<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C., 20549

                                   FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934


   Special Financial Report For Only The Fiscal Year Ended December 31, 1996

                       Commission File Number: 333-18859

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

                         INTERNATIONAL HOME FOODS, INC.
             (Exact name of registrant as specified in its charter)


             DELAWARE                                     13-3377322
   (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                     Identification No.)

                  1633 LITTLETON ROAD, PARSIPPANY, N.J. 07054
              (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (201 359-9920)

        Securities registered Pursuant to Section 12(b) of the Act: None


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 [ ]  No  [X]

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









<PAGE>   2


                         INTERNATIONAL HOME FOODS, INC.

                                    PART II


ITEM  8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

              The consolidated financial statements and report of the
         independent accountants for the fiscal year 1996 only are included in
         this Special Financial Annual Report.



<TABLE>
<CAPTION>
                                                                                                      Page No.


              <S>                                                                                         <C>
              Consolidated balance sheet as of December 31, 1996                                          1

              Consolidated statement of income for the year ended                                         2
              December 31, 1996

              Consolidated statement of stockholders' deficiency for                                      3
              the year ended December 31, 1996

              Consolidated statement of cash flows for the year                                           4
              ended December 31, 1996

              Notes to consolidated financial statements                                                 5-23

              Report of Independent Accountants                                                           24

              FINANCIAL STATEMENT SCHEDULES
</TABLE>

         All financial statement schedules have been omitted either because the
         information is not required or is otherwise included in the financial
         statements and notes thereto.


                                    PART IV

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

         a)   Financial Statements - See index above.

         b)   Exhibits - Exhibits to this report are filed as part of
              this report as set forth in the Index to Exhibits on pages 1 and
              2 hereof.






<PAGE>   3


                                   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, in the City of
Parsippany, State of New Jersey.

                               INTERNATIONAL HOME FOODS, INC.


                               By: /s/ C. DEAN METROPOULOS
                                  --------------------------------------------
                                  C. Dean Metropoulos, Chief Executive Officer


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 date indicated.

<TABLE>
<CAPTION>
            Signature                                     Capacity                                        Date
            ---------                                     --------                                        ----    
<S>                                       <C>                                                         <C>
/s/   C.DEAN METROPOULOS
-----------------------------------       Chairman of the Board and Chief Executive                    May 15, 1997
      C. Dean Metropoulos                 Officer (Principal Executive Officer)

/s/   N. MICHAEL DION
-----------------------------------       Chief Financial Officer                                      May 15, 1997
      N. Michael Dion                     (Principal Financial and Accounting Officer)

/s/   L. HOLLIS JONES
-----------------------------------       Director                                                     May 15, 1997
      L. Hollis Jones

      THOMAS O. HICKS
-----------------------------------       Director                                                     May 15, 1997
      Thomas O. Hicks

/s/   CHARLES W. TATE
-----------------------------------       Director                                                     May 15, 1997
      Charles W. Tate

/s/   ALAN B. MENKES
-----------------------------------       Director                                                     May 15, 1997
      Alan B. Menkes

/s/   MICHAEL J. LEVITT
-----------------------------------       Director                                                     May 15, 1997
      Michael J. Levitt

      M. L. LOWENKRON
-----------------------------------       Director                                                     May 15, 1997
      M. L. Lowenkron

      ROGER T. STAUBACH
-----------------------------------       Director                                                     May 15, 1997
      Roger T. Staubach

</TABLE>



<PAGE>   4

                         INTERNATIONAL HOME FOODS, INC.
                           CONSOLIDATED BALANCE SHEET
                               DECEMBER 31, 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<S>                                                            <C>            
ASSETS

CURRENT ASSETS:
     Cash and cash equivalents                                 $        45,859
     Accounts receivable, net of allowances                             48,801
     Inventories                                                       129,205
     Prepaid expenses and other current assets                           8,197
     Deferred income taxes                                              11,571
                                                               ---------------
              Total current assets                                     243,633

Property, plant and equipment, net                                     186,002
Intangible assets, net                                                 153,938
Deferred income taxes                                                  353,034
Other assets                                                            31,664
                                                               ---------------
              Total assets                                     $       968,271
                                                               ===============

LIABILITIES

CURRENT LIABILITIES:
       Due to banks                                            $         9,278
       Current portion of long-term debt                                26,000
       Amount payable to minority stockholder                           16,556
       Accounts payable                                                 18,679
       Accrued salaries, wages, and benefits                            14,379
       Accrued advertising and promotion                                38,127
       Accrued interest                                                 10,843
       Other accrued liabilities                                        28,151
                                                               ---------------
           Total current liabilities                                   162,013

Long-term debt                                                       1,044,000
Postretirement benefits obligation                                      16,689
Other noncurrent liabilities                                             9,764
                                                               ---------------
              Total liabilities                                      1,232,466

Commitments and contingencies

STOCKHOLDERS' DEFICIENCY

Preferred stock - par value $.01 per share; authorized,        $          --
     100,000,000 shares; no shares issued or outstanding
Common stock - par value $.01 per share; authorized,
     1,900,000,000 shares; issued and outstanding
     330,000,000 shares                                                  3,300
Additional paid-in capital                                            (263,999)
Accumulated deficit                                                     (1,598)
Former Parent Company's investment and advances                           --
Foreign currency translation adjustment                                 (1,898)
                                                               ---------------
              Total stockholders' deficiency                          (264,195)
                                                               ---------------
     Total liabilities and stockholders' deficiency            $       968,271
                                                               ===============
</TABLE>


See accompanying notes to consolidated financial statements.



                                       1

<PAGE>   5

                         INTERNATIONAL HOME FOODS, INC.
                        CONSOLIDATED STATEMENT OF INCOME
                          YEAR ENDED DECEMBER 31, 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)






<TABLE>
<S>                                              <C>     
Net sales                                        $942,792
Cost of sales                                     444,879
                                                 --------
      Gross profit                                497,913

Marketing expenses                                191,527
Selling, general, and administrative expenses     148,903
Provision for restructuring and other charges       4,308
                                                 --------
      Income from operations                      153,175

Interest expense                                   17,072
Interest income and other, net                        177
                                                 --------
      Income before provision for income taxes    136,280
Provision for income taxes                         53,319
                                                 --------
      Net income                                 $ 82,961
                                                 ========
</TABLE>




See accompanying notes to consolidated financial statements.


                                       2

<PAGE>   6

                         INTERNATIONAL HOME FOODS, INC.
         CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                          YEAR ENDED DECEMBER 31, 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<S>                                                       <C>          
Common Stock:
     Balance at beginning of year                         $          --
     Effect of merger transaction - issued
        330,000,000 shares                                          3,300
                                                          ---------------
     Balance at end of year                               $         3,300
                                                          ===============
Additional Paid-in Capital:
     Balance at beginning of year                         $          --
     Effect of merger transaction                                (263,999)
                                                          ---------------
     Balance at end of year                               ($      263,999)
                                                          ===============
Foreign Currency Translation Adjustment:
     Balance at beginning of year                         $          --
     Effect of merger transaction                                  (1,662)
     Translation adjustment for the period
        November 1, 1996 to December 31, 1996                        (236)
                                                          ---------------
     Balance at end of year                               ($        1,898)
                                                          ===============
Former Parent Company's Investment and Advances:
     Balance at beginning of year                         $       384,997
     Net income                                                    84,559 *
     Other activity, net **                                      (101,256)
     Effect of merger transaction                                (630,661)
     Transfer to Common Stock, Additional Paid-in
      Capital, and Foreign Currency Translation
       Adjustment on November 1, 1996                             262,361
                                                          ---------------
     Balance at end of year                               $          --
                                                          ===============
Accumulated Deficit:
     Balance at beginning of year                         $          --
     Net loss for the period November 1, 1996 to
       December 31, 1996                                           (1,598)
                                                          ---------------
     Balance at end of year                               ($        1,598)
                                                          ===============
</TABLE>


 * For the period January 1, 1996 to October 31, 1996
** Consists principally of advances, withdrawals, dividends, and foreign
   currency translation adjustments.





