<PAGE>

                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

For the Fiscal Year Ended December 31, 2004

                                       OR

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

For the transition period from ____________________ to ____________________

Commission file number       000-21827
                         ----------------

                              AMSCAN HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

                  Delaware                                    13-3911462
(State or other jurisdiction of incorporation    (I.R.S. Employer Identification
               or organization)                                 Number)

             80 Grasslands Road
             Elmsford, New York                                  10523
  (Address of principal executive offices)                    (Zip Code)


Registrant's telephone number, including area code: (914) 345-2020

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

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    X            No
           -------            -------

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

       Yes                 No    X
           -------             ------

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant (assuming for purposes of this calculation, without conceding, that
all executive officers and directors are "affiliates") at June 30, 2004, the
last business day of the registrant's most recently completed second fiscal
quarter, was $6,994,000.

As of March 25, 2005, 1,000.00 shares of Registrants' Common Stock, par value
$0.10, were outstanding.

                       Documents Incorporated by Reference

None.
<PAGE>
                              AMSCAN HOLDINGS, INC.

                                    FORM 10-K

                                DECEMBER 31, 2004
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                      PART I                                      PAGE
<S>                                                                               <C>
ITEM 1    Business.............................................................      3
ITEM 2    Properties...........................................................      9
ITEM 3    Legal Proceedings....................................................     10
ITEM 4    Submission of Matters to a Vote of Security Holders..................     10
                                     PART II

ITEM 5    Market for Registrant's Common Equity and Related Stockholder
             Matters and Issuer Purchases of Equity Securities.................     10

ITEM 6    Selected Consolidated Financial Data.................................     11
ITEM 7    Management's Discussion and Analysis of Financial Condition and
             Results of Operations.............................................     14
ITEM 7A   Quantitative and Qualitative Disclosures About Market Risk...........     24
ITEM 8    Financial Statements and Supplementary Data..........................     25
ITEM 9    Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure..............................................     25

ITEM 9A   Controls and Procedures..............................................     25

ITEM 9B   Other Information....................................................     25

                                    PART III

ITEM 10   Directors and Executive Officers of the Registrant...................     25
ITEM 11   Executive Compensation ..............................................     27
ITEM 12   Security Ownership of Certain Beneficial Owners and Management and
             Related Shareholder Matters.......................................     30
ITEM 13   Certain Relationships and Related Transactions.......................     32
ITEM 14   Principal Accountant Fees and Services...............................     32
                                     PART IV

ITEM 15   Exhibits and Financial Statement Schedules...........................     33
          Signatures...........................................................     37
</TABLE>

                                       2
<PAGE>
                                     PART I

ITEM 1. BUSINESS

         Amscan Holdings, Inc. ("Amscan" or the "Company") designs,
manufactures, contracts for manufacture and distributes party goods, including
paper and plastic tableware, metallic balloons, accessories, novelties, gifts
and stationery. We believe we are a leading designer, manufacturer and
distributor of decorative party goods in the United States and the largest
manufacturer of metallic balloons in the world. We offer one of the broadest and
deepest product lines in the industry. Our extensive gift and stationery product
lines, encompassing home, baby and wedding products for general gift giving or
self-purchase, further leverage our design, marketing and distribution
capabilities,. We sell our products through party superstores, other party goods
retailers, independent card and gift stores, and other retailers and
distributors throughout the world, including North America, South America,
Europe, Asia and Australia. We manufactured items which represented
approximately 60% of 2004 net sales and purchased the remainder from third-party
manufacturers, many of whom are located in Asia.

         We currently offer over 400 party ensembles, which range from
approximately 30 to 150 design-coordinated items spanning tableware,
accessories, novelties, decorations and gifts. The breadth of these ensembles
enables retailers to encourage additional sales for a single occasion.

         We design, manufacture and market party goods for a wide variety of
occasions including seasonal and religious holidays, special events and themed
celebrations. Our seasonal and religious ensembles enhance holiday celebrations
throughout the year including New Year's, Valentine's Day, St. Patrick's Day,
Easter, Passover, Fourth of July, Halloween, Thanksgiving, Hanukkah and
Christmas. Our special event ensembles include birthdays, christenings, first
communions, bar mitzvahs, confirmations, graduations, bridal and baby showers
and anniversaries. Our theme-oriented ensembles include Hollywood, Chinatown,
Cocktail Party, Bachelorette, Card Party, Hawaiian Luaus, Mardi Gras, Fifties
Rock-and-Roll Parties, Summer Barbeque, Patriotic and Western. In 2004,
approximately 80% of our net sales consisted of products designed for
non-seasonal occasions, with the remaining 20% comprised of items used for
holidays and seasonal celebrations throughout the year.

         In addition to our long-standing relationships with independent card
and party retailers, we are a leading supplier to the party superstore
distribution channel. Party superstores provide consumers with a one-stop source
for all of their party needs, generally at discounted prices. Our sales to party
superstores represented approximately 41% of total net sales in 2004 and have
grown at a 6.0% compound annual growth rate during the past five years. With our
products occupying an increasing share of party superstore shelf space in many
product categories, we believe we are well positioned to take advantage of
continued growth in the party superstore distribution channel.

         To strengthen our position as a leader in the party goods industry and
to broaden our line of metallic balloons, we acquired M&D Balloons, Inc. (since
renamed M&D Industries, Inc. ("M&D Industries")) in 2002. The acquisition
significantly increased our balloon manufacturing capacity as well as our
portfolio of character licenses. During 2003, M&D Industries was integrated into
Anagram International Inc ("Anagram"), our existing balloon operation.

THE TRANSACTIONS

         On April 30, 2004, Amscan and AAH Acquisition Corporation ("AAH
Acquisition"), a wholly-owned subsidiary of AAH Holdings Corporation, ("AAH
Holdings"), an entity jointly controlled by funds affiliated with Berkshire
Partners LLC and Weston Presidio (together the "Principal Investors") entered
into a merger agreement, with Amscan continuing as the surviving entity and as a
wholly owned subsidiary of AAH Holdings. Under the terms of the agreement, the
equity interests in Amscan held by GS Capital Partners II, L.P. and certain
other private investment funds managed by Goldman, Sachs & Co., which are
collectively referred to as GSCP, and all other stockholders, other than certain
management investors, were cancelled in exchange for the right to receive cash.
Cash paid to consummate the acquisition totaled $530.0 million and was financed
with initial borrowings (before deducting deferred financing costs of $13.1
million) consisting of a $205.0 million term loan under a new senior secured
credit facility which includes a $50.0 million revolving loan facility, the
proceeds from the issuance of $175.0 million of 8.75% senior subordinated notes
due 2014, an equity contribution by the Principal Investors and employee
stockholders of $140.5 million, borrowings under the revolver of $23.6 million
and available cash on hand. Certain existing employee shareholders participated
in the Transactions (as defined hereafter) by purchasing approximately 296.91
shares of common stock. The Chief Executive Officer and the President of the
Company exchanged

                                       3
<PAGE>
5.4945 and 2.7472 of their shares of common stock of Amscan for 100 and 50
shares of common stock of AAH Holdings with an equivalent value of $1.0 million
and $0.5 million, respectively. In addition, the Chief Executive Officer and the
President of the Company exchanged vested options to purchase 5.607 and 2.804
shares of Amscan common stock, which had intrinsic values of $0.6 million and
$0.3 million, respectively, for vested options under the AAH Holdings equity
incentive plan with intrinsic values of $0.5 million and $0.2 million and fair
values of $0.6 million and $0.3 million, respectively.

         Concurrent with the acquisition, the following financing transactions
were also consummated: the repayment of a term loan of $147.7 million under our
then existing senior secured credit facility and the termination of all
commitments there under; the redemption of $87.2 million of the $110.0 million
aggregate principal amount outstanding of our 9.875% senior subordinated notes
due 2007 for $93.5 million or 103.542% of the principal amount of such notes
plus accrued and unpaid interest following our tender offer and consent
solicitation; and repayment of a $8.5 million mortgage obligation with a
financial institution (the acquisition together with the foregoing financing
transactions are referred to herein collectively as the "Transactions").

         On May 31, 2004, the remaining outstanding 9.875% senior subordinated
notes due 2007 were redeemed for $23.6 million or 103.292% of the principal
amount of such notes plus accrued and unpaid interest pursuant to the redemption
notice. The Company financed the redemption with borrowings under its new
revolving credit facility.

         The 8.75% senior subordinated notes were sold to the initial purchasers
by the Company on April 30, 2004, and were subsequently resold to qualified
institutional buyers and non-U.S. persons in reliance upon Rule 144A and
Regulation S under the Securities Act of 1933 (the "Note Offering"). In August
2004, the Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-4, offering to exchange registered notes for
the notes issued in connection with the Note Offering. The terms of the notes
and the exchange notes are substantially identical. The exchange was completed
in October 2004.

         As used herein and in the consolidated financial statements,
"Predecessor" refers to Amscan prior to the Transactions and "Successor" refers
to Amscan after the Transactions; this distinction between Predecessor and
Successor is needed because generally accepted accounting principles required us
to account for the acquisition under the purchase method of accounting, which
required that the Successor adjust its assets and liabilities to their relative
fair values at the date of the Transactions. In order to reflect the ultimate
beneficial ownership of the Successor, the capital structure disclosed in the
Successor financial statements is the capital structure of AAH Holdings.

         The purchase price has been allocated based upon preliminary estimates
of the fair value of net assets acquired at the date of the Transactions. The
final allocations will be based on independent valuations that have not yet been
completed and will be subject to change when the valuations are completed during
the second quarter of 2005. The Company does not expect the final allocation to
be significantly different from the preliminary estimates currently reflected in
Successor consolidated financial statements. The excess of the purchase price
over tangible net assets acquired has been allocated to intangible assets
consisting of customer lists / relationships ($14.0 million) and copyrights /
designs and other intangibles ($12.8 million), which are being amortized using
the straight-line method over the assets estimated useful lives ( 2 to 15
years), and tradenames ($33.5 million) and goodwill ($282.9 million), which are
not being amortized. The acquisition was structured as a purchase of common
stock and, accordingly, amortization of intangible assets is not deductible for
income tax purposes.

SUMMARY FINANCIAL INFORMATION ABOUT THE COMPANY

         Information about the Company's net sales, income from operations and
assets for the last five years is included in this report in Item 6, "Selected
Consolidated Financial Data." The Company's consolidated financial statements
for the periods prior to May 1, 2004 (the "Predecessor") and for the period
subsequent to April 30, 2004 (the "Successor") include the accounts of Amscan
Holdings and its majority-owned and controlled entities.

         Despite a concentration of holidays in the fourth quarter of the year,
as a result of our expansive product lines and customer base and increased
promotional activities, the impact of seasonality on our quarterly results of
operations has been limited. Promotional activities, including special dating
terms, particularly with respect to Halloween and Christmas products sold in the
third quarter, and the introduction of our new everyday products and designs
during the fourth quarter

                                       4
<PAGE>
result in higher accounts receivables and inventory balances and higher interest
costs to support these balances.

         The Company does business in the United States and in other geographic
areas of the world. Information about the Company's net sales, income from
operations and assets relating to geographic areas outside the United States for
the eight months ended December 31, 2004 (Successor), the four months ended
April 30, 2004 (Predecessor), and for each of the years in the two-year period
ended December 31, 2003, (Predecessor), is included in Note 16 to the Company's
2004 Consolidated Financial Statements which are included in this report
beginning on page F-2.

OUR STRATEGY

         Our objective is to be the primary source for consumers' party goods
requirements and a recognized supplier of quality stationery and gift items. The
key elements of our strategy are as follows:

         -        BUILD UPON OUR POSITION AS A LEADING PROVIDER TO PARTY GOODS
                  RETAILERS. We will continue to offer convenient "one-stop
                  shopping" for both large party superstores and smaller party
                  goods retailers. We will seek to grow our sales to existing
                  stores by increasing our share of sales volume and shelf
                  space, continuing to develop innovative new products and
                  helping retailers promote coordinated ensembles that increase
                  average purchase volume per consumer through "add-on" or
                  impulse purchases. Given our position in the party superstore
                  distribution channel and the strength of our relationships
                  with all major party superstore chains, we expect our sales
                  will continue to grow as new party superstores are opened.

         -        CAPITALIZE ON INVESTMENTS IN INFRASTRUCTURE. We intend to
                  increase our net sales and profitability by leveraging the
                  significant investments that we have made in our
                  infrastructure. We invested approximately $38 million in a new
                  544,000 square foot distribution facility and related
                  equipment that was completed in the fourth quarter of 2002. We
                  believe that the addition of this new facility provides us
                  with state of the art warehousing and distribution
                  capabilities to serve anticipated future growth.

                  We also intend to leverage our investment in our design
                  capabilities and our relationships with Asian suppliers to
                  further build our business. Under this program, we will design
                  products and utilize our Asian suppliers as a direct source
                  for customers who possess the necessary infrastructure, global
                  logistics and distribution capabilities to deliver products to
                  their outlets. This program will enable us to offer products
                  that we currently do not sell as well as to further penetrate
                  existing and new customer accounts with minimal capital
                  expenditures and working capital requirements.

         -        EXPAND INTERNATIONAL PRESENCE. We believe there is an
                  opportunity to expand our international business, which
                  represented approximately 14% of our net sales in each of the
                  years in the three-year period ended December 31, 2004. We
                  currently have a presence in Mexico, Canada, Europe and Asia.
                  We have our own sales force in Mexico, Canada, and the United
                  Kingdom, and operate through third-party sales representatives
                  elsewhere. The market for decorative party goods outside the
                  U.S. is less mature due to lower consumer awareness of party
                  products and less developed retail distribution channels. Our
                  strategy is to grow our international sales by broadening our
                  distribution network, increasing accessorization and
                  customization of our products to local tastes and holidays and
                  continuing to deepen retail penetration.

         -        INCREASE PENETRATION IN INDEPENDENT RETAIL DISTRIBUTION
                  CHANNEL. We believe there is a significant opportunity to
                  expand our sales to independent retailers, including card and
                  gift stores. We have made significant investments by adding
                  management and expanding our customer service and marketing
                  infrastructure to support the existing specialty sales effort
                  as well as additional sales representatives that we expect to
                  hire. As our existing sales representatives become more
                  seasoned and productive, and as we add new sales
                  representatives, we expect to increase sales and profitability
                  from this distribution channel as sales growth is achieved
                  with relatively fixed support costs.

         -        CONTINUED GROWTH THROUGH TARGETED ACQUISITIONS. We believe
                  that there will be from time to time opportunities to make
                  acquisitions of complementary businesses. Through such
                  businesses, we can leverage our existing marketing,
                  distribution and production capabilities, expand our presence
                  in the various retail distribution channels, further broaden
                  and deepen our product lines and increase our penetration in
                  international markets.

