.  Forschner believes that it
has the largest market share of imported  professional  cutlery products sold in
the United States and that its share of all  professional  cutlery,  foreign and
domestic,  sold in  this  country  is  second  to the  dominant  seller  of such
products.  Forschner  believes  that it has achieved and  maintained  its market
share due to the quality of its products and its merchandising efforts. Sales of
professional cutlery products are not seasonal.


                                      - 4 -

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        Forschner's wholly owned subsidiary,  Cuisine de France Limited, imports
and  distributes  cutlery  products  for  consumer  use  under the  "Cuisine  de
France'r' Sabatier'r'" brand. Cuisine de France Limited holds the U.S. trademark
for "Cuisine de France" and has been granted the right by the holder of the U.S.
trademark  registration  for  "Sabatier" to use the name as applied to knives in
the  United  States.  Cuisine  de  France  Limited  has  exclusive  distribution
agreements  with three  separate  French  cutlery  manufacturers  located in the
Thiers region of France where Sabatier cutlery was originated. Cuisine de France
Limited distributes its consumer cutlery through sales representatives to retail
cutlery stores and department stores.

                              Victorinox Agreements

        All of Forschner's  products are manufactured by independent  suppliers.
Forschner's principal supplier of pocket knives and cutlery is Victorinox, which
has  manufactured the Original Swiss Army Knife for the Swiss Army for more than
100 years.  The loss of this supplier  would have a material  adverse  effect on
Forschner's business.  Forschner,  now Victorinox's largest single customer, has
been  distributing  Victorinox's  products  since  1937.  Distribution  was on a
non-exclusive  basis for more than 45 years when, as a result of  understandings
reached on  Forschner's  behalf by Mr. Louis Marx,  Jr. and Mr. Stanley R. Rawn,
Jr., both now Forschner Directors, and Mr. Charles Elsener, Sr., Chief Executive
Officer of Victorinox,  Forschner  became  Victorinox's  exclusive United States
distributor of Victorinox  Original  Swiss Army Knives under an agreement  dated
December 12, 1983 (as subsequently amended, the "U.S. Distribution  Agreement").
In 1992 and 1993,  Messrs.  Marx and Rawn,  together  with Mr. James W. Kennedy,
then Co-Chairman of the Company,  held extensive  conversations,  principally in
Switzerland,  with  Victorinox  looking  to  expand  the  scope  of  Forschner's
exclusive   territory.   This   resulted  in   Forschner   obtaining   exclusive
distributorship  rights first in Canada,  and then in Bermuda and the  Caribbean
areas, as well as Forschner's  receipt of exclusive U.S., Canadian and Caribbean
distribution rights to the Victorinox watch, which is supplied to the Company by
another Swiss manufacturer.

        The U.S. Distribution Agreement,  together with the Company's agreements
with respect to the rights obtained in 1992 and 1993 (together,  the "Victorinox
Agreements"), provides:

                Forschner is the exclusive distributor in the United States, its
                territories and possessions,  Canada (with one minor exception),
                Bermuda and the Caribbean  (excluding  Cuba so long as Forschner
                is  prohibited  by United  States  law from  operating  therein)
                (together, the "Territories"), of Victorinox Original Swiss Army
                Knives and most other Victorinox cutlery products and Victorinox
                Swiss- made watches (collectively, "Products").

                The U.S. Distribution Agreement was renewed through December 12,
                1998  and is  subject  to  renewal  at five  year  intervals  at
                Forschner's   option  unless,  in  any  two  consecutive  years,
                purchases  of  Products  by  Forschner  fall  below the  average
                purchases for 1981 and 1982,  which was 19,766,035 Swiss francs.
                Forschner's  distribution rights in Canada and the Caribbean are
                for  initial  terms of seven years  (expiring  in 1999 and 2000,
                respectively),  subject  to  renewal  for  successive  five year
                periods.  In the  event  that  Victorinox  elects  not to  renew
                Forschner's  Canada  distribution  rights,  Victorinox  will  be
                required to pay Forschner the amount of $3,500,000.

                During  each   calendar  year   Forschner   must  purchase  from
                Victorinox  at least 85% of the  maximum  quantities  of each of
                Swiss Army Knives and cutlery



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                (expressed  in Swiss  francs)  purchased in any prior year.  The
                only remedy of  Victorinox  for  Forschner's  failure to achieve
                these  goals  would  be  the  termination  of  Forschner's  U.S.
                distribution  rights. The Company purchased the required minimum
                for 1995. By agreement  dated December 18, 1995,  Victorinox and
                the  Company   agreed   that  for  1996  the  minimum   purchase
                requirement for Swiss Army Knives would be reduced to 75% of the
                maximum quantity purchased in any prior year.

                In each calendar  year  Victorinox  must, if requested,  furnish
                Forschner  with up to 105% of  each  type of  product  purchased
                during  the   immediately   preceding   year.   Victorinox   has
                historically  been  able  to  accommodate   Forschner's   supply
                requirements even when they have exceeded such amount.  However,
                Victorinox's  plant has a finite  capacity and no assurances can
                be given that  Victorinox  will  continue to meet any  increased
                supply requirements of Forschner.

                Pricing  provisions assure that the prices paid by Forschner for
                products  shipped to the United  States  will be as low or lower
                than  those  charged  to  any  other  Victorinox  customer.   In
                addition,  Forschner  is granted a 4% discount on  purchases  of
                pocket  knives and a 3% discount on  purchases  of cutlery.  For
                products shipped directly to Canada and the Caribbean (including
                Bermuda),  the prices paid by Forschner are Victorinox's regular
                export prices. Forschner also pays a royalty to Victorinox of 1%
                of net sales of Victorinox Watches. In addition,  Victorinox has
                informally undertaken to share in Forschner's  promotional costs
                with  respect  to the  Victorinox  brand in an  amount  of up to
                500,000 Swiss francs per year.

                Forschner  will not add any new  cutlery  items  to its  current
                sales program without the agreement of Victorinox.

                Forschner  will  have  complete  discretion  as to  advertising,
                packaging, pricing and other marketing matters.

        In  consideration  of the grant of the  Canada  distributorship  rights,
Forschner  issued to Victorinox  277,066 shares of common stock,  par value $.10
per share, of Forschner ("Common Stock").  In consideration for the grant of the
Caribbean  distribution rights, the Victorinox watch distribution rights and the
acquisition  by  Forschner  of  Victorinox's  20%  interest in a  subsidiary  of
Forschner,  Forschner  issued to  Victorinox  a  five-year  warrant to  purchase
1,000,000 shares of Common Stock at a discount from the market price on the date
of exercise.  Victorinox  exercised the warrant in full in April 1994 at a price
per share of $9.75,  a discount of $4.25 per share from the then current  market
price of Forschner  Common Stock.  All of the shares issued upon exercise of the
warrant  were  subsequently  sold to Brae  Group,  Inc.  ("Brae"),  a  corporate
shareholder  of Forschner  that is controlled by Louis Marx,  Jr., a Director of
Forschner, in exchange for shares of the common stock of that corporation.


                                      Victory Capital LLC

        In 1994, in furtherance of its acquisition strategy,  Forschner invested
a total of $7,002,990,  paid in cash and in shares of stock of a publicly traded
corporation,  to acquire 700,299 shares of Series A Preferred  Stock  (currently
representing approximately 20.3% of the equity) of Forschner Enterprises,  Inc.,
a privately held  corporation  which has since been merged into Victory  Capital
LLC  ("Victory")



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which currently conducts its operations through small and medium-sized companies
which it believes present an opportunity for significant equity growth and which
may benefit  from  Victory's  management,  operating  and  financial  expertise.
Victory may also acquire interests in businesses that can benefit from synergies
with, and the reputation of, Forschner. Victory seeks to acquire interests which
represent a controlling position in the entities in which it acquires interests.
Victory currently has equity and other interests in several private and publicly
traded  companies.  The preferred  units held by Forschner carry a preference on
liquidation  equal to their $10 per unit cost as well as a cumulative  preferred
dividend.

        490,000 shares of Victory's common units and 981,474 shares of Victory's
Series  B  Preferred   Units   (currently   representing,   in  the   aggregate,
approximately  42.7% of  Victory's  outstanding  equity)  are  held by  Brae,  a
shareholder  of Forschner  that is controlled by Louis Marx,  Jr., a Director of
Forschner.  Pursuant  to an  agreement  between  Victory  and Brae,  if  certain
conditions  are met, Brae is required to purchase from Victory at Victory's cost
10%, and may purchase up to 20%, of the "equity portion"  (defined as the common
and  warrant  portion,  or the  preferred  and  warrant  portion if no common is
purchased  provided  that  the  preferred  portion  is  participating)  of  each
investment made by Victory. Brae may allocate all or a portion of the securities
to be  acquired  pursuant  to such  agreement  among  the  officers,  directors,
employees, consultants and common stockholders of Victory in such proportions as
Brae shall determine.

        Mr.  Marx,  a Director of  Forschner,  is  Co-Chairman  of the Board and
a  director  of  Victory.  Stanley R. Rawn, Jr., Senior Managing  Director and a
Director of Forschner, and A. Clinton Allen, Herbert M. Friedman, M.  Leo  Hart
and  Eric  M.  Reynolds,  Directors  of  Forschner,  also  serve as directors of
Victory.


                           Simmons Outdoor Corporation


        On or about  November  17, 1995,  S.O.C.  Corporation  ("Purchaser"),  a
Delaware corporation and a wholly owned subsidiary of Blount, Inc. ("Blount"), a
Delaware  corporation  which  itself  is a wholly  owned  subsidiary  of  Blount
International,  Inc., commenced a tender offer (the "Offer") for all outstanding
shares (the  "Shares") of the common  stock of Simmons  Outdoor  Corporation,  a
Delaware corporation ("Simmons"), at $10.40 per share.

        Pursuant to the Tender and Option Agreement dated November 13, 1995 (the
"Tender and Option Agreement") by and among Blount, Purchaser, Noel Group, Inc.,
a Delaware corporation, and Forschner,  Forschner tendered pursuant to the Offer
655,000  Shares (the  "Simmons  Shares"),  which shares  represented  all of the
Shares  beneficially  owned by  Forschner.  As of December 18,  1995,  Purchaser
acquired  pursuant  to the Offer the  Simmons  Shares  (together  with all other
Shares tendered pursuant to the Offer).  Forschner  received in cash pursuant to
the Offer $10.40 per Share,  or  $6,812,000 in the  aggregate.  These shares had
been purchased by Forschner for an aggregate purchase price of $3,856,452.


Item 2. Properties.

        The   executive   and   administrative   offices  of  Forschner   occupy
approximately  32,500 square feet of leased space in an office building  located
in Shelton, Connecticut. Forschner moved into these premises in September, 1993.
The  initial  term of the lease on this  space  expires  on  September  1, 2001,
subject to a renewal option for an additional five-year term.

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        In  addition,  Forschner  leases  approximately  7.4  acres in  Shelton,
Connecticut  upon  which the  landlord  has  constructed  a 85,000  square  foot
building,  increased in January 1995 from 60,000  square feet,  which  Forschner
uses as a facility for warehousing,  distribution,  imprinting and assembly. The
lease commenced in June, 1991 and has a term of ten years. Forschner also leases
approximately 13,000 square feet in a building in Toronto,  Canada which it uses
for office space and  warehousing of products.  The lease commenced in December,
1992 and has a term of five years.

        In 1996,  Forschner entered into a four-year lease for 7,000 square feet
of space in a 30,000  square foot  building in Nidau,  Switzerland  for use as a
distribution center.

        Forschner  believes its  properties  are  sufficient for the current and
anticipated needs of its business.


Item 3. Legal Proceedings.

        Except as set forth or referenced  below, the Company is not involved in
any material pending legal proceedings.

        Arrow filed on November 15, 1994  petitions to cancel the Company's U.S.
Trademark Reg. No.  1,734,665 for watches and Reg. No.  1,715,093 for sunglasses
for "Swiss Army".  Arrow failed to file evidence in support of its  cancellation
petitions  and the Company  moved to dismiss the  petitions on ground of lack of
prosecution.  Arrow has  opposed the  motions to  dismiss,  arguing  inadvertent
failure to prosecute.  The Company believes it has meritorious defenses to these
petitions although their outcome cannot be predicted at this time.

        The Company is also a plaintiff  in several  proceedings  to enforce its
intellectual property rights.

        In  addition,  see  "Business  - Swiss Army  Knives and Swiss Army Brand
Products".


Item 4. Submission of Matters to a Vote of Security Holders.

               Not Applicable.


                                      - 8-

<PAGE>
<PAGE>



                                     PART II


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

        A.     Market Information.

        Shares of  Forschner's  Common  Stock are traded on the Nasdaq  National
Market tier of The Nasdaq Stock Market under the symbol FSNR.  The range of high
and low  transactions  for  shares of Common  Stock,  which is the only class of
capital  stock of Forschner  outstanding,  as reported by Nasdaq since the first
quarter of 1994 were as follows:

<TABLE>
<CAPTION>
                                  Fiscal 1994                 Fiscal 1995               Fiscal 1996*
                              -------------------         -------------------       -----------------
                              High         Low            High         Low          High         Low
<S>                           <C>          <C>            <C>          <C>          <C>          <C>
First Quarter                 $16          $14 3/4        $12 7/8      $10 1/2      $12 5/8    $11 1/4*

Second Quarter                 16 1/4       10 1/4         10 7/8       10

Third Quarter                  14 1/2       11             12 1/2       10 1/4

Fourth Quarter                 13           10 1/2         12 3/8       11 1/8

</TABLE>

*Through March 13, 1996.

        The  public  market  for  Common  Stock  is  limited  and the  foregoing
quotations  should not be taken as necessarily  reflective of prices which might
be  obtained  in  actual  market  transactions  or  in  transactions   involving
substantial numbers of shares.

        B.     Holders.

        On March 13, 1996 shares of Common Stock were held by 379 persons, based
on the number of record holders,  including several holders who are nominees for
an undetermined number of beneficial owners.

        C.     Dividends.

        The Company has not paid a cash dividend  since its  inception,  and its
present  policy  is to  retain  earnings  for use in its  business.  Payment  of
dividends is dependent  upon the earnings and  financial  condition of Forschner
and other  factors  which its Board of  Directors  may deem  appropriate.  Under
Forschner's bank loan agreement, as amended, Forschner has agreed not to declare
or pay any dividends unless immediately following such payment Forschner's ratio
of indebtedness to tangible net worth, calculated as set forth in the agreement,
does not exceed 0.75 to one, and Forschner's  ratio of current assets to current
liabilities is in excess of 2.5 to one.



                                      - 9 -

<PAGE>
<PAGE>



Item 6. Selected Financial Data

        The following  selected financial data for the five years ended December
31, 1995, was derived from the consolidated  financial  statements of Forschner.
This  data  should  be read in  conjunction  with  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations and the  Consolidated
Financial  Statements,  related notes and other financial  information  included
herein.
<TABLE>
<CAPTION>

(In thousands, except per share amounts)                   Year Ended December 31,

                                                  1995      1994       1993     1992       1991
                                                  ----      ----       ----     ----       ----

<S>                                            <C>        <C>       <C>        <C>       <C>    
Net sales..............................        $126,695   $144,437  $102,543   $74,148   $60,098
Gross profit...........................          44,264     55,804    42,027    29,779    21,796
Selling, general and administrative expenses.    40,265     40,293    30,753    21,016    17,956
Operating income.......................           3,999     15,511    11,274     8,763     3,840
Gain on sale of investments............           1,771         37         -         -         -
Other income (expense), net............            (134)       445       251       143      (287)
Income before income taxes and cumulative
  effect of accounting change..........           5,636     15,993    11,525     8,906     3,553
Income tax provision...................           2,523      6,633     4,221     3,974     1,592

Income before cumulative effect of
  accounting change....................           3,113      9,360     7,304     4,932     1,961
Cumulative effect of accounting
  change for income taxes..............               -          -       220         -         -
                                              --------------------------------------------------
Net income.............................          $3,113    $ 9,360   $ 7,524   $ 4,932   $ 1,961
Earnings per share:
  Income before cumulative effect of
    accounting change..................          $ 0.38    $  1.16   $  1.04   $  0.80   $  0.45
  Cumulative affect of accounting
    change for income taxes............               -          -      0.03         -         -
                                              --------------------------------------------------
  Net income...........................          $ 0.38    $  1.16   $  1.07   $  0.80   $  0.45
Other Financial Data:
Current assets.........................         $74,355    $78,641   $57,551   $43,664   $24,994
Total assets...........................         101,230    105,708    78,004    54,283    28,955
Current liabilities....................          16,291     23,932    17,651    10,756     6,790
Long-term debt ........................               -          -         -         -     8,140
Stockholders' equity...................         $84,939    $81,775   $60,353   $43,038   $13,280
Weighted average number of shares
  outstanding..........................           8,236      8,062     7,053     6,186     4,359
</TABLE>





                                     - 10 -

<PAGE>
<PAGE>



Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations


RESULTS OF OPERATIONS

        In 1995,  sales  totalled  $126.7  million,  a 12%  decrease  from 1994.
However, excluding sales to a single customer for a special promotional program,
Forschner  experienced  sales growth of 10% primarily due to growth in its Swiss
Army  Brand  Watch,  cutlery  and a  marginal  increase  in sales of  Victorinox
Original  Swiss Army Brand Knives.  Sales  relating to this single  customer for
this promotional  program  represented 6% and 25% of net sales in 1995 and 1994,
respectively. No programs are currently scheduled with this customer for 1996.

        The following table shows,  as a percentage of net sales,  the Company's
Consolidated  Statements of Operations for each of the three years in the period
ended December 31, 1995:
<TABLE>
<CAPTION>
                                                                     Year Ended December 31,
                                                                     -----------------------
                                                         1995                    1994                     1993
                                                         ----                    ----                     ----
<S>                                                     <C>                     <C>                      <C>   
Net sales..................................             100.0%                  100.0%                   100.0%
Cost of Sales..............................              65.1                    61.4                     59.0
                                                        -----                    ----                     ----
  Gross Profit.............................              34.9                    38.6                     41.0
Selling, general and administrative
  expenses before special charitable
  contributions............................              31.8                    26.9                     30.0
Special charitable contribution............                 -                     1.0                        -
                                                         ----                    ----                     ----
Total selling, general and
  administrative expense...................              31.8                    27.9                     30.0
Operating income...........................               3.1                    10.7                     11.0
Interest expense...........................               (.2)                      -                      (.1)
Interest income............................                .4                      .3                       .2
Gain on sale of investments................               1.4                       -                        -
Equity interest in
  unconsolidated affiliates................               (.4)                      -                        -
Other income (expense), net................                .1                      .1                       .1
                                                         ----                   -----                    -----
Income before income taxes
  and cumulative effect of
  accounting change........................               4.4                    11.1                     11.2
Income tax provision.......................               2.0                     4.6                      4.1
                                                         ----                     ---                     ----
Income before cumulative effect of
accounting change..........................               2.4                     6.5                      7.1
Cumulative effect of accounting
  change for income taxes..................                 -                       -                       .2
                                                         ----                   -----                     ----
Net income.................................               2.4%                    6.5%                     7.3%
                                                         ====                    ====                     ====
</TABLE>



Comparison of the Years Ended December 31, 1995 and December 31, 1994

        With sales of $126.7  million  for the year  ended  December  31,  1995,
Forschner  posted a 12% decrease  compared to $144.4  million  reported in 1994.
Sales of Swiss Army  Brand  products  decreased  significantly  in 1995,  due to
Forschner's  decreased  participation in a special  promotional program with


                                     - 11-
<PAGE>
<PAGE>

one customer  that  accounted  for 6% and 25% of  Forschner's  1995 and 1994 net
sales,  respectively.  Excluding the special promotional  program, the Company's
sales  increased by 10% for the year.  For the year,  excluding the  promotional
program,  Swiss Army Brand Watch sales  increased  19% and  Victorinox  Original
Swiss Army Knife sales  increased by 3%. Cutlery  sales,  which include both the
Cuisine de France Sabatier line of cutlery and the R.H.  Forschner  professional
line, increased 7% in 1995.

        Gross profit for the year ended  December 31, 1995,  was $44.3  million,
21% lower than in 1994.  This is due primarily to lower sales volume as a result
of the special  promotional  program with one  customer in 1994 and  unfavorable
exchange  rates.  Forschner's  gross profit margin is a function of both product
mix and Swiss franc exchange rates. Since Forschner imports virtually all of its
products  from  Switzerland,  its  costs are  affected  by both the spot rate of
exchange and by its foreign  currency  hedging  program.  Forschner  attempts to
mitigate the impact on gross margin of exchange rate changes  through  selective
hedging of anticipated  Swiss franc purchases.  To the extent the Company is not
hedged, a weakening of the dollar versus the Swiss franc will negatively  impact
the  profitability  of the  Company.  Based on  current  estimated  Swiss  franc
requirements, the Company is hedged through the first quarter of 1996.

        Selling, general and administrative expenses for the year ended December
31, 1995 were $40.3  million,  $1.5 million or 4% higher than the amount for the
comparable period in 1994,  excluding a special charitable  contribution of $1.5
million in 1994. The expense increase resulted  primarily from increased selling
expenses and increased expenditures in the areas of merchandising and promotion.
As a percentage of net sales, total selling, general and administrative expenses
(including the charitable contribution) increased from 27.9% in 1994 to 31.8% in
1995.

        Interest  income of $557,000  for the year ended  December  31, 1995 was
$166,000 or 42% higher than interest  income for the comparable  period in 1994,
due to increased invested cash balances during most of 1995.

        Gain on sale of  investments  of $1.8  million was due  primarily to the
sale of the common stock of Simmons Outdoor Corporation in 1995. Gain on sale of
investments was not significant in 1994.