See accompanying notes to consolidated financial statements.



                                       3
<PAGE>   7


                         INTERNATIONAL HOME FOODS, INC.
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                          YEAR ENDED DECEMBER 31, 1996
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





<TABLE>
<S>                                                                 <C>            
OPERATING ACTIVITIES:
     Net income                                                     $        82,961
     Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization                                         19,019
       Deferred income taxes                                                 (1,032)
       Provision for restructuring and other charges                          4,308
     Changes in assets and liabilities:
       Accounts receivable                                                    1,253
       Inventories                                                           14,970
       Other current assets                                                  (3,133)
       Accounts payable                                                        (352)
       Accrued liabilities                                                   30,298
       Other                                                                 (2,342)
                                                                    ---------------
         Net cash provided by operating activities                          145,950
                                                                    ---------------

INVESTING ACTIVITIES:
     Purchases of plant and equipment, net                                  (11,905)
     Purchase of business, net of cash acquired                             (29,136)
                                                                    ---------------
         Net cash used in investing activities                              (41,041)
                                                                    ---------------
FINANCING ACTIVITIES:
     Increase in due to banks                                                 9,278
     Dividends paid to American Home Products Corporation                    (1,539)
     Redemption of common stock of AHFP and distribution
        to American Home Products Corporation                            (1,209,000)
     Change in former parent company's investment
       and advances, net                                                    (99,121)
     Issuance of long-term bank debt                                        670,000
     Issuance of Senior Subordinated Notes,                                 400,000
     Payment of debt issuance costs                                         (30,649)
     Retirement of Heritage long-term debt and accrued
       interest                                                             (40,763)
     Issuance of common stock, net of issuance costs                        242,744
                                                                    ---------------
         Net cash used in financing activities                              (59,050)
                                                                    ---------------

Effect of exchange rate changes on cash                                        --
                                                                    ---------------

Increase in cash and cash equivalents                                        45,859

Cash and cash equivalents at beginning of year                                 --
                                                                    ---------------

Cash and cash equivalents at end of year                            $        45,859
                                                                    ===============

Cash paid during the year for:
     Interest                                                       $         5,568
     Income taxes                                                   $           827
</TABLE>


See accompanying notes to consolidated financial statements.




                                       4


<PAGE>   8

                         INTERNATIONAL HOME FOODS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


(1)      DESCRIPTION OF BUSINESS, MERGER, AND ACQUISITION

         Background and Basis of Presentation

         On September 5, 1996, American Home Products Corporation ("AHP" or
         "Former Parent") and AHP Subsidiary Holding Corporation and other
         parties entered into an agreement ("Agreement") pursuant to which an
         affiliate ("Parent") of Hicks, Muse, Tate & Furst Equity Fund III,
         L.P. ("HM") acquired, effective November 1, 1996, an 80 percent
         interest in American Home Food Products, Inc. ("AHFP") and its
         subsidiary, M. Polaner, Inc., for approximately $1,226,000. In
         connection with the merger transaction ("Transaction"), AHP
         contributed all of its other food products businesses into AHFP.
         Effective November 1, 1996, these entities and businesses constitute
         International Home Foods, Inc. and subsidiaries ("Company"). In
         connection with the Agreement, AHFP received $264,000 of equity
         financing and incurred indebtedness of $1,070,000. Approximately
         $962,000 was used to redeem shares of common stock of AHFP which were
         indirectly held by AHP and $264,000 was distributed to AHP. At
         December 31, 1996, the Company has a liability to AHP of $16,556 for
         the unpaid redemption amount. As a result of the redemption, AHP
         continues to beneficially own approximately 20 percent of the Company.
         The Transaction has been accounted for as a leveraged recapitalization
         such that the Company's assets and liabilities remain at their
         historical bases for financial reporting purposes; for income tax
         purposes, the transaction has been treated as a taxable business
         combination such that the consolidated financial statements reflect a
         "step-up" in tax basis (see Note 8).

         Earnings, advances, withdrawals, dividends, foreign currency
         translation adjustments, and other transactions between the Company
         and AHP for periods prior to November 1, 1996 are reflected in Former
         Parent Company's Investment and Advances in the accompanying financial
         statements which are presented on a combined basis prior to November
         1, 1996 and on a consolidated basis from November 1, 1996 to December
         31, 1996. The combined financial statements for the period January 1,
         1996 to October 31, 1996 reflect the financial position, results of
         operations, and cash flows of the Company as if the Company was a
         stand-alone entity. The Company began presenting retained earnings
         (accumulated deficit) as a separate component of stockholders'
         deficiency effective November 1, 1996.

         The effects of the Transaction are summarized as follows:

<TABLE>
<S>                                                                                        <C>         
           Redemption and distribution to AHP Subsidiary Holding Corporation               ($1,225,556)
           Issuance of common stock                                                            264,000
           Fees                                                                                (21,256)
           Recognition of postretirement benefits obligation                                   (16,207)
           Deferred income taxes                                                               368,358
                                                                                          ------------
                                                                                          ($   630,661)
                                                                                          ============ 
</TABLE>





                                       5


<PAGE>   9
                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



         Background and Basis of Presentation (Continued)

         Pro forma unaudited net income (loss) for the year ended December 31,
         1996, assuming the Transaction had occurred at the beginning of 1996,
         would have been $31,241. The unaudited pro forma income does not
         purport to be indicative of what the Company's actual results of
         operations would have been had the Transaction been consummated on
         January 1, 1996 or to project the Company's results of operations for
         any future period.

         The accompanying financial statements have been prepared in accordance
         with generally accepted accounting principles and necessarily include
         amounts based on judgments and estimates made by management. Actual
         results could differ from these estimates. Estimates are used when
         accounting for potential bad debts, inventory obsolescence and
         spoilage, trade and promotion allowances, coupon redemptions,
         depreciation and amortization, deferred income taxes and tax valuation
         allowances, restructuring charges, and contingencies, among other
         items.

         Acquisition

         Immediately after the Transaction and effective November 1, 1996, the
         Company acquired Heritage Brands Holdings, Inc. and subsidiaries
         ("Heritage") for approximately $70,800, including the assumption of
         approximately $40,800 of debt, in a transaction accounted for using
         the purchase method of accounting. The excess of the purchase price of
         Heritage over the fair value of assets acquired and liabilities
         assumed resulted in goodwill and other intangible assets of
         approximately $59,100 (an increase of approximately $25,000 over the
         amount of Heritage's unamortized goodwill and intangible assets prior
         to the acquisition) which are being amortized over 20 years. The
         acquisition was not significant and, accordingly, pro forma financial
         information has not been provided. The results of operations and cash
         flows of Heritage have been included in the accompanying consolidated
         financial statements of the Company since November 1, 1996.