                                       5
<PAGE>
INNOVATIVE PRODUCT DEVELOPMENT AND DESIGN CAPABILITIES

         Our 120 person in-house design staff continuously develops fresh,
innovative and contemporary product designs and concepts. Our continued
investment in art and design results in a steady supply of fresh ideas and the
creation of complex, unique ensembles that appeal to consumers. In 2004, we
introduced over 5,000 new products and 59 new ensembles and also provided
customers with over 2,000 new private label products. Our proprietary designs
help us keep our products differentiated from the competition.

PARTY PRODUCT LINES

         The percentage of net sales for each product line for 2004, 2003 and
2002 are set forth in the following table:

<TABLE>
<CAPTION>
                                              2004      2003      2002
                                             -----     -----     -----
<S>                                          <C>       <C>       <C>
                Party Goods................    68%       65%       65%
                Metallic Balloons..........    24        24        23
                Stationery.................     5         8         7
                Gift.......................     3         3         5
                                             ----      ----      ----
                                              100%      100%      100%
                                             ====      ====      ====
</TABLE>

         The following table sets forth the principal products in each of the
product lines, excluding metallic balloons:

<TABLE>
<CAPTION>
                PARTY GOODS                       STATIONERY                      GIFT
         ----------------------------       ----------------------------   ----------------
<S>                                         <C>                            <C>
         Decorative and Solid Color         Baby and Wedding Memory        Ceramic Giftware
            Tableware                          Books                       Decorative Candles
         Candles                            Decorative Tissues             Decorative Frames
         Cascades and Centerpieces          Gift Wrap, Bows and            Mugs
         Crepe                              Bags                           Plush Toys
         Cutouts                            Invitations, Notes             Wedding Accessories
         Flags and Banners                     and Stationery                 and Cake Tops
         Guest Towels                       Photograph Albums
         Latex Balloons                     Ribbons
         Party Favors                       Stickers and Confetti
         Party Hats
         Pinatas


</TABLE>

         Our products span a wide range of lifestyle events from age-specific
birthdays to theme parties and sporting events, as well as holidays such as
Halloween and New Year's. Approximately 80% of our net sales consist of items
designed for non-seasonal occasions, with the remaining 20% comprised of items
used for holidays and seasonal celebrations throughout the year. Our product
offerings cover the following:

<TABLE>
<CAPTION>
                    SEASONAL               THEMES                  EVERYDAY
                ----------------     ------------------        ------------
<S>                                  <C>                       <C>
                New Year's           Bachelorette              Birthdays
                Valentine's Day      Card Party                Graduations
                St. Patrick's Day    Chinatown                 Weddings
                Easter               Cocktail Party            Anniversaries
                Passover             Fiesta                    Showers
                Fourth of July       Fifties Rock and Roll     First Communions
                Halloween            Hawaiian Luau             Confirmations
                Thanksgiving         Hollywood                 Retirements
                Hanukkah             Mardi Gras                Christenings
                Christmas            Masquerade                Bar Mitzvahs
                                     Patriotic
                                     Religious
                                     Sports
                                     Summer Barbeque
                                     Western
</TABLE>

MANUFACTURED PRODUCTS

           Our vertically integrated manufacturing capability (i.e., our ability
to perform each of the steps in the process of

                                       6
<PAGE>
converting raw materials into our finished products) enables us to control
costs, monitor product quality, manage inventory investment better and provide
more efficient order fulfillment. We manufactured items representing
approximately 60% of our 2004 net sales. Our facilities in New York, Kentucky,
Rhode Island, Minnesota and Mexico are highly automated and produce paper and
plastic plates and cups, napkins, metallic balloons and other party and novelty
items. State-of-the art printing, forming, folding and packaging equipment
support these manufacturing operations. Given our size and sales volume, we are
generally able to operate our manufacturing equipment on the basis of at least
two shifts per day thus lowering production costs per unit. In addition, we
manufacture products for third parties, which allows us to maintain a
satisfactory level of equipment utilization.

PURCHASED PRODUCTS

          We purchase products created and designed by us, representing nearly
40% of net sales in 2004, from independently-owned manufacturers, many of whom
are located in Asia and with whom we have long-standing relationships. We have
relationships of over 15 years with our two largest suppliers. We believe that
the quality and price of the products manufactured by these suppliers provide a
significant competitive advantage. During 2004, we experienced inventory
shortages of certain products as a result of a production disruption at one of
our largest foreign suppliers. However, as our business is not dependent upon
any single source of supply for these products, we were able to eventually
procure these products from alternate suppliers.

RAW MATERIALS

          The principal raw materials used in manufacturing our products are
paper and petroleum-based resin. While we currently purchase such raw material
from a relatively small number of sources, paper and resin are available from
numerous sources. Therefore, we believe our current suppliers could be replaced
without adversely affecting our manufacturing operations in any material
respect.

SALES AND MARKETING

         Our principal sales and marketing efforts are conducted through a
domestic direct employee sales force of approximately 130 professionals
servicing over 40,000 retail accounts. Included in this sales force are
approximately 30 seasoned sales professionals who primarily service the party
superstore and party specialty retailer distribution channel and who, on
average, have been affiliated with us for over 9 years. In addition to the
employee sales team, a select group of manufacturers' representatives handle
specific account situations. Employees of subsidiaries outside the United States
generally service international customers. Anagram utilizes a group of
approximately 40 independent distributors to bring their metallic balloons to
the grocery, gift and floral markets, as well as to our party superstore and
specialty retailer customers.

         Our practice of including party goods retailers in all facets of our
product development is a key element of our sales and marketing efforts. We
target important consumer preferences by integrating our own market research
with the input of party goods retailers in the creation of our designs and
products. In addition, our sales force assists customers in the actual layout of
displays of our products and, from time to time, provides customers with
promotional displays.

         To support our sales and marketing efforts, we produce four main
decorative party product catalogues annually (three catalogues for seasonal
products and one catalogue for everyday products), with additional catalogues to
market our metallic balloons and gift and stationery products. We have also
developed a website which displays and describes our product assortment and
capabilities. This website enables our key customers to access real time
information regarding the status of existing orders and stock availability, and
to place new orders. We utilize this website as a vital marketing tool,
providing us with the ability to announce special product promotions and other
information in an expeditious manner.

DISTRIBUTION AND SYSTEMS

         We ship our products directly to customers throughout the United States
and Canada from distribution facilities that employ computer assisted systems.
Our electronic-order entry and information systems allow us to manage our
inventory with minimal waste, maintain strong fill rates and provide quick order
turnaround times of generally between 24 to 48 hours.

         Our distribution facilities for party items are principally located in
New York; represent more than 1,000,000 square

                                       7
<PAGE>
feet in the aggregate and include a state-of-the-art 544,000 square foot
facility which became fully operational during the fourth quarter of 2002. We
distribute our metallic balloons domestically from facilities in Minnesota and
New York. Products for markets outside the United States are also shipped from
our distribution facilities in the United Kingdom, Mexico and Australia.

CUSTOMERS

         Our customers are principally party superstores, other party goods
retailers, independent card and gift retailers and other distributors. We have
also expanded our presence in the gift shop, supermarket and other smaller
independent retail distribution channels. In the aggregate, we supply more than
40,000 retail outlets both domestically and internationally. During 2004 we
began utilizing our Asian suppliers as a direct source for mass market, grocery,
drug and other customers who possess the necessary infrastructure, global
logistics and distribution capabilities to deliver products to their outlets. In
addition, to deepen our retail penetration at key European hypermarket and
supermarket accounts, our future focus will include broadening our distribution
network, increasing accessorization and customization of our products to local
tastes and holidays.

         We have a diverse customer base. Although our sales volume is
concentrated with several important customers, generally party superstores, only
one customer, Party City Corporation ("Party City"), the nation's largest party
goods retailer, accounted for more than 10% of our net sales in 2004. For the
years ended December 31, 2004, 2003 and 2002, sales to Party City's
corporate-owned and operated stores represented 14%, 12%, and 13% of net sales,
respectively. For the years ended December 31, 2004, 2003 and 2002, sales to
Party City's franchise-owned and operated stores represented 14%, 13% and 14% of
net sales, respectively. Franchisees are financially independent from Party City
and diversify our credit exposure.

COMPETITION

         We compete on the basis of diversity and quality of our product
designs, breadth of product line, product availability, price, reputation and
customer service. Although we have many competitors with respect to one or more
of our products, we believe that there are few competitors who manufacture and
distribute products with the complexity of design and breadth of product lines
that we do. Furthermore, our design and manufacturing processes create
efficiencies in manufacturing that few of our competitors achieve in the
production of numerous coordinated products in multiple design types.

         Competitors include smaller independent specialty manufacturers, as
well as divisions or subsidiaries of large companies with greater financial and
other resources than ours. Certain of these competitors control various product
licenses for widely recognized images, such as cartoon or motion picture
characters, which could provide them with a competitive advantage. However,
through the acquisitions of Anagram and M&D Industries, we have acquired a
strong portfolio of character licenses for use in the design and production of
our metallic balloons.

COPYRIGHTS

         We own copyrights on the designs we create and use on our products and
trademarks on the words and designs used on or in connection with our products.
It is our practice to register our copyrights with the United States Copyright
Office to the extent we deem reasonable. We do not believe that the loss of
copyrights or trademarks with respect to any particular product or products
would have a material adverse effect on our business. We hold approximately 110
licenses, allowing us to use various cartoon and other characters and designs
principally on our metallic balloons. None of these licenses is individually
material to our aggregate business.

EMPLOYEES

         As of December 31, 2004, the Company had approximately 1,750 employees,
none of whom is represented by a labor union. The Company considers its
relationship with its employees to be good.

                                       8
<PAGE>
ITEM 2. PROPERTIES

         The Company maintains its corporate headquarters in Elmsford, New York
and conducts its principal design, manufacturing and distribution operations at
the following facilities:

<TABLE>
<CAPTION>
                                                                                                 OWNED OR LEASED
LOCATION                         PRINCIPAL ACTIVITY                   SQUARE FEET            (WITH EXPIRATION DATE)
--------                         ------------------                   -----------            ----------------------
<S>                           <C>                                 <C>                        <C>
Elmsford, New York            Executive offices; showrooms;       117,411 square feet        Leased (expiration date:
                              design and art production of party                             December 31, 2014)
                              products and decorations

Harriman, New York            Manufacture of paper napkins        75,000 square feet         Leased (expiration date:
                              and cups                                                       March 31, 2006)

Narragansett, Rhode Island    Manufacture and distribution        48,455 square feet         Leased (expiration date:
                              of plastic plates, cups and bowls                              April 26, 2006)

Louisville, Kentucky          Manufacture and distribution        189,000 square feet        Leased (expiration date:
                              of paper plates                                                March 31, 2010)

Newburgh, New York            Manufacture of paper napkins        53,000 square feet         Leased (expiration date:
                              and cups                                                       May 31, 2006)

Eden Prairie, Minnesota       Manufacture and distribution        115,600 square feet        Owned
                              of balloons and accessories

Tijuana, Mexico               Manufacture and distribution        75,000 square feet         Leased (expiration dates:
                              of party products                                              May 16, 2007 and June 30,
                                                                                             2009)

Chester, New York             Distribution of decorative party    287,000 square feet        Owned
                              products

Chester, New York (1)         Distribution of decorative party    544,000 square feet        Owned
                              and gift products

Goshen, New York              Warehousing of decorative           130,000 square feet        Leased (expiration date:
                              party products                                                 October 31, 2006)

Milton Keynes,                Distribution of party products      110,000 square feet        Leased (expiration date:
Buckinghamshire, England      throughout United Kingdom                                      June 30, 2017)
                              and Europe

Edina, Minnesota              Distribution of balloons and        122,312 square feet        Leased (expiration date:
                              accessories                                                    December 31, 2009)
</TABLE>

(1)     Property is subject to a lien mortgage note in the original principal
        amount of $10.0 million with the New York State Job Development
        Authority. The lien mortgage note bears interest at a rate of 3.31%,
        subject to change under certain conditions. The mortgage note is for a
        term of 96 months and requires monthly payments based on a 180-month
        amortization period with a balloon payment upon maturity in January
        2010. At December 31, 2004, the principal amount outstanding under the
        lien mortgage note is approximately $8.5 million.

         In addition to the facilities listed above, we maintain smaller
distribution facilities in Australia, Canada and Mexico. We also maintain sales
offices in Australia, Canada, Hong Kong and Japan and showrooms in New York,
California, Georgia, Texas, Canada and Hong Kong.

         We believe that our properties have been adequately maintained, are in
generally good condition and are suitable for our business as presently
conducted. We believe our existing facilities provide sufficient production
capacity for our present needs and for our anticipated needs in the foreseeable
future. To the extent such capacity is not needed for the manufacture of our
products, we generally use such capacity for the manufacture of products for
others pursuant to terminable agreements. All properties generally are used on a
basis of two shifts per day. We also believe that upon the expiration of our
current leases, we will be able either to secure renewal terms or to enter into
leases for alternative locations at market terms.

                                       9
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

         We are a party to certain claims and litigation in the ordinary course
of business. We do not believe any of these proceedings will have, individually
or in the aggregate, a material adverse effect on our financial condition or
future results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    Not applicable.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
        AND ISSUER PURCHASES OF EQUITY SECURITIES

         There is no public trading market for the Company's Common Stock.

         As of the close of business on March 25, 2005, there were 59 holders of
record of the Company's Common Stock.

         The Company has not paid any dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain its earnings for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. In addition,
the Company's current credit facility and the indenture governing its notes
contain restrictive covenants which have the effect of limiting the Company's
ability to pay cash dividends or distributions to its stockholders.

EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                            (a)                        (b)                         (c)
                                                                                          Number of securities
                                                                                         remaining available for
                                  Number of securities to be    Weighted-average         future issuance under
                                   issued upon exercise of      exercise price of         equity compensation
                                     outstanding options,       outstanding options,    plans (excluding securities
                                      warrants and rights       warrants and rights      reflected in column (a))
                                      -------------------       -------------------      ------------------------
<S>                               <C>                           <C>                     <C>
Equity compensation plans
  approved by security holders               98.182                    $2,500                   1,604.750
Equity compensation plans not
  approved by security holders                   --                        --                          --
                                             ------                    ------                   ---------
           Total                             98.182                    $2,500                   1,604.750
                                             ======                    ======                   =========
</TABLE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

         The selected consolidated financial data presented below under the
captions "Statement of Operations Data," and "Balance Sheet Data" as of and for
the eight months ended December 31, 2004 (Successor), for the four months ended
April 30, 2004 and as of and for each of the years in the four-year period ended
December 31, 2003 (Predecessor), are derived from the consolidated financial
statements of Amscan Holdings, Inc. The consolidated financial statements as of
and for the eight months ended December 31, 2004 (Successor), for the four
months ended April 30, 2004 and as of December 31, 2003 and for each of the
years in the two-year period ended December 31, 2003 (Predecessor), are included
in this report under Item 8, "Financial Statements and Supplementary Data." The
selected consolidated financial data should be read in conjunction with the
consolidated financial statements and the related notes thereto and Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

                                       10
<PAGE>
<TABLE>
<CAPTION>
                                          EIGHT MONTHS ENDED  FOUR MONTHS ENDED                 YEARS ENDED DECEMBER 31,
                                          ------------------  -----------------        ------------------------------------------
                                          DECEMBER 31, 2004     APRIL 30, 2004         2003       2002          2001         2000
                                          -----------------     --------------         ----       ----          ----         ----
                                              (SUCCESSOR)       (PREDECESSOR)                        (PREDECESSOR)
                                                                            (Dollars in thousands)
<S>                                       <C>                  <C>                  <C>          <C>          <C>          <C>
STATEMENT OF OPERATIONS DATA:
  Net sales ............................        $265,556             $133,660        $402,816    $385,603     $345,183     $323,484
  Cost of sales ........................         178,210               88,247         269,125     252,980      225,036      206,872
                                                --------             --------        --------    --------     --------     --------
  Gross profit .........................          87,346               45,413         133,691     132,623      120,147      116,612
  Selling expenses .....................          23,529               12,430          36,515      34,619       31,414       28,578
  General and administrative expenses ..          21,410               10,145          31,925      32,056       33,317       31,958
  Provision for doubtful accounts ......           1,308                  729           2,588       3,008        3,758        7,133
  Art and development costs ............           6,713                3,332           9,395      10,301        8,772        8,453
  Non-recurring expenses related
     to the Transactions (1) ...........                               11,757
  Write-off of deferred financing
     and IPO-related costs (2) .........                                                            2,261
  Restructuring charges (3) ............                                                1,007       1,663                       500
                                                --------             --------        --------    --------     --------     --------
  Income from operations ...............          34,386                7,020          52,261      48,715       42,886       39,990
  Interest expense, net ................          19,124                8,384          26,368      21,792       24,069       26,355
  Undistributed loss in unconsolidated
     joint venture .....................           1,168                   89
  Gain on sales of available-for-sale
    securities (4)......................                                  (47)         (1,486)
  Other (income) expense, net ..........            (286)                 (11)             52        (311)          24           96
                                                --------             --------        --------    --------     --------     --------
  Income (loss) before income
     taxes and minority interests ......          14,380               (1,395)         27,327      27,234       18,793       13,539
  Income tax expense (benefit) .........           5,679                 (551)         10,065      10,757        7,423        5,348
  Minority interests ...................             137                   46              99          12           68           75
                                                --------             --------        --------    --------     --------     --------
  Net income (loss) ....................           8,564                 (890)         17,163      16,465       11,302        8,116
  Dividend on redeemable
     convertible preferred stock .......                                  136             399         376          270
                                                --------             --------        --------    --------     --------     --------
  Net income (loss) applicable
     to common shares ..................        $  8,564             $ (1,026)       $ 16,764    $ 16,089     $ 11,032     $  8,116
                                                ========             ========        ========    ========     ========     ========
OTHER FINANCIAL DATA:

  Gross margin percentage ..............            32.9%                34.0%           33.2%       34.4%        34.8%        36.0%
  Capital expenditures, including assets
     under capital leases ..............        $  7,910             $  3,757        $ 12,668    $ 17,765     $ 37,623     $ 18,576
  Depreciation and amortization (5) ....           9,519                5,296          16,119      13,962       15,468       14,487
  Ratio of earnings to fixed charges (6)            1.7x                 0.9x            1.9x        2.0x         1.6x         1.4x
</TABLE>

<TABLE>
<CAPTION>
                                                                                 AT DECEMBER 31,
                                                      --------------------------------------------------------------------
                                                      2004            2003            2002           2001             2000
                                                      ----            ----            ----           ----             ----
                                                   (SUCCESSOR)                             (PREDECESSOR)
                                                                              (Dollars in thousands)
<S>                                                <C>              <C>             <C>             <C>             <C>
BALANCE SHEET DATA:

  Working capital ..........................         $ 126,372      $ 120,559       $ 119,256       $  96,713       $  83,760
  Total assets (8) .........................           647,266        382,102         372,497         310,474         280,627

  Short-term obligations (7) ...............         $   4,832      $  23,237       $   3,220       $   4,155       $  14,089
  Long-term obligations (8) ................           384,993        272,272         295,420         278,443         261,815
                                                     ---------      ---------       ---------       ---------       ---------
  Total obligations ........................         $ 389,825      $ 295,509       $ 298,640       $ 282,598       $ 275,904
                                                     =========      =========       =========       =========       =========

  Redeemable convertible preferred stock (9)                        $   7,045      $   6,646       $   6,270

  Redeemable common securities (10) ........         $   3,705          9,498          30,523          29,949       $  28,768
  Stockholders' equity (deficit) (8) (10) ..           146,728         (8,619)        (46,283)        (77,305)        (86,881)

</TABLE>

                                       11
<PAGE>
(1)      In connection with the Transactions in April 2004, the Company recorded
         non-recurring expenses of $11.8 million comprised of $6.2 million of
         debt retirement costs and the write-off of $5.6 million of deferred
         financing costs associated with the repayment of debt in connection
         with the Transactions.

(2)      During the fourth quarter of 2002, we amended and restated our credit
         facility with various lenders which resulted in a $1.5 million
         write-off of deferred financing costs associated with the facility.
         Additionally, during the fourth quarter of 2002, we decided not to
         pursue an initial public offering ("IPO") of shares of our Common Stock
         given valuations available in the equity markets at that time, which
         resulted in a $0.8 million write-off of costs associated with the
         offering. On March 12, 2003, we filed a Form RW with the Commission
         withdrawing our registration statement for the IPO.

(3)      During 2003 and 2002, we incurred restructuring charges of $1.0 million
         and $1.7 million, respectively, resulting from the consolidation of
         certain domestic and foreign distribution operations, and during 2003,
         the integration of M&D Industries. We recorded charges of $0.5 million
         in 2000 in connection with the restructuring of our distribution
         operations and consolidation of certain manufacturing operations.

(4)      During 2004 and 2003, we sold common stock of a customer that we
         received in connection with the customer's reorganization in
         bankruptcy, receiving net proceeds of approximately $0.07 million and
         $2.0 million and recognizing gains of approximately $0.05 million and
         $1.5 million, respectively.

(5)      Depreciation and amortization includes amortization of goodwill of $2.6
         million, in each of the years 2001 and 2000.

(6)      For purposes of determining the ratio of earnings to fixed charges,
         earnings are defined as earnings before income taxes and minority
         interests plus fixed charges. Fixed charges consist of interest expense
         on all obligations, amortization of deferred financing costs and an
         estimate of the rental expense on operating leases representing that
         portion of rental expense deemed by the Company to be attributable to
         interest.

(7)      Short-term obligations consists primarily of borrowings under bank
         lines of credit and the current portion of long-term debt. At December
         31, 2003, the current portion of long-term debt included $20.2 million
         of the Company's then existing term loan which was paid in March 2004
         and was required based on the Company's excess cash flows, as defined,
         for the year ended December 31, 2003.

(8)      Cash paid to consummate the acquisition of the Successor in April 2004
         totaled $530.0 million and was financed with initial borrowings (before
         deducting deferred financing costs of $13.1 million) consisting of a
         $205.0 million term loan under a new senior secured credit facility,
         the proceeds from the issuance of $175.0 million of 8.75% senior
         subordinated notes due 2014, an equity contribution by the Principal
         Investors and employee stockholders of $140.5 million, borrowings under
         the revolver of $23.6 million and available cash on hand. The purchase
         price has been allocated based upon preliminary estimates of the fair
         value of net assets acquired at the date of the Transactions. The final
         allocations will be based on independent valuations that have not yet
         been completed and will be subject to change when the valuations are
         completed during the second quarter of 2005. The excess of the purchase
         price over tangible net assets acquired has been allocated to
         intangible assets consisting of customer lists / relationships ($14.0
         million) and copyrights / designs and other intangibles ($12.8
         million), tradenames ($33.5 million) and goodwill ($282.9 million).

(9)      On March 30, 2001, the Board of Directors authorized 500 shares of our
         preferred stock, $0.10 par value, and designated 100 shares as Series A
         Redeemable Convertible Preferred Stock. Also on March 30, 2001, the
         Company issued 40 shares of Series A Redeemable Convertible Preferred
         Stock to GSCP, for proceeds of $6.0 million. Dividends were cumulative
         and payable annually, at 6% per annum. On March 30, 2003 and 2002, the
         annual dividend was distributed in additional shares of Series A
         Redeemable Convertible Preferred Stock. As of December 31, 2003,
         accrued dividends aggregated $0.3 million, and were included in
         redeemable convertible preferred stock on the Predecessor's
         consolidated balance sheet. At December 31, 2003, 44.94 shares of our
         Series A Redeemable Convertible Preferred Stock were issued and
         outstanding. Each share of Series A Redeemable Convertible Preferred
         Stock was convertible at the option of the holder at any time into
         shares of Common Stock, $0.10 par value, at a conversion rate of 1.0
         share of Common Stock for each share of Series A Redeemable Convertible
         Preferred Stock, subject to adjustment under certain conditions. Upon
         completion of the Transactions,

                                       12
<PAGE>
         no shares of the Series A Redeemable Convertible Preferred Stock were
         outstanding.

(10)     Under the terms of both Amscan's amended and restated stockholders'
         agreement, dated February 20, 2002 and effective through April 30,
         2004, and the new AAH Holdings stockholders' agreement dated April 30,
         2004, we have an option to purchase all of the shares of common stock
         held by former employees and, under certain circumstances, including
         death and disability, former employee stockholders can require us to
         purchase all of the shares held by the former employees. The purchase
         price as prescribed in the stockholders' agreements is to be determined
         through a market valuation of the minority-held shares or, under
         certain circumstances, based on cost, as defined therein. The aggregate
         amount that may be payable by us to all employee stockholders based on
         fully paid and vested shares is classified as redeemable common
         securities.

         In connection with the Transactions, our Chief Executive Officer and
         President exchanged 5.4945 and 2.7472 of their shares of Amscan Common
         Stock for 100 and 50 shares of AAH Holdings Common Stock with an
         equivalent value of $1,000,000 and $500,000, respectively. In addition,
         our Chief Executive Officer and President exchanged their 5.607 and
         2.804 vested options to purchase shares of Amscan Common Stock, which
         had intrinsic values of $0.6 million and $0.3 million, respectively,
         for vested options to purchase 65.455 and 32.727 shares of AAH Holdings
         Common Stock under the new equity incentive plan with intrinsic values
         of $0.5 million and $0.2 million and estimated fair values of $0.6
         million and $0.3 million, respectively. The fair value of the AAH
         Holdings options was included in the equity contribution related to the
         Transactions; however, as the AAH Holdings options are options to
         purchase redeemable common stock, their estimated redemption value is
         classified as redeemable common securities on the consolidated balance
         sheet.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

GENERAL

           Over the past several years, the party goods industry has experienced
significant changes in both distribution channels and product offerings.
Although there has been consolidation in the party superstore distribution
channel in the past five years, the number of party superstores has remained
stable. Due, in part, to the success of the party superstore distribution
channel, party goods manufacturers have broadened their product offerings to
support the celebration of a greater number of occasions. The industry's growth
has been directly affected by these changes. To achieve further sales growth and
expansion, our sales effort has focused more closely on card and gift stores and
other independent retailers and we have created expansive gift lines
encompassing home, baby and wedding products for general gift giving or
self-purchase, principally for this distribution channel. In addition, during
2004 we began utilizing our Asian suppliers as a direct source for mass market,
grocery, drug and other customers who possess the necessary infrastructure,
global logistics and distribution capabilities to deliver products to their
outlets. To deepen our retail penetration at key European hypermarket and
supermarket accounts, our future focus will include broadening our distribution
network, increasing accessorization and customization of our products to local
tastes and holidays.

         Our revenues are generated from sales of approximately 38,000 SKU's
consisting of party goods for all occasions, including paper and plastic
tableware, accessories and novelties, metallic balloons, stationery and gift
items. Tableware (plates, cups, cutlery, napkins and tablecovers) is our core
product category, with coordinating accessories (e.g., balloons, banners, gifts
and stationery) and novelties (e.g., party favors) being offered to complement
these tableware products. As a metallic balloon manufacturer, we have a strong
presence in grocery, gifts and floral distribution channels, and have leveraged
our strong presence to bring additional party goods to these markets. In
February 2002, we completed the strategic acquisition of M&D Industries, a
metallic balloon manufacturer with a strong portfolio of character licenses that
complement those of our previously existing portfolio.

FACTORS WHICH AFFECT OUR FINANCIAL PERFORMANCE

Sales Concentration

         Our sales volume is concentrated with several important customers,
generally party superstores. Our sales concentration also causes our receivables
to be concentrated within the party superstore channel. From time to time, we
have made significant additional provisions for credit losses and have
restructured the terms of accounts receivable because of changes in the credit
condition of certain superstore customers. Economic difficulties experienced in
this channel have

                                       13
<PAGE>
affected and may continue to affect the Company's financial results.

Design Trends and Customer Preferences

         Our strategy and our relationships with our customers are dependent on
our regular introduction of new designs that are attractive and distinctive. We
must anticipate the tastes and preferences of party goods retailers and
consumers in order to compete for their business successfully. Our failure to
anticipate, identify or react appropriately to changes in consumer tastes could,
among other things, lead to excess inventories, a shortage of products and lost
sales.

Competition

        The party goods industry is highly competitive. We compete with many
other companies, including smaller, independent specialty manufacturers and
divisions or subsidiaries of larger companies with greater financial and other
resources than we have. Some of our competitors control licenses for widely
recognized images, such as cartoon or motion picture characters, and have
broader access to mass market retailers which could provide them with a
competitive advantage.

Raw Material and Production Costs

         The costs of our key raw materials (paper and petroleum-based resin)
fluctuate. Generally, the Company absorbs movements in raw material costs it
considers temporary or insignificant. However, cost increases that are
considered other than temporary may require the Company to increase its prices
to maintain its margins. Customers may resist such price increases.

         Products we manufacture, primarily tableware and metallic balloons,
represented approximately 60% of our net sales in 2004. During the past three
years, we have invested approximately $30.9 million in printing, fabrication,
packaging and other manufacturing equipment, which has allowed us to increase
productivity rates, thereby lowering labor and overhead as a percentage of
manufacturing costs. We believe our ability to manufacture product representing
approximately 60% of our sales enables us to lower production costs by
optimizing production while minimizing inventory investment, to ensure product
quality through rigid quality control procedures during production and to be
responsive to our customers' product design demands.

Interest Rates

         Although we may utilize interest rate swap agreements to manage the
risk associated with fluctuations in interest rates, we are exposed to
fluctuations in interest rates on a significant portion of our variable rate
debt.

Exchange Rates

         We are exposed to foreign currency risk, predominately in European
countries, principally from fluctuations in the Euro and British Pound Sterling
and their impact on our profitability in foreign markets. Although we
periodically enter into foreign currency forward contracts to hedge against the
earnings effects of such fluctuations, we may not be able to hedge such risks
completely or permanently.