        Equity interest in unconsolidated  affiliates with a loss of $548,000 in
1995 was due to the  Company  using  the  equity  method of  accounting  for its
investments in Simmons Outdoor  Corporation  and  SweetWater,  Inc. in 1995. The
equity method of accounting was not applicable in 1994.

        As a result of these changes,  income before income taxes and cumulative
effect of  accounting  change  for the year  ended  December  31,  1995 was $5.6
million versus $16.0 million for 1994, a decrease of $10.4 million or 65%.

        Income tax expense was  provided at an  effective  rate of 44.8% for the
year ended December 31, 1995 versus 41.5% in 1994 due to increased state taxes.

        Net income was $3.1 million for the year ended  December 31, 1995 versus
$9.4 million in 1994, representing a decrease of $6.3 million or 67%.

        On a per share  basis,  net income for the year ended  December 31, 1995
was $0.38 compared with $1.16 in 1994.



                                     - 12 -

<PAGE>
<PAGE>



Comparison of the Years Ended December 31, 1994 and December 31, 1993

        With sales of $144.4  million  for the year  ended  December  31,  1994,
Forschner  posted a 41% increase over the $102.5 million reported in 1993. Sales
of Swiss Army Brand products  increased  significantly in 1994, due, in part, to
Forschner's  continued  participation  in special  promotional  programs  with a
customer that accounted for 25% and 14% of Forschner's  1994 and 1993 sales.  No
programs are currently  scheduled with this customer after the conclusion of the
special  programs in the first quarter of 1995.  Furthermore,  an agreement with
this  customer  in the  fourth  quarter of 1994  which  resulted  in a change in
pricing did adversely  affect gross profit in first  quarter of 1995.  Excluding
the special promotional programs,  the Company's sales were up 23% for the year.
For the year, including the promotional  programs,  Swiss Army Brand Watch sales
rose 100% and Victorinox  Original  Swiss Army Knife sales were down  marginally
(1.5%). Cutlery sales, which include both the Cuisine de France Sabatier line of
cutlery and the R.H. Forschner professional line, increased 14% in 1994.

        Gross profit for the year ended December 31, 1994, was $55.8 million 33%
higher than in 1993, due to the profit from increased sales volume,  offset by a
reduction in gross profit margins which decreased from 41.0% in 1993 to 38.6% in
1994. The lower margin reflects the impact of shipments of sunglasses in 1994 at
lower gross profit margins than the Company's average for all other products and
a pricing agreement relating to Forschner's  continued  participation in special
promotional  programs with one customer  which was reached in the fourth quarter
of 1994.  Forschner's  gross profit margin is a function of both product mix and
Swiss  franc  exchange  rates.  Since  Forschner  imports  virtually  all of its
products  from  Switzerland,  its  costs are  affected  by both the spot rate of
exchange and by its foreign  currency  hedging  program.  Forschner  attempts to
mitigate the impact on gross margin of exchange rate changes  through  selective
hedging of anticipated Swiss franc purchases.

        Selling,  general  and  administrative  expenses,  excluding  a  special
charitable  contribution  of $1.5 million,  for the year ended December 31, 1994
were  $38.8  million,  $8.0  million  or 26%  higher  than  the  amount  for the
comparable  period  in  1993.  The  expense  increase  resulted  primarily  from
personnel  costs  relating to increases in headcount  (principally  in its sales
force and  distribution  function)  and increased  expenditures  in the areas of
advertising, printed material, occupancy and market research. As a percentage of
net sales,  total selling,  general and administrative  expenses  (including the
charitable contribution) decreased from 30.0% in 1993 to 27.9% in 1994.

        Interest  income of $391,000  for the year ended  December  31, 1994 was
$214,000 or 121% higher than interest income for the comparable  period in 1993,
due to increased invested cash balances during most of 1994.

        As a result of these changes,  income before income taxes and cumulative
effect of  accounting  change for the year  ended  December  31,  1994 was $16.0
million versus $11.5 million for 1993, an increase of $4.5 million or 39%.

        Income tax expense was  provided at an  effective  rate of 41.5% for the
year ended  December 31, 1994 versus 36.6% in 1993.  The 1993 rate  reflects the
one-time benefit of a favorable settlement of certain tax contingencies effected
in the third quarter.

        Income before  cumulative  effect of accounting  change was $9.4 million
for the year ended  December 31, 1994 versus $7.3 million in 1993,  representing
an increase of $2.1 million or 28%.


                                     - 13 -

<PAGE>
<PAGE>



        After 1993's one-time cumulative  adjustment as required by Statement of
Financial  Accounting  Standards No. 109,  "Accounting for Income Taxes",  which
added $.2 million to income,  net income of $9.4 million for 1994  compared with
$7.5 million in 1993, for an increase of 24%.

        On a  per  share  basis,  income  before  the  cumulative  effect  of an
accounting  change for the year ended  December 31, 1994 was $1.16 compared with
$1.04 in 1993.  After the cumulative  effect of an accounting  change for income
taxes of $0.03 in 1993,  net  income  per share of $1.16 in 1994  compared  with
$1.07 in 1993, an increase of 9%.

LIQUIDITY AND CAPITAL RESOURCES

        As of December 31, 1995  Forschner had working  capital of $58.1 million
compared  with $54.7  million as of  December  31,  1994,  an  increase  of $3.4
million.  Sources of working capital in 1995 included net income of $3.1 million
and depreciation  and amortization of $3.2 million,  and proceeds from the sales
of Simmons Outdoor Corporation common stock of $6.8 million. Significant uses of
working  capital  included  investments  in common stock of $3.7  million,  $2.8
million in additions to other assets and capital  expenditures  of $1.4 million.
The Company currently has no material commitments for capital expenditures.

        Cash used for operating  activities was  approximately  $16.4 million in
the year ended  December  31, 1995  compared  with cash  provided  by  operating
activities of $8.9 million in the  comparable  period of 1994.  The large change
resulted from a decrease in net income from 1994 to 1995. In addition, increases
in inventory,  prepaid and other current assets,  a decrease in accounts payable
and a smaller  increase  in  accounts  receivable  in 1995  versus 1994 were the
primary contributors to the decrease.

        Forschner meets its short-term  liquidity needs with cash generated from
operations,  and, when  necessary,  bank borrowings  under its revolving  credit
agreements.  As of December 31, 1995,  Forschner had no  outstanding  borrowings
under its  revolving  line of credit  agreements,  leaving  unused  lines of $20
million.  Forschner's  short-term  liquidity is affected by seasonal  changes in
inventory levels,  payment terms and seasonality of sales. The Company's current
liquidity levels and financial  resources  continue to be sufficient to meet its
operating needs.

Item 8. Financial Statements and Supplementary Data

        The financial  information  required by Item 8 is included  elsewhere in
this report. See Part IV, Item 14.

Item 9. Disagreements on Accounting and Financial Disclosure

               None.





                                     - 14 -

<PAGE>
<PAGE>



                                    PART III


Item 10.       Directors and Executive Officers of the Registrant

        The Directors and Executive Officers of Forschner are as follows:
<TABLE>
<CAPTION>
                                                                               Director
                                                                                and/or
   Name                       Age            Position(s)                     Officer Since
   ----                       ---            ----------                      --------------
<S>                           <C>           <C>                             <C> 
J. Merrick Taggart            45            President                       Dec., 1995
Peter W. Gilson               56            Chairman of the Executive
                                            Committee and Director(1)       Dec., 1994
Thomas D. Cunningham          46            Executive Vice President,
                                            Chief Financial Officer
                                            and Director(2)                 Mar., 1994
Stanley R. Rawn, Jr.          68            Senior Managing Director
                                            and Director(3)                       1990
Harry R. Thompson             66            Managing Director(4)            Dec., 1994
Stanley G. Mortimer III       53            Executive Vice President
                                            and Director(5)                 Dec., 1994
Thomas M. Lupinski            43            Senior Vice President, Controller,
                                            Secretary and Treasurer               1986
Michael J. Belleveau          39            Vice President                  Jun., 1994
Leslie H. Green               48            Vice President                  Dec., 1995
David J. Parcells             37            Vice President - Operations           1992
Jerald J. Rinder              49            Vice President                  Feb., 1996
Robert L. Topazio             47            Vice President                  Feb., 1996
Douglas M. Rumbough           39            Vice President                        1992
A. Clinton Allen              52            Director(6)                           1993
Thomas A. Barron              44            Director                              1983
Vincent D. Farrell, Jr.       49            Director(7)                           1992
Herbert M. Friedman           64            Director(8)                           1981
M. Leo Hart                   47            Director(9)                           1991
James W. Kennedy              45            Director(10)                          1981
Keith R. Lively               44            Director                        Oct., 1994
Lindsay Marx                  30            Director                        Feb., 1994
Louis Marx, Jr.               64            Director(11)                          1990
Eric M. Reynolds              43            Director                        Mar., 1994
John Spencer                  66            Director(12)                          1990
John V. Tunney                61            Director(13)                          1992

</TABLE>


1.      Mr. Gilson is Chairman of Forschner's Executive Committee.

2.      Mr.  Cunningham  is  a  member  of  Forschner's   Executive   Committee,
        Management Committee and Special Products Committee.



                                     - 15 -

<PAGE>
<PAGE>



3.      Mr.  Rawn is a member of  Forschner's  Executive  Committee,  Management
        Committee, Nominating Committee and Special Products Committee.

4.      Mr. Thompson is Chairman of Forschner's Special Products Committee.

5.      Mr.  Mortimer was elected a Director of Forschner in December,  1994. He
        had previously  served as a Director of Forschner from June 1987 to June
        1994. Mr.  Mortimer was named  Executive Vice President in May, 1988. He
        had become a Senior Vice  President in  September,  1985.  Prior to that
        time, he was a Vice  President.  Mr. Mortimer is a member of Forschner's
        Special Products Committee.

6.      Mr.  Allen is  Chairman of  Forschner's  Stock  Option and  Compensation
        Committee and Acquisition Committee.

7.      Mr. Farrell is Chairman of Forschner's  Audit  Committee and a member of
        Forschner's Acquisition Committee and Executive Committee.

8.      Mr.  Friedman is Chairman of Forschner's  Charitable  Insurance  Program
        Committee  and  a  member  of  Forschner's  Executive  Committee,  Audit
        Committee, Nominating Committee and Special Products Committee.

9.      Mr. Hart was Co-Chairman of the Board and Chief  Executive  Officer from
        February 1994 to December  1995. He had become  Executive Vice President
        and a Director in  October,  1991.  Mr. Hart is a member of  Forschner's
        Management  Committee,  Executive  Committee  and  Charitable  Insurance
        Program Committee.

10.     Mr.  Kennedy was  Co-Chairman of the Board and Chief  Executive  Officer
        from  February 1994 to December  1995.  He had been  President and Chief
        Executive  Officer  since March,  1988.  He had become  President  and a
        Director in June,  1987 and a Senior Vice President in September,  1985.
        Prior to that time he was a Vice  President.  Mr. Kennedy is a member of
        Forschner's Executive Committee and Management Committee.

11.     Mr. Marx is Chairman of Forschner's  Management Committee and Nominating
        Committee and a member of Forschner's Executive Committee.  Mr. Marx was
        Chairman of Forschner's Executive Committee until June, 1995.

12.     Mr. Spencer is a member of Forschner's  Audit Committee and Stock Option
        and Compensation Committee.

13.     Mr.  Tunney is a member of  Forschner's  Stock  Option and  Compensation
        Committee,   Acquisition  Committee  and  Charitable  Insurance  Program
        Committee.


        Directors hold office until the next annual meeting of  stockholders  of
Forschner and until their  successors have been elected and qualified.  Officers
serve at the discretion of the Board of Directors.



                                     - 16 -

<PAGE>
<PAGE>


        The  following   sets  forth  the  principal   occupations  of  each  of
Forschner's  officers and directors  during the previous five years,  as well as
the  names of any  other  public  or  affiliated  companies  of  which  they are
directors.


        J. Merrick Taggart, President of Forschner, was elected to that position
on December 13, 1995.  From 1993 to November  1995 Mr.  Taggart was President of
Duofold,  Inc, a sports  apparel  company,  and Pringle of Scotland  U.S.A.,  an
apparel company. From 1990 to November 1992 Mr. Taggart was President of O'Brien
International,  a manufacturer and marketer of water sports equipment.  Prior to
that Mr.  Taggart  was Senior  Vice  President  of Product  Development  for the
Timberland Company, a footwear and apparel company.

        Peter W. Gilson,  Chairman of the Executive  Committee and a Director of
Forschner,  has served as  President  and Chief  Executive  Officer of Physician
Support Systems,  Inc., a company  specializing in the management of physician's
health care practices, since 1991. From 1988 to the present, Mr. Gilson has also
served as President and Chief Executive Officer of the Warrington Group, Inc., a
manufacturer  of  safety  products  which  was  previously  a  division  of  The
Timberland  Company.  From 1987 to 1988,  Mr. Gilson  served as Chief  Operating
Officer of The  Timberland  Company,  a  manufacturer  of  footwear  and outdoor
clothing.  From 1978 to 1986,  he  served as  President  of the  Gortex  Fabrics
Division of W.L. Gore  Associates.  Mr. Gilson is also a director of SweetWater,
Inc.  ("SweetWater"),  a manufacturer  and marketer of portable water filtration
systems.

        Louis Marx, Jr., Chairman of the Management  Committee and a Director of
Forschner, has been associated with the Company for over 20 years and has played
the key role in helping to guide its affairs during that entire period.  Through
discussions with the Chief Executive Officer of Victorinox, he and Mr. Rawn were
responsible  for Forschner  obtaining  exclusive  U.S.  distribution  rights for
Victorinox  products  and  later,  together  with  Mr.  Rawn  and  Mr.  Kennedy,
negotiated the expansion of Forschner's  distribution  rights to include Canada,
Bermuda  and  the  Caribbean  and  also  obtained  for  the  Company   exclusive
distribution  rights to the  Victorinox  Watch.  In a prior year he and Mr. Rawn
played an important part in negotiating,  on behalf of Forschner, the settlement
of potentially expensive litigation,  and more recently,  Mr. Marx has played an
active role in the Company's  investment policy and, together with the Company's
advisors,  has successfully  managed the Company's currency hedging program. Mr.
Marx is Chairman of the Executive  Committee and a director of Noel Group,  Inc.
("Noel"),  a publicly  held  company  which  conducts its  principal  operations
through small and medium sized operating companies in which it holds controlling
interests,  a director and member of the  Compensation  Committee of Cyrk,  Inc.
("Cyrk"), a distributer of products for promotional programs and custom-designed
sports apparel and  accessories,  and Co-Chairman of the Board and a director of
Tigera Group,  Inc.  ("Tigera"),  an  acquisition  company.  Mr. Marx has been a
venture capital investor for more than thirty years. Mr. Marx, together with his
close business associates,  have been founders or substantial  investors in such
companies as Pan Ocean Oil Corporation,  Donaldson,  Lufkin & Jenrette,  Bridger
Petroleum  Corporation  Ltd.,  Questor  Corporation,  Environmental  Testing and
Certification  Corporation,  Garnet Resources  Corporation,  The Prospect Group,
Inc.  and Noel.  Mr. Marx served as a director of The  Prospect  Group,  Inc., a
company which,  prior to its adoption in 1990 of a Plan of Complete  Liquidation
and Dissolution, conducted its major operations through subsidiaries acquired in
leveraged buyout transactions ("Prospect"),  from February 1986, and as Chairman
of Prospect's  Asset  Committee from October 1988,  until January 1990. Mr. Marx
serves as a trustee of the New York  University  Medical  Center and  Middlebury
College and as Chairman of the  Madison  Avenue Fund for  Children.  Mr. Marx is
also Co-Chairman  and a director of Victory.  He is President  and a director of
Victorinox-Swiss  Army Knife  Foundation,  a  non-profit  corporation  formed by
Forschner for charitable  purposes  including the



                                     - 17 -

<PAGE>
<PAGE>

improvement of the welfare of underprivileged  children.  Mr. Marx is the father
of Lindsay Marx, a Director of Forschner.

        Thomas D. Cunningham,  Executive Vice President, Chief Financial Officer
and a Director of Forschner, was appointed to those offices in March 1994. Prior
to joining Forschner,  Mr. Cunningham had been with JP Morgan & Co. Incorporated
since  1973  where  he was  appointed  a Vice  President  in 1979,  Senior  Vice
President  in 1987,  Managing  Director  Corporate  Finance in 1988 and Managing
Director - Corporate Banking Group in 1993. Mr. Cunningham is also a director of
Emcor Group, Inc., a mechanical and electrical contractor.

        Stanley  R. Rawn,  Jr.,  Senior  Managing  Director  and a  Director  of
Forschner, actively participates with Messrs. Marx and Kennedy in furthering the
relationship  between  Forschner  and  Victorinox  as  well  as in  coordinating
management  strategies.  He has also played an important  part in obtaining  and
expanding  the  Company's  exclusive  distribution  rights  covering  Victorinox
products.  Mr. Rawn was Chairman and Chief  Executive  Officer and a director of
Adobe Resources  Corporation,  an oil and gas exploration and production company
from  November,  1985 until the merger of that company in May, 1992. Mr. Rawn is
also the Chief Executive Officer and a director of Noel; a director of Prospect,
Victory, Staffing Resources, Inc., a temporary help corporation,  and Victorinox
- Swiss Army Knife  Foundation;  and a Trustee of the  California  Institute  of
Technology.

        Harry R. Thompson, Managing Director of Forschner was appointed Managing
Director in December 1994.  From 1987 to 1995, Mr. Thompson was president of The
Strategy  Group,  a business and marketing  consulting  firm.  Mr.  Thompson had
previously served as a director of Forschner from June 1987 to June 1991, and as
Chairman of Forschner's Board of Directors from January 1990 to October 1990 and
served in senior executive  capacities with the Interpublic  Group of Companies,
Inc., a leading marketing and communications organization.

        Stanley G.  Mortimer  III,  Executive  Vice  President and a Director of
Forschner, has served Forschner in a variety of capacities since September 1984.
Mr.  Mortimer  was  elected as a director in December  1994.  He had  previously
served as a director from June 1987 to June 1994.

        Thomas M. Lupinski,  Senior Vice  President,  Controller,  Secretary and
Treasurer of Forschner,  has been Vice President of Forschner for more than five
years.  He served as Chief Financial  Officer from 1990 to March 1994.  Prior to
joining  Forschner,  Mr. Lupinski was Finance Manager for The Revlon Health Care
Group from 1982 to 1986 and was with Arthur  Andersen & Co.,  from 1976  through
1982.

        David J.  Parcells,  Vice  President - Operations,  joined  Forschner in
December  1992. Mr.  Parcells was employed by Arthur  Andersen & Co. as a Senior
Manager - Audit and Business  Advisory Practice from 1989 through 1992 and as an
Audit Manager from 1986 to 1989.

        Michael J. Belleveau,  Vice President - Sales, was elected to the office
of Vice  President in June 1994. Mr.  Belleveau has served  Forschner in various
positions since 1991.  Prior to that Mr.  Belleveau was a regional sales manager
for Cartier, Inc., a manufacturer and marketer of watches and luxury goods.

        Leslie H.  Green,  Vice  President,  was  elected  to the office of Vice
President in December 1995. Ms. Green has served Forschner in various  positions
since January, 1991.

        Jerald J.  Rinder,  Vice  President,  was  elected to the office of Vice
President in February, 1996. From 1994 through 1995 Mr Rinder was Executive Vice
President of Pringle of Scotland USA, an




                                     - 18 -
<PAGE>
<PAGE>

apparel   company.   From  1993  to  1994  Mr.  Rinder  was  Vice   President  -
Sales/Marketing  of  Walkover  Shoe Co.  and  from  1991  through  1993 was Vice
President - Sales of Stride Rite Corp.

        Robert L.  Topazio,  Vice  President,  was elected to the office of Vice
President  in  February,  1996.  Mr.  Topazio  has served  Forschner  in various
positions  since  September,  1992.  From  1991 to 1993  Mr.  Topazio  was  Vice
President of Cuisine de France,  Ltd., a marketer of consumer  cutlery which was
purchased  by the  Company in 1992. Prior to that Mr. Topazio was National Sales
Manager for J.A. Henckels.

        Douglas M. Rumbough,  Vice President - Corporate Markets, was elected to
the office of Vice President in June 1992. Mr. Rumbough has served  Forschner in
various positions since 1981.

        A. Clinton Allen, a Director of Forschner,  is Chairman of A. C. Allen &
Co., a  Massachusetts  based  consulting  firm.  Mr.  Allen also  serves as Vice
Chairman and a director of  Psychemedics  Corporation,  a company that  provides
testing services for the detection of abused  substances  through an analysis of
hair samples,  and of Dewolfe Companies,  Inc., a real estate company,  and as a
director of SweetWater and Tigera.

        Thomas A.  Barron,  a Director of  Forschner,  is an author and has been
Chairman of Evergreen Management Corp., a private investment firm since January,
1990.  From November,  1983 through  November 1989, Mr. Barron was President and
Chief Operating  Officer and a director of Prospect.  From 1988 through January,
1990,  Mr. Barron served as Chairman of the Board of Forschner.  Mr. Barron also
serves as a director of Illinois Central  Corporation,  a railroad  corporation,
Illinois Central Railroad  Company,  and SweetWater.  Mr. Barron has served as a
Trustee of Princeton University.

        Herbert M.  Friedman,  a Director of Forschner,  is a partner in the law
firm of Zimet, Haines, Friedman & Kaplan, where he has been a member since 1967.
Zimet, Haines,  Friedman & Kaplan acts as counsel to Forschner.  Mr. Friedman is
also a director of Noel, Prospect,  Victory,  Tigera and Victorinox - Swiss Army
Knife Foundation.