         Business

         The Company operates in one business segment which manufactures and
         markets a diversified portfolio of shelf-stable food products
         including entrees, side dishes, spreadable fruit products, and snacks,
         among others. The Company sells its products primarily in the United
         States and Canada and is not dependent on any single or major group of
         customers for its sales. The Company's canned pasta product line
         accounted for approximately 40-50 percent of consolidated sales for
         the year ended December 31, 1996.








                                       6

<PAGE>   10

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)




(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Principles of Combination/Consolidation

         For periods through October 31, 1996, the accompanying financial
         statements included the operations of the following indirect
         wholly-owned subsidiaries of AHP: American Home Food Products, Inc.
         and its subsidiary M. Polaner, Inc., American Home Foods, Inc., Luck's
         Incorporated, Canadian Home Products Limited, and certain related
         assets owned by AHP and its subsidiaries. Effective November 1, 1996,
         the consolidated operations of the Company include the aforementioned
         entities and Heritage (see Note 1). All significant intercompany
         balances and transactions have been eliminated in the combined and
         consolidated financial statements. The accompanying combined and
         consolidated financial statements are referred to herein as
         "consolidated" financial statements.

         Cash and Cash Equivalents

         All highly liquid investments with original maturities of three months
         or less are considered to be cash equivalents. The Company's cash and
         cash equivalents at December 31, 1996 consist of cash in banks and
         investments in the commercial paper of several companies.

         Inventories

         Inventories are valued at the lower of cost or market, determined on a
         first-in, first-out basis, and consist of materials, labor, and
         manufacturing overhead.

         Property, Plant and Equipment

         Property, plant, and equipment are stated at cost. Normal maintenance
         and repairs are expensed. Additions and improvements to provide
         necessary capacity, improve production efficiency, or modernize
         facilities are capitalized. Depreciation is calculated using the
         straight-line method over the estimated useful lives of the related
         assets, generally 40 years for buildings; 15 years for machinery and
         equipment; and five to 20 years for furniture and fixtures.

         Intangible and Other Assets

         Goodwill represents the excess of cost over the fair value of net
         assets acquired and is being amortized using the straight-line method
         over periods of 20-40 years. Deferred financing costs relate to costs
         incurred in connection with the agreements for bank and other
         indebtedness. Such costs are being amortized over the terms of the
         financings using the interest or straight-line method, as appropriate.
         Amortization of deferred financing costs is included in interest
         expense in the accompanying consolidated financial statements.





                                       7

<PAGE>   11


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



         Intangible and Other Assets (Continued)

         The Company periodically reviews goodwill to evaluate whether changes
         have occurred that would suggest that goodwill may be impaired based
         on the estimated cash flows of the entity acquired over the remaining
         amortization period. If this review indicates that the goodwill is not
         recoverable over its remaining useful life, the carrying amount of the
         goodwill is reduced by the estimated shortfall of cash flows on a
         discounted basis.

         During 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's
         adoption of this pronouncement in 1996 did not have a significant
         effect on the consolidated financial statements.

         Research and Development

         Research and development costs are charged to expense as incurred and
         amounted to $3,823 for the year ended December 31, 1996.

         Advertising

         Advertising costs are charged to expense as incurred and amounted to
         $58,551 for the year ended December 31, 1996.

         Former Parent Company's Investment and Advances

         Former Parent Company's Investment and Advances includes the
         stockholder's equity of the individual AHP subsidiaries as described
         in Note 1. The equity of the individual subsidiaries represents the
         original investment by AHP, plus accumulated earnings and advances,
         less withdrawals and dividends, and foreign currency translation
         adjustments. For periods prior to November 1, 1996, cash receipts were
         transferred to AHP by daily cash sweeps, and AHP made funds available
         for operating expenses.

         Foreign Currency Translation

         The assets and liabilities of the Company's foreign subsidiary,
         Canadian Home Products Limited, are translated into United States
         dollars at year-end exchange rates. Income, expense, and cash flow
         amounts are translated using monthly average exchange rates.
         Translation adjustments were accumulated in Former Parent Company's
         Investment and Advances through October 31, 1996 and, effective
         November 1, 1996, are accumulated as a separate component of
         stockholders' deficiency. Transaction gains and losses are reflected
         in other income (expense), net and have not been significant.

         Financial Instruments

         The cost of interest rate collars is amortized as interest expense
         over the terms of the related agreements. Interest expense is adjusted,
         if required, to reflect the interest rates included in these collar
         agreements.







                                       8

<PAGE>   12


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



         Income Taxes

         The Company's operations were included in the consolidated income tax
         returns of AHP through October 31, 1996. The Company was charged by
         AHP based on the statutory tax rates adjusted for permanent
         differences, but without regard for temporary differences.
         Accordingly, the Company's financial statements for periods prior to
         the Transaction do not reflect deferred tax assets or liabilities
         since those amounts were being provided for by AHP. Deferred tax
         assets and liabilities prior to the Transaction would have reflected
         temporary differences between assets and liabilities for financial
         reporting purposes and income tax purposes. Such temporary differences
         were primarily attributable to depreciation, allowances for doubtful
         accounts, and nondeductible reserves and were not significant through
         October 31, 1996. The income tax provision on a stand-alone basis for
         periods prior to November 1, 1996 would not differ materially from the
         income tax provision reflected in the accompanying consolidated
         financial statements.

         Effective November 1, 1996, the Company's operations are included in
         the consolidated federal income tax returns of its Parent. For the
         period November 1, 1996 to December 31, 1996, the Company's income tax
         provision has been prepared on a separate return basis, with deferred
         income taxes provided for differences in the financial statement and
         tax bases of assets and liabilities. The tax effects of the temporary
         differences which resulted from the "step-up" in tax basis (see Notes
         1 and 8) have been reflected in stockholders' deficiency as of
         November 1, 1996. The Company intends to permanently reinvest its
         undistributed Canadian earnings in the Canadian operations;
         accordingly, deferred income taxes, which would not be significant,
         have not been provided for the repatriation of such undistributed
         earnings.

 (3)     INVENTORIES

         Inventories as of December 31, 1996 are as follows:


<TABLE>
<S>                                                               <C>      
                    Raw materials                                 $  53,670
                    Work in progress                                  3,052
                    Finished goods                                   72,483
                                                                  ---------
                         Total                                    $ 129,205
                                                                  =========

</TABLE>





                                       9


<PAGE>   13


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(4)      PROPERTY, PLANT AND EQUIPMENT

         Property, plant, and equipment as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                 1996
                                                                              ----------
<S>                                                                           <C>       
                    Land                                                      $    4,589
                    Buildings and improvements                                   107,923
                    Machinery and equipment                                      185,867
                    Furniture and fixtures                                        19,917
                                                                              ----------
                                                                                 318,296
                         Accumulated depreciation and amortization               132,294
                                                                              ----------
                                                                              $  186,002
                                                                              ==========
</TABLE>

         Depreciation expense aggregated $15,683 for the year ended December
         31, 1996.

(5)      INTANGIBLE AND OTHER ASSETS

         Intangible assets as of December 31, 1996 are as follows:

<TABLE>
<CAPTION>
                                                                                1996
                                                                              --------
<S>                                                                           <C>     
                  Goodwill and tradenames                                     $169,749
                        Accumulated amortization                                15,811
                                                                              --------
                                                                              $153,938
                                                                              ========
</TABLE>

         Amortization of goodwill and tradenames aggregated $2,675 for the year
         ended December 31, 1996.