RESULTS OF OPERATIONS

         The accompanying audited consolidated financial statements include the
accounts of Amscan Holdings and its majority-owned and controlled entities. For
the purposes of management's discussion and analysis of financial condition and
results of operations, financial information for the Predecessor (periods prior
to May 1, 2004) and the Successor (the period subsequent to April 30, 2004) have
been combined to compare yearly information and therefore the term "Company"
refers to Amscan Holdings, Inc. and its subsidiaries for all periods presented.

                                       14
<PAGE>
YEAR ENDED DECEMBER 31, 2004 COMPARED TO YEAR ENDED DECEMBER 31, 2003

PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                                -----------------------
                                                                   2004         2003
                                                                   ----         ----

<S>                                                             <C>           <C>
Net sales .................................................        100.0%       100.0%
Cost of sales .............................................         66.7         66.8
                                                                 -------      -------
    Gross profit ..........................................         33.3         33.2
Operating expenses:
    Selling expenses ......................................          9.0          9.1
    General and administrative expenses ...................          7.9          7.9
    Provision for doubtful accounts .......................          0.5          0.6
    Art and development costs .............................          2.5          2.3
    Non-recurring expenses related to the Transactions ....          3.0
    Restructuring charges .................................                       0.3
                                                                 -------      -------

Total operating expenses ..................................         22.9         20.2
                                                                 -------      -------
    Income from operations ................................         10.4         13.0
Interest expense, net .....................................          6.9          6.5
Undistributed loss in unconsolidated joint venture ........          0.3
Gain on sales of available-for-sale securities ............                      (0.3)
Other income, net .........................................         (0.1)
                                                                 -------      -------
    Income before income tax expense and minority interests          3.3          6.8
Income tax expense ........................................          1.3          2.5
Minority interests ........................................
                                                                 -------      -------
    Net income ............................................          2.0%         4.3%
                                                                 =======      =======
</TABLE>

         NET SALES. Net sales of $399.2 million for the year ended December 31,
2004 were $3.6 million lower than net sales for the year ended December 31,
2003. The decrease in net sales reflects a general softness in retail markets
that occurred earlier in the year, the impact of inventory shortages of certain
products as a result of a production disruption at one of the Company's foreign
vendors and the rationalization of inventories and changes in the promotional
pricing activities at certain national chains. These decreases in net sales were
partially offset by higher net international sales, principally as a result of
foreign currency exchange fluctuations.

         GROSS PROFIT. Gross profit margin for the year ended December 31, 2004
was 33.3% and comparable to the gross profit margin for the year ended December
31, 2003. However, the gross profit margin for 2004 principally reflects higher
inventory costs from the write-up of finished goods inventories as a result of
purchase accounting for the Transactions, increased raw material costs and
higher freight costs (including nonrecurring air freight incurred to expedite
the replenishment of inventory shortages noted above). These increases in costs
were offset by lower depreciation and amortization expense (arising from changes
in asset valuations and useful lives as a result of the Transactions), the full
synergies arising from the completed integration of M&D Industries, Inc., our
2002 balloon business acquisition, and the elimination of redundant distribution
costs incurred in 2003 arising from the transition from four to three east coast
distribution facilities.

         OPERATING EXPENSES. Selling expenses of $36.0 million for the year
ended December 31, 2004 were $0.6 million lower than for the year ended December
31, 2003 primarily as a result of a consolidation of sales territories. As a
percentage of net sales, selling expenses were 9.0%, or 0.1% lower than in 2003.

         General and administrative expenses of $31.6 million for the year ended
December 31, 2004 were $0.4 million lower than for the year ended December 31,
2003. As a percentage of net sales, general and administrative expenses were
7.9% for each of the years ended December 31, 2004 and 2003. The net decrease in
general and administrative expenses principally reflects the closure, in 2003,
of certain international facilities and the contribution, in December 2003, of
our metallic balloon distribution operations located in Mexico to a newly
created joint venture. The joint venture distributes certain metallic balloons
principally in Mexico and Latin America. These decreases in general and
administrative expenses were partially offset by management fees paid to our
Principal Investors in 2004 ($1.3 million).

         Provision for doubtful accounts for the year ended December 31, 2004
was $2.0 million or 0.5% of net sales, as

                                       15
<PAGE>
compared to $2.6 million or 0.6% of net sales for year ended December 31, 2003.
During the second quarter of 2003, a customer filed a voluntary petition for
relief under Chapter 11 of the United States Bankruptcy Code and, as a result,
the Company charged $1.8 million to the provision for doubtful accounts during
2003. This customer accounted for approximately 2.1% of our net sales for 2003.

         Art and development costs of $10.0 million for the year ended December
31, 2004 were $0.7 million higher as compared to 2003 principally due to
increased development of custom product lines. As a percentage of net sales, art
and development costs were 2.5% for the year ended December 31, 2004 or 0.2%
higher than in 2003.

         In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11.8 million comprised of $6.2 million of debt
retirement costs and the write-off of $5.6 million of deferred financing costs
associated with the repayment of debt.

         During the year ended December 31, 2003, the Company incurred
restructuring charges of $1.0 million resulting from the consolidation of
certain domestic and foreign distribution operations and the integration of M&D
Industries, Inc. into our balloon operations.

         INTEREST EXPENSE, NET. Interest expense, net, of $27.5 million for the
year ended December 31, 2004 was $1.1 million higher than for the year ended
December 31, 2003, due to the impact of higher average borrowings partially
offset by lower interest rates.

         GAIN ON SALES OF AVAILABLE-FOR-SALE SECURITIES. During 2004 and 2003,
the Company sold common stock of a customer that it received in connection with
the customer's reorganization in bankruptcy, receiving net proceeds of $0.07
million and $2.0 million and recognizing gains of $0.05 million and $1.5
million, respectively.

         UNDISTRIBUTED LOSS IN UNCONSOLIDATED JOINT VENTURE. Undistributed loss
in unconsolidated joint venture represents our share of the joint venture's
start-up losses, including the elimination of intercompany profit in the joint
venture's inventory on hand at December 31, 2004.

         INCOME TAXES. Income taxes for the years ended December 31, 2004 and
2003 were provided for at consolidated effective income tax rates of 39.5% and
36.8%, respectively. Our effective income tax rates exceed the federal statutory
income tax rate primarily due to state income taxes, partially offset, for the
year ended December 31, 2003, by the benefit of foreign tax credits.

                                       16
<PAGE>
YEAR ENDED DECEMBER 31, 2003 COMPARED TO YEAR ENDED DECEMBER 31, 2002

PERCENTAGE OF NET SALES

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              -----------------------
                                                                2003          2002
                                                                ----          ----
<S>                                                           <C>           <C>
Net sales ...............................................        100.0%       100.0%
Cost of sales ...........................................         66.8         65.6
                                                               -------      -------
    Gross profit ........................................         33.2         34.4
Operating expenses:
    Selling expenses ....................................          9.1          9.0
    General and administrative expenses .................          7.9          8.3
    Provision for doubtful accounts .....................          0.6          0.8
    Art and development costs ...........................          2.3          2.7
    Write-off of deferred financing and IPO-related costs                       0.6
    Restructuring charges ...............................          0.3          0.4
                                                               -------      -------
Total operating expenses ................................         20.2         21.8
                                                               -------      -------
    Income from operations ..............................         13.0         12.6
Interest expense, net ...................................          6.5          5.6
Gain on sale of available-for-sale securities ...........         (0.3)
Other income, net .......................................                      (0.1)
                                                               -------      -------
    Income before income taxes and minority interests ...          6.8          7.1
Income tax expense ......................................          2.5          2.8
Minority interests ......................................
                                                               -------      -------
    Net income ..........................................          4.3%         4.3%
                                                               =======      =======
</TABLE>

         NET SALES. Net sales of $402.8 million for the year ended December 31,
2003 were $17.2 million or 4.5% higher than net sales for the year ended
December 31, 2002. During the year ended December 31, 2003, our domestic sales
of party goods, including metallic balloons, grew by 3.1% over 2002. Contract
manufacturing increased by 17.5% during 2003, as compared to 2002. International
net sales reported for the year ended December 31, 2003 increased by 5.3%,
principally as a result of favorable foreign currency exchange fluctuations.
Domestic sales performance during 2003 was adversely affected by general
economic conditions which resulted in a weak retail environment and, during the
first quarter of 2003, severe weather conditions.

         GROSS PROFIT. Gross profit margin for the year ended December 31, 2003,
of 33.2% was 1.2% lower than the corresponding period in 2002. Gross profit
margin for the year ended December 31, 2003 reflects the impact of product sales
and customer mix (particularly solid color tableware and contract manufacturing)
and additional depreciation and amortization and equipment rental costs
associated with the new distribution facility that became operational in the
fourth quarter of 2002. Gross profit margin for the year ended December 31, 2003
also reflects additional production costs incurred during the first and second
quarters of 2003 in connection with the integration of M&D Industries, redundant
costs arising from the Company's transition from four to three east coast
distribution facilities and additional distribution costs incurred as a result
of severe weather conditions during the first quarter of 2003, partially offset
by operating efficiencies from the transition to the new distribution facility.

       OPERATING EXPENSES. Selling expenses of $36.5 million for the year ended
December 31, 2003 were $1.9 million higher than in the corresponding period in
2002 principally due to the inclusion of the operating results of M&D Industries
for two additional months in 2003 and the continued development of our specialty
sales effort. Selling expenses, as a percentage of net sales, increased from
9.0% to 9.1%.

         General and administrative expenses of $31.9 million for the year ended
December 31, 2003 were relatively consistent with the corresponding period in
2002 as increased insurance and occupancy costs were offset by synergies
realized from the consolidation of M&D Industries' administrative functions into
our existing operations. As a percentage of sales, general and administrative
expenses decreased by 0.4% to 7.9% for the year ended December 31, 2003.

          During the second quarter of 2003, a customer filed a voluntary
petition for relief under Chapter 11 of the United

                                       17
<PAGE>
States Bankruptcy Code and, as a result, we charged $1.8 million to the
provision for doubtful accounts during the year ended December 31, 2003. This
customer accounted for approximately 2.1% of our net sales for the year ended
December 31, 2003. We do not believe the potential loss of this customer will
have a material adverse effect on our future results of operations or our
financial condition.

         Art and development costs of $9.4 million for the year ended December
31, 2003 were $0.9 million lower than for the corresponding period in 2002,
principally due to synergies realized from the integration of M&D Industries'
art and development departments into our existing operations. As a percentage of
sales, art and development costs decreased by 0.4% to 2.3% for the year ended
December 31, 2003.

         During the fourth quarter of 2002, we amended and restated our credit
facility with various lenders which resulted in a $1.5 million write-off of
deferred financing costs associated with the facility. Additionally, during the
fourth quarter of 2002, we decided not to pursue an initial public offering of
our Common Stock, given the valuations available in the equity markets at that
time, which resulted in a $0.8 million write-off of costs associated with the
offering. On March 12, 2003, we filed a Form RW with the Commission withdrawing
our registration statement for the IPO.

         During the years ended December 31, 2003 and 2002, we incurred
restructuring charges of $1.0 million and $1.7 million, respectively, resulting
from the consolidation of certain domestic and foreign distribution operations,
in addition to the ongoing integration of M&D Industries. The further
consolidation of domestic distribution operations may result in additional
restructuring charges in subsequent periods.

         INTEREST EXPENSE, NET. Interest expense, net, of $26.4 million for the
year ended December 31, 2003 was $4.6 million higher than for the year ended
December 31, 2002 and reflects the impact of higher average borrowings and a
higher average effective interest rate (8.8% in 2003 versus 7.2% in 2002). We
incurred a higher average effective interest rate in 2003 as a result of the
amortization of the original issue discount and the 2% LIBOR floor required by
our Second Amended and Restated Credit and Guaranty Agreement dated December 20,
2002.

         GAIN ON SALE OF AVAILABLE-FOR-SALE SECURITIES. During the year ended
December 31, 2003, we sold shares of common stock of a customer which we
received in connection with the customer's reorganization in bankruptcy. We
received net proceeds of $2.0 million and recognized a gain of $1.5 million.

         INCOME TAXES. Income taxes for the years ended December 31, 2003 and
2002 were provided for at consolidated effective income tax rates of 36.8% and
39.5%, respectively. Our effective income tax rates exceed the federal statutory
income tax rate primarily due to state income taxes, partially offset, for the
year ended December 31, 2003, by the benefit of foreign tax credits.

LIQUIDITY AND CAPITAL RESOURCES

Capital Structure

         Our senior secured credit facility contains financial covenants and
maintenance tests, including a minimum interest coverage test and a maximum
total leverage test, and restrictive covenants, including restrictions on our
ability to make capital expenditures or pay dividends. The senior secured credit
facility is secured by substantially all of our assets and the assets of some of
our subsidiaries, and by a pledge of all of our domestic subsidiaries' capital
stock and a portion of our wholly owned foreign subsidiaries' capital stock.

         The Company's term loan provides for amortization (in quarterly
installments) of 1.0% per annum through June 30, 2010, and will then amortize in
equal quarterly payments through June 30, 2012. The term loan bears interest, at
the option of the Company, at the index rate plus 1.75% per annum or at LIBOR
plus 2.75% per annum. At December 31, 2004, the term loan balance was $204.0
million, with a floating interest rate of 4.72%. To hedge the risk associated
with fluctuations in interest rates, the Company entered into two interest rate
swap transactions with a financial institution during 2004, for an initial
aggregate notional amount of $17.4 million, increasing over three years to $62.6
million.

         Revolving loans under the senior credit facility expire on April 30,
2010 and bear interest, at the option of the Company, at the index rate plus,
based on performance, a margin ranging from 0.75% to 1.50% per annum, or at
LIBOR

                                       18
<PAGE>
plus, based on performance, a margin ranging from 1.75% to 2.50% per annum. At
December 31, 2004, the Company had borrowings under the revolver totaling $2.0
million at a floating interest rate of 6.75%. Standby letters of credit totaling
$7.3 million were outstanding and the Company had borrowing capacity of $40.7
million under the terms of the revolver at December 31, 2004.

         On April 30, 2004, in connection with the Transactions, a term loan of
$147.7 million under the then existing senior secured credit facility was repaid
and all commitments under that facility were terminated.

         At December 31, 2004, we have a 400,000 Canadian dollar denominated
revolving credit facility which bears interest at the Canadian prime rate plus
0.6% and expires on June 30, 2005, a 1.0 million British Pound Sterling
denominated revolving credit facility which bears interest at the U.K. base rate
plus 1.75% and expires on May 31, 2005, and a $1.0 million revolving credit
facility which bears interest at LIBOR plus 1.0% and expires on December 31,
2005. No borrowings were outstanding under these revolving credit facilities at
December 31, 2004. We expect to renew these revolving credit facilities upon
expiration.