        Vincent D. Farrell,  Jr., a Director of  Forschner,  has been a Managing
Director of the investment management firm of Spears, Benzak, Solomon & Farrell,
Inc., ("Spears, Benzak") since 1982. Mr. Farrell is a director of Noel.

        M. Leo Hart, a Director of Forschner,  is President and Chief  Executive
Officer of Brae, a privately held acquisition company.  Until December 13, 1995,
Mr. Hart was Co-Chairman of the Board and Chief Executive  Officer of Forschner,
which  capacity  he had  served  in  since  February  1994.  Previously,  he was
Executive  Vice President and a Director.  Mr. Hart joined  Forschner in October
1991.  Prior to this,  Mr. Hart spent the  previous 15 years in senior sales and
marketing  positions  in  the  hospitality  industry,  serving  as  Senior  Vice
President of Marketing for The Ritz-Carlton  Hotel Company from 1987 to 1991 and
before that as Vice  President - Sales and  Marketing  for Fairmont  Hotels from
1983 to 1987.  Until  1991,  he was the North  American  Chairperson  of Leading
Hotels of the  World,  a hotel  marketing  association.  Prior to his  career in
sales, Mr. Hart played professional  football with the NFL's Atlanta Falcons and
Buffalo  Bills.  Mr.  Hart is also a  director  of  Victory  and a  director  of
Victorinox - Swiss Army Knife Foundation, a charitable organization.

        James W.  Kennedy,  a Director of  Forschner,  is  President  of Lahinch
Group,  Inc.,  a  start-up  company  proposing  to engage in the golf  award and
apparel  business.  Until December 13, 1995, Mr. Kennedy was  Co-Chairman of the
Board and Chief Executive Officer of Forschner,  which capacity he had served in
since February 1994.  Previously,  he was President of Forschner,  a position he
had held 




                                     - 19 -
<PAGE>
<PAGE>

since 1988.  Prior to 1988,  Mr.  Kennedy was Senior Vice President of Forschner
and had served in various sales and marketing  positions  with  Forschner  since
1975.  Mr.  Kennedy  has  served on  committees  for the  Specialty  Advertising
Association  International,  the National Restaurant  Association,  the American
Meat Institute,  the Sporting Goods  Manufacturers  Association and the American
Association of Exporters and Importers.

        Keith R. Lively,  a Director of  Forschner,  is a private  investor and,
since January 1995 through December,  1995, was a consultant to Forschner.  From
1988 through  September  1994,  Mr. Lively was the  President,  Chief  Executive
Officer  and a Director of The Famous Amos  Chocolate  Chip Cookie  Corporation.
From  September  1992 through  September  1994,  Mr. Lively was also Senior Vice
President,  a member of the  Executive  Committee  and a Director  of  President
Baking Company,  which purchased The Famous Amos Chocolate Cookie Corporation in
September 1992.

        Lindsay  Marx,  a Director  of  Forschner  is a private  investor.  From
November 1992 to January 1994,  she was a production  assistant at Iron Mountain
Productions,  a dramatic  production  company.  Ms. Marx was an assistant to the
director at the Paper Mill  Playhouse in 1992 and, from  September 1989 to March
1992,  an artistic  assistant at The Body  Politic,  also a dramatic  production
company. Ms. Marx graduated from Middlebury College in 1987.
Ms. Marx, is the daughter of Louis Marx, Jr.

        Eric M. Reynolds, a Director of Forschner, is President, Chief Executive
Officer and a director  of  SweetWater,  a position  he has held since  January,
1993.  Previously,  from 1987 through 1990, Mr.  Reynolds  served as a marketing
consultant to various  companies  including  W.L.  Gore & Associates  and Marmot
Mountain  Works,  Ltd., a company founded by Mr. Reynolds in 1974 that is in the
business of designing,  manufacturing and marketing mountaineering,  backpacking
and ski outerwear products.

        John  Spencer,  a  Director  of  Forschner,  holds the  African  Studies
Professorship  at  Middlebury  College  where he has  served  as a member of the
faculty since 1974.  Mr.  Spencer has also served as Dean of Middlebury  College
and Chairman of its History  Department.  Mr.  Spencer is  Vice-Chairman  of the
African American Institute, a Trustee of the Cape of Good Hope Foundation and of
the University of Capetown Fund,  Inc. and a director of Victorinox - Swiss Army
Knife Foundation.

        John V. Tunney,  a Director of Forschner,  is currently  Chairman of the
Board of Cloverleaf Group, Inc. and a general partner of Sun Valley Ventures,  a
partnership  engaged in venture capital and leveraged  buyout  activities.  From
1971 to 1977 Mr.  Tunney  served as a United  States  Senator  from the state of
California  and as a Member of the United States House of  Representatives  from
1965 to 1971.  Mr.  Tunney is also a  director  of  Prospect,  Illinois  Central
Corporation,  Illinois Central Railroad Company,  Foamex International,  Inc., a
foam manufacturer, and Garnet Resources Corporation.


        Section  16(a)  of the  Securities  Exchange  Act of 1934  requires  the
Company's officers and directors, and persons who own more than ten percent of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  directors and greater than  ten-percent  shareholders are required by
regulation  to furnish the Company  with copies of all Section  16(a) forms they
file.

        Based  solely on its review of the copies of such forms  received by it,
or written  representations  from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that except for one late filing
of a Form 4 by Mr. Eric  Reynolds  pertaining  to a purchase of 1,000  shares of
Common Stock,  during the year ended  December 31, 1995 all filing  requirements
applicable to the Company's  officers,  directors,  and greater than ten-percent
beneficial owners were complied with.


                                     - 20 -

<PAGE>
<PAGE>




Item 11.       Executive Compensation

                                  Summary Compensation Table

        The Summary Compensation Table below sets forth individual  compensation
information of the Chief  Executive  Officer and the four other most highly paid
executive officers of the Company for services rendered in all capacities during
the fiscal years ended December 31, 1995, 1994 and 1993.

<TABLE>
<CAPTION>

                                             Annual Compensation                 Long-Term Compensation

                                                                                   Awards              Payouts

           (a)                (b)        (c)         (d)         (e)           (f)           (g)         (h)          (i)

                                                                Other
                                                               Annual      Restricted                              All Other
        Name and                                               Compen-        Stock       Options/      LTIP        Compen-
   Principal Position        Year      Salary       Bonus      sation         Award         SARS       Payouts      sation
   ------------------        ----      ------       -----      ------         -----         ----       -------      ------
<S>                          <C>     <C>          <C>          <C>           <C>          <C>          <C>         <C>
J. Merrick Taggart           1995      33,654         -           -            -          100,000        -             -
President1                   1994        -            -           -            -             -           -             -
                             1993        -            -           -            -             -           -             -

James W. Kennedy             1995     240,000      300,000        -            -           25,000        -           6,941 (3)
Co-Chairman and              1994     250,000      125,000        -            -           50,000        -          13,523 (4)
Chief                        1993     226,065       75,000        -            -           25,000        -          12,681 (5)
Executive Officer(2)

M. Leo Hart                  1995     210,000      75,000         -            -           25,000        -           1,432 (7)
Co-Chairman and              1994     220,000     125,000         -            -           25,000        -           2,332 (8)
Chief                        1993     211,115      75,000         -            -           50,000        -           2,111 (9)
Executive Officer(6)

Thomas D. Cunningham         1995     210,000      10,000         -            -           25,000        -           4,400 (10)
Executive Vice President     1994     174,308     100,000         -            -           50,000        -           2,846 (11)
and Chief Financial          1993        -            -           -            -             -           -             -
Officer

Stanley G. Mortimer III      1995     210,000       5,000         -            -           25,000        -           8,584 (12)
Executive Vice President     1994     220,000     100,000         -            -             -           -          12,845 (13)
                             1993     210,961      75,000         -            -           25,000        -          11,155 (14)

Harry R. Thompson            1995     200,000      15,000         -            -           25,000        -           2,195 (15)
Managing Director            1994        -            -           -            -             -           -             -
                             1993        -            -           -            -             -           -             -

Leslie H. Green              1995     175,000      10,000         -            -           10,000        -           3,796 (16)
Vice President               1994     175,000      45,000         -            -             -           -           3,705 (17)
                             1993     170,000      40,000         -            -           10,000        -           3,531 (18)
</TABLE>



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

        (1) Mr. Taggart was elected President on December 13, 1995.


                                     - 21 -

<PAGE>
<PAGE>



        (2) Mr. Kennedy resigned as Co-Chairman and Co-Chief  Executive  Officer
on December 13, 1995.

        (3)  Consists  of $4,620  contributed  by the  Company to Mr.  Kennedy's
account  under the  Company's  401K  savings  plan and  $2,321 in benefit to Mr.
Kennedy of insurance  premiums  paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Kennedy.

        (4)  Consists  of $4,620  contributed  by the  Company to Mr.  Kennedy's
account  under the  Company's  401K  savings  plan and  $8,903 in benefit to Mr.
Kennedy of insurance  premiums  paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Kennedy.

        (5)  Consists  of $4,497  contributed  by the  Company to Mr.  Kennedy's
account  under the  Company's  401K  savings  plan and  $8,184 in benefit to Mr.
Kennedy of insurance  premiums  paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Kennedy.

        (6) Mr. Hart resigned as Co-Chairman and Co-Chief  Executive  Officer on
December 13, 1995.

        (7) Consists of $1,432 in benefit to Mr. Hart of insurance premiums paid
by the Company with respect to split dollar life  insurance  for the benefit Mr.
Hart.

        (8) Consists of $2,332 in benefit to Mr. Hart of insurance premiums paid
by the Company with respect to split  dollar life  insurance  for the benefit of
Mr. Hart.

        (9) Consists of $2,111 in benefit to Mr. Hart of insurance premiums paid
by the Company with respect to split  dollar life  insurance  for the benefit of
Mr. Hart.

        (10) Consists of $4,400  contributed by the Company to Mr.  Cunningham's
account under the Company's 401K savings plan.

        (11) Consists of $2,846  contributed by the Company to Mr.  Cunningham's
account under the Company's 401K savings plan.

        (12)  Consists of $4,300  contributed  by the Company to Mr.  Mortimer's
account  under the  Company's  401K  savings  plan and  $4,284 in benefit to Mr.
Mortimer of insurance  premiums paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Mortimer.

        (13)  Consists of $4,620  contributed  by the Company to Mr.  Mortimer's
account  under the  Company's  401K  savings  plan and  $8,225 in benefit to Mr.
Mortimer of insurance  premiums paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Mortimer.

        (14)  Consists of $4,497  contributed  by the Company to Mr.  Mortimer's
account  under the  Company's  401K  savings  plan and  $6,658 in benefit to Mr.
Mortimer of insurance  premiums paid by the Company with respect to split dollar
life insurance for the benefit of Mr. Mortimer.

        (15)  Consists of $2,195  contributed  by the Company to Mr.  Thompson's
account under the Company's 401K savings plans.

        (16)  Consists  of $3,796  contributed  by the  Company  to Ms.  Green's
account under the Company's 401K savings plan.



                                     - 22 -

<PAGE>
<PAGE>



        (17)  Consists  of $3,705  contributed  by the  Company  to Ms.  Green's
account under the Company's 401K savings plan.

        (18)  Consists  of $3,531  contributed  by the  Company  to Ms.  Green's
account under the Company's 401K savings plan.


                        Option Grants in Last Fiscal Year

        The following table sets forth, for each of the executive officers named
in the Summary  Compensation Table,  information  regarding individual grants of
options made in the last fiscal year, and their potential realizable values.


<TABLE>
<CAPTION>
                                                                                          Potential Realizable
                                                                                          Value at Assumed
                                                                                          Annual Rates of Stock
                                                                                          Price Appreciation for
                                    Individual Grants                                     Option Term

           (a)                   (b)            (c)                  (d)        (e)           (f)           (g)

                                         % of Total
                                         Options Granted     Exercise or
                              Option     to Employees in      Base Price     Expiration
Name                         Granted     Fiscal Year(1)        ($/Sh)          Date         5% ($)        10% ($)
----                         -------     -------               -------         -----        -------       -------
<S>                         <C>                <C>                <C>         <C>          <C>          <C>       
J. Merrick Taggart           100,000(2)       10.9%              $12.50      12/13/05     $786,118     $1,992,178

James W. Kennedy              25,000           2.7%              $12.875      1/26/05      $202,425      $512,986

M. Leo Hart                   25,000           2.7%              $12.875      1/26/05      $202,425      $512,986

Thomas D. Cunningham          25,000           2.7%              $12.875      1/26/05      $202,425      $512,986

Stanley G. Mortimer III       25,000           2.7%              $12.875      1/26/05      $202,425      $512,986

Harry R. Thompson             25,000           2.7%              $12.875      2/16/05      $202,425      $512,986

Leslie H. Green               10,000           1.1%              $12.875      1/26/05       $80,970      $205,194
</TABLE>

        -----------------------
        (1) Based on 812,000 options granted plus 100,000 warrants.

        (2) Consists of warrants to purchase Common Stock.





                                     - 23 -

<PAGE>
<PAGE>



                    Option Exercises and Year-End Value Table

        The  following  table sets forth  option  exercise  activity in the last
fiscal  year and  fiscal  year-end  option  values  with  respect to each of the
executive officers named in the Summary Compensation Table.

<TABLE>
<CAPTION>

                 Aggregated Option Exercises in Last Fiscal Year, and FY-End Option/SAR Value
-----------------------------------------------------------------------------------------------------------
           (a)                     (b)                  (c)                   (d)                   (e)

                                                                                                 Value of
                                                                          Number of            Unexercised
                                                                         Unexercised           In-the-Money
                                                                       Options/SARs at       Options/SARs at
                                                                          FY-End (#)            FY-End (#)

                             Shares Acquired           Value             Exercisable/          Exercisable/
Name                        on Exercise (#)        Realized ($)         Unexercisable         Unexercisable
--------------------------  ----------------       ------------         -------------         -------------
<S>                              <C>                 <C>                <C>                   <C>  
J. Merrick Taggart                  -                    -              25,000/75,000             $0/$0

James W. Kennedy                    -                    -              50,000/50,000         $5,469/$3,906

M. Leo Hart                         -                    -              56,250/43,750         $6,250/$3,125

Thomas D. Cunningham                -                    -              31,250/43,750         $3,125/$3,125

Stanley G. Mortimer III             -                    -              25,000/25,000          $2,344/$781

Harry R. Thompson                   -                    -              16,250/18,750           $71,250/$0

Leslie H. Green                     -                    -              20,000/10,000           $938/$312
</TABLE>






                            Compensation of Directors

        The Company compensates those of its directors who were not employees of
the Company in the amount of $10,000 annually plus $1,000 for attendance at each
meeting of the Board of  Directors.  The  Chairmen of the Audit  Committee,  the
Stock Option and  Compensation  Committee and the  Acquisition  Committee of the
Board  of  Directors  are each  paid an  additional  annual  fee of  $10,000  in
recognition of the additional  responsibilities and time commitments  associated
with such positions.

        In 1995,  Louis Marx, Jr. and Stanley R. Rawn, Jr. were granted  options
under the  Company's  1994 Stock  Option  Plan to  purchase  150,000 and 100,000
shares,  respectively,  of the Company's  Common Stock at a price of $12.875 per
share,  the market  price of the  Company's  Common Stock when such options were
issued.  On December  13,  1995 the  options to  purchase  up to 150,000  shares
granted to Mr.  Marx were  voluntarily  returned  to the  Company by Mr. Marx to
permit them to be reissued to others.  Also on  December  13,  1995,  options to
purchase  150,000  shares of Common  Stock under the 1994 Stock Option Plan were
granted to Mr. Peter W. Gilson at an exercise price of $12.50,  the market price
of such shares on the date of grant.


                                     - 24 -

<PAGE>
<PAGE>



        In  addition,  the Company has  purchased  split  dollar life  insurance
policies in respect of each of Messrs.  Louis Marx, Jr. and Stanley R. Rawn, Jr.
See "Certain Transactions".


                  Employment Agreement and Severance Agreement

        The Company entered into an employment  agreement dated as of January 2,
1996 with Mr. James W. Kennedy,  a director of the Company and,  until  December
13, 1995,  Co-Chairman of the Board and Chief Executive  Officer of the Company.
The  agreement  provides  that Mr.  Kennedy  shall be employed  in an  executive
capacity  with the Company and shall be available to consult with and advise the
Company  on such  matters  as might be  requested  by senior  management  of the
Company  for at least  eighty-five  hours per month to assist on issues  dealing
with the  maintenance of corporate  trademarks;  corporate  legal  matters;  and
strategic  support  relative to  strategic  relations  with  Victorinox  Cutlery
Company,  the  Company's  key  supplier.  Mr.  Kennedy is to be paid a salary of
$140,000  per  annum  and,  during  1996,  a one  time  bonus of  $300,000.  The
agreement,  which has a term of five years,  also  provides  that  following the
termination  of the agreement Mr.  Kennedy would be prohibited  from  competing,
with certain exceptions,  with the business of the Company for a period of three
years.

        In connection with the resignation of Mr. M. Leo Hart, a director of the
Company,  from his  position  as  Co-Chairman  of the Board and Chief  Executive
Officer  of the  Company,  the  Company  paid Mr.  Hart the sum of  $75,000  and
accepted for surrender and  cancellation  all of Mr.  Hart's  outstanding  stock
options to purchase Stock. To replace of such options, the Company has issued to
Mr. Hart new options  covering the same number of shares and upon the same terms
and conditions except that the newly issued options were fully vested upon grant
and the  exercise  ability  of such  options  is not  contingent  on Mr.  Hart's
employment with the Company.


                                  Pension Plan

               Each  employee  of the  Company  at  least  twenty  years of age,
becomes  eligible to  participate  in the Company's  Pension Trust (the "Pension
Trust")  after  completing  two Years of  Credited  Service  (as  defined in the
Pension Trust).  Monthly benefits at Normal Retirement Age, age sixty-five,  are
computed as follows:  Average Monthly Compensation (as defined below) multiplied
by 0.65% plus Average Monthly  Compensation in excess of Social Security Covered
Compensation  (as defined  below)  multiplied by 0.65%,  such sum  multiplied by
Years of Credited  Service,  not to exceed 35 years.  Accrued benefits under the
prior  formula  used by the  Company's  Pension  Trust are  grandfathered  as of
December 31, 1993 for  Non-Highly  Compensated  Employees and as of December 31,
1988 for Highly Compensated Employees.

               "Average  Monthly  Compensation" is defined as one-twelfth of the
highest five consecutive  years of total  compensation.  Social Security Covered
Compensation is defined as the average of the Taxable Wage Base over the 35-year
period ending with the year of the Social Security Normal  Retirement (ages 65 -
67, depending on year of birth).

               Participants  will  receive  reduced  benefits on a life  annuity
basis with  continuation  of benefits  to their  spouses  after death  unless an
optional form of benefit is selected.  Preretirement  death benefit  coverage is
also provided. A participant is 100% vested in his accrued benefits,  as defined
in the Pension  Trust,  upon such accrual.  The Years of Credited  Service as of
December  31,  1995 of each of the  individuals  named in the Cash  Compensation
table herein are as follows:


                                     - 25 -

<PAGE>
<PAGE>



                             J. Merrick Taggart................ 0 years
                             James W. Kennedy................. 20 years
                             M. Leo Hart....................... 4 years
                             Thomas D. Cunningham.............. 2 years
                             Stanley G. Mortimer III.......... 11 years
                             Harry R. Thompson................. 0 years
                             Leslie H. Green................... 5 years


               The  following  table shows  annual  pension  benefits  under the
Pension Trust assuming  retirement at age sixty-five in 1996,  payable as a life
annuity, in various remuneration and years of employment  classifications.  Note
that the maximum allowable compensation for years beginning in 1994 is $150,000,
so remuneration in excess of that amount is not shown.  Some  grandfathering  of
benefits earned at higher compensation levels is provided.

                  PENSION BENEFITS FOR 1995 RETIREES AT AGE 65
<TABLE>
<CAPTION>
                                                  Years  of Service
                    -----------------------------------------------------------------------
Remuneration            15              20               25            30             35
-------------           --              --               --            --             --
<S>                    <C>             <C>             <C>           <C>            <C>   
 50,000                7,061           9,415           11,769        14,123         16,476
 75,000               11,936          15,915           19,894        23,873         27,851
100,000               16,811          22,415           28,019        33,623         39,226
125,000               21,686          28,915           36,144        43,373         50,601
150,000               26,561          35,415           44,269        53,123         61,976
</TABLE>


           Compensation Committee Interlocks and Insider Participation

        In 1995, the  Compensation  Committee was comprised of A. Clinton Allen,
John V.  Tunney and John  Spencer.  None of these  individuals  is an officer or
employee of the Company or any of its subsidiaries.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

        The following table sets forth certain information  regarding beneficial
ownership of the Common  Stock on March __, 1996,  by each person or group known
by Forschner to own  beneficially  5% or more of the  outstanding  Common Stock.
Except  as  otherwise  noted,  each  person  listed  below has sole  voting  and
investment power with respect to the shares listed next to his or its name.
<TABLE>
<CAPTION>
                                                 Number of
Name of Beneficial Owner                          Shares                       Percent owned(1)
------------------------                         ---------                     ---------------
<S>                                          <C>                                 <C>  
Louis Marx, Jr.
667 Madison Avenue
New York, NY  10021                           3,022,222(2)                           34.8%

Brae Group, Inc.
15710 John F. Kennedy Blvd.
Houston, TX  77032                            2,998,200(3)                           34.5%
</TABLE>




                                     - 26 -

<PAGE>
<PAGE>



<TABLE>
<CAPTION>
                                                 Number of
Name of Beneficial Owner                          Shares                       Percent owned(1)
------------------------                         ---------                     ---------------
<S>                                          <C>                                 <C>
Victorinox A.G.
CH-6438
Ibach-Schwyz
Switzerland                                     854,200                              10.4%

Tweedy, Browne Company L.P.
52 Vanderbilt Avenue
New York, New York 10017                        589,150(4)                            7.2%

David L. Babson & Co., Inc.
One Memorial Drive
Cambridge, MA 02142                             501,000(5)                            6.1%

Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
Santa Monica, CA 90401                          414,688(6)                           5.07%

Smith Barney Holdings, Inc.
Travelers Group, Inc.
388 Greenwood Street
New York, NY 10013                              412,000(7)                           5.03%
</TABLE>

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

        (1) Based on 8,186,610 shares of Common Stock outstanding, not including
614,108 shares held as Treasury  stock.  Treated as outstanding for the purposes
of computing  percentage  ownership  of each holder are shares  issuable to such
holder upon exercise of Options and Warrants.

