<PAGE>


________________________________________________________________________________
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
----------------------------------------------------------
                                           FORM 10-K
 
<TABLE>
<S>        <C>
(MARK ONE)
[x]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
           DECEMBER 31, 1996 OR
[ ]        TRANSITION  REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934 FOR THE TRANSITION
           PERIOD FROM TO
</TABLE>
 
                        COMMISSION FILE NUMBER: 33-68992
 
----------------------------------------------------------
                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                                       <C>
                        DELAWARE                                                 13-3438814
            (STATE OR OTHER JURISDICTION OF                                   (I.R.S. EMPLOYER
             INCORPORATION OR ORGANIZATION)                                 IDENTIFICATION NO.)
 
                   9 WEST 57TH STREET                                              10019
                   NEW YORK, NEW YORK                                            (ZIP CODE)
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 756-8900
 
                            ------------------------
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
<TABLE>
            <S>                     <C>
            TITLE OF EACH CLASS     NAME OF EACH EXCHANGE ON WHICH REGISTERED
                    None                               None
</TABLE>
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) 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]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to  Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of registrant's knowledge,  in definitive proxy  or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
 
     As  of  February  28,  1997,  the  number  of  shares  outstanding  of  the
registrant's Common Stock, par value $.01 per share, was 9,138,465 shares. There
is  no trading  market for the  Common Stock. Accordingly,  the aggregate market
value of  the Common  Stock held  by  non-affiliates of  the registrant  is  not
determinable. See Part II, Item 5 of this Report.
 
________________________________________________________________________________



<PAGE>


                             CROSS REFERENCE SHEET
                                      AND
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                                                                                      PAGE NUMBER
                                                                                                          OR
                                                                                                       REFERENCE
                                                                                                      -----------
 
<S>                                                                                                   <C>
                                              PART I
ITEM  1. Business..................................................................................         1
ITEM  2. Properties................................................................................         7
ITEM  3. Legal Proceedings.........................................................................         8
ITEM  4. Submission of Matters to a Vote of Security Holders.......................................        12
 
                                              PART II
ITEM  5. Market for Registrant's Common Equity and Related Stockholder Matters.....................        13
ITEM  6. Selected Financial Data...................................................................        13
ITEM  7. Management's Discussion and Analysis of Financial Condition and Results of Operations.....        16
ITEM  8. Financial Statements and Supplementary Data...............................................        26
ITEM  9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......        26
 
                                             PART III
ITEM 10. Directors and Executive Officers of the Registrant........................................        27
ITEM 11. Executive Compensation....................................................................        29
ITEM 12. Security Ownership of Certain Beneficial Owners and Management............................        39
ITEM 13. Certain Relationships and Related Transactions............................................        41
 
                                              PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................        43
</TABLE>



<PAGE>


                                     PART I
 
     As  used  in  this  Report, unless  the  context  otherwise  requires, 'TLC
Beatrice' refers to TLC Beatrice International Holdings, Inc. and references  to
the  'Company' shall  mean TLC Beatrice  and its subsidiaries,  certain of which
subsidiaries are  not wholly-owned,  directly or  indirectly, by  TLC  Beatrice.
References  in  this  Report  to 'subsidiaries'  refer  to  both  TLC Beatrice's
wholly-owned and  majority  owned  subsidiaries, unless  the  context  otherwise
requires.   TLC  Beatrice's  operations  are   conducted  entirely  through  its
subsidiares.
 
ITEM 1. BUSINESS
 
     The Company  is an  international food  and grocery  products company  with
operations principally in western Europe. The Company's operations are comprised
of  two  segments: Food  Distribution  and Grocery  Products.  Food Distribution
operations are  concentrated in  the wholesale  and retail  distribution of  dry
groceries,  beverages, household products and frozen food in France. Through its
Grocery Products segment,  the Company  manufactures and markets  ice cream  and
dessert  products, potato  chips, snacks  and beverages  principally in selected
western European  markets.  The  Company's  business  is  conducted  principally
through   11  entities   (the  'Principal   Companies')  and   their  respective
subsidiaries, which have sales in over 20 countries and manufacturing facilities
in six countries.
 
     The table below  sets forth  the percentage  of TLC  Beatrice's direct  and
indirect  ownership,  and  country of  organization,  of each  of  the Principal
Companies:
 
<TABLE>
<CAPTION>
                                                                 PERCENTAGE                    COUNTRY
                       PRINCIPAL COMPANY                         OWNERSHIP             OF ORGANIZATION
---------------------------------------------------------------- ----------    -----------------------
 
<S>                                                              <C>           <C>
FOOD DISTRIBUTION
  Franprix
     Etablissements Baud S.A. (wholesale operations)                 97.0%                      France
     Minimarche Group (retail operations)                            74.0                       France
  Leader Price
     Distribution Leader Price S.A. (wholesale operations)           51.0                       France
     Retail Leader Price Group (retail operations)                   51.0                       France
GROCERY PRODUCTS
  Ice Cream
     Helados La Menorquina S.A.                                      65.0                        Spain
     Interglas S.A.                                                  65.0       Spain (Canary Islands)
  Potato Chips and Snacks
     Tayto, Ltd.                                                     97.4                      Ireland
  Beverage
     Frisdranken Industrie Winters B.V.                             100.0                  Netherlands
     Sunco N.V.                                                      80.0                      Belgium
     Saint Alban Boissons S.A.                                       95.0                       France
     Bireley's California Orange (Thailand) Co. Ltd.                 95.3                     Thailand
</TABLE>
 
     The Company's operations  are decentralized, enabling  local management  to
develop  and  implement  business  plans tailored  to  local  market conditions.
Generally, the management of each subsidiary has primary responsibility for such
subsidiary's day-to-day  operations.  Management of  each  individual  operating
company  is  responsible for  attaining  financial and  other  goals established
jointly with, and then  monitored by, corporate and  segment management. In  the
case  of  Etablissements  Baud  S.A. ('Baud'),  Distribution  Leader  Price S.A.
('Distribution  Leader  Price'),  Interglas   S.A.  ('Interglas'),  Helados   La
Menorquina  S.A.  ('La Menorquina'),  the  Minimarche Group  ('Minimarche'), the
Retail Leader  Price Group  ('Retail Leader  Price'), Sunco  N.V. ('Sunco')  and
Tayto,  Ltd.  ('Tayto'), management  includes  local minority  stockholders. See
' -- Relationships with Minority Stockholders.'
 
     For a discussion of certain business segment and geographic data, see  Part
II,  Item 8. 'Financial Statements and Supplementary Data -- Note 17 of Notes to
Consolidated Financial Statements.'
 
                                       1
 


<PAGE>


FOOD DISTRIBUTION
 
     The Company is a major wholesale  and retail distributor of dry  groceries,
beverages,  household products and  frozen food, operating  through its Franprix
and Leader Price networks. The Company's Franprix network consisted at  December
31,  1996 of 416 supermarkets and superettes in the Paris metropolitan area. The
Leader Price  network  consisted  at  December  31,  1996  of  241  stores.  The
objectives  of the Company's  Food Distribution segment are  (1) to preserve its
position in  the Paris  metropolitan area  under the  Franprix name  and (2)  to
capitalize  on the trend  toward discount retailing  by expanding its operations
throughout France and by entering neighboring European markets under the  Leader
Price name.
 
  FRANPRIX
 
     Franprix  stores  are  generally neighborhood  supermarkets  and superettes
carrying  an  assortment  of  4,000  to  6,000  grocery  products.  Of  the  416
supermarkets  and superettes in the Franprix  network, 31 are owned and operated
by Minimarche and 385 are owned and operated by franchisees. The Franprix stores
are supplied with dry groceries,  beverages, household products and frozen  food
by  Baud, the Company's wholesale distribution subsidiary. Baud distributes such
products on  a  wholesale  basis  almost exclusively  to  Franprix  stores,  and
distributes  a small amount of such  products to smaller, non-franchised stores.
Based on published industry data for 1996, the Franprix network has the  largest
number  of supermarkets in the Paris metropolitan area, approximately 25% of the
total number, and the most supermarket selling space in the supermarket category
(supermarkets are categorized as those stores  with 4,000 to 25,000 square  feet
of  selling  space). At  present, slightly  less than  one-half of  the Franprix
stores are superettes, with an average  size of 3,800 square feet. Franprix  has
no  stores in  the hypermarket  category, which are  stores in  excess of 25,000
square feet of selling space.
 
     The Paris  metropolitan area  constitutes the  largest consumer  market  in
France,  with  approximately  ten  million  people.  The  Franprix  outlets  are
generally in densely populated areas  where there is limited direct  competition
from  larger  supermarkets and  hypermarkets. The  Company believes  that Baud's
position in  the  highly  visible  Paris market  has  enabled  it  to  negotiate
competitive  discounts, rebates and promotional allowances from food and grocery
manufacturers.
 
     Under the Company's franchise agreements with its Franprix franchisees, the
franchisees are obligated to purchase their dry groceries, beverages,  household
products  and frozen food exclusively  from the Company and  are required to use
the Franprix name. The franchisees are  free to purchase other goods from  other
sources.  The Company  does not  receive any  franchise or  other fees  from its
Franprix franchisees. The consideration the Company receives is reflected in the
prices charged for  the products  purchased. The Company  has a  right of  first
refusal  on franchised Franprix stores if a franchisee desires to sell his store
to a third party.
 
     The Company provides  marketing support to  the Franprix stores,  including
advice  on store layout  and appearance, product  mix and promotional materials.
The Company utilizes promotional programs under which the Company offers 100  to
150  items at discount prices to increase  traffic and purchases in the Franprix
stores.
 
     In addition to selling brand name products, the Company markets goods under
several private label brand names (including Leader Price), which accounted  for
approximately  29% of  Baud's total net  sales in 1996.  Private label products,
which are generally  priced below comparable  brand name products  to appeal  to
price  sensitive  customers, provide  the  Company with  additional  leverage in
negotiations with brand suppliers.
 
     Franprix franchisees are generally  independent entrepreneurs. Many have  a
long  affiliation with the Baud organization. Of  the 416 stores in the Franprix
network, 31 are owned by  the Company and 10 are  owned by children of the  late
Jacques  Baud,  a  former Vice  President  of  Baud. These  41  stores represent
approximately 18% of  total Baud sales  and approximately 10%  of the number  of
stores   in  the  network.  The  31   stores  owned  by  the  Company  represent
approximately 14% of  total Baud  sales and approximately  7% of  the number  of
stores  in the  network. Company-owned  Franprix stores  operate under  the same
arrangements with Baud as franchised Franprix stores. Of the Franprix stores not
owned by  the Company  or the  children  of Jacques  Baud, 96  are owned  by  an
affiliated group
 
                                       2
 


<PAGE>


consisting  of members of a  single family, and 40  are owned by franchisees who
have five to seven stores each. Each of the remaining franchisees has one or two
stores.
 
     Baud distributes dry grocery products from its 520,000 sq. ft. warehouse at
Chennevieres located nine miles  from Paris. Baud also  leases a 200,000  square
foot  facility  from  which  it  delivers  bulk  products.  Its  efficiently run
distribution system  is  designed and  managed  to  make deliveries  on  a  cost
effective  basis in the congested  Paris metropolitan area via  its fleet of 200
leased trucks. Baud  receives orders  from a computer  controlled system,  which
facilitates delivery scheduling and inventory management.
 
  LEADER PRICE
 
     In  1991,  in  response  to increasing  consumer  demand  for  lower priced
products, the Company developed  a range of items  under the Leader Price  brand
name which were initially introduced in certain Franprix stores. Since then, the
Company  has expanded the concept  to include Leader Price  stores which carry a
limited range of approximately 1,800 items, almost all of which carry the Leader
Price brand name. Of the  241 Leader Price stores,  201 are wholly or  partially
owned  by the Company's Retail Leader Price subsidiary. Leader Price's wholesale
activities are conducted by the Company's Distribution Leader Price  subsidiary.
Leader  Price stores are obligated to  purchase all products except produce from
the Company.
 
     The Company's  objective  with Leader  Price  is to  offer  consumers  good
quality  products with prices at  least 20%, and as  much as 50%, below national
brands. It is common practice for French food distributors to offer products  in
three  price ranges:  higher priced national  brands; store  brands or secondary
brands at 15  to 25%  lower prices;  and discount products  at 20  to 50%  lower
prices. Leader Price products offer consistent quality at discount prices.
 
     Leader  Price stores are  clean, well-ordered and  brightly lit. The sizes,
which typically range  from 7,000 to  10,000 square feet  of selling space,  are
comparable  to traditional  supermarkets in France.  Racks for  the products are
simple in  design, facilitate  frequent restocking  and display  products in  an
attractive  way. The product  range of approximately  1,800 items is one-quarter
that of an  average Franprix  supermarket, which improves  product turnover  and
simplifies  product handling. Labor  costs are minimized  by the limited product
range  and   by  eliminating   labor-intensive  departments   such  as   bakery,
delicatessen  and meat cutting. The everyday low price policy results in reduced
time and expense required to change product prices.
 
     Leader Price stores all offer the same range of products and have a similar
appearance. Store operations are closely  monitored with respect to labor  costs
and  other expenses. The lower  costs and investment required  in a Leader Price
store compared  to  a  traditional supermarket  permit  store  profitability  to
compare  favorably with that of a  traditional supermarket despite lower selling
prices. Leader Price stores are required to offer the same products at the  same
prices with uniform layout, signage, operating practices and staffing.
 
     As  of December 31, 1996, the Leader Price network had 241 stores, of which
201 were wholly or partially  owned by the Company  and 40 were franchised.  The
Company  intends to manage the Leader Price network through direct ownership and
minority equity  stakes with  select franchisees  which carry  rights  providing
elements  of control. The Company believes this approach ensures greater control
over store operations and  standards as the network  expands. As with  Franprix,
the  Company does not receive any franchise  or other fees from franchisees. The
consideration the Company receives  is reflected in the  prices charged for  the
products  purchased.  The Company  has a  right of  first refusal  on franchised
Leader Price stores if a franchisee desires to sell his stores to a third party.
 
     The Leader  Price  stores are  serviced  from Distribution  Leader  Price's
warehouse  at Gretz, near Paris. The  warehouse was constructed to the Company's
specifications and became  fully operational  in the  latter part  of 1993.  The
facility  has 550,000  sq. ft. of  warehousing space, as  well as administrative
facilities to process  orders. Order  entry, delivery  and inventory  management
systems  are computer based,  and electronic ordering systems  are in place. The
Company uses outside transport companies to supply the Leader Price stores.  The
Company  believes this arrangement permits it to respond to growth in the Leader
Price network not only in the Paris area but also in other areas of France where
 
                                       3
 


<PAGE>


Company-owned trucks  would not  be cost  effective. Deliveries  are managed  so
that,  in general,  full truckloads are  delivered to  stores, reducing delivery
times and loading costs.
 
  GROCERY PRODUCTS
 
     The Company  is a  major  ice cream  manufacturer  and marketer  in  Spain,
including the Canary Islands and is the leading manufacturer of potato chips and
snacks  in the Republic of Ireland. The  Company also manufactures and markets a
variety of beverages  and soft drinks.  The Company's strategy  for its  Grocery
Products  segment is to develop new products  designed to appeal to a variety of
consumers, to differentiate  the Company's  branded products from  those of  its
competitors  and to focus its resources  on maintaining or building market share
and on products with potential for growth.
 
  ICE CREAM AND DESSERTS
 
     The Company manufactures ice cream products in Spain, including the  Canary
Islands  and markets such products  throughout western Europe. Increasing market
integration in  Europe has  led the  Company to  emphasize a  greater degree  of
uniformity  of ingredients, composition and packaging  of its ice cream products
so that  they  may  be sold  with  little  modification in  all  European  Union
countries. In Spain and the Canary Islands, the Company's most important product
categories  are ice cream novelties which are purchased on impulse for immediate
consumption and ice cream desserts.
 
     La Menorquina,  operating in  Spain, including  the Balearic  Islands,  and
Portugal,  has established itself as a leading supplier to the restaurant sector
by developing  sophisticated  ice cream  desserts.  Examples of  these  desserts
include frozen natural orange, apple, coconut and other fruit shells filled with
natural  fruit-flavored  ice  cream,  multi-layer  ice  cream  cakes  and frozen
desserts in stylized ceramic  dishes. While supermarkets  are not currently  the
major  outlets for ice cream in these  markets due to consumption habits and the
small size of home freezers in such markets, the Company has developed  products
that  are suitable for this 'take home' sector  of the market as it develops. La
Menorquina also exports to customers in other countries. Approximately 33% of La
Menorquina sales  during the  year ended  December 31,  1996 were  derived  from
products developed during the last three years.
 
     In  the Canary Islands,  Interglas is the leading  ice cream supplier under
its Kalise brand name, and  has a significant share  of the yogurt and  desserts
market. In 1996, approximately 65% of ice cream sales were high margin ice cream
novelties,  cakes and specialty  frozen desserts. The  Company has increased its
sales by developing innovative products that are designed to appeal to the  over
six million tourists who visit the Canary Islands each year.
 
  POTATO CHIPS AND SNACKS
 
     The  Company, through  Tayto, has a  dominant position in  the Irish potato
chip market and is a leading manufacturer of processed snacks in Ireland. During
1996, the Company believes that its market shares in these markets, based on net
sales, were approximately  60% and  38%, respectively. Under  its primary  brand
name,  Tayto,  and  secondary  brand  name,  King,  the  Company  distributes to
approximately 6,000 outlets, representing  nearly all of the  points of sale  in
Ireland  where snack products  are sold. The Company  strives to manufacture the
highest quality products, receiving the Irish Quality Mark, which now appears on
Tayto's packaging, in each year from 1990 through 1996.
 
  BEVERAGE OPERATIONS
 
     The  Company's  principal  bottling   operations  consist  of   Frisdranken
Industrie Winters B.V. ('Winters') and Sunco, each of which produces soft drinks
on  a  contract basis  for supermarket  private  labels and  major international
brands. The Company  also manufactures and  markets a variety  of beverages  and
soft  drinks  under  the Company's  own  brand  names. Winters,  located  in the
Netherlands, produces  soft drinks,  principally in  cans, for  sale  throughout
western  Europe.  Sunco, located  in Belgium,  produces  soft drinks  in plastic
bottles for sale principally in Belgium, France and
 
                                       4
 


<PAGE>


Germany. Bireley's,  well-known in  Thailand, is  a marketer  of  non-carbonated
orange drinks and other beverages in that country.
 
     In  January 1996, the Company established a new company, St. Alban Boissons
S.A., to acquire the brand name and  business assets of a mineral water  company
in  southern France. During 1996  a new factory was  constructed to produce soft
drinks and  mineral  water in  plastic  and glass  bottles  and in  cans,  while
continuing to produce 'St. Alban' brand mineral water at its former facility.
 
CUSTOMERS AND COMPETITION
 
     The  Company believes that its aggregate  sales are not concentrated in, or
materially dependent  on,  any single  customer  or small  group  of  customers.
However, certain individual markets in which the Company competes are subject to
increasing  customer concentration by one or  a few supermarket chains or buying
cooperatives. For example,  a group  consisting of  members of  a single  family
which  owns  96 Franprix stores accounted for approximately 32% of 1996 sales by
Baud in France.
 
     The  Food Distribution  and Grocery Products  segments in  general are very
competitive, and  the  Company  faces  substantial  competition  throughout  its
activities  and product  lines from many  companies, some of  which have greater
financial resources than the Company and some of which offer other, better-known
branded products.  Competition in  the Food  Distribution segment  is largely  a
function  of service and  price. Competition in the  Grocery Products segment is
generally based on  quality, product innovation,  price, availability and  brand
name recognition.
 
     The  Company's  main  competitors  in  its  Food  Distribution  segment are
Carrefour S.A.,  Promodes  and Auchan.  In  its Grocery  Products  segment,  the
Company's  main competitors are Procter &  Gamble, Inc. and United Biscuits U.K.
Ltd. in the potato  chip and processed snack  markets and Nestle S.A.,  Unilever
PLC  and Danone S.A.  in the ice  cream, yogurt and  frozen dessert markets. The
Company believes it competes effectively on  the basis of the factors  affecting
its industry segments.
 
RAW MATERIALS
 
     Various  agricultural  commodities constitute  the principal  raw materials
used by the Company  in the manufacture of  its grocery products. Primary  items
include  milk powder, butter, potatoes, vegetable oil and sugar. None of the raw
materials for the Company's significant  products are currently in short  supply
and  most are  available from  many different  independent suppliers.  Prices of
agricultural commodities  tend to  fluctuate in  response to  various  seasonal,
climatic  and economic factors, which generally affect the Company's competitors
as well.
 
TRADEMARKS, TRADE NAMES AND LICENSES
 
     The Company has  locally registered  trademarks for many  of its  products.
Trademarks  are important to the Company because local brand name recognition is
a critical element to its success.
 
     In 1987, Beatrice  Companies, Inc.  assigned the trade  name and  trademark
Beatrice  to the Company for  use on its products  anywhere in the world, except
the United  States. However,  Beatrice Companies,  Inc. and  its affiliates  are
permitted  to  use the  trade  name and  trademark  Beatrice in  connection with
products which they manufacture  or distribute anywhere  in the world.  Although
the  name Beatrice is contained  in the Company's trade name  and is part of its
corporate identity, it is not currently anticipated that the name Beatrice  will
be  used by the Company  to a significant degree  as an identifying trademark in
connection with local product marketing and sales.
 
     In 1992,  Geimex S.A.R.L.,  a French  limited liability  company  partially
owned  by Jean Baud ('Geimex'),  assigned to Baud ownership  of the Leader Price
trademark and the exclusive right to  use the trademark in the French  territory
pursuant  to an  Assignment of Trademark  (the 'Leader  Price Assignment') which
superseded a prior licensing agreement. Pursuant to the Leader Price Assignment,
Baud agreed not to  expand the Leader Price  trademark to foreign countries  and
granted  to Geimex  an exclusive  license to use  the trademark  in the overseas
French territories in return for which Geimex agreed to grant any foreign  third
parties only the right to distribute, and not the right to manufacture, products
under  the Leader  Price trademark.  In addition,  pursuant to  the Leader Price
 
                                       5
 


<PAGE>


Assignment, Geimex granted to Baud a  right of first refusal prior to  assigning
to  a foreign third party  any rights under the  Leader Price trademark, and the
shareholders of Geimex granted to Baud a right of first refusal prior to selling
all or any portion of their  shares of Geimex. The Company anticipates  entering
into  arrangements for using the Leader Price name outside the French territory.
However, no assurance  can be given  that the Company  will succeed in  entering
into such arrangements.
 
     The  Company is not aware  of any factors which  would adversely affect its
ability to  utilize any  of its  major trademarks.  Patents are  not  considered
material to the conduct of the Company's business.
 
EMPLOYEES
 
     As  of December  31, 1996, the  Company had  approximately 4,700 employees,
although the number of employees may vary by as many as 1,000 from time to  time
based  on the Company's seasonal needs.  TLC Beatrice's subsidiaries are managed
by local  nationals. Substantially  all of  the Company's  full-time  employees,
other  than management  personnel, are  hourly employees  represented by unions.
Management of the Company believes no single union relationship or agreement  is
material   to  the  Company's  aggregate  results.  Labor  relations,  including
compensation and severance, are governed by local law. The Company believes  its
relations  with its employees  are satisfactory. During the  past five years, no
subsidiary has experienced any work  stoppage or labor-related problem  material
to the Company as a whole.
 
GOVERNMENTAL REGULATION
 
     Virtually  all  of the  Company's operations  are subject  to the  laws and
regulations of foreign countries, which differ from country to country, as  well
as  the laws and regulations of  the United States. The production, distribution
and sale  of  many  of  the  Company's  products  are  subject  to  governmental
regulation  regarding  the production,  sale,  safety, sanitation,  labeling and
ingredients of  such products  in the  various countries  in which  the  Company
operates.  In  addition,  in various  markets  the  manufacture of  many  of the
Company's products  is  subject  to  governmental  regulation  relating  to  the
discharge   of  materials   into  the  environment.   Compliance  with  existing
legislation and regulations relating to  environmental matters has not had,  and
is  not expected  to have,  a material adverse  effect on  the Company's capital
expenditures or results of operations.
 
     During the  fourth quarter  of 1996,  new French  regulations were  enacted
which  place certain restrictions on  the opening of new  food stores over 3,000
square feet in size. During the year ended December 31, 1996, the Company opened
35 new Leader Price stores versus 50  and 48 stores in the years ended  December
31,  1995 and 1994, respectively.  The Company anticipates that  in 1997 and for
the  foreseeable  future,  the  number  of  Leader  Price  store  openings  will
approximate  30 per year; however no assurance  can be given that this number of
openings can be  achieved. See Part  II, Item. 7.  'Management's Discussion  and
Analysis of Financial Condition and Results of Operations.'
 
RELATIONSHIPS WITH MINORITY STOCKHOLDERS
 
     Certain  of  TLC  Beatrice's  operating  subsidiaries  have  local minority
stockholders whose equity  interests in  these subsidiaries range  from 2.6%  to
49%.  The subsidiaries  that have  the largest  equity interests  owned by local
stockholders include Distribution Leader Price (49%), Retail Leader Price (49%),
Interglas (35%), La Menorquina  (35%) and Minimarche (26%).  In most cases,  the
local stockholders are responsible for the management of these subsidiaries.
 
     The  Company  believes that  equity  participation by  local  management is
beneficial in that it gives  them a direct interest  in the business which  they
manage  and thus provides an incentive  to enhance performance of that business.
While the Company believes that it generally has satisfactory relationships with
the management of its  subsidiaries, the ability of  the Company to achieve  its
earnings  and other  objectives could  be adversely  affected if  relations with
certain local stockholders were not satisfactory.
 
     The minority stockholders  of Distribution Leader  Price and Retail  Leader
Price,  directly or  indirectly, are  various members of  the Baud  family and a
corporate entity controlled by the Baud family
 
                                       6
 


<PAGE>


(collectively, the 'Baud Minority Stockholders'). Pursuant to certain agreements
entered into in 1992,  the Company is obligated  under certain circumstances  to
purchase  the Baud  Minority Stockholders'  ownership interests  in Distribution
Leader Price and Retail Leader Price. The agreements provide that prior to  June
30,  1997, if certain members of the  Baud family cease to hold their management
positions with the applicable company and the Company fails to propose and  vote
in favor of one of certain members of the Baud family as a replacement, the Baud
Minority  Stockholders have the right  to require TLC France  to purchase all of
the Baud Minority Stockholders' shares  of Distribution Leader Price and  Retail
Leader  Price (the 'Put Right'), and TLC France has the right to purchase all of
the Baud Minority Stockholders' shares of Distribution Leader Price in the event
that the Baud Minority  Stockholders exercise their put  option with respect  to
the  shares of Retail Leader Price. In addition, at any time on or after July 1,
1997 and prior to June 30, 2027, the Baud Minority Stockholders can exercise the
Put Right, and TLC  France has the  right to purchase all  of the Baud  Minority
Stockholders'  shares of Distribution Leader Price  and Retail Leader Price (the
'Call Right'), without restriction. The price to exercise the Put Right is based
on a formula calculated at the time of exercise which sets a purchase price at a
multiple of the average annual net income per share of Distribution Leader Price
and Retail  Leader Price,  as applicable,  for  the two  fiscal years  prior  to
exercise,  with a guaranteed  minimum return on  the Baud Minority Stockholders'
aggregate investment if an option is exercised prior to July 1, 1997. If the Put
Right is exercised  after July  1, 1997,  and as  long as  TLC Beatrice's  11.5%
Senior  Secured Notes  due October  1, 2005  (the 'Notes')  are outstanding, the
purchase price for such shares is payable 25% on the closing of the purchase  of
such  shares, 45% on the first anniversary of such closing and 30% on the second
anniversary of  such  closing,  together  with interest  thereon  at  the  Paris
Interbank  Offering Rate ('PIBOR').  After repayment of  the Notes, the purchase
price for such  shares is payable  50% on the  closing of the  purchase of  such
shares  and  50% on  the first  anniversary of  such closing,  without interest.
Solely for purposes of illustration, if  the Baud Minority Stockholders were  to
have  exercised their  Put Right  on December 31,  1996, using  the formula that
would be in effect  on July 1,  1997, the total purchase  price for such  shares
would have been approximately $143 million. The price to exercise the Call Right
is  based on the same formula  as in the exercise of  the Put Right, except that
the multiple of average annual net  income is higher. Distribution Leader  Price
and  Retail Leader Price have shown  substantial earnings growth during the past
three years. If such companies' earnings were to continue to increase during the
two fiscal years prior to the exercise of such option, as to which no  assurance
can  be given, the purchase price payable upon exercise of the Put Right and the
Call Right would increase materially.
 
     In  addition  to   the  foregoing,  the   Company,  including  in   certain
circumstances  TLC Beatrice, is a party  to separate stockholder agreements with
certain other local minority stockholders of Baud, Sedipro, S.A. and  Minimarche
(collectively,  the  'Other  Baud  Stockholders')  and  certain  other  minority
stockholders.  Certain  of   these  agreements  and   the  by-laws  of   certain
subsidiaries restrict the sale of the minority stockholders' interest or require
the  Company or the minority stockholders, as the  case may be, to offer to sell
their shares to the other stockholders prior  to selling such shares to a  third
party  and/or  require the  Company to  purchase  these interests  under certain
circumstances. These local minority stockholders have the option to require  the
Company  to purchase their interests in whole or  in part at any time. If all of
such options were exercised in full, the Company's aggregate purchase obligation
is estimated to be approximately $35 million  as of December 31, 1996. See  Part
II,  Item 7.  'Management's Discussion and  Analysis of  Financial Condition and
Results of Operations -- Liquidity and  Capital Resources' and Part II, Item  8.
'Financial  Statements and Supplementary Data -- Note 5 of Notes to Consolidated
Financial Statements.'
 
ITEM 2. PROPERTIES
 
     The Company's principal executive offices are located at 9 West 57th Street
in New York City, where the Company currently leases approximately 7,000  square
feet  of space. The lease for this space  expires June 30, 2003. The Company has
leased this space since March  1995 when it amended  its prior lease for  23,000
square  feet in  the same  building. Net base  rental expense  for the Company's
current executive office space is approximately $362,000 per annum over the life
of the lease. In  addition, as a  fee for the amendment  to the Company's  prior
lease,  the Company paid $500,000 in each of 1994 and 1995, and has or will make
annual payments of $800,000 in each of 1996 through
 
                                       7
 


<PAGE>


1999. The Company also  maintains divisional offices  for its Food  Distribution
operations  in  Paris, France  and its  Grocery  Products operations  in Ninove,
Belgium. Rental expense for  leased property in  the Food Distribution  division
office was approximately $222,000, $266,000 and $169,000 in 1994, 1995 and 1996,
respectively.  Rental  expense  for  the Grocery  Products  division  office was
approximately $19,000 in each  of 1994 and 1995.  In 1996, the Grocery  Products
division  relocated to office space in the Company's Sunco operations in Ninove,
Belgium and no longer pays outside rental expense.
 
     The  Company  also   owns  and  leases   manufacturing  plants,   warehouse
distribution  centers,  retail  stores  and  other  facilities  in  the  various
countries in which it operates. The Company believes the facilities are suitable
and adequate for  the conduct of  its business. The  following table sets  forth
information with respect to the approximate number of facilities owned or leased
as of December 31, 1996:
 
<TABLE>
<CAPTION>
                              MANUFACTURING      DISTRIBUTION           OTHER              TOTAL
                             ---------------    ---------------    ---------------    ---------------
                             OWNED    LEASED    OWNED    LEASED    OWNED    LEASED    OWNED    LEASED
                             -----    ------    -----    ------    -----    ------    -----    ------
 
<S>                          <C>      <C>       <C>      <C>       <C>      <C>       <C>      <C>
Food Distribution.........     0         0         7       149       0         1         7       150
Grocery Products..........     8         3        10        25       3         2        21        30
                             -----    -----     -----    ------   -----     -----    -----     ------
     Total................     8         3        17       174       3         3        28       180
                             -----    -----     -----    ------   -----     -----    -----     ------
                             -----    -----     -----    ------   -----     -----    -----     ------
</TABLE>
 
     The  aggregate rental expense for leased property for the Food Distribution
operations was $12.4 million, $17.6 million and $19.0 million in 1994, 1995  and
1996,   respectively.  The  increase   from  1994  through   1996  is  primarily
attributable to the expansion of the Leader Price network. The aggregate  rental
expense  for  leased  property  for the  Grocery  Products  operations  was $4.1
million, $7.1 million and  $5.6 million in 1994,  1995, and 1996,  respectively.
The  decline in Grocery Products rental expense in 1996 reflects 1995 subsidiary
dispositions.
 
ITEM 3. LEGAL PROCEEDINGS
 
     TLC BEATRICE IS A DEFENDANT IN CERTAIN LEGAL PROCEEDINGS BROUGHT BY CARLTON
INVESTMENTS, A CALIFORNIA LIMITED  PARTNERSHIP ('CARLTON'), AS DESCRIBED  BELOW.
NOTWITHSTANDING  THE INFORMATION SET FORTH IN THIS REPORT, TLC BEATRICE RESERVES
ANY AND ALL CLAIMS OR DEFENSES THAT IT HAS OR MAY HAVE AGAINST CARLTON.
 
     On May 20,  1994, Carlton,  formed and  controlled by  former officers  and
employees  of  Drexel  Burnham  Lambert,  Inc.  ('Drexel'),  filed  a  two-count
Complaint against  TLC  Beatrice  and  against Mrs.  Loida  Nicolas  Lewis,  the
Chairman and Chief Executive Officer of TLC Beatrice, and Ms. Leslie N. Lewis, a
Director  of TLC Beatrice and a daughter  of Loida Nicolas Lewis, as Executrices
of The  Estate  of  Reginald  F. Lewis  (the  'Lewis  Estate')  titled,  Carlton
Investments  v. TLC  Beatrice International  Holdings, Inc.,  et al.,  Index No.
114798/94, Supreme Court of the State of New York, County of New York (the  'New
York  Suit'). Reginald  F. Lewis  was TLC Beatrice's  founder and  served as its
Chairman and Chief Executive  Officer from its organization  until his death  in
January 1993.
 
     In Count I of the Complaint, Carlton alleges that TLC Beatrice breached the
Stockholders'  Agreement dated as of November 30, 1987, as amended, by and among
TLC Beatrice and  the original purchasers  of TLC Beatrice's  Common Stock  (the
'Stockholders'  Agreement') when  TLC Beatrice  paid Reginald  F. Lewis  a $22.1
million compensation package  for services  rendered to TLC  Beatrice from  1988
through 1992. Carlton claims that payment of the compensation package violated a
provision  of  the  Stockholders'  Agreement  restricting  certain  transactions
between TLC Beatrice  and its  affiliates. As a  result of  the alleged  breach,
Carlton  asserts that it has been damaged in  an amount estimated to be not less
than $11,460,000, plus interest; it also claims that it is entitled, pursuant to
a provision in the Stockholders' Agreement,  to recover its attorneys' fees  and
litigation expenses.
 
     In  Count  II of  the  Complaint, Carlton  alleged  that Reginald  F. Lewis
tortiously interfered with the Stockholders'  Agreement by causing TLC  Beatrice
to  pay  the compensation  package.  As a  result  of the  alleged interference,
Carlton asserts that it has been damaged  in an amount estimated to be not  less
than  $11,460,000, plus interest; it also seeks punitive damages for the alleged
interference. On  September 21,  1994,  the Supreme  Court  of New  York  County
granted the motion of TLC Beatrice and
 
                                       8
 


<PAGE>


the  Lewis Estate  to dismiss  this claim.  In so  ruling, the  Court found that
Carlton  had  not  stated  a  claim  against  the  Lewis  Estate  for   tortious
interference.  On November 29, 1994,  Carlton filed a Notice  of Appeal from the
September 21, 1994 order, but has not prosecuted this appeal.
 