         Long-term borrowings at December 31, 2004 include a mortgage note with
the New York State Job Development Authority of $8.5 million which requires
monthly payments based on a 180-month amortization period with a balloon payment
upon maturity in January 2010. The mortgage note bears interest at the rate of
3.41%, and is subject to review and adjustment semi-annually based on the New
York State Job Development Authority's confidential internal protocols. The
mortgage note is collateralized by a distribution facility located in Chester,
New York. On April 30, 2004, in connection with the Transactions, a first lien
mortgage note of $8.5 million was paid in full. The mortgage note bore interest
at LIBOR plus 2.75%. However, we utilized an interest rate swap agreement to
effectively fix the loan rate at 8.40% for the term of the loan. The related
interest rate swap agreement was terminated on April 30, 2004 in connection with
the Transactions at a cost of $0.7 million.

         In connection with the Transactions on April 30, 2004, the Company
redeemed all outstanding shares of Series A Redeemable Convertible Preferred
Stock at a redemption price per share equal to $182,000 in cash, together with
accrued and unpaid dividends.

         Our senior subordinated notes, totaling $175 million, were sold to the
initial purchasers by the Company in the Note Offering. In connection with the
Note Offering, the Company entered into a Registration Rights Agreement, which
granted holders of the new notes certain exchange and registration rights. In
August 2004, the Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-4 offering to exchange registered notes for the
notes issued in connection with the Note Offering. The terms of the notes and
the exchange notes are substantially identical. The exchange was completed in
October 2004. The senior subordinated notes due 2014 bear interest at a rate of
8.75% per annum. Interest is payable semi-annually on May 1 and November 1 of
each year.

         We have entered into various capital leases for machinery and equipment
with implicit interest rates ranging from 7.70% to 8.80% which extend to 2007.

         The Company has several non-cancelable operating leases principally for
office, distribution and manufacturing facilities, showrooms and warehouse
equipment. These leases expire on various dates through 2017 and generally
contain renewal options and require the Company to pay real estate taxes,
utilities and related insurance costs. Rent expense for the years ended December
31, 2004, 2003 and 2002 totaled $11.4 million, $13.2 million and $12.7 million,
respectively. The minimum lease payments currently required under non-cancelable
operating leases for the year ended December 31, 2005 approximated $12.3
million.

         In connection with the Transactions, we executed a management agreement
with our Principal Investors, Berkshire Partners LLC and Weston Presidio.
Pursuant to the management agreement, Berkshire Partners LLC and Weston Presidio
will be paid annual management fees of $0.8 million and $0.4 million,
respectively. Although the indenture governing the 8.75% senior subordinated
notes will permit the payments under the management agreement, such payments
will be restricted during an event of default under the notes and will be
subordinated in right of payment to all obligations due with respect to the
notes in the event of a bankruptcy or similar proceeding of Amscan.

         We expect that cash generated from operating activities and
availability under our senior secured credit facility will be our principal
sources of liquidity. Based on our current level of operations, we believe our
cash flow from operations and

                                       19
<PAGE>
available cash and available borrowings under our senior secured credit facility
will be adequate to meet our liquidity needs for at least the next twelve
months. We cannot assure you, however, that our business will generate
sufficient cash flow from operations or that future borrowings will be available
to us under our senior secured credit facility in an amount sufficient to enable
us to repay our indebtedness, including the notes, or to fund our other
liquidity needs.

Cash Flow Data - Year Ended December 31, 2004 Compared to Year Ended December
31, 2003

         Net cash provided by operating activities during the years ended
December 31, 2004 and 2003, totaled $34.2 million and $42.1 million,
respectively. Net cash flow provided by operating activities before changes in
operating assets and liabilities for the years ended December 31, 2004 and 2003,
was $40.7 million and $42.1 million, respectively. Changes in operating assets
and liabilities for the year ended December 31, 2004 resulted in the use of cash
of $6.5 million.

         During the year ended December 31, 2004, net cash used in investing
activities of $540.7 million included payments of $530.0 million to consummate
the Transactions on April 30, 2004 and $11.4 million of additional investments
principally in distribution and manufacturing equipment, partially offset by
proceeds from the sales of equipment and available-for-sale securities. Net cash
used in investing activities during the year ended December 31, 2003 of $10.3
million consisted of additional investments in distribution and manufacturing
equipment and other assets partially offset by proceeds of $2.2 million received
from both the disposal of equipment and the sale of a portion of our investment
in the common stock of a customer received in connection with the customer's
reorganization in bankruptcy.

         During the year ended December 31, 2004, net cash provided by financing
activities of $478.8 million included proceeds totaling $368.9 million from
short-term borrowings under the revolver and debt issued in connection with the
Transactions, net of deferred financing costs of $13.1 million. Net cash
provided by financing activities for the year ended December 31, 2004, also
included a cash contribution of $139.0 million in connection with the
Transactions, partially offset by scheduled payments on other long-term
obligations of $2.8 million, a required prepayment of the Predecessor's term
loan of $20.2 million based on the Company's excess cash flows for the year
ended December 31, 2003 and debt retirement costs totaling $6.2 million paid in
connection with the Transactions. During the year ended December 31, 2003, net
cash used in financing activities of $4.2 million consisted of the scheduled
payments on the term loan and other long-term obligations and the purchase of
Common Stock from both our Chief Executive Officer and President, partially
offset by proceeds from the exercise of stock options and the repayment of the
notes receivable by both the Chief Executive Officer and President.

Cash Flow Data - Year Ended December 31, 2003 Compared to Year Ended December
31, 2002

         Net cash provided by operating activities during the years ended
December 31, 2003 and 2002, totaled $42.2 million and $20.3 million,
respectively. Net cash flow provided by operating activities before changes in
operating assets and liabilities for the years ended December 31, 2003 and 2002,
was $42.1 million and $40.9 million, respectively. Changes in operating assets
and liabilities for the year ended December 31, 2003 offset, principally
reflecting the Company's efforts to reduce its investment in working capital.
Changes in operating assets and liabilities, net of acquisition, for the year
ended December 31, 2002 resulted in the use of cash of $20.6 million.

         Net cash used in investing activities during the year ended December
31, 2003 of $10.3 million consisted of additional investments in distribution
and manufacturing equipment and other assets of $12.5 million partially offset
by proceeds of $2.2 million received from both the disposal of equipment and the
sale of a portion of our investment in the common stock of a customer received
in connection with the customer's reorganization in bankruptcy. Net cash used in
investing activities during the year ended December 31, 2002 of $30.7 million
consisted of $13.5 million relating to the acquisition of M&D Industries, $17.7
million of capital expenditures, including $3.1 million for equipment for the
new domestic distribution facility, and $0.5 million of proceeds from disposal
of property and equipment.

         During the year ended December 31, 2003, net cash used in financing
activities of $4.2 million consisted of the scheduled payments on the then
outstanding term loan and other long-term obligations and the purchase of Common
Stock from both our Chief Executive Officer and President, partially offset by
proceeds from the exercise of stock options and the repayment of the notes
receivable by both the Chief Executive Officer and President. During 2002, net
cash provided by financing activities of $11.4 million consisted of net proceeds
from the then outstanding term loan of $164.0 million, which were used to repay
our AXEL term loan and revolver borrowings at the closing date and to pay
certain fees and expenses associated with the refinancing, scheduled payments of
other long-term obligations totaling $3.1 million and loans to officers under
notes totaling $0.2 million.

                                       20
<PAGE>
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

       Our contractual obligations at December 31, 2004 are summarized by the
year in which the payments are due in the following table (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                                                     More than
                                         Total          2005          2006           2007       2008        2009      5 years
                                         -----          ----          ----           ----       ----        ----      -------
<S>                                    <C>            <C>           <C>           <C>         <C>         <C>         <C>
Long-term debt obligations (a) ....    $ 387,429      $  2,627      $  2,619      $  2,619    $  2,619    $  2,619    $374,326
Capital lease obligations (a) .....          371           180           146            45
Operating lease obligations (b) ...       61,999        11,502         9,713         7,841       5,187       5,050      22,706

Minimum royalty obligations (b) ...       10,836         2,707         3,517         2,324       1,889         399
                                       ---------      --------      --------      --------    --------    --------    --------
    Total contractual obligations .    $ 460,635      $ 17,016      $ 15,995      $ 12,829    $  9,695    $  8,068    $397,032
                                       =========      ========      ========      ========    ========    ========    ========
</TABLE>

         (a)      See Note 6 to our 2004 Consolidated Financial Statements which
                  are included in this report beginning on page F-2.

         (b)      See Note 15 to our 2004 Consolidated Financial Statements
                  which are included in this report beginning on page F-2.

         At December 31, 2004 there were no non-cancelable purchase orders
related to capital expenditures.

         At December 31, 2004, borrowings under our Revolver were $2.0 million.
Standby letters of credit totaling $7.1 million were outstanding at December 31,
2004. See Note 5 to our 2004 Consolidated Financial Statements which are
included in this report beginning on page F-2.

OFF-BALANCE SHEET ARRANGEMENTS

         We do not have any off-balance sheet arrangements, as defined in Item
303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as
amended.

EFFECTS OF INFLATION

         Inflation has not had a material impact on our operations during the
past three years.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require us
to make estimates and assumptions. We believe that the following significant
accounting policies may involve a higher degree of judgment and complexity.

Revenue Recognition

         Our terms of sale are principally F.O.B. shipping point and,
accordingly, title and the risks and rewards of ownership are transferred to the
customer, and revenue is recognized, when goods are shipped. We estimate
reductions to revenues for volume-based rebate programs at the time sales are
recognized. Should customers earn rebates higher than estimated by us,
additional reductions to revenues may be required.

Royalty Agreements

         Commitments for minimum payments under royalty agreements, a portion of
which may be paid in advance, are charged to expense ratably, based on our
estimate of total sales of related products. If all or a portion of the minimum
guarantee subsequently appears not to be recoverable, the unrecoverable portion
is charged to expense at that time.

Doubtful Accounts

                                       21
<PAGE>
         We maintain allowances for doubtful accounts for estimated losses
resulting from the inability of our customers to make required payments. A
considerable amount of judgment is required in assessing the ultimate
realization of these receivables, including consideration of our history of
receivable write-offs, the level of past due accounts and the economic status of
our customers. If the financial condition of our customers were to deteriorate,
resulting in an impairment of their ability to make payments, additional
allowances would be required.

Inventories

         Our policy requires that we state our inventories at the lower of cost
or market. In assessing the ultimate realization of inventories, we are required
to make judgments regarding, among other things, future demand and market
conditions, current inventory levels and the impact of the possible
discontinuation of product designs. If actual conditions are less favorable than
those projected by us, additional inventory write-downs to market value may be
required.

Long-Lived and Intangible Assets

         We review the recoverability of our long-lived assets, including
definite-lived intangible assets other than goodwill, whenever facts and
circumstances indicate that the carrying amount may not be fully recoverable.
For purposes of recognizing and measuring impairment, we evaluate long-lived
assets other than goodwill based upon the lowest level of independent cash flows
ascertainable to evaluate impairment. If the sum of the undiscounted future cash
flows expected over the remaining asset life is less than the carrying value of
the assets, we may recognize an impairment loss. The impairment related to
long-lived assets is measured as the amount by which the carrying amount of the
assets exceeds the fair value of the asset. When fair values are not readily
available, we estimate fair values using expected discounted future cash flows.

         Goodwill is reviewed for potential impairment, on an annual basis or
more frequently if circumstances indicate a possible impairment, by comparing
the fair value of a reporting unit with its carrying amount, including goodwill.
If the carrying amount of a reporting unit exceeds its fair value, the excess,
if any, of the fair value of the reporting unit over amounts allocable to the
unit's other assets and liabilities is the implied fair value of goodwill. If
the carrying amount of a reporting unit's goodwill exceeds the implied fair
value of that goodwill, an impairment loss will be recognized in an amount equal
to that excess. The fair value of a reporting unit refers to the amount at which
the unit as a whole could be sold in a current transaction between willing
parties.

         In connection with the Transactions in April 2004, the purchase price
has been allocated based upon preliminary estimates of the fair value of net
assets acquired at the date of the Transactions. The final allocations will be
based on independent valuations that have not yet been completed and will be
subject to change when the valuations are completed during the second quarter of
2005. The Company does not expect the final allocation to be significantly
different from the preliminary estimates currently reflected in the Successor
consolidated financial statements

LEGAL PROCEEDINGS

         We are a party to certain claims and litigation in the ordinary course
of business. We do not believe any of these proceedings will result,
individually or in the aggregate, in a material adverse effect upon our
financial condition or future results of operations.

INCOME TAXES

    For information regarding income tax matters, see Note 13 of the Notes to
Consolidated Financial Statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

         The Financial Accounting Standards Board ("FASB") recently issued
Statement of Financial Accounting Standards ("SFAS") No. 151, "Inventory Costs",
an amendment of Accounting Research Bulletin ("ARB") No. 43, Chapter 4. Adoption
of SFAS No. 151 is required by the year beginning January 1, 2006. We plan to
adopt SFAS No. 151 no later than that date. The amendments made by SFAS No. 151
clarify that abnormal amounts of idle facility expense, freight,

                                       22
<PAGE>
handling costs and wasted materials (spoilage) should be recognized as
current-period charges and requires the allocation of fixed production overheads
to inventory based on the normal capacity of the production facilities. While
SFAS No. 151 enhances ARB 43 and clarifies the accounting for abnormal amounts
of idle facility expense, freight, handling costs and wasted material
(spoilage), the statement also removes inconsistencies between ARB 43 and
International Accounting Standard No. 2 and amends ARB 43 to clarify that
abnormal amounts of costs should be recognized as period costs. Under some
circumstances, according to ARB 43, the above listed costs may be so abnormal as
to require treatment as current period charges. SFAS No. 151 requires these
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal" and requires allocation of fixed production
overheads to the costs of conversion. This statement will apply to our
businesses if they become subject to "abnormal costs" as defined in SFAS No.
151. We are currently evaluating the impact, if any, that adoption of SFAS No.
151 will have on our consolidated statement of income and consolidated balance
sheet.

         Effective May 1, 2004, the Successor adopted the fair-value-based
method of accounting for stock options and the expense recognition provisions of
SFAS No. 123, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. In December 2004, the FASB issued
SFAS 123R, Share-Based Payment (Revised 2004), which requires companies to
recognize in the income statement the fair value of all employee share-based
payments, including grants of employee stock options as well as compensatory
employee stock purchase plans, for interim periods beginning after June 15, 2005
and will become effective for the Company for the quarter ending September 30,
2005. Although the Company has not determined whether the adoption of SFAS 123R
will result in amounts that are similar to the current pro forma disclosures
under SFAS 123, the Company is evaluating the requirements under SFAS 123R
including the valuation methods and support for the assumptions that underlie
the valuation of the awards, as well as the transition methods (the modified
prospective transition method or the modified retrospective transition method).
Under the "modified prospective" method, compensation cost is recognized
beginning with the effective date (a) based on the requirements of SFAS No.
123(R) for all share-based payments granted after the effective date and (b)
based on the requirements of SFAS No. 123 for all awards granted to employees
prior to the effective date of SFAS No. 123(R) that remain unvested on the
effective date. The "modified retrospective" method includes the requirements
of the modified prospective method but also permits entities to restate based on
the amounts previously recognized under SFAS No. 123 for purposes of pro forma
disclosures either (a) all prior periods presented or (b) prior interim period
of the year of adoption.