        (2) Consists of 19,730  shares held  directly by Mr. Marx,  4,292 shares
held by a trust for the  benefit  of Mr.  Marx,  2,498,200  shares  held by Brae
Group,  Inc., which  corporation Mr. Marx may be deemed to control,  and 500,000
shares issuable upon the exercise of a stock option held by Brae Group, Inc.

        (3) Includes 500,000 shares issuable upon the exercise of a stock option
held by Brae Group, Inc.

        (4)  According  to a Schedule 13D filed  February 29, 1996,  consists of
shares held in the  accounts of  customers of Tweedy,  Browne  Company,  L.P., a
broker-dealer.

        (5)  According  to a Schedule 13G dated  February 12, 1996,  consists of
shares which David L. Babson & Co., Inc.  beneficially owns by virtue of serving
as investment advisor.

        (6)  According  to a Schedule  13G dated  February 7, 1996,  consists of
shares as to which  Dimensional  Fund  Advisor  shares power of  disposition  by
virtue of serving as investment advisor to its clients.

        (7)  According  to a Schedule  13G dated  February 1, 1996,  consists of
shares  held by Smith  Barney  Holdings,  Inc.,  a wholly  owned  subsidiary  of
Travelers Group, Inc.




                                     - 27 -

<PAGE>
<PAGE>



        The  following  table  sets forth  certain  information  concerning  the
beneficial  ownership of Common Stock on March __, 1996 by each  director,  each
officer named in the Summary  Compensation Table herein and by all directors and
officers of Forschner as a group.

<TABLE>
<CAPTION>
                                          Number of
   Name                                    Shares        Percent of Class(1)
   ----                                   ---------      -----------------
<S>                                        <C>            <C>     
J. Merrick Taggart                         25,000(2)              *
Thomas D. Cunningham                       37,500(3)              *
Stanley G. Mortimer III                    32,262(4)              *
Harry R. Thompson                          22,500(5)              *
Leslie H. Green                            22,500(6)              *
A. Clinton Allen                           35,000(7)              *
Thomas A. Barron                           60,000(8)              *
Vincent D. Farrell, Jr.                    35,000(9)              *
Herbert M. Friedman                        15,368(10)             *
Peter W. Gilson                            37,500(11)             *
M. Leo Hart                               100,000(12)            1.2%
James W. Kennedy                           75,429(13)             *
Keith R. Lively                               -0-                 *
Lindsay Marx                               25,000(14)             *
Louis Marx, Jr.                         3,022,222(15)            34.8%
Stanley R. Rawn, Jr.                      142,711(16)             1.7%
Eric M. Reynolds                           26,000(17)             *
John Spencer                                1,000                 *
John V. Tunney                                -0-                 *
All officers and directors              3,802,304(18)            40.7%
  as a group (23 persons)
</TABLE>
--------------------------
*Less than 1% of the Class.

        (1) Based on 8,186,610 shares of Common Stock outstanding, not including
614,108 shares held as Treasury Stock. Treated as outstanding for the purpose of
computing  the  percentage  ownership of each  director and of all directors and
officers as a group are shares  issuable to such  individuals  upon  exercise of
options.

        (2) Consists of 25,000 shares of Common Stock  issuable upon exercise of
warrants held by Mr. Taggart.

        (3) Consists of 37,500 shares of Common Stock  issuable upon exercise of
Options held by Mr. Cunningham.

        (4) Includes  31,250  shares of Common Stock  issuable  upon exercise of
Options held by Mr. Mortimer.

        (5) Consists of 22,500 shares of Common Stock  issuable upon exercise of
Options held by Mr. Thompson.


                                     - 28 -

<PAGE>
<PAGE>



        (6) Consists of 22,500 shares of Common Stock  issuable upon exercise of
Options held by Ms. Green.

        (7) Consists of 35,000 shares of Common Stock  issuable upon exercise of
Options held by Mr. Allen.

        (8) Includes  25,000  shares of Common Stock  issuable  upon exercise of
Options held by Mr. Barron.

        (9) Consists of 35,000 shares of Common Stock  issuable upon exercise of
Options  held by Mr.  Farrell.  Excludes  shares  beneficially  owned by Spears,
Benzak, a general partnership in which Mr. Farrell has a 22% interest.

        (10) Includes  12,500  shares of Common Stock  issuable upon exercise of
Options held by Mr. Friedman.

        (11) Consists of 37,500 shares of Common Stock issuable upon exercise of
Options held by Mr. Gilson.

        (12) Consists of 100,000  shares of Common Stock  issuable upon exercise
of Options held by Mr. Hart.

        (13) Includes  56,250  shares of Common Stock  issuable upon exercise of
Options held by Mr. Kennedy.

        (14) Consists of 25,000 shares of Common Stock issuable upon exercise of
Options held by Ms. Marx.

        (15)  Consists  of 19,730  shares of Common  Stock held  directly by Mr.
Marx, 4,292 shares held by a trust for the benefit of Mr. Marx, 2,498,200 shares
held by Brae Group,  Inc., which  corporation Mr. Marx may be deemed to control,
and 500,000 shares issuable upon exercise of options held by Brae Group, Inc.

        (16) Includes  100,000  shares of Common Stock issuable upon exercise of
Options held by Mr. Rawn.

        (17) Includes  25,000  shares of Common Stock  issuable upon exercise of
Options held by Mr. Reynolds.

        (18) Includes 1,128,750 shares of Common Stock issuable to directors and
officers  upon  exercise of Options and 25,000  shares of Common Stock  issuable
upon exercise of warrants.




                                     - 29 -

<PAGE>
<PAGE>



Item 13.       Certain Relationships and Related Transactions

        Messrs. Louis Marx, Jr., Chairman of the Company's Management Committee,
and a Director of the Company, and Stanley R. Rawn Jr., Senior Managing Director
and a Director of the Company,  devoted  considerable  time and attention to the
affairs of the  Company  during  1995.  During 1995  Messrs.  Marx and Rawn were
principally compensated, through split dollar insurance on their lives, a method
which allows the Company to recover,  without interest, all premiums paid on the
death of the insured and which has substantially  lower earnings impact over the
years than would similar amounts paid as cash  compensation.  Specifically,  the
Company has purchased  split dollar life  insurance  payable on the death of Mr.
Marx, some of which is payable on the later to die of Mr. Marx and his wife, and
split  dollar  life  insurance  payable on the death of Mr.  Rawn.  Under  these
arrangements  the Company will pay  approximately  $2,492,000 over the course of
the next 14 years as premiums under the policies for Mr. Marx and  approximately
$1,425,000  over the course of the next six years  under the policy for Mr. Rawn
(in each case including  amounts paid through the first fiscal quarter of 1996),
and will be reimbursed,  without  interest,  for all of the premiums that it has
paid upon the death of the respective  insured.  The actual  premiums to be paid
may be higher than  estimated  depending  upon the  performance of the insurance
company's investments and other factors. Pursuant to the terms of life insurance
agreements  entered  into with each of Messrs.  Marx and Rawn,  Forschner  shall
continue to be obligated to pay these premiums  during the insured's  employment
with the Company and in the event of the  termination of such employment for any
reason,  unless the insured  willfully  and  materially  breaches the terms of a
consulting  agreement between him and Forschner and such breach continues for 30
days after written notice. Under the terms of such consulting  agreements,  each
of Messrs. Marx and Rawn is to be engaged as a consultant  immediately following
the  termination  of his employment  with  Forschner  and, in such event,  shall
receive such compensation as shall be fair under the circumstances. Mr. Marx has
been so engaged as a consultant to the Company since February 15, 1995, the date
on which he ceased to serve as Chairman of the  Company's  Executive  Committee.
The  consulting  agreements  may be  terminated  by  Forschner  upon thirty days
notice.  In 1995,  the Company  paid an aggregate of $635,098 in premiums on the
policies  pertaining to Mr. Marx (of which $105,000  pertained to 1994 premiums)
and $552,650 in premiums on the policy pertaining to Mr. Rawn (of which $237,500
pertained to 1994 premiums).  There will be a small, negative earnings impact in
the early  years of the  policies  on Messrs.  Marx's and Rawn's  lives,  and an
increasingly positive impact on earnings in the later years.

        In July 1994,  Forschner  entered  into a Services  Agreement  with Brae
which beneficially owns 34.5% of the outstanding Common Stock and in which Louis
Marx,  Jr., a Director of Forschner,  has a controlling  interest,  and in which
Victorinox Cutlery Company  ("Victorinox"),  a key supplier and beneficial owner
of  approximately  10% of the outstanding  Common Stock,  has a  non-controlling
stock  interest.  Mr. M. Leo Hart, a director of Forschner,  is Chief  Executive
Officer  of Brae.  Under the  Services  Agreement,  Brae is to  provide  various
services  to  Forschner  for a period of four  years  relating  to  maintaining,
enhancing and expanding  Forschner's  relationship with Victorinox.  In exchange
for these  services,  Brae  received  an option to  purchase  500,000  shares of
Forschner's  Common Stock at the then current  market price of $10.75 per share.
The option is fully vested and can be  exercised  for ten years from the date of
the Services Agreement.

        The Company loaned to Mr. James W. Kennedy, a Director of the Company, a
total of $87,500. The loan bore interest at the prime rate and was paid in full,
together with accrued interest, on January 3, 1996.

        An existing Company policy  authorizes  Forschner to compensate,  in the
form  of a  commission  of up to  3%  of  net  sales  for  up  to  three  years,
non-employees for their direct role in introducing  significant new customers to
the Company.  In 1995 Forschner paid to Louis Marx III, a son of Louis



                                     - 30 -

<PAGE>
<PAGE>

Marx,  Jr.  and a brother  of  Lindsay  Marx,  both  Directors  of the  Company,
$107,533,  representing  one half of a 3% commission on net sales to Cyrk,  Inc.
("Cyrk"), a customer introduced to Forschner by Mr. Marx.

        Simmons  Outdoor  Corporation  ("Simmons"),  in  which  Forschner  owned
655,000 shares of common stock  (approximately 20% of the issued and outstanding
shares) until  December 19, 1995,  sells  Victorinox  Original Swiss Army Knives
purchased  from  Forschner to selected  sporting  goods  distributors.  In 1995,
Forschner's  sales to Simmons  were  approximately  $296,000.  Forschner's  1995
purchases  from Simmons of optical  products for sale to  Forschner's  Corporate
Markets customers totaled $387,000 in 1995. Both sales and purchases of products
are on an arm's length basis. Herbert M. Friedman, a Director of Forschner, also
served on the Board of Directors of Simmons until December 19, 1995.

        In June 1994,  the Company  received  75,299 newly issued  shares of the
Series A Preferred Stock of Forschner  Enterprises,  Inc. (n/k/a Victory Capital
LLC) in  exchange  for all of the  Company's  shares of Tigera  Group,  Inc.,  a
publicly traded company.  The Company currently holds approximately 20.3% of the
outstanding  equity units of Victory.  Louis Marx, Jr., a Director of Forschner,
is Co-Chairman and a director of Victory.  Stanley R. Rawn, Jr., Senior Managing
Director and a Director of Forschner, and A. Clinton Allen, Herbert M. Friedman,
M.  Leo Hart  and  Eric M.  Reynolds,  Directors  of  Forschner,  also  serve as
Victory's directors.

        In 1995,  Forschner paid $432,000 for legal services rendered by the law
firm of Zimet,  Haines,  Friedman & Kaplan, of which Mr. Herbert M. Friedman,  a
Director of the Company, is a partner.

        Keith R. Lively,  a Director of the Company,  served as a consultant  to
the Company from  January,  1995 to December 31, 1995,  for a fee of $10,000 per
month, in respect of the Company's acquisition program and other matters.

        Peter W. Gilson,  Chairman of the Executive  Committee and a Director of
the Company, is an employee of the Company and was compensated by the Company at
the rate of $150,000 per year in 1995.

        It is  anticipated  that  Lahinch  Group,  Inc.,  of which Mr.  James W.
Kennedy,  a director of  Forschner,  is  president,  director and a  significant
stockholder, and of which Mr. Louis Marx, Jr. and Victorinox Cutlery Company are
investors, will purchase from Forschner products for resale to the golf oriented
channel of trade beginning in 1996.

        During 1995, the Company purchased shares of common stock of SweetWater,
Inc.  ("SweetWater"),  a publicly traded company which  manufactures and markets
portable  water  filtration  systems,   for  the  aggregate  purchase  price  of
$1,837,000, raising the Company's percentage ownership of SweetWater to 38%. Mr.
Eric M. Reynolds,  a director of Forschner,  is the Chief  Executive  Officer of
SweetWater  and Mr. Peter W. Gilson,  Chairman of the Executive  Committee,  and
Messrs.  A. Clinton  Allen and Thomas A. Barron,  directors of the Company,  are
directors of SweetWater.

        During  1995,  the  Company  purchased  5,160  shares of  common  stock,
representing a 19% interest,  of Omar Torres,  Inc.  ("Omar"),  a privately held
company in the business of designing  and marketing  jewelry,  at $100 per share
and purchased an 8%  convertible  note of Omar for $284,000.  Victory then owned
approximately 69% Omar's outstanding stock. In March 1996 Brae, a shareholder of
Omar at the time of the Company's purchase, bought an additional 4,000 shares of
Omar at the same purchase price per share  previously paid by the Company,  thus
reducing the Company's and Victory's 



                                     - 31 -

<PAGE>
<PAGE>

percentage interest in Omar. Brae, which is controlled by Mr. Louis Marx, Jr., a
director of the Company,  and in which Victorinox also holds an interest,  is an
equity holder in Victory.

        Victorinox  Cutlery  Company owns  approximately  10% of the outstanding
Common  Stock  and  is the  supplier  to  the  Company  of  Swiss  Army  Knives,
professional  cutlery  products and  Victorinox  Watches.  During the year ended
December 31, 1995,  Forschner made payments for Victorinox products in aggregate
amount of approximately $39,676,000.


             The Forschner Group, Inc. Charitable Insurance Program

        Forschner  recognizes its responsibility to the communities in which its
products are sold and the importance of charitable  organizations to the country
at large.  The  Company is also aware of the  benefits to  commercial  good will
resulting from the proper discharge of its responsibilities. In order to further
these objectives,  the Company instituted its Charitable Insurance Program. This
program allows Forschner to provide the maximum assistance to numerous charities
by utilizing  tax  provisions  intended to  encourage  such  activities,  and to
eventually recover, without interest, all amounts expended.

        Under  the  Company's  Charitable  Insurance  Program  (the  "Program"),
adopted by the  Company's  Board of Directors in 1993,  the Company will utilize
insurance on the lives of each of its  directors  and other  designated  persons
(the "Insured  Directors") to fulfill charitable pledges to the Victorinox-Swiss
Army Knife  Foundation (the  "Foundation")  and to charities  recommended by the
Insured Directors. The Company previously purchased life insurance on one of the
Company's then  Co-Chairmen  and designated the Foundation as a beneficiary of a
portion  of the  proceeds,  subject  to  the  Company's  right  to  revoke  such
designation.

        The Program  enables the Company to make a meaningful  commitment to the
Victorinox-Swiss  Army Knife  Foundation,  as well as a broad range of charities
benefiting our communities. The Company anticipates that it will be able to make
substantial  contributions in the future to these charities at a minimal cost to
the Company.

        The  Victorinox-Swiss  Army Knife  Foundation  is a  tax-exempt  private
foundation,  funded primarily by contributions from Forschner and Victorinox. It
was organized in December,  1992 for general charitable purposes,  including the
improvement of the welfare of underprivileged  children (and others) through the
encouragement of organized athletic activities,  including those sports in which
an underprivileged  child would not ordinarily  participate.  Louis Marx, Jr., a
director of the Company, is President and a director of the Foundation.  Stanley
R. Rawn,  Jr.,  Senior  Managing  Director  and a director of the  Company,  and
Herbert M. Friedman, M. Leo Hart and John Spencer, directors of the Company, are
directors of the Foundation.

        The Company is the owner and beneficiary of the policies, with the right
to borrow  against  them,  and will receive the proceeds  upon the death of each
Insured.  The proceeds will not be legally segregated from the Company's general
funds and will remain  subject to claims of the  Company's  creditors.  Upon the
death of an Insured  Director,  the Company will retain a share of the insurance
proceeds equal to the cumulative  premiums paid by the Company for the policy on
that Insured  Director's  life. One half of the remaining amount will be used to
fulfill a pledge to the  Foundation  and the other  half will be used to fulfill
pledges to tax-exempt charities recommended by Insured Directors and approved by
the Board.



                                     - 32 -

<PAGE>
<PAGE>



        Generally,  the Company will be bound to continue to pay all premiums on
the policy for the life of the Insured or, in the case of Mr.  Marx,  as long as
he is an  officer  or Board  member or agrees  to serve as a  consultant  to the
Company.

        Generally,  there will be a small,  negative impact on earnings  through
1998,  and an  increasingly  positive  impact on earnings after 1998 as the cash
surrender value of the insurance increases.

        If a director  were to leave the Company prior to the time when the cash
surrender  value of the policy exceeds the aggregate  premiums,  and the Company
received no further substantial benefit from his or her services, the obligation
to pay future  premiums  would  result in a charge to earnings at the time he or
she left. The charge to earnings for 1995 with respect to directors who left the
Company in 1995 is insignificant.

        The  Company  would not be entitled  to a tax  deduction,  nor would the
Company  realize income for regular income tax purposes,  at the time the policy
is obtained nor as premiums are paid.  Upon the death of the director  (when the
policy  matures  and the  insurance  proceeds  are paid) the  Company  would not
realize  income for  "regular"  income tax  purposes,  but the Company  might be
subject to alternative minimum tax ("AMT") on a portion of the receipts from the
policy.  Upon the  making of the cash  contribution  following  the death of the
insured  director,  the  Company  would be entitled  to a  deduction.  Since the
Company is entitled to claim as  charitable  deductions  only 10% of its taxable
income in any year, the extent of the utilization of this deduction would depend
upon income. These deductions may be carried forward for a period of five years.


                                     - 33 -

<PAGE>
<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)       Documents filed as part of this report:


                                                                         Page(s)
                                                                         -------

(1)       Financial Statements:



          Report of Independent Public Accountants                   F-1


          Consolidated Balance Sheets - December 31, 1995 and 1994   F-2 to F-3


          Consolidated Statements of Operations for the
          Years Ended December 31, 1995, 1994 and 1993               F-4


          Consolidated Statements of Stockholders' Equity for the
          Years Ended December 31, 1995, 1994 and 1993               F-5 to F-6


          Consolidated  Statements  of Cash Flows for the Years
          Ended  December  31, 1995, 1994 and 1993                   F-7


          Notes to Consolidated Financial Statements                 F-8 to F-24

(2)       Schedule --



          Schedule II -- Valuation and Qualifying  Accounts for the Years
          Ended December 31, 1995,  1994 and 1993                    F-25


All other schedules  called for under  Regulation S-X are not submitted  because
they are not applicable or not required,  or because the required information is
included in the financial statements or notes thereto.





                                     - 34 -

<PAGE>
<PAGE>


(3)       Exhibits.
<TABLE>
<CAPTION>

          Exhibit Title                                                                       Exhibit No.
          -------------                                                                       -----------
<S>       <C>                                                                                 <C>
(2)       Not Applicable

(3)      (A)    Articles of  Incorporation,  as amended,  incorporated by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year ended
                December 31, 1993.                                                                  *

         (B)    By-laws, as amended.                                                            (3)-1

(4)      Instruments defining the rights of security holders, including indentures:

         (A)    Excerpts from Certificate of Incorporation,  as amended,  incorporated
                by reference to Exhibit 3(a) hereto.                                                *

         (B)    Excerpts from By-Laws,  as amended,  incorporated  by reference to the
                Exhibits  from  Annual  Report on Form 10-K for the fiscal  year ended
                December 31, 1992.                                                                  *

(9)      Not Applicable.