     On December 2, 1994, TLC Beatrice  responded to the Complaint by filing  an
Answer,  Affirmative  Defenses and  Counterclaim.  In the  Answer,  TLC Beatrice
denied all material allegations  of the Complaint and  set forth 17  affirmative
defenses  thereto. TLC Beatrice defends against the Complaint by alleging, among
other things, that Mr. Lewis earned the compensation package for his  successful
and  dynamic  leadership of  the Company  from 1988  through 1992.  TLC Beatrice
claims that the 1992 payment to Mr. Lewis was not prohibited by the terms of the
Stockholders' Agreement  for  a variety  of  reasons. Among  other  things,  TLC
Beatrice alleges that the Stockholders' Agreement does not preclude compensation
to  TLC Beatrice's  officers, and that  it was  not anticipated at  the time the
Stockholders' Agreement was executed that Mr. Lewis would be required to  devote
nearly  all of his time and efforts to the day-to-day management of the Company,
including having to  relocate his family  to Europe. In  addition, TLC  Beatrice
alleges  that  the  compensation package  was  approved in  1990  and therefore,
Carlton, by its years of inaction, waived any claims or objections it had to the
compensation package. TLC Beatrice further  alleges that Carlton lacks  standing
to assert its claim under the Stockholders' Agreement.
 
     TLC  Beatrice also defends against the Complaint by asserting that, because
Carlton wrongfully acquired the stock it claims to control through a pattern  of
fraud  and breaches of fiduciary duties committed  by a group of Drexel officers
including  Peter  Ackerman  (the  'Ackerman  Group')  in  connection  with   the
Acquisition  and thereafter, Carlton is barred  by its misconduct from asserting
its claims.
 
     Based on the foregoing allegations,  TLC Beatrice contends that Carlton  is
barred  by its misconduct from pursuing the Complaint and that the Stockholders'
Agreement is unenforceable by  Carlton. TLC Beatrice and  the Lewis Estate  also
have  a  four-count  Counterclaim  against  Carlton,  Paul  Biddelman  and Peter
Ackerman based on these allegations.
 
     On January 10, 1995,  Carlton and Messrs. Biddelman  and Ackerman moved  to
dismiss  TLC Beatrice's Counterclaims  and certain of  its affirmative defenses,
including the defenses  that claim  that Carlton  is barred  from asserting  its
rights  under the Stockholders' Agreement by its alleged misconduct. Among other
arguments, Carlton asserts that  these affirmative defenses  are barred in  that
they  seek to relitigate  claims which were  allegedly conclusively settled, and
from which Carlton was allegedly released, in connection with the court-approved
settlement in 1992  of over 180  lawsuits including approximately  60 class  and
derivative   actions  filed  against  Michael   Milken  and  hundreds  of  other
individuals and  entities, including  Mr. Ackerman,  Mr. Biddelman  and  Carlton
relating  to their allegedly unlawful activities relating to aspects of business
of Drexel Burnham Lambert Group, Inc., its subsidiaries and affiliates.
 
     The motion to dismiss was  denied in part and granted  in part by Order  of
the  Court on  June 3, 1996.  The Court  denied Carlton's motion  to dismiss TLC
Beatrice's  affirmative  defenses,  but  granted  the  motion  to  dismiss   the
counterclaims. Carlton filed a Notice of Appeal from the denial of its motion to
dismiss the affirmative defenses which is pending before the appellate court.
 
     The  above-described litigation  is in the  early stages.  TLC Beatrice has
served written  document  requests  and interrogatories  upon  Carlton  and  has
requested  the depositions of various Carlton  partners but discovery was stayed
by Carlton's motions and because of the focus of the parties' efforts in  taking
discovery  in the Delaware  litigation described below.  TLC Beatrice intends to
defend against the Complaint  and pursue its  defenses vigorously, and  believes
that  the  Complaint  is  without  merit, although  no  assurance  can  be given
regarding the  outcome  of  such  litigation. Carlton  has  been  enjoined  from
prosecuting  this action  by the  Delaware Chancery  Court pending  that Court's
review  of  the  proposed  settlement  of  the  Delaware  derivative  litigation
described  below.  For  further  information  with  respect  to  the litigation,
reference is hereby made to the Complaint  and the Answer which have been  filed
as  Exhibits to Registration  Statement No. 33-88602 of  TLC Beatrice filed with
the Securities  and Exchange  Commission and  which are  incorporated herein  by
reference.
 
                                       9
 


<PAGE>


     On  January  4,  1995,  Carlton filed  a  stockholder  derivative complaint
allegedly on behalf of  TLC Beatrice in  the Court of Chancery  of the State  of
Delaware,  New  Castle  County,  entitled Carlton  Investments  v.  TLC Beatrice
International Holdings,  Inc.,  et al.,  C.A.  No. 13950.  In  this  stockholder
derivative  action, which has  been amended twice, Carlton  seeks to recover for
the benefit of  TLC Beatrice millions  of dollars of  corporate funds  allegedly
paid to the late Reginald F. Lewis and entities controlled by or affiliated with
him between 1987 and 1993. Named as defendants are the executrices of Mr. Lewis'
estate,  several entities allegedly controlled by  the late Mr. Lewis (TLC Group
L.P., TLC Holdings Corp., TLC General Corp. and McCall Pattern Holdings,  Inc.),
together  with a number of current and  former directors and a former officer of
TLC Beatrice. The derivative complaint also names TLC Beatrice and three of  its
subsidiaries as nominal defendants.
 
     TLC  Beatrice and the  other defendants have  filed answers and affirmative
defenses to  the  derivative complaint  denying  all material  allegations.  For
further  information concerning  the allegations  of Carlton  in this derivative
lawsuit, reference is made to the  derivative complaint, as amended, which  have
been  filed as an Exhibit to Registration Statement No. 33-88602 of TLC Beatrice
filed with  the Securities  and Exchange  Commission and  which is  incorporated
herein by reference.
 
     In  the Delaware litigation the parties have engaged in extensive discovery
with the production of  over 100,000 documents and  scores of depositions  being
taken. All further discovery has been stayed and all further pretrial dates have
been  continued by the Delaware Chancery Court on November 27, 1996, pending the
Court's review of the proposed settlement of the litigation described below.
 
     This proposed settlement results from the formation by TLC Beatrice's Board
of Directors on May 24, 1996 of  a Special Litigation Committee (the 'SLC').  On
that  date, the  Board, including  Carlton's representative  on the  Board, Paul
Biddelman, unanimously  voted to  expand the  size of  the Board  by two  seats,
elected  Clifford L.  Alexander, Jr.  and William  H. Webster  to the  Board and
appointed Messrs.  Alexander  and Webster  as  directors, with  no  personal  or
business  relationships or  dealings with  the defendants,  TLC Beatrice  or the
Lewis family, and to serve as the members  of the SLC. The SLC was charged  with
the responsibility of investigating and evaluating the allegations and issues in
the   litigation  and  to  consider  and  determine  whether  or  not  continued
prosecution of  the  derivative complaint  was  in  the best  interests  of  TLC
Beatrice  and  its  shareholders  and  what  action  TLC  Beatrice  should  take
concerning the litigation in accordance with Delaware law.
 
     To give the SLC time  to complete its objectives  and to save TLC  Beatrice
expense,  TLC Beatrice moved the  Delaware Chancery Court in  June of 1996 for a
stay of discovery. Carlton objected, and as a result the Court denied the  stay,
requiring  the SLC to conduct its investigation and evaluation while the parties
continued with  discovery.  The  SLC  engaged  counsel  and  experts  it  deemed
necessary to accomplish its purpose.
 
     Over  the course of nearly six months, the SLC investigated the allegations
and claims in the  derivative complaint, including a  review of all  depositions
taken  in the derivative  action, a review  of all of  the documentary discovery
made or  given  by  the  parties  and  non-parties  in  the  derivative  action,
interviews  with numerous witnesses, a study  of the legal principles applicable
to the derivative action and an extensive analysis of the substantial  discovery
in  conjunction and consultation with its experts. In evaluating the litigation,
the SLC considered, among other things, the expense and length of time necessary
to prosecute the derivative action, the  defenses asserted by the defendants  in
the  derivative  action,  the uncertainties  of  the outcome  of  the derivative
action, the benefit  provided by a  settlement of the  derivative action to  the
Company  and  its  stockholders and  that  even  if the  derivative  action were
resolved in the plaintiff's  favor, that with appellate  review, which would  be
likely,  it could be  many years before  a final adjudication  of the derivative
action.
 
     Based on  the  foregoing  considerations, the  SLC,  through  its  counsel,
entered  into a Stipulation  of Settlement dated November  12, 1996 with counsel
for all of the defendants. Subject to  the approval of the Court of Chancery  of
the  State of Delaware, the Stipulation of  Settlement would be a full and final
settlement of the derivative action and would release defendants from all claims
that were or could have been raised  by Carlton or any other shareholder in  the
suit.  Under the Stipulation of  Settlement, the Lewis Estate  has agreed to pay
the Company the amount of $14,932,000 plus interest at the rate of 8% per  annum
until  the Effective  Date (as  hereinafter defined)  (the 'Settlement Amount'),
pursuant to the following terms: (a)  On the Effective Date, $2,000,000 in  cash
and a secured promissory note for
 
                                       10
 


<PAGE>


the  unpaid balance of the  Settlement Amount, (b) from  and after the Effective
Date, interest on the  Settlement Amount shall  be paid at a  rate equal to  the
U.S.  prime rate plus 1/2 of 1 percent compounded daily, (c) $500,000 in cash on
May 1 and November  1 of each  year, until payment of  the Settlement Amount  in
full,  and (d) a final payment of the balance of the Settlement Amount on May 1,
2004 if not  paid in  full prior  thereto. For  purposes of  the Stipulation  of
Settlement,  the  Effective Date  shall be  the  date that  the approval  of the
Stipulation of Settlement  is considered  final, which  shall be  the latest  to
occur  of (i) the expiration of the time for filing or noticing of any appeal or
motion for reargument from the  judgment, if any, of  the Chancery Court of  the
State  of Delaware  approving the  Stipulation of  Settlement, (ii)  the date of
final affirmance on any appeal or  reargument, (iii) the expiration of time  for
petitions  for writs  of certiorari  and if certiorari  is granted,  the date of
final affirmance  following review  pursuant to  such grant  or (iv)  the  final
dismissal of any appeal or proceedings on certiorari.
 
     The  payment of  the Settlement  Amount is  to be  secured by  the personal
guaranty of Loida  N. Lewis  and the  pledge by the  Lewis Estate  of shares  of
Common  Stock of the Company owned by the  Lewis Estate, the number of shares to
be pledged to be  determined as follows: number  of shares pledged =  Settlement
Amount divided by $25.00 multiplied by 4.
 
     Carlton  has  indicated  its intent  to  oppose the  settlement.  After the
Delaware Chancery  Court stayed  all  further discovery  until it  reviewed  the
settlement,  the SLC on December  23, 1996 filed a  162-page brief in support of
the settlement it negotiated, analyzing and evaluating the claims and explaining
how it arrived at the  settlement. By Order of January  13, 1997, the Court  set
April 16, 1997 as the date for argument on the SLC's request that the settlement
be  approved. The Court also set a briefing schedule for Carlton and the parties
to file  briefs in  opposition  or support  of  the Settlement.  Over  Carlton's
objection,  the  Court also  enjoined Carlton  and  all other  shareholders from
initiating or prosecuting any lawsuit asserting  claims that were or could  have
been asserted in the Delaware litigation or which arise from or relate to any of
the  matters or transactions referred to  in the litigation. Carlton also sought
discovery from the SLC and its counsel,  the scope of which the SLC objected  to
and  filed  a motion  for a  protective order  that was  granted by  the Court's
decision of January 28, 1997. Specific notice of the settlement has been sent to
TLC Beatrice shareholders.
 
     There can  be no  assurance  that the  Stipulation  of Settlement  will  be
approved, or if approved, what its final terms may be.
 
     On July 20, 1995, Carlton filed a motion for contempt against TLC Beatrice,
its  counsel  and  the  Lewis  Estate in  the  case  entitled  Presidential Life
Insurance Co. v. Milken Milken, et al.,  pending in the U.S. District Court  for
the  Southern District of New  York before the Honorable  Milton Pollack as Case
No. 92  Civ. 1151  (MP) ('Presidential  Life'), asserting  that certain  of  TLC
Beatrice's  affirmative  defenses  in  the New  York  Suit  constituted 'claims'
allegedly dismissed  and  released under  the  July  17, 1992  order  and  final
judgment  in Presidential  Life (the  'Order and  Final Judgment'). Presidential
Life was a class action  which, as described by  counsel for the class  members,
was  instituted for the purpose  of marshaling and laying to  rest, as part of a
broader settlement of other litigation, all previously unasserted claims against
Michael Milken and  hundreds of  other individuals  and partnerships  concerning
their  activities related to  Drexel and its  affiliates. On July  27, 1995, TLC
Beatrice filed a motion seeking leave to intervene in Presidential Life for  the
purpose  of resolving the extent, if any,  to which the Order and Final Judgment
is binding on TLC Beatrice or precludes  any of its affirmative defenses in  the
New  York Suit, and also filed a separate motion seeking to vacate the Order and
Final Judgment to the extent it purports to preclude TLC Beatrice's assertion of
such affirmative defenses or claims seeking the cancellation of Carlton's common
stock. In these motions, TLC Beatrice asserts, among other things, that even  if
the  Order and  Final Judgment  is binding  on TLC  Beatrice, it  precludes only
claims  by  class  members,  and  does  not  preclude  affirmative  defenses  to
subsequently  filed claims by  any of the defendants.  In addition, TLC Beatrice
asserts that the proceedings in Presidential Life, including the Order and Final
Judgment, are not binding upon it (i) because it never received adequate  notice
of  the action; (ii) because  Presidential Life was a  collusive suit brought in
order to accommodate  the defendants'  demand, as  an express  condition to  the
settlement  of other  litigation against them,  that they  receive immunity from
future civil liability in connection  with their Drexel-related activity;  (iii)
because  the court lacked subject matter jurisdiction  over such a suit and over
any claims by TLC
 
                                       11
 


<PAGE>


Beatrice against Carlton; and (iv) because the named plaintiff and class counsel
did not  adequately  represent  the  interests  of  class  members,  purportedly
including  TLC Beatrice. By order dated September 12, 1995, Judge Pollack denied
Carlton's motion  for contempt  finding  that his  order  did not  preclude  TLC
Beatrice  from asserting  its affirmative defenses.  Carlton did  not appeal. By
orders dated September 25, 1995, Judge  Pollack denied TLC Beatrice's motion  to
intervene  and motion for relief  from the Order and  Final Judgment. On October
24, 1995, TLC Beatrice  filed a Notice  of Appeal from such  orders to the  U.S.
Court  of Appeals for the Second Circuit.  Carlton filed a motion to dismiss the
appeal which was denied by the Second  Circuit after briefing of the appeal  was
complete.
 
     The  Second Circuit  reversed Judge Pollack  by its decision  of August 26,
1996, and remanded the matter to Judge  Pollack to obtain his views on  specific
issues  and indicated that upon  Judge Pollack's decision the  same panel of the
Second Circuit would hear the appeal on an expedited basis. Further briefing and
argument before Judge Pollack  on October 26, 1996  resulted in Judge  Pollack's
denial  again of  TLC Beatrice's  motions. TLC  Beatrice appealed  and, after an
expedited briefing by the parties, oral argument was heard by the Second Circuit
on January 24, 1997. No decision has yet been handed down.
 
     TLC Beatrice's outside litigation counsel has advised TLC Beatrice that  at
this  time the extent  of TLC Beatrice's liability,  if any, as  a result of the
above described litigation, is not  determinable. The ultimate outcome that  may
result  from  these  matters  may  have  a  material  effect  on  TLC Beatrice's
consolidated financial  condition and/or  results  of operations.  In  addition,
under  certain  circumstances,  TLC  Beatrice  is  obligated  to  reimburse  the
directors for their share of any judgment and litigation expenses. See Part  II,
Item 7. 'Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources.'
 
     TLC  Beatrice and its subsidiaries are also involved in certain other legal
actions and  claims  arising in  the  ordinary course  of  business.  Management
believes  that the  outcome of  such other litigation  will not  have a material
adverse effect  on  the financial  position  or  results of  operations  of  the
Company.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     No  matters were submitted to a vote  of security holders during the fourth
quarter of 1996.
 
                                       12



<PAGE>


                                    PART II
 
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     There  is currently no established trading market for the Common Stock. TLC
Beatrice has no current intention  to list the Common  Stock for trading on  any
securities  exchange or on  any automated dealer  quotation system. The Transfer
Agent and Registrar for  TLC Beatrice's Common  Stock is The  Bank of New  York,
located in New York, New York. On February 28, 1997, there were approximately 50
holders of record of Common Stock.
 
     On  January 17,  1997, the  Board of Directors  declared a  dividend on the
Common Stock of $.22 per share, which was paid on February 5, 1997 to holders of
record on January 28, 1997. On January 19, 1996, the Board of Directors declared
a dividend on the Common Stock of $.11 per share, which was paid on February 15,
1996 to holders of record on February 5, 1996. On January 19, 1996, the Board of
Directors also established a policy providing  for the payment of dividends  not
less  than annually, subject to the availability  of surplus and net profits and
further subject to declaration by the Board of Directors. The Board of Directors
will make any such determination in light of conditions then existing, including
the  Company's   earnings,  financial   condition  and   capital   requirements,
restrictions  in the Indenture (as defined herein), credit and other agreements,
business conditions  and  other factors.  See  Part II,  Item  7.  'Management's
Discussion    and   Analysis    of   Financial   Condition    and   Results   of
Operations -- Liquidity and Capital Resources'  and Part II, Item 8.  'Financial
Statements  and  Supplementary  Data  --  Notes  11  and  13  of  the  Notes  to
Consolidated Financial Statements.'
 
     TLC Beatrice's ability to pay dividends and make other distributions on its
Common  Stock  will  depend  on  distributions  from  its  subsidiaries,   which
distributions will depend on the earnings and cash flow of such subsidiaries.
 
     TLC   Beatrice  is  a  holding   company  whose  operations  are  conducted
exclusively through  its  subsidiaries.  Its assets  consist  primarily  of  its
investments  in its subsidiaries, and a  substantial portion of the consolidated
liabilities of the Company have been incurred by such subsidiaries.
 
     The ability of  TLC Beatrice's  subsidiaries to make  distributions to  TLC
Beatrice  will  be subject  to, among  other  things, the  prior claims  of such
subsidiaries' creditors,  including trade  creditors.  TLC Beatrice's  right  to
participate  in  the distribution  of  the assets  of  any subsidiary  upon such
subsidiary's liquidation or  reorganization will  also be subject  to the  prior
claims  of such subsidiary's creditors, including trade creditors, except to the
extent that TLC Beatrice may itself be a creditor with recognized claims against
such subsidiary  (in which  case, the  claims  of TLC  Beatrice would  still  be
subject  to the prior claims  of any secured creditor  of such subsidiary and of
any other holder of indebtedness of such subsidiary that is senior to that  held
by TLC Beatrice).
 
     The  ability of TLC Beatrice to pay,  and any determination by the Board of
Directors with respect to, dividends or other distributions on Common Stock will
be subject to  Delaware law, which  provides that dividends  on a  corporation's
capital  stock may be paid either out of its surplus, as defined and computed in
accordance with Delaware law, or  in case there is no  such surplus, out of  its
net  profits for the  fiscal year in  which the dividend  is declared and/or the
preceding fiscal year.
 
     Many  of  TLC  Beatrice's   operating  subsidiaries  have  local   minority
stockholders  whose equity  interests in these  subsidiaries range  from 2.6% to
49%. Any dividends paid by such operating subsidiaries would be shared pro  rata
with  such local  stockholders. See Part  I, Item 1.  'Business -- Relationships
with Minority Stockholders.'
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The following  selected  consolidated financial  data  of the  Company  are
qualified  by reference to and should be  read in conjunction with Part II, Item
8. 'Financial  Statements  and  Supplementary  Data  --  Consolidated  Financial
Statements,'  including the  Notes thereto, and  Part II,  Item 7. 'Management's
Discussion and Analysis of Financial  Condition and Results of Operations.'  The
consolidated financial data for fiscal years 1992 through 1996 have been derived
from  audited consolidated financial statements. The Company reports its results
in U.S. dollars. However, since the
 
                                       13
 


<PAGE>


Company's operations are  conducted principally  in France,  Spain and  Ireland,
fluctuations  in the value of currencies in which the Company transacts business
in relation to the U.S. dollar  may significantly affect the Company's  reported
results of operations and stockholders' equity.
 
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                ------------------------------------------------------------------
                                                                   1996          1995          1994          1993          1992
                                                                ----------    ----------    ----------    ----------    ----------
                                                                          (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                             <C>           <C>           <C>           <C>           <C>
CONSOLIDATED INCOME STATEMENT DATA:
    Net sales................................................   $2,225,313    $2,072,613    $1,821,670    $1,656,336    $1,664,602
    Cost of sales............................................    1,831,006     1,693,288     1,435,143     1,275,644     1,237,393
    Selling, general and administrative expenses(1)..........      307,777       300,013       314,948       311,901       340,364
    Special charges(2).......................................       --            --            --             8,650        39,943
                                                                ----------    ----------    ----------    ----------    ----------
    Operating income.........................................       86,530        79,312        71,579        60,141        46,902
    Interest income..........................................        8,140         9,372         8,601         9,298        12,501
    Interest expense.........................................      (30,778)      (32,974)      (32,715)      (37,023)      (37,170)
    Other income(3)..........................................          616         7,182        13,729           646         4,627
                                                                ----------    ----------    ----------    ----------    ----------
    Income from operations before income taxes and minority
      interests in earnings..................................       64,508        62,892        61,194        33,062        26,860
    Income taxes(4)..........................................      (17,496)      (20,470)      (35,999)      (19,445)      (29,638)
    Minority interests in earnings...........................      (27,411)      (23,966)      (13,882)      (12,570)      (13,792)
                                                                ----------    ----------    ----------    ----------    ----------
    Income (loss) before extraordinary item..................       19,601        18,456        11,313         1,047       (16,570)
    Extraordinary item, net of tax(5)........................       --            (3,092)       --            --            --
                                                                ----------    ----------    ----------    ----------    ----------
    Net income (loss)........................................   $   19,601    $   15,364    $   11,313    $    1,047    $  (16,570)
                                                                ----------    ----------    ----------    ----------    ----------
                                                                ----------    ----------    ----------    ----------    ----------
Net income (loss) per common share:
    Income (loss) before extraordinary item..................   $     2.14    $     2.01    $     1.23    $      .11    $    (1.91)
    Extraordinary item.......................................       --              (.33)       --            --            --
                                                                ----------    ----------    ----------    ----------    ----------
        Net income (loss) per common share...................   $     2.14    $     1.68    $     1.23    $      .11    $    (1.91)
                                                                ----------    ----------    ----------    ----------    ----------
                                                                ----------    ----------    ----------    ----------    ----------
OTHER DATA:
    Franprix stores open at end of year(6)...................          416           412           425           424           422
                                                                ----------    ----------    ----------    ----------    ----------
                                                                ----------    ----------    ----------    ----------    ----------
    Leader Price stores open at end of year(6)...............          241           206           156           108            59
                                                                ----------    ----------    ----------    ----------    ----------
                                                                ----------    ----------    ----------    ----------    ----------
        Cash dividends per common share......................   $      .11    $   --        $   --        $   --        $      .60
                                                                ----------    ----------    ----------    ----------    ----------
                                                                ----------    ----------    ----------    ----------    ----------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                              DECEMBER 31,
                                                                       ----------------------------------------------------------
                                                                         1996        1995        1994         1993         1992
                                                                       --------    --------    ---------    ---------    --------
                                                                                         (DOLLARS IN THOUSANDS)
<S>                                                                    <C>         <C>         <C>          <C>          <C>
CONSOLIDATED BALANCE SHEET DATA:
    Working capital (deficiency)....................................   $ 37,439    $ 42,283    $   8,807    $(163,361)   $ 10,853
    Total assets....................................................    781,704     815,575      735,503      756,980     795,871
    Short-term debt and current portion of
      long-term debt................................................     34,095      64,647       87,898      292,485     124,407
    Long-term debt..................................................    229,492     223,308      145,209       29,714     179,177
    Total common stockholders' equity...............................    106,210      97,047       93,222       65,358      86,306
</TABLE>
 
------------
 
(1) Includes  amortization of intangible assets. See Part II, Item 8. 'Financial
    Statements and Supplementary Data -- Consolidated Financial Statements.'
 
(2) During 1993, the  Company recorded  special charges  in the  amount of  $8.7
    million  for the corporate  headquarters located in  New York. These charges
    included a  write-off for  excess office  lease space  of $3.0  million  and
    employee  severance  expense  of  $5.7  million.  During  1992,  the Company
    recorded special charges in  the amount of  $39.9 million for  restructuring
    charges and special compensation expense. The restructuring charges included
    write-offs  for plant closures  of ice cream companies  in Belgium and Spain
    and severance expense  for redundant personnel  throughout the Company.  The
    write-offs  for  plant  closures  and severance  expense  amounted  to $12.4
    million and $4.4 million,  respectively. Other miscellaneous  reorganization
    charges  amounted to $1.0 million. In 1992, the Company paid to Mr. Reginald
    F. Lewis,  the  Company's  then  Chairman and  Chief  Executive  Officer,  a
    compensation  package consisting of $16.6 million in cash and a $5.5 million
    demand note bearing interest  at a rate  per annum equal  to the prime  rate
    plus 1%. The demand note was paid in October 1993. The package included $3.0
    million per year for the three-year period December 1, 1987 through November
    30,  1990 and  annual salary, bonus  and certain  other benefits, commencing
    December 1, 1990 through December 31, 1992. The total amount of compensation
    expense  recorded  as  special  charges  amounted  to  $22.1  million.   The
    compensation
 
                                              (footnotes continued on next page)
 
                                       14
 


<PAGE>


(footnotes continued from previous page)
    package  for Mr. Lewis was approved by the Board of Directors of the Company
    by resolution adopted in December 1990. At that time, an issue was raised as
    to whether any stockholder might claim that the payment of the  compensation
    package was prohibited under the terms of the Stockholders' Agreement. While
    TLC  Beatrice  did  not believe  that  such  payment was  prohibited  by the
    Stockholders' Agreement, the  Board of Directors,  with the acquiescence  of
    Mr.  Lewis, did not  obtain advice from outside  counsel resolving the issue
    until late 1992, when,  in anticipation of  proposed legislative changes  in
    the  tax  treatment of  executive compensation,  TLC Beatrice  determined to
    resolve the  issue. In  December 1992,  the Board  of Directors  sought  and
    obtained  advice from  outside counsel to  the effect  that the compensation
    package was not prohibited under  the terms of the Stockholders'  Agreement,
    and the package was paid at that time. These payments were made in late 1992
    in  anticipation of  proposed legislative  changes in  the tax  treatment of
    executive compensation. In addition, in March 1993, TLC Beatrice obtained  a
    written  opinion from  outside counsel which  concluded that  payment of the
    compensation package  to  Mr. Lewis  did  not violate  restrictions  in  the
    Stockholders'  Agreement on certain transactions with  holders of 5% or more
    of the equity securities of TLC Beatrice or an affiliate.
 
(3) During  the  year  ended   December  31,  1995,   the  Company  sold   three
    subsidiaries:  Artigel GmbH & Co. Kg, a  70% owned ice cream manufacturer in
    Germany, and two wholly owned ice cream distributors, Artic S.A. in  Belgium
    and  Artic  France  S.A.R.L.  in France.  Additionally,  the  Company ceased
    operations of its subsidiary, Dairyworld S.A., a Swiss trader of bulk  dairy
    products.The  Company recorded pre-tax gains  on such sales and dispositions
    of approximately $10.5 million,  which have been  included in other  income.
    The  Company  also recorded  charges  relating to  non-cash  exchange losses
    recorded in  compliance with  Statement  of Financial  Accounting  Standards
    ('SFAS')   No.  52,  'Foreign  Currency   Translation,'  in  the  amount  of
    approximately  $4.8  million.  During  1995,  the  Company  determined  that
    advances  from foreign subsidiaries were no longer of a long-term investment
    nature. Additionally, certain  advances were either  forgiven in  connection
    with  the sale of certain subsidiaries,  converted into dividends or settled
    through  other   non-cash   transactions.   Accordingly,   the   translation
    adjustments  related to  these advances,  previously included  in cumulative
    translation adjustment,  have been  included in  other income  for the  year
    ended   December  31,  1995.  Also  during  1995,  the  Company  sold  other
    investments for  approximately $467,000,  recorded equity  in earnings  from
    minority-owned  Leader Price stores of  approximately $331,000, and received
    additional proceeds of $703,000 from the 1994 sale of Choky, S.A., described
    below, which  have been  included in  other income.  During the  year  ended
    December  31, 1994 the Company  sold four wholly-owned subsidiaries: Premier
    Is A/S, an ice  cream manufacturer in Denmark,  Choky S.A. a distributor  of
    powdered  drink  products in  France, Sodialim  S.A., an  institutional food
    distributor in France, and Gelati  Sanson S.p.A., an ice cream  manufacturer
    in  Italy. The Company recorded pre-tax gains on such sales of approximately
    $12.1 million in 1994, which have been included in other income. The Company
    recorded after-tax gains on such  sales of approximately $3.9 million.  Also
    during  1994, the Company sold other investments for a gain of approximately
    $1.6 million, which has also been included in other income. During the  year
    ended  December 31, 1991, the Company sold  its 20% equity investment in its
    Canadian affiliate and its wholly-owned  subsidiary, Maxime Delrue, S.A.,  a
    French  distributor of juice  and other food  products. The Company recorded
    gains on such sales of approximately $4.6 million and $18.8 million in  1992
    and 1991, respectively, which have been included in other income.
 
(4) During  1996, the Company recognized the  tax benefit related to the startup
    losses of its Leader Price  operations previously not recognized under  SFAS
    109 in the amount of $3.7 million. In addition, the Company recognized a tax
    benefit  due to a settlement  of a tax audit  at its French holding company,
    TLC France, and the tax benefit  from the qualified investments made at  its
    Canary  Islands' subsidiary, Interglas,  in the amounts  of $2.9 million and
    $2.8 million, respectively. During 1995,  the Company favorably concluded  a
    tax audit for its Canary Islands' subsidiary with respect to a tax incentive
    investment  reserve  set  up in  1991  and qualified  investments  made from
 
                                              (footnotes continued on next page)
 
                                       15
 


<PAGE>


(footnotes continued from previous page)
    1992 through 1995 related to this  reserve which resulted in a reduction  in
    income tax expense of $10.9 million.
 
(5) During   the  year  ended   December  31,  1995   the  Company  recorded  an
    extraordinary loss  of $3.1  million relating  to the  write-off of  certain
    deferred  debt issuance costs and other costs incurred relating to long-term
    debt repaid  prior to  maturity.  The pre-tax  amount  of $4.6  million  was
    recorded net of an income tax benefit of $1.5 million.
 
(6) Includes Company-owned and franchised stores.
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
     The  following discussion  and analysis  is qualified  by reference  to and
should be read in  conjunction with Part II,  Item 8. 'Financial Statements  and
Supplementary  Data --  Consolidated Financial Statements,'  including the Notes
thereto. The Company's net  sales and results of  operations during the  periods
presented have not been significantly affected by inflation.
 
     The  Company's net  sales, costs, assets  and liabilities are  for the most
part denominated  in  local currencies.  Therefore,  results of  operations,  as
stated  in local currencies, and the Company's business practices and plans with
respect to a particular country, are not significantly affected by exchange rate
fluctuations. However, such results  of operations as  reported in U.S.  dollars
may  be  significantly  affected  by  fluctuations in  the  value  of  the local
currencies in  which the  Company transacts  business in  relation to  the  U.S.
dollar.  Results of operations of the Company's subsidiaries are translated into
U.S. dollars  on the  basis of  average exchange  rates throughout  the  period.
Assets and liabilities are translated into U.S. dollars on the basis of rates of
exchange  as of the  balance sheet dates. The  Company has in  the past and will
continue to closely monitor its currency exposure.
 
     Operations of the Company's Food  Distribution segment are concentrated  in
France,  and net  sales, costs, assets  and liabilities of  these operations are
therefore denominated almost  exclusively in  French francs.  Operations of  the
Company's  Grocery Products  segment, however,  are located  in several European
countries, including Spain,  Ireland, Belgium, the  Netherlands and France.  The
approximate  percentage  of  the  Company's  operating  income,  before  special
charges, attributable to  operations in French  francs was 66%  in 1996, 59%  in
1995 and 67% in 1994. A significant portion of the Company's remaining operating
income  was attributable to operations denominated in Spanish pesetas, and, to a
lesser extent, Irish punts, and, prior to 1995, Italian lira. See Part II,  Item
8.  'Financial  Statements  and  Supplementary  Data  --  Note  17  of  Notes to
Consolidated Financial Statements.' Unless  otherwise indicated, all  percentage
changes  in segment operating results set forth below have been calculated based
on local currency amounts.
 
     Beginning with the  year ended December  31, 1995, and  as reflected  below
under ' -- 1995 Compared with 1994,' the Company has redefined the components of
its  Food Distribution segment to consist of the Company's (i) Franprix network,
which consists of Baud, which is the Company's Franprix wholesale operation, and
Minimarche, which owns and operates the Franprix and certain of the Leader Price
retail stores  owned  by the  Company,  and  (ii) Leader  Price  network,  which
consists  of  Distribution Leader  Price, the  Company's Leader  Price wholesale
operation, and Retail  Leader Price,  which operates  a majority  of the  Leader
Price  retail stores  owned by the  Company. This redefinition  differs from the
Company's earlier definition of its lines  of business for the year ended  1994,
which  classified  the Company's  wholesale operations  under both  the Franprix
network and the  Leader Price network  as one  line of business  and its  retail
operations  under  both the  Franprix network  and the  Leader Price  network as
another line of business.
 
     During  the  year  ended  December   31,  1995,  the  Company  sold   three
subsidiaries:  Artigel  GmbH  &  Co.  Kg  ('Artigel'),  a  70%  owned  ice cream
manufacturer in Germany, and two wholly-owned ice cream distributors, Artic S.A.
('Artic') in  Belgium and  Artic  France S.A.R.L.  ('Artic France')  in  France.
Artigel, Artic and Artic France had combined net sales in 1995 and 1994 of $66.3
million  and $75.6  million, respectively. Artigel,  Artic and  Artic France are
sometimes  referred  to   collectively  herein  as   the  'Northern  Ice   Cream
Subsidiaries.'
 
                                       16
 


<PAGE>


     During  1994 the Company sold four  wholly-owned subsidiaries. In May 1994,
the Company sold Choky S.A. ('Choky'), a distributor of powdered drink  products
in  France. In July 1994,  the Company disposed of  two subsidiaries, Premier Is
A/S, ('Premier'),  an  ice cream  manufacturer  in Denmark,  and  Sodialim  S.A.
('Sodialim'),  an institutional food distributor in France. Gelati Sanson S.p.A.
('Sanson'), an  ice cream  manufacturer in  Italy was  sold in  September  1994.
Choky,  Premier, Sodialim and  Sanson are referred to  collectively as the 'Sold
Subsidiaries.' See  '  --  1995  Compared  with 1994,'  and  Part  II,  Item  8.
'Financial  Statements and Supplementary Data -- Note 3 of Notes to Consolidated
Financial Statements.'
 
RESULTS OF OPERATIONS
 
     The following table provides information concerning the Company's net sales
and operating  income, by  segment,  for fiscal  years  1994 through  1996.  The
approximate percentage changes in net sales and operating income attributable to
operations  on a local currency basis and  to changes in exchange rates for such
periods are shown in the tables on pages 19 and 21 below.
 