         On December 21, 2004, the FASB issued FASB Staff Position ("FSP") 109-1
and 109-2. FSP 109-1 provides guidance on the application of SFAS No. 109,
"Accounting for Income Taxes", with regard to the tax deduction on qualified
production activities provision within H.R. 4520 The American Jobs Creation Act
of 2004 (Act) that was enacted on October 22, 2004. FSP 109-2 provides guidance
on a special one-time dividends received deduction on the repatriation of
certain foreign earnings to qualifying U.S. taxpayers. The Act contains numerous
provisions related to corporate and international taxation including repeal of
the Extraterritorial Income (ETI) regime, creation of a new Domestic Production
Activities (DPA) deduction and a temporary dividends received deduction related
to repatriation of foreign earnings. The Act contains various effective dates
and transition periods related to its provisions. Under the guidance provided in
FSP 109-1 the new DPA deduction will be treated as a "special deduction" as
described in SFAS No. 109. As such, the special deduction has no effect on the
Company's deferred tax assets and liabilities existing at the enactment date.
Rather, the impact of this deduction will be reported in the period in which the
deduction is claimed on our income tax return. The repeal of ETI and its
replacement with a DPA deduction were not in effect in 2004 and therefore, did
not have an affect on our income tax provision for the year ended December 31,
2004. We do not expect the net effect of the phase-out of the ETI deduction and
phase-in of the new DPA deduction to result in a material impact on our
effective income tax rate in 2005. In FSP 109-2, the Financial Accounting
Standards Board acknowledged that, due to the proximity of the Act's enactment
date to many companies' year-ends and the fact that numerous provisions within
the Act are complex and pending further regulatory guidance, many companies may
not be in a position to assess the impacts of the Act on their plans for
repatriation or reinvestment of foreign earnings. Therefore, the FSP provided
companies with a practical exception to the permanent reinvestment standards of
SFAS No. 109 and APB No. 23 by providing additional time to determine the amount
of earnings, if any, that they intend to repatriate under the Act's provisions.
We are not yet in a position to decide whether, and to what extent, we might
repatriate foreign earnings to the U.S. Therefore, under the guidance provided
in FSP 109-2, no deferred tax liability has been recorded in connection with the
repatriation provisions of the Act. We are currently analyzing the impact of the
temporary dividends received deduction provisions contained in the Act.

         Other pronouncements issued by the FASB or other authoritative
accounting standards groups with future effective dates are either not
applicable or not significant to our consolidated financial statements.

"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

         This report includes "forward-looking statements" within the meaning of
various provisions of the Private Securities Litigation Reform Act of 1995. All
statements, other than statements of historical facts, included in this report
that address activities, events or developments that we expect or anticipate
will or may occur in the future, future capital expenditures (including the
amount and nature thereof), business strategy and measures to implement
strategy, including any

                                       23
<PAGE>
changes to operations, goals, expansion and growth of our business and
operations, plans, references to future success and other such matters are
forward-looking statements. These statements are based on certain assumptions
and analyses made by us in light of our experience and our perception of
historical trends, current conditions and expected future developments as well
as other factors we believe are appropriate in the circumstances. Actual results
may differ materially from those discussed. Whether actual results and
developments will conform with our expectations and predictions is subject to a
number of risks and uncertainties, including, but not limited to (1) the
concentration of sales by us to party superstores where the reduction of
purchases by a small number of customers could materially reduce our sales and
profitability, (2) the concentration of our credit risk in party superstores,
several of which are privately held and have expanded rapidly in recent years,
(3) the failure by us to anticipate changes in tastes and preferences of party
goods retailers and consumers, (4) the introduction by us of new product lines,
(5) the introduction of new products by our competitors, (6) the inability to
increase prices to recover fully future increases in raw material prices,
especially increases in prices of paper and petroleum-based resin, (7) the loss
of key employees, (8) changes in general business conditions, (9) other factors
which might be described from time to time in our filings with the Commission,
and (10) other factors which are beyond our control. Consequently, all of the
forward-looking statements made in this report are qualified by these cautionary
statements, and the actual results or developments anticipated by us may not be
realized or, even if substantially realized, may not have the expected
consequences to or effects on our business or operations. Although we believe
that we have the product offerings and resources needed for growth in revenues
and margins, future revenue and margin trends cannot be reliably predicted.
Changes in such trends may cause us to adjust our operations in the future.
Because of the foregoing and other factors, recent trends should not be
considered reliable indicators of future financial results. In addition, our
highly leveraged nature may impair our ability to finance our future operations
and capital needs and our flexibility to respond to changing business and
economic conditions and business opportunities.

QUARTERLY RESULTS (UNAUDITED)

         Despite a concentration of holidays in the fourth quarter of the year,
as a result of our expansive product lines and customer base and increased
promotional activities, the impact of seasonality on our quarterly results of
operations in recent years has been limited. Promotional activities, including
special dating terms, particularly with respect to Halloween and Christmas
products sold in the third quarter, and the introduction of our new everyday
products and designs during the fourth quarter result in higher accounts
receivables and inventory balances and higher interest costs to support these
balances. The following table sets forth our historical net sales, gross profit,
income (loss) from operations and net income (loss), by quarter, for 2004 and
2003.

<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS ENDED,
                                               ---------------------------------------------------------------
                                               MARCH 31,     JUNE 30,       SEPTEMBER 30,         DECEMBER 31,
                                               ---------     --------       -------------         ------------
                                                                 (DOLLARS IN THOUSANDS)
<S>                                            <C>           <C>             <C>                  <C>
     2004
     Net sales..............................   $100,525      $ 96,316         $ 97,834              $104,541
     Gross profit...........................     34,444        30,726           31,744                35,845
     Income (loss) from operations..........     14,580        (1,298) (a)      12,270                15,854
     Net income (loss)......................      4,939        (5,127) (a)       2,815                 5,047

     2003

     Net sales..............................   $ 99,844      $100,996         $103,220              $ 98,756
     Gross profit...........................     32,875        32,046           34,978                33,792
     Income from operations.................     12,374 (b)    11,016 (b)(c)    14,378 (b)(c)         14,493
     Net income.............................      3,462 (b)     2,706 (b)(c)     5,226 (b)(c)(d)       5,769 (d)
</TABLE>

         (a)      In connection with the Transactions in April 2004, we recorded
                  non-recurring expenses of $11.8 million comprised of $6.2
                  million of debt retirement costs and the write-off of $5.6
                  million of deferred financing costs associated with the
                  repayment of debt in connection with the Transactions.

         (b)      We incurred restructuring charges of $0.3 million, $0.5
                  million, and $0.2 million during the first, second, and third
                  quarters of 2003, respectively. These charges resulted from
                  the consolidation of certain domestic and foreign distribution
                  operations, in addition to the integration of M&D Industries.

         (c)      During the second quarter of 2003, a customer filed a
                  voluntary petition for relief under Chapter 11 of the United
                  States Bankruptcy Code and, as a result, approximately $1.6
                  million and $0.2 million were charged

                                       24
<PAGE>
                  to the provision for doubtful accounts during the second and
                  third quarters of 2003, respectively. This customer accounted
                  for approximately 2.1% of our net sales for the year ended
                  December 31, 2003.

         (d)      We recognized gains of $1.0 million and $0.5 million during
                  the third and fourth quarter of 2003, respectively, from the
                  sale of shares of common stock of a customer which we had
                  received in connection with the customer's reorganization in
                  bankruptcy.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our earnings are affected by changes in interest rates as a result of
our variable rate indebtedness. However, we utilize interest rate swap
agreements to manage the market risk associated with fluctuations in interest
rates. If market interest rates for our variable rate indebtedness averaged 2%
more than the interest rate actually paid for the years ended December 31, 2004,
2003 and 2002, our interest expense, after considering the effects of our
interest rate swap agreements, would have increased, and income before income
taxes would have decreased, by $3.3 million, $2.1 million and $3.4 million,
respectively. These amounts are determined by considering the impact of the
hypothetical interest rates on our borrowings and interest rate swap agreements.
This analysis does not consider the effects of the reduced level of overall
economic activity that could exist in such an environment. Further, in the event
of a change of such magnitude, management would likely take actions to further
mitigate our exposure to the change. However, due to the uncertainty of the
specific actions that we would take and their possible effects, the sensitivity
analysis assumes no changes in our financial structure.

         Our earnings are also affected by fluctuations in the value of the U.S.
dollar as compared to foreign currencies, predominately in European countries,
as a result of the sales of our products in foreign markets. Although we
periodically enter into foreign currency forward contracts to hedge against the
earnings effects of such fluctuations, we may not be able to hedge such risks
completely or permanently. A uniform 10% strengthening in the value of the
dollar relative to the currencies in which our foreign sales are denominated
would have resulted in a decrease in gross profit of $1.9 million, $1.7 million
and $1.5 million for the years ended December 31, 2004, 2003 and 2002,
respectively. These calculations assume that each exchange rate would change in
the same direction relative to the U.S. dollar. In addition to the direct
effects of changes in exchange rates, which could change the U.S. dollar value
of the resulting sales, changes in exchange rates may also affect the volume of
sales or the foreign currency sales price as competitors' products become more
or less attractive. Our sensitivity analysis of the effects of changes in
foreign currency exchange rates does not factor in a potential change in sales
levels or local currency prices.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         See the consolidated financial statements and supplementary data
listed in the accompanying Index to Consolidated Financial Statements and
Financial Statement Schedule on page F-1 herein.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

         The Company's management, with the participation of the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of the Company's disclosure controls and procedures as of December 31, 2004.
Based on that evaluation, the Company's Chief Executive Officer and Chief
Financial Officer concluded that the Company's disclosure controls and
procedures were effective as of December 31, 2004. There were no material
changes to the Company's internal controls over financial reporting during the
fourth quarter of 2004.

ITEM 9B. OTHER INFORMATION

Not applicable.

                                       25
<PAGE>
                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          Set forth below are the names, ages and positions with the Company of
the persons who are serving as directors and executive officers of the Company
at March 25, 2005.

<TABLE>
<CAPTION>
         NAME                       AGE           POSITION
<S>                                 <C>       <C>
Gerald C. Rittenberg.................53       Chief Executive Officer and Director
James M. Harrison....................53       President, Chief Operating Officer and Director
Michael A. Correale..................47       Chief Financial Officer
Robert J. Small   ...................38       Chairman of the Board of Directors
Michael F. Cronin....................51       Director
Jordan A. Kahn  .....................63       Director
Kevin M. Hayes  .....................36       Director
Richard K. Lubin.....................58       Director
John R. Ranell  .....................58       Director
</TABLE>

         Gerald C. Rittenberg became our Chief Executive Officer in December
1997. From May 1997 until December 1997, Mr. Rittenberg served as acting
Chairman of the Board. Prior to that time, Mr. Rittenberg served as the
President of Amscan Inc., from April 1996 to October 1996, and as our President
from the time of our formation in October 1996.

         James M. Harrison became our President in December 1997 and our Chief
Operating Officer in March 2002. From February 1997 to March 2002, Mr. Harrison
also served as our Chief Financial Officer and Treasurer. From February 1997 to
December 1997, Mr. Harrison served as our Secretary. Prior to that time, Mr.
Harrison served as the Chief Financial Officer of Amscan Inc., from August 1996
to February 1997.

         Michael A. Correale became our Chief Financial Officer in March 2002.
Prior to that time, Mr. Correale served as our Vice President -- Finance, from
May 1997 to March 2002.

         Robert J. Small became one of our directors upon the consummation of
the Transactions. Mr. Small has been a Managing Director since January 2000. Mr.
Small is also a director of Hexcel Corporation.

         Michael F. Cronin became one of our directors upon the consummation of
the Transactions. From 1991 to the present, Mr. Cronin has served as Managing
Partner of Weston Presidio, a management company for several venture capital
limited liability partnerships. Mr. Cronin also serves as a Director of Nebraska
Books, Inc., Tekni-Plex, Inc., Tweeter Home Entertainment Group, Inc. and
several privately held companies.

         Kevin M. Hayes became one of our directors upon the consummation of the
Transactions. Mr. Hayes is a General Partner of Weston Presidio and has served
in that position since 2000. From 1996 to 1999, he was a Principal at Weston
Presidio. Mr. Hayes is also a director of Associated Materials Incorporated.

         Jordan A. Kahn became a director on January 20, 2005. Mr. Kahn is the
founder and Chairman of the Board of Directors of The Holmes' Group and has
served as President and Chief Executive Officer since Holmes' organization in
1982. Since 1968, Mr. Kahn has also been President of Jordan Kahn Co., Inc. a
manufacturer's representative representing small electric personal appliance
manufacturers to retailers across the Northeast.

         Richard K. Lubin became one of our directors upon the consummation of
the Transactions. Mr. Lubin is a Managing Director of Berkshire Partners LLC,
which he co-founded in 1986. He has been a director of many of Berkshire
Partners' manufacturing, retailing and transportation investments, and is a
director of U.S. Can Corporation and The Holmes' Group.

         John R. Ranelli became a director on January 20, 2005. Mr. Ranelli is
the Chairman of the Board and Chief Executive Officer of FGX, a brand leader in
sunglasses and reading glasses. Mr Ranelli is also a Director of Deckers


                                       26
<PAGE>
Outdoor Corporation

Board of Directors

         The Board of Directors is led by Robert J. Small, a Non-Executive
Chairman of the Board, and is comprised of five additional non-employee
directors and two employee directors. The Board of Directors has determined that
Jordan A. Kahn and John Ranelli are independent directors, as used in Item
7(d)(iv) of Schedule 14A under the Securities Exchange Act.

         The Board of Directors holds regularly scheduled meetings each quarter.
In addition to the quarterly meetings, there are typically other regularly
scheduled meetings and several special meetings annually. At each quarterly
meeting, time is set aside for the non-management directors to meet without
management present.

Audit Committee

         The Audit Committee of the Board of Directors consists of Robert J.
Small, Chairman, Michael F. Cronin and James M. Harrison. The Audit Committee is
responsible for evaluating and recommending independent auditors, reviewing with
the independent auditors the scope and results of the audit engagement and
establishing and monitoring the Company's financial policies and control
procedures. The Audit Committee holds regularly scheduled meetings each quarter.
In addition to the quarterly meetings, there are typically other regularly
scheduled meetings and several special meetings each year.

         As required by SEC rules, the Audit Committee has established
procedures for the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls or auditing
matters, as well as the confidential and anonymous submission of information,
written or oral, by Company employees regarding questionable accounting or
auditing matters.