         Other assets at December 31, 1996 include deferred financing fees
         incurred in connection with the Company's issuance of long-term debt.
         Such costs aggregated $32,149; the related accumulated amortization at
         December 31, 1996 and amortization expense for the period November 1,
         1996 (date of debt issuance) to December 31, 1996 was $661.

(6)      ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES RETURNS AND ALLOWANCES

         The allowance for doubtful accounts and sales returns and allowances
         and their related activity for the year ended December 31, 1996 is as
         follows:

<TABLE>
<CAPTION>
                                                    Write-Offs and
                   Beginning         Charged      Reductions, Net of        Ending
                    Balance        to Expense         Recoveries           Balance 
                   ---------       ----------     ------------------      ---------
<S>                <C>                <C>                <C>                <C>  
                   $4,064             $563               $296               $4,331
</TABLE>







                                      10



<PAGE>   14

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


(7)      BUSINESS RESTRUCTURING AND OTHER CHARGES

         In December 1996, a pretax charge was recorded for severance costs of
         $3,240 and other charges (principally noncash) of $1,068.

         The severance charge covers both voluntary and involuntary
         terminations of approximately 125 employees, including management,
         sales and marketing, technical, and administrative personnel. Employee
         separations were substantially completed prior to December 31, 1996.

         During 1996, cash payments of $437 were charged against the business
         restructuring reserve. Management believes that the remaining reserves
         for business restructuring of $2,871 at December 31, 1996 are adequate
         to complete its plans. The remaining balance will result in future
         cash payments over the next year.

(8)      INCOME TAXES

         The provision for income taxes is as follows:

<TABLE>
<CAPTION>
                            Period from          Period from  
                         November 1,1996 to   January 1, 1996 to 
                         December 31, 1996    October 31, 1996
                         ------------------   ------------------
         <S>               <C>                <C>            
         Current:
            Federal        $          --      $        46,136
            Foreign                     41              1,228
            State                        2              6,944
                           ---------------    ---------------
                                        43             54,308
                           ---------------    ---------------
         Deferred:
            Federal                   (802)              --
            Foreign                    (76)              --
            State                     (154)              --
                           ---------------    ---------------
                                    (1,032)              --
                           ---------------    ---------------
                           ($          989)   $        54,308
                           ===============    ===============
</TABLE>

         For federal and state income tax purposes, the Transaction (see Note
         1) is a taxable business combination and is a qualified stock
         purchase. The buyer and seller have elected jointly to treat the
         Transaction as an asset acquisition under Section 338(h)(10) of the
         Internal Revenue Code of 1986, as amended. A preliminary allocation of
         the purchase price to the tax bases of assets and liabilities based on
         their respective estimated fair values at November 1, 1996 has been
         made for income tax purposes and will be finalized during 1997. In
         connection with the Transaction, the Company has recorded a deferred
         tax asset of approximately $368,000 at November 1, 1996 related to
         future tax deductions for the net excess of the tax bases of the
         assets and liabilities over the financial statement carrying amounts
         with a corresponding credit to additional paid-in capital.
         Historically, the Company has generated operating income and
         realization of the deferred tax assets is dependent upon the Company's
         ability to generate sufficient future taxable income which management
         believes is more likely than not.

                                       11

<PAGE>   15


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(8)      INCOME TAXES (Continued)

         The Company anticipates future taxable income after debt service and
         adjusting for the effects of the Transaction and acquisition discussed
         in Note 1 sufficient to realize the deferred tax assets existing at
         November 1, 1996 and December 31, 1996. Future taxable income is based
         on management's forecasts of the operating results of the Company and
         there can be no assurance that such results will be achieved.
         Management continually reviews such forecasts in comparison with
         actual results and expected trends. In the event management determines
         that sufficient future taxable income may not be generated to fully
         realize the deferred tax assets, the Company will provide a valuation
         allowance by a charge to income tax expense in the period of such
         determination.

         As discussed in Note 2, the Company's consolidated financial
         statements for periods prior to November 1, 1996 do not reflect
         deferred income taxes as all such taxes were provided for by AHP.
         Deferred tax assets and liabilities existing prior to the Transaction
         and those established as a result of the Transaction and the purchase
         of Heritage have been reflected on the accompanying consolidated
         balance sheet, effective November 1, 1996, as an adjustment to the
         Former Parent Company's Investment and Advances account or goodwill,
         as appropriate.

         The components of deferred tax assets at December 31, 1996 and
         November 1, 1996 are as follows:

<TABLE>
<CAPTION>
                                       December 31, 1996   November 1, 1996
                                        ---------------    ---------------
<S>                                     <C>                <C>            
Current deferred tax assets:
     Allowance for doubtful accounts    $         1,771    $         2,196
     Inventory reserves                           2,850             14,813
     Other accruals                               6,950              2,557
                                        ---------------    ---------------
Net current deferred tax assets                  11,571             19,566
Noncurrent deferred tax assets:
     Property, plant, and equipment              15,607             15,668
     Tradenames                                 187,689            189,909
     Goodwill                                   137,813            139,874
     Other                                          855                829
     Net operating loss carryforwards            14,070                727
     Valuation allowance                         (3,000)            (3,000)
                                        ---------------    ---------------
Net noncurrent deferred tax assets              353,034            344,007
                                        ---------------    ---------------
Net deferred tax assets                 $       364,605    $       363,573
                                        ===============    ===============
</TABLE>

         At December 31, 1996, the Company had a net operating loss for federal
         and state income tax purposes of approximately $35,500 which expires
         principally in 2011. The Company has established a $3,000 valuation
         allowance related to certain deferred tax assets for state purposes
         due to state limitations regarding the utilization of net operating
         loss carryforwards.





                                       12

<PAGE>   16


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(8)      INCOME TAXES (Continued)

         A reconciliation between the U. S. Federal statutory income tax rate
         and the Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
                                               Period from               Period from
                                           November 1, 1996           January 1, 1996
                                        to December 31, 1996       to October 31, 1996
                                        --------------------       --------------------
<S>                                                      <C>                      <C>
         U. S. federal statutory
            income tax rate                              35%                      35%
         State income taxes, net of
            federal benefit                               4%                       4%
         Nondeductible amortization
            of intangible assets                          -                        -
         Other, net                                      (1%)                      -
                                                        ----                    ----
         Effective income tax rate                       38%                      39%
                                                        ====                    ====
</TABLE>

(9)      LONG-TERM DEBT

         Long-term debt at December 31, 1996 is as follows:

<TABLE>
<CAPTION>
                                                                               1996
                                                                           ------------
<S>                                                                        <C>         
                  Senior secured bank facilities:
                      Tranche A                                            $    300,000
                      Tranche B                                                 200,000
                      Tranche C                                                 170,000
                                                                           ------------
                                                                                670,000
                  Senior Subordinated Notes                                     400,000
                                                                           ------------
                                                                              1,070,000
                  Less:  Current portion                                         26,000
                                                                           ------------
                           Long-term debt                                  $  1,044,000
                                                                           ============
</TABLE>

         In connection with the purchase of an 80 percent interest in the
         Company by an affiliate of HM from a subsidiary of AHP and the
         acquisition of Heritage and related assumption of Heritage's debt (see
         Note 1), the Company entered into a $770,000 Credit Agreement with
         Chase Manhattan Bank, Bankers Trust Company, and Morgan Stanley Senior
         Funding, Inc. and issued $400,000 of 10-3/8 percent Senior
         Subordinated Notes ("Notes"). The Credit Agreement provides for term
         loans ("Term Loans") in three tranches aggregating $670,000 and a
         revolving credit loan facility ("Revolver") of $100,000. At December
         31, 1996, there were no borrowings under the Revolver nor were any
         letters of credit outstanding.