<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                       --------------------------------------
                                                                          1996          1995          1994
                                                                       ----------    ----------    ----------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                                    <C>           <C>           <C>
Net Sales:
     Food Distribution..............................................   $1,867,568    $1,640,994    $1,356,532
     Grocery Products...............................................      357,745       431,619       465,138
                                                                       ----------    ----------    ----------
          Total Net Sales...........................................   $2,225,313    $2,072,613    $1,821,670
                                                                       ----------    ----------    ----------
                                                                       ----------    ----------    ----------
Operating Income:
     Food Distribution..............................................   $   59,055    $   49,995    $   51,653
     Grocery Products...............................................       43,559        42,374        43,354
     Corporate Expenses.............................................      (13,144)      (10,317)      (20,200)
     Amortization of Intangibles(1).................................       (2,940)       (2,740)       (3,228)
                                                                       ----------    ----------    ----------
          Total Operating Income....................................   $   86,530    $   79,312    $   71,579
                                                                       ----------    ----------    ----------
                                                                       ----------    ----------    ----------
</TABLE>
 
------------
 
(1) Includes amortization of 1987 Acquisition goodwill only.
 
1996 COMPARED WITH 1995
 
     Net sales were approximately $2.2 billion  for the year ended December  31,
1996,  an increase of 7% compared to the  corresponding period in 1995, or a 10%
increase on a local currency basis. Excluding the net sales of the Northern  Ice
Cream  Subsidiaries for the year  ended December 31, 1995,  net sales would have
increased 11%, or 14% on  a local currency basis, in  1996 versus 1995. For  the
three  months ended December 31,  1996, excluding the net  sales of the Northern
Ice Cream  Subsidiaries, net  sales would  have  increased 7%  or 12%  on  local
currency basis versus the comparable 1995 period. The increase in fourth quarter
1996  versus fourth quarter 1995 net sales was primarily attributed to growth in
the Food Distribution Segment as the Grocery Products segment is highly seasonal
with the majority of sales occurring in the second and third quarters.
 
     The Food Distribution segment had net sales for the year ended December 31,
1996 of $1.9 billion, an increase of 14%, or a 17% increase on a local  currency
basis,  over  1995. Wholesale  sales  to the  Franprix  network declined  by 5%,
primarily reflecting a  3% decline in  sales to comparative  Franprix stores  in
1996  versus 1995. Net sales  relating to the Leader  Price network increased by
42% in 1996 versus 1995, reflecting the additional volume created by the opening
of 35  stores between  December 31,  1995  and December  31, 1996.  The  Company
anticipates  that in 1997  and for the  foreseeable future the  number of Leader
Price store openings will approximate 30 per year; however, no assurance can  be
given  that this number of openings can be achieved. Fourth quarter sales of the
Franprix network declined  by 2% from  the fourth quarter  in 1995 while  Leader
Price network sales increased 29% in the same period 1996 versus 1995.
 
     The  Grocery Products segment  had net sales in  1996 of approximately $358
million, a  decrease of  17%,  or 15%  on a  local  currency basis,  over  1995.
Excluding  the net  sales of  the Northern Ice  Cream Subsidiaries  for the year
ended December 31, 1995, net sales would have decreased 2% or increased 1% on  a
local  currency basis, in 1996  versus 1995. Increased sales  in snack foods and
ice cream
 
                                       17
 


<PAGE>


operations was offset by  lower sales in beverage  operations. Snack food  sales
increased  7%  due to  the full  year impact  of price  increases in  the second
quarter of  1995. The  Company's  Spanish ice  cream operations,  consisting  of
Interglas  S.A. ('Interglas') and Helados  La Menorquina S.A. ('La Menorquina'),
also experienced  sales growth  in  1996 versus  1995.  Net sales  of  Interglas
increased  by 3%  due to  price increases  in ice  cream products  and increased
yogurt sales.  Net sales  of La  Menorquina  increased by  5% primarily  due  to
increased  distributor and export  sales. Beverage operation  sales declined 6%,
primarily due  to unfavorable  weather conditions  during high  selling  months,
overcapacity  in the German market which has resulted in heavy price competition
and lower contract filling requirements by major customers.
 
     Operating income of the Food Distribution segment increased by 18%, or  21%
on  a local currency  basis, in 1996  compared to 1995.  Leader Price reported a
significant increase in operating  income, primarily due to  an increase in  the
number  of Leader Price stores from 206 in December 1995 to 241 in December 1996
and improved  profitability  of  previously opened  stores.  This  increase  was
partially  offset by a decline in  Franprix's operating income. The shortfall in
Franprix's operating income was due to a decline in wholesale sales of 5%, lower
gross margins due to price reductions  to counter competition in the Paris  area
and  fewer suppliers offering cash discounts  for early payment of invoices. For
retail operations, operating  income was  impacted by expenses  relating to  the
adoption  of a new Franprix logo, operating  losses from a newly opened Franprix
store and one-time expenses  associated with the  closing of an  underperforming
store.  The  Company's traditional  Franprix supermarkets  located in  the Paris
metropolitan area are experiencing intensified competition from hypermarkets and
discount stores. The Company has responded by reducing its prices and developing
an updated store design. This trend will continue to negatively affect  Franprix
operations but is beneficial to the Company's Leader Price discount operations.
 
     Operating income of the Grocery Products segment increased by 3% or 5% on a
local  currency basis  for the  year ended December  31, 1996  compared to 1995.
Excluding the  Northern  Ice Cream  Subsidiaries  from 1995  results,  operating
income would have decreased 5%, or 3% on a local currency basis, for 1996 versus
1995.  Improved performance of Tayto Ltd.  ('Tayto') and Interglas was offset by
lower  operating  income  at  the  Company's  beverage  operations  and  at   La
Menorquina.  Tayto,  a  manufacturer  of potato  chips  and  snacks  in Ireland,
recorded a 2% increase  in operating income  due to a 7%  increase in net  sales
slightly offset by higher costs associated with Tayto changing to more expensive
foil  packaging. Interglas  reported a  3% increase  in operating  income due to
increased net sales. La Menorquina experienced a 12% decline in operating income
primarily due to the recognition in  1995 of previously deferred exchange  gains
not  repeated in  1996. Excluding  this one-time  gain in  1995, La Menorquina's
operating income would have declined by  less than 1%, primarily reflecting  bad
debt expenses relating to the bankruptcy of one client offset by improvements in
production  processes and  purchasing prices  of materials.  Beverage operations
posted a 23% decline in  operating income primarily from  a drop in earnings  at
Frisdranken  Industrie Winters B.V. ('Winters'),  the Company's producer of soft
drinks in  the Netherlands.  The  decline in  operating  income at  Winters  was
attributed  to a 10% drop in sales due to unfavorable summer weather conditions,
lower gross margin due to competitive pressure in Germany and higher  production
costs associated with the transition to a new type of can.
 
     Corporate  expenses increased  from $10.3 million  to $13.1  million in the
year ended December 31, 1996 versus the same period in 1995 primarily reflecting
an increase of $3.8 million, to $5.8 million, of legal and professional expenses
relating to the litigation with Carlton Investments. See Part I, Item 3.  'Legal
Proceedings.'
 
                                       18
 


<PAGE>


     The following table details the approximate percentage changes in net sales
and operating income attributable to operations on a local currency basis and to
changes  in exchange rates for  the year ended December  31, 1996 as compared to
the year ended December 31, 1995.
 
<TABLE>
<CAPTION>
                                                             
                                                       NET SALES                        OPERATING INCONE
                                           ---------------------------------    ---------------------------------
                                               PERCENT CHANGE                       PERCENT CHANGE
                                              ATTRIBUTABLE TO                      ATTRIBUTABLE TO
                                           ----------------------     TOTAL     ----------------------     TOTAL
                                                         EXCHANGE    PERCENT                  EXCHANGE    PERCENT
                                           OPERATIONS     RATES      CHANGES    OPERATIONS     RATES      CHANGES
                                           ----------    --------    -------    ----------    --------    -------
<S>                                        <C>           <C>         <C>        <C>           <C>         <C>
Segment
     Food distribution..................        17%         (3)%        14%         21%          (3)%        18%
     Grocery products...................       (15)         (2)        (17)          5           (2)          3
     Grocery products, excluding
       Northern Ice Cream
       Subsidiaries.....................         1          (3)         (2)         (3)          (2)         (5)
          Total.........................        10          (3)          7          14           (3)         11
          Total, excluding Northern Ice
            Cream Subsidiaries..........        14          (3)         11          10           (3)          7
</TABLE>
 
     Net income for the year ended December 31, 1996 increased by  approximately
$4.2  million to  $19.6 million,  compared to  $15.3 million  in the  year ended
December 31, 1995. The increase was primarily due to higher operating income  of
$7.2  million, lower tax expense of $3.0  million, lower net interest expense of
$1.0 million  and a  1995 reporting  of an  extrarodinary item  of $3.1  million
offset  by  lower other  income  of $6.6  million  and higher  reported minority
interest in  earnings  of  $3.4  million.  The  reduction  in  tax  expense  was
attributable  to  the  recognition  of  a  deferred  tax  asset,  previously not
recognized under Statement of Financial  Accounting Standards ('SFAS') No.  109,
'Accounting  for Income  Taxes', on the  startup losses of  the Company's Leader
Price operations, the reduction of the statutory tax rate in the Canary  Islands
and  the favorable  settlement of  a tax audit  at the  Company's French holding
company. These  reductions were  partially offset  by an  increase in  U.S.  tax
losses  for which no tax benefit is recognized under SFAS No. 109 and a decrease
in the tax benefit recognized, as compared to 1995, related to the tax incentive
reserves at the Company's Canary Islands' subsidiary Interglas. Other income was
lower in 1996 versus 1995 due to the sale in 1995 of three subsidiaries and  the
recognition of one-time exchange losses. See ' -- 1995 Compared with 1994.'
 
1995 COMPARED WITH 1994
 
     Net  sales were approximately $2.1 billion  for the year ended December 31,
1995, an increase of 14% compared to 1994, or a 3% increase on a local  currency
basis.  Excluding the  net sales  of the  Sold Subsidiaries  for the  year ended
December 31, 1994,  net sales would  have increased by  22%, or 10%  on a  local
currency  basis, in 1995 versus 1994.  Fourth quarter net sales of approximately
$527 million for the quarter ended December 31, 1995, represented an increase of
28%, or 20% on a local currency  basis, from the comparable period in 1994.  The
significant  increase was  primarily due  to the  expansion of  the Leader Price
network as described below.
 
     The Food Distribution segment had net sales for the year ended December 31,
1995 of $1.6 billion, an increase of 21%, or 9% on a local currency basis,  over
the  comparable period  in 1994. Partially  offsetting the sales  increase was a
decline  in  net  sales  due  to  the  1994  disposition  of  two  of  the  Sold
Subsidiaries,  Choky and Sodialim. Excluding these two companies' net sales from
1994, net sales would have increased by  26%, or 13% on a local currency  basis.
Wholesale  and retail sales relating  to the Franprix network  declined by 3% in
1995 compared with 1994. Price  cutting strategies from hypermarket  competitors
and  discount retailers along  with sluggish consumer  spending were responsible
for such decline.  Consumers living  in the Paris  area have  been commuting  to
hypermarkets  and other discount stores outside Paris to make major purchases of
groceries and other household items.  Franprix stores, generally located in  the
Paris  metropolitan  area, have  been adversely  affected  by such  trend. Sales
relating to  the Leader  Price network  increased by  45% in  1995 versus  1994,
primarily  reflecting the additional volume created  by the opening of 50 stores
between December  31,  1994 and  December  31,  1995. Leader  Price  sales  were
especially  strong in the fourth quarter of 1995 as reflected by an 87% increase
in   net   sales    over   the    fourth   quarter   of    1994.   The    larger
 
                                       19
 


<PAGE>


base of opened stores in the fourth quarter of 1995 versus the fourth quarter of
1994  was primarily responsible  for the significant  increase. The Company does
not believe that Franprix results were materially impacted by the growth of  the
Leader Price network.
 
     The  Grocery Products  segment had  net sales  in 1995  of $432  million, a
decrease of 7%, or a 15% decrease on a local currency basis, over the comparable
period in 1994. The decrease was primarily due to a decline in net sales due  to
the  1994  disposition of  two  of the  Sold  Subsidiaries, Premier  and Sanson.
Excluding these two companies'  net sales from 1994,  net sales for the  Grocery
Products  segment would have increased by 8%, or declined 2% on a local currency
basis in 1995,  compared with 1994.  Increased net sales  in southern ice  cream
operations, consisting of Interglas and La Menorquina, were substantially offset
by  lower sales in the beverage and  ice cream operations in northern Europe and
the Company's  snack operations  in Ireland.  La Menorquina,  the Company's  ice
cream  operation in mainland Spain, posted a 14% increase in net sales primarily
due to significantly higher  export and supermarket sales  in 1995 versus  1994.
Interglas  reported a  6% increase  in net sales  due to  successful new product
introductions, strong yogurt sales and lower discounts offered to  distributors.
The  Company's ice cream  operations in Belgium and  Germany, Artic and Artigel,
respectively, recorded a combined  decrease in net sales  of 22% from the  prior
year.  Artigel's decrease was attributable to  lower sales to major distributors
which were diversifying their purchasing portfolios in order to reduce  reliance
on  any single source. Artic's decline was due to lower export sales and reduced
sales  to  distributors,  due  in  part  to  overstock  of  inventories  at  the
distributor  level carried over from the fourth  quarter of 1994. An 8% decrease
in net sales  at Winters in  the Netherlands was  primarily responsible for  the
decrease  in the total beverage  operation sales of 3%  during 1995 versus 1994.
Winters' decline was  primarily due  to unusually high  1994 sales  of iced  tea
products to a single customer related to product promotions not repeated by this
customer  in 1995. Tayto, the leading potato  chip and snack company in Ireland,
reported a 2% reduction  of net sales due  to increased promotional activity  by
competitors.
 
     Total  combined segment operating income (operating income before corporate
expenses and amortization of intangibles) for  the year ended December 31,  1995
decreased  by 3% to $92  million, or an 11% decrease  on a local currency basis,
over the comparable period  in the prior year.  Excluding the segment  operating
income  of the Sold Subsidiaries  for the year ended  December 31, 1994, segment
operating income would have increased by 13%,  or 3% on a local currency  basis,
in 1995 versus 1994.
 
     Operating  income of the Food Distribution segment declined 3%, or 13% on a
local currency basis, in  1995 compared to 1994.  Excluding Choky and  Sodialim,
segment  operating  income increased  4%, or  decreased 7%  on a  local currency
basis. The  32% increase  in  the number  of Leader  Price  stores from  156  in
December  1994 to  206 in December  1995 was  responsible for a  31% increase in
Leader Price  operating income.  Continued margin  pressure and  overall  volume
decline  in the Franprix network was responsible  for a 22% decline in operating
income for the combined results of both Baud and Minimarche.
 
     Operating income of the Grocery Products segment decreased by approximately
$1 million to $42  million in 1995 compared  to 1994. Excluding Premier,  Sanson
and the sale of idle property in Puerto Rico from 1994 results, operating income
would  have increased by 16% on a local currency basis in 1995 versus 1994. Also
included  in  1994  operating  income  of  the  Grocery  Products  segment   was
approximately $2 million in accelerated depreciation expenses. La Menorquina and
Interglas  reported increases in  operating income of  28% and 3%, respectively,
primarily related  to  sales increases  of  14% and  6%,  respectively,  greater
production  efficiencies  and better  expense  controls experienced  during 1995
versus the prior  year. La Menorquina  also benefitted from  the recognition  of
previously  deferred exchange  gains related  to export  sales. Offsetting these
improvements in such companies' operating profit was a decline in gross margins.
Such decline was due at Interglas to increases in raw material prices and higher
packaging costs and due  at La Menorquina to  below average weather in  mainland
Spain  which resulted  in lower  sales of high  margin ice  cream novelties. The
northern ice cream  operations, Artigel and  Artic, reported a  1995 loss of  $3
million versus a 1994 loss of $5 million. Included in the 1994 net loss was $3.6
million  in special bad  debt and restructuring  charges consisting of severance
expense,  writeoffs  of  obsolete  inventory  and  additional  plant   shut-down
expenses.  Excluding these special reserves, northern ice cream operating income
would have declined by $1.6
 
                                       20
 


<PAGE>


million, primarily reflecting a  22% decline in net  sales in 1995 versus  1994.
Winters  experienced  a 23%  decline in  operating income  in 1995  versus 1994,
primarily due  to  decreased net  sales  of  8%, lower  margins  resulting  from
increased  competition  and  higher  labor  and  freight  costs  associated with
increased export sales outside Europe.
 
     The following table details the approximate percentage changes in net sales
and operating income attributable to operations on a local currency basis and to
changes in exchange rates for  the year ended December  31, 1995 as compared  to
the year ended December 31, 1994.
 
<TABLE>
<CAPTION>
                                                       NET SALES                        OPERATING INCOME
                                           ---------------------------------    ---------------------------------
                                               PERCENT CHANGE                       PERCENT CHANGE
                                              ATTRIBUTABLE TO                      ATTRIBUTABLE TO
                                           ----------------------     TOTAL     ----------------------     TOTAL
                                                         EXCHANGE    PERCENT                  EXCHANGE    PERCENT
                                           OPERATIONS     RATES      CHANGES    OPERATIONS     RATES      CHANGES
                                           ----------    --------    -------    ----------    --------    -------
 
<S>                                        <C>           <C>         <C>        <C>           <C>         <C>
Segment
     Food distribution..................         9%         12%         21%         (13%)         10%        (3%)
     Food distribution, excluding Sold
       Subsidiaries.....................        13          13          26           (7)          11          4
     Grocery products...................       (15)          8          (7)          (8)           6         (2)
     Grocery products, excluding Sold
       Subsidiaries.....................        (2)         10           8           16           10         26
          Total.........................         3          11          14          (11)           8         (3)
          Total, excluding Sold
            Subsidiaries................        10          12          22            3           10         13
</TABLE>
 
     Net  income for 1995 increased by $4.1 million to $15.4 million compared to
$11.3 million in 1994. The  increase was primarily due  to lower tax expense  of
$15.5  million  and improved  operating  income of  $7.7  million and  lower net
interest expense of $.5 million,  offset by a decrease  of other income of  $6.5
million  and higher reported minority interest  in earnings of $10.1 million and
the recognition of an extraordinary loss of $3.1 million.
 
     During  the  year  ended  December   31,  1995,  the  Company  sold   three
subsidiaries:  Artigel GmbH  & Co.  Kg, a  70% owned  ice cream  manufacturer in
Germany, and two wholly owned ice cream distributors, Artic S.A. in Belgium  and
Artic  France S.A.R.L. in France. Additionally, the Company ceased operations of
its subsidiary, Dairyworld  S.A., a  Swiss trader  of bulk  dairy products.  The
Company  recorded pre-tax gains on such  sales and dispositions of approximately
$10.5 million,  which have  been  included in  other  income. The  Company  also
recorded  charges relating  to non-cash  exchange losses  recorded in compliance
with SFAS No. 52 in the amount  of approximately $4.8 million. During 1995,  the
Company  determined that advances from foreign  subsidiaries were no longer of a
long-term investment nature. Additionally, certain advances were either forgiven
in connection with the sale of certain subsidiaries, converted into dividends or
settled  through  other  non-cash  transactions.  Accordingly,  the  translation
adjustments  related  to  these  advances,  previously  included  in  cumulative
translation adjustment, have been  included in other income  for the year  ended
December  31, 1995.  Also during  1995, the  Company sold  other investments for
approximately $467,000, recorded equity  in earnings from minority-owned  Leader
Price  stores  of approximately  $331,000, and  received additional  proceeds of
$703,000 from the 1994  sale of Choky,  S.A. which have  been included in  other
income.
 
     During  the  year  ended  December  31, 1994,  the  Company  sold  the Sold
Subsidiaries. The Company recorded pre-tax gains on such sales of  approximately
$12.1  million in  1994 which  have been included  in other  income. Also during
1994, the Company  sold other investments  for a pre-tax  gain of  approximately
$1.6 million which has also been included in other income.
 
     The  decrease in  tax expense  was attributable  to taxes  related to asset
dispositions recorded in 1994 of $8.2 million and a reversal of tax  contingency
reserves in 1995 of $10.9 million.
 
     During   the  year  ended  December  31,   1995  the  Company  recorded  an
extraordinary loss of $3.1 million relating to the write-off of certain deferred
debt issuance costs and other costs incurred relating
 
                                       21
 


<PAGE>


to long-term debt repaid prior to  maturity. The pre-tax amount of $4.6  million
was recorded net of an income tax benefit of $1.5 million.
 
SEASONALITY
 
     The  Company's Food  Distribution segment  shows relatively  even sales and
operating income throughout the year. The Grocery Products segment shows greater
seasonality, with the majority of sales  and operating income earned during  the
second  and third quarters of the year.  Results of the Grocery Products segment
are affected  by summer  weather conditions  which impact  sales of  ice  cream,
dessert  and soft drink  products. While the  working capital needs  of the Food
Distribution segment  remain stable  throughout the  year, the  working  capital
levels  of the  Grocery Products  segment increase  during the  second and third
quarters because of higher inventories and receivables.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Management believes  that  the  Company's current  level  of  indebtedness,
amounting  to approximately  $264 million  at December  31, 1996,  of which $230
million represents long-term debt and $34 million represents short-term debt and
current portion of long-term debt, is  such that no significant restrictions  on
future  earnings or  liquidity exist  and that  the Company's  existing level of
indebtedness will not have any adverse impact on its operating flexibility.  The
Company, however, continues to monitor its level of indebtedness.
 
     Working   capital  financing  is  generally  available  to  each  operating
subsidiary of  the Company  through  short-term lines  of credit  and  overdraft
facilities  from local banks. At December  31, 1996, TLC Beatrice's subsidiaries
had lines of credit  denominated in local currencies  totalling $91 million,  of
which  $74 million  remained unused.  The Company  believes that  cash flow from
operations  combined  with  local  credit  facilities  are  sufficient,  in  the
aggregate,   to   meet  anticipated   working   capital  and   capital  spending
requirements, as  well  as  the  Company's debt  service  requirements  for  the
foreseeable future, including interest payments.
 
     At  December 31,  1996, the Company  had working capital  of $37.4 million,
compared to working capital of $42.3 million at December 31, 1995.
 
     On October  2, 1995,  TLC Beatrice  sold $175  million aggregate  principal
amount of 11.5% Senior Secured Notes due October 1, 2005 (the 'Notes'). Interest
on  the Notes is payable on April 1 and October 1 of each year, commencing April
1, 1996. The Notes rank pari passu  in right of payment with all  unsubordinated
borrowings  of TLC Beatrice and are secured  by a security interest in a portion
of the  capital stock  of certain  of TLC  Beatrice's subsidiaries  and  certain
intercompany indebtedness. The Indenture relating to the Notes (the 'Indenture')
permits  TLC  Beatrice's  subsidiaries to  incur  additional  indebtedness under
certain circumstances,  including  up  to  $25  million  for  general  corporate
purposes  under a Facility Agreement  (the 'Credit Agreement'), described below,
among  Banque  Paribas,   Smurfit  Paribas   Bank  Limited   and  TLC   Beatrice
International (Irish) Holdings Limited ('Irish Holdings') which is guaranteed by
TLC Beatrice.
 
     The  Notes are redeemable,  at the option  of TLC Beatrice,  in whole or in
part, at any  time on or  after October 1,  2000, at the  redemption prices  set
forth  in  the  Indenture  plus  accrued interest  to  the  redemption  date. In
addition, upon one or more Public Equity Offerings (as defined in the Indenture)
consummated prior to October 1, 1998, TLC  Beatrice may at its option redeem  up
to  $52.5 million aggregate principal amount  of Notes from the proceeds thereof
at 110% of the  principal amount thereof  plus accrued interest  to the date  of
redemption.
 
     TLC  Beatrice is required  to offer to repurchase  all outstanding Notes at
101% of principal amount plus accrued interest promptly after the occurrence  of
a  Change of Control (as defined in the Indenture) with respect to TLC Beatrice.
A Change of  Control will  generally be  deemed to  occur if  (i) the  Permitted
Holders  (as defined in  the Indenture) shall beneficially  own in the aggregate
less than 20% of the aggregate voting  power of all classes of Voting Stock  (as
defined  in the Indenture) of TLC Beatrice;  or (ii) any person or entity (other
than a Permitted  Holder) shall  beneficially own either  more than  50% of  the
aggregate  voting power of all classes of Voting Stock of TLC Beatrice or shares
of Voting Stock of TLC Beatrice representing aggregate voting power greater than
that represented by the
 
                                       22
 


<PAGE>


aggregate shares  of  Voting Stock  then  beneficially owned  by  the  Permitted
Holders;  or (iii) any such person or entity shall elect a majority of the Board
of Directors of TLC Beatrice. There can  be no assurance that TLC Beatrice  will
have sufficient funds to repay the Notes should a Change of Control occur.
 
     The  Indenture restricts, among  other things, the  ability of TLC Beatrice
and  its  Restricted  Subsidiaries  (as  defined  in  the  Indenture)  to  incur
indebtedness,  incur  liens, enter  into sale  and leaseback  transactions, make
restricted payments, enter  into asset dispositions  and engage in  transactions
with  affiliates. The Indenture also limits the  ability of TLC Beatrice and its
Restricted Subsidiaries to enter  into agreements that  restrict the payment  of
dividends  and other  payments by any  Restricted Subsidiary to  the Company. In
addition, the  Indenture restricts  the  ability of  TLC  Beatrice to  merge  or
consolidate  with or transfer all or substantially  all of its assets to another
entity.
 
     On October  6,  1995, Irish  Holdings  entered into  the  Credit  Agreement
pursuant  to which Irish Holdings can initially borrow up to the lower of (a) 16
million Irish Punts (approximately $25.9 million at the then-prevailing  foreign
exchange  rate) and (b) an amount calculated  as follows: 28 million Irish Punts
plus any share capital contributed in  cash to Tayto, Irish Holdings'  principal
operating  subsidiary, less  the cumulative  amount of  cash dividends  paid and
management fees and intercompany loans made by Tayto to Irish Holdings from  the
date  of  the Credit  Agreement. The  amount available  for borrowing  under the
Credit Agreement is reduced to (i) 9.6 million Irish Punts (approximately  $15.9
million  at the December 31,  1996 foreign exchange rate)  from February 1, 1999
through January 31, 2000  and (ii) 3.2 million  Irish Punts (approximately  $5.3
million  at the December 31,  1996 foreign exchange rate)  from February 1, 2000
through January 31, 2001, at which time all amounts outstanding must be  repaid.
Interest  on borrowings  in Irish  Punts is  payable at  the rate  of the Dublin
Interbank Offering Rate ('DIBOR') plus 1.65%. The Credit Agreement also provides
for an alternative currency option pursuant  to which Irish Holdings can  borrow
in  certain other currencies at an interest  rate equal to LIBOR plus 1.65%. The
Credit Agreement contains restrictions on  certain activities of Irish  Holdings
and  Tayto, including,  among other  things, the  incurrence of  indebtedness or
encumbrances, entering  into agreements  other than  in the  ordinary course  of
business, the making of certain capital expenditures and the acquisition or sale
of  assets outside the ordinary course  of business. In addition, Irish Holdings
and Tayto  are  required  to  maintain  certain  financial  ratios.  The  Credit
Agreement  is guaranteed by TLC  Beatrice and secured by  a pledge of the common
stock of Tayto owned by Irish Holdings. As of December 31, 1996, no indebtedness
was outstanding under the Credit Agreement.
 
     For the years  ended December  31, 1996, 1995  and 1994,  cash provided  by
operating  activities  was  $74.6  million,  $75.8  million  and  $48.3 million,
respectively.
 
     In the year ended December 31, 1996, cash used in financing activities  was
$21.3 million, primarily reflecting approximately $37.6 million in repayments of
short-term  debt  offset  by $18.4  million  in  net proceeds  from  issuance of
long-term debt.
 
     In the year ended December 31, 1995, cash provided by financing  activities
was  $49.3 million, primarily  reflecting net proceeds from  the issuance of the
Notes, offset by the repayments of $136.4 million and $6.4 million of  long-term
and short-term indebtedness, respectively.
 
     In  1994, cash  used in financing  activities was  $79.4 million, primarily
reflecting the net repayments  of short-term indebtedness  of $41.2 million  and
long-term indebtedness of $34.7 million.
 
     For the year ended December 31, 1996, cash used in investing activities was
$76.9 million primarily reflecting disbursements for net capital expenditures.
 
     For the year ended December 31, 1995, cash used in investing activities was
$83.8  million, primarily reflecting disbursements  for net capital expenditures
of $60.9 million, bond investments relating  to the Canary Island tax  incentive
program (described below) of $10.4 million and equity ownership stakes in Leader
Price stores of $8.7 million.
 
     For the year ended December 31, 1994, cash provided by investing activities
was  $48.6 million, primarily as a result of the proceeds received from the sale
of the Sold  Subsidiaries of  $87.4 million  principally offset  by net  capital
expenditures of $40.5 million.
 
                                       23
 


<PAGE>


     The 1996 net capital expenditures of approximately $74.0 million, primarily
related to (i) the construction of St. Alban's manufacturing facility in France,
(ii) the construction of a warehouse in Ireland to consolidate Tayto's warehouse
operations,  (iii) Leader Price  store openings and  (iv) increased purchases of
ice cream cabinets.
 
     The 1995  net  capital expenditures  of  approximately $60.9  million  were
applied  primarily toward the maintenance and further expansion of the Company's
ice cream sales in Spain and distribution network in France and the costs of new
store openings, which primarily consisted of Leader Price stores. The  reduction
in  1994  net capital  expenditures reflects  the  disposition of  the corporate
aircraft and the sale of idle property in Puerto Rico.
 
     The Company  estimates  its  1997  net  capital  expenditures  will  be  at
approximately  $40  million.  The Company  anticipates  that, as  in  1996, such
expenditures will be applied  primarily to the costs  of new Leader Price  store
openings  and further expansion of  the Company's ice cream  sales in Spain. See
Part I, Item 1. 'Business -- Governmental Regulation.'
 
     Pursuant to  certain  agreements  entered  into in  1992,  the  Company  is
obligated   under   certain  circumstances   to   purchase  the   Baud  Minority
Stockholders' ownership interests in Distribution Leader Price and Retail Leader
Price. The agreements provide that prior to June 30, 1997, if certain members of
the Baud family  cease to hold  their management positions  with the  applicable
company  and the Company  fails to propose and  vote in favor  of one of certain
members of the Baud family as a replacement, the Baud Minority Stockholders have
the  right  to  require  TLC  France  to  purchase  all  of  the  Baud  Minority
Stockholders'  shares pursuant to the Put Right, and TLC France has the right to
purchase all of the  Baud Minority Stockholders'  shares of Distribution  Leader
Price in the event that the Baud Minority Stockholders exercise their put option
with  respect to the shares of Retail Leader  Price. In addition, at any time on
or after July 1, 1997 and prior to June 30, 2027, the Baud Minority Stockholders
can exercise the Put Right, and TLC France can exercise the Call Right,  without
restriction.  The  price  to  exercise  the Put  Right  is  based  on  a formula
calculated at the time of exercise which sets a purchase price at a multiple  of
the  average annual net income per share of Distribution Leader Price and Retail
Leader Price, as applicable, for the two fiscal years prior to exercise, with  a
guaranteed   minimum  return  on  the   Baud  Minority  Stockholders'  aggregate
investment if an option is exercised prior to July 1, 1997. If the Put Right  is
exercised  after July  1, 1997, and  as long  as the Notes  are outstanding, the
purchase price for such shares is payable 25% on the closing of the purchase  of
such  shares, 45% on the first anniversary of such closing and 30% on the second
anniversary of  such closing,  together with  interest thereon  at PIBOR.  After
repayment of the Notes, the purchase price for such shares is payable 50% on the
closing  of the purchase of such shares and 50% on the first anniversary of such
closing, without  interest. Solely  for purposes  of illustration,  if the  Baud
Minority  Stockholders were  to have exercised  their Put Right  on December 31,
1996, using the  formula that  would be  in effect on  July 1,  1997, the  total
purchase  price for such shares would  have been approximately $143 million. The
price to exercise the Call Right is based on the same formula as in the exercise
of the Put  Right, except  that the  multiple of  average annual  net income  is
higher. Distribution Leader Price and Retail Leader Price have shown substantial
earnings growth during the past three years. If such companies' earnings were to
continue  to increase during the two fiscal  years prior to the exercise of such
option, as to which no assurance can  be given, the purchase price payable  upon
exercise of the Put Right and the Call Right would increase materially.
 
     In   addition  to  the   foregoing,  the  Company,   including  in  certain
circumstances TLC Beatrice, is a  party to separate stockholder agreements  with
the  Other Baud Stockholders and certain other minority stockholders. Certain of
these agreements and the  by-laws of certain subsidiaries  restrict the sale  of
the  minority  stockholders' interest  or require  the  Company or  the minority
stockholders, as the case  may be, to  offer to sell their  shares to the  other
stockholders  prior to selling such  shares to a third  party and/or require the
Company to purchase  these interests  under certain  circumstances. These  local
minority  stockholders have the option to  require the Company to purchase their
interests in whole or in part at any time. If all of such options were exercised
in full,  the  Company's  aggregate  purchase  obligation  is  estimated  to  be
approximately  $35  million  as of  December  31,  1996. See  Part  II,  Item 7.
'Management's Discussion  and Analysis  of Financial  Condition and  Results  of
Operations -- Liquidity
 
                                       24
 


<PAGE>


and   Capital  Resources'  and  Part  II,  Item  8.  'Financial  Statements  and
Supplementary Data -- Note 5 of Notes to Consolidated Financial Statements.'
 
     If any or all of such minority stockholders require the Company to purchase
their interest in certain subsidiaries of the Company pursuant to the put rights
described above, the Company believes cash flows from operations, together  with
the  Company's  potential  financing sources,  will  be sufficient  to  meet any
purchase obligation that may  result. No assurance can  be given, however,  that
the Company will be able to satisfy its purchase obligations from these sources.
 
     As  a consequence  of the termination  of certain  long-standing income tax
incentives in the Canary Islands as of December 31, 1991, transition rules  were
promulgated by the Spanish and Canary Island provincial governments. To preserve
the  tax advantages granted  under these prior  incentives, the transition rules
required investments by  TLC Beatrice Canary  Islands subsidiary, Interglas,  in
certain  approved investments  over the  five-year period  from 1992  to 1996. A
variety  of  investments  were  eligible,  including  productive  machinery  and
equipment  and/or local  government interest-bearing  bonds. Interglas satisfied
the last  investment required  under the  transition rules  of approximately  $8
million  entirely from internal cash flow.  The Company recognized an income tax
benefit of  $2.8 million  in 1996  due to  the satisfaction  of this  investment
requirement.
 
     In  addition, the Canary Islands instituted new tax incentives beginning in
1994. Interglas opted  to take advantage  of these incentives  for its 1994  and
1995  tax years and is required to  make qualifying investments of $16.8 million
in 1997, $16.8 million in  1998 and $440,000 in  1999. The Company has  provided
for deferred income taxes on these requirements equal to the 35% tax rate on $34
million,  or  approximately,  $11.9  million, in  the  event  that  the required
investment obligations  are  not fulfilled.  There  can be  no  assurances  that
changes  in existing Canary Islands tax rules and requirements will not occur or
that the Company will be able to make the qualifying investments in the  future.
By  reason of these  uncertainties, the Company has  recorded the potential full
deferred  tax  liability.   If  the   Company  can   fulfill  these   investment
requirements,  the deferred  tax liability  may be  reversed depending  upon the
relevant facts and circumstances existing at the time.
 
     TLC Beatrice is a defendant in lawsuits with Carlton Investments  alleging,
among  other things, a breach of the Stockholders' Agreement, waste of corporate
assets and  breaches of  fiduciary duties.  TLC Beatrice  intends to  vigorously
defend against these actions and believes these allegations to be without merit.
TLC  Beatrice's outside litigation counsel has advised TLC Beatrice that at this
time the extent of  TLC Beatrice's liability, if  any, is not determinable.  The
ultimate  outcome that may result from these  matters may have a material effect
on TLC Beatrice's consolidated financial condition and/or results of operations.
See Part I, Item 3. 'Legal Proceedings.'
 