(10)     Material Contracts

         (A)    Employment  Agreement dated as of September 15, 1983 between Forschner
                and Michael M.  Weatherly,  incorporated  by reference to the Exhibits
                to Registration Statement on Form S-18, No. 2-87357-B.                              *

         (B)    1983 Stock Option Plan,  incorporated  by reference to the Exhibits to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1990.                                                                               *

         (C)    Letter  Agreement  dated  December 12, 1983  between  Victorinox
                Cutlery  Company and R.H.  Forschner Co., Inc.,  incorporated by
                reference to the Exhibits to Annual  Report on Form 10-K for the
                fiscal year ended December 31, 1994.                                                *

         (D)    Mutual Agreement dated as of October 20, 1986 between Victorinox
                Cutlery Company and The Forschner Group,  Inc.,  incorporated by
                reference to the Exhibits to Annual  Report on Form 10-K for the
                fiscal year ended December 31, 1994.                                                *

         (E)    Letter Agreement dated as of October 20, 1986 between Victorinox
                Cutlery Company and The Forschner Group,  Inc.,  incorporated by
                reference to the Exhibits to Annual  Report on Form 10-K for the
                fiscal year ended December 31, 1994.                                                *

         (F)    Letter  Agreement  dated August 24, 1988 between The Forschner  Group,
                Inc.  and Recta S.A.,  incorporated  by  reference  to the Exhibits to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1994.                                                                               *

</TABLE>
                                     - 35 -

<PAGE>
<PAGE>


<TABLE>
<S>       <C>                                                                                 <C>

         (G)    Mutual  Agreement  dated October 25, 1988 between  Victorinox  Cutlery
                Co. and The Forschner  Group,  Inc.,  incorporated by reference to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1994.                                                                  *

         (H)    Letter  Agreement dated June 12, 1989 between  Victorinox  Cutlery Co.
                and The  Forschner  Group,  Inc.,  incorporated  by  reference  to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1989.                                                                  *

         (I)    Agreement  to Lease dated June 14, 1990 between The  Forschner  Group,
                Inc. and Petran Trap Falls  Associates,  incorporated  by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year ended
                December 31, 1990.                                                                  *

         (J)    Security  agreement  dated  January  31, 1991  between  The  Forschner
                Group, Inc. and Connecticut  National Bank,  incorporated by reference
                to the  Exhibits  to Annual  Report on Form 10-K for the  fiscal  year
                ended December 31, 1989.                                                            *

         (K)    Security  agreement  dated  January 31, 1991 between Swiss Army Brands
                Ltd. and Connecticut  National Bank,  incorporated by reference to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1989.                                                                  *

         (L)    Security  agreement  dated  January 31,  1991  between  Victorinox  of
                Switzerland,  Ltd. and  Connecticut  National  Bank,  incorporated  by
                reference  to the  Exhibits  to  Annual  Report  on Form  10-K for the
                fiscal year ended December 31, 1989.                                                *

         (M)    Security   agreement   dated   January  31,  1991  between   Excelsior
                Advertising,  Inc. and  Connecticut  National  Bank,  incorporated  by
                reference  to the  Exhibits  to  Annual  Report  on Form  10-K for the
                fiscal year ended December 31, 1989.                                                *

         (N)    Agreement of guarantee and suretyship  dated January 31, 1991 by Swiss
                Army Brands Ltd. in favor of Connecticut  National Bank,  incorporated
                by  reference  to the  Exhibits to Annual  Report on Form 10-K for the
                fiscal year ended December 31, 1989.                                                *

         (O)    Agreement  of  guarantee  and  suretyship  dated  January  31, 1991 by
                Victorinox  of  Switzerland,  Ltd.  in favor of  Connecticut  National
                Bank,  incorporated  by reference to the Exhibits to Annual  Report on
                Form 10-K for the fiscal year ended December 31, 1989.                              *

         (P)    Agreement  of  guarantee  and  suretyship  dated  January  31, 1991 by
                Excelsior  Advertising  Inc. in favor of  Connecticut  National  Bank,
                incorporated  by reference  to the  Exhibits to Annual  Report on Form
                10-K for the fiscal year ended December 31, 1989.                                   *

         (Q)    Life  insurance  agreement  dated as of December  7, 1991  between The
                Forschner  Group,  Inc. and Stanley R. Rawn,  Jr., as Trustee u/a dtd.
                December 9, 1986  between  Louis Marx,  Jr. and Stanley R. Rawn,  Jr.,
</TABLE>


                                     - 36 -


<PAGE>
<PAGE>

<TABLE>
<S>       <C>                                                                                 <C>

                incorporated  by reference  to the  Exhibits to Annual  Report on Form
                10-K for the fiscal year ended December 31, 1992.                                   *

         (R)    Amended and Restated  Loan  Agreement  dated June 18, 1992 between The
                Forschner Group, Inc. and The Connecticut  National Bank (now known as
                Shawmut  Bank  Connecticut,  N.A.),  incorporated  by reference to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1992.                                                                  *

         (S)    Letter  agreement  dated June 18, 1992  between The  Forschner  Group,
                Inc. and The Connecticut  National Bank,  incorporated by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year ended
                December 31, 1992.                                                                  *

         (T)    License  Agreement  dated June 30, 1992 between The  Forschner  Group,
                Inc. and Precise  Imports  Corporation,  incorporated  by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year ended
                December 31, 1992.                                                                  *

         (U)    Letter  agreement dated November 11, 1992 between The Forschner Group,
                Inc.  and  Michael M.  Weatherly,  incorporated  by  reference  to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1992.                                                                  *

         (V)    Life  insurance   agreement   dated  December  24,  1992  between  The
                Forschner  Group,  Inc. and Louis Marx, Jr., as Trustee u/a dtd. as of
                October 24, 1988  between  Stanley R. Rawn,  Jr. and Barbara  Rawn and
                Louis Marx,  Jr.,  incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended December 31, 1992.                    *

         (W)    License Agreement dated as of January 1, 1993 between Cuisine de
                France Limited and Coutel 'Innov,  incorporated  by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year
                ended December 31, 1992.                                                            *

         (X)    Mutual  Agreement  dated April 6, 1992  between The  Forschner  Group,
                Inc. and Victorinox Cutlery Company,  incorporated by reference to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1992.                                                                  *

         (Y)    Stock  Purchase  Agreement  dated May 17, 1993  between The  Forschner
                Group,  Inc.  and  K.P.A.,  Inc.  (now  known  as  SweetWater,  Inc.),
                incorporated  by reference to the Exhibits to  Registration  Statement
                on Form S-1, No. 33- 71036, filed by SweetWater, Inc.                               *

         (Z)    1993 Stock Option Plan,  incorporated  by reference to the Exhibits to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1993.                                                                               *

         (AA)   First  Modification to Amended and Restated Loan Agreement dated as of
                August 13, 1993  between The  Forschner  Group,  Inc. and Shawmut Bank
                Connecticut,  N.A.,  incorporated  by  reference  to the  Exhibits  to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1993.                                                                               *

         (BB)   Second  Modification  to Amended and Restated Loan Agreement  dated as
                of February 17, 1994  between The  Forschner  Group,  Inc. and Shawmut
                Bank

</TABLE>

                                     - 37 -

<PAGE>
<PAGE>

<TABLE>
<S>       <C>                                                                                 <C>

                Connecticut,  N.A.,  incorporated by  reference  to  the  Exhibits  to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1993.                                                                               *

         (CC)   Commercial  Promissory  Note dated  February 17, 1994 of The Forschner
                Group,  Inc. in the principal  amount of $15,000,000,  incorporated by
                reference  to the  Exhibits  to  Annual  Report  on Form  10-K for the
                fiscal year ended December 31, 1993.                                                *

         (DD)   Lease dated May 3, 1993  between One Research  Drive  Associates
                Limited Partnership and The Forschner Group, Inc.,  incorporated
                by reference  to the Exhibits to Annual  Report on Form 10-K for
                the fiscal year ended December 31, 1993.                                            *

         (EE)   License  Agreement  dated as of July 1, 1993 between  Cuisine de
                France Limited and Coutel 'Innov,  incorporated  by reference to
                the  Exhibits to Annual  Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                                            *

         (FF)   Life  insurance  agreement  dated as of December  24, 1992 between The
                Forschner Group,  Inc. and Louis Marx, Jr.,  incorporated by reference
                to the  Exhibits  to Annual  Report on Form 10-K for the  fiscal  year
                ended December 31, 1993.                                                            *

         (GG)   Life  insurance  agreement  dated as of September 24, 1993 between The
                Forschner Group,  Inc. and Louis Marx, Jr.,  incorporated by reference
                to the  Exhibits  to Annual  Report on Form 10-K for the  fiscal  year
                ended December 31, 1993.                                                            *

         (HH)   Life  insurance  agreement  dated as of September 24, 1993 between The
                Forschner  Group,  Inc.  and James D. Rawn,  as Trustee u/a dtd. as of
                June 4, 1992  between  Louis  Marx,  Jr.,  Grantor  and James D. Rawn,
                Trustee,  incorporated  by reference to the Exhibits to Annual  Report
                on Form 10-K for the fiscal year ended December 31, 1993.                           *

         (II)   Mutual  Agreement dated December 21, 1993 between The Forschner Group,
                Inc. and Victorinox Cutlery Company,  incorporated by reference to the
                Exhibits  to  Annual  Report on Form 10-K for the  fiscal  year  ended
                December 31, 1993.                                                                  *

         (JJ)   1994 Stock Option Plan,  incorporated  by reference to the Exhibits to
                Registration  Statement  on  Form  S-8,  No.  33-87078  filed  by  The
                Forschner Group, Inc.                                                               *

         (KK)   Services  Agreement  dated as of July 29, 1994  between The  Forschner
                Group,  Inc. and Brae Group,  Inc.,  incorporated  by reference to the
                Exhibits  to  Quarterly  Report  on Form 10-Q for the  fiscal  quarter
                ended September 30, 1994.                                                           *

         (LL)   Non-Incentive  Stock  Option  Agreement  dated  as of  July  29,  1994
                between The Forschner Group, Inc. and Brae Group,  Inc.,  incorporated
                by reference to the 
</TABLE>

                                     - 38 -
<PAGE>
<PAGE>
<TABLE>
<S>       <C>                                                                                 <C>
                Exhibits to Quarterly Report on Form 10-Q for the fiscal quarter ended
                September 30, 1994.                                                                 *

         (MM)   Consulting  Agreement  dated as of December 7, 1991 by and between The
                Forschner Group,  Inc. and Louis Marx, Jr.,  incorporated by reference
                to the  Exhibits  to Annual  Report on Form 10-K for the  fiscal  year
                ended December 31, 1994.                                                            *

         (NN)   Letter Agreement dated June 9, 1994 between The Forschner Group,  Inc.
                and Forschner Enterprises,  Inc. relating to the purchase by Forschner
                Enterprises,  Inc. of shares of Tigera Group,  Inc.,  incorporated  by
                reference  to the  Exhibits  to  Annual  Report  on Form  10-K for the
                fiscal year ended December 31, 1994.                                                *

         (OO)   Third  Modification to Amended and Restated Loan Agreement dated as of
                September 30, 1994 between The Forschner Group,  Inc. and Shawmut Bank
                Connecticut,  N.A.,  incorporated  by  reference  to the  Exhibits  to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1994.                                                                               *

         (PP)   First  Amendment  to Lease dated June 16, 1994  between The  Forschner
                Group,  Inc.  and  Petran  Trap  Falls  Associates,   incorporated  by
                reference  to the  Exhibits  to  Annual  Report  on Form  10-K for the
                fiscal year ended December 31, 1994.                                                *

         (QQ)   Restricted  Stock  Award  Agreement  dated  as of  December  12,  1994
                between  The  Forschner   Group,   Inc.  and  Stanley  R.  Rawn,  Jr.,
                incorporated  by reference  to the  Exhibits to Annual  Report on Form
                10-K for the fiscal year ended December 31, 1994.                                   *

         (RR)   Life  insurance  agreement  dated as of April  15,  1994  between  The
                Forschner Group,  Inc. and Lawrence T. Warble,  as Trustee u/a dtd. as
                of March 21, 1994 between Stanley R. Rawn,  Jr.,  Grantor and Lawrence
                T.  Warble,  Trustee,  incorporated  by  reference  to the Exhibits to
                Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
                1994.                                                                               *


         (SS)   Agreement  dated June 30, 1995 between The Forschner  Group,  Inc. and
                Bill- Mar Specialty  Company,  Inc.,  incorporated by reference to the
                Exhibits  to  Quarterly  Report  on Form 10-Q for the  fiscal  quarter
                ended June 30, 1995.                                                                *

         (TT)   Agreement dated October 6, 1995 between The Forschner Group,  Inc. and
                James  W.  Kennedy,  incorporated  by  reference  to the  Exhibits  to
                Quarterly  Report on Form 10-Q for the fiscal quarter ended  September
                30, 1995.                                                                           *

         (UU)   Letter  agreement dated February 15, 1995 between The Forschner Group,
                Inc. and Harry Thompson,  incorporated by reference to the Exhibits to
                Quarterly  Report on Form 10-Q for the fiscal quarter ended  September
                30, 1995.                                                                           *

         (VV)   Letter  agreement dated October 25, 1995 between The Forschner  Group,
                Inc. and Harry Thompson,  incorporated by reference to the Exhibits to
                Quarterly  Report on Form 10-Q for the fiscal quarter ended  September
                30, 1995.                                                                           *
</TABLE>

                                     - 39 -

<PAGE>
<PAGE>


<TABLE>
<S>       <C>                                                                                 <C>
         (WW)   Employment   agreement  dated  as  of  January  2,  1996  between  The
                Forschner Group, Inc. and James W. Kennedy.                                    (10)-1

         (XX)   Warrant  dated as of December  13, 1995 between The  Forschner  Group,
                Inc. and J. Merrick Taggart.                                                   (10)-2

         (YY)   Letter  Agreement dated December 18, 1995 between The Forschner Group,
                Inc. and Victorinox Cutlery Company.                                           (10)-3


(11)     Statement re computation of per share earnings is not required  because
         the relevant  computations can be clearly  determined from the material
         contained in the financial statements included herein.

(12)     Not applicable.

(13)     Not applicable.

(16)     Not Applicable.

(18)     Not Applicable.

(21)     Subsidiaries of Registrant.                                                               21

(22)     Not Applicable.

(23)     Consents of experts and counsel:  Consent of Arthur Andersen LLP.                         23

(27)     Not Applicable.

(28)     Not Applicable.

(99)     Not Applicable.
</TABLE>


----------------------
*        Incorporated by reference

         No Current  Reports on Form 8-K were  filed  during the fiscal  quarter
ending December 31, 1995.

                                     - 40 -

<PAGE>
<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      THE FORSCHNER GROUP, INC.
                                            (Registrant)


                                                  By /s/ J. Merrick Taggart
                                                     ----------------------
                                                     J. Merrick Taggart
                                                     President




Date:  March 27, 1996


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the Registrant and in the
capacities and on the dates indicated.


 /s/ Thomas D. Cunningham                                        March 27, 1996
-----------------------------------------
Thomas D. Cunningham
Chief Financial Officer
and a Director



 /s/ Thomas M. Lupinski                                           March 27, 1996
-----------------------------------------
Thomas M. Lupinski
Chief Accounting Officer



 /s/ A. Clinton Allen                                             March 27, 1996
-----------------------------------------
A. Clinton Allen
Director



 /s/ Thomas A. Barron                                             March 27, 1996
-----------------------------------------
Thomas A. Barron
Director





                                     - 41 -

<PAGE>
<PAGE>


                                                                  March   , 1996
-----------------------------------------
Vincent D. Farrell, Jr.    
Director



 /s/ Herbert M. Friedman                                          March 27, 1996
-----------------------------------------
Herbert M. Friedman
Director



 /s/ Peter W. Gilson                                              March 27, 1996
-----------------------------------------
Peter W. Gilson
Director



 /s/ M. Leo Hart                                                  March 27, 1996
-----------------------------------------
M. Leo Hart
Director



 /s/ James W. Kennedy                                             March 27, 1996
-----------------------------------------
James W. Kennedy
Director



 /s/ Keith R. Lively                                              March 27, 1996
-----------------------------------------
Keith R. Lively
Director



 /s/ Lindsay Marx                                                 March 27, 1996
-----------------------------------------
Lindsay Marx
Director



 /s/ Louis Marx, Jr.                                              March 27, 1996
-----------------------------------------
Louis Marx, Jr.
Director






                                     - 42 -

<PAGE>
<PAGE>



 /s/ Stanley G. Mortimer III                                      March 27, 1996
-----------------------------------------
Stanley G. Mortimer III
Director



 /s/ Stanley R. Rawn, Jr.                                         March 27, 1996
-----------------------------------------
Stanley R. Rawn, Jr.
Director



 /s/ Eric M. Reynolds                                             March 27, 1996
-----------------------------------------
Eric M. Reynolds
Director



 /s/ John Spencer                                                 March 27, 1996
-----------------------------------------
John Spencer
Director



 /s/ John V. Tunney                                               March 27, 1996
-----------------------------------------
John V. Tunney
Director


                                     - 43 -
<PAGE>
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


TO THE FORSCHNER GROUP, INC.:

We have audited the accompanying consolidated balance sheets of The Forschner
Group, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Forschner Group, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.

As explained in Note 2 to the financial statements, effective January 1, 1993,
the Company changed its method of accounting for income taxes.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14(a)(2) is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.





                                                             ARTHUR ANDERSEN LLP
Stamford, Connecticut                                        ARTHUR ANDERSEN LLP
February 5, 1996



<PAGE>
<PAGE>

                   THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                            1995                  1994
                                                                  ------------------------------------
<S>                                                                        <C>               <C>        
Current assets
   Cash and short-term investments                                         $608,757          $18,019,797

   Accounts receivable, less
    allowance for doubtful accounts
    of $975,000 and $755,000,                                            31,970,449           29,606,328
respectively

   Inventories                                                           36,733,146           26,932,105

   Deferred income tax benefits                                           2,395,858            2,467,440

   Prepaid and other                                                      2,647,121            1,615,273
                                                                        ------------          ------------
      Total current assets                                               74,355,331           78,640,943
                                                                        ------------          ------------
Deferred income tax benefits
                                                                            771,371               56,634

Property, plant and equipment, net                                        4,105,865            4,227,658


Investments in preferred stock, at cost                                   7,002,990            7,002,990


Investments in common stock and note                                      2,591,415            4,463,080
   receivable of unconsolidated affiliates

Foreign distribution rights, net of
   accumulated amortization of $1,843,812
   and $1,165,129, respectively                                           4,900,396            5,579,079


Other assets, net of accumulated
   amortization of $3,166,339 and
   $2,159,756, respectively                                               7,502,884            5,737,337
                                                                       ------------          ------------
TOTAL ASSETS
                                                                       $101,230,252         $105,707,721
                                                                     ==============         ============
</TABLE>



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







                                       F-2

<PAGE>
<PAGE>



                   THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                                             DECEMBER 31,

                                                                       1995                     1994
                                                               --------------------         ------------
<S>                                                                     <C>                 <C>        
Current liabilities
   Accounts payable                                                     $6,479,200          $14,057,507

   Accrued liabilities                                                   8,697,994            8,651,738

   Income taxes payable                                                  1,114,389            1,223,193
                                                                      ------------         ------------
     Total current liabilities                                          16,291,583           23,932,438
                                                                      ------------         ------------



Commitments and contingencies


Stockholders' equity
   Preferred stock, par value $.10 per
      share: shares authorized -                                                 -                    -
      2,000,000; no shares issued

   Common stock, par value $.10 per
      share: shares authorized -
      12,000,000; shares issued -
      8,800,718 and 8,796,968, respectively                                880,072              879,697

   Additional paid-in capital                                           45,897,740           45,866,814

   Foreign currency translation adjustment                                  (9,216)             (28,085)

   Retained earnings                                                    43,283,540           40,170,324
                                                                      ------------         ------------

                                                                        90,052,136           86,888,750

   Less-cost of common stock in
      treasury; 614,108 shares                                          (5,113,467)          (5,113,467)
                                                                      ------------         ------------



Total stockholders' equity                                              84,938,669           81,775,283
                                                                      ------------         ------------



TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $101,230,252         $105,707,721
                                                                      ============         ============
</TABLE>






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










                                       F-3

<PAGE>
<PAGE>



                   THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                        -------------------------------------------------
                                                            1995              1994               1993
                                                         ------------     --------------    --------------
<S>                                                      <C>               <C>               <C>         
NET SALES                                                $126,694,786      $144,437,320      $102,543,224

Cost of sales                                             82,430,435        88,633,762        60,516,258
                                                         ------------      ------------      ------------

GROSS PROFIT                                               44,264,351        55,803,558        42,026,966


Selling, general and administrative
   expenses before special charitable
   contribution                                            40,265,716        38,792,909        30,753,401


Special charitable contribution
                                                                   -         1,500,000                -
                                                         ------------      ------------      ------------


Total selling, general and
   administrative expenses                                40,265,716
                                                                            40,292,909        30,753,401

OPERATING INCOME                                            3,998,635        15,510,649        11,273,565


Interest expense                                            (216,937)          (27,674)          (25,180)

Interest income                                               556,631           391,387           176,960

Gain on sale of investments                                 1,771,456            36,720                 -

Equity interest in unconsolidated affiliates                (548,200)                 -                 -

Other income (expense), net
                                                              74,276            81,543            99,873
                                                         ------------      ------------      ------------

Total interest and other income, net                       1,637,226           481,976           251,653
                                                         ------------      ------------      ------------

Income before income taxes
   and cumulative effect of
   accounting change                                        5,635,861        15,992,625        11,525,218


Income tax provision                                       2,522,645          6,632,895         4,221,320
                                                         ------------      ------------      ------------

Income before cumulative effect
   of accounting change                                     3,113,216         9,359,730         7,303,898

Cumulative effect of accounting
   change for income taxes                                        --                --            220,000
                                                         ------------      ------------      ------------

NET INCOME                                                $3,113,216         $9,359,730        $7,523,898
                                                         ============      ============      ============
                                                                            

EARNINGS PER SHARE:
   Income per share before cumulative
      effect of accounting change                               $0.38             $1.16             $1.04

   Cumulative effect per share of
      accounting change for income taxes
                                                                   -                 -              0.03
                                                         ------------      ------------      ------------

   Net income                                                  $0.38              $1.16             $1.07
                                                         ============      ============      ============