         Tranche A of the Term Loans is a $300,000, 6-1/2-year facility;
         Tranche B of the Term Loans is a $200,000, eight-year facility; and
         Tranche C of the Term Loans is a $170,000, nine-year facility. Each
         tranche requires semi-annual principal payments in increasing amounts,
         and amounts paid under the Term Loans may not be reborrowed.
         Borrowings under the Term Loans and the Revolver bear interest based
         on either the London Interbank Offered Rate ("LIBOR"), or an Alternate
         Base Rate, as defined, plus applicable margins which range from 0.5
         percent to 3.5 percent. At December 31,






                                       13


<PAGE>   17


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(9)      LONG-TERM DEBT (Continued)

         1996, the rates in effect on Tranches A, B, and C were 8.0 percent,
         8.6 percent, and 9.1 percent, respectively. In accordance with the
         Credit Agreement, in February 1997, the Company entered into interest
         rate protection agreements to the extent necessary to provide that,
         when combined with the Notes, at least 50 percent of the Company's
         aggregate indebtedness is subject to either a fixed interest rate or
         interest rate protection through December 1998. Included in the Term
         Loans are certain Eurodollar loans which qualify as fixed interest
         under the terms of the Credit Agreement. In order to comply with
         required interest rate protection provisions, the Company also entered
         into an interest rate collar transaction that becomes effective in
         September 1997 and expires in December 1998. The notional amount of
         the collar is $135,000 with the cap set at 8 percent and the floor set
         at 5.25 percent. The agreement is with a financial institution having
         a credit rating (Moody's/S&P) of Aa3/A+, which minimizes
         non-performance risk.

         Borrowings and letters of credit issued under the Revolver are
         available to the Company until the earlier of March 31, 2003 or the
         date on which the Tranche A Term Loans mature or are repaid in full.
         The Company pays a commitment fee of 0.5 percent on the unused portion
         of the Revolver.

         The Company is required to make mandatory prepayments on the Term
         Loans and credit commitments under the Revolver will be mandatorily
         reduced based on (a) excess levels of cash flow, as defined; (b) all
         of the net proceeds from certain asset or subsidiary dispositions; and
         (c) the issuance of capital stock or the incurrence of certain
         indebtedness. At the Company's option, loans may be prepaid and credit
         commitments under the Revolver may be permanently reduced.

         Obligations under the Credit Agreement are unconditionally and
         irrevocably guaranteed by each of the Company's domestic subsidiaries.
         In addition, such obligations are collateralized by first priority or
         equivalent collateral interests in (a) all of the capital stock of, or
         other equity interests in, each domestic subsidiary of the Company and
         65 percent of the capital stock, or other equity interests in, each
         foreign subsidiary of the Company and (b) all tangible and intangible
         assets of the Company and its subsidiaries, subject to certain
         exceptions and qualifications.

         The Credit Agreement also contains a number of significant covenants
         that, among other things, restrict the ability of the Company to
         dispose of assets, incur additional indebtedness, repay other
         indebtedness, pay dividends, make investments or acquisitions, engage
         in mergers or consolidations, make capital expenditures, or engage in
         certain transactions with affiliates, and otherwise restrict corporate
         activities. In addition, under the Credit Agreement, effective
         beginning March 31, 1997, the Company is required to comply with
         specified minimum interest coverage, maximum leverage, and minimum
         fixed charge coverage ratios, as defined.



                                       14

<PAGE>   18


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)




(9)      LONG-TERM DEBT (Continued)

         The Notes are due on November 1, 2006 and require semi-annual interest
         payments. The Notes may be redeemed prior to November 1, 2000 in up to
         an aggregate principal amount of $160,000 with the proceeds of one or
         more equity offerings, as defined, by the Company under certain
         conditions at a redemption price of 110.375 percent. The Notes may
         also be redeemed prior to November 1, 2001 at a redemption price of
         100 percent upon the occurrence of a change in control, as defined.
         Except as discussed above, the Notes are not redeemable prior to
         November 1, 2001. The Notes will be redeemable, in whole or in part,
         at the Company's option at redemption prices decreasing from 105.188
         percent at November 1, 2001 to 100 percent on November 1, 2004 and
         thereafter.

         Each of the Company's subsidiaries (I.H.F.P., Inc., Luck's
         Incorporated, Canadian Home Products Limited, M. Polaner, Inc., and
         Heritage) fully and unconditionally guarantee the Notes, on a joint
         and several basis.

         The Notes contain certain restrictive covenants limiting, among other
         things (a) the incurrence of additional indebtedness; (b) the
         declaration or payment of dividends or other capital stock
         distributions or redemptions; (c) the redemption of certain
         subordinated obligations; (d) investments; (e) sales of assets; and
         (f) consolidations, mergers, and transfers of all or substantially all
         of the Company's assets.

         The Company filed a registration statement on Form S-4 pursuant to the
         Securities Act of 1933, which became effective on February 19, 1997,
         to register the Notes. The Company has issued a Prospectus to offer to
         exchange the unregistered Notes for registered Notes. The exchange
         offer expired on March 27, 1997 and all of the Notes have been
         exchanged.

         The fair value of the Company's debt at December 31, 1996 approximates
         its carrying value.

         Future principal payments on the Company's long-term debt at December
         31, 1996 are as follows:

<TABLE>
<S>                                     <C>               <C>          
                                        1997              $      26,000
                                        1998                     31,000
                                        1999                     41,000
                                        2000                     51,000
                                        2001                     58,500
                                        Thereafter              862,500
                                                          -------------
                                                          $   1,070,000
                                                          =============
</TABLE>






                                       15


<PAGE>   19


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(10)     EMPLOYEE BENEFIT PLANS

         The Company sponsors various retirement plans for substantially all of
         its employees. The Company sponsors two insignificant defined benefit
         pension plans for collectively-bargained employees of its Highspire
         and Canadian operations. It is the Company's policy to contribute the
         amounts necessary to meet the minimum funding requirements of defined
         benefit plans under applicable laws. The aggregate accumulated benefit
         obligation, projected benefit obligation, plan assets, and accrued
         pension costs of the Highspire and Canadian plans were $153, $154,
         $136, and $19, respectively, at December 31, 1996. Net periodic
         pension cost for the Highspire and Canadian plans was insignificant
         for the period presented. Assumptions used in accounting for these
         plans included a weighted-average discount rate of 7.5 percent, an
         expected long-term rate of return on plan assets of 7.5 percent, and a
         rate of increase in compensation levels of 0-3.5 percent.

         For the AHP defined benefit pension plans in which the Company
         participated prior to the Transaction, the amounts charged to the
         Company by AHP aggregated $3,188 for the period January 1, 1996 to
         October 31, 1996.