TAX MATTERS
 
     TLC Beatrice is presently a personal holding company within the meaning  of
Section 542 of the Internal Revenue Code of 1986, as amended. It could therefore
be  subject to a  special United States  federal income tax  (in addition to the
regular  corporate  tax)  under   certain  circumstances.  If  applicable,   the
additional  tax is imposed at a rate  of 28% through 1992, and 39.6% thereafter,
based on such corporation's taxable income (computed after certain  adjustments,
including  a reduction for capital  gains, the regular federal  income tax and a
limited use of the  net operating loss deduction)  reduced by certain  dividends
paid ('undistributed personal holding company income'). For the one-month period
ended  December 31, 1987 and the nine years ended December 31, 1996, the Company
had no undistributed personal holding company  income and therefore the tax  did
not apply.
 
     Currently,  many of the  countries in which  the Company's subsidiaries are
located impose a withholding tax of approximately 5% to 15% on dividends paid by
such subsidiaries to the Company. Such  taxes may generally be credited  against
federal  income  taxes payable  by the  Company in  the United  States. However,
because the  Company does  not have  significant taxable  income in  the  United
States, it may be unable to use any or all of such credits.
 
                                       25
 


<PAGE>


CAUTIONARY STATEMENT FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
 
     Except  for historical matters,  the matters discussed in  Part II, Item 7.
'Management's Discussion  and Analysis  of Financial  Condition and  Results  of
Operations,'  as well as  other portions of this  Form 10-K, are forward-looking
statements that involve risks and uncertainties. Such forward-looking statements
include, but are  not limited  to, statements  about future  openings of  Leader
Price  stores and  changes in rates  of growth  as a result  thereof, results of
Franprix, obligations with minority stockholders and the litigation with Carlton
Investments. TLC Beatrice wishes to caution the reader that the factors below in
some cases have affected and could affect TLC Beatrice's actual results, causing
results to differ materially from those in any forward-looking statement.  These
factors  include:  governmental  regulations  relating  to  new  store openings,
continued adverse market trends and purchasing habits of consumers living in the
Paris metropolitan area  which adversely affect  Franprix, negotiations and  the
then-current   relationships  with  minority   stockholders,  determinations  of
judicial authorities with respect to the litigation with Carlton Investments and
foreign exchange rates.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     The financial statements and  supplementary financial information that  are
required  to be included pursuant to  this Item 8 are listed  in Item 14 of this
Report under the caption  '(a)1.' and follow Item  14. The financial  statements
and supplementary financial information specifically referenced in such list are
incorporated in this Item 8 by reference.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     None.
 
                                       26



<PAGE>


                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
 
     Directors  are elected  by the stockholders  of TLC Beatrice  at its annual
meeting or, in the case  of a vacancy, appointed by  the stockholders or by  the
directors  then in office to serve until  the next annual meeting or until their
successors are elected and qualified. The  officers of TLC Beatrice are  elected
by  and serve  at the  pleasure of the  Board of  Directors. Set  forth below is
certain information  concerning  the directors  and  executive officers  of  TLC
Beatrice.
 
<TABLE>
<CAPTION>
                 NAME                                       POSITION                      AGE
---------------------------------------  ----------------------------------------------   ---
<S>                                      <C>                                              <C>
                                                                                          
Loida Nicolas Lewis....................  Chairman and Chief Executive Officer; Director   54
                                                                                          
Reynaldo P. Glover.....................  Executive Vice President, General Counsel and
                                           Assistant Secretary; Director                  53
                                                                                          
Peter Offermann........................  Executive Vice President and Chief Financial
                                           Officer                                        52
                                                                                          
Dennis P. Jones........................  Executive Vice President, Operations             45
                                                                                          
Daniel Jux.............................  President, Food Distribution Division            53
                                                                                          
Vincent P. O'Sullivan..................  President, Grocery Products Division             51
                                                                                          
Charles Clarkson.......................  Vice President; Secretary; Deputy Counsel        49
                                                                                          
Terri L. Pike..........................  Controller                                       34
                                                                                          
Rene S. Meily..........................  Vice President, Director of Communications       43
                                                                                          
Imelda M. Nicolas......................  Vice President, Training and Development         51
                                                                                          
Clifford L. Alexander, Jr..............  Director                                         63
                                                                                          
Lee A. Archer, Jr......................  Director                                         73
                                                                                          
Dort A. Cameron III....................  Director                                         53
                                                                                          
Robert C. deJongh......................  Director                                         50
                                                                                          
Anthony S. Fugett......................  Director                                         43
                                                                                          
Leslie N. Lewis........................  Director                                         24
                                                                                          
James E. Obi...........................  Director                                         54
                                                                                          
Ricardo J. Olivarez....................  Director                                         55
                                                                                          
Samuel P. Peabody......................  Director                                         72
                                                                                          
William H. Webster.....................  Director                                         72
</TABLE>
 
     Loida  Nicolas Lewis has been a director of TLC Beatrice since December 22,
1993. She became Chairman of TLC  Beatrice effective February 1, 1994 and  Chief
Executive  Officer in July 1994. From 1979  through 1990, Mrs. Lewis served as a
General Attorney for the United  States Immigration and Naturalization  Service.
From  February 1993 she has  been Chairman of The  Reginald F. Lewis Foundation,
Inc., a private foundation. Mrs. Lewis was an associate attorney with Antonio C.
Martinez from 1977 to 1979 and legal clerk at Manhattan Legal Services from 1970
to 1973.  Mrs. Lewis  is the  mother of  Leslie N.  Lewis, sister  of Imelda  M.
Nicolas and sister-in-law of Anthony S. Fugett.
 
     Reynaldo  P. Glover has been a director of TLC Beatrice since July 1995 and
Executive Vice  President,  General  Counsel  and  Assistant  Secretary  of  TLC
Beatrice  since July  1994. Since  September 1994, Mr.  Glover has  served as of
counsel to the law firm  Rudnick & Wolfe. From 1991  through July 1994 he was  a
general  partner of the law firm Miller, Shakman, Hamilton, Kurtzson & Schlifke.
From 1987 through 1991 he was a general partner of the law firm Jenner & Block.
 
     Peter Offermann  has  been Executive  Vice  President and  Chief  Financial
Officer  of TLC Beatrice since December 1994.  Since May 1994, Mr. Offermann has
been the President of  Offermann Financial, Inc.,  a financial consulting  firm.
From  1968 through  May 1994, he  served in  a number of  positions with Bankers
Trust  Company  and  its  affiliates,  including  as  Managing  Director  of  BT
Investment  Partners, Inc. from October 1992 through May 1994, Managing Director
of BT  Securities  Corporation  from  October 1991  through  October  1992,  and
Managing Director of
 
                                       27
 


<PAGE>


Bankers  Trust  Company from  1986 through  September 1991.  Mr. Offermann  is a
director of Jan-Bell Marketing, Inc. and National Auto Finance Company, Inc.
 
     Dennis P.  Jones  has been  Executive  Vice President,  Operations  of  TLC
Beatrice  since  January  1993. He  served  as Senior  Vice  President, Business
Planning and Development of  TLC Beatrice from March  1990 to January 1993,  and
Vice  President, Business Planning and Development  of TLC Beatrice from 1987 to
March 1990.
 
     Daniel Jux has been the President of the Food Distribution Division of  TLC
Beatrice  since June  1990. He was  Financial Director of  the Food Distribution
Division of TLC France from February 1988 to June 1990. Previously he was  Field
Manager from 1985 to 1988 and Financial Director from 1982 to 1985 of Boucheries
Bernard, a French meat company.
 
     Vincent  P. O'Sullivan has been President  of the Grocery Products Division
since January  1994. Mr.  O'Sullivan has  also been  the Chairman  and  Managing
Director  of Tayto, the Company's  snack company in Ireland,  for more than five
years.
 
     Charles Clarkson has been Vice  President, Secretary and Deputy Counsel  of
TLC  Beatrice since July 1996. From July 1994  to July 1996 he was Secretary and
Counsel of  TLC  Beatrice.  From April  1993  to  July 1994,  he  was  Assistant
Secretary  and Counsel of TLC Beatrice. From March 1993 through January 1994, he
also served as a consultant to TLC  Beatrice. From May 1990 through March  1993,
Mr.  Clarkson was  on a  leave of  absence from  TLC Beatrice.  He was Assistant
Secretary of TLC Beatrice from April 1990  to October 1990 and Secretary of  TLC
Beatrice  from August 1987 to April 1990. Mr.  Clarkson was a partner of the law
firm Lewis & Clarkson or its successor from 1979 until May 1990.
 
     Terri L.  Pike has  been Controller  of TLC  Beatrice since  July 1993  and
previously served as Assistant Controller of TLC Beatrice from July 1992 to July
1993.  Ms.  Pike  was Controller  of  the Office  of  Environmental Policy/Legal
Services Group for W.R. Grace & Co. from July 1991 to July 1992.
 
     Rene S. Meily has  been Vice President, Director  of Communications of  TLC
Beatrice  since April 1995.  From March 1994  through March 1995  he served as a
consultant  to  TLC  Beatrice.  Mr.  Meily  was  Vice  President,  Director   of
Communications  of  TLC Beatrice  from November  1989  through January  1994 and
Director of Communications from  June 1988 through November  1989. From 1987  to
1988 he served as Client Service Manager for Burson-Marsteller Inc.
 
     Imelda  M. Nicolas has been Vice President, Training and Development of TLC
Beatrice since January 1996. From March 1994 through January 1996 she served  as
Assistant  to the Chairman of TLC Beatrice.  Since 1993 she has been Chairperson
of the National Commission of Women for the Philippines. From 1986 through  1992
she  was  a  presidential  assistant  in the  Office  of  the  President  of the
Philippines under  President Corazon  C.  Aquino. She  is  the sister  of  Loida
Nicolas Lewis and the aunt of Leslie N. Lewis.
 
     Clifford  L. Alexander, Jr. has  been a director of  TLC Beatrice since May
24, 1996. Since January 1981, Mr. Alexander has been the President of  Alexander
&  Associates,  Incorporated,  a  private consulting  firm.  From  February 1977
through January  1981,  Mr. Alexander  served  as  Secretary of  the  Army.  Mr.
Alexander  is a director of MCI Communications Corporation, The Dun & Bradstreet
Corporation, The Dreyfus Third Century Fund, Dreyfus General Family of Funds and
Dreyfus Premier of Funds, Mutual of America Life Insurance Company, and American
Home Products.
 
     Lee A. Archer, Jr. has been a director of TLC Beatrice since February 1988.
From 1976 to 1987, he was a  Vice President of General Foods Corporation.  Since
1987,  he  has  been  Chairman and  Chief  Executive  Officer  of Organizational
Publishing Company.
 
     Dort A. Cameron III has  been a director of  TLC Beatrice since July  1995.
Since 1984, Mr. Cameron has been the general partner of BMA Limited Partnership,
which  is the general  partner of Investment  Limited Partnership, an investment
partnership focusing  on  high-yield  securities,  structured  transactions  and
certain  direct  equity  investments.  Since  1988,  Mr.  Cameron  has  been the
co-general partner  of EBD  L.P., which  is the  general partner  of The  Airlie
Group,   L.P.,   an  investment   partnership   focusing  on   hedged  arbitrage
transactions. Since 1993,  Mr. Cameron  has been the  Chairman of  the Board  of
Entex  Information Services, Inc., a  computer reseller and service corporation.
Since 1994, Mr.
 
                                       28
 


<PAGE>


Cameron has been the Chairman of the Board of Milestone Capital Management.  Mr.
Cameron is a director of Foodbrands America, Inc. and Perkins Restaurants, Inc.
 
     Robert  C. deJongh has been a director of TLC Beatrice since February 1988.
For more  than  five years,  Mr.  deJongh has  headed  the U.S.  Virgin  Islands
architectural firm of deJongh & Associates.
 
     Anthony  S. Fugett has been a director  of TLC Beatrice since January 1993.
Since May  1989,  he has  been  President and  Chief  Executive Officer  of  ASF
Systems,  Inc., a  computer systems integration  company. From  1977 through May
1989, he was an executive with the International Business Machines  Corporation.
He is a brother-in-law of Loida Nicolas Lewis and uncle of Leslie N. Lewis.
 
     Leslie  N. Lewis has been  a director of TLC  Beatrice since December 1991.
Beginning in  1991,  Ms.  Lewis  attended Harvard  University,  from  which  she
graduated  in 1995.  She has  held summer  analyst positions  at McKinsey  & Co.
during the summer of 1994,  TLC Beatrice during the summer  of 1993 and at  Lion
Advisors,  L.P. during the  summer of 1992.  She is a  daughter of Loida Nicolas
Lewis and a niece of Imelda M. Nicolas and Anthony S. Fugett.
 
     James E. Obi has been a director  of TLC Beatrice since February 1988.  For
more  than five years Mr.  Obi has been a  Chartered Life Underwriter and Agency
Manager for The Equitable Life Assurance Society of the United States.
 
     Ricardo J. Olivarez  has been  a director  of TLC  Beatrice since  February
1988.  Since  April 1988,  he  has been  the  Controller of  Southern California
Association of Governments.
 
     Samuel P. Peabody has been a director of TLC Beatrice since February  1988.
For more than five years, Mr. Peabody has been an educational consultant.
 
     William  H. Webster has been a director of TLC Beatrice since May 24, 1996.
Since September  1991, Mr.  Webster has  been a  partner with  the law  firm  of
Milbank,  Tweed,  Hadley &  McCloy. From  May 1987  through September  1991, Mr.
Webster served as Director of  Central Intelligence. From February 1978  through
May 1987, Mr. Webster served as Director of the Federal Bureau of Investigation.
Mr.  Webster  is  a director  of  Anheuser-Busch Companies,  Inc.,  Maritz Inc.,
Pinkerton, Inc. and Next Wave Telecom, Inc.
 
ITEM 11. EXECUTIVE COMPENSATION
 
COMPENSATION OF EXECUTIVE OFFICERS
 
     The following table sets forth the compensation paid by TLC Beatrice to (i)
its Chairman of the Board and Chief Executive Officer and (ii) each of the  four
most highly compensated individuals serving as executive officers of the Company
at the end of 1996 (collectively, the 'Named Executives'), for services rendered
in all capacities to TLC Beatrice during the periods indicated.
 
                                       29
 


<PAGE>


                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                                            LONG-TERM
                                                                                           COMPENSATION
                                                        ANNUAL COMPENSATION              ----------------
                                            -------------------------------------------     SECURITIES
                                                                        OTHER ANNUAL        UNDERLYING        ALL OTHER
   NAME AND PRINCIPAL POSITION     YEAR     SALARY($)      BONUS($)   COMPENSATION($)    OPTIONS/SARS (#)  COMPENSATION($)
---------------------------------- ----     ----------     --------  ------------------  ----------------  ----------------
 
<S>                                <C>      <C>            <C>       <C>                 <C>               <C>
Loida Nicolas Lewis                1996      1,000,000      750,000        --                  80,000            4,750(2)
  Chairman of the Board            1995         --          750,000        --                 --               --
  and Chief Executive              1994         --            --           --                 --               --
  Officer(1)
Dennis P. Jones                    1996        250,000      187,500        --                  80,000            4,750(2)
  Executive Vice President,        1995        250,000      155,000        --                 --                 4,620(2)
  Operations                       1994        195,000      101,250        --                 --                 4,620(2)
Peter Offermann                    1996        300,000      120,000        --                  80,000            4,750(2)
  Executive Vice President and     1995        240,000      150,000        --                 --                 1,072(2)
  Chief Financial Officer(3)       1994         10,239       40,000        --                 --               --
Reynaldo P. Glover                 1996        275,000      110,000        --                  80,000            4,750(2)
  Executive Vice President,        1995        275,000      115,000        --                 --                 4,620(2)
  General Counsel and Assistant    1994        232,500      140,000        --                 100,000(4)         4,620(2)
  Secretary; Director(5)
Vincent P. O'Sullivan              1996        262,566      121,006(6)     --                  35,000          --
  President, Grocery Products      1995        241,618      159,270        --                 --               --
  Division and Managing Director,  1994        231,333       86,724        --                 --               --
  Tayto, Ltd.
</TABLE>
 
------------
 
(1) Loida  Nicolas Lewis became  Chairman of TLC  Beatrice effective February 1,
    1994 and Chief Executive Officer on July  27, 1994. She did not receive  any
    salary or bonus for her services to TLC Beatrice in 1994 and only received a
    bonus  for  1995. Mrs.  Lewis did,  however,  receive compensation  from TLC
    Group, L.P.  in the  amount of  $1 million  in each  of 1995  and 1994.  TLC
    Beatrice  paid  TLC  Group an  annual  fee  of $1  million  pursuant  to the
    Stockholders' Agreement  in each  of 1994  and 1995.  Commencing January  1,
    1996, Mrs. Lewis has been compensated as an employee of TLC Beatrice and has
    not  received  compensation from  TLC  Group, L.P.  See  Part III,  Item 13.
    'Certain Relationships and Related Transactions.'
 
(2) Reflects TLC Beatrice-matching contributions  to the Beatrice  International
    Savings Plan, as allowable under Section 401(k) of the Internal Revenue Code
    of 1986, as amended.
 
(3) Mr.  Offermann is the President of Offermann Financial, Inc., which provided
    financial advisory services to TLC  Beatrice prior to Mr. Offermann  joining
    the Company in December 1994. TLC Beatrice paid fees to Offermann Financial,
    Inc.  of $150,000 in 1994. See Part III, Item 13. 'Certain Relationships and
    Related Transactions.'
 
(4) Pursuant to  his employment  agreement, Mr.  Glover received  100,000  stock
    appreciation rights ('SARs') in 1994, 25,000 of which vested in each of 1994
    and  1995. The remaining SARs  have been cancelled. See  ' -- Employment and
    Other Agreements.'
 
(5) Mr. Glover is of counsel to the law firm Rudnick & Wolfe, which has been and
    continues to be retained by TLC Beatrice to perform legal services on behalf
    of TLC Beatrice. TLC Beatrice paid fees to Rudnick & Wolfe of  approximately
    $248,000  in  1994 and  approximately $1,283,000  in 1995  and approximately
    $521,000 in 1996. In addition, prior to July 1994, Mr. Glover was a  general
    partner of Miller, Shakman, Hamilton, Kurtzon and Schlifke, a law firm which
    was  retained by TLC  Beatrice to perform substantial  services in 1994. The
    fees paid to Miller, Shakman, Hamilton, Kurtzon and Schlifke and Mr.  Glover
    for  legal services in 1994 were  approximately $147,000. See Part III, Item
    13. 'Certain Relationships and Related Transactions.'
 
(6) Reflects Mr. O'Sullivan's bonus for services as Managing Director of  Tayto.
    The  amount of bonus earned for 1996  as President of TLC Beatrice's Grocery
    Products Division has not been determined  because it was not calculable  as
    of  the date of this Report. In  accordance with the Securities and Exchange
    Commission's rules on executive compensation, these amounts will be included
    for such year  in TLC Beatrice's  Annual Report  on Form 10-K  for the  year
    ended December 31, 1997.
 
                                       30
 


<PAGE>


     The  following table contains information regarding grants of stock options
and SARs made to the Named Executives in 1996.
 
                           OPTION/SAR GRANTS IN 1996
 
<TABLE>
<CAPTION>
                                                         INDIVIDUAL GRANTS
                                        ----------------------------------------------------
                                                       PERCENT
                                                         OF
                                          NUMBER        TOTAL
                                            OF        OPTIONS/
                                        SECURITIES      SARS                                    POTENTIAL REALIZABLE VALUE AT
                                        UNDERLYING     GRANTED                                  ASSUMED ANNUAL RATES OF STOCK
                                         OPTIONS/        TO                                     PRICE APPRECIATION FOR OPTION
                                           SARS       EMPLOYEES    EXERCISE OR                             TERM(3)
                                          GRANTED      IN 1996     BASE PRICE     EXPIRATION   -------------------------------
                 NAME                     (#)(1)         (%)      ($/SHARE)(2)       DATE          5% ($)          10% ($)
--------------------------------------  -----------   ---------   -------------   ----------   --------------   --------------
 
<S>                                     <C>           <C>         <C>             <C>          <C>              <C>
Loida Nicolas Lewis...................     80,000         14         $ 25.00        1/19/06       1,257,789        3,187,485
Dennis P. Jones.......................     80,000         14           25.00        1/19/06       1,257,789        3,187,485
Peter Offermann.......................     80,000         14           25.00        1/19/06       1,257,789        3,187,485
Reynaldo P. Glover....................     80,000         14           25.00        1/19/06       1,257,789        3,187,485
Vincent P. O'Sullivan.................     35,000          6           25.00        1/19/06         550,283        1,394,525
</TABLE>
 
------------
 
(1) All options granted in  1996 were granted under  the 1996 Stock Option  Plan
    (as  defined below).  For a summary  of the  terms of such  options, see the
    discussion under ' -- 1996 Long Term Incentive Stock Option Plan.'
 
(2) The exercise price per share  of the options granted  was equal to the  fair
    market  value of the Common Stock of the date of grant, as determined by the
    Board of Directors.
 
(3) Amounts  represent  hypothetical  gains  that  could  be  achieved  for  the
    respective  options if exercised at the end  of the option term. These gains
    are based on assumed  rates of stock price  appreciation, mandated by  rules
    promulgated  by  the  Securities  and Exchange  Commission,  of  5%  and 10%
    compounded annually from  the date  the respective options  were granted  to
    their  expiration date,  and are  not intended  to forecast  possible future
    appreciation, if any, in the price of the Company's Common Stock. The  gains
    shown  are net of the  option exercise price, but  do not include deductions
    for federal or  state income  taxes or  other expenses  associated with  the
    exercise  of the options  or the sale  of the underlying  shares. The actual
    gains, if any,  on the  exercise of  the stock  options will  depend on  the
    future  performance  of  the  Common  Stock,  the  optionholder's  continued
    employment through the option period and  the date on which the options  are
    exercised.
 
     The following table sets forth information regarding stock options and SARs
held by the Named Executives as of the end of 1996.
 
                  AGGREGATED OPTION/SAR EXERCISES IN 1996 AND
                        YEAR-END 1996 OPTION/SAR VALUES
 
<TABLE>
<CAPTION>
                                                                         NUMBER OF
                                                                         SECURITIES
                                                                         UNDERLYING         VALUE OF UNEXERCISED
                                                                        UNEXERCISED             IN-THE-MONEY
                                                                        OPTIONS/SARS            OPTIONS/SARS
                                                                     AT FISCAL YEAR-END      AT FISCAL YEAR-END
                                          SHARES                            (#)                    ($)(1)
                                         ACQUIRED        VALUE       ------------------     --------------------
                                        ON EXERCISE     REALIZED        EXERCISABLE/            EXERCISABLE/
                NAME                        (#)           ($)          UNEXERCISABLE           UNEXERCISABLE
------------------------------------    -----------     --------     ------------------     --------------------
 
<S>                                     <C>             <C>          <C>                    <C>
Loida Nicolas Lewis.................       --             --               0/80,000                  0/0
Dennis P. Jones.....................       --             --               0/80,000                  0/0
Peter Offermann.....................       --             --               0/80,000                  0/0
Reynaldo P. Glover..................       --             --              0/130,000(2)               0/0
Vincent O'Sullivan..................       --             --               0/35,000                  0/0
</TABLE>
 
------------
 
(1) There  is  no  trading  market  for  the  Common  Stock.  However,  based on
    management's belief that the fair market value of the Common Stock is $25.00
    per share, TLC Beatrice believes that the SARs and stock options held by the
    Named Executives were not in-the-money on December 31, 1996.
 
                                              (footnotes continued on next page)
 
                                       31
 


<PAGE>


(footnotes continued from previous page)
 
(2) Represents securities underlying 50,000 SARs and 80,000 stock options.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Company's compensation  policies are determined  and executive  officer
compensation  decisions are made  by the Compensation Committee  of the Board of
Directors (the  'Compensation  Committee').  During 1996,  the  members  of  the
Compensation  Committee were Anthony S. Fugett, James  E. Obi and Lee A. Archer,
Jr.
 
     During 1996,  none of  the members  of the  Compensation Committee  was  an
officer  or employee  of TLC  Beatrice or  any of  its subsidiaries  or a former
officer of TLC Beatrice or any of its subsidiaries.
 
EMPLOYMENT AND OTHER AGREEMENTS
 
     The Company is a  party to employment agreements  with Reynaldo P.  Glover,
Peter  Offermann, Daniel Jux and Vincent  P. O'Sullivan. Mr. Glover's employment
agreement commenced August 1, 1994 and can  be terminated by Mr. Glover upon  at
least  six months'  prior written  notice or  by TLC  Beatrice, with  or without
cause, effectively immediately  upon written notice.  Under such agreement,  Mr.
Glover  receives a base salary  of $275,000 per annum  and an annual performance
bonus determined in  accordance with TLC  Beatrice's management incentive  plan.
TLC  Beatrice paid Mr. Glover an additional one-time signing payment of $100,000
in 1994. Pursuant to his employment agreement, Mr. Glover also received (subject
to vesting) 100,000  SARs in 1994  with an  exercise price of  $30.00 per  share
under  the  TLC Beatrice  Stock Incentive  Plan  (the '1992  Plan'). Twenty-five
thousand of these SARs vested  in each of 1994 and  1995 and the remaining  SARs
were  cancelled in  1996 upon the  adoption of  the TLC Beatrice  1996 Long Term
Incentive Stock Option  Plan. See  ' -- 1996  Long Term  Incentive Stock  Option
Plan.'  The outstanding  SARs will  become exercisable for  a period  of 90 days
either upon  a Change  of Control  (as  defined in  the 1992  Plan) or,  at  TLC
Beatrice's  option,  when Mr.  Glover leaves  TLC Beatrice.  Mr. Glover  is also
eligible to participate  in TLC  Beatrice's benefit plans  offered generally  to
executive  employees and  is eligible  for certain  other fringe  benefits. Upon
termination by TLC  Beatrice, other than  for cause, Mr.  Glover is entitled  to
receive  two years' base pay  if terminated in the  first year, eighteen months'
base pay if terminated in the second year and one years' base pay if  terminated
in  the third year or later,  such amounts in all cases  to be paid on a monthly
basis.
 
     Mr.  Offermann's  employment  agreement  commenced  January  1,  1997   and
terminates  on January  1, 2000,  except that on  the first  and each succeeding
anniversary of  such employment  agreement, the  employment agreement  shall  be
extended  for one year unless notice of termination is given by Mr. Offermann or
TLC Beatrice prior to such anniversary date. Under such agreement, Mr. Offermann
receives a base salary of $300,000 and an annual performance bonus in accordance
with TLC Beatrice's Annual Incentive Plan  (as defined herein), targeted at  not
less  than forty percent of  base salary. See '  -- Employee Benefit Plans.' Mr.
Offermann is  also  eligible to  participate  in TLC  Beatrice's  benefit  plans
offered  generally  to executive  employees. Upon  termination by  TLC Beatrice,
other than for cause, Mr. Offermann is  entitled to receive (i) base salary  for
twenty-four  months  or through  the conclusion  of the  term of  his agreement,
whichever is longer, (ii) an amount equal  to the pro rata target bonus for  the
year  in which he is terminated (the  'Pro Rata Amount') and (iii) an additional
payment to be paid on a date  mutually agreed by Mr. Offermann and TLC  Beatrice
(not  to exceed eighteen months after termination) equal to the Pro Rata Amount.
In the event of a  change of control (as  defined in the employment  agreement),
Mr.  Offermann may, at his option, upon thirty days written notice, given within
one  hundred  eighty  days  following  the  change  of  control,  terminate  the
employment  agreement and receive the amount he would be entitled to had he been
terminated other than for cause.
 
     Mr. O'Sullivan has  separate employment  agreements with  TLC Beatrice  and
Tayto. Mr. O'Sullivan's employment agreement with TLC Beatrice commenced January
1,  1994 and can be terminated by Mr. O'Sullivan upon at least six months' prior
written notice  or by  TLC Beatrice,  with or  without cause,  immediately  upon
written  notice. Under such agreement, Mr.  O'Sullivan receives a base salary of
$110,000 per annum and an annual performance bonus determined in accordance with
TLC Beatrice's
 
                                       32
 


<PAGE>


management incentive plan. Under such agreement, Mr. O'Sullivan waived  coverage
under  all fringe benefit programs maintained or  offered by TLC Beatrice to its
employees except  the Beatrice  International Pension  Plan and  those  benefits
provided  for specifically in his  employment agreement. Upon termination, other
than for cause, Mr. O'Sullivan is  entitled to receive regular salary and  bonus
for  a period equal to the number  of full months that elapse following December
31, 1993  and  prior  to  termination during  which  Mr.  O'Sullivan  served  as
President of the Grocery Products Division, up to a maximum of 30 months.
 
     Mr. O'Sullivan's employment agreement with Tayto commenced January 1, 1994,
and has a three-year term which can be extended until Mr. O'Sullivan reaches age
65. Such agreement can be terminated by Mr. O'Sullivan upon at least six months'
prior written notice or by Tayto, with or without cause, upon thirty days' prior
written  notice. Under such agreement, Mr.  O'Sullivan receives a base salary of
92,040 Irish pounds per annum and an annual performance bonus in accordance with
TLC Beatrice's management incentive plan.  Under such agreement, Mr.  O'Sullivan
is  eligible to participate in the Tayto Ltd. Non-Contributory Pension Plan, and
is entitled to certain fringe benefits. Upon termination other than for cause or
following six  months' prior  written notice  of termination  by Mr.  O'Sullivan
following  a change in control (as defined in such agreement), Mr. O'Sullivan is
entitled to receive his current base  salary and target bonus for the  unexpired
term of such agreement.
 
     Mr.  Jux  has  an employment  agreement  with TLC  France,  which commenced
September 1, 1988  and is  terminable at  any time,  with or  without cause,  by
either  TLC France or  Mr. Jux upon  six months' prior  notice. Mr. Jux receives
base salary of  1,350,000 French  Francs per  annum plus  an annual  performance
bonus of up to 60% of base salary, the exact amount depending on the achievement
of  certain financial and other objectives established each year by the Company.
In addition, Mr. Jux is entitled to participate in the retirement and  insurance
plans of TLC France and is eligible for certain other customary fringe benefits.
Upon  termination, other  than for serious  professional misconduct,  Mr. Jux is
entitled to a lump-sum payment equal to six months' base salary.
 
EMPLOYEE BENEFIT PLANS
 
     Beatrice International Pension Plan.  Generally, employees of TLC  Beatrice
and  participating subsidiaries  and affiliates of  TLC Beatrice ('Participating
Employers')  who  are   in  executive,   managerial,  technical,   professional,
administrative,  clerical  or  sales positions  or  who are  members  of covered
collective bargaining units, and who have performed 1,000 hours of service,  are
covered  by the Beatrice International Pension  Plan ('BIPP'), which is designed
to qualify under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the 'Code'). BIPP provides a monthly retirement benefit at age 65 equal to 1.5%
of final average monthly earnings multiplied  by years of benefit service,  less
1.5%  of monthly Social Security benefits multiplied by years of benefit service
(not to exceed, however,  50% of monthly Social  Security benefits), reduced  by
amounts  payable  under  other  defined benefit  plans.  'Final  average monthly
earnings,'  as  defined  in  BIPP,  means  average  monthly  cash   compensation
(excluding  payments under long-term incentive plans and expense reimbursements)
over  five  consecutive  years  for   which  earnings  were  highest  during   a
participant's  last fifteen calendar years of  employment, or if greater, the 60
consecutive months during the last 120  months of service during which  earnings
were  highest.  BIPP also  provides early  retirement  benefits and  a surviving
spouse benefit if a participant dies after satisfying certain requirements.
 
     The normal form of payment under BIPP is a life annuity if the  participant
is  unmarried,  or a  50% joint  and  survivor annuity,  if married.  There are,
however, optional forms of payment available, including other joint and survivor
annuities, and a life annuity with a guaranteed payment period of up to  fifteen
years. The Code imposes a limitation on the benefits that may be paid under BIPP
as  of January 1, 1989.  The amount of annual  compensation which could be taken
into account for benefit plan purposes in 1996, 1995 and 1994 was $150,000.  The
Company  has a non-qualified supplemental pension  plan to provide benefits that
participants would have  been entitled  to receive under  BIPP were  it not  for
these and other limitations.
 
                                       33
 


<PAGE>


                               PENSION PLAN TABLE
 
<TABLE>
<CAPTION>
                                                                      YEARS OF SERVICE
                                                  --------------------------------------------------------
REMUNERATION                                         15          20          25          30          35
-----------------------------------------------   --------    --------    --------    --------    --------
 
<S>                                               <C>         <C>         <C>         <C>         <C>
$125,000.......................................   $ 24,542    $ 32,723    $ 40,904    $ 49,084    $ 57,663
 150,000.......................................     30,167      40,223      50,279      60,334      70,788
 175,000.......................................     35,792      47,723      59,654      71,584      83,913
 200,000.......................................     41,417      55,223      69,029      82,834      97,038
 225,000.......................................     47,042      62,723      78,404      94,084     110,163
 250,000.......................................     52,667      70,223      87,779     105,334     123,288
 300,000.......................................     63,917      85,223     106,529     127,834     149,538
 400,000.......................................     86,417     115,223     144,029     172,834     202,038
 450,000.......................................     97,667     130,223     162,779     195,334     228,288
 500,000.......................................    108,917     145,223     181,529     217,834     254,538
</TABLE>
 
     Based  on  estimated Social  Security  benefit levels,  the  table reflects
annual benefit payments  under BIPP and  the non-qualified supplemental  pension
plan  in the form of a straight life annuity to participants at specified annual
salary levels and with  specified lengths of service  under BIPP. BIPP  provides
that  (i)  the  definition of  the  term  'final average  monthly  earnings' for
purposes of that plan includes earnings  through the month of termination,  (ii)
the reduction factors for early retirement and deferred pensions are 6% for each
year between ages 55 and 60 and (iii) no reduction factors apply above age 60 or
above  age 55 if  the sum of  the participant's age  and years of  service is at
least 90. At December 31, 1996, Mr. Jones had 18 years of credited service,  Mr.
O'Sullivan  had three  years of credited  service, Messrs.  Glover and Offermann
each had two years of credited service  and Mrs. Lewis had one year of  credited
service for purposes of BIPP.
 
     Beatrice    International   Supplemental   Pension   Plan.   The   Beatrice
International Supplemental Pension Plan ('SPP') provides supplemental retirement
income for participants and their  beneficiaries. A participant is any  employee
of  TLC Beatrice or any  of its affiliates or  subsidiaries who is a participant
under BIPP. Participants are entitled to receive the actuarial equivalent of (i)
the amount by which  their benefits under  BIPP are reduced as  a result of  the
operation  of Sections 415  (limit on benefits) and  401(a)(17) (annual limit on
compensation) of the Code and (ii) the amount by which their benefits under BIPP
and SPP  are reduced  due to  the  deferral of  their compensation  after  1985.
Additionally,  officers of TLC Beatrice holding  the office of Vice President or
higher, whose employment with TLC  Beatrice and its affiliates terminates  after
any  'change in control' (as defined in SPP) and before their benefit under BIPP
becomes nonforfeitable, shall  be entitled  to an  amount equal  to the  benefit
under  BIPP that they would have been entitled to had they performed the minimum
number of  years of  service  necessary to  qualify  for a  benefit  thereunder.
Benefits  shall be calculated on the basis of  a monthly benefit for the life of
the employee and  are paid  in a  lump sum  or, in  the sole  discretion of  the
committee  which administers BIPP and  SPP, in any form  of benefit provided for
under BIPP.
 