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                                      8,235,849          8,061,846         7,053,107
                                                         ============      ============      ============
</TABLE>


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

                                       F-4

<PAGE>
<PAGE>




                   THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
                                      Common Stock                                  Foreign
                                     Par Value  $.10              Additional       Currency
                              -----------------------------        Paid-In        Translation       Retained          Treasury 
                                  Shares         Amount            Capital        Adjustment        Earnings            Stock
                              -----------------------------       ----------      -----------       --------          --------
<S>                             <C>                <C>            <C>                 <C>           <C>              <C>         
BALANCE
DECEMBER 31, 1992                 7,110,951         $711,095       $24,620,407         ($2,082)      $23,286,696      ($5,577,758)
Net income                                -                -                 -               -         7,523,898                -
Stock options exercised             492,194           49,220         5,272,993               -                 -                - 
Issuance of common stock 
   from treasury                          -                -           125,975               -                 -           158,400
Issuance of common stock             45,823            4,582           751,497               -                                  -
Issuance of warrant for                                                                                        -                -
   Distribution Rights                    -                -         3,750,000               -                 -                - 
Foreign currency 
   translation adjustment                 -                -                 -               -                 -                -
Purchase of 3,297 shares 
   of common stock                        -                -                 -          (4,747)                -           (52,752)
                                  ---------         --------       -----------         -------       -----------       ----------- 
BALANCE
DECEMBER 31, 1993                 7,648,968         $764,897       $34,520,872         ($6,829)      $30,810,594      ($5,472,110)
Net income 
Stock options and                         -                -                 -                -        9,359,730                -
warrant     exercised             1,111,000          111,100        10,467,657                                 -                -
Stock grant                          37,000            3,700           486,925                -                -                -
Issuance of common stock             
   from treasury                                                       391,360                -                -          358,643
Foreign currency                          -                -                           (21,256)                -                -
   translation adjustment            
                                  ---------         --------       -----------         -------       -----------      ----------- 
BALANCE
DECEMBER 31, 1994                 8,796,968         $879,697       $45,866,814         ($28,085)     $40,170,324       ($5,113,467)
                                  =========         ========       ===========         ========      ===========       =========== 
</TABLE>


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





                                       F-5

<PAGE>
<PAGE>



                             THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                        FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
                                             (CONTINUED)
<TABLE>
<CAPTION>
                                                                                     
                                        Common Stock                                 Foreign
                                       Par Value  $.10             Additional       Currency
                                -----------------------------        Paid-In       Translation       Retained          Treasury 
                                    Shares         Amount            Capital       Adjustment        Earnings            Stock
                                -----------------------------      ----------      -----------       --------          ---------
<S>                                <C>                <C>           <C>                <C>            <C>             <C>         
BALANCE
DECEMBER 31, 1994                  8,796,968          $879,697      $45,866,814        ($28,085)      $40,170,324     ($5,113,467)
Net income                                 -                 -                -               -         3,113,216               -
Stock options exercised                3,750               375           30,926               -                 -               -
Foreign currency                       
   translation adjustment                  -                 -                -          18,869                 -               - 
                                   ---------         ---------        ---------  ---------------      -----------     ------------
BALANCE
DECEMBER 31, 1995                  8,800,718          $880,072      $45,897,740         ($9,216)      $43,283,540     ($5,113,467)
                                   =========          ========      ===========         =======       ===========     =========== 
</TABLE>


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



                                       F-6

<PAGE>
<PAGE>


                             THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                    Year Ended December 31,
                                                          -------------------------------------------------
                                                              1995               1994               1993
                                                           ----------         -----------         ----------
<S>                                                        <C>                 <C>                <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                              $3,113,216          $9,359,730         $7,523,898
   Adjustments to reconcile net income to cash
   provided from (used for) operating activities:
      Cumulative effect of accounting change                        -                   -           (220,000)
      Depreciation and amortization                         3,249,376           3,207,294          2,524,742
      Deferred income taxes                                  (643,155)         (1,644,567)            94,423
      Treasury shares contributed to charitable                     -             750,003                  -
foundation                                                          -             303,125                  -
      Stock award                                             548,200                   -                  -
      Equity interest in unconsolidated affiliates              8,788              (9,030)                 -
      (Gain) loss on sales of property, plant &            (1,771,456)            (36,720)                 -
equipment                                              --------------    ----------------          ---------
      (Gain) on sale of investments                         4,504,969          11,929,835          9,923,063

CHANGES IN OTHER CURRENT ASSETS AND LIABILITIES:
   Accounts receivable                                    (2,329,783)          (6,105,787)        (6,911,964)
   Inventories                                            (9,741,351)          (6,281,294)        (2,476,354)
   Prepaid and other                                      (1,144,356)           3,020,220         (3,311,157)
   Accounts payable                                       (7,580,883)           2,765,024          6,383,575
   Accrued liabilities                                        44,598            2,702,523            893,834
   Income taxes payable                                     (108,804)             823,193              4,585
                                                     ----------------     ---------------   ----------------
      NET CASH PROVIDED FROM (USED FOR)
         OPERATING ACTIVITIES                            (16,355,610)           8,853,714          4,505,582
                                                      ---------------      --------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                   (1,430,352)          (1,676,477)        (2,769,013)
   Proceeds from sales of property, plant & equipment         21,500               22,412              4,200
   Disposition of property, plant & equipment                     -                   -          1,213,538
   Additions to other assets                              (2,814,301)          (2,205,205)        (2,204,800)
   Investments in preferred stock                                   -          (6,250,000)        (2,016,500)
   Investments in common stock                            (3,709,546)                   -         (2,784,260)
   Proceeds from note receivable                                    -             186,120             43,509
   Proceeds from sale of investments                       6,822,282              377,490                  -
                                                       --------------      --------------      -------------
        NET CASH (USED FOR) INVESTING ACTIVITIES          (1,110,417)          (9,545,660)        (8,513,326)
                                                       --------------      --------------      --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments to acquire treasury stock                               -                   -            (52,752)
   Proceeds from exercise of stock options and                31,301           10,766,257          5,322,213
warrant                                              ----------------      --------------    ---------------
      Net cash provided from financing activities             31,301           10,766,257          5,269,461
                                                     ----------------      --------------    ---------------
   EFFECT OF EXCHANGE RATE CHANGES ON CASH                    23,686              109,638            (42,012)
NET INCREASE (DECREASE) IN CASH AND SHORT-TERM
   INVESTMENTS                                           (17,411,040)          10,183,949          1,219,705
   Cash and short-term investments, beginning of          18,019,797            7,835,848          6,616,143
period                                                 --------------      --------------     --------------
   Cash and short-term investments, end of period       $    608,757          $18,019,797        $ 7,835,848
                                                      ===============       =============      =============

CASH PAID DURING THE PERIOD:
   Interest                                            $     251,637        $      27,674      $      25,180
                                                      ===============     ===============    ===============
   Income taxes                                         $  3,428,792          $ 6,883,242        $ 3,068,910
                                                       ==============      ==============      =============
</TABLE>



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


                                       F-7


<PAGE>
<PAGE>

                   THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1995


(1)     NATURE OF BUSINESS
               The Forschner Group, Inc. ("Forschner" or the "Company") is the
               exclusive distributor in the United States, Canada (with one
               minor exception for cutlery) and the Caribbean of the Victorinox
               Original Swiss Army Knife, Victorinox cutlery and Victorinox
               watches. Forschner also markets its own line of Swiss Army Brand
               Watches and other high quality Swiss made products under its
               Swiss Army Brand worldwide. Forschner's cutlery line, which also
               includes imported products from Germany, England, France and
               Brazil, is sold primarily to the food processing and service
               industries. Forschner's wholly-owned subsidiary, Cuisine de
               France Limited, imports and distributes high quality French made
               consumer cutlery under the Cuisine de France Sabatier brand.
               Forschner has only one business segment - the importation and
               distribution of cutlery, knives, watches and other consumer
               products. Approximately 6% and 25% of Forschner's revenues for
               the years ended December 31, 1995 and 1994, respectively,
               resulted from participation in two special promotional programs
               with one customer. No programs currently are scheduled with this
               customer for 1996. Foreign operations represented 11%, 1% and 13%
               of sales, assets and net income in 1995, respectively. Included
               in the Company's balance sheet at December 31, 1995 are net
               assets of $689,000 relating to the Company's foreign operations.
               Foreign operations were less than 10% of sales, assets and net
               income in 1994 and 1993.

(2)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
           PRINCIPLES OF CONSOLIDATION
               The consolidated financial statements include the accounts of the
               Company and its wholly owned subsidiaries. All significant
               intercompany transactions have been eliminated.

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

           FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS
               Assets and liabilities of the Company's foreign operations are
               translated into U.S. dollars using the exchange rate in effect at
               the balance sheet date. Results of operations are translated
               using the average exchange rate prevailing throughout the period.
               The effects of exchange rate fluctuations on translating foreign
               currency assets and liabilities into U.S. dollars are included in
               the foreign currency translation adjustment component of
               stockholders' equity, while gains and losses resulting from
               foreign currency transactions are included in net income. The
               Company, from time to time, enters into foreign currency forward
               contracts and other currency trading arrangements to hedge
               specific



                                      F-8

<PAGE>
<PAGE>

               foreign currency inventory purchase commitments. Gains and losses
               on these contracts are deferred and recognized in cost of sales
               when the related inventory is sold.

           CASH AND SHORT-TERM INVESTMENTS
               Excess cash balances are invested primarily in U.S. treasury
               bills and other U.S. government agency securities, which, as of
               December 31, 1995 and 1994, comprised $0 and $17,188,000 of the
               balance of cash and short-term investments, respectively.

           INVENTORIES
               Domestic inventories are valued at the lower of cost determined
               by the last-in, first-out (LIFO) method or market. Had the
               first-in, first-out (FIFO) method been used to value domestic
               inventories as of December 31, 1995 and 1994, the balance at
               which inventories are stated would have been $2,746,000 and
               $2,407,000 higher, respectively. Foreign inventories are valued
               at the lower of cost or market determined by the FIFO method.
               Inventories primarily consist of finished goods and packaging
               material.

           PROPERTY, PLANT AND EQUIPMENT
               Property, plant and equipment are stated at cost. Major
               improvements which add to productive capacity or extend the life
               of an asset are capitalized while repairs and maintenance are
               charged to expense as incurred. Property, plant and equipment are
               comprised of the following:

<TABLE>
<CAPTION>

                                                      December 31,
                                                 1995             1994
                                                ------           ------
               <S>                           <C>           <C>
               Leasehold improvements        $   818,446   $   658,842
               Equipment                       6,199,914     5,189,298
               Furniture & fixtures            1,473,188     1,256,462
                                              ----------     ---------
                                               8,491,548     7,104,602
               Accumulated depreciation       (4,385,683)   (2,876,944)
                                              -----------  -----------
                                              $4,105,865    $4,227,658
                                              ===========   ==========
</TABLE>

               Depreciation is computed principally by use of the straight-line
               method based on the following estimated useful lives:

                                                   Years
                                                   -----
                      Equipment                   3 to 10
                      Furniture and fixtures      7 to 10

               The provision for amortization of leasehold improvements is
               provided on a straight-line basis over the estimated useful lives
               of the assets or terms of the leases, whichever is shorter. For
               the years ended December 31, 1995, 1994, and 1993, the total
               provisions for depreciation and amortization of property, plant
               and equipment were approximately $1,521,000, $1,273,000 and
               $1,072,000, respectively.

           INVESTMENTS
               Investments in common stock, in which the Company owns 20% to
               50%, are being accounted for under the equity method, with
               Forschner recording its proportional share of net income or
               losses of these companies and amortization of goodwill related to
               the



                                      F-9

<PAGE>
<PAGE>

               acquisition of the two investments. These amounts equalled losses
               of $548,200 for 1995. The accompanying balance sheets as of
               December 31, 1994 reflect adjustments necessary to show
               Forschner's investments in Simmons Outdoor Corporation and
               SweetWater, Inc. under the equity method.

               Investments in preferred stock and common stock of which the
               Company owns less than 20%, are accounted for at cost. Since
               these investments do not have a readily determinable fair value,
               the valuation of these investments is subject to uncertainty.

           EARNINGS PER SHARE
               Net income per share has been computed based on the weighted
               average number of shares outstanding during each year. For the
               years ended December 31, 1995, 1994, and 1993, the computation
               included 50,000, 230,000 and 443,000 shares, respectively,
               issuable upon exercise of stock options and warrants after the
               assumed repurchase of common shares with the related proceeds.
               There is no difference between primary and fully diluted earnings
               per share.

           INCOME TAXES
               Forschner adopted Statement of Financial Accounting Standards
               (SFAS) No. 109, "Accounting for Income Taxes" in the first
               quarter of 1993. SFAS No. 109 supersedes SFAS No. 96, the
               accounting standard that the Company had previously followed. As
               a result of adopting SFAS No. 109, the Company recorded a
               $220,000, or $0.03 per share, increase to consolidated net
               income. The increase in consolidated net income was recorded as a
               cumulative effect of accounting change.

               Under SFAS No. 109, the provision for income taxes, as determined
               using the liability method, includes deferred taxes resulting
               from temporary differences in income for financial and tax
               purposes. Such temporary differences primarily result from
               differences between the tax bases of assets and liabilities and
               their carrying amounts for financial reporting purposes. The
               cumulative effect on deferred taxes of changes in the corporate
               income tax rate is recognized as an adjustment to income tax
               expense.

           FOREIGN CURRENCY
               The vast majority of the Company's products are imported from
               Switzerland and are paid for in Swiss francs. Increases in the
               value of the Swiss franc versus the dollar may effectively
               increase the cost of these products to the Company. The increase
               in the cost of products to the Company may result in either
               higher prices charged to customers or reductions in gross margin,
               both of which may have an adverse effect on the Company's results
               of operations. The Company enters into foreign currency contracts
               and options to hedge the exposure associated with foreign
               currency fluctuations. However, such hedging activity cannot
               eliminate the long-term adverse impact on the Company's
               competitive position and results of operations that would result
               from a sustained decrease in the value of the dollar versus the
               Swiss franc. These hedging transactions, which are meant to
               reduce foreign currency risk, also reduce the beneficial effects
               to the Company of any increase in the dollar relative to the
               Swiss franc. The Company plans to continue to engage in hedging
               transactions; however, it is uncertain as to what extent to which
               such hedging transactions will reduce the effect of adverse
               currency fluctuations.


                                             F-10

<PAGE>
<PAGE>



           RECLASSIFICATIONS
               Certain reclassifications have been made to prior year's
               financial statements to conform with the 1995 presentation.

           NEWLY ISSUED ACCOUNTING STANDARDS
               In March 1995, Statement of Financial Accounting Standards (SFAS)
               No. 121, "Accounting for the Impairment of Long-Lived Assets and
               for Long-Lived Assets to Be Disposed Of", was issued. The Company
               plans to adopt SFAS No. 121 in 1996, and believes that this
               accounting standard will not have a material effect on the
               Company's financial position and its results of operations.

               In October 1995, Statement of Financial Accounting Standards
               (SFAS) No. 123, "Accounting for Stock-Based Compensation", was
               issued. The Company plans to adopt SFAS No. 123 in 1996. The
               Company currently does not plan to change its method of
               accounting for stock-based compensation; however, SFAS No. 123
               will require additional footnote disclosures relating to the
               effect of using a fair value based method of accounting for
               stock-based compensation cost.

(3)     PRINCIPAL SUPPLIERS
               Forschner imports for resale all of its Swiss Army Knives and
               certain of its other cutlery products from a principal supplier,
               Victorinox Cutlery Company ("Victorinox"), a Swiss company.
               Effective December 12, 1993, Forschner renewed a five-year
               agreement (originally signed on December 12, 1983 and as amended)
               with Victorinox which appoints Forschner as exclusive distributor
               of Victorinox Original Swiss Army Knives and most of its other
               cutlery products in the United States and gives Forschner
               exclusive rights to use Victorinox trademarks and trade names in
               the United States with respect to Swiss Army Knives and cutlery.
               The agreement remains in effect as long as Forschner continues to
               purchase quantities of Swiss Army Knives and cutlery (based on
               the Swiss franc purchase price) at least equal to 85% of the
               maximum amount of purchases of each in any preceding year. Due to
               high 1992 year-end inventory levels, with written concurrence of
               Victorinox, Forschner reduced 1993 purchases to a level that was
               2.3% below the minimum requirement of Swiss Army Knives. In 1995,
               Victorinox agreed to reduce the 1996 minimum purchase
               requirements on knives to 75% of the maximum amount of purchases
               in any preceding year. The Company purchased the required minimum
               during 1995 and 1994, and, based upon the current projections,
               management believes that the Company will purchase the required
               minimum during 1996. In 1995 total payments to Victorinox were
               $39,676,000. Pursuant to this agreement, Forschner must obtain
               Victorinox's permission to sell new cutlery items. All of the
               Swiss Army Knives and certain of the cutlery items that Forschner
               sells in Canada and the Caribbean also are supplied by
               Victorinox.

               Foreign distribution rights with Victorinox are comprised of the
               following:







                                      F-11

<PAGE>
<PAGE>


<TABLE>
<CAPTION>
                                                         Cost at December 31,         Amortization
                                                        1995             1994            Period
                                                       ------           ------          -------
               <S>                                   <C>                <C>             <C> 
               Canadian distribution
                  rights (A)                         $3,483,064         $3,483,064      10 years
               Caribbean & Victorinox Watch
                  distribution rights (B)             3,261,144          3,261,144       10 years
                                                    -----------         ----------
                                                      6,744,208          6,744,208
               Accumulated amortization              (1,843,812)        (1,165,129)
                                                    ------------        -----------
                                                     $4,900,396         $5,579,079
                                                     ==========         ==========
</TABLE>


               (A) In April 1992, Forschner entered into an agreement with
               Victorinox under which it received the exclusive distribution
               right for Victorinox Original Swiss Army Knives in Canada and was
               appointed the principal distributor of Victorinox professional
               cutlery in Canada. In exchange for the grant of these rights,
               Forschner issued to Victorinox 277,066 shares of its common stock
               from treasury. The rights received were awarded to Forschner for
               a fixed term with a continuous five-year renewal arrangement upon
               expiration of the fixed term. Victorinox has the right not to
               renew the agreement; however, should Victorinox choose not to
               renew upon expiration of the fixed term, Victorinox is required
               to pay Forschner $3,500,000.

               (B) On December 21, 1993, Forschner entered into an agreement
               with Victorinox under which it received the exclusive
               distribution rights for Victorinox Original Swiss Army Knives and
               professional cutlery in the Caribbean. Forschner also received
               the right to distribute Victorinox Swiss-made watches in the
               United States, Canada and the Caribbean and acquired the 20%
               share of the Company's subsidiary, Victorinox of Switzerland,
               Ltd., that Victorinox owned. In exchange for the grant of these
               rights and the stock acquired, Forschner issued to Victorinox a
               five-year warrant to purchase 1,000,000 shares of common stock at
               a $3.75 discount to the current market price on the date of
               exercise. In April 1994, the discount from the current market
               price was modified to $4.25 in exchange for Victorinox's
               agreement to pay the exercise price immediately instead of after
               one year as allowed by the original agreement. All of the shares
               issued upon exercise of the warrant were subsequently sold to a
               corporate shareholder of Forschner that is controlled by a
               director of Forschner, in exchange for shares of the common stock
               of that corporation. In addition, Forschner will pay Victorinox a
               royalty of 1% of net sales of Victorinox Watches. The Caribbean
               distribution rights are for a fixed term automatically renewable
               in successive five-year periods unless either party notifies the
               other at least six months prior to expiration of such period of
               its intent not to renew. The term of Victorinox Watch
               distribution rights in each territory coincides with the term in
               that territory for Victorinox cutlery products.

               The Company does not have any manufacturing facilities and
               imports virtually all of its products from independent suppliers.
               The Company's business is subject to certain risks related to its
               arrangements with its foreign suppliers, including possible
               restrictions on transfer of funds, the risk of imposition of
               quotas on the amount of products which may be imported into the
               United States (although no quota currently exists), maritime
               union strikes and political instability. Although the Company has
               a United States exclusive distributorship agreement with
               Victorinox Cutlery Company ("Victorinox"), its principal
               supplier, it does not have such contractual arrangements with its
               other suppliers. The agreement with Victorinox provides for
               certain minimum annual purchases of products by the Company, and
               failure to achieve these

                                      F-12



<PAGE>
<PAGE>

               goals would result in Victorinox having the right to terminate
               the agreement. Such a termination would have a material effect
               upon the Company's operations. The agreement also provides that
               the Company will not add non-Victorinox items to its line of
               cutlery products without the prior agreement of Victorinox.
               Although the Company has a contractual right to receive minimum
               quantities of Swiss Army Knives from Victorinox, were this source
               of supply to fail for any reason, the Company would probably be
               unable to find an alternative source. Any substantial disruption
               of the Company's relationships with Victorinox would have a
               material adverse effect on its operation and results. Virtually
               all of the Company's imported products are subject to United
               States custom duties.

               Although 77% or $23,384,000 of total payments for watches and
               watch parts in 1995 were made to a single watch supplier, which
               is responsible for the final assembly of watch components
               manufactured by several manufacturers, the Company believes that
               alternate watch suppliers would be available, if necessary.
               Furthermore, the Company believes that the loss of this supplier
               of Swiss Army Brand Watches would not have a material adverse
               effect on the Company's business.

(4)     RELATED PARTY TRANSACTIONS
               One of Forschner's directors is a partner in a law firm which
               provides legal services to Forschner and its subsidiaries. For
               the years ended December 31, 1995, 1994 and 1993, Forschner
               incurred fees of $432,000, $588,000 and $540,000, respectively,
               relating to these services. Of the 1994 fees, $176,000 were paid
               on behalf of Forschner Enterprises and capitalized as part of
               Forschner's investment therein.