         The Board of Directors has determined Mr. Harrison has the requisite
financial knowledge and experience and qualifies as an "audit committee
financial expert" within the meaning of SEC regulations. Because of his role as
an executive officer of the Company, Mr. Harrison is not "independent" within
the meaning of SEC regulations.

Compensation Committee

         The Compensation Committee of the Board of Directors consists of
Richard K. Lubin, Chairman, Kevin M. Hayes and Gerald C. Rittenberg. The
Compensation Committee is responsible for setting and administering the
Company's policies that govern executive compensation and for establishing the
compensation of the Company's executive officers. The Compensation Committee is
also responsible for the administration of, and grants under, the Company's
equity incentive plan.

CODE OF ETHICS

         The Company has adopted a Code of Business Conduct, a copy of which is
filed with the Securities and Exchange Commission as an exhibit to this report.
The Company's Code of Business Conduct is a "code of ethics," as defined in Item
406(b) of Regulation S-K of the Securities and Exchange Commission.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Because the Company Common Stock is not registered under the Exchange
Act, none of the Company's directors, officers or stockholders is obligated to
file reports of beneficial ownership of Company Common Stock pursuant to Section
16 of the Exchange Act.

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

         The following table sets forth information concerning the compensation
earned for the past three years by the Company's Chief Executive Officer and all
other executive officers of the Company as of December 31, 2004 whose aggregate


                                       27
<PAGE>
salary and bonus for 2004 exceeded $100,000. The amounts shown include
compensation for services in all capacities that were provided to the Company or
its subsidiaries. Amounts shown were paid by the Company's principal subsidiary,
Amscan Inc.

<TABLE>
<CAPTION>
                                                                       Long-Term Compensation
                                                                      No. of  Securities Under-          All Other
Name and Principal Position       Year      Salary       Bonus (a)      lying Options Granted         Compensation (b)
---------------------------       ----      ------       ---------      ---------------------         ----------------
<S>                               <C>      <C>           <C>          <C>                             <C>
Gerald C. Rittenberg              2004     $500,000       $330,000                                         $9,139
  Chief Executive Officer         2003      500,000        766,263            25(c)                        $7,694
                                  2002      325,328        722,000                                          9,115

James M. Harrison                 2004     $450,000       $297,000                                         $9,139
  President and Chief             2003      450,000        689,058            25(c)                         7,694
  Operating Officer               2002      303,188        649,000                                          9,115

James F. Flanagan (d)             2004     $250,000                                                        $9,139
  Executive Vice President        2003     $250,000       $150,000                                          7,694
                                  2002      250,000        150,000            2.5(c)                        3,615

Michael A. Correale               2004     $195,000        $70,000                                         $8,589
  Chief Financial Officer         2003     $193,269        $75,000              4(c)                       $7,544
                                  2002      183,100         75,000                                          9,115
</TABLE>


(a) Represents amounts earned with respect to the years indicated, whether paid
    or accrued.

(b) Represents contributions by the Company under a profit sharing and savings
    plan, as well as insurance premiums paid by the Company with respect to term
    life insurance for the benefit of the named executive officer.

(c) Represents options granted to named executive officer.

(d) Mr. Flanagan resigned his position with the Company in January 2005.



OPTION GRANTS TABLE

         The following table sets forth information concerning rollover options
which were granted during 2004 to the executive officers named in the Summary
Compensation Table. Information with respect to options relates to options on
the Company Common Stock at December 31, 2004.

<TABLE>
<CAPTION>
                                                                                              POTENTIAL REALIZABLE VALUE AT
                   NUMBER OF         % OF                                                        ASSUMED ANNUAL RATES OF
                  SECURITIES      TOTAL OPTIONS                  MARKET                        STOCK PRICE APPRECIATION FOR
                  UNDERLYING       GRANTED TO                   PRICE AT                             OPTION TERM
                   OPTIONS        EMPLOYEES IN     EXERCISE      DATE OF      EXPIRATION             -----------
    NAME         GRANTED (1)       FISCAL YEAR       PRICE      GRANT (2)        DATE            5%               10%
    ----         -----------       -----------       -----      ---------        ----            --               ---
<S>              <C>              <C>              <C>          <C>           <C>              <C>           <C>
    Gerald C.
      Rittenberg      65.455           67%           $2,500       $10,000       April 30,        $902,559    $1,534,103
                                                                                  2014

    James M.
      Harrison        32.727           33%           $2,500       $10,000       April 30,        $451,272    $  767,040
                                                                                  2014
</TABLE>

(1)   In connection with the Transactions, all unvested options granted prior to
      the Transactions vested immediately on April 30, 2004 and, except for
      those held by the Chief Executive Officer and the President all were
      exercised. The Chief Executive Officer and the President exchanged vested
      options to purchase 5.607 and 2.804 shares of Amscan Common Stock, with
      intrinsic values of $600,000 and $300,000, respectively, for vested
      options to purchase 65.455 and 32.727 shares of AAH Holdings Common Stock,
      under the new equity incentive plan (the "Rollover Options") with
      intrinsic values of $492,000 and $245,000 and estimated fair values of
      $590,000 and $290,000, respectively.


                                       28
<PAGE>
(2)  Assumes a fair market value of the Common Stock underlying the rollover
     options of $10,000, based on the value of Company Common Stock at April 30,
     2004. The rollover options are fully vested and expire on April 30, 2014.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                Predecessor Shares
Name                           Acquired on Exercise          Value Realized
----                           --------------------          --------------
<S>                            <C>                           <C>
Gerald C. Rittenberg                 41.648                    $2,581,336

James M. Harrison                    41.268                    $2,589,645

Michael A. Correale                   6.570                      $406,972

James F. Flanagan                     5.000                      $147,500
</TABLE>

In connection with the Transactions, all unvested options granted prior to the
Transactions vested immediately on April 30, 2004 and, with the exception of
5.607 and 2.804 options held by Messrs. Rittenberg and Harrison, respectively,
all options were exercised.

FISCAL 2004 YEAR END OPTION VALUES

<TABLE>
<CAPTION>
                                     Number of Securities               Value of Unexercised In the Money
                              Underlying Unexercised Options               Options at Fiscal Year End
                              ------------------------------           -----------------------------------

Name                            Exercisable        Unexercisable       Exercisable           Unexercisable
----                            -----------        -------------       -----------           -------------
<S>                           <C>                  <C>                 <C>                   <C>
Gerald C. Rittenberg              65.455              -                  $492,000              $      -

James M. Harrison                 32.727              -                   245,000                     -
</TABLE>

         The value of unexercised in the money options is based on the value of
Company Common Stock of $10,000 per share at December 31, 2004.

EMPLOYMENT ARRANGEMENTS

         Employment Agreement with Gerald C. Rittenberg. Gerald C. Rittenberg
entered into an employment agreement with us, dated June 19, 2003, which is
referred to as the Rittenberg Employment Agreement, pursuant to which Mr.
Rittenberg serves as our Chief Executive Officer for a term expiring December
31, 2005. This term will be extended automatically for successive additional
one-year periods, unless either we give Mr. Rittenberg, or Mr. Rittenberg gives
us written notice of the intention not to extend the term. Such notices must be
given no less than twelve months prior to the end of the term then in effect.
During 2004, Mr. Rittenberg received an annual base salary of $500,000, which
will increase by 5% annually for the term of the Rittenberg Employment
Agreement. Mr. Rittenberg will be eligible for an annual bonus for each calendar
year if certain operational and financial targets are attained as determined by
both our compensation committee and board of directors in consultation with Mr.
Rittenberg. A discretionary bonus may be awarded in the sole discretion of our
board of directors. The Rittenberg Employment Agreement also provides for other
customary benefits including incentive, savings and retirement plans, paid
vacation, health care and life insurance plans and expense reimbursement.

         Under the Rittenberg Employment Agreement, if we terminate Mr.
Rittenberg's employment other than for cause, death or disability, we would be
obligated to pay Mr. Rittenberg a lump sum cash payment in an amount equal to
the sum of (1) accrued unpaid salary, earned but unpaid bonus for any prior
year, any deferred compensation and accrued but unpaid vacation pay,
collectively referred to as Accrued Obligations, plus (2) severance pay equal to
his annual base salary, provided, however, that in connection with a termination
by us other than for cause or due to his death or disability, such


                                       29
<PAGE>
severance pay will be equal to Mr. Rittenberg's annual base salary multiplied by
the number of years we elect as the Restriction Period (as defined below). Upon
termination of Mr. Rittenberg's employment by us for cause, death or disability
or if he terminates his employment, Mr. Rittenberg will be entitled to his
unpaid Accrued Obligations. Additionally, upon termination of Mr. Rittenberg's
employment during the current term or any additional term (1) by us other than
for cause, (2) by reason of his death or disability or (3) if the current term
or any additional term is not renewed at its expiration (other than for cause),
the Rittenberg Employment Agreement provides for payment of a prorated portion
of the bonus to which Mr. Rittenberg would otherwise have been entitled.

         The Rittenberg Employment Agreement also provides that during his
current term, any additional term and during the three-year period following any
termination of his employment, referred to as the Restriction Period, Mr.
Rittenberg will not participate in or permit his name to be used or become
associated with any person or entity that is or intends to be engaged in any
business that is in competition with our business, or any of our subsidiaries or
controlled affiliates, in any country in which we or any of our subsidiaries or
controlled affiliates operate, compete or are engaged in such business or at
such time intend to so operate, compete or become engaged in such business.
However, if we terminate Mr. Rittenberg's employment other than for cause or due
to his death or disability, the Restriction Period will be instead a one, two or
three-year period at our election. If all, or substantially all, of our stock or
assets is sold or otherwise disposed of to a third party not affiliated with us
and Mr. Rittenberg is not offered employment on substantially similar terms by
us or by one of our continuing affiliates immediately thereafter, then for all
purposes of the Rittenberg Employment Agreement, Mr. Rittenberg's employment
shall be deemed to have been terminated by us other than for cause effective as
of the date of such sale or disposition, provided, however, that we shall have
no obligations to Mr. Rittenberg if he is hired or offered employment on
substantially similar terms by the purchaser of our stock or assets. The
Rittenberg Employment Agreement also provides for certain other restrictions
during the Restriction Period in connection with (a) the solicitation of persons
or entities with whom we have business relationships and (b) inducing any of our
employees to terminate their employment or offering employment to such persons,
in each case subject to certain conditions.

         Employment Agreement with James M. Harrison. James M. Harrison entered
into an employment agreement with us, dated June 19, 2003, which is referred to
as the Harrison Employment Agreement, pursuant to which Mr. Harrison serves as
our President for a term expiring December 31, 2005. During 2004, Mr. Harrison
received an annual base salary of $450,000, which will increase by 5% annually
during the term of the Harrison Employment Agreement. The Harrison Employment
Agreement contains provisions for additional renewal terms, salary increases
during additional terms, non-discretionary and discretionary bonus payments,
severance, other benefits, definitions of cause and disability, and provisions
for non-competition and non-solicitation similar to those in the Rittenberg
Employment Agreement.

         Employment Agreement with James F. Flanagan. James F. Flanagan entered
into an employment agreement with us, dated January 1, 2002, which is referred
to as the Flanagan Employment Agreement, pursuant to which Mr. Flanagan served
as our Executive Vice President through December 31, 2004. For the term of the
agreement, Mr. Flanagan received an annual salary of $250,000. The Flanagan
Employment Agreement contained provisions for additional renewal terms,
severance and other benefits, and definitions of cause and disability. The
Flanagan Employment Agreement also provided that upon termination of employment
he may not, for a period of one year, be employed by, or associated in any
manner with, any business that is in competition with us. In January 2005, Mr.
Flanagan resigned his position with the Company.

2004 Equity Incentive Plan

         Following the consummation of the Transactions, the Company adopted the
AAH Holdings Corporation 2004 Equity Incentive Plan (the "Equity Incentive
Plan") under which the Company may grant incentive awards in the form of options
to purchase shares of Company Common Stock ("Company Stock Options") and shares
of restricted and unrestricted Company Common Stock to certain directors,
officers, employees and consultants ("Participants") of the Company and its
affiliates. A committee of the Company's board of directors (the "Committee"),
or the board itself in the absence of a Committee, is authorized to make grants
and various other decisions under the Equity Incentive Plan. Unless otherwise
determined by the Committee, any Participant granted an award under the Equity
Incentive Plan must become a party to, and agree to be bound by, the
Stockholders' Agreement.

         Company Stock Option awards under the Equity Incentive Plan reserved
and available for grant total 1,702.9316 and may include incentive stock
options, nonqualified stock options, or both types of Company Stock Options.
Company Stock Options are nontransferable (except under certain limited
circumstances) and, unless otherwise determined by the


                                       30
<PAGE>
Committee, have a term of ten years. Upon a Participant's death or when the
Participant's employment with the Company or the applicable affiliate of the
Company is terminated for any reason, such Participant's previously unvested
Company Stock Options are forfeited and the Participant or his or her legal
representative may, within 60 days (if termination of employment is for any
reason other than death) or 90 days (in the case of the Participant's death),
exercise any previously time- vested Company Stock Options and in the case of
performance based Options, within 30 days following the date value determined as
specified by the Board in the Option agreement evidencing the grant of such
Options.

         Unless otherwise provided in the related award agreement or, if
applicable, the Stockholders' Agreement, immediately prior to certain change of
control transactions described in the Equity Incentive Plan, all outstanding
Company Stock Options will, subject to certain limitations, become fully
exercisable and vested and any restrictions and deferral limitations applicable
to any restricted stock awards will lapse.

         The Equity Incentive Plan will terminate ten years after its effective
date; however, awards outstanding as of such date will not be affected or
impaired by such termination. The Company's board of directors and the Committee
has authority to amend the Equity Incentive Plan and awards granted thereunder,
subject to the terms of the Equity Incentive Plan.

COMPENSATION OF DIRECTORS

         During 2004, the Company did not compensate its directors other than
for expense reimbursement. The Company has agreed to pay its independent
directors an annual fee, for 2005, of $20,000 and fees of $1,500 and $2,500 for
regular and special meetings of the Board.

STOCK PERFORMANCE GRAPH

         The Company's Common Stock has not traded publicly during the past five
years. For this reason a graph indicating the relative performance of the
Company Common Stock price to other standard measures has not been included
since it would provide no meaningful information.

COMPENSATION COMMITTEE POLICIES

         During 2004, the compensation of executive officers of the Company,
with the exception of Mr. Correale, was paid pursuant to the terms of existing
employment agreements. The compensation paid to Mr. Correale was based on
competitive salaries observed within the labor market.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         To the knowledge of the Company, no relationship of the type described
in Item 402(j)(3) of Regulation S-K existed during 2004 with respect to the
Company.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

         On April 30, 2004, upon completion of the Transactions, we became a
wholly-owned subsidiary of AAH Holdings. At such time, a group of investors
comprised of certain affiliated funds of Berkshire Partners LLC and Weston
Presidio, together with employee stockholders owned substantially all of the
outstanding stock of our parent, AAH Holdings.