     Beatrice International Savings Plan.  The Beatrice Companies, Inc.'s  Board
of  Directors approved the establishment of  the Beatrice Employee Savings Trust
(the 'Prior  Plan'),  which became  effective  July  1, 1984.  Effective  as  of
December  1, 1987, TLC  Beatrice established the  Beatrice International Savings
Plan ('BISP')  for the  benefit of  its  employees and  retirees, and  those  of
Participating  Employers, who were  employees and retired  employees of Beatrice
International Food Company and who participated or were eligible to  participate
in  the  Prior Plan.  Other salaried  and  hourly employees  of the  Company and
Participating Employers (and part-time  employees who have  completed a year  of
service  with  the Company  or a  Participating Employer)  are also  eligible to
participate in BISP if they so elect. BISP is designed to qualify under Sections
401(a) and 401(k) of the Code as a profit-sharing plan. BISP allows participants
to defer up to  17% of their  eligible compensation on  a pre-tax basis,  except
that  pre-tax contributions were limited to $9,500  for 1996 and $9,240 for 1995
and 1994  to  conform with  the  Tax Reform  Act  of 1986.  Subject  to  certain
limitations, the BISP also permits participants to make after tax contributions.
TLC  Beatrice and Participating Employers make  matching contributions of 50% of
the amount  of  salary  deferral  and  after-tax  contributions  (up  to  6%  of
compensation) elected by a BISP participant.
 
                                       34
 


<PAGE>


     Amounts  contributed for a participant are  held in trust until distributed
either in a lump sum, or installments,  pursuant to the provisions of the  plan.
All  employee contributions  are 100%  vested. Fifty  percent of  the employer's
contributions vest after three years of  employment. One hundred percent of  the
employer's   contributions  vest  after  five   years  of  employment.  Employee
contributions and employer matching contributions are invested at the employee's
discretion in investment alternatives offered by the plan.
 
     During 1996, TLC  Beatrice made  contributions to  BISP on  behalf of  Mrs.
Lewis, Messrs. Jones, Offermann and Glover in the amount of $4,750 each.
 
     Management  Incentive  Plan.  Certain members  of  TLC  Beatrice's eligible
senior management employees,  as approved  by the Chairman  and Chief  Executive
Officer,  participate  in  TLC  Beatrice's  Management  Incentive  Plan ('MIP').
Certain other members of management  participated at the discretion of  officers
named  in MIP.  Participants in  MIP earned  annual bonuses  based upon  (i) the
yearly financial performance of the business unit of the Company for which  they
performed services, as compared with the financial targets set for it by members
of  TLC Beatrice's management; and (ii) individual performance, as compared with
individual  performance  goals  developed  jointly  by  participants  and  their
supervisors. The maximum bonus that could be earned under MIP varied from 85% of
a  participant's base salary  (for the most  highly compensated participants) to
25%  of  a  participant's  base   salary  (for  the  least  highly   compensated
participants).  Base salary meant  gross earnings before  BISP deferrals for the
applicable year,  excluding MIP  bonuses, long-term  incentive awards,  overbase
allowances,  imputed income from fringe benefit plans and non-recurring payments
such as  moving expenses.  The  criteria used  in developing  financial  targets
included  the operating earnings, cash flow and  return on total capital for the
business unit of  the participant.  Individual performance  goals included  both
quantifiable and non-quantifiable criteria and incorporated specific objectives,
plans  of  action  and timetables  for  accomplishment. The  Chairman  and Chief
Executive Officer  could,  prior to  the  end  of the  applicable  year,  change
financial targets or individual performance goals.
 
ANNUAL INCENTIVE PLAN
 
     On January 19, 1996, the Board of Directors of TLC Beatrice established the
TLC  Beatrice 1996 Annual  Incentive Plan (the 'Annual  Incentive Plan') for the
purpose of  promoting the  long-term  financial performance  of the  Company  by
providing  incentive compensation opportunities to  officers, managers and other
key  employees  of  TLC  Beatrice's   New  York  based  corporate  staff.   Each
participant's award under the Annual Incentive Plan for any fiscal year is based
on  the  Company's  financial performance  as  well as,  where  appropriate, the
participant's  own  individual  performance.   The  Annual  Incentive  Plan   is
administered by the Compensation Committee.
 
     Participants  in the Annual  Incentive Plan are  chosen by the Compensation
Committee, upon  the  recommendation  of  the Chief  Executive  Officer  of  TLC
Beatrice.  At the beginning of each fiscal  year, an individual target award (an
'Individual Target  Award')  is established  for  each participant  based  on  a
percentage  of  such  participant's  base  salary.  The  Annual  Incentive  Plan
contemplates that the applicable  percentage will vary  by Company position  and
range  from  10%  to 75%  of  base  salary, as  determined  by  the Compensation
Committee. Actual  awards under  the  Annual Incentive  Plan  are based  on  the
following  factors: (i) the  Company's actual earnings  from operations ('Actual
Earnings') as compared to targeted  earnings ('Target Earnings') established  at
the  beginning of each fiscal year; (ii)  the Company's achievement of any other
special, strategic  or  other  performance factors;  and  (iii)  the  individual
performance of each participant.
 
     The  maximum amount of funds made available  by the Company for the purpose
of making  awards  under the  Annual  Incentive Plan  in  any fiscal  year  (the
'Maximum  Available  Awards Fund')  is the  aggregate  amount of  all Individual
Target Awards established at the commencement of the fiscal year (the 'Incentive
Award Pool') multiplied by a percentage  based on the Company's Actual  Earnings
as  compared  to  Target Earnings  for  such  fiscal year.  Depending  on Actual
Earnings, the Maximum Available Awards Fund in any fiscal year may equal from 0%
to 150% of  the Incentive Award  Pool. In  years in which  the Company's  Actual
Earnings  meet or exceed 80% of the Target Earnings, the Chief Executive Officer
and the Compensation  Committee also have  discretion to make  available to  the
Chief
 
                                       35
 


<PAGE>


Executive  Officer an additional discretionary bonus  pool of an amount equal to
up to 25% of the Incentive Award Pool, which amount is payable at the discretion
of the Chief Executive  Officer to any  one or more  employees as an  additional
bonus  to any bonus otherwise payable under  the Annual Incentive Plan, based on
other performance measures that are deemed appropriate. The amount of the  award
paid  to each  participant is  equal to  such participant's  proportionate share
(based on his or  her Individual Target Award)  of the Maximum Available  Awards
Fund, subject to adjustment by the Compensation Committee.
 
1996 LONG TERM INCENTIVE STOCK OPTION PLAN
 
     On  January 19, 1996,  TLC Beatrice established the  TLC Beatrice 1996 Long
Term Incentive Stock Option Plan (the  '1996 Stock Option Plan') to promote  the
long-term  financial performance  of TLC  Beatrice by  attracting, retaining and
motivating Key  Employees  (as  defined  in the  1996  Stock  Option  Plan)  and
Consultants  (as defined in the 1996 Stock  Option Plan). The Board of Directors
administers the 1996 Stock Option Plan, which provides for the grant of  options
with  respect to a maximum of 750,000  shares of Common Stock. Each Key Employee
and Consultant may receive  options to purchase a  maximum of 100,000 shares  of
Common  Stock  under  the  1996  Stock Option  Plan  in  any  calendar  year, as
determined by the Board of Directors.  The exercise price for an option  granted
pursuant  to  the  1996  Stock  Option  Plan  which  is  intended  to  meet  the
requirements of Section 422(b) of the Code (an 'ISO'), which may be granted only
to a Key Employee, cannot  be less than 100% (or  110% in certain cases) of  the
fair  market value (as calculated in accordance with the 1996 Stock Option Plan)
of a share of Common  Stock on the date the  ISO is granted. The exercise  price
for  each  non-ISO option  granted pursuant  to  the 1996  Stock Option  Plan (a
'NQSO'), which may be granted to either a Key Employee or a Consultant, shall be
determined by the Board of Directors on the date that the NQSO is granted.  Each
option  granted under the 1996  Stock Option Plan shall  be evidenced by a stock
option agreement between the Key Employee or Consultant, as the case may be, and
TLC Beatrice, which agreement may contain additional terms not inconsistent with
the 1996 Stock Option Plan.
 
     Each  option  granted  under  the  1996  Stock  Option  Plan  shall  become
exercisable,  in full or in part, as the Board of Directors determines, provided
that no option may become exercisable prior  to the later of the listing of  the
Common Stock on any national securities exchange or interdealer quotation system
or  thirty months  from the grant  of such  option except options  granted to an
optionee whose ISO or NQSO is subject to the taxation laws of the Netherlands or
Belgium, in  which  case such  options  shall be  exercisable  immediately  upon
granting. The Board of Directors may postpone the exercise of an option in order
to (i) effect or maintain registration or qualification of the 1996 Stock Option
Plan,  or Common Stock issuable thereunder, under any applicable securities law,
(ii) take  any action  required  to comply  with  restrictions incident  to  the
listing  on any securities  exchange of, or  the maintenance of  a public market
for, the Common Stock or  (iii) determine that the  actions described in (i)  or
(ii)  need not be  taken. No postponement  of the exercise  of an option granted
under the 1996 Stock Option Plan will extend the termination or expiration  date
of  such option. In  the event of  a Change of  Control (as defined  in the 1996
Stock Option Plan)  of TLC  Beatrice, any  unvested options  shall become  fully
vested and immediately exercisable.
 
     Each  option granted  under the 1996  Stock Option Plan  shall terminate as
determined by the Board of Directors, but not later than the earliest of (i) ten
years (or five years in the case of  certain ISOs) from the date of grant,  (ii)
ninety  days after  the grantee's employment  or relationship  with TLC Beatrice
terminates other than 'for  cause' (as defined in  the 1996 Stock Option  Plan),
(iii) two years after the grantee's employment or relationship with TLC Beatrice
terminates  other than 'for  cause' if such termination  occurs within two years
following a Change  of Control  of TLC Beatrice  and (iv)  immediately upon  the
termination  of the grantee's employment or  relationship with TLC Beatrice 'for
cause.' The 1996 Stock Option Plan  will terminate on December 31, 2000,  unless
terminated earlier by the Board of Directors.
 
     Provisions  of  the 1996  Stock Option  Plan relating  to extension  of its
termination date, the amount of Common  Stock for which options may be  granted,
the  eligibility standards for participants and  the period during which options
may  be   exercised   may   only   be   amended   with   shareholder   approval.
 
                                       36
 


<PAGE>


Amendment  or termination  of the  1996 Stock Option  Plan shall  not affect the
validity or  terms of  any  option previously  granted  thereunder in  a  manner
adverse to the grantee without the consent of such grantee.
 
     On  January  19,  1996, the  Board  of  Directors of  TLC  Beatrice granted
non-qualified options  with  respect  to  563,000  shares  of  Common  Stock  to
seventeen  Key Employees under the 1996 Stock Option Plan. Pursuant to the stock
option agreements related to these grants, these options will become exercisable
in accordance with the 1996  Stock Option Plan at an  exercise price of $25  per
share,  provided that such options may not be exercised until the option holders
have completed seven years of employment with the Company from the date of  such
grants.  These stock option  agreements also provide  that notwithstanding a Key
Employee's length of  employment, (i) options  held for thirty  months from  the
date  of  grant become  exercisable immediately  for up  to 50%  or 100%  of the
underlying shares if  the five-day public  market average closing  price of  the
Common  Stock exceeds $40 or  $50, respectively. In addition,  if there is not a
public market for  the Common  Stock as  of February  1, 2000,  then (a)  option
holders  will be entitled to buy  out rights with respect to  50% or 100% of the
underlying shares if the fair market value  of the Common Stock is at least  $40
or  $50, respectively, at a purchase price per  share equal to the excess of the
fair market value over the  exercise price, not to  exceed $25, (b) the  Company
will  be entitled to purchase 100% of  the underlying shares at a purchase price
per share of $1 if the  fair market value of the  Common Stock is less than  $40
and  (c) the Company will  be entitled to terminate  such agreements if the fair
market value of the Common Stock is less than the exercise price.
 
1992 STOCK INCENTIVE PLAN
 
     In December  1992, TLC  Beatrice established  a Stock  Incentive Plan  (the
'1992  Plan') to reward officers, key employees and directors for service to the
Company and  to  provide  incentives  for  future  service  and  enhancement  of
shareholder  value. The  Compensation Committee  administers the  1992 Plan. The
1992 Plan  provided  for awards  of  up  to 500,000  stock  appreciation  rights
('SARs')  to directors  and key  employees and up  to 100,000  shares of phantom
stock to officers and members of  TLC Beatrice's management, each as  determined
by  the Compensation Committee. With the adoption of the 1996 Stock Option Plan,
no further awards of SARs or phantom stock will be made under the 1992 Plan. See
' -- 1996 Long Term Incentive Stock Option Plan.'
 
     Upon a  Change  in  Control (as  defined  in  the 1992  Plan)  or,  at  TLC
Beatrice's option, when a plan participant leaves the Company, TLC Beatrice will
pay  to the participant in cash the fair market value of the aggregate number of
SARs and phantom stock awarded to  such participant less the Exercise Price  (as
defined  in the 1992 Plan) of each SAR or share of phantom stock. Under the 1992
Plan, in the event that the Common Stock is not traded in the public market, the
determination of fair market value, both for purposes of SARs and phantom  stock
rights,  is determined solely  at the discretion  of the Compensation Committee.
The 1992  Plan  does  not  provide  any  parameters  limiting  the  Compensation
Committee  in this regard,  and there are  a variety of  permissible methods for
determining fair market  value. Awarded  SARs and  shares of  phantom stock  are
subject to forfeiture under certain circumstances.
 
     On December 1, 1992, 5,000 SARs were awarded to each member of the Board of
Directors  and to several  key employees, for  a total of  55,000 SARs. In 1993,
25,000 shares of phantom stock were awarded to certain members of TLC Beatrice's
management. In  1994,  200,000 SARs  were  awarded  to certain  members  of  TLC
Beatrice's  management. Also during 1994, the rights to 20,000 shares of phantom
stock and 10,000 SARs  were waived pursuant to  certain severance agreements  of
key management personnel. In January 1995, 75,000 of the 200,000 SARs awarded in
1994  were forfeited  in connection with  the termination  of certain employment
agreements. In  January 1996,  50,000  SARs awarded  under  the 1992  Plan  were
cancelled with the adoption of the 1996 Stock Option Plan.
 
FINANCIAL COUNSELING PLAN
 
     Each  executive officer  of TLC  Beatrice is  entitled to  annual financial
counseling services having a value of $3,000 to $10,000 depending on his or  her
position, and certain senior officers are entitled to
 
                                       37
 


<PAGE>


an additional $5,000 for an estate review in the fifth year of participation and
the year of retirement. The financial counseling services include tax and estate
planning,  tax return  preparation assistance and  personal financial management
advice.
 
BEATRICE INTERNATIONAL FOOD COMPANY SEVERANCE POLICY
 
     TLC Beatrice maintains  the Beatrice International  Food Company  Severance
Policy  (the  'Policy') for  eligible  employees who  are  not exempt  under the
Federal Fair Labor Standards Act  and are employed on  a full-time basis at  TLC
Beatrice's  corporate headquarters (the 'Covered  Employees'). TLC Beatrice may,
in its sole discretion, extend the policy to non-exempt persons employed by  one
or  more of its  divisions or subsidiaries. Severance  benefits are available to
employees who are unemployed following termination without cause or  resignation
with  good reason. TLC Beatrice may, in its sole discretion, award severance pay
to an  employee  terminated  for  poor  job  performance  or  may  classify  any
termination  as  a  'special  situation  separation'  and  establish  a separate
severance policy.  Covered Employees  who become  unemployed because  of  death,
disability  or  misconduct are  not eligible  for benefits  under the  Policy. A
Covered Employee who is  bonus eligible and  is in salary grade  14 or above  is
entitled  to an amount equal to (i) one year's base salary at the highest annual
rate in effect during the three-year  period prior to termination of  employment
and  (ii)  his target  bonus  under the  bonus  plan in  effect  at the  date of
termination. A Covered Employee who is not bonus eligible or is in salary  grade
15  or below is entitled to  an amount equal to nine  months' base salary at the
highest annual rate in effect during the three-year period prior to  termination
of employment. Benefits are paid on a schedule determined by TLC Beatrice. If an
employee  is  entitled to  receive  severance pay  benefits,  he is  entitled to
continue receiving basic health and welfare plan benefits until the earliest  of
(i)  the date the Covered  Employee is covered by  another employer's plan, (ii)
the date  that is  six months  after  a Covered  Employee receives  a  severance
payment  in a lump sum or (iii) the  date the Covered Employee ceases to receive
severance pay installments. In 1995  and 1994, excluding termination  agreements
with  certain of TLC  Beatrice's former executive officers  (see ' -- Employment
and Other  Agreements'),  accruals  in  the amount  of  $600,000  and  $700,000,
respectively, were set up for severance payments to be made in 1994 through 1996
under the Policy.
 
COMPENSATION OF DIRECTORS
 
     Directors  who are  employees of  TLC Beatrice  do not  receive any special
compensation for their services as directors. During 1996 each outside  director
of  TLC Beatrice  was paid an  annual fee  of $20,000 and  a fee  of $1,200 plus
travel-related expenses for each meeting of the Board of Directors or  committee
of the Board of Directors attended.
 
     In  July 1996, the  Special Litigation Committee  was formed to investigate
allegations made  by Carlton.  See  Part I,  Item  3. 'Legal  Proceedings.'  Mr.
Webster  and Mr. Alexander  were appointed to that  committee and, each received
compensation of (i) $50,000  to oversee the committee  and (ii) $1,200 for  each
meeting of the Special Litigation Committee attended.
 
                                       38
 


<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
PRINCIPAL STOCKHOLDERS
 
     The   following  table  sets  forth,  as  of  February  28,  1997,  certain
information with respect to the beneficial  ownership of shares of Common  Stock
of  TLC Beatrice of all persons known by  TLC Beatrice to own beneficially 5% or
more of the outstanding shares of Common  Stock. Except as noted below, each  of
the  persons listed  has sole  investment and voting  power with  respect to the
shares indicated. All information was  determined in accordance with Rule  13d-3
under  the Securities  Exchange Act  of 1934,  as amended,  based on information
furnished by the persons listed or otherwise known to TLC Beatrice.
 
<TABLE>
<CAPTION>
                                                                         AMOUNT AND NATURE
                           NAME AND ADDRESS                                OF BENEFICIAL           PERCENTAGE OF
                         OF BENEFICIAL OWNER                                 OWNERSHIP               CLASS(1)
----------------------------------------------------------------------   -----------------         -------------
 
<S>                                                                      <C>                       <C>
Estate of Reginald F. Lewis ..........................................       4,378,260(2)              47.91%
  c/o TLC Beatrice International Holdings, Inc.
  9 West 57th Street
  New York, NY 10019
Loida Nicolas Lewis ..................................................       4,478,260(2)(3)           49.00%
  c/o TLC Beatrice International Holdings, Inc.
  9 West 57th Street
  New York, NY 10019
Leslie N. Lewis ......................................................       4,378,260(2)(4)           47.91%
  c/o TLC Beatrice International Holdings, Inc.
  9 West 57th Street
  New York, NY 10019
Carlton Investments ..................................................       2,018,891(5)              22.09%
  c/o CS Manager Corporation
  844 Moraga Drive
  Los Angeles, CA 90049
MAC & Company ........................................................       1,432,092(6)              15.67%
  P.O. Box 360796M
  Pittsburgh, PA 15251
Cede & Co. ...........................................................              --(7)             --
  Box 20
  Bowling Green Station
  New York, New York 10004
Baupost Entities .....................................................         496,035(8)               5.43%
  44 Brattle Street
  Cambridge, Massachusetts 02238
</TABLE>
 
------------
 
(1) At  February  28,  1997,  there  were  9,138,465  shares  of  Common   Stock
    outstanding.
 
(2) Loida  Nicolas Lewis, the wife of the  late Reginald F. Lewis, and Leslie N.
    Lewis  are  the  co-executrices  of  the  Lewis  Estate.  Joint  voting  and
    dispositive  power with respect to  the shares held by  the Lewis Estate are
    held by Loida Nicolas Lewis and Leslie N. Lewis. Accordingly, Loida  Nicolas
    Lewis  and Leslie N.  Lewis may be deemed  to have shared  power to vote and
    shared investment power with  respect to the 4,378,260  shares owned by  the
    Lewis  Estate. Loida  Nicolas Lewis, her  two children, Leslie  N. Lewis and
    Christina S.N. Lewis, and The Reginald  F. Lewis Foundation, Inc. are  among
    the beneficiaries of the Lewis Estate.
 
    In  addition, Loida  Nicolas Lewis  owns directly  100,000 shares  of Common
    Stock of TLC Beatrice.
 
    Not included  in the  figures in  the table  are (i)  an additional  100,000
    shares  of Common Stock  of TLC Beatrice  owned directly by  a trust for the
    benefit of Leslie N. Lewis, of which Carolyn E. Fugett, her grandmother,  is
    trustee,  with sole power to vote and  sole investment power with respect to
    such shares and  (ii) an additional  100,000 shares of  Common Stock of  TLC
    Beatrice owned directly by a
 
                                              (footnotes continued on next page)
 
                                       39
 


<PAGE>


(footnotes continued from previous page)
    trust  for the benefit of Christina S.N.  Lewis, of which Carolyn E. Fugett,
    her grandmother, is  trustee, with sole  power to vote  and sole  investment
    power with respect to such shares.
 
(3) Includes  (i) 100,000 shares owned directly  by Loida Nicolas Lewis and (ii)
    4,378,260 shares owned by the Lewis Estate, as to all of which shares  Loida
    Nicolas Lewis may be deemed to be a beneficial owner. See Note (2).
 
(4) Includes  shares of  Common Stock owned  by the  Lewis Estate, as  to all of
    which shares Leslie N.  Lewis may be  deemed to be  a beneficial owner.  See
    Note (2).
 
(5) Includes  (i) 593,799  shares owned directly  by Carlton  and (ii) 1,425,092
    shares held of record by  MAC & Company, of which  Carlton claims to be  the
    beneficial  owner. TLC Beatrice has been advised that the general partner of
    Carlton is CS  Manager Corporation, and  that the board  of directors of  CS
    Manager  Corporation is responsible for voting  the shares of TLC Beatrice's
    Common Stock owned directly by Carlton and the shares held of record by  MAC
    & Company.
 
(6) Includes  1,425,092 shares,  of which  Carlton claims  to be  the beneficial
    owner, that are held of record by MAC & Company. See Note (5).
 
(7) Cede & Co.  is the  record holder  of 1,046,505  shares, or  11.45%, of  the
    outstanding  Common Stock, including 496,035 shares which are believed to be
    beneficially owned  by the  Baupost Entities.  See Note  (8). The  remaining
    shares of Common Stock owned of record by Cede & Co. are believed to be held
    by  Cede & Co. as  a nominee for various  beneficial owners of Common Stock,
    none of  which are  believed  to own  and/or control  more  than 5%  of  TLC
    Beatrice's Common Stock.
 
(8) The  Baupost  Entities  include  Baupost  Partners,  a  general  partnership
    ('Baupost Partners'), The Baupost Group, Inc. ('Baupost Group') and  certain
    affiliated  persons and entities. TLC Beatrice has been advised that Baupost
    Partners is the managing  general partner of  two limited partnerships  (the
    'Baupost Partnerships') which together own 327,935 shares of Common Stock of
    TLC  Beatrice.  Baupost  Group  is a  managing  general  partner  of Baupost
    Partners and also an investment adviser to an investment company  registered
    under  the Investment  Company Act of  1940 (the 'Baupost  Fund') which owns
    168,000 shares  of  Common Stock  of  TLC Beatrice.  Seth  A. Klarman  is  a
    managing  general partner of Baupost Partners and the president and majority
    shareholder of Baupost Group. By  virtue of their voting and/or  dispositive
    power  with  respect to  the  shares of  Common  Stock held  by  the Baupost
    Partnerships and the  Baupost Fund, Baupost  Group and Seth  A. Klarman  may
    each  be deemed to be  the beneficial owner of  the 496,035 shares of Common
    Stock held by the Baupost Entities.
 
                                       40
 


<PAGE>


DIRECTORS AND EXECUTIVE OFFICERS
 
     The  following  table  sets  forth,  as  of  February  28,  1997,   certain
information  with respect to the beneficial  ownership of shares of Common Stock
of TLC  Beatrice  by  the  Named  Executives,  each  director  individually  who
beneficially  owns  shares  of Common  Stock,  and all  directors  and executive
officers of TLC Beatrice as a group.
 
<TABLE>
<CAPTION>
                                                                      AMOUNT AND NATURE
                                                                        OF BENEFICIAL             PERCENTAGE OF
                     NAME OF BENEFICIAL OWNER                             OWNERSHIP                 CLASS(1)
-------------------------------------------------------------------   -----------------           -------------
 
<S>                                                                   <C>                         <C>
Loida Nicolas Lewis................................................       4,478,260(2)(3)             49.00%
Dennis P. Jones....................................................        --                        --
Peter Offermann....................................................        --                        --
Reynaldo P. Glover.................................................        --                        --
Vincent P. O'Sullivan..............................................        --                        --
Leslie N. Lewis....................................................       4,378,260(2)(4)             47.91%
All Directors and Executive Officers as a Group....................       4,485,670(5)                49.09%
</TABLE>
 
------------
 
(1) At  February  28,  1997,  there  were  9,138,465  shares  of  Common   Stock
    outstanding.
 
(2) See  Note (2) to the  table under Part III,  Item 12. 'Security Ownership of
    Certain Beneficial Owners and Management -- Principal Stockholders.'
 
(3) Includes 4,378,260 shares  owned by  the Lewis Estate,  as to  all of  which
    shares  Loida Nicolas Lewis may be  deemed the beneficial owner, and 100,000
    shares owned directly  by Loida  Nicolas Lewis. See  Note (2)  to the  table
    under  Part III, Item  12. 'Security Ownership  of Certain Beneficial Owners
    and Management -- Principal Stockholders.'
 
(4) Includes shares of  Common Stock owned  by the  Lewis Estate, as  to all  of
    which  shares Leslie N. Lewis  may be deemed the  beneficial owner. See Note
    (2) to the  table under Part  III, Item 12.  'Security Ownership of  Certain
    Beneficial Owners and Management -- Principal Stockholders.'
 
(5) The total for all directors and executive officers as a group represents the
    4,478,260  shares  as  to  which  Loida  Nicolas  Lewis  may  be  deemed the
    beneficial owner and includes the 4,378,260 shares of which Leslie N.  Lewis
    may  be deemed the beneficial  owner, and 7,410 shares  owned by Carl Brody,
    the former Senior Vice President, Director of Taxes of the Company. See Note
    (2) to the  table under Part  III, Item 12.  'Security Ownership of  Certain
    Beneficial  Owners and Management  -- Principal Stockholders'  and Notes (2)
    and (4)  above. Other  than Leslie  N.  Lewis and  Loida Nicolas  Lewis,  no
    director owns any shares of the Common Stock of TLC Beatrice.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     On  January 19, 1996 TLC Holdings, which was 100% owned by the Lewis Estate
and directly  owned  4,300,000 shares  of  Common  Stock formerly  held  by  TLC
Partners,  which was dissolved on such date,  and an additional 34,000 shares of
Common Stock, was merged  with TLCB Acquisition Corp.  ('TLCB'), a newly  formed
wholly  owned subsidiary of TLC Beatrice,  with TLC Holdings being the surviving
corporation. Subsequent to the  merger of TLC Holdings  with TLCB, TLC  Holdings
was  merged into TLC Beatrice with TLC Beatrice being the surviving corporation.
As a result of these transactions, the  shares of Common Stock formerly held  by
TLC  Holdings have  been cancelled  and an  equal number  of shares  were issued
directly to the Lewis Estate.
 
     Carlton was  the  sole  limited  partner  of  TLC  Partners  and  with  the
dissolution  of TLC Partners on January 19, 1996 owned directly 1,000,000 shares
of Common Stock  formerly held by  TLC Partners. Carlton  has since  transferred
406,201  shares of Common  Stock and currently  claims to own  593,799 shares of
Common Stock. In addition, Carlton, through a nominee, claims to own or  control
an additional 1,425,092 shares of Common Stock that were acquired for $1,425,092
in 1987. See Part III, Item 12. 'Security Ownership of Certain Beneficial Owners
and Management.'
 
     Reynaldo  P. Glover,  Executive Vice President,  General Counsel, Assistant
Secretary and a  director of  TLC Beatrice,  is of counsel  to the  law firm  of
Rudnick & Wolfe, a law firm which has been and
 
                                       41
 


<PAGE>


continues  to be retained by TLC Beatrice to perform legal services on behalf of
TLC Beatrice on specific  matters. The fees  paid to Rudnick  & Wolfe for  legal
services during 1996 were approximately $521,000.
 
     William H. Webster is a partner with the law firm of Milbank, Tweed, Hadley
&  McCloy. The fees paid by TLC  Beatrice to Mr. Webster's firm, Milbank, Tweed,
Hadley &  McCloy during  the year  ended December  31, 1996  were  approximately
$635,000 and $917,000, for the period January 1, 1997 through February 28, 1997.
 
                                       42



<PAGE>


                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a) List of documents filed as part of this Report:
 
          1. The  financial statements listed  on page F-1 are  filed as part of
             this Report.
 
          2. The following financial  statement schedules are  filed as part  of
             this Report:
 
                All  schedules are omitted because  they are not applicable, not
           required or the information is included elsewhere in the Consolidated
           Financial Statements or Notes thereto.
 
          3. List of Exhibits:
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
------   ---------------------------------------------------------------------------------------------
<S>                       <C>                                                                                             <C>
   *3 (a) -- Restated Certificate of Incorporation of TLC Beatrice
  **3 (b) -- By-Laws of TLC Beatrice
  **4     -- Form of Certificate for Common Stock
 **10 (a) -- Beatrice International Pension Plan
 **10 (b) -- Beatrice International Savings Plan
 **10 (c) -- Beatrice International Supplemental Pension Plan
 **10 (d) -- Management Incentive Plan
 **10 (e) -- Beatrice International Severance Policy
 **10 (f) -- Loan Agreement  dated as of  October 21,  1994 among TLC  Beatrice International  Holdings
             France S.A., Banque Paribas and a syndicate of Banks, with Banque Paribas as agent thereof
 **10 (g) -- Debenture  Issue  Contract dated  October  21,  1994 between  TLC  Beatrice International
             Holdings France S.A. and First Britannia Mezzanine Capital B.V.
 **10 (h) -- Facility  Agreement  dated March  31,  1994  between TLC  Beatrice  International  (Irish)
             Holdings Limited and Banque Paribas
 **10 (j) -- Employment Agreements between TLC Beatrice and  Vincent P. O'Sullivan and Tayto, Ltd. and
             Vincent P. O'Sullivan
 **10 (k) -- Employment Agreement between TLC Beatrice and Reynaldo P. Glover
  *10 (m) -- Employment Agreement between TLC Beatrice and Daniel Jux
 **10 (n) -- Stockholders'  Agreement dated  as of  November 30,  1987, as  amended, by  and among  the
             Registrant, TLC Beatrice International Partners L.P. and certain other purchasers of Common
             Stock
 **10 (o) -- 1992 Stock Incentive Plan of TLC Beatrice
 **10 (p) -- Common Stock Subscription Agreement dated as of  November 30, 1987 among TLC Beatrice and
             certain purchasers of its Common Stock
 **10 (q) -- Termination Agreement dated as of October 3, 1994 between TLC Beatrice and Jean S. Fugett,
             Jr.
 **10 (r) -- Termination Agreement  dated as  of January  8, 1993 between  TLC Beatrice  and Albert  M.
             Fenster
 **10 (s) -- Termination Agreement dated as of June 30, 1994 between TLC Beatrice and David A. Guarino
 **10 (t) -- Termination Agreement dated as of June 30, 1994 between TLC Beatrice and W. Kevin Wright
***10 (u) -- Indenture dated as of October 2, 1995, between  TLC Beatrice and The Bank of New York, as
             Trustee
***10 (v) -- Facility Agreement  among Banque Paribas,  Smurfit Paribas Bank  Limited and TLC  Beatrice
             International (Irish) Holdings Limited
</TABLE>
 
                                       43
 


<PAGE>


 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
------   ---------------------------------------------------------------------------------------------
<C>      <S>                                                                                             <C>
***10 (w) --  Pledge  and  Security  Agreement  dated  as  of  October  2,  1995,  among  TLC  Beatrice
           International Holdings, Inc., TLC Beatrice International Finance, Inc. and The Bank of  New
           York, as collateral trustee and as indenture trustee
***10 (x) --  Pledge Agreement dated as of October 2, 1995, between TLC Beatrice International Holdings
           France S.A. and TLC Beatrice International Finance, Inc.
***10 (y) -- Pledge Agreement dated October 2,  1995, among TLC Beatrice International Holdings,  Inc.,
           TLC  Beatrice  International  Netherlands Holdings,  B.V.  and  The Bank  of  New  York, as
           collateral trustee
****10(z) -- Put Option dated June  8, 1995 among TLC Beatrice  International Holdings France S.A.  and
           Mr. Jean Ernest Desire Baud and Mr. Robert Henri Jean Baud.
****10(aa) --  Put Option dated June 8, 1995 between TLC Beatrice International Holdings France S.A. and
           The Estate of Mr. Andre Albert Jacques Baud.
****10(bb) -- Retained Stock Agreement dated December 1,  1983 between Beatrice Foods Co. and  Genevieve
           Baud Fiat.
****10(cc) --  Retained Stock  Agreement dated December  1, 1983  between Beatrice Foods  Co. and Robert
           Baud.
****10(dd) -- Retained Stock Agreement  dated December 1,  1983 between Beatrice  Foods Co. and  Bernard
           Baud.
****10(ee) --  Letter Agreement dated July 26, 1989  among TLC Beatrice International Holdings, Inc. and
           Genevieve Fiat Baud, Robert Baud and Bernard Baud
****10(ff) -- Letter  Agreement dated  June 8,  1995  among TLC  Beatrice International  Holdings,  Inc.
           Genevieve Fiat Baud, Robert Baud and Bernard Baud.
****10(gg) --  Put Option dated December 23, 1992  among TLC Beatrice International Holdings France S.A.
           and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud and
           Mr. Robert Henri Jean Baud.
****10(hh) -- Put Option dated December 23, 1992  among TLC Beatrice International Holdings France  S.A.
           and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud and
           Mr. Robert Henri Jean Baud.
****10(ii) --  Amending Agreement dated  June 8, 1995  among TLC Beatrice  International Holdings France
           S.A. and Sibel,  Mr. Bernard Baud,  Mr. Jean Ernest  Desire Baud, The  Estate of Mr.  Andre
           Albert Jacques Baud and Mr. Robert Henri Jean Baud.
****10(jj) --  Put  Option dated  December  23, 1992  among International  Foods  (Paris) S.A.  and R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(kk) -- Put  Option dated  December  23, 1992  among International  Foods  (Paris) S.A.  and  R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(ll) --  Amending Agreement  dated June 8,  1995 among  International Foods (Paris)  S.A. and R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(mm) --  Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.  and  C.B.
           Participations and D.B. Participations.
****10(nn) --  Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.  and  C.B.
           Participations and D.B. Participations.
****10(oo) -- Put Option dated June  8, 1995 among TLC Beatrice  International Holdings France S.A.  and
           Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
****10(pp) --  Put Option dated June  8, 1995 among TLC Beatrice  International Holdings France S.A. and
           Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
***10 (qq) -- Amending  Agreement dated  September 5,  1995 among  TLC Beatrice  International  Holdings
           France  S.A. and Sibel,  Mr. Bernard Baud, Mr.  Jean Ernest Desire Baud,  The Estate of Mr.
           Andre Albert Jacques Baud and Mr. Robert Henri Jean Baud.
***10 (rr) -- Amending Agreement dated September 5, 1995 among International Foods (Paris) S.A. and R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
</TABLE>
 
                                       44
 


<PAGE>


 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
------   ---------------------------------------------------------------------------------------------
<C>      <S>                                                                                             <C>
***10 (ss) -- Amending Agreement dated September 5, 1995 among International Foods (Paris) S.A. and C.B.
           Participations and D.B. Participations.
   10 (tt) -- TLC Beatrice International Holdings, Inc. 1996 Annual Incentive Plan
  *10 (uu) -- TLC Beatrice International Holdings, Inc. 1996 Long Term Incentive Stock Option Plan
  *10 (vv) -- Termination Agreement dated as of November 30, 1995 between TLC Beatrice and Carl Brody
   10 (ww) -- Employment Agreement between TLC Beatrice and Peter Offermann
   21    -- Subsidiaries of TLC Beatrice
 **99 (a) -- Complaint  filed by  Carlton  Investments and  Answer filed  in  response thereto  by  TLC
           Beatrice  International  Holdings, Inc.  in litigation  titled  Carlton Investments  v. TLC
           Beatrice International Holdings,  Inc. et  al., Supreme  Court of  the State  of New  York,
           County of New York
 **99 (b) --  Complaint filed by  Carlton Investments in  litigation titled Carlton  Investments v. TLC
           Beatrice International Holdings, Inc. et al., Chancery Court of the State of Delaware,  New
           Castle County
 **99 (c) --  First  Amended  Complaint  filed  by Carlton  Investments  in  litigation  titled Carlton
           Investments v. TLC  Beatrice International  Holdings, Inc. et  al., Chancery  Court of  the
           State of Delaware, New Castle County
  *99 (d) --  Second  Amended  Complaint filed  by  Carlton  Investments in  litigation  titled Carlton
           Investments v. TLC  Beatrice International  Holdings, Inc. et  al., Chancery  Court of  the
           State of Delaware, New Castle County
</TABLE>
 
------------
 
  * Filed  with Registration Statement  No. 33-80445 and  incorporated herein by
    reference.
 