               Six of Forschner's directors serve as directors for Victory
               Capital LLC, ("Victory") formerly Forschner Enterprises, Inc.,
               including one who serves as Co-Chairman of Victory (See Note 5).
               Four of Forschner's directors, one of which is an executive
               officer of Forschner, serve as directors of SweetWater, Inc.
               ("SweetWater").

               Simmons Outdoor Corporation ("Simmons"), in which Forschner had
               an investment (See Note 5), is a marketer of Victorinox Original
               Swiss Army Knives purchased from Forschner to selected sporting
               goods distributors. Forschner's sales to Simmons were $296,000
               and $472,000 in 1995 and 1994, respectively. Forschner's
               purchases from Simmons of optical products for sale to
               Forschner's Corporate Markets customers totaled $387,000 and
               $1,105,000 in 1995 and 1994, respectively.

               An existing company policy authorizes Forschner to compensate, in
               the form of a commission of up to 3% of net sales for up to three
               years, non-employees for their direct role in introducing
               significant new customers to the Company. In 1995 and 1994,
               Forschner paid to a relative of one of Forschner's directors half
               of a 3% commission on net sales to a customer, on whose board the
               same director also serves as a member, which in 1995 and 1994
               represented 6% and 25% of Forschner's total revenues (See Note
               1). No programs are currently scheduled with this customer in
               1996.

               In July 1994, Forschner entered into a Services Agreement with
               Brae Group, Inc. ("Brae"), a company which is a stockholder of
               Forschner and in which a Forschner director and principal
               supplier have a controlling and minority stock interest,
               respectively. In addition, the President and Chief Executive
               Officer of Brae is also a director of Forschner. Under the
               Services Agreement, Brae is to provide various services to
               Forschner for a period of four



                                      F-13

<PAGE>
<PAGE>

               years relating to maintaining, enhancing, and expanding
               Forschner's relationship with Forschner's principal supplier. In
               exchange for these services, Brae received an option to purchase
               500,000 shares of Forschner's common stock at the then current
               market price of $10.75 per share. The option vested immediately
               and can be exercised for 10 years from the date of the Services
               Agreement (See Note 11).

               Effective January 1, 1995, Forschner entered into an agreement
               with a director, under which the director received $10,000 per
               month for consulting services rendered in 1995. This agreement
               was terminated on December 31, 1995.

               In December 1995, a Forschner director and former Co-Chairman
               entered into an agreement with the Company to become a sole
               distributor of Swiss Army Brand products to the golf market.
               Investors in this new entity include the Company's principal
               supplier and a member of Forschner's Board of Directors who is a
               controlling stockholder of Brae.

(5)     INVESTMENTS
               Investments consist of the following as of December 31, 1995 and
               1994:

<TABLE>
<CAPTION>
                                                     Carrying                              Fair
                                                       Value             Cost              Value
                                                     --------           ------            -------
<S>                                                  <C>                <C>               <C>
     December 31, 1995:

               Preferred stock of Victory
                  Capital LLC (A)                     $ 7,002,990       $ 7,002,990
                                                      -----------       -----------
                  Total investment at cost            $ 7,002,990       $ 7,002,990
                                                      ===========       ===========
               Common stock of SweetWater,
                  Inc. (C)                            $ 1,791,415       $ 3,430,157        $2,907,640
               Common stock and note receivable
                  of affiliated entity (D)                800,000           800,000
                                                     ------------      ------------

               Total investments in common stock
                  and note receivable of
                  unconsolidated affiliates           $ 2,591,415       $ 4,230,157        $2,907,640
                                                      ===========       ===========        ==========

     December 31, 1994:

               Preferred stock of Victory
                  Capital LLC (A)                      $7,002,990        $7,002,990
                                                       ----------        ----------
                  Total investment at cost             $7,002,990        $7,002,990
                                                       ==========        ==========

               Common stock of Simmons
                   Outdoor Corporation (B)             $2,784,260        $2,784,260        $2,750,000
               Common stock of SweetWater,
                   Inc. (C)                             1,678,820         1,678,820         2,371,750
                                                       ----------      ------------       -----------

               Total investments in common stock of 
                 unconsolidated affiliates             $4,463,080        $4,463,080        $5,121,750
                                                       ==========        ==========        ==========
</TABLE>



               (A) Victory Capital LLC ("Victory"), formerly Forschner
               Enterprises, Inc., is a



                                      F-14
<PAGE>
<PAGE>

               privately held limited liability corporation that intends to
               acquire interests in businesses which it believes present an
               opportunity for significant equity growth and which may benefit
               from Victory's management, operating and financial expertise. In
               1994, Forschner invested a total of $6,250,000, acquiring 625,000
               shares of preferred stock. In the second quarter of 1994,
               Forschner increased its investment in Victory through the
               exchange of all of its shares of Tigera Group, Inc. for 75,299
               shares of Victory valued at $752,990, and cash of $3,090,
               together representing Forschner's cost of Tigera shares
               exchanged. The preferred stock that Forschner owns accumulates an
               anual Preferred Amount (as defined) in any year in which Victory
               has profit. Upon liquidation, assets of Victory are distributed
               in accordance with the positive balance in each investor's
               Capital Account (after adjustment for unrealized gain and losses
               not previously reflected). Forschner is accounting for its
               investment on the cost basis.

               (B) Simmons Outdoor Corporation was a publicly traded company
               whose primary business is marketing and distributing branded
               sporting goods products (principally optical in nature). During
               1995, Forschner purchased additional shares of common stock for
               $1,072,000, raising its percentage ownership to over 20%.
               Accordingly, in 1995, the Company accounted for this investment
               under the equity method. Forschner's share of the income of
               Simmons, net of amortization of goodwill, totaled $1,090,000. In
               the fourth quarter of 1995, this investment was sold, resulting
               in a pre-tax profit of $1,740,000, which is included in the gain
               on sale of investments.

               (C) SweetWater, Inc. ("SweetWater") manufactures and sells
               portable water purification and filtration systems to the
               sporting goods, recreational, travel and tourist, emergency
               preparedness and military markets. As of December 31, 1993,
               SweetWater was a private company and Forschner owned preferred
               stock with a 40% voting interest. In January 1994, SweetWater
               issued 718,750 shares of common stock in an initial public
               offering (resulting in 1,837,243 shares of common stock
               outstanding), at which time Forschner's holdings of preferred
               stock were converted into 430,000 shares of common stock. In
               January 1994, Forschner sold 72,000 shares of SweetWater to a
               stockholder of Victorinox for approximately $374,000. Forschner's
               cost for the stock sold was approximately $338,000. Through
               December 31, 1994, the Company accounted for this investment at
               fair value with changes between cost and fair value reflected as
               part of unrealized gains (losses) included as a component of
               stockholders' equity. During 1995, Forschner purchased additional
               shares of common stock for $1,837,000, raising its percentage
               ownership to 38%. Accordingly, in 1995, the Company accounted for
               this investment under the equity method. Forschner's share of the
               losses of SweetWater, including amortization of goodwill, totaled
               $1,638,000. As of December 31, 1995, Forschner owned 20.5% of the
               outstanding stock of SweetWater. SweetWater's revenues for the
               year ended December 31, 1995 were $2,163,000, and it's assets as
               of December 31, 1995 were $7,506,000.


               (D) In 1995, the Company purchased 5,160 shares of common stock
               and an 8% convertible note due in the year 2000 of a private
               affiliated start-up entity that is in the business of designing,
               manufacturing and marketing fine jewelry. The common stock and
               the convertible note have been recorded at cost. Due to the
               start-up nature of this business and to the lack of an
               established market for common stock, the valuation of this
               investment is subject to uncertainty. The amount the Company will
               ultimately realize from this investment may materially differ
               from the carrying value.



                                      F-15

<PAGE>
<PAGE>




(6)     OTHER ASSETS
               Other assets in the accompanying consolidated balance sheets
               consists of the following at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
                                                            December 31,             Amortization
                                                       1995               1994           Period
                                                     -------             ------      -------------
<S>                                                  <C>                <C>             <C>     
                Goodwill (A)                         $1,179,189         $1,179,189      10 years

                Deferred employment
                     agreement (B)                    1,204,832          1,204,832      4-5 years

                Other                                 2,429,445          1,844,619      1-3 years
                                                     -----------        -----------
                                                      4,813,466          4,228,640

                Accumulated amortization             (3,166,339)        (2,159,756)
                                                     -----------        -----------
                                                      1,647,127          2,068,884

                 Cash surrender value of
                     life insurance (See Note 12)     5,855,757          3,668,453
                                                     -----------        ----------
                                                     $7,502,884         $5,737,337
                                                     ===========        ==========
</TABLE>



               (A) On September 2, 1992, Forschner acquired certain assets and
               assumed certain liabilities of Cuisine de France Limited, a
               company which distributes a line of high quality, French-made
               forged cutlery. This acquisition was accounted for as a purchase
               with the assets acquired and liabilities assumed recorded at
               their fair value.

               (B) In December 1992, Forschner issued 140,773 shares of its
               common stock to a former president and current employee of
               Forschner as prepayment of Forschner's obligations under an
               employment and deferred compensation agreement. Included in other
               assets is the value of the shares on the date issued, net of the
               deferred compensation liability previously recorded. The cost is
               being amortized over the former president's future period of
               service to Forschner.

               For the years ended December 31, 1995, 1994 and 1993 amortization
               expense was approximately $1,728,000, $1,934,000 and $1,088,000,
               respectively.

(7)     ACCRUED LIABILITIES
               The components of accrued liabilities were as follows as of
               December 31, 1995 and 1994:

<TABLE>
<CAPTION>
                                                                    1995         1994
                                                                   ------       -----
<S>                                                              <C>            <C> 
                Sales, marketing and promotional                 $3,318,970     $4,166,437
                Payroll related                                   1,623,641        940,328
                Pension                                             628,303        453,800
                Other                                             3,127,080      3,091,173
                                                                 ----------     ----------
                                                                 $8,697,994     $8,651,738
                                                                 ==========     ==========
                                                                 
</TABLE>




                                      F-16

<PAGE>
<PAGE>



(8)     REVOLVING CREDIT AGREEMENT
               Forschner has a $15,000,000 revolving credit agreement which, as
               amended, carries interest at either the bank's Base Rate, 8.5% at
               December 31, 1995 and 1994, or at the London Interbank Offered
               Rate (LIBOR), 5.5% and 6.125% at December 31, 1995, and 1994,
               respectively, plus 1.25%. The interest rate is at Forschner's
               discretion subject to the terms of the loan. Forschner had no
               outstanding balance under this agreement at either December 31,
               1995 or 1994. Borrowings under this line are to be used for
               working capital requirements and, within certain restrictions,
               for any corporate purpose. The revolving term loan agreement
               contains certain restrictions relating to the payment of
               dividends, repurchase of stock, issuance of additional debt and
               sale of certain assets. In addition, the agreement requires the
               continuation of the exclusive distribution agreement with
               Forschner's principal Swiss Army Knife and cutlery supplier (See
               Note 3). Under the agreement, earnings available for the payment
               of interest (as defined) must not be less than 1.5 times interest
               payable, the ratio of current assets to current liabilities must
               exceed 2.5:1 and the ratio of indebtedness (as defined) to
               tangible net worth cannot exceed .75:1. Any balance outstanding
               is due and payable on April 30, 1996, the expiration date of the
               facility. The Company's bank has offered to extend the facility
               under similar terms with options for reduced pricing. The Company
               is in discussions to extend the facility to one or more other
               banks.

               In addition, the Company maintains a $5,000,000 line of credit
               with a financial institution. This facility is unsecured and
               contains no restrictions or requirements. Forschner had no
               outstanding balance under this agreement at December 31, 1995.

(9)     INCOME TAXES
               The income tax provision for the years ended December 31, 1995,
               1994 and 1993, consists of the following:
<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                                   --------------------------------------
                                                     1995             1994          1993
                                                   --------        ----------    -------
<S>                                                 <C>            <C>             <C>       
               Current
                  Federal                           $2,657,745     $7,188,549      $3,926,020
                  State                                508,055      1,088,913         250,748
                                                 -------------    -----------     -----------
                     Total current                   3,165,800      8,277,462       4,176,768
               Deferred
                   Federal                            (492,108)    (1,258,334)         34,933
                   State                              (151,047)      (386,233)          9,619
                                                --------------   ------------    ------------
                      Total deferred                  (643,155)    (1,644,567)         44,552
                                                --------------    -----------    ------------
                Provision for income
                    taxes                           $2,522,645     $6,632,895      $4,221,320
                                                   ===========     ==========    ============
</TABLE>



               The 1993 tax provision reflects the reversal of tax liabilities
               established in prior years of approximately $500,000 which were
               deemed no longer required as a result of clarifications received
               from certain taxing authorities.

               Deferred income taxes reflect the impact of temporary differences
               between the amount of assets and liabilities for financial
               reporting purposes and such amounts as measured by tax laws and
               regulations.

                                      F-17

<PAGE>
<PAGE>




               The cumulative amount of each temporary difference that comprises
               the net deferred tax benefit is as follows:
<TABLE>
<CAPTION>
                                                                       December 31,
                                                                1995              1994
                                                          -------------      -------------
<S>                                                       <C>                <C>          
                Depreciation                              $   (150,750)      $   (158,399)
                Deferred compensation                          (63,167)          (157,844)
                LIFO-related reserves currently not
                     deductible                                215,684            193,324
                Other reserves currently not
                     deductible                              2,272,042          2,341,134
                Equity interest in unconsolidated              651,195                  -
                  affiliates                                   242,225            305,859
                                                        ---------------    --------------
                Other                                   $    3,167,229      $   2,524,074
                                                        ===============     =============
</TABLE>


               The effective income tax rate differed from federal statutory
               rates for the following reasons:


<TABLE>
<CAPTION>

                                                                Year Ended December 31,
                                                            ----------------------------------
                                                            1995            1994          1993
                                                            ----            ----          ----
<S>                                                           <C>           <C>           <C>  
                Statutory federal income tax rate              34.0%         35.0%         34.0%
                State income taxes, net of
                     federal income tax benefit                 6.8           2.9           1.5
                Foreign tax rate differences                    0.8           1.4             -
                Other                                           3.2           2.2           1.1
                                                                ---           ---           ---
                Effective income tax rate                      44.8%         41.5%         36.6%
                                                               ====          ====          ====
</TABLE>


(10)    EMPLOYEE BENEFITS
               Substantially all employees of Forschner and its subsidiaries are
               covered by a noncontributory defined benefit pension plan.
               Benefits are based on years of service and the employee's
               compensation during the five highest consecutive compensation
               years. Costs under the plan are accrued and funded on the basis
               of accepted actuarial methods. Total pension expense approximated
               $324,000, $218,000 and $185,000, for the years ended December 31,
               1995, 1994 and 1993, respectively.

               The net periodic pension cost of Forschner's pension plan in
               1995, 1994 and 1993 includes the following components:











                                      F-18

<PAGE>
<PAGE>



<TABLE>
<CAPTION>
                                                            1995           1994           1993
                                                        ------------   ------------   --------
<S>                                                       <C>             <C>           <C> 
               Service cost - benefits
                    earned during the period               $256,331       $196,795       $169,201
               Interest cost on projected
                    benefit obligation                      159,618        123,590        117,948
               Return on assets                            (110,233)       (94,726)       (92,666)
               Amortization of net
                    transition asset                        (14,188)       (14,188)       (14,188)
               Amortization of unrecognized
                    prior service cost                      (13,529)       (13,818)       (13,818)
               Amortization of net loss                      46,021         19,939         18,926
                                                         ----------     ----------      ---------
               Net periodic pension cost                   $324,020       $217,592       $185,403
                                                          =========      =========       ========
</TABLE>


               The funded status of Forschner's defined benefit plan at December
               31, 1995 and 1994 follows:

<TABLE>
<CAPTION>
                                                                  1995                  1994
                                                               ----------            ----------
<S>                                                            <C>                   <C>       
                Actuarial present value of:
                     Vested benefit obligation                 $1,903,390            $1,157,457
                                                               ===========           ==========
                     Accumulated benefit obligation            $1,903,390            $1,157,457
                                                               ===========           ==========
                Projected benefit obligation                    $2,694,164           $2,038,054
                Market value of plan assets                      1,565,095            1,299,223
                                                               -----------           ----------
                Plan assets less than projected
                     benefit obligation                         (1,129,069)            (738,831)
                Unrecognized net loss                              896,032              697,443
                Unrecognized prior service cost                   (281,768)            (295,297)
                Unrecognized net transition asset                  (99,322)            (113,510)
                                                            --------------         ------------
                Accrued pension cost                             ($614,127)           ($450,195)
                                                             =============          ===========
</TABLE>


               Rates used in determining the actuarial present value of the
               projected benefit obligation were as follows:
<TABLE>
<CAPTION>
                                                                               December 31,
                                                                             ----------------
                                                                             1995       1994
                                                                             ----       ----
<S>                                                                          <C>        <C> 
               Discount rate                                                 7.00%      7.00%
               Rate of increase in future compensation levels                5.00%      5.00%
               Expected long-term rate of return on plan assets              8.00%      7.75%
</TABLE>


               Plan assets consist principally of investments in fixed income
               securities, short-term investments and common stock.

               The Company maintains a 401(k) employee benefit plan pursuant to
               which participants can defer a certain percent of their annual
               compensation in order to receive certain benefits upon
               retirement, death, disability or termination of employment. The
               Company can elect to make a matching contribution of up to 6% of
               annual eligible compensation per employee. The determination to
               make a matching contribution is made at the beginning of each
               fiscal year. During 1995, 1994 and 1993 the Company incurred
               expenses of approximately $129,000,




                                      F-19
<PAGE>
<PAGE>

               $88,000 and $69,000 related to this plan.

               The Company offers no other post retirement benefits.

(11)    STOCKHOLDERS' EQUITY
               In 1993 Forschner's stockholders approved an increase in the
               number of authorized shares of its common stock from 8,000,000 to
               12,000,000 and authorized a new class of 2,000,000 shares of
               preferred stock, par value $.10 per share. The Board of Directors
               has the authority to determine the relative rights and
               preferences of the preferred stock.

               During 1994, stockholders approved adoption of The Forschner
               Group, Inc. 1994 Stock Option Plan providing for the grant of
               options to employees, including officers of the Company, and
               members of the Board of Directors. Under this plan and a previous
               stock option plan which has expired, options covering 1,949,344
               shares of common stock were reserved for issuance, of which
               131,219 remain available for issuance. Options expire no later
               than ten years after the date of grant. Option prices equal at
               least 100% of the fair market value of Forschner's common stock
               on the date of grant. The vesting of options is determined by the
               Stock Option and Compensation Committee, which administers the
               plan, and for options outstanding as of December 31, 1995,
               vesting ranges from immediately upon grant to five years.

               The following table summarizes stock option plan and warrant
               activity for the three years ended December 31, 1995:

<TABLE>
<CAPTION>
                                                                  Number
                                                                 of Shares         Option Price
                                                                 ---------        --------------
<S>                                                             <C>               <C>   
               Outstanding at December 31, 1992                     726,727       $ 3.32 - $14.00
               Granted                                              435,000       $14.38 - $17.50
               Exercised                                           (492,194)      $ 5.25 - $11.50
                                                                    -------

               Outstanding at December 31, 1993                     669,533       $ 3.32 - $17.50
               Granted                                            1,325,000       $10.75 - $15.25
               Exercised                                           (111,000)      $ 5.25 - $11.50
               Canceled                                            (535,000)      $14.50 - $17.50
                                                                    -------

               Outstanding at December 31, 1994                   1,348,533       $ 3.32 - $17.50
               Granted (A) (B) (C) (D)                              912,000       $11.75 - $12.88
               Exercised                                             (3,750)      $ 6.50
               Canceled (B) (D)                                    (248,658)      $ 3.32 - $17.50
                                                                 ----------

               Outstanding at December 31, 1995                   2,008,125       $ 5.25 - $14.50
                                                                  =========

               Exercisable at December 31, 1995                   1,289,250
</TABLE>


               (A) In January 1995, the Company issued 637,000 options to
               purchase common stock at $12.88 per share to various Forschner
               employees, officers and directors. These options are exercisable
               in four equal increments over the next three years starting with
               the grant date.


                                      F-20

<PAGE>
<PAGE>



               (B) Included as granted are options to purchase 25,000 shares of
               common stock at $11.75 per share to a former director, which
               replaced the same number of options granted in 1993 at $17.50 per
               share, that were canceled concurrently. The newly issued options
               retain vesting rights of the options they replaced.

               (C) In December 1995, the Company issued a warrant to purchase
               100,000 shares of common stock at $12.50 per share to an officer
               of the Company. The warrant is exercisable in four equal
               increments over three years starting with the grant date.

               (D) Included as canceled are 150,000 options to purchase common
               stock at $12.88 per share which were issued to a director in
               January 1995. At the same time options covering 150,000 shares
               were granted to another director at $12.50 per share. These
               options are exercisable in four equal increments over three years
               starting with the grant date.

(12)    COMMITMENTS AND CONTINGENCIES
               Forschner has minimum purchase requirements under an agreement
               with its principal Swiss Army Knife and cutlery supplier (See
               Note 3).

               At December 31, 1995, minimum rental payment commitments for
               office and warehouse space leased by Forschner under operating
               leases are:
 
                             1996                            $   1,209,000
                             1997                                1,333,000
                             1998                                1,331,000
                             1999                                1,333,000
                             2000                                1,270,000
                             Thereafter                            810,000

               During the years ended December 31, 1995, 1994 and 1993, rent
               expense was approximately $1,094,000, $945,000 and $629,000,
               respectively.