         Effective January 1, 1997, the Company established defined benefit
         plans for its salaried and collectively-bargained employees. Benefits
         earned under the plans will include service from November 1, 1996 to
         December 31, 1996; prior service cost for the two-month period was
         insignificant. Benefits under the plans will be based primarily on
         compensation levels and years of service.

         The Company provides certain health care and life insurance benefits
         for most of its retired employees. Generally, employees become
         eligible for benefits after attaining specified age and service
         requirements. In connection with the Transaction, at November 1, 1996,
         the Company has recorded its postretirement benefits obligation with a
         corresponding charge to paid-in capital. The following table sets
         forth the plan's funded status reconciled with amounts reported in the
         Company's consolidated balance sheet:

<TABLE>
<CAPTION>
                                                                  December 31, 1996          November 1, 1996
                                                                  -----------------          ----------------
<S>                                                                      <C>                      <C>     
         Accumulated postretirement benefit obligation:
              Retirees                                                   $      -                 $      -
              Fully eligible participants                                       -                        -
              Other active participants                                  ( 16,855)                 (16,207)
                                                                         --------                 -------- 
         Total benefits earned                                            (16,855)                 (16,207)
         Plan assets at fair value                                              -                        -
                                                                         --------                 -------- 
         Funded status                                                    (16,855)                 (16,207)
         Unrecognized net loss                                                166                        -
                                                                         --------                 -------- 
         Accrued postretirement benefit obligation                       ($16,689)                ($16,207)
                                                                         ========                 ========
</TABLE>




                                       16

<PAGE>   20


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(10)     EMPLOYEE BENEFIT PLANS (Continued)

         Net periodic postretirement benefit cost for the period from November
         1, 1996 to December 31, 1996 consisted of the following components:
<TABLE>
<S>                                                                                     <C> 
                  Service cost                                                          $245
                  Interest cost on postretirement benefit obligation                     237
                                                                                        ----
                       Net periodic postretirement benefit cost                         $482
                                                                                        ====
</TABLE>

         The discount rate used to measure the accumulated postretirement
         benefit obligation as of November 1, 1996 and December 31, 1996 was
         7.5 percent. The assumed health care cost trend rate used to measure
         the expected cost of benefits was 8.5 percent for 1996 and is assumed
         to trend downward to 6.0 percent for 2010 and thereafter. The health
         care trend rate has a significant effect on the amounts reported. For
         example, increasing the health care cost trend rate by one percentage
         point in each year would increase the accumulated postretirement
         benefit obligation as of December 31, 1996 by $3,686 and the service
         cost and interest components of the net periodic postretirement
         benefit cost for the period from November 1, 1996 to December 31, 1996
         by $100. The postretirement health care costs relating to the
         Company's participation in the AHP postretirement plan represented
         charges for actual retiree benefit costs based on the ratio of the
         Company's participants to total AHP participants and aggregated $3,239
         for the period January 1, 1996 to October 31, 1996.

         Effective November 1, 1996, the Company also sponsors a 401(k) defined
         contribution plan for nonunion employees. Contributions for the period
         November 1, 1996 to December 31, 1996 were insignificant. In periods
         prior to November 1, 1996, the Company participated in certain defined
         contribution plans sponsored by AHP. Expense recognized for these
         plans aggregated $955 for the period from January 1, 1996 to October
         31, 1996.

         The Company also participates in union-sponsored multiemployer
         pension, life insurance and health and welfare plans which provide
         benefits to union employees located at the Company's facility in
         Vacaville, CA. The Company's contributions to these plans were $2,993
         for the year ended December 31, 1996.

(11)     RELATED PARTY TRANSACTIONS

         The consolidated statements of income for periods through October 31,
         1996 included the costs of certain administrative and other services
         provided by AHP. These services included treasury, tax, personnel,
         legal, environmental, safety, public relations, audit, and other
         related costs. The charges to the Company for corporate administration
         on an annualized basis approximated $2,500 through October 31, 1996.
         Such charges are representative of costs which would have been
         incurred by the Company on a stand alone basis.


                                       17

<PAGE>   21


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(11)     RELATED PARTY TRANSACTIONS (Continued)

         AHP also charged the Company for its share of group insurance costs
         (medical, dental, basic life, etc.) based on AHP's historical claims
         experience and current claim trends and the ratio of the Company's
         employees to total AHP domestic employees. The charges, which are
         reflected in the accompanying consolidated statement of income,
         amounted to $9,143 for the 10 months ended October 31, 1996.

         The consolidated statements of income include rent for 35,000 square
         feet of space in AHP's corporate headquarters. The rent expense
         related to this space amounted to $946 for the year ended December 31,
         1996. The Company vacated this space and relocated its corporate
         headquarters at the end of 1996.

         Various self-insurance coverages were provided to the Company through
         AHP's consolidated programs through October 31, 1996. Auto, property,
         product liability, and other insurance coverages provided by AHP were
         allocated to the Company based on past claims history, exposure,
         trends, and judgment. The charges, which are reflected in the
         accompanying consolidated statement of income for the 10 months ended
         October 31, 1996 amounted to $346.

         The Company purchased advertising through a wholly-owned subsidiary of
         AHP through 1996. The rates at which the Company purchased advertising
         reflected the rates obtained by the consolidated purchasing of AHP.
         The charges, which are reflected in the accompanying consolidated
         statement of income for the year ended December 31, 1996 amounted to
         $45,186.

         Effective November 1, 1996, the Company entered into a transition
         services agreement with AHP under which AHP, until six months after
         November 1, 1996, provides to the Company, for a fee, certain
         facilities and services. In addition, AHP agreed to assist the Company
         for 90 days after November 1, 1996 with the administration of welfare
         benefit plans for payment by the Company to AHP based on past
         practices. Charges by AHP to the Company under these arrangements for
         the period November 1, 1996 to December 31, 1996 were insignificant.

         Effective November 1, 1996, the Company entered into a 10-year
         monitoring and oversight agreement with an affiliate of its indirect
         majority stockholder, HM. The agreement provides for an annual fee of
         the greater of $1,000 or 0.1 percent of the budgeted consolidated net
         sales of the Company for the current year. In addition, effective
         November 1, 1996, the Company entered into a financial advisory
         agreement with the affiliate under which the affiliate will be
         entitled to a fee of 1.5 percent of the transaction value, as defined,
         for each add-on transaction, as defined. In 1996, the Company incurred
         financial advisory fees of $167 and paid transaction fees of $19,320
         to such affiliate relating to the Transaction (see Note 1).





                                       18

<PAGE>   22

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(11)     RELATED PARTY TRANSACTIONS (Continued)

         Included in prepaid expenses and other current assets at December 31,
         1996 is a receivable of approximately $3,600 from AHP.

         Following is an analysis of the activity in the Parent Company's
         Investment and Advances account for the ten months ended October 31,
         1996:

<TABLE>
<S>                                                                      <C>      
Beginning Balance:
     Parent Company's Investment and Advances                            $ 384,997
     Net Income                                                             84,559
     Distribution and other activity through Parent Company's             (116,492)
        Investment and Advances account

Changes in other assets & liabilities through the account:
     Depreciation and amortization                                          15,093
     Accounts receivable                                                    (6,585)
     Inventories                                                            10,903
     Prepaid expenses and other current assets                                (820)
     Other noncurrent assets                                                    34
     Accounts payable                                                        1,334
     Accrued salaries, wages and benefits                                    2,248
     Accrued advertising and promotion                                        (168)
     Other accrued liabilities                                                 672
     Other                                                                    (329)
     Purchases of plant and equipment, net                                  (7,146)

Ending Balance:
     Parent Company's Investment and Advances                            $ 368,300
</TABLE>

 (12)    STOCK COMPENSATION PLANS

         During 1996, certain employees of the Company were granted stock
         options under the AHP stock option plans. These options had a ten-year
         term and generally vested one year from date of grant. The AHP stock
         options awarded to Company employees during 1996 or prior were
         exercised, canceled, or settled in cash by January 31, 1997.