 ** Filed with Registration  Statement No. 33-88602  and incorporated herein  by
    reference.
 
 *** Filed  with Registration Statement No.  33-95922 and incorporated herein by
     reference.
 
**** Confidential treatment requested for a  portion of this exhibit  previously
     filed  with Registration Statement No.  33-95922 and incorporated herein by
     reference.
 
     (b) Reports on Form 8-K:
 
          The Company did not file any  reports on Form 8-K with the  Securities
     and Exchange Commission during the fourth quarter 1996.
 
     (c) Exhibits:
 
          See  (a)3. above  for a listing  of Exhibits  filed as a  part of this
     Report.
 
     (d) Additional Financial Statement Schedules:
 
        None.
 
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
 
     Neither an annual report covering the Company's last fiscal year nor  proxy
materials  with respect to any annual or  other meeting of security holders have
been sent to security holders.
 
     The Company currently anticipates that it will send to security holders  an
annual report covering the year ended December 31, 1996, at a future date.
 
                                       45



<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<S>                                                                                                           <C>
Independent Auditors' Report...............................................................................   F-2
 
Consolidated Balance Sheets -- December 31, 1996 and 1995..................................................   F-3
 
Consolidated Statements of Income for the years ended December 31, 1996, 1995 and 1994.....................   F-4
 
Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.................   F-5
 
Consolidated Statements of Changes in Stockholders' Equity for the years ended December 31, 1996, 1995 and
  1994.....................................................................................................   F-6
 
Notes to Consolidated Financial Statements.................................................................   F-7
</TABLE>
 
                                      F-1
 


<PAGE>


                          INDEPENDENT AUDITORS' REPORT
 
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.:
 
     We  have  audited  the  accompanying  consolidated  balance  sheets  of TLC
Beatrice International Holdings,  Inc. and  subsidiaries (the  'Company') as  of
December  31, 1996 and  1995 and the related  consolidated statements of income,
cash flows, and changes in stockholders' equity  for each of the three years  in
the  period  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 audits.
 
     We  conducted  our audits  in accordance  with generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In  our opinion, such consolidated  financial statements present fairly, in
all material  respects,  the consolidated  financial  position of  TLC  Beatrice
International  Holdings, Inc. and subsidiaries at December 31, 1996 and 1995 and
the results of their operations and their cash flows for each of the three years
in the period  ended December  31, 1996  in conformity  with generally  accepted
accounting principles.
 
     As  discussed  in Note  20 to  the  consolidated financial  statements, the
Company is a defendant in various lawsuits, alleging breach of the Stockholders'
Agreement and breach of fiduciary duty by the directors and claiming damages and
attorney fees.
 
DELOITTE & TOUCHE LLP
 
New York, New York
February 28, 1997
 
                                      F-2
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
                          CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                         YEAR ENDED DECEMBER
                                                                                                 31,
                                                                                        ----------------------
                                                                                          1996          1995
                                                                                        --------      --------
 
<S>                                                                                     <C>           <C>
                                       ASSETS
Current assets:
     Cash and cash equivalents.......................................................   $ 95,784      $120,279
     Receivables, net................................................................    150,817       165,989
     Inventories, net................................................................    117,461       129,848
     Other current assets............................................................     11,036        13,356
                                                                                        --------      --------
          Total current assets.......................................................    375,098       429,472
Property, plant and equipment, net...................................................    263,859       237,174
Goodwill, net of accumulated amortization of $23,539 and $21,519 at December 31, 1996
  and 1995, respectively.............................................................     90,509        95,887
Other noncurrent assets..............................................................     52,238        53,042
                                                                                        --------      --------
          Total assets...............................................................   $781,704      $815,575
                                                                                        --------      --------
                                                                                        --------      --------
 
                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Short-term debt and current portion of long-term debt...........................   $ 34,095      $ 64,647
     Accounts payable................................................................    226,827       256,466
     Taxes currently payable.........................................................     18,563         8,996
     Accrued expenses................................................................     58,174        57,080
                                                                                        --------      --------
          Total current liabilities..................................................    337,659       387,189
Long-term debt.......................................................................    229,492       223,308
Deferred income taxes................................................................      7,409        18,180
Minority interests...................................................................     77,447        58,065
Other noncurrent liabilities.........................................................     23,487        31,786
                                                                                        --------      --------
          Total liabilities..........................................................    675,494       718,528
                                                                                        --------      --------
Commitments and contingencies........................................................      --            --
Stockholders' equity:
     Preferred stock, $.01 par value; authorized 2,500,000 shares; none
      outstanding....................................................................      --            --
     Common stock, $.01 par value; authorized 11,000,000 shares; issued 9,750,000
      shares.........................................................................         97            97
     Additional paid-in capital......................................................      9,653         9,653
     Treasury stock (611,535 shares).................................................    (23,200)      (23,200)
     Retained earnings...............................................................    157,148       138,552
     Cumulative foreign currency translation adjustment..............................    (37,488)      (28,055)
                                                                                        --------      --------
          Total stockholders' equity.................................................    106,210        97,047
                                                                                        --------      --------
          Total liabilities and stockholders' equity.................................   $781,704      $815,575
                                                                                        --------      --------
                                                                                        --------      --------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-3
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                           1996            1995          1994
                                                                       -------------    ----------    ----------
 
<S>                                                                    <C>              <C>           <C>
Net sales...........................................................    $ 2,225,313     $2,072,613    $1,821,670
                                                                       -------------    ----------    ----------
Operating expenses:
     Cost of sales..................................................      1,831,006      1,693,288     1,435,143
     Selling, general and administrative expenses...................        304,098        297,273       311,720
     Amortization of intangible assets..............................          3,679          2,740         3,228
                                                                       -------------    ----------    ----------
          Total operating expenses..................................      2,138,783      1,993,301     1,750,091
                                                                       -------------    ----------    ----------
Operating income....................................................         86,530         79,312        71,579
                                                                       -------------    ----------    ----------
Other income (expense):
     Interest income................................................          8,140          9,372         8,601
     Interest expense...............................................        (30,778)       (32,974)      (32,715)
     Other income...................................................            616          7,182        13,729
                                                                       -------------    ----------    ----------
          Total other expense.......................................        (22,022)       (16,420)      (10,385)
                                                                       -------------    ----------    ----------
Income from operations before income taxes and minority interests in
  earnings..........................................................         64,508         62,892        61,194
Income taxes........................................................        (17,496)       (20,470)      (35,999)
Minority interests in earnings......................................        (27,411)       (23,966)      (13,882)
                                                                       -------------    ----------    ----------
Income before extraordinary item....................................         19,601         18,456        11,313
Extraordinary item, net of tax......................................        --              (3,092)       --
                                                                       -------------    ----------    ----------
Net income..........................................................    $    19,601     $   15,364    $   11,313
                                                                       -------------    ----------    ----------
                                                                       -------------    ----------    ----------
Net income (loss) per common share:
     Income before extraordinary item...............................          $2.14          $2.01         $1.23
     Extraordinary item.............................................        --                (.33)       --
                                                                       -------------    ----------    ----------
     Net income per common share....................................          $2.14          $1.68         $1.23
                                                                       -------------    ----------    ----------
                                                                       -------------    ----------    ----------
Weighted average number of common shares outstanding................          9,138          9,167         9,181
                                                                       -------------    ----------    ----------
                                                                       -------------    ----------    ----------
Cash dividends per common share.....................................           $.11         --            --
                                                                       -------------    ----------    ----------
                                                                       -------------    ----------    ----------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-4
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                   YEAR ENDED DECEMBER 31,
                                                                                               --------------------------------
                                                                                                 1996        1995        1994
                                                                                               --------    --------    --------
<S>                                                                                            <C>         <C>         <C>
Cash flows from operating activities:
  Net income................................................................................   $ 19,601    $ 15,364    $ 11,313
  Items not affecting cash:
     Depreciation and amortization of intangible assets.....................................     39,966      36,261      36,791
     Minority interests in earnings, net....................................................     21,786      21,235      11,226
     Loss (gain) on sale of assets..........................................................      1,365     (10,322)    (13,729)
     Deferred income taxes and other items, net.............................................    (18,847)     (5,063)        758
     Extraordinary item, net of tax.........................................................      --          3,092       --
  Changes in working capital:
     Receivables, net.......................................................................      6,573     (15,295)     (9,396)
     Inventories, net.......................................................................      5,554      (1,781)    (15,908)
     Accounts payable and accrued expenses..................................................    (12,729)     42,986      31,221
     Taxes currently payable................................................................     10,106      (9,572)     (3,317)
     Other current assets...................................................................      1,193      (1,096)       (665)
                                                                                               --------    --------    --------
          Net cash provided by operating activities.........................................     74,568      75,809      48,294
                                                                                               --------    --------    --------
  Cash flows from investing activities:
     Proceeds from divestitures.............................................................      --         (3,439)     87,436
     Expenditures for property, plant and equipment.........................................    (78,486)    (65,080)    (58,444)
     Proceeds from disposal of assets.......................................................      4,445       4,157      17,972
     Purchases of bond investments..........................................................      --        (10,435)     (5,988)
     Redemption of bond investments.........................................................      --          --         11,178
     Other investments......................................................................     (2,824)     (9,022)     (3,545)
                                                                                               --------    --------    --------
          Net cash (used in) provided by investing activities...............................    (76,865)    (83,819)     48,609
                                                                                               --------    --------    --------
  Cash flows from financing activities:
     Net proceeds from issuance of 11.5% Senior Secured Notes...............................      --        169,474       --
     Proceeds from issuance of long-term bank debt..........................................     33,144      23,116     141,627
     Repayment of long-term bank borrowings.................................................    (14,697)   (136,422)   (176,350)
     Net repayments of short-term debt......................................................    (37,615)     (6,354)    (41,206)
     Repurchase of common stock.............................................................     (1,170)       (488)      --
     Common stock dividends.................................................................     (1,005)      --          --
     Minority interest loans................................................................      --          --         (3,519)
                                                                                               --------    --------    --------
          Net cash (used in) provided by financing activities...............................    (21,343)     49,326     (79,448)
                                                                                               --------    --------    --------
Foreign exchange effects on cash and cash equivalents.......................................       (855)      4,177       6,114
                                                                                               --------    --------    --------
Net (decrease) increase in cash and cash equivalents........................................    (24,495)     45,493      23,569
Cash and cash equivalents at beginning of the year..........................................    120,279      74,786      51,217
                                                                                               --------    --------    --------
Cash and cash equivalents at end of the year................................................   $ 95,784    $120,279    $ 74,786
                                                                                               --------    --------    --------
                                                                                               --------    --------    --------
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
     Interest...............................................................................   $ 30,442    $ 27,741    $ 32,452
                                                                                               --------    --------    --------
                                                                                               --------    --------    --------
     Income taxes...........................................................................   $ 20,675    $ 33,833    $ 27,815
                                                                                               --------    --------    --------
                                                                                               --------    --------    --------
Supplemental schedule of non-cash investing and financing activities:
  Conversion of loans to minority shareholders to dividends.................................   $  --       $ 47,517
                                                                                               --------    --------
                                                                                               --------    --------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-5
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                                    UNFUNDED
                                                                                                                  ACCUMULATED
                                                                                                                    PENSION
                                                                                                                  BENEFITS IN
                                   COMMON STOCK                   TREASURY STOCK                    CUMULATIVE     EXCESS OF
                                  ---------------                -----------------                   FOREIGN      UNRECOGNIZED
                                  NUMBER            ADDITIONAL   NUMBER                              CURRENCY        PRIOR
                                    OF               PAID-IN       OF                  RETAINED     TRANSLATION     SERVICE
                                  SHARES   AMOUNT    CAPITAL     SHARES    AMOUNT      EARNINGS     ADJUSTMENT        COST
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
 
<S>                               <C>      <C>      <C>          <C>      <C>        <C>            <C>           <C>
Balance, January 1, 1994........  9,750     $ 97      $9,653       569    $(21,542)    $111,875      $(33,413)      $ (1,312)
 
    Net income..................                                                         11,313
    Cumulative translation loss
      realized on sale of
      foreign subsidiaries......                                                                       11,871
    Unfunded accumulated pension
      benefits in excess of
      unrecognized prior service
      cost......................                                                                                         138
    Translation adjustment......                                                                        4,542
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
    Balance, December 31, 1994..  9,750       97       9,653       569     (21,542)     123,188       (17,000)        (1,174)
 
Year Ended December 31, 1995
    Net income..................                                                         15,364
    Purchase of treasury
      stock.....................                                    43      (1,658)
    Unfunded accumulated pension
      benefits in excess of
      unrecognized prior service
      cost......................                                                                                       1,174
    Translation adjustment......                                                                      (11,055)
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
    Balance, December 31, 1995..  9,750       97       9,653       612     (23,200)     138,552       (28,055)        --
Year Ended December 31, 1996
    Net income..................                                                         19,601
    Common stock dividends......                                                         (1,005)
    Translation adjustment......                                                                       (9,433)
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
    Balance, December 31, 1996..  9,750     $ 97      $9,653       612    $(23,200)    $157,148      $(37,488)      $ --
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
                                  ------   ------   ----------   ------   --------   ------------   ----------    ------------
 
<CAPTION>
 
                                      TOTAL
                                  STOCKHOLDERS'
                                     EQUITY
                                  -------------
<S>                               <C>
Balance, January 1, 1994........    $  65,358
    Net income..................       11,313
    Cumulative translation loss
      realized on sale of
      foreign subsidiaries......       11,871
    Unfunded accumulated pension
      benefits in excess of
      unrecognized prior service
      cost......................          138
    Translation adjustment......        4,542
                                  -------------
    Balance, December 31, 1994..       93,222
Year Ended December 31, 1995
    Net income..................       15,364
    Purchase of treasury
      stock.....................       (1,658)
    Unfunded accumulated pension
      benefits in excess of
      unrecognized prior service
      cost......................        1,174
    Translation adjustment......      (11,055)
                                  -------------
    Balance, December 31, 1995..       97,047
Year Ended December 31, 1996
    Net income..................       19,601
    Common stock dividends......       (1,005)
    Translation adjustment......       (9,433)
                                  -------------
    Balance, December 31, 1996..    $ 106,210
                                  -------------
                                  -------------
</TABLE>
 
                See Notes to Consolidated Financial Statements.
 
                                      F-6



<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
1. BUSINESS DESCRIPTION
 
     As  of December 31,  1996, TLC Beatrice  International Holdings, Inc. ('TLC
Beatrice,'  and  together  with  its   subsidiaries,  the  'Company')  and   its
subsidiaries  is  comprised  of  11 operating  entities  and  their subsidiaries
located principally  in  western  Europe, having  disposed  of  eight  operating
entities  since December 31, 1994 (see Note 3). The Company's operating entities
are engaged  in  the  wholesale  and retail  distribution  of  food,  groceries,
household products and beverages, and the manufacture and marketing of ice cream
and  desserts,  snacks,  and beverages.  Sales  of  these products  are  made to
customers principally in western Europe.
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
PRINCIPLES OF CONSOLIDATION
 
     The consolidated financial statements include the accounts of TLC  Beatrice
and  its majority-owned subsidiaries. All significant intercompany transactions,
balances and profits have been eliminated. For accounting efficiencies,  certain
of TLC Beatrice's French subsidiaries report results on a one to three month lag
basis.  All of TLC Beatrice's other subsidiaries' year-ends are December 31. For
each of the periods presented there  have been no events during the  intervening
periods  which would  materially affect  the consolidated  financial position or
results of operations of the Company.
 
USE OF ESTIMATES
 
     The preparation  of  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that  affect the  reported  amounts of  assets and  liabilities  and
disclosure  of contingent  assets and liabilities  at the date  of the financial
statements and  the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.
 
FOREIGN CURRENCY TRANSLATION
 
     Assets  and liabilities of foreign entities  have been translated using the
exchange rates in effect  at the balance sheet  dates. Results of operations  of
foreign  entities  are translated  using the  average exchange  rates prevailing
throughout the period. Local currencies are considered the functional currencies
of the Company's foreign operating entities. Translation effects are accumulated
as part of  the cumulative  foreign currency translation  adjustment in  equity.
Gains  and losses from foreign currency  transactions are included in net income
for the period. During the year ended December 31, 1996, the Company recorded  a
net gain from foreign exchange transactions of approximately $3.7 million, which
has  been included in  Selling, general and  administrative expenses. During the
year ended  December 31,  1995, the  Company recorded  a net  loss from  foreign
exchange  transactions of approximately $4.8 million, which has been included in
other income (see Note 3). The Company did not report foreign exchange gains  or
losses in the year ended December 31, 1994.
 
FOREIGN CURRENCY SWAPS THAT QUALIFY AS HEDGES
 
     Changes in the value of foreign currency swap contracts related to existing
assets  and liabilities are  recognized in income  currently, offsetting foreign
exchange gains and losses from the hedged asset/liability. Changes in the  value
of  foreign currency swap  contracts that qualify as  hedges of firm commitments
are deferred and  are recognized in  income as adjustments  to carrying  amounts
when the hedged transaction occurs.
 
                                      F-7
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
INVENTORIES
 
     Inventories  are  valued  at the  lower  of  cost or  market.  The  cost of
substantially all inventories is determined by the first-in, first-out method.
 
REVENUE RECOGNITION
 
     Sales and related cost of sales  are recognized primarily upon shipment  of
products.   Volume  discounts   offered  by  the   Company  are   accrued  on  a
month-to-month  basis  based  on  customer  sales  to  date.  Retail  sales  are
recognized at the time when goods are sold to the customer.
 
INVESTMENT IN MARKETABLE DEBT SECURITIES
 
     In  accordance with  the Company's  investment intentions,  the Company has
classified its investment in marketable debt securities as held to maturity, and
has recorded  such  marketable debt  securities  at their  amortized  cost.  The
Company's  held to maturity marketable debt  securities at December 31, 1996 are
included in other  noncurrent assets  in the  accompanying consolidated  balance
sheets.  The  accompanying consolidated  statements  of cash  flows  reflect the
Company's redemption of approximately $11,178,000  of bond investments that  had
reached their maturity in 1994.
 
PROPERTY, PLANT AND EQUIPMENT
 
     Depreciation   is  generally  provided  on  the  straight-line  method  for
financial reporting purposes over the  estimated useful lives of the  underlying
assets.  Machinery and equipment are depreciated over a period ranging from 3 to
12 years and buildings are amortized from 20 to 50 years. Leasehold improvements
are amortized using the straight-line method over  the term of the lease or  the
estimated useful life of the improvements, whichever is shorter.
 
GOODWILL
 
     Goodwill  is amortized using the  straight-line method over various periods
not exceeding 40 years. The Company assesses the recoverability of its  goodwill
quarterly   during  the  preparation  of   the  Company's  operating  plans  and
consolidated financial statements, which includes estimates of future  operating
unit  earnings. In connection with this  review, the Company also considers past
trends and other  current factors  that may impact  the value  of the  Company's
investment in the individual operating units.
 
EVALUATION OF LONG-LIVED ASSETS
 
     Long-lived  assets are assessed for recoverability on an on-going basis. In
evaluating the value and  future benefits of  long-lived assets, their  carrying
value  would be  reduced by  the excess,  if any,  of the  long-lived asset over
management's estimate of the anticipated  undiscounted future net cash flows  of
the  related long-lived asset. There were  no adjustments to the carrying amount
of long-lived assets  in fiscal  years 1996, 1995  and 1994  resulting from  the
Company's evaluations.
 
INCOME TAXES
 
     The  Company accounts  for income  taxes in  accordance with  SFAS No. 109,
'Accounting for Income  Taxes.' SFAS  No. 109  requires an  asset and  liability
approach  for financial reporting for income taxes. It also requires the Company
to adjust its deferred tax balances in the period of enactment for the effect of
enacted changes in tax rates and  to provide a valuation allowance against  such
deferred tax assets that are not, more likely than not, to be realized.
 
                                      F-8
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
     Certain of TLC Beatrice's foreign subsidiaries file consolidated income tax
returns   in  the  jurisdiction   of  their  operations.   TLC  Beatrice's  U.S.
subsidiaries file a consolidated U.S. income tax return.
 
NET INCOME PER COMMON SHARE
 
     Net income per common share is computed  by dividing the net income by  the
weighted average number of common shares outstanding during the year.
 
CASH EQUIVALENTS
 
     Highly  liquid investments with original maturities of three months or less
are considered cash equivalents.
 
RECLASSIFICATIONS
 
     Certain prior  year amounts  have  been reclassified  to conform  with  the
current year presentation.
 
STOCK OPTIONS AND WARRANTS
 
     In  October 1995, the Financial Accounting  Standards Board issued SFAS No.
123, 'Accounting  for  Stock-Based Compensation,'  which  is effective  for  the
Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based  compensation arrangements  with employees and  encourages (but does
not require) compensation cost  to be measured  based on the  fair value of  the
equity  instrument  awarded. Companies  are permitted,  however, to  continue to
apply Accounting  Principles  Board ('APB')  Opinion  No. 25,  which  recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The  Company accounts for stock based compensation awards to employees under APB
No. 25.
 
3. OTHER INCOME
 
     During the year  ended December 31,  1996, the Company  recorded equity  in
earnings from minority-owned Leader Price stores of approximately $616,000.
 
     During   the  year  ended  December  31,   1995,  the  Company  sold  three
subsidiaries: Artigel  GmbH &  Co. Kg,  a 70%  owned ice  cream manufacturer  in
Germany,  and two wholly owned ice cream distributors: Artic S.A. in Belgium and
Artic France S.A.R.L. in France. Additionally, the Company ceased operations  of
its  subsidiary, Dairyworld  S.A., a  Swiss trader  of bulk  dairy products. The
Company recorded pre-tax gains on  such sales and dispositions of  approximately
$10.5 million, which have been included in other income.
 
     The  Company  also recorded  charges relating  to non-cash  exchange losses
recorded in compliance with SFAS No. 52, 'Foreign Currency Translation,' in  the
amount  of approximately $4.8 million. During  1995, the Company determined that
advances from  foreign subsidiaries  were no  longer of  a long-term  investment
nature.  Additionally, certain advances were  either forgiven in connection with
the sale of certain  subsidiaries, converted into  dividends or settled  through
other non-cash transactions. Accordingly, the translation adjustments related to
these  advances, previously included in  cumulative translation adjustment, have
been included in other income for the year ended December 31, 1995. Also  during
1995,  the Company sold  other investments for  approximately $467,000, recorded
equity in  earnings from  minority-owned Leader  Price stores  of  approximately
$331,000,  and received  additional proceeds of  $703,000 from the  1994 sale of
Choky, S.A. which have been included in other income.
 
                                      F-9
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
     During the year ended December 31, 1994 the Company sold four  wholly-owned
subsidiaries:  Premier Is A/S, an ice cream manufacturer in Denmark, Choky S.A.,
a  distributor  of  powdered  drink   products  in  France,  Sodialim  S.A.   an
institutional  food distributor in France and Gelati Sanson S.p.A., an ice cream
manufacturer in  Italy. The  Company recorded  pre-tax gains  on such  sales  of
approximately  $12.1 million in  1994 which have been  included in other income.
The Company  recorded  after-tax  gains  on such  sales  of  approximately  $3.9
million. Also during 1994, the Company sold other investments for a pre-tax gain
of approximately $1.6 million which has also been included in other income.
 
4. EXTRAORDINARY ITEM
 
     During the year ended December 31, 1995 the Company wrote off $4.6 million,
$3.1  million net of  tax benefit, of  certain deferred debt  issuance costs and
other costs incurred relating to long-term debt repaid prior to maturity.
 
5. RELATED PARTY TRANSACTIONS
 
     TLC Beatrice was founded by Mr. Reginald F. Lewis, its former Chairman  and
Chief  Executive Officer. Mr.  Lewis died on  January 19, 1993.  TLC Group, L.P.
('TLC Group'), a New York limited partnership owned and controlled by the estate
of Mr. Lewis, provided certain  administrative services to TLC Beatrice.  During
1995 and 1994, TLC Beatrice paid TLC Group, as assignee from TLC Holdings Corp.,
a  Delaware corporation ('TLC Holdings'),  a monitoring fee in  the amount of $1
million per year. Commencing January 1,  1996, Mrs. Lewis was compensated as  an
employee  of  TLC Beatrice  and the  monitoring  fee was  no longer  paid. Until
January 19, 1996, TLC Holdings owned directly 4,334,000 shares of Common  Stock.
Leslie N. Lewis was Chairman of TLC Holdings. TLC Holdings was 100% owned by the
Estate of Reginald F. Lewis, deceased (the 'Lewis Estate').
 
     On  January 19, 1996,  TLC Holdings was merged  with TLCB Acquisition Corp.
('TLCB'), a  newly formed  wholly-owned  subsidiary of  TLC Beatrice,  with  TLC
Holdings  being  the  surviving corporation.  Subsequent  to the  merger  of TLC
Holdings with TLCB, TLC Holdings was merged into TLC Beatrice with TLC  Beatrice
being  the surviving corporation. As a  result of these transactions, the shares
of Common Stock formerly held by TLC  Holdings have been cancelled and an  equal
number of shares were issued directly to the Lewis Estate.
 
     Certain  of  TLC  Beatrice's  operating  subsidiaries  have  local minority
stockholders whose equity  interests in  these subsidiaries range  from 2.6%  to
49%.  The subsidiaries  that have  the largest  equity interests  owned by local
stockholders  include  Distribution  Leader  Price  S.A.  ('Distribution  Leader
Price')(49%),  the  Retail Leader  Price  Group ('Retail  Leader  Price') (49%),
Interglas S.A. ('Interglas') (35%), Helados La Menorquina S.A. ('La Menorquina')
(35%) and the Minimarche  Group ('Minimarche') (26%). In  most cases, the  local
stockholders are responsible for the management of these subsidiaries.
 
     The  minority stockholders of  Distribution Leader Price  and Retail Leader
Price, directly or  indirectly, are  various members of  the Baud  family and  a
corporate entity controlled by the Baud family (collectively, the 'Baud Minority
Stockholders'). Pursuant to certain agreements entered into in 1992, the Company
is   obligated  under  certain  circumstances  to  purchase  the  Baud  Minority
Stockholders' ownership interests in Distribution Leader Price and Retail Leader
Price. The agreements provide that prior to June 30, 1997, if certain members of
the Baud family  cease to hold  their management positions  with the  applicable
company  and the Company  fails to propose and  vote in favor  of one of certain
members of the Baud family as a replacement, the Baud Minority Stockholders have
the  right  to  require  TLC  France  to  purchase  all  of  the  Baud  Minority
Stockholders'  shares of Distribution Leader Price  and Retail Leader Price (the
'Put Right'), and TLC France has the right to purchase all of the Baud  Minority
Stockholders'  shares of  Distribution Leader Price  in the event  that the Baud
Minority
 
                                      F-10
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
Stockholders exercise their  put option  with respect  to the  shares of  Retail
Leader  Price. In addition,  at any time on  or after July 1,  1997 and prior to
June 30, 2027, the  Baud Minority Stockholders can  exercise the Put Right,  and
TLC  France has  the right  to purchase all  of the  Baud Minority Stockholders'
shares of Distribution Leader Price and Retail Leader Price (the 'Call  Right'),
without  restriction. The price to exercise the  Put Right is based on a formula
calculated at the time of exercise which sets a purchase price at a multiple  of
the  average annual net income per share of Distribution Leader Price and Retail
Leader Price, as applicable, for the two fiscal years prior to exercise, with  a
guaranteed   minimum  return  on  the   Baud  Minority  Stockholders'  aggregate
investment if an option is exercised prior to July 1, 1997. If the Put Right  is
exercised  after July 1,  1997, and as  long as the  TLC Beatrice's 11.5% Senior
Secured Notes due October  1, 2005 (the 'Notes')  are outstanding, the  purchase
price  for such  shares is payable  25% on the  closing of the  purchase of such
shares, 45% on  the first  anniversary of  such closing  and 30%  on the  second
anniversary of such closing, together with interest thereon at PIBOR (as defined
in Note 11). After repayment of the Notes, the purchase price for such shares is
payable  50% on the closing of the purchase  of such shares and 50% on the first
anniversary  of  such  closing,  without   interest.  Solely  for  purposes   of
illustration, if the Baud Minority Stockholders were to have exercised their Put
Right on December 31, 1996, using the formula that would be in effect on July 1,
1997,  the total  purchase price for  such shares would  have been approximately
$143 million. The price to exercise the Call Right is based on the same  formula
as  in the exercise of the Put Right, except that the multiple of average annual
net income is  higher. Distribution Leader  Price and Retail  Leader Price  have
shown  substantial  earnings  growth  during  the  past  three  years.  If  such
companies' earnings were  to continue to  increase during the  two fiscal  years
prior to the exercise of such option, as to which no assurance can be given, the
purchase  price payable upon exercise of the  Put Right and the Call Right would
increase materially.
 
     In  addition  to   the  foregoing,  the   Company,  including  in   certain
circumstances  TLC Beatrice, is a party  to separate stockholder agreements with
certain other local minority stockholders of Etablissements Baud S.A.,  Sedipro,
S.A.  and Minimarche (collectively,  the 'Other Baud  Stockholders') and certain
other minority  stockholders. Certain  of these  agreements and  the by-laws  of
certain subsidiaries restrict the sale of the minority stockholders' interest or
require  the Company or the minority stockholders,  as the case may be, to offer
to sell their shares to the other stockholders prior to selling such shares to a
third party and/or require the Company to purchase these interests under certain
circumstances. These local minority stockholders have the option to require  the
Company  to purchase their interests in whole or  in part at any time. If all of
such options were exercised in full, the Company's aggregate purchase obligation
is estimated to be approximately $35 million as of December 31, 1996.
 
     The Company assesses the fair value of the underlying minority interests to
determine that  such value  continues to  equal or  exceed the  amount that  the
Company  would have to pay to the minority stockholders should they exercise the
puts. As a  part of its  strategic planning  process the Company  is in  regular
communication with a number of investment banks and financial institutions which
provide  it with information from which  it can determine the approximate market
value of its businesses. Based in part on such information, it is the  Company's
current  assessment that  the underlying  fair value  of the  minority interests
exceeds any obligation that would result from the exercise of the puts.
 
     The Company  has  made  loans  to  a  minority  interest  partner  totaling
$38,147,000  and $47,517,000  at December 31,  1996 and  1995, respectively. The
maturity dates of the loans range from January 1997 to October 1997. At December
31, 1996, the interest rate on such loans was 6.85 percent. Loans by certain  of
TLC  Beatrice's  subsidiaries to  minority  interests represent  a tax-efficient
method of distributing earnings to stockholders. Such loans are also made to the
Company as majority stockholder on a pro rata basis. In 1995, the Company netted
these loans to a  minority interest partner  (previously recorded in  noncurrent
assets) against the respective minority interests. The loans were repaid through
the application of a dividend payment in January 1997.
 
                                      F-11
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
6. RECEIVABLES
 
     Receivables  included in  current assets are  stated net  of allowances for
doubtful accounts  amounting  to approximately  $6  million and  $7  million  at
December  31, 1996 and  1995, respectively. The Company  recorded $3 million, $1
million and $3 million for bad debts for the years ended December 31, 1996, 1995
and 1994, respectively.
 
7. INVENTORIES
 
     Inventories consisted of the following components:
 
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                                 --------------------
                                                                                   1996        1995
                                                                                 --------    --------
                                                                                    (IN THOUSANDS)
 
<S>                                                                              <C>         <C>
Raw materials and supplies....................................................   $ 10,428    $ 10,860
Work in process...............................................................         78          76
Finished goods................................................................    107,648     120,189
                                                                                 --------    --------
                                                                                  118,154     131,125
Less inventory reserves.......................................................       (693)     (1,277)
                                                                                 --------    --------
     Total....................................................................   $117,461    $129,848
                                                                                 --------    --------
                                                                                 --------    --------
</TABLE>
 
8. PROPERTY, PLANT AND EQUIPMENT
 
     Property, plant and equipment consisted of the following components:
 
<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                               ----------------------
                                                                                 1996         1995
                                                                               ---------    ---------
                                                                                   (IN THOUSANDS)
 
<S>                                                                            <C>          <C>
Land and buildings..........................................................   $ 125,797    $ 106,720
Machinery and equipment.....................................................     327,598      295,251
                                                                               ---------    ---------
                                                                                 453,395      401,971
Less accumulated depreciation...............................................    (189,536)    (164,797)
                                                                               ---------    ---------
     Property, plant and equipment -- net...................................   $ 263,859    $ 237,174
                                                                               ---------    ---------
                                                                               ---------    ---------
</TABLE>
 
     Depreciation expense amounted to approximately $36 million, $33 million and
$34 million for the years ended December 31, 1996, 1995 and 1994, respectively.
 
9. LEASES
 
     Property leased under capital  leases and included  in property, plant  and
equipment is as follows:
 
<TABLE>
<CAPTION>
                                                                                       DECEMBER 31,
                                                                                     -----------------
                                                                                       1996      1995
                                                                                     --------    -----
                                                                                      (IN THOUSANDS)
 
<S>                                                                                  <C>         <C>
Buildings.........................................................................   $  8,712    $--
Machinery and equipment...........................................................      2,093      370
                                                                                     --------    -----
                                                                                       10,805      370
Less accumulated depreciation.....................................................     (1,941)    (227)
                                                                                     --------    -----
     Property held under capital leases -- net....................................   $  8,864    $ 143
                                                                                     --------    -----
                                                                                     --------    -----
</TABLE>
 
     The  Company  leases  office facilities,  manufacturing  facilities, retail
facilities, distribution facilities  and equipment  under various  noncancelable
operating lease agreements expiring through 2037.
 
                                      F-12
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
Future  minimum lease payments under  noncancelable capital and operating leases
at December 31, 1996 were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                   CAPITAL    OPERATING
                                                                                   LEASES      LEASES
                                                                                   -------    ---------
                                                                                      (IN THOUSANDS)
 
<S>                                                                                <C>        <C>
1997............................................................................   $ 1,394     $17,498
1998............................................................................     1,164      11,284
1999............................................................................       954       5,936
2000............................................................................       867       2,408
2001............................................................................       851       2,486
Later years.....................................................................     6,279      41,612
                                                                                   -------    ---------
Total minimum lease payments....................................................    11,509     $81,224
                                                                                              ---------
                                                                                              ---------
Less amount representing interest...............................................    (2,529)
                                                                                   -------
Present value of net minimum lease payments.....................................   $ 8,980
                                                                                   -------
                                                                                   -------
</TABLE>
 
     Total rent expense for all  operating leases amounted to approximately  $25
million, $25 million and $18 million for the years ended December 31, 1996, 1995
and 1994, respectively.
 
10. SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT
 
     Short-term  debt and current portion of long-term debt at December 31, 1996
and 1995 consisted of the following components:
 
<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                                   ------------------
                                                                                    1996       1995
                                                                                   -------    -------
                                                                                     (IN THOUSANDS)
 
<S>                                                                                <C>        <C>
Current portion of long-term debt...............................................   $17,440    $13,872
Short-term debt.................................................................    16,655     50,775
                                                                                   -------    -------
     Total......................................................................   $34,095    $64,647
                                                                                   -------    -------
                                                                                   -------    -------
</TABLE>
 
     The weighted  average  interest  rate of  short-term  debt  outstanding  at
December 31, 1996 and December 31, 1995 was 6.77% and 8.66%, respectively.
 
     At  December 31, 1996, the Company  had approximately $74 million of unused
lines of credit available for short-term financing.
 
     On October 6, 1995, TLC Beatrice International Irish Holdings Ltd.  ('Irish
Holdings')  entered into  a Facility Agreement  with Banque  Paribas and Smurfit
Paribas Bank Limited (the 'Credit Agreement'), pursuant to which Irish  Holdings
can   initially  borrow  up  to  the  lower   of  (a)  16  million  Irish  Punts
(approximately $25.9 million  at the then-prevailing  foreign exchange rate)  or
(b)  an amount  calculated as  follows: 28  million Irish  Punts plus  any share
capital contributed  in  cash  to Tayto,  Irish  Holdings'  principal  operating
subsidiary,  less the  cumulative amount of  cash dividends  paid and management
fees and intercompany loans made by Tayto to Irish Holdings from the date of the
Credit Agreement. The amount available for borrowing under the Credit  Agreement
is  reduced to (i) 9.6  million Irish Punts (approximately  $15.9 million at the
December 31, 1996 foreign exchange rate)  from February 1, 1999 through  January
31,  2000 and (ii)  3.2 million Irish  Punts (approximately $5.3  million at the
December 31, 1996 foreign exchange rate)  from February 1, 2000 through  January
31,  2001, at  which time  all amounts outstanding  must be  repaid. Interest on
borrowings in  Irish  Punts is  payable  at the  rate  of the  Dublin  Interbank
Offering  Rate ('DIBOR') plus  1.65%. The Credit Agreement  also provides for an
alternative currency  option pursuant  to  which Irish  Holdings can  borrow  in
certain  other currencies  at an  interest rate equal  to LIBOR  plus 1.65%. The
Credit Agreement contains restrictions on  certain activities of Irish  Holdings
and    Tayto,    including,   among    other    things,   the    incurrence   of
 
                                      F-13
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
indebtedness or  encumbrances,  entering  into  agreements  other  than  in  the
ordinary  course of business, the making of certain capital expenditures and the
acquisition or  sale of  assets  outside the  ordinary  course of  business.  In
addition,  Irish Holdings and  Tayto are required  to maintain certain financial
ratios. The Credit  Agreement is  guaranteed by TLC  Beatrice and  secured by  a
pledge  of the common stock of Tayto owned by Irish Holdings. As of December 31,
1996, no indebtedness was outstanding under the Credit Agreement.
 
     The Company is a party to  certain loan and credit agreements with  various
banks to finance its working capital and other requirements.
 
11. LONG-TERM DEBT
 
     Long-term debt at December 31, 1996 and 1995 consisted of the following:
 
<TABLE>
<CAPTION>
                                                                                             1996        1995
                                                                                           --------    --------
                                                                                              (IN THOUSANDS)
 
<S>                                                                                        <C>         <C>
11.5% Senior Secured Notes due October 1, 2005..........................................   $175,000    $175,000
PIBOR Plus .6% Note due 1999(1).........................................................      6,937       9,787
PIBOR Plus .6% Notes due 2002(1)........................................................      5,684       3,806
PIBOR Plus .8% Notes due 2001(1)........................................................      2,451       1,202
PIBOR Plus .6% Note due 1999(1).........................................................      2,153       --
7.10% Note due 1999.....................................................................      1,419       2,210
PIBOR Plus .8% Note due 2002(1).........................................................      1,107       --
PIBOR Plus .8% Note due 1996(1).........................................................      --          2,203
Miscellaneous, individually less than $1,000,000 in 1996 and 1995 due various dates
  through the year 2005 (5.35%*)........................................................     43,201      42,972
Capitalized lease obligations (7.47%*)..................................................      8,980       --
                                                                                           --------    --------
                                                                                            246,932     237,180
Less current portion....................................................................    (17,440)    (13,872)
                                                                                           --------    --------
     Total long-term debt...............................................................   $229,492    $223,308
                                                                                           --------    --------
                                                                                           --------    --------
</TABLE>
 
------------
 
 (1) Paris Interbank Offering Rate ('PIBOR') at December 31, 1996 equaled 3.43%.
 
 (*) Weighted average interest rates at December 31, 1996.
 
     On  October 2,  1995, TLC  Beatrice sold  $175 million  aggregate principal
amount of the Notes. Interest on the Notes  is payable on April 1 and October  1
of  each year, commencing April  1, 1996. The Notes rank  pari passu in right of
payment with all unsubordinated borrowings of TLC Beatrice and are secured by  a
security interest in a portion of the capital stock of certain of TLC Beatrice's
subsidiaries  and certain  intercompany indebtedness. The  Indenture relating to
the Notes  (the  'Indenture')  permits  TLC  Beatrice's  subsidiaries  to  incur
additional indebtedness under certain circumstances, including up to $25 million
for general corporate purposes under the Credit Agreement.
 
     The  Notes are redeemable,  at the option  of TLC Beatrice,  in whole or in
part, at any  time on or  after October 1,  2000, at the  redemption prices  set
forth  in  the  Indenture  plus  accrued interest  to  the  redemption  date. In
addition, upon one or more Public Equity Offerings (as defined in the Indenture)
consummated prior to October 1, 1998, TLC  Beatrice may at its option redeem  up
to  $52.5 million aggregate principal amount  of Notes from the proceeds thereof
at 110% of the  principal amount thereof  plus accrued interest  to the date  of
redemption.
 
     TLC  Beatrice is required  to offer to repurchase  all outstanding Notes at
101% of principal amount plus accrued interest promptly after the occurrence  of
a  Change of Control (as defined in the Indenture) with respect to TLC Beatrice.
A Change of  Control will  generally be  deemed to  occur if  (i) the  Permitted
Holders  (as defined in  the Indenture) shall beneficially  own in the aggregate
less than
 
                                      F-14
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
20% of the aggregate voting power of all classes of Voting Stock (as defined  in
the  Indenture) of  TLC Beatrice;  or (ii)  any person  or entity  (other than a
Permitted Holder) shall beneficially own either  more than 50% of the  aggregate
voting  power of all classes of Voting Stock of TLC Beatrice or shares of Voting
Stock of  TLC Beatrice  representing aggregate  voting power  greater than  that
represented  by the aggregate shares of  Voting Stock then beneficially owned by
the Permitted Holders; or (iii) any such person or entity shall elect a majority
of the Board of Directors  of TLC Beatrice. There can  be no assurance that  TLC
Beatrice  will  have sufficient  funds to  repay  the Notes  should a  Change of
Control occur.
 
     The Indenture restricts, among  other things, the  ability of TLC  Beatrice
and  its  Restricted  Subsidiaries  (as  defined  in  the  Indenture)  to  incur
indebtedness, incur  liens, enter  into sale  and leaseback  transactions,  make
restricted  payments, enter into  asset dispositions and  engage in transactions
with affiliates. The Indenture also limits  the ability of TLC Beatrice and  its
Restricted  Subsidiaries to enter  into agreements that  restrict the payment of
dividends and other  payments by any  Restricted Subsidiary to  the Company.  In
addition,  the  Indenture restricts  the  ability of  TLC  Beatrice to  merge or
consolidate with or transfer all or  substantially all of its assets to  another
entity.
 
     The  PIBOR  plus .6%  Note due  1999  of approximately  $6.9 million  is an
indebtedness secured by a  mortgage on the  Company's distribution warehouse  in
France.
 
     The  7.1% Note due 1999 is secured  by a mortgage on the Company's bottling
factory in Belgium.
 
     The remaining notes are indebtedness secured by mortgages on the  Company's
retail and discount supermarkets in France.
 
     The  net book  value of property  and equipment  encumbered under long-term
debt agreements was $112 million at December 31, 1996.
 
     The scheduled annual maturities of long-term debt, as of December 31, 1996,
are approximately $16 million in 1998, $14 million in 1999, $9 million in  2000,
$7 million in 2001, and $184 million in later years.
 
12. ACCRUED EXPENSES
 
     Included  in  other accrued  expenses  at December  31,  1996 and  1995 are
liabilities as follows:
 
<TABLE>
<CAPTION>
                                                                          1996       1995
                                                                         -------    -------
                                                                           (IN THOUSANDS)
 
<S>                                                                      <C>        <C>
Employee compensation.................................................   $23,943    $20,949
Other.................................................................    34,231     36,131
                                                                         -------    -------
                                                                         $58,174    $57,080
                                                                         -------    -------
                                                                         -------    -------
</TABLE>
 
13. COMMON STOCK
 
     In 1995,  TLC  Beatrice  repurchased  42,500 shares  of  Common  Stock  for
approximately $1.7 million.
 
     On  February 5,  1997, the  Company paid  a dividend  of $.22  per share to
stockholders of record as of January 28, 1997.
 
     On February 15,  1996, the Company  paid a  dividend of $.11  per share  to
stockholders of record as of February 5, 1996.
 
     No Common Stock dividends were paid in 1995 and 1994.
 
                                      F-15
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
14. PENSION AND POSTRETIREMENT PLANS
 
     TLC  Beatrice  maintains a  noncontributory  defined benefit  plan covering
employees of TLC Beatrice and  its participating subsidiaries and divisions  who
are  in executive, managerial,  office, technical, professional, administrative,
clerical or sales positions and have completed one year of service.
 
     Plan benefits are calculated according to a benefit formula based on  total
years  and months of credited service and  average compensation in the highest 5
years of the last 15 years of  employment, or the highest 60 consecutive  months
of the last 120 months of employment. A majority of the plan assets are invested
in  short-term fixed income instruments and  various equity portfolios. The plan
does not  have  significant  liabilities other  than  benefit  obligations.  TLC
Beatrice's  funding policy is to contribute amounts equal to the minimum funding
requirements of the Employee Retirement Income Security Act of 1974.
 
     Certain of TLC Beatrice's non-U.S. operating companies also sponsor defined
benefit plans for their employees.
 
     Pension expense  for the  years  ended December  31,  1996, 1995  and  1994
includes the following components:
 
<TABLE>
<CAPTION>
                                                                            YEAR ENDED DECEMBER 31,
                                                                         -----------------------------
                                                                          1996       1995       1994
                                                                         -------    -------    -------
                                                                                (IN THOUSANDS)
 
<S>                                                                      <C>        <C>        <C>
Service cost..........................................................   $   577    $   569    $   589
Interest cost.........................................................     1,102      1,076      1,030
Actual return on plan assets..........................................    (1,514)    (1,115)       299
Net amortization and deferral.........................................       610        357     (1,011)
                                                                         -------    -------    -------
          Total pension expense.......................................   $   775    $   887    $   907
                                                                         -------    -------    -------
                                                                         -------    -------    -------
</TABLE>
 
     The reconciliation of the funded status of TLC Beatrice's plans at December
31, 1996 and 1995 follows:
 
<TABLE>
<CAPTION>
                                                                                  ASSETS EXCEED
                                                                               ACCUMULATED BENEFITS
                                                                            --------------------------
                                                                               1996           1995
                                                                            -----------    -----------
                                                                                  (IN THOUSANDS)
<S>                                                                         <C>            <C>
Actuarial present value of benefit obligation:
     Vested benefit obligation...........................................     $12,716        $ 9,732
     Nonvested benefit obligation........................................          76            131
                                                                            -----------    -----------
     Accumulated benefit obligation......................................      12,792          9,863
     Value of future pay increases.......................................       2,627          4,662
                                                                            -----------    -----------
     Projected benefit obligation........................................      15,419         14,525
     Plan assets at fair value...........................................      14,555         11,996
                                                                            -----------    -----------
     Underfunded projected benefit obligation............................        (864)        (2,529)
     Unrecognized net loss...............................................       1,078          2,114
                                                                            -----------    -----------
     Net pension asset/(liability) recognized in the accompanying
       consolidated balance sheets.......................................     $   214        $  (415)
                                                                            -----------    -----------
                                                                            -----------    -----------
</TABLE>
 
     The  assumptions  used  in  determining  the  pension  expense  and pension
liability for the years  ended December 31, 1996  and 1995, respectively,  were:
Discount  rate -- 7.5-8% and 7.5-8%; Rate  of salary progression -- 5% and 5-6%;
Long-term rate of return on assets -- 8-8.5% and 8-8.5%.
 
     TLC Beatrice sponsors an  employee savings plan  designed to qualify  under
Sections  401(a) and  401(k) of  the Internal  Revenue Code  as a profit-sharing
plan. TLC Beatrice makes matching
 
                                      F-16
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
contributions  of  50%  of   the  amount  of   salary  deferral  and   after-tax
contributions (up to 6% of compensation) elected by a participant. The amount of
TLC  Beatrice's  contributions to  this plan  that were  charged to  income were
$57,000,  $37,000  and  $37,000  for  the  years  ended  1996,  1995  and  1994,
respectively.
 
15. STOCK OPTION AND BONUS PLANS
 
ANNUAL INCENTIVE PLAN AND 1996 LONG TERM INCENTIVE STOCK OPTION PLAN
 
     On January 19, 1996, the Board of Directors of TLC Beatrice established the
TLC  Beatrice 1996 Annual  Incentive Plan (the 'Annual  Incentive Plan') for the
purpose of  promoting the  long-term  financial performance  of the  Company  by
providing  incentive compensation opportunities to  officers, managers and other
key employees  of  TLC  Beatrice.  Each participant's  award  under  the  Annual
Incentive  Plan  for  any  fiscal  year  is  based  on  the  Company's financial
performance as  well as,  where appropriate,  the participant's  own  individual
performance.  The  Annual Incentive  Plan  is administered  by  the Compensation
Committee of the Board of Directors (the 'Compensation Committee').
 
     Participants in the Annual  Incentive Plan are  chosen by the  Compensation
Committee,  upon  the  recommendation  of the  Chief  Executive  Officer  of TLC
Beatrice. At the beginning of each  fiscal year, an individual target award  (an
'Individual  Target  Award')  is established  for  each participant  based  on a
percentage  of  such  participant's  base  salary.  The  Annual  Incentive  Plan
contemplates  that the applicable  percentage will vary  by Company position and
range from  10%  to  75% of  base  salary,  as determined  by  the  Compensation
Committee.  Actual  awards under  the  Annual Incentive  Plan  are based  on the
following factors: (i)  the Company's actual  earnings from operations  ('Actual
Earnings')  as compared to targeted  earnings ('Target Earnings') established at
the beginning of each fiscal year;  (ii) the Company's achievement of any  other
special,  strategic  or  other  performance factors;  and  (iii)  the individual
performance of each participant.
 
     The maximum amount of funds made  available by the Company for the  purpose
of  making  awards under  the  Annual Incentive  Plan  in any  fiscal  year (the
'Maximum Available  Awards Fund')  is  the aggregate  amount of  all  Individual
Target Awards established at the commencement of the fiscal year (the 'Incentive
Award  Pool') multiplied by a percentage  based on the Company's Actual Earnings
as compared  to  Target Earnings  for  such  fiscal year.  Depending  on  Actual
Earnings, the Maximum Available Awards Fund in any fiscal year may equal from 0%
to  150% of  the Incentive Award  Pool. In  years in which  the Company's Actual
Earnings meet or exceed 80% of the Target Earnings, the Chief Executive  Officer
and  the Compensation  Committee also have  discretion to make  available to the
Chief Executive  Officer an  additional discretionary  bonus pool  of an  amount
equal  to up to 25% of the Incentive  Award Pool, which amount is payable at the
discretion of the Chief  Executive Officer to  any one or  more employees as  an
additional bonus to any bonus otherwise payable under the Annual Incentive Plan,
based  on other performance measures that  are deemed appropriate. The amount of
the award paid to each participant is equal to such participant's  proportionate
share  (based on his  or her Individual  Target Award) of  the Maximum Available
Awards Fund, subject to adjustment by the Compensation Committee.
 
     On January  19,  1996, TLC  Beatrice  established (subject  to  shareholder
approval) the TLC Beatrice 1996 Long Term Incentive Stock Option Plan (the '1996
Stock  Option  Plan')  to promote  the  long-term financial  performance  of TLC
Beatrice by attracting, retaining  and motivating Key  Employees (as defined  in
the 1996 Stock Option Plan) and Consultants (as defined in the 1996 Stock Option
Plan).  The Board  of Directors  administers the  1996 Stock  Option Plan, which
provides for the grant of options with respect to a maximum of 750,000 shares of
Common Stock. Each Key Employee and Consultant may receive options to purchase a
maximum of 100,000 shares of  Common Stock under the  1996 Stock Option Plan  in
any  calendar year, as determined by the  Board of Directors. The exercise price
for an option granted pursuant to the  1996 Stock Option Plan which is  intended
to meet
 
                                      F-17
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
the  requirements of Section 422(b) of the Code (an 'ISO'), which may be granted
only to a Key Employee, cannot be less  than 100% (or 110% in certain cases)  of
the  fair market value (as  calculated in accordance with  the 1996 Stock Option
Plan) of a share of  Common Stock on the date  the ISO is granted. The  exercise
price  for each non-ISO option granted pursuant to the 1996 Stock Option Plan (a
'NQSO'), which may be granted to either a Key Employee or a Consultant, shall be
determined by the Board of Directors on the date that the NQSO is granted.  Each
option  granted under the 1996  Stock Option Plan shall  be evidenced by a stock
option agreement between the Key Employee or Consultant, as the case may be, and
TLC Beatrice, which agreement may contain additional terms not inconsistent with
the 1996 Stock Option Plan.
 
     Each  option  granted  under  the  1996  Stock  Option  Plan  shall  become
exercisable,  in full or in part, as the Board of Directors determines, provided
that no option may become exercisable prior  to the later of the listing of  the
Common Stock on any national securities exchange or interdealer quotation system
or  thirty months  from the  grant of  such option.  The Board  of Directors may
postpone the  exercise  of  an  option  in  order  to  (i)  effect  or  maintain
registration  or qualification  of the 1996  Stock Option Plan,  or Common Stock
issuable thereunder, under any applicable  securities law, (ii) take any  action
required  to comply with restrictions incident  to the listing on any securities
exchange of, or  the maintenance of  a public  market for, the  Common Stock  or
(iii)  determine that the actions described in (i) or (ii) need not be taken. No
postponement of the exercise  of an option granted  under the 1996 Stock  Option
Plan will extend the termination or expiration date of such option. In the event
of  a  Change of  Control (as  defined in  the  1996 Stock  Option Plan)  of TLC
Beatrice, any  unvested  options  shall  become  fully  vested  and  immediately
exercisable.
 
     Each  option granted  under the 1996  Stock Option Plan  shall terminate as
determined by the Board of Directors, but not later than the earliest of (i) ten
years (or five years in the case of  certain ISOs) from the date of grant,  (ii)
ninety  days after  the grantee's employment  or relationship  with TLC Beatrice
terminates other than 'for  cause' (as defined in  the 1996 Stock Option  Plan),
(iii) two years after the grantee's employment or relationship with TLC Beatrice
terminates  other than 'for  cause' if such termination  occurs within two years
following a Change  of Control  of TLC Beatrice  and (iv)  immediately upon  the
termination  of the grantee's employment or  relationship with TLC Beatrice 'for
cause.' The 1996 Stock Option Plan  will terminate on December 31, 2000,  unless
terminated earlier by the Board of Directors.
 
     Provisions  of  the 1996  Stock Option  Plan relating  to extension  of its
termination date, the amount of Common  Stock for which options may be  granted,
the  eligibility standards for participants and  the period during which options
may be exercised  may only be  amended with shareholder  approval. Amendment  or
termination of the 1996 Stock Option Plan shall not affect the validity or terms
of  any option previously granted thereunder in  a manner adverse to the grantee
without the consent of such grantee.
 
     On January  19,  1996, the  Board  of  Directors of  TLC  Beatrice  granted
non-qualified  options  with  respect  to  563,000  shares  of  Common  Stock to
seventeen Key Employees under the 1996 Stock Option Plan. Pursuant to the  stock
option agreements related to these grants, these options will become exercisable
in  accordance with the 1996  Stock Option Plan at an  exercise price of $25 per
share, provided that such options may not be exercised until the option  holders
have  completed seven years of employment with the Company from the date of such
grants. These stock option  agreements also provide  that notwithstanding a  Key
Employee's length of employment (i) options held for thirty months from the date
of  grant become exercisable immediately for up to 50% or 100% of the underlying
shares if the five-day public market  average closing price of the Common  Stock
exceeds  $40 or $50, respectively. In addition,  if there is not a public market
for the Common Stock  as of February  1, 2000, then (a)  option holders will  be
entitled  to buy out rights with respect to 50% or 100% of the underlying shares
if the  fair  market  value  of  the  Common Stock  is  at  least  $40  or  $50,
respectively,  at a  purchase price per  share equal  to the excess  of the fair
market value over the
 
                                      F-18
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
exercise price, not to exceed $25, (b) the Company will be entitled to  purchase
100%  of the underlying shares at  a purchase price per share  of $1 if the fair
market value of the Common  Stock is less than $40  and (c) the Company will  be
entitled  to terminate such  agreements if the  fair market value  of the Common
Stock is less than the exercise price.
 
     The Company  has adopted  the disclosure-only  provisions of  Statement  of
Financial   Accounting   Standards   No.   123,   'Accounting   for  Stock-Based
Compensation.' Accordingly, no compensation cost has been recognized for options
granted under the 1996 Stock Option Plan. Had compensation cost for the  options
awarded  under the 1996 Stock Option Plan (no options were granted in 1995) been
determined based  on  the fair  value  at the  grant  date for  awards  in  1996
consistent  with the provisions  of SFAS No.  123, the Company's  net income and
income per share  would have  been reduced to  the pro  forma amounts  indicated
below:
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED
                                                                  DECEMBER 31, 1996
                                                                  -----------------
 
<S>                                                               <C>
Net income -- as reported (in thousands).......................        $19,601
                                                                  -----------------
                                                                  -----------------
Net income -- pro forma (in thousands).........................        $18,995
                                                                  -----------------
                                                                  -----------------
Net income per share -- as reported............................        $  2.14
                                                                  -----------------
                                                                  -----------------
Net income per share -- pro forma..............................        $  2.08
                                                                  -----------------
                                                                  -----------------
</TABLE>
 
     The fair value of each option grant is estimated on the date of grant using
the  Black-Scholes  option-pricing  model  with  the  following weighted-average
assumptions  used  for  grants  in  1996:  dividend  yield  of  0.88%;  expected
volatility  of 0%;  risk-free interest  rate of  6.5%; and  expected lives  of 7
years.
 
1992 STOCK INCENTIVE PLAN
 
     In December  1992, TLC  Beatrice established  a Stock  Incentive Plan  (the
'1992  Plan') to reward officers, key employees and directors for service to the
Company and  to  provide  incentives  for  future  service  and  enhancement  of
shareholder  value. The  Compensation Committee  administers the  1992 Plan. The
1992 Plan  provided  for awards  of  up  to 500,000  stock  appreciation  rights
('SARs')  to directors  and key  employees and up  to 100,000  shares of phantom
stock to officers and members of  TLC Beatrice's management, each as  determined
by  the Compensation Committee. With the adoption of the 1996 Stock Option Plan,
no further awards of SARs or phantom stock will be made under the 1992 Plan.
 
     Upon a  Change  in  Control (as  defined  in  the 1992  Plan)  or,  at  TLC
Beatrice's option, when a plan participant leaves the Company, TLC Beatrice will
pay  to the participant in cash the fair market value of the aggregate number of
SARs and phantom stock awarded to  such participant less the Exercise Price  (as
defined  in the 1992 Plan) of each SAR or share of phantom stock. Under the 1992
Plan, in the event that  the common stock of TLC  Beatrice is not traded in  the
public market, the determination of fair market value, both for purposes of SARs
and  phantom  stock  rights,  is  determined solely  at  the  discretion  of the
Compensation Committee. The 1992 Plan  does not provide any parameters  limiting
the  Compensation  Committee  in  this  regard,  and  there  are  a  variety  of
permissible methods for determining fair market value.
 
     Five thousand (5,000)  SARs were  awarded to each  member of  the Board  of
Directors  as of December 1,  1992 and to several key  employees, for a total of
55,000 SARs. In  1993, 25,000 shares  of phantom stock  were awarded to  certain
members of TLC Beatrice's management.
 
     In  1994, 200,000  SARs were awarded  to certain members  of TLC Beatrice's
management. Vesting will occur in 25% intervals in each year beginning in  1994.
Also  during 1994, the rights to 20,000  shares of phantom stock and 10,000 SARs
were waived pursuant to certain severance agreements of
 
                                      F-19
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
key management personnel. In January 1995, 75,000 of the 200,000 SARs awarded in
1994 were forfeited  in connection  with the termination  of certain  employment
agreements. In January 1996, 50,000 SARs were cancelled with the adoption of the
1996  Stock Option Plan. As of December 31, 1996, approximately $1.1 million has
been provided for current and noncurrent obligations under the 1992 Plan.
 
16. INCOME TAXES
 
     The income tax provisions are comprised of the following:
 
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                                 -----------------------------
                                                                                  1996       1995       1994
                                                                                 -------    -------    -------
                                                                                        (IN THOUSANDS)
<S>                                                                              <C>        <C>        <C>
United States:
     Current..................................................................   $ --       $ --       $ --
     Deferred.................................................................     --         --         --
Foreign:
     Current(a)...............................................................    25,601     28,147     26,959
     Deferred(b)..............................................................    (8,105)    (7,677)     9,040
                                                                                 -------    -------    -------
          Total...............................................................   $17,496    $20,470    $35,999
                                                                                 -------    -------    -------
                                                                                 -------    -------    -------
</TABLE>
 
------------
 
 (a) 1995 Foreign Current income tax excludes $201,000 of tax benefit related to
     the retirement of debt which reduced the extraordinary loss.
 
 (b) 1995 Foreign Deferred income tax excludes $1,297,000 of tax benefit related
     to the retirement of debt which reduced the extraordinary loss in 1995.
 
     Income (loss) from operations before income taxes and minority interests in
earnings were as follows:
 
<TABLE>
<CAPTION>
                                                                                    YEAR ENDED DECEMBER 31,
                                                                               ---------------------------------
                                                                                 1996        1995         1994
                                                                               --------    ---------    --------
                                                                                        (IN THOUSANDS)
 
<S>                                                                            <C>         <C>          <C>
United States...............................................................   $(24,422)   $ (20,927)   $(33,584)
Foreign.....................................................................     88,930       83,819      94,778
                                                                               --------    ---------    --------
          Total.............................................................   $ 64,508    $  62,892    $ 61,194
                                                                               --------    ---------    --------
                                                                               --------    ---------    --------
</TABLE>
 
                                      F-20
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
     The provision  for income  taxes  varied from  the U.S.  Federal  statutory
income tax rate due to the following:
 
<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                                 -------------------------------
                                                                                  1996        1995        1994
                                                                                 -------    ---------    -------
                                                                                         (IN THOUSANDS)
 
<S>                                                                              <C>        <C>          <C>
U.S. Statutory Rate...........................................................       35%          35%        35%
                                                                                 -------    ---------    -------
                                                                                 -------    ---------    -------
Income taxes computed at U.S. statutory rates.................................   $22,578    $  22,012    $21,418
Goodwill amortization.........................................................     1,288        1,139      1,130
U.S. losses without tax benefit...............................................     8,548        6,364     11,754
Foreign losses without tax benefit............................................     2,110        1,712      1,737
Foreign withholding taxes without benefit.....................................       401          853      --
Foreign investment tax credit.................................................    (1,863)      --          --
Reversal of a portion of SFAS 109 valuation allowance.........................    (3,670)      --          --
Rate differentials and tax incentive jurisdictions............................    (4,597)      (2,758)    (2,616)
Reversal of foreign tax contingency reserves..................................    (5,683)     (10,872)    (1,600)
Other.........................................................................    (1,616)       2,020      4,176
                                                                                 -------    ---------    -------
          Total tax provision.................................................   $17,496    $  20,470    $35,999
                                                                                 -------    ---------    -------
                                                                                 -------    ---------    -------
</TABLE>
 
     TLC  Beatrice  has  not provided  deferred  taxes  on $274  million  of the
undistributed earnings of its non-U.S. subsidiaries which are not considered  to
be  permanently  invested, since  TLC Beatrice  has and  is anticipated  to have
sufficient U.S. operating losses to substantially reduce any U.S. Federal income
tax due upon distribution of such earnings.
 
     TLC Beatrice has U.S. net operating loss carryforwards of approximately $20
million as of December 31, 1996 which expire between 2008 and 2011.
 
     At the end of 1996, TLC Beatrice  recorded a deferred tax liability in  the
amount  of $11.9 million  with respect to  the timing difference  related to tax
incentive reserves that  have been  set up  by its  Canary Islands'  subsidiary,
Interglas  (see note 18). If Interglas  makes the necessary investments required
for the reserves  it has  set up,  TLC Beatrice  will recognize  a reduction  in
income tax expense of $5.9 million in 1997, $5.9 million in 1998 and $154,000 in
1999.  During 1995, Interglas favorably concluded a tax audit with respect to an
investment reserve it set up in 1991 and qualified investments made between 1992
and 1995 related to  this reserve which  resulted in a  reduction in income  tax
expense of $10.9 million.
 
     During  1996, the Company recognized the tax benefit related to the startup
losses of its Leader Price operations  previously not recognized under SFAS  109
in the amount of $3.7 million. In addition, the Company recognized a tax benefit
due  to a settlement of  a tax audit at its  French holding company, TLC France,
and the tax benefit from the  qualified investments made at its Canary  Islands'
subsidiary,  Interglas,  in  the  amounts  of  $2.9  million  and  $2.8 million,
respectively.
 
     At December 31, 1996, deferred income taxes reflect the net tax effects  of
(a) temporary differences between the carrying amounts of assets and liabilities
for  financial reporting purposes and the  amounts used for income tax purposes,
and (b) the value of operating loss and tax credit
 
                                      F-21
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
carryforwards. The tax  effects of significant  items comprising TLC  Beatrice's
net deferred tax liability as of December 31, 1996 and 1995 are as follows:
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,    DECEMBER 31,
                                                                     1996            1995
                                                                 ------------    ------------
<S>                                                              <C>             <C>
Deferred tax liabilities:
     Differences between book and tax basis of property.......     $ (5,071)       $ (2,242)
     Differences in recognition of foreign reinvestment
       reserves...............................................      (11,915)        (16,013)
     Inventory valuation differences..........................       (1,107)         (1,645)
     Other....................................................       (1,264)         (2,535)
                                                                 ------------    ------------
                                                                    (19,357)        (22,435)
                                                                 ------------    ------------
Deferred tax assets:
     Reserves not currently deductible........................        3,095           2,925
     U.S. and foreign operating loss carryforwards............       17,963          15,708
                                                                 ------------    ------------
                                                                     21,058          18,633
     Valuation allowance......................................       (9,110)        (14,378)
                                                                 ------------    ------------
                                                                     11,948           4,255
                                                                 ------------    ------------
          Net deferred tax liability..........................     $ (7,409)       $(18,180)
                                                                 ------------    ------------
                                                                 ------------    ------------
</TABLE>
 
17. BUSINESS SEGMENT AND GEOGRAPHIC DATA
 
     The Company's operations are composed of two segments, Grocery Products and
Food  Distribution. Financial  data for  each of the  segments are  shown in the
tables below (in thousands of dollars):
 
<TABLE>
<CAPTION>
                                                                                     NET SALES
                                                                       --------------------------------------
                                                                              YEAR ENDED DECEMBER 31,
                                                                       --------------------------------------
                                                                          1996          1995          1994
                                                                       ----------    ----------    ----------
<S>                                                                    <C>           <C>           <C>
Food Distribution...................................................   $1,867,568    $1,640,994    $1,356,532
Grocery Products....................................................      357,745       431,619       465,138
                                                                       ----------    ----------    ----------
                                                                       $2,225,313    $2,072,613    $1,821,670
                                                                       ----------    ----------    ----------
                                                                       ----------    ----------    ----------
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                  OPERATING INCOME
                                                                       --------------------------------------
                                                                              YEAR ENDED DECEMBER 31,
                                                                       --------------------------------------
                                                                          1996          1995          1994
                                                                       ----------    ----------    ----------
<S>                                                                    <C>           <C>           <C>
Food Distribution...................................................    $ 59,476      $ 49,995      $ 51,653
Amortization of intangible assets...................................      (2,781)       (2,141)       (2,199)
                                                                       ----------    ----------    ----------
Net Food Distribution...............................................      56,695        47,854        49,454
                                                                       ----------    ----------    ----------
Grocery Products....................................................      43,877        42,374        43,354
Amortization of intangible assets...................................        (898)         (599)         (889)
                                                                       ----------    ----------    ----------
Net Grocery Products................................................      42,979        41,775        42,465
                                                                       ----------    ----------    ----------
          Total segments............................................      99,674        89,629        91,919
                                                                       ----------    ----------    ----------
Corporate expenses..................................................     (13,144)      (10,317)      (20,200)
Amortization of intangible assets...................................      --            --              (140)
                                                                       ----------    ----------    ----------
Net Corporate expenses..............................................     (13,144)      (10,317)      (20,340)
                                                                       ----------    ----------    ----------
                                                                        $ 86,530      $ 79,312      $ 71,579
                                                                       ----------    ----------    ----------
                                                                       ----------    ----------    ----------
</TABLE>
 
                                      F-22
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
<TABLE>
<CAPTION>
                                                                             IDENTIFIABLE                    CAPITAL
                                                                                ASSETS       DEPRECIATION    SPENDING
                                                                             ------------    ------------    --------
<S>                                                                          <C>             <C>             <C>
1996
     Food Distribution....................................................     $463,239        $ 24,185      $33,900
     Grocery Products.....................................................      243,868          11,984       44,586
                                                                             ------------    ------------    --------
          Total segments..................................................      707,107          36,169       78,486
     Corporate and other..................................................       74,597             118        --
                                                                             ------------    ------------    --------
                                                                               $781,704        $ 36,287      $78,486
                                                                             ------------    ------------    --------
                                                                             ------------    ------------    --------
1995
     Food Distribution....................................................     $484,232        $ 21,013      $44,867
     Grocery Products.....................................................      249,119          11,876       19,622
                                                                             ------------    ------------    --------
          Total segments..................................................      733,351          32,889       64,489
     Corporate and other..................................................       82,224             118          591
                                                                             ------------    ------------    --------
                                                                               $815,575        $ 33,007      $65,080
                                                                             ------------    ------------    --------
                                                                             ------------    ------------    --------
1994
     Food Distribution....................................................     $385,621        $ 16,195      $36,664
     Grocery Products.....................................................      276,738          17,327       21,637
                                                                             ------------    ------------    --------
          Total segments..................................................      662,359          33,522       58,301
     Corporate and other..................................................       73,144              41          143
                                                                             ------------    ------------    --------
                                                                               $735,503        $ 33,563      $58,444
                                                                             ------------    ------------    --------
                                                                             ------------    ------------    --------
</TABLE>
 
     The following  table  provides certain  geographic  data on  the  Company's
operations (in thousands of dollars):
 
<TABLE>
<CAPTION>
                                                                                          OPERATING    IDENTIFIABLE
                                                                            NET SALES      INCOME         ASSETS
                                                                            ----------    ---------    ------------
<S>                                                                         <C>           <C>          <C>
1996
     France..............................................................   $1,871,305    $  57,294      $480,872
     Southern Europe*....................................................      180,272       23,207       136,590
     Other countries.....................................................      173,736       19,173        89,645
     Corporate and other.................................................       --          (13,144)       74,597
                                                                            ----------    ---------    ------------
                                                                            $2,225,313    $  86,530      $781,704
                                                                            ----------    ---------    ------------
                                                                            ----------    ---------    ------------
1995
     France..............................................................   $1,654,432    $  47,132      $483,277
     Southern Europe*....................................................      176,674       24,533       154,131
     Other countries.....................................................      241,507       17,964        95,943
     Corporate and other.................................................       --          (10,317)       82,224
                                                                            ----------    ---------    ------------
                                                                            $2,072,613    $  79,312      $815,575
                                                                            ----------    ---------    ------------
                                                                            ----------    ---------    ------------
1994
     France..............................................................   $1,369,605    $  48,282      $384,951
     Southern Europe*....................................................      199,309       29,328       154,194
     Other countries.....................................................      252,756       14,309       123,214
     Corporate and other.................................................       --          (20,340)       73,144
                                                                            ----------    ---------    ------------
                                                                            $1,821,670    $  71,579      $735,503
                                                                            ----------    ---------    ------------
                                                                            ----------    ---------    ------------
</TABLE>
 
------------
 
* Southern Europe is comprised of Spain, Portugal and, prior to 1995, Italy.
 