         As of December 31, 2004, the issued and outstanding capital stock of
AAH Holdings consisted of 13,962.38 shares of common stock, par value $.01 per
share. The number of shares of AAH Holdings common stock outstanding used in
calculating the percentage for each listed person includes the shares of AAH
Holdings common stock underlying the options beneficially owned by that person
that are exercisable within 60 days following December 31, 2004. The
stockholders agreement of AAH Holdings governs the stockholders' exercise of
their voting rights with respect to the election of directors and other material
events. See "Certain Relationships and Related Party Transactions -- Arrangement
with Our Investors."

         The following table sets forth information with respect to the
beneficial ownership of AAH Holdings common stock as of March 25, 2005 (i) by
each person known by us to own beneficially more than 5% of such class of
securities, (ii) by each director and named executive officer and (iii) by all
directors and executive officers as a group. Unless otherwise noted, to our
knowledge, each of such stockholders has sole voting and investment power as to
the shares shown.


                                       31
<PAGE>
<TABLE>
<CAPTION>
                                                       SHARES OF COMPANY              PERCENTAGE
                                                          COMMON STOCK                 OF CLASS
NAME OF BENEFICIAL OWNER                               BENEFICIALLY OWNED             OUTSTANDING
------------------------                               ------------------             -----------
<S>                                                    <C>                            <C>
Berkshire Partners LLC (1)...........................       9,060.3150                     64.9 %
Weston Presidio (2)..................................       4,530.1576                     32.5 %
Michael A. Correale++................................           7.6000                       *
Michael F. Cronin (3)+ ..............................       4,530.1576                     32.5 %
James M. Harrison (4)+, ++ ..........................          82.7270                       *
Kevin M. Hayes (3)+ .................................       4,530.1576                     32.5 %
Richard K. Lubin (5)+ ...............................       9,060.3151                     64.9 %
Gerald C. Rittenberg (6)+, ++ .......................         165.4550                      1.2 %
Robert J. Small (5)+.................................       9,060.3151                     64.9 %
All directors and executive officers
     as a group (9 persons)..........................      13,748.0720                      98.5%
</TABLE>

*    Less than 1%
+    Director
++   Named Executive Officer

(1) Consists of (i) 4,118.3209 shares of common stock owned by Berkshire Fund V,
    Limited Partnership, (ii) 4,486.9942 shares of common stock owned by
    Berkshire Fund VI, Limited Partnership and (iii) 454.9999 shares of common
    stock owned by Berkshire Investors LLC. The address of Berkshire Partners
    LLC is One Boston Place, Suite 3300, Boston, Massachusetts 02108.

(2) Consists of (i) 4,459.5663 shares of common stock owned by Weston Presidio
    Capital IV, L.P. and (ii) 70.5913 shares of common stock owned by WPC
    Entrepreneur Fund II, L.P. The address of Weston Presidio is 200 Clarendon
    Street, 50th Floor, Boston, Massachusetts 02116.

(3) Mr. Cronin is a Managing Partner of Weston Presidio and Mr. Hayes is a
    General Partner of Weston Presidio. Mr. Cronin and Mr. Hayes each disclaims
    beneficial ownership of the shares held by Weston Presidio, except to the
    extent of his pecuniary interest therein. Their addresses are 200 Clarendon
    Street, 50th Floor, Boston, Massachusetts 02116.

(4) Includes 32.7270 shares which could be acquired by Mr. Harrison within 60
    days upon exercise of options.

(5) Mr. Lubin and Mr. Small are Managing Directors of Berkshire Partners LLC.
    Mr. Lubin and Mr. Small each disclaims beneficial ownership of the shares
    held by Berkshire Partners LLC, except to the extent of his pecuniary
    interest therein. Their addresses are One Boston Place, Suite 3300, Boston,
    Massachusetts 02108.

(6) Includes 65.4550 shares which could be acquired by Mr. Rittenberg within 60
    days upon exercise of options.

STOCKHOLDERS AGREEMENT

         As of April 30, 2004, the Company entered into a stockholders'
agreement with the Principal Investors, other investors and certain employees of
the Company listed as parties thereto. The following discussion summarizes the
terms of the Stockholders Agreement which the Company believes are material to
an investor in the debt or equity securities of the Company. The Stockholders
Agreement provides, among other things, for (i) the right of the non-principal
investors to participate in, and the right of the Principal Investors to require
the non-principal investors to participate in, certain sales of Company Common
Stock by the Principal Investors, (ii) prior to an initial public offering of
the stock of the Company (as defined in the Stockholders Agreement), certain
rights of the Company to purchase, and certain rights of the non-principal
investors to require the Company to purchase (except in the case of termination
of employment by such non-principal investors) all, but not less than all, of
the shares of Company Common Stock owned by a non-principal investor upon the
termination of employment or death of such non-principal investor, at prices
determined in accordance with the Stockholders Agreement and (iii) certain
additional restrictions on the rights of the non-principal investors to transfer
shares of Company Common Stock. The Stockholders' Agreement also contains
certain provisions granting the Principal Investors and the non-principal
investors


                                       32
<PAGE>
certain rights in connection with registrations of Company Common Stock in
certain offerings and provides for indemnification and certain other rights,
restrictions and obligations in connection with such registrations.

         For information concerning our equity compensation plans, see "Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities."

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          GSCP received fees totaling $8,123,000 for services provided in
connection with the Transactions.

          In connection with the Transactions, the Company executed a management
agreement with Berkshire Partners LLC and Weston Presidio. Pursuant to the
management agreement, Berkshire Partners LLC and Weston Presidio will be paid
annual management fees of $833,000 and $417,000, respectively. For the eight
months ended December 31, 2004, management fees to Berkshire Partners LLC and
Weston Presidio were $556,000 and $277,000, respectively. At December 31, 2004,
accrued management fees payable to Berkshire Partners LLC and Weston Presidio
totaled $139,000 and $277,000, respectively. Although the indenture governing
the 8.75% senior subordinated notes will permit the payments under the
management agreement, such payments will be restricted during an event of
default under the notes and will be subordinated in right of payment to all
obligations due with respect to the notes in the event of a bankruptcy or
similar proceeding of Amscan.

           During the four months ended April 30, 2004, the Company sold
$836,000 of metallic balloons and other party goods to American Greetings
Corporation, a minority stockholder from February 2002 through the date of the
Transactions.

         In connection with the Transactions, Messrs. Rittenberg, Harrison,
Correale and Flanagan exercised their options and realized values of $2,581,336,
$2,589,645, $406,792, and $147,500, respectively.

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

         Fees for audit services totaled $1,130,000 and $555,000 for the fiscal
years ended December 31, 2004 and 2003, respectively. These fees included the
audit of the consolidated financial statements; reviews of financial statements
included in the Company's Quarterly Reports on Form 10-Q; assistance with SEC
filings, including comfort letters, consents and comment letters; and accounting
consultations on matters addressed during the audit or interim reviews.

AUDIT-RELATED FEES

         Fees for audit-related services totaled $132,000 and $128,000 for the
fiscal years ended December 31, 2004 and 2003, respectively. Such fees related
to the audits of the Company's employee benefit plans; due diligence services;
statutory audits incremental to the audit of the consolidated financial
statements; and general assistance with implementation of the requirements of
SEC rules pursuant to the Sarbanes-Oxley Act of 2002.

TAX FEES

         Fees for tax services, including tax compliance, tax advice and tax
planning, totaled $44,000 and $81,000 for the fiscal years ended December 31,
2004 and 2003, respectively.

ALL OTHER FEES

         All other fees totaled $1,500 for each of the fiscal years ended
December 31, 2004 and 2003, respectively, and related to a subscription to the
Ernst & Young Global Accounting and Auditing Information Tool.

         The Company's Audit Committee appoints the independent registered
public accounting firm and pre-approves the fee arrangements with respect to the
above accounting fees and services.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES


                                       33
<PAGE>
 (a) Documents filed as part of this report:
              1. and 2.  Financial Statements and Schedule.

                  See Index to Consolidated Financial Statements and Financial
                  Statement Schedule which appears on page F-1 herein.

              3.  Exhibits

<TABLE>
<CAPTION>
   Exhibit
   Number                             Description
   ------                             -----------
<S>         <C>
3(1)        Amended Articles of Incorporation of Anagram International, Inc.
            (incorporated by reference to Exhibit 3(1) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

3(2)        By-Laws of Anagram International, Inc. (incorporated by reference to
            Exhibit 3(2) to the Registrant's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 2004 (Commission File No. 000-21827))

3(3)        Articles of Incorporation of Anagram International Holdings, Inc.
            (incorporated by reference to Exhibit 3(3) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

3(4)        By-Laws of Anagram International Holdings, Inc. (incorporated by
            reference to Exhibit 3(4) to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
            000-21827))

3(5)        Articles of Organization of Anagram International, LLC (incorporated
            by reference to Exhibit 3(5) to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
            000-21827))

3(6)        Operating Agreement of Anagram International, LLC (incorporated by
            reference to Exhibit 3(6) to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
            000-21827))

3(7)        Certificate of Formation of Anagram Eden Prairie Property Holdings
            LLC (incorporated by reference to Exhibit 3(7) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

3(8)        Plan of Merger of Am-Source, Inc. into Am-Source, LLC dated February
            28, 2000 and Articles of Organization of Am-Source, LLC.
            (incorporated by reference to Exhibit 3(8) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

3(9)        Operating Agreement of Am-Source, LLC. (incorporated by reference to
            Exhibit 3(9) to the Registrant's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 2004 (Commission File No. 000-21827))

3(10)       Certificate of Incorporation of M&D Industries, Inc. (incorporated
            by reference to Exhibit 3(10) to the Registrant's Quarterly Report
            on Form 10-Q for the quarter ended June 30, 2004 (Commission File
            No. 000-21827))

3(11)       By-Laws of M&D Industries, Inc. (incorporated by reference to
            Exhibit 3(11) to the Registrant's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 2004 (Commission File No. 000-21827))

4(1)        Indenture, dated as of April 30, 2004, by and among the Company, the
            Guarantors named therein and The Bank of New York with respect to
            the 8.75% Senior Subordinated Notes due 2014. (incorporated by
            reference to Exhibit 4(1) to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
            000-21827))
</TABLE>


                                       34
<PAGE>
<TABLE>
<S>         <C>
4(2)        First Supplemental Indenture, dated as of June 21, 2004 by and among
            the Company, the Guarantors named therein and The Bank of New York
            with respect to the 8.75% Senior Subordinated Notes due 2014
            (incorporated by reference to Exhibit 4(2) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

4(3)        Exchange and Registration Rights Agreement dated April 30, 2004 by
            and among the Company, the Guarantors named therein and Goldman,
            Sachs & Co. and Credit Suisse First Boston LLC. (incorporated by
            reference to Exhibit 4(3) to the Registrant's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 2004 (Commission File No.
            000-21827))

10(1)       Credit and Guaranty Agreement, dated as of April 30, 2004, by and
            among AAH Holdings Corporation, Amscan Holdings, Inc., certain
            subsidiaries of Amscan Holdings, Inc., Goldman Sachs Credit
            Partners, L.P., as Joint Lead Arranger, Joint Bookrunner and
            Co-Syndication Agent, General Electric Capital Corporation, as
            Administrative Agent and Collateral Agent, and J.P. Morgan
            Securities Inc., as Joint Lead Arranger, Joint Bookrunner and
            Co-Syndication Agent. (incorporated by reference to Exhibit 10(1) to
            the Registrant's Quarterly Report on Form 10-Q for the quarter ended
            June 30, 2004 (Commission File No. 000-21827))

10(2)       Counterpart Agreement, dated as of July 16, 2004, of Anagram
            International, LLC to the Credit and Guaranty Agreement
            (incorporated by reference to Exhibit 10(2) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

10(3)       Purchase Agreement dated April 27, 2004 by and among AAH Holdings
            Corporation, Asmcan Holdings, Inc., the Guarantors named therein and
            Goldman, Sachs & Co. and Credit Suisse First Boston LLC.
            (incorporated by reference to Exhibit 10(3) to the Registrant's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 2004
            (Commission File No. 000-21827))

10(4)       Stockholders' Agreement of AAH Holdings Corporation dated as of
            April 30, 2004 (incorporated by reference to Exhibit 10(4) to the
            Registrant's Quarterly Report on Form 10-Q for the quarter ended
            June 30, 2004 (Commission File No. 000-21827))

10(5)       Amendment No. 1 to the Stockholders' Agreement of AAH Holdings
            Corporation dated as of May 24, 2004 (incorporated by reference to
            Exhibit 10(5) to the Registrant's Quarterly Report on Form 10-Q for
            the quarter ended June 30, 2004 (Commission File No. 000-21827))

10(6)       2004 Equity Incentive Plan of AAH Holdings Corporation (incorporated
            by reference to Exhibit 10(6) to the Registrant's Quarterly Report
            on Form 10-Q for the quarter ended June 30, 2004 (Commission File
            No. 000-21827))

10(7)       Stock Purchase Agreement, dated as of August 6, 1998, by and among
            Amscan Holdings, Inc. and certain stockholders of Anagram
            International, Inc. and certain related companies (incorporated by
            reference to Exhibit 2.1 to the Registrant's Quarterly Report on
            Form 8-K dated August 6, 1998 (Commission File No. 000-21827))

10(8)       Certificate of Incorporation of Amscan Holdings, Inc., dated October
            3, 1996, as amended to March 30, 2001 (incorporated by reference to
            Exhibit 3(a) to the Registrant's Annual Report on Form 10-K for the
            year ended December 31, 2000 (Commission File No. 000-21827))

10(9)       Amended By-Laws of Amscan Holdings, Inc. (incorporated by reference
            to Exhibit 3.2 to the Registrant's Registration Statement on Form
            S-4 (Registration No. 333-45457))

10(11)      Tax Indemnification Agreement between Amscan Holdings, Inc., and
            John A. Svenningsen, dated as of December 18, 1996 (incorporated by
            reference to Exhibit 10(j) to the Registrant's 1996 Annual Report on
            Form 10-K (Commission File No. 000-21827))
</TABLE>


                                       35
<PAGE>
<TABLE>
<S>         <C>
10(12)      Tax Indemnification Agreement between Amscan Holdings, Inc.,
            Christine Svenningsen and the Estate of John A. Svenningsen, dated
            as of August 10, 1997 (incorporated by reference to Exhibit 10.17 to
            the Registrant's Registration Statement on Form S-4 (Registration
            No. 333-40235))

10(13)      The MetLife Capital Corporation Master Lease Purchase Agreement
            between MetLife Capital Corporation and Amscan Inc., Deco Paper
            Products, Inc., Kookaburra USA Ltd., and Trisar, Inc., dated
            November 21, 1991, as amended (incorporated by reference to Exhibit
            10(n) to Amendment No. 2 to the Registrant's