         Effective November 1, 1996, the Company adopted the International Home
         Foods, Inc. 1996 Stock Option Plan ("the IHF Plan") which provides for
         the grant of stock options at fair value on the date of grant.
         Generally, stock options have a ten-year term and vest immediately or
         ratably over three years. Certain options have been granted with an
         exercise price which increases by 8 percent per year until the
         exercise date. The total number of shares of common stock authorized
         for grant under the IHF Plan is 45,000,000.


                                       19

<PAGE>   23

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(12)     STOCK COMPENSATION PLANS (Continued)

         The Company has adopted the disclosure-only provisions of SFAS No.
         123, "Accounting for Stock-Based Compensation", but applies Accounting
         Principles Board Opinion No. 25 and related interpretations in
         accounting for its plans. No compensation expense was recognized for
         1996. If the Company had elected to recognize compensation cost based
         on the fair value of the options at the grant dates, consistent with
         the method prescribed by SFAS No. 123, 1996 net income would have been
         reduced to the pro forma amount indicated below:


<TABLE>
          <S>                       <C>                              <C>     
          Net income                As reported                      $82,961
                                    Pro forma                        $81,735
</TABLE>

         Note:    The pro forma disclosure shown above is not representative of
                  the effects on net income in future years.

         The fair value of the AHP stock options used to compute 1996 pro forma
         net income is the estimated present value at grant date using the
         Black-Scholes option-pricing model with the following weighted-average
         assumptions:


<TABLE>
                                <S>                              <C>  
                                Expected volatility               15.0%
                                Expected term                    4 years
                                Dividend yield                     4.3%
                                Risk-free interest rate            6.4%
</TABLE>

         IHF options granted on November 1, 1996 were valued using the minimum
         value method permitted under SFAS No. 123 for companies which do not
         have publicly traded equity securities and the following assumptions:
         expected term of four years, zero percent dividend yield, and six
         percent risk-free interest rate.









                                       20
<PAGE>   24

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(12)     STOCK COMPENSATION PLANS (Continued)

         Presented below is a summary of the status of the AHP fixed stock
         options held by the Company's employees, and IHF stock options, for
         1996:


<TABLE>
<CAPTION>
                                                      Weighted
                                          Shares   Average Exercise
                                          (000's)  Price Per Share
                                          -------  ----------------
<S>                                        <C>     <C>       
AHP options:
  Outstanding at
     beginning of year                     1,471        $33.11
  Granted                                    171        $52.99
  Exercised                                  758        $32.64
  Forfeited/Expired                           12        $45.11
  Settled                                    150            *
  Outstanding at
     end of year                             722        $34.20

IHF indexed options:
  Granted                                 25,750        $ 1.00
  Forfeited**                               --           --
  Outstanding at
     December 31, 1996**                  25,750        $ 1.01
IHF options exercisable
   at end of year                         18,750        $ 1.01

IHF non-indexed options:
  Granted                                  9,330        $ 1.00
  Forfeited                                 --           --
  Outstanding at
     December 31, 1996                     9,330        $ 1.00
IHF options exercisable
   at end of year                            210        $ 1.00
</TABLE>

          *150 options were settled for $61.19 per option which represents
           the stock's fair value at November 1, 1996.

         **7,000 options were forfeited by an officer upon termination in
           February 1997.

         The weighted-average fair value of AHP stock options granted during
         1996 is $7.21 per option. The weighted-average fair value of IHF
         non-indexed options granted on November 1, 1996 is $.21 per option.
         The IHF indexed options, which provide for an eight percent per annum
         increase in exercise price, have no value under the minimum value
         method.

         As of December 31, 1996, the 35,080,000 stock options outstanding
         under the IHF plan have exercise prices ranging from $1.00 to $1.01
         and a weighted-average exercise price of $1.01. Such options have a
         remaining contractual life of 10 years and 18,960,000 were exercisable
         at December 31, 1996.


                                       21

<PAGE>   25

                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


(13)     COMMITMENTS AND CONTINGENCIES

         The Company has ongoing royalty arrangements with several parties,
         primarily representing licensing agreements for its wet spices
         business and for the use of characters in the Company's canned pasta
         business. The accompanying consolidated statement of income include
         royalty costs which amounted to $2,113 for the year ended December 31,
         1996.

         There is also a royalty obligation related to the Company's
         acquisition of its cereals business in 1988. The agreement includes a
         minimum annual royalty of $750, payable annually, as well as a $10,250
         balloon payment payable in January 1998. As of December 31, 1996,
         $10,155, has been accrued towards the annual minimum royalty for the
         period and the appropriate share of the balloon obligation. There are
         no minimum royalty requirements after December 31, 1997; however, an
         ongoing royalty of ten percent of net sales will continue.

         The Company leases certain facilities and equipment under operating
         leases. Rental expense, including rent related to the Company's lease
         with AHP (see Note 11), aggregated $1,884 for the year ended December
         31, 1996. Future minimum lease payments under noncancelable operating
         leases at December 31, 1996 are as follows:

<TABLE>
<S>                          <C>                                <C>      
                             1997                               $   1,956
                             1998                                   1,548
                             1999                                   1,306
                             2000                                   1,066
                             2001 and later years                   6,451
                                                                ---------
                                                                $  12,327
                                                                =========
</TABLE>

         In the ordinary course of business, the Company enters into contracts
         for the purchase of certain of its raw materials and is involved in
         various pending or threatened litigation and claims. The Company has
         responsibility for environmental, safety, and cleanup obligations
         under various local, state and federal laws, including the
         Comprehensive Environmental Response, Compensation and Liability Act,
         commonly known as Superfund. The Company has been identified as a
         potentially responsible party at two Superfund sites. Although the
         outcome of any legal proceeding cannot be predicted with certainty,
         management believes through its discussions with counsel and the
         United States Environmental Protection Agency that its proportionate
         share of any liability arising from such matters, or the resolution of
         any other pending or threatened litigation or claims, in the aggregate
         will not have a material adverse effect on the consolidated financial
         position, results of operations, or cash flows of the Company.








                                       22

<PAGE>   26


                         INTERNATIONAL HOME FOODS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



(14)     GUARANTOR FINANCIAL DATA

         The Notes are fully and unconditionally guaranteed by each of the
         Company's subsidiaries, on a joint and several basis. Presented below
         is summarized combined financial information of the subsidiary 
         guarantors:

<TABLE>
<CAPTION>
           
                                                                             December 31, 1996
                                                                             -----------------
         <S>                                                                      <C>
         Current Assets                                                           $ 91,835

         Noncurrent Assets                                                         254,729
 
         Current Liabilities                                                        46,354

         Noncurrent Liabilities                                                    248,052
</TABLE>

<TABLE>
<CAPTION>
                                                                              For the year ended
                                                                              December 31, 1996
                                                                              ------------------
         <S>                                                                      <C>
         Net Sales                                                                $136,873

         Gross Profit                                                               58,382

         Net Loss                                                                   (1,054)

         Net cash provided by operating activities                                  11,540

         Net cash used in investing activities                                     (11,457)

         Net cash provided by financing activities                                   1,029 
</TABLE>

         Federal, state and foreign income taxes included in the above data
         have been allocated based on estimated separate return amounts and the
         preliminary allocation of the purchase price to the tax bases of
         assets and liabilities discussed in Note 8.