     Intersegment and intergeographic sales are not significant to the net sales
of any business segment or geographic location. Sales to any single customer are
not  material. There are no  export sales from the  United States. Corporate and
other assets consist principally of cash and cash equivalents, and goodwill.
 
                                      F-23
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
18. COMMITMENTS AND OTHER CONTINGENT LIABILITIES
 
     As a consequence  of the  termination of certain  long-standing income  tax
incentives  in the Canary Islands as of December 31, 1991, transition rules were
promulgated by the Spanish and Canary Island provincial governments. To preserve
the tax advantages granted  under these prior  incentives, the transition  rules
required  investments by TLC  Beatrice Canary Islands  subsidiary, Interglas, in
certain approved investments  over the  five-year period  from 1992  to 1996.  A
variety  of  investments  were  eligible,  including  productive  machinery  and
equipment and/or local  government interest-bearing  bonds. Interglas  satisfied
the  last investment  required under  the transition  rules of  approximately $8
million entirely from internal cash flow.  The Company recognized an income  tax
benefit  of $2.8  million in  1996 due  to the  satisfaction of  this investment
requirement.
 
     In addition, the Canary Islands instituted new tax incentives beginning  in
1994.  Interglas opted to  take advantage of  these incentives for  its 1994 and
1995 tax years and is required  to make qualifying investments of $16.8  million
in  1997, $16.8 million in  1998 and $440,000 in  1999. The Company has provided
for deferred income taxes on these requirements equal to the 35% tax rate on $34
million, or  approximately,  $11.9  million,  in the  event  that  the  required
investment  obligations are  not fulfilled. The  Company can  give no assurances
that changes in  existing Canary  Islands tax  rules and  requirements will  not
occur or that the Company will be able to make the qualifying investments in the
future. By reason of these uncertainties, the Company has recorded the potential
full  deferred  tax  liability.  If the  Company  can  fulfill  these investment
requirements, the  deferred tax  liability may  be reversed  depending upon  the
relevant facts and circumstances existing at the time.
 
19. OTHER INVESTMENTS
 
     Included  in  other noncurrent  assets at  December 31,  1996 and  1995 are
investments as follows:
 
<TABLE>
<CAPTION>
                                                                                    1996       1995
                                                                                   -------    -------
                                                                                     (IN THOUSANDS)
<S>                                                                                <C>        <C>
Noncurrent:
     Investment in various Spanish interest-bearing bonds.......................   $23,113    $24,624
                                                                                   -------    -------
                                                                                   -------    -------
</TABLE>
 
     The interest  rates of  such  investments range  from  6.95% to  12.35%  at
December  31, 1996  and at December  31, 1995. Maturities  ranged from September
1998 to December  2002 at  December 31,  1996 and  at December  31, 1995.  These
investments are treated as held to maturity in accordance with SFAS No. 115, and
are carried at amortized cost (see Note 2).
 
20. LITIGATION
 
     On  May 20, 1994, Carlton Investments ('Carlton') filed a complaint against
TLC Beatrice and the executrices of the Lewis Estate in the Supreme Court of the
State of  New  York, County  of  New York,  titled  Carlton Investments  v.  TLC
Beatrice  International Holdings, Inc., et al. Carlton alleges that TLC Beatrice
breached the  Stockholders' Agreement  by paying  a $22.1  million  compensation
package  to  Mr. Reginald  F.  Lewis, former  Chairman  of the  Board  and Chief
Executive Officer of TLC Beatrice, and that Mr. Lewis tortiously interfered with
the  Stockholders'  Agreement  by  procuring   that  breach  for  his   personal
enrichment.  The tortious interference  claim was subsequently  dismissed by the
court and  is now  pending appeal.  TLC Beatrice  is vigorously  defending  this
action. Carlton is seeking $11.5 million plus interest in damages and attorneys'
fees and costs.
 
     On  January  4,  1995,  Carlton filed  a  stockholder  derivative complaint
allegedly on behalf of  TLC Beatrice in  the Court of Chancery  of the State  of
Delaware,  New  Castle  County,  entitled Carlton  Investments  v.  TLC Beatrice
International Holdings,  Inc.,  et al.,  C.A.  No. 13950.  In  this  stockholder
derivative  action, which has  been amended twice, Carlton  seeks to recover for
the benefit of  TLC Beatrice millions  of dollars of  corporate funds  allegedly
paid to the late Reginald F. Lewis and entities
 
                                      F-24
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
controlled  by or affiliated with him between 1987 and 1993. Named as defendants
are the executrices of Mr. Lewis' estate, several entities allegedly  controlled
by  the late Mr. Lewis,  together with a number  of current and former directors
and a former officer  of TLC Beatrice. The  derivative complaint also names  TLC
Beatrice and three of its subsidiaries as nominal defendants.
 
     TLC  Beatrice and the  other defendants have  filed answers and affirmative
defenses to  the  derivative complaint  denying  all material  allegations.  For
further  information concerning  the allegations  of Carlton  in this derivative
lawsuit, reference is made to the  derivative complaint, as amended, which  have
been  filed as  an Exhibit  to the  Registration Statement  No. 33-88602  of TLC
Beatrice filed with the Securities and Exchange Commission.
 
     A proposed settlement  has resulted  from the formation  by TLC  Beatrice's
Board  of  Directors on  May 24,  1996  of a  Special Litigation  Committee (the
'SLC'). On  that date,  the  Board, including  Carlton's representative  on  the
Board,  Paul Biddelman, unanimously voted to expand the size of the Board by two
seats, elected Clifford L.  Alexander, Jr. and William  H. Webster to the  Board
and  appointed Messrs. Alexander  and Webster as directors,  with no personal or
business relationships  or dealings  with the  defendants, TLC  Beatrice or  the
Lewis  family, to serve as the members of  the SLC. The SLC was charged with the
responsibility of investigating and evaluating the allegations and issues in the
litigation and to consider and determine whether or not continued prosecution of
the derivative  complaint was  in the  best interests  of TLC  Beatrice and  its
shareholders  and what action TLC Beatrice should take concerning the litigation
in accordance with Delaware law.
 
     The SLC,  through its  counsel, entered  into a  Stipulation of  Settlement
dated  November 12, 1996 with counsel for  all of the defendants. Subject to the
approval of the Court of Chancery of  the State of Delaware, the Stipulation  of
Settlement  would be a  full and final  settlement of the  derivative action and
would release defendants from all claims that were or could have been raised  by
Carlton  or  any  other  shareholder  in  the  suit.  Under  the  Stipulation of
Settlement, the  Lewis  Estate has  agreed  to pay  the  Company the  amount  of
$14,932,000  plus interest at the rate of  8% per annum until the Effective Date
(as hereinafter defined)  (the 'Settlement Amount'),  pursuant to the  following
terms:  (a) On the Effective  Date, $2,000,000 in cash  and a secured promissory
note for the unpaid  balance of the  Settlement Amount, (b)  from and after  the
Effective  Date, interest on the Settlement amount shall be paid at a rate equal
to the U.S. prime rate plus 1/2  of 1 percent compounded daily, (c) $500,000  in
cash  on May  1 and  November 1 of  each year,  until payment  of the Settlement
Amount in full, and (d) a final payment of the balance of the Settlement  Amount
on  May  1,  2004  if not  paid  in  full  prior thereto.  For  purposes  of the
Stipulation of  Settlement,  the Effective  date  shall  be the  date  that  the
approval  of the Stipulation  of Settlement is considered  final, which shall be
the latest to occur (i) the expiration of the time for filing or noticing of any
appeal or motion for reargument from the judgment, if any, of the Chancery Court
of the State of Delaware approving the Stipulation of Settlement, (ii) the  date
of  final affirmance on any  appeal or reargument; (iii)  the expiration of time
for petitions for writs of certiorari and, if certiorari is granted, the date of
final affirmance  following review  pursuant to  such grant  or (iv)  the  final
dismissal of any appeal or proceedings on ceriorari.
 
     The  payment of  the Settlement  Amount is  to be  secured by  the personal
guaranty of Loida  N. Lewis  and the  pledge by the  Lewis Estate  of shares  of
Common  Stock of the Company owned by the  Lewis Estate, the number of shares to
be pledged  to  be  determined  as follows:  number  of  shares  pledged  equals
Settlement Amount divided by $25.00 multiplied by 4.
 
     There  can  be no  assurance  that the  Stipulation  of Settlement  will be
approved, or if approved, what its final terms may be.
 
     TLC Beatrice's outside litigation counsel has advised TLC Beatrice that  at
this  time the extent of TLC Beatrice's  liability, if any, is not determinable.
The ultimate outcome  that may  result from these  matters may  have a  material
effect  on  TLC Beatrice's  consolidated financial  condition and/or  results of
operations. No provision for  any liability that may  result from these  matters
has been made in the
 
                                      F-25
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
consolidated financial statements. In addition, under certain circumstances, TLC
Beatrice  is  obligated  to  reimburse  the directors  for  their  share  of any
judgement or settlement.
 
21. FAIR MARKET VALUE OF FINANCIAL INSTRUMENTS
 
<TABLE>
<CAPTION>
                                                                     YEAR ENDED                 YEAR ENDED
                                                                  DECEMBER 31, 1996          DECEMBER 31, 1995
                                                               -----------------------    -----------------------
                                                               CARRYING    FAIR MARKET    CARRYING    FAIR MARKET
                                                                VALUE         VALUE        VALUE         VALUE
                                                               --------    -----------    --------    -----------
                                                                                 (IN THOUSANDS)
<S>                                                            <C>         <C>            <C>         <C>
                          ASSETS:
Cash and cash equivalents...................................   $ 95,784     $  95,784     $120,279     $ 120,279
Receivables, net............................................    150,817       150,817      165,989       165,989
Other current assets........................................     11,036        11,036       13,356        13,356
Other noncurrent assets.....................................     46,690        46,708       53,042        53,053
                        LIABILITIES:
Short-term debt and current portion of long-term debt.......     34,095        34,095       64,647        64,647
Accounts payable............................................    226,827       226,827      256,466       256,466
Taxes payable...............................................     18,563        18,563        8,996         8,996
Long-term debt..............................................    229,492       229,492      223,308       223,308
Deferred income taxes.......................................      7,409         7,409       18,180        18,180
Other noncurrent liabilities................................     23,487        23,487       29,944        29,944
Foreign currency swaps (receivable) payable.................     (5,548)        7,912        1,842         8,942
</TABLE>
 
Cash and cash equivalents, net receivables, accounts payable, taxes payable,
deferred income taxes and other noncurrent liabilities.
 
The carrying amounts  of these  items are a  reasonable estimate  of their  fair
value.
 
Other current and noncurrent assets.
 
The  fair market  value of securities  held for investment  purposes included in
other current and noncurrent assets is based on quoted market prices.
 
Short-term and long-term debt.
 
Interest rates which are currently available to the Company for issuance of debt
with similar terms and remaining maturities are used to estimate fair value  for
debt issues that are not quoted on an exchange.
 
Foreign currency swaps.
 
The  fair value is the estimated amount  that the Company would pay to terminate
the contracts  at  the reporting  date.  The  fair value  information  has  been
obtained from dealer quotations.
 
22. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
 
     The  Company operates internationally, giving  rise to significant exposure
to market risk  from changes  in foreign exchange  rates. In  October 1995,  the
Company  entered into currency  swaps to reduce  the risk that  the cash inflows
from its foreign subsidiaries will be adversely affected by changes in  exchange
rates  and affect the Company's  ability to meet interest  payments on the Notes
(see Note 11).  The Company  does not hold  or issue  financial instruments  for
trading purposes.
 
     Under  the currency swap agreements, the  Company agrees with other parties
to exchange, at specified  intervals, French francs for  U.S. dollars, based  on
specified  interest rates  applied to  the notional  amount of  the contract. At
inception, the  Company  received approximately  660  million French  francs  in
exchange  for  approximately  $133  million. The  Company  receives  interest in
dollars at 11.50%
 
                                      F-26
 


<PAGE>


                   TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
 
based on the notional U.S. dollar amount and pays interest in French francs at a
weighted average  rate of  12.51% based  on the  notional French  franc  amount.
Interest payments and receipts occur semi-annually on March 25 and September 25.
The  swap agreements expire September  25 and October 1,  2000 and require final
settlement of the notional amounts at those dates.
 
     The  Company  is  exposed  to   credit-related  losses  in  the  event   of
nonperformance  by counterparties to the swap agreements, but it does not expect
any counterparties to  fail to meet  their obligations given  their high  credit
ratings.  The credit exposure from swap contracts is represented by the value of
contracts with a positive fair value at the reporting date.
 
24. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
 
     The following is a summary of the unaudited quarterly results of operations
for the calendar years 1996 and 1995:
 
<TABLE>
<CAPTION>
                                                                   QUARTERS ENDED
                         ---------------------------------------------------------------------------------------------------
                             DECEMBER 31,              SEPTEMBER 30,               JUNE 30,                  MARCH 31,
                         ---------------------     ---------------------     ---------------------     ---------------------
                           1996         1995         1996         1995         1996         1995         1996         1995
                         --------     --------     --------     --------     --------     --------     --------     --------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                      <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
Net sales............    $558,168     $526,512     $551,019     $532,950     $585,736     $561,644     $530,390     $451,507
                         --------     --------     --------     --------     --------     --------     --------     --------
Gross profit.........      90,978       90,265      107,518      104,757      107,625      107,245       88,186       77,058
                         --------     --------     --------     --------     --------     --------     --------     --------
Income before
  extraordinary
  item...............       3,148        3,209        7,606        8,431        7,607        5,775        1,240        1,041
Extraordinary item,
  net of taxes.......       --          (3,092)       --           --           --           --           --           --
                         --------     --------     --------     --------     --------     --------     --------     --------
Net income...........    $  3,148     $    117     $  7,606     $  8,431     $  7,607     $  5,775     $  1,240     $  1,041
                         --------     --------     --------     --------     --------     --------     --------     --------
                         --------     --------     --------     --------     --------     --------     --------     --------
Net income per common
  share..............    $    .34     $    .01     $    .83     $    .92     $    .83     $    .63     $    .14     $    .11
                         --------     --------     --------     --------     --------     --------     --------     --------
                         --------     --------     --------     --------     --------     --------     --------     --------
</TABLE>
 
     Net income  per common  share for  each of  the quarters  is based  on  the
weighted  average number of shares  outstanding for each period,  and the sum of
the quarters may  not necessarily be  equal to  the full year's  net income  per
share.
 
                                      F-27



<PAGE>


                                   SIGNATURES
 
     Pursuant to the requirements Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this Report to be signed
on  its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on February 28, 1997.
 
                                          TLC BEATRICE  INTERNATIONAL  HOLDINGS,
                                          INC.
 
                                          By:         /S/ LOIDA N. LEWIS
                                             ...................................
                                                    LOIDA NICOLAS LEWIS
                                                 CHAIRMAN OF THE BOARD AND
                                                  CHIEF EXECUTIVE OFFICER
 
     Pursuant  to the  requirements of the  Securities Exchange Act  of 1934, as
amended, this Report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                SIGNATURE                                     CAPACITY                            DATE
------------------------------------------  --------------------------------------------   -------------------
 
<C>                                         <S>                                            <C>
            /s/ LOIDA N. LEWIS              Chairman of the Board and Chief Executive
 .........................................    Officer and Director
          (LOIDA NICOLAS LEWIS)
 
           /s/ PETER OFFERMANN              Executive Vice President and Chief Financial
 .........................................    Officer
            (PETER OFFERMANN)
 
            /s/ TERRI L. PIKE               Controller
 .........................................
             (TERRI L. PIKE)
 
      /s/ CLIFFORD L. ALEXANDER, JR.        Director
 .........................................
       (CLIFFORD L. ALEXANDER, JR.)
 
          /s/ LEE A. ARCHER, JR.            Director
 .........................................
           (LEE A. ARCHER, JR.)
 
         /s/ DORT A. CAMERON III            Director
 .........................................
          (DORT A. CAMERON III)
 
          /s/ ROBERT C. DEJONGH             Director
 .........................................
           (ROBERT C. DEJONGH)
                                                                                            February 28, 1997
 
          /s/ ANTHONY S. FUGETT             Director
 .........................................
           (ANTHONY S. FUGETT)
 
          /s/ REYNALDO P. GLOVER            Director
 .........................................
           (REYNALDO P. GLOVER)
 
           /s/ LESLIE N. LEWIS              Director
 .........................................
            (LESLIE N. LEWIS)
 
             /s/ JAMES E. OBI               Director
 .........................................
              (JAMES E. OBI)
 
         /s/ RICARDO J. OLIVAREZ            Director
 .........................................
          (RICARDO J. OLIVAREZ)
                                            Director
 ..........................................
           (SAMUEL P. PEABODY)
 
          /s/ WILLIAM H. WEBSTER            Director
 .........................................
           (WILLIAM H. WEBSTER)
</TABLE>


<PAGE>


<PAGE>

                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
 
<C>      <S>                                                                                              <C>
    *3(a) -- Restated Certificate of Incorporation of TLC Beatrice
   **3(b) -- By-Laws of TLC Beatrice
   **4   -- Form of Certificate for Common Stock
  **10(a) -- Beatrice International Pension Plan
  **10(b) -- Beatrice International Savings Plan
  **10(c) -- Beatrice International Supplemental Pension Plan
  **10(d) -- Management Incentive Plan
  **10(e) -- Beatrice International Severance Policy
  **10(f) --  Loan Agreement  dated as  of October  21, 1994  among TLC  Beatrice International Holdings
           France S.A., Banque Paribas and a syndicate of Banks, with Banque Paribas as agent thereof
  **10(g) -- Debenture Issue Contract dated October 21, 1994 between TLC Beatrice International Holdings
           France S.A. and First Britannia Mezzanine Capital B.V.
  **10(h) -- Facility Agreement dated March 31, 1994 between TLC Beatrice International (Irish) Holdings
           Limited and Banque Paribas
  **10(j) -- Employment Agreements between TLC  Beatrice and Vincent P.  O'Sullivan and Tayto, Ltd.  and
           Vincent P. O'Sullivan
  **10(k) -- Employment Agreement between TLC Beatrice and Reynaldo P. Glover
   *10(m) -- Employment Agreement between TLC Beatrice and Daniel Jux
  **10(n) --  Stockholders'  Agreement dated  as of  November 30,  1987,  as amended,  by and  among the
           Registrant, TLC Beatrice International Partners L.P. and certain other purchasers of  Common
           Stock
  **10(o) -- 1992 Stock Incentive Plan of TLC Beatrice
  **10(p) --  Common Stock Subscription Agreement  dated as of November 30,  1987 among TLC Beatrice and
           certain purchasers of its Common Stock
  **10(q) -- Termination Agreement dated as of October 3, 1994 between TLC Beatrice and Jean S.  Fugett,
           Jr.
  **10(r) --  Termination Agreement  dated as  of January  8, 1993  between TLC  Beatrice and  Albert M.
           Fenster
  **10(s) -- Termination Agreement dated as of June 30, 1994 between TLC Beatrice and David A. Guarino
  **10(t) -- Termination Agreement dated as of June 30, 1994 between TLC Beatrice and W. Kevin Wright
 ***10(u) -- Indenture dated as of October  2, 1995, between TLC Beatrice and  The Bank of New York,  as
           Trustee
 ***10(v) --  Facility Agreement  among Banque  Paribas, Smurfit Paribas  Bank Limited  and TLC Beatrice
           International (Irish) Holdings Limited
 ***10(w) -- Pledge and Security Agreement dated as of October 2, 1995, among TLC Beatrice International
           Holdings, Inc.,  TLC Beatrice  International Finance,  Inc. and  The Bank  of New  York,  as
           collateral trustee and as indenture trustee
 ***10(x) --  Pledge Agreement dated as of October  2, 1995, between TLC Beatrice International Holdings
           France S.A. and TLC Beatrice International Finance, Inc.
 ***10(y) -- Pledge Agreement dated  October 2, 1995, among  TLC Beatrice International Holdings,  Inc.,
           TLC  Beatrice  International  Netherlands  Holdings,  B.V. and  The  Bank  of  New  York, as
           collateral trustee
****10(z) -- Put Option dated June 8, 1995 among TLC Beatrice International Holdings France S.A. and Mr.
           Jean Ernest Desire Baud and Mr. Robert Henri Jean Baud.
****10(aa) -- Put Option dated June 8, 1995  between TLC Beatrice International Holdings France S.A.  and
           The Estate of Mr. Andre Albert Jacques Baud.
****10(bb) --  Retained Stock Agreement dated  December 1, 1983 between  Beatrice Foods Co. and Genevieve
           Baud Fiat.
</TABLE>
 


<PAGE>
<TABLE>
<CAPTION>

EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
<S>                             <C>
****10(cc) -- Retained Stock Agreement dated December 1, 1983 between Beatrice Foods Co. and Robert Baud.
****10(dd) -- Retained Stock  Agreement dated December  1, 1983  between Beatrice Foods  Co. and  Bernard
           Baud.
****10(ee) --  Letter Agreement dated July  26, 1989 among TLC  Beatrice International Holdings, Inc. and
           Genevieve Fiat Baud, Robert Baud and Bernard Baud
****10(ff) -- Letter  Agreement  dated June  8,  1995 among  TLC  Beatrice International  Holdings,  Inc.
           Genevieve Fiat Baud, Robert Baud and Bernard Baud.
****10(gg) --  Put Option dated December  23, 1992 among TLC  Beatrice International Holdings France S.A.
           and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud  and
           Mr. Robert Henri Jean Baud.
****10(hh) --  Put Option dated December  23, 1992 among TLC  Beatrice International Holdings France S.A.
           and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud  and
           Mr. Robert Henri Jean Baud.
****10(ii) -- Amending Agreement dated June 8, 1995 among TLC Beatrice International Holdings France S.A.
           and  Sibel, Mr. Bernard  Baud, Mr. Jean Ernest  Desire Baud, The Estate  of Mr. Andre Albert
           Jacques Baud and Mr. Robert Henri Jean Baud.
****10(jj) -- Put  Option  dated December  23,  1992 among  International  Foods (Paris)  S.A.  and  R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(kk) --  Put  Option  dated December  23,  1992 among  International  Foods (Paris)  S.A.  and R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(ll) -- Amending Agreement  dated June  8, 1995  among International  Foods (Paris)  S.A. and  R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
****10(mm) --   Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.  and  C.B.
           Participations and D.B. Participations.
****10(nn) --  Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.  and   C.B.
           Participations and D.B. Participations.
****10(oo) --  Put Option dated  June 8, 1995 among  TLC Beatrice International  Holdings France S.A. and
           Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
****10(pp) -- Put Option dated  June 8, 1995  among TLC Beatrice International  Holdings France S.A.  and
           Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
 ***10(qq) -- Amending Agreement dated September 5, 1995 among TLC Beatrice International Holdings France
           S.A.  and Sibel,  Mr. Bernard Baud,  Mr. Jean  Ernest Desire Baud,  The Estate  of Mr. Andre
           Albert Jacques Baud and Mr. Robert Henri Jean Baud.
 ***10(rr) -- Amending Agreement dated September 5, 1995 among International Foods (Paris) S.A. and  R.B.
           Participations, B.B. Participations, and G.B.F. Participations.
 ***10(ss) --  Amending Agreement dated September 5, 1995 among International Foods (Paris) S.A. and C.B.
           Participations and D.B. Participations.
    10(tt) -- TLC Beatrice International Holdings, Inc. 1996 Annual Incentive Plan
   *10(uu) -- TLC Beatrice International Holdings, Inc. 1996 Long Term Incentive Stock Option Plan
   *10(vv) -- Termination Agreement dated as of November 30, 1995 between the Registrant and Carl Brody
    10(ww) -- Employment Agreement between TLC Beatrice and Peter Offermann
    21   -- Subsidiaries of TLC Beatrice
  **99(a) -- Complaint filed by Carlton Investments and Answer filed in response thereto by TLC Beatrice
           International Holdings,  Inc.  in litigation  titled  Carlton Investments  v.  TLC  Beatrice
           International  Holdings, Inc. et al., Supreme Court of  the State of New York, County of New
           York
 
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
<S>                           <C>
  **99(b) -- Complaint filed  by Carlton  Investments in litigation  titled Carlton  Investments v.  TLC
           Beatrice  International Holdings, Inc. et al., Chancery  Court of the State of Delaware, New
           Castle County
  **99(c) -- First  Amended  Complaint  filed  by  Carlton  Investments  in  litigation  titled  Carlton
           Investments v. TLC Beatrice International Holdings, Inc. et al., Chancery Court of the State
           of Delaware, New Castle County
   *99(d) --  Second  Amended  Complaint  filed  by Carlton  Investments  in  litigation  titled Carlton
           Investments v. TLC Beatrice International Holdings, Inc. et al., Chancery Court of the State
           of Delaware, New Castle County
</TABLE>
------------
 
   * Filed with Registration Statement No.  33-80445 and incorporated herein  by
     reference.
 
  ** Filed  with Registration Statement No.  33-88602 and incorporated herein by
     reference.
 
 *** Filed with Registration Statement No.  33-95922 and incorporated herein  by
     reference.
 
**** Confidential  treatment requested for a  portion of this exhibit previously
     filed with Registration Statement No.  33-95922 and incorporated herein  by
     reference.


<PAGE>

<PAGE>
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
<S>      <C>                                                                                              <C>
    *3(a) --  Restated Certificate of Incorporation of TLC Beatrice
   **3(b) --  By-Laws of TLC Beatrice
   **4    --  Form of Certificate for Common Stock
  **10(a) --  Beatrice International Pension Plan
  **10(b) --  Beatrice International Savings Plan
  **10(c) --  Beatrice International Supplemental Pension Plan
  **10(d) --  Management Incentive Plan
  **10(e) --  Beatrice International Severance Policy
  **10(f) --  Loan Agreement  dated as  of October  21, 1994  among TLC  Beatrice International  Holdings
              France S.A., Banque Paribas and a syndicate of Banks, with Banque Paribas as agent  thereof
  **10(g) --  Debenture Issue Contract dated October 21, 1994 between TLC Beatrice International Holdings
              France S.A. and First Britannia Mezzanine Capital B.V.
  **10(h) --  Facility Agreement dated March 31, 1994 between TLC Beatrice International (Irish) Holdings
              Limited and Banque Paribas
  **10(j) --  Employment Agreements between TLC  Beatrice and Vincent P.  O'Sullivan and Tayto, Ltd.  and
              Vincent P. O'Sullivan
  **10(k) --  Employment Agreement between TLC Beatrice and Reynaldo P. Glover
   *10(m) --  Employment Agreement between TLC Beatrice and Daniel Jux
  **10(n) --  Stockholders'  Agreement dated  as of  November 30,  1987,  as amended,  by and   among the
              Registrant, TLC Beatrice International Partners L.P. and certain other purchasers of Common
              Stock
  **10(o) --  1992 Stock Incentive Plan of TLC Beatrice
  **10(p) --  Common Stock Subscription Agreement  dated as of November 30,  1987 among TLC Beatrice  and
              certain purchasers of its Common Stock
  **10(q) --  Termination Agreement dated as of October 3, 1994 between TLC Beatrice and Jean S.  Fugett,
              Jr.
  **10(r) --  Termination Agreement  dated as  of January  8, 1993  between TLC  Beatrice and   Albert M.
              Fenster
  **10(s) --  Termination Agreement dated as of June 30, 1994 between TLC Beatrice and  David  A. Guarino
  **10(t) --  Termination Agreement dated as of June 30, 1994 between TLC Beatrice and  W.  Kevin  Wright
 ***10(u) --  Indenture dated as of October  2, 1995, between TLC Beatrice and  The Bank of New York,  as
              Trustee
 ***10(v) --  Facility Agreement  among Banque  Paribas, Smurfit Paribas  Bank Limited  and TLC  Beatrice
              International (Irish) Holdings Limited
 ***10(w) --  Pledge and Security Agreement dated as of October 2, 1995, among TLC Beatrice International
              Holdings, Inc.,  TLC Beatrice  International Finance,  Inc. and  The Bank  of New York,  as
              collateral trustee and as indenture trustee
 ***10(x) --  Pledge Agreement dated as of October  2, 1995, between TLC Beatrice International  Holdings
              France S.A. and TLC Beatrice International Finance, Inc.
 ***10(y) --  Pledge Agreement dated  October 2, 1995, among  TLC Beatrice International Holdings,  Inc.,
              TLC  Beatrice  International  Netherlands  Holdings,  B.V. and  The  Bank  of  New York, as
              collateral trustee
****10(z) --  Put Option dated June 8, 1995 among TLC Beatrice International Holdings France S.A. and Mr.
              Jean Ernest Desire Baud and Mr. Robert Henri Jean Baud.
****10(aa) -- Put Option dated June 8, 1995  between TLC Beatrice International Holdings France S.A.  and
              The Estate of Mr. Andre Albert Jacques Baud.
****10(bb) -- Retained Stock Agreement dated  December 1, 1983 between  Beatrice Foods Co. and  Genevieve
              Baud Fiat.
</TABLE>
 

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<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
<C>           <S>                                                                                           <C>
****10(cc) -- Retained Stock Agreement dated December 1, 1983 between Beatrice Foods Co. and Robert Baud.
****10(dd) -- Retained Stock  Agreement dated December  1, 1983  between Beatrice Foods  Co. and  Bernard
              Baud.
****10(ee) -- Letter Agreement dated July  26, 1989 among TLC  Beatrice International Holdings,  Inc. and
              Genevieve Fiat Baud, Robert Baud and Bernard Baud
****10(ff) -- Letter  Agreement  dated June  8,  1995 among  TLC  Beatrice International  Holdings,  Inc.
              Genevieve Fiat Baud, Robert Baud and Bernard Baud.
****10(gg) -- Put Option dated December  23, 1992 among TLC  Beatrice International Holdings  France S.A.
              and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud and
              Mr. Robert Henri Jean Baud.
****10(hh) -- Put Option dated December  23, 1992 among TLC  Beatrice International Holdings France  S.A.
              and Sibel, Mr. Bernard Baud, Mr. Jean Ernest Desire Baud, Mr. Andre Albert Jacques Baud and
              Mr. Robert Henri Jean Baud.
****10(ii) -- Amending Agreement dated June 8, 1995 among TLC Beatrice International Holdings France S.A.
              and  Sibel, Mr. Bernard  Baud, Mr. Jean Ernest  Desire Baud, The Estate of Mr. Andre Albert
              Jacques Baud and Mr. Robert Henri Jean Baud.
****10(jj) -- Put  Option  dated December  23,  1992 among  International  Foods (Paris)  S.A.  and  R.B.
              Participations, B.B. Participations, and G.B.F. Participations.
****10(kk) -- Put  Option  dated December  23,  1992 among  International  Foods (Paris)  S.A.  and  R.B.
              Participations, B.B. Participations, and G.B.F. Participations.
****10(ll) -- Amending Agreement  dated June  8, 1995  among International  Foods (Paris)  S.A. and  R.B.
              Participations, B.B. Participations, and G.B.F. Participations.
****10(mm) -- Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.   and   C.B.
              Participations and D.B. Participations.
****10(nn) -- Put  Option  dated  June  8,  1995  among  International  Foods  (Paris)  S.A.   and   C.B.
              Participations and D.B. Participations.
****10(oo) -- Put Option dated  June 8, 1995 among  TLC Beatrice International  Holdings France  S.A. and
              Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
****10(pp) -- Put Option dated  June 8, 1995  among TLC Beatrice International  Holdings France S.A.  and
              Sibel, The Estate of Mr. Andre Albert Jacques Baud and Mr. Francois Louis Leon Fiat.
 ***10(qq) -- Amending Agreement dated September 5, 1995 among TLC Beatrice International Holdings France
              S.A.  and Sibel,  Mr. Bernard Baud,  Mr. Jean  Ernest Desire Baud,  The Estate of Mr. Andre
              Albert Jacques Baud and Mr. Robert Henri Jean Baud.
 ***10(rr) -- Amending Agreement dated September 5, 1995 among International Foods (Paris) S.A. and  R.B.
              Participations, B.B. Participations, and G.B.F. Participations.
 ***10(ss) -- Amending Agreement dated September 5, 1995 among International Foods (Paris)  S.A. and C.B.
              Participations and D.B. Participations.
    10(tt) -- TLC Beatrice International Holdings, Inc. 1996 Annual Incentive Plan
   *10(uu) -- TLC Beatrice International Holdings, Inc. 1996 Long Term Incentive Stock Option Plan
   *10(vv) -- Termination Agreement dated as of November 30, 1995 between the Registrant and  Carl  Brody
    10(ww) -- Employment Agreement between TLC Beatrice and Peter Offermann
    21     -- Subsidiaries of TLC Beatrice
  **99(a)  -- Complaint filed by Carlton Investments and Answer filed in response thereto by TLC Beatrice
              International Holdings,  Inc.  in litigation  titled  Carlton Investments  v. TLC  Beatrice
              International Holdings, Inc. et al., Supreme Court of  the State of New York, County of New
              York
</TABLE> 


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<PAGE>

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                                            DESCRIPTION                                             PAGE
------   ----------------------------------------------------------------------------------------------   ----
<C>         <S>                                                                                              <C>
  **99(b) -- Complaint filed  by Carlton  Investments in litigation  titled Carlton   Investments v.  TLC
             Beatrice  International Holdings, Inc. et al., Chancery  Court of the State of Delaware, New
             Castle County
  **99(c) -- First  Amended  Complaint  filed  by  Carlton  Investments  in  litigation   titled  Carlton
             Investments v. TLC Beatrice International Holdings, Inc. et al., Chancery Court of the State
             of Delaware, New Castle County
   *99(d) -- Second  Amended  Complaint  filed  by Carlton  Investments  in  litigation   titled  Carlton
             Investments v. TLC Beatrice International Holdings, Inc. et al., Chancery Court of the State
             of Delaware, New Castle County
</TABLE>
------------
 
   * Filed with Registration Statement No.  33-80445 and incorporated herein  by
     reference.
 
  ** Filed  with Registration Statement No.  33-88602 and incorporated herein by
     reference.
 
 *** Filed with Registration Statement No.  33-95922 and incorporated herein  by
     reference.
 
**** Confidential  treatment requested for a  portion of this exhibit previously
     filed with Registration Statement No.  33-95922 and incorporated herein  by
     reference.








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