               As of February 2, 1996, Forschner has open contracts to purchase
               19,000,000 Swiss francs as a hedge against future purchase of
               inventories.

               The Company maintains split dollar life insurance agreements
               covering two members of the Board of Directors. Primarily, these
               policies can only be canceled upon the mutual agreement of the
               Company and the insured. However, if these policies were canceled
               at December 31, 1995, the Company would receive in cash an amount
               equal to the lesser of the cash surrender value or cumulative
               premiums paid to date on these policies which was approximately
               $3,045,000. Under the terms of these life insurance policies, the
               Company will make approximate future premium payments, if the
               policies remain in force, as follows:

                             1996                              $ 629,984
                             1997                                582,484
                             1998                                597,484
                             1999                                612,484
                             2000                                492,469
                             Thereafter                        1,002,224


                                      F-21

<PAGE>
<PAGE>

               In 1993, Forschner's Board of Directors adopted a charitable
               insurance program that will enable Forschner to make a commitment
               to the Victorinox-Swiss Army Knife Foundation (the "Foundation"),
               a foundation which engages in various charitable activities
               including the promotion of athletic events for underprivileged
               urban youth, as well as a broad range of charities. In 1994,
               Forschner made a special $1.5 million contribution in the form of
               cash and common stock to the Foundation. Under the program,
               Forschner owns, is the beneficiary of, and pays all the premiums
               for life insurance policies on the lives of all Board members.
               Pursuant to the program, upon the death of each Director, the
               Company will retain a share of the insurance proceeds equal to
               the cumulative premiums paid by the Company for the policy on
               that Director's life. One half of any additional insurance
               proceeds received upon the death of an insured Director will be
               used to fulfill charitable pledges made to the Victorinox-Swiss
               Army Knife Foundation. The remaining half of the additional
               proceeds will be used to fulfill charitable pledges recommended
               by the individual Directors. Forschner is generally bound to
               continue to pay all premiums on the policies for the lives of the
               insured Directors or, in the case of the Chairman of the
               Management Committee, as long as he is an officer or a board
               member or agrees to serve as a consultant to the Company.
               Forschner will make approximate future premium payments related
               to these programs as follows:

                             1996                              $ 1,115,194
                             1997                                1,115,194
                             1998                                1,115,194
                             1999                                1,115,194
                             2000                                1,115,194
                             Thereafter                          8,204,744

               Under existing federal tax laws, the receipt by Forschner of the
               proceeds from an insurance policy upon the death of a director
               would not result in regular taxable income to the Company;
               however, Forschner may be subject to alternative minimum tax on a
               portion of the receipts. When Forschner makes cash contributions
               to a designated charity, it will be entitled to a tax deduction
               equivalent to the sum of those contributions. The extent of the
               utilization of this deduction in that year will depend upon
               Forschner's taxable income, since the Company is entitled to
               claim as charitable deductions only 10% of its taxable income in
               any year. However, these deductions may be carried forward for
               tax purposes for a period of five years.

               For the policies obtained under the charitable insurance program
               in existence at December 31, 1995, based upon estimates prepared
               by Forschner's insurance agent, the anticipated expense to be
               recorded as a result of the difference between premiums paid and
               increases in cash surrender value of the related policies, is
               estimated to be less than $150,000 each year through 1998.
               Subsequent to 1998, it is estimated that there will be a minor
               positive impact on earnings.

               The Company entered into an employment agreement dated as of
               January 2, 1996 with a director of the Company who, until
               December 13, 1995, was Co-Chairman of the Board and Chief
               Executive Officer of the Company. The agreement provides that the
               former Co- Chairman shall be employed in an executive capacity
               with the Company and shall be available to consult with and
               advise the Company on such matters as might be requested by
               senior management of the Company for at least eighty-five hours
               per month on issues dealing with the maintenance of corporate
               trademarks, corporate legal matters, and strategic support
               relative to strategic relations with Victorinox Cutlery Company,
               the Company's key supplier.


                                      F-22


<PAGE>
<PAGE>

               The former Co-Chairman is to be paid a salary of $140,000 per
               annum and, during 1996, a one-time bonus of $300,000. The
               agreement, which has a term of five years, also provides that
               following the termination of the agreement, this individual would
               be prohibited from competing, with certain exceptions, with the
               business of the Company for a period of three years.

               During the normal course of business, Forschner was involved in a
               legal action in which a former employee had filed a complaint
               against Forschner and Forschner's former Co-Chairman and Chief
               Executive Officer alleging age discrimination in connection with
               the plaintiff's employment with Forschner, wrongful discharge and
               other causes of action relating to plaintiff's discharge from
               Forschner. The plaintiff was seeking damages of an unspecified
               amount. This legal action was settled in December 1995.

               In 1994, in a case originally brought by Forschner against Arrow
               Trading Co., Inc. ("Arrow") in September 1992 in the District
               Court for the Southern District of New York, the U.S. Court of
               Appeals for the Second Circuit reversed a judgment originally
               issued in the Company's favor and held that the use of "Swiss
               Army" on Chinese-made knives could not be enjoined on grounds of
               geographic misdescriptiveness. On remand, the District Court
               ruled that Arrow had violated Section 43(a) of the Lanham Act and
               New York common law in connection with its sale of Chinese-made
               multi-bladed pocketknives which Arrow called "Swiss Army Knives".
               The court found that Forschner had proved its contention that
               Arrow engaged in unfair competition and held that "Arrow,
               although free to use the phrase 'Swiss Army Knife' to designate
               its product, must amply distinguish it from the Forschner
               product." The court is considering the scope of an order
               determining how Arrow must differentiate its product. The Company
               intends to utilize all reasonable means to safeguard the public
               from being misled by inferior imitation products. Management and
               legal counsel believe that the outcome of this litigation will
               not result in damages or other costs that would have a material
               adverse effect on the financial position of the Company.

               In addition, the Company is involved in certain legal matters
               relating to trademark, patent, and other general business
               matters. Management believes that the outcome of these legal
               matters will not have a material adverse effect on the financial
               position and results of operations of the Company.












                                      F-23

<PAGE>
<PAGE>



(13)    QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      Quarter Ended
                                       ---------------------------------------------------------------
                                        March 31         June 30         September 30      December 31
                                       ---------        ---------       -------------     ------------
<S>                                    <C>              <C>               <C>               <C>         
1995
Net sales                              $ 29,369,721     $ 25,925,259      $ 30,186,155      $ 41,213,651
Gross profit                             10,700,594        8,715,449        10,466,106        14,382,202
Income before income tax
   provision                              2,194,832          538,773           540,331         2,361,925
Net income                                1,270,782          218,183           196,290         1,427,961
Net income per share                $          0.15  $          0.03   $          0.02   $          0.18

1994
Net sales                               $27,049,038      $39,935,320       $37,264,291       $40,188,671
Gross profit                             10,772,990       13,375,373        15,212,347        16,442,848
Income before income tax
   provision                              2,658,072        2,383,669         5,927,326         5,023,558
Net income                                1,539,024        1,380,144         3,431,922         3,008,640
Net income per share                 $         0.21    $        0.17     $        0.42    $         0.37
</TABLE>





               The decrease in net sales and gross profits in the second and
               third quarter of 1995 versus 1994, is due primarily to sales to a
               single customer for a special promotional program, which ended in
               the first quarter of 1995.


                                      F-24

<PAGE>
<PAGE>


                          THE FORSCHNER GROUP, INC. AND SUBSIDIARIES

                        SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

                     FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993


<TABLE>
<CAPTION>
                Column A                      Column B       Column C        Column D        Column E

                                                             Additions
                                             Balance At     Charged to
                                             Beginning      Costs and                       Balance At
              Classification                 of Year        Expenses        Deductions     End of Year
Year Ended December 31, 1995:
<S>                                           <C>               <C>              <C>         <C>  
   Allowance for Doubtful Accounts            $   755,000       $220,000         $  -        $   975,000
                                              ===========       ========         =======     ===========
   Inventory Reserve                          $   750,000       $168,000                     $   918,000
                                              ===========       ========         $  -        ===========
Year Ended December 31, 1994:
   Allowance for Doubtful Accounts            $   710,000      $  45,000         $  -        $   755,000
                                              ===========      =========                     ===========
   Inventory Reserve                          $   201,000       $549,000         $  -        $   750,000
                                              ===========       ========         =======     ===========
Year Ended December 31, 1993:
   Allowance for Doubtful Accounts             $1,087,000   $     -            ($377,000)    $   710,000
                                               ==========   ============        ========     ===========
   Inventory Reserve                          $   440,000   $     -            ($239,000)    $   201,000
                                              ===========   ============       =========     ===========
</TABLE>


                                      F-25

                                  STATEMENT OF DIFFERENCES
                                  ------------------------

The registered trademark symbol shall be expressed as............. 'r'
The trademark symbol shall be expressed as........................ 'tm'
<PAGE>
<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   ---------


                                    EXHIBITS

                                       TO

                                    FORM 10-K

                                      UNDER

                       THE SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1995

                                   ---------

                            THE FORSCHNER GROUP, INC.

             (Exact name of registrant as specified in its charter)

                          Commission File No. 0-1282-3





<PAGE>
<PAGE>



                                  EXHIBIT INDEX

<TABLE>
<CAPTION>


         Exhibit Title                                                      Exhibit No.   Page
         -------------                                                      ----------    ----
<S>      <C>                                                                  <C>
(2)      Not Applicable

(3)      (A)    Articles of Incorporation, as amended, incorporated
                by reference to the Exhibits to Annual Report on
                Form 10-K for the fiscal year ended December 31,
                1993.                                                             *

         (B)    By-Laws, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1992.                                      (3)-1

(4)      Instruments defining the rights of security holders, including indentures:

         (A)    Excerpts from Certificate of Incorporation, as
                amended, incorporated by reference to Exhibit 3(a)
                hereto.                                                           *

         (B)    Excerpts from By-Laws, as amended, incorporated by
                reference to the Exhibits from Annual Report on
                Form 10-K for the fiscal year ended December 31,
                1992.                                                             *

(9)      Not Applicable.

(10)     Material Contracts

         (A)    Employment Agreement dated as of September 15, 1983
                between Forschner and Michael M. Weatherly,
                incorporated by reference to the Exhibits to
                Registration Statement on Form S-18, No. 2-87357-B.               *

         (B)    1983 Stock Option Plan, incorporated by reference
                to the Exhibits to Annual Report on Form 10-K for
                the fiscal year ended December 31, 1990.                          *

         (C)    Letter Agreement dated December 12, 1983 between
                Victorinox Cutlery Company and R.H. Forschner Co.,
                Inc.                                                              *

         (D)    Mutual Agreement dated as of October 20, 1986 between Victorinox
                Cutlery Company and The
                Forschner Group, Inc.                                             *


</TABLE>

<PAGE>
<PAGE>

<TABLE>
<S>      <C>                                                                  <C>
         (E)    Letter Agreement dated as of October 20, 1986 between Victorinox
                Cutlery Company and The
                Forschner Group, Inc.                                             *

         (F)    Letter Agreement dated August 24, 1988 between The
                Forschner Group, Inc. and Recta S.A.                              *

         (G)    Mutual Agreement dated October 25, 1988 between
                Victorinox Cutlery Co. and The Forschner Group,
                Inc.                                                              *

         (H)    Letter Agreement dated June 12, 1989 between Victorinox Cutlery
                Co. and The Forschner Group, Inc., incorporated by reference to
                the Exhibits to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1989.                                          *

         (I)    Agreement to Lease dated June 14, 1990 between The
                Forschner Group, Inc. and Petran Trap Falls
                Associates, incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1990.                              *

         (J)    Security agreement dated January 31, 1991 between
                The Forschner Group, Inc. and Connecticut National
                Bank, incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year
                ended December 31, 1989.                                          *

         (K)    Security agreement dated January 31, 1991 between
                Swiss Army Brands Ltd. and Connecticut National
                Bank, incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year
                ended December 31, 1989.                                          *

         (L)    Security agreement dated January 31, 1991 between
                Victorinox of Switzerland, Ltd. and Connecticut
                National Bank, incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1989.                              *

         (M)    Security agreement dated January 31, 1991 between
                Excelsior Advertising, Inc. and Connecticut
                National Bank, incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1989.                              *

</TABLE>

                                       ii

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<PAGE>


<TABLE>
<S>      <C>                                                                  <C>
         (N)    Agreement of guarantee and suretyship dated January
                31, 1991 by Swiss Army Brands Ltd. in favor of
                Connecticut National Bank, incorporated by
                reference to the Exhibits to Annual Report on Form
                10-K for the fiscal year ended December 31, 1989.                 *

         (O)    Agreement of guarantee and suretyship dated January
                31, 1991 by Victorinox of Switzerland, Ltd. in
                favor of Connecticut National Bank, incorporated by
                reference to the Exhibits to Annual Report on Form
                10-K for the fiscal year ended December 31, 1989.                 *

         (P)    Agreement of guarantee and suretyship dated January
                31, 1991 by Excelsior Advertising Inc. in favor of
                Connecticut National Bank, incorporated by
                reference to the Exhibits to Annual Report on Form
                10-K for the fiscal year ended December 31, 1989.                 *

         (Q)    Life insurance agreement dated as of December 7,
                1991 between The Forschner Group, Inc. and Stanley
                R. Rawn, Jr., as Trustee u/a dtd. December 9, 1986
                between Louis Marx, Jr. and Stanley R. Rawn, Jr.,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1992.                                                *

         (R)    Amended and Restated Loan Agreement dated June 18,
                1992 between The Forschner Group, Inc. and The
                Connecticut National Bank (now known as Shawmut
                Bank Connecticut, N.A.), incorporated by reference
                to the Exhibits to Annual Report on Form 10-K for
                the fiscal year ended December 31, 1992.                          *

         (S)    Letter agreement dated June 18, 1992 between The
                Forschner Group, Inc. and The Connecticut National
                Bank, incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year
                ended December 31, 1992.                                          *

         (T)    License Agreement dated June 30, 1992 between The
                Forschner Group, Inc. and Precise Imports
                Corporation, incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1992.                              *

         (U)    Letter agreement dated November 11, 1992 between
                The Forschner Group, Inc. and Michael M. Weatherly,
                incorporated by reference to the Exhibits to Annual
</TABLE>


                                      iii
<PAGE>
<PAGE>
<TABLE>
<S>      <C>                                                                  <C>
                Report on Form 10-K for the fiscal year ended
                December 31, 1992.                                                *

         (V)    Life insurance agreement dated December 24, 1992
                between The Forschner Group, Inc. and Louis Marx,
                Jr., as Trustee u/a dtd. as of October 24, 1988
                between Stanley R. Rawn, Jr. and Barbara Rawn and
                Louis Marx, Jr., incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1992.                              *

         (W)    License Agreement dated as of January 1, 1993 between Cuisine de
                France Limited and Coutel 'Innov, incorporated by reference to
                the Exhibits to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1992.                                          *

         (X)    Mutual Agreement dated April 6, 1992 between The
                Forschner Group, Inc. and Victorinox Cutlery
                Company, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1992.                                          *

         (Y)    Stock Purchase Agreement dated May 17, 1993 between
                The Forschner Group, Inc. and K.P.A., Inc. (now
                known as SweetWater, Inc.), incorporated by
                reference to the Exhibits to Registration Statement
                on Form S-1, No. 33-71036, filed by SweetWater, Inc.              *

         (Z)    1993 Stock Option Plan, incorporated by reference
                to the Exhibits to Annual Report on Form 10-K for
                the fiscal year ended December 31, 1993.                          *

         (AA)   First Modification to Amended and Restated Loan
                Agreement dated as of August 13, 1993 between The
                Forschner Group, Inc. and Shawmut Bank Connecticut,
                N.A., incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                          *

         (BB)   Second Modification to Amended and Restated Loan
                Agreement dated as of February 17, 1994 between The
                Forschner Group, Inc. and Shawmut Bank Connecticut,
                N.A., incorporated by reference to the Exhibits to
                Annual Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                          *
</TABLE>


                                       iv

<PAGE>
<PAGE>


<TABLE>
<S>      <C>                                                                  <C>
         (CC)   Commercial Promissory Note dated February 17, 1994
                of The Forschner Group, Inc. in the principal
                amount of $15,000,000, incorporated by reference to
                the Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.                              *

         (DD)   Lease dated May 3, 1993 between One Research Drive
                Associates Limited Partnership and The Forschner
                Group, Inc., incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.                              *

         (EE)   License Agreement dated as of July 1, 1993 between
                Cuisine de France Limited and Coutel 'Innov,
                incorporated by reference to the Exhibits to Annual
                Report on Form 10-K for the fiscal year ended
                December 31, 1993.                                                *

         (FF)   Life insurance agreement dated as of December 24,
                1992 between The Forschner Group, Inc. and Louis
                Marx, Jr., incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.                              *

         (GG)   Life insurance agreement dated as of September 24,
                1993 between The Forschner Group, Inc. and Louis
                Marx, Jr., incorporated by reference to the
                Exhibits to Annual Report on Form 10-K for the
                fiscal year ended December 31, 1993.                              *

         (HH)   Life insurance agreement dated as of September 24,
                1993 between The Forschner Group, Inc. and James D.
                Rawn, as Trustee u/a dtd. as of June 4, 1992
                between Louis Marx, Jr., Grantor and James D. Rawn,
                Trustee, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                          *

         (II)   Mutual Agreement dated December 21, 1993 between
                The Forschner Group, Inc. and Victorinox Cutlery
                Company, incorporated by reference to the Exhibits
                to Annual Report on Form 10-K for the fiscal year
                ended December 31, 1993.                                          *

         (JJ)   1994 Stock Option Plan, incorporated by reference
                to the Exhibits to Registration Statement on Form
                S-8, No. 33-87078 filed by The Forschner Group, Inc.              *

</TABLE>

                                        v

<PAGE>
<PAGE>


<TABLE>
<S>      <C>                                                                  <C>
         (KK)   Services Agreement dated as of July 29, 1994
                between The Forschner Group, Inc. and Brae Group,
                Inc., incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the fiscal
                quarter ended September 30, 1994.                                 *

         (LL)   Non-Incentive Stock Option Agreement dated as of
                July 29, 1994 between The Forschner Group, Inc. and
                Brae Group, Inc., incorporated by reference to the
                Exhibits to Quarterly Report on Form 10-Q for the
                fiscal quarter ended September 30, 1994.                          *

         (MM)   Consulting Agreement dated as of December 7, 1991
                by and between The Forschner Group, Inc. and Louis
                Marx, Jr.                                                         *

         (NN)   Letter Agreement dated June 9, 1994 between The
                Forschner Group, Inc. and Forschner Enterprises,
                Inc. relating to the purchase by Forschner
                Enterprises, Inc. of shares of Tigera Group, Inc.                 *

         (OO)   Third Modification to Amended and Restated Loan
                Agreement dated as of September 30, 1994 between
                The Forschner Group, Inc. and Shawmut Bank
                Connecticut, N.A.                                                 *

         (PP)   First Amendment to Lease dated June 16, 1994
                between The  Forschner Group, Inc. and Petran Trap
                Falls Associates.                                                 *

         (QQ)   Restricted Stock Award Agreement dated as of
                December 12, 1994 between The Forschner Group, Inc.
                and Stanley R. Rawn, Jr.                                          *

         (RR)   Life insurance agreement dated as of April 15, 1994
                between The Forschner Group, Inc. and Lawrence T.
                Warble, as Trustee u/a dtd. as of March 21, 1994
                between Stanley R. Rawn, Jr., Grantor and Lawrence
                T. Warble, Trustee.                                               *

         (SS)   Agreement dated June 30, 1995 between The Forschner
                Group, Inc. and Bill-Mar Specialty Company, Inc.,
                incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the fiscal
                quarter ended June 30, 1995.                                      *

         (TT)   Agreement dated October 6, 1995 between The
                Forschner Group, Inc. and James W. Kennedy,

</TABLE>


                                       vi
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<TABLE>
<S>      <C>                                                                  <C>

                incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the fiscal
                quarter ended September 30, 1995.                                 *

         (UU)   Letter agreement dated February 15, 1995 between
                The Forschner Group, Inc. and Harry Thompson,
                incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the fiscal
                quarter ended September 30, 1995.                                 *

         (VV)   Letter agreement dated October 25, 1995 between The
                Forschner Group, Inc. and Harry Thompson,
                incorporated by reference to the Exhibits to
                Quarterly Report on Form 10-Q for the fiscal
                quarter ended September 30, 1995.                                 *

         (WW)   Employment agreement dated as of January 2, 1996
                between The Forschner Group, Inc. and James W.
                Kennedy.                                                     (10)-1

         (XX)   Warrant dated as of December 13, 1995 between The
                Forschner Group, Inc. and J. Merrick Taggart.                (10)-2

         (YY)   Letter Agreement dated December 18, 1995 between
                The Forschner Group, Inc. and Victorinox Cutlery
                Company.                                                     (10)-3


(11)     Statement re computation of per share earnings is not required because
         the relevant computations can be clearly determined from the material
         contained in the financial statements included herein.

(12)     Not applicable.

(13)     Not applicable.

(16)     Not Applicable.

(18)     Not Applicable.

(21)     Subsidiaries of Registrant.                                             21

(22)     Not Applicable.

(23)     Consents of experts and counsel:  Consent of Arthur Andersen LLP.       23

(27)     Not Applicable.

</TABLE>

                                       vii

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<TABLE>
<S>      <C>                                                                  <C>

(28)     Not Applicable.

(99)     Not Applicable.



------------------------
*    Incorporated by reference


                                      viii



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