(15)     SUBSEQUENT EVENT

         On May 2, 1997 the Company agreed to acquire the ongoing canned
         seafood business of Bumble Bee Seafoods, Inc. for approximately $163
         million in cash plus the assumption of certain liabilities estimated
         to be between $30 and $40 million.

         Bumble Bee is one of the world's largest distributors of canned
         seafood products. Bumble Bee's principal products include canned tuna
         and salmon. To expedite completion of the sale, Bumble Bee has filed
         for protection under Chapter 11 of the Federal Bankruptcy Code. It is
         anticipated that under the reorganization, Bumble Bee will continue to
         function on a business as usual basis. Bumble Bee has obtained
         debtor-in-possession financing of $83.5 million, which should allow
         Bumble Bee to maintain normal day to day operations, including payment
         of its trade obligations. Closing is subject to approval of the
         Bankruptcy Court.


                                       23




<PAGE>   27


                       REPORT OF INDEPENDENT ACCOUNTANTS



         To the Board of Directors and Stockholders of International Home
         Foods, Inc.:

         We have audited the accompanying consolidated balance sheet of
         International Home Foods, Inc. and subsidiaries as of December 31,
         1996 and the related consolidated statements of income, changes in
         stockholders' deficiency, and cash flows for the year ended December
         31, 1996. These financial statements are the responsibility of the
         Company's management. Our responsibility is to express an opinion on
         these financial statements based on our audit.

         We conducted our audit 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 audit provides a reasonable basis for our opinion.

         In our opinion, the financial statements referred to above present
         fairly, in all material respects, the consolidated financial position
         of International Home Foods, Inc. and subsidiaries as of December 31,
         1996 and the consolidated results of their operations and their cash
         flows for the year ended December 31, 1996, in conformity with
         generally accepted accounting principles.


                                                COOPERS & LYBRAND L.L.P.


         Parsippany, New Jersey 
         April 18, 1997 except as to Note 15, 
         which is as of May 2, 1997









                                       24
<PAGE>   28

                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION
-------                             -----------
         <S>               <C>                                       
         2.1*     - -      Agreement of Sale and Plan of Merger (the "Merger
                           Agreement") entered into among AHP subsidiary
                           Holding Corporation, American Home Food Products,
                           Inc., AHFP Holding Corporation and AHFP Acquisition
                           Corporation dated as of September 5, 1996+
         2.2*     - -      First Amendment to Agreement of Sale and Plan of
                           Merger dated as of October 31, 1996+
         3.1*     - -      Certificate of Incorporation; Certificate of
                           Amendment to Certificate of Incorporation of
                           International Home Foods, Inc. filed with the
                           Delaware Secretary of State on October 30, 1996
         3.2*     - -      Bylaws of International Home Foods, Inc.
         3.3*     - -      Certificate of Incorporation of American Home Foods,
                           Inc.
         3.4*     - -      Bylaws of American Home Foods, Inc.
         3.5*     - -      Certificate of Incorporation of Luck's, Incorporated
         3.6*     - -      Bylaws of Luck's, Incorporated
         3.7*     - -      Certificate of Incorporation of M. Polaner, Inc.
         3.8*     - -      Bylaws of M. Polaner, Inc.
         3.9*     - -      Certificate of Continuance of Canadian Home Products
                           Limited
         3.10*    - -      By-Laws of Canadian Home Products Limited
         3.11*    - -      Certificate of Incorporation of Heritage Brands
                           Holdings, Inc.
         3.12*    - -      Bylaws of Heritage Brands Holdings, Inc.
         3.13*    - -      Certificate of Incorporation of Heritage Brands,
                           Inc.
         3.14*    - -      Bylaws of Heritage Brands, Inc.
         3.15*    - -      Certificate of Incorporation of Campfire, Inc.


</TABLE>









                                       1



<PAGE>   29

                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                              DESCRIPTION
-------                             -----------
         <S>               <C>                                       
         3.16*    - -      Bylaws of Campfire, Inc.
         4.1*     - -      Registration Rights Agreement made as of November 1,
                           1996 by and among International Home Foods, Inc.
                           (formerly American Home Food Products, Inc.), AHP
                           Subsidiary Holding Corporation and AHFP Holding
                           Corporation
         4.2*     - -      Indenture dated as of November 1, 1996 between the
                           Company and United States Trust Company of New York
         10.1*    - -      Traditional Services Agreement dated as of November
                           1, 1996 between American Home Products Corporation
                           and International Home Foods, Inc.
         10.2*    - -      Financial Advisory Agreement dated as of November 1,
                           1996 by and between International Home Foods, Inc.
                           and Hicks, Muse & Company Partners, L.P. ("HMCo")
         10.3*    - -      International Home Foods, Inc. 1996 Stock Option
                           Plan
         10.4*    - -      Nonqualified Stock Option Agreement dated November
                           1, 1996 by and between International Home Foods,
                           Inc. and C. Dean Metropoulos
         10.5*    - -      Nonqualified Stock Option Agreement dated November
                           1, 1996 by and between International Home Foods,
                           Inc. and Kenneth J. Martin
         10.6*    - -      Nonqualified Stock Option Agreement dated November
                           12, 1996 by and between International Home Foods,
                           Inc. and M. L. Lowenkron
         10.7*    - -      Nonqualified Stock Agreement dated November 12, 1996
                           by and between International Home Foods, Inc. and
                           Roger T. Staubach
         10.8*    - -      Indemnification Agreement dated November 1, 1996
                           between International Home Foods, Inc. and C. Dean
                           Metropoulos, together with a schedule identifying
                           substantially identical documents and setting forth
                           the material details in which those documents differ
                           from the foregoing documents
         10.9*    - -      Credit Agreement among International Home Foods,
                           Inc., as Borrower, the Several Lenders, Morgan
                           Stanley Senior Funding, Inc., as Document Agent,
                           Bankers Trust Company, as Syndication Agent, and The
                           Chase Manhattan Bank as Administrative Agent dated
                           as of November 1, 1996
         10.10* - -        Monitoring and Oversight Agreement dated as of
                           November 1, 1996 by and between International Home
                           Foods, Inc. and HMCo.
         11.11* - -        Nonqualified Stock Option Agreement dated January 3,
                           1997, by and between International Home Foods, Inc.
                           and L. Hollis Jones
         12.1**  - -       Computation of Consolidation Ratio of Earnings to
                           Fixed Charges
         16.1*    - -      Letter regarding change to certifying accountants
         21.1*    - -      Subsidiaries of the Company
         27.1**  - -       Financial Data Schedule
</TABLE>
------------
*  Incorporated by reference to the Company's Registration Statement on
   Form S-4

** Filed herewith

+  The Company will furnish upon request of the Commission 
   any omitted schedule.




                                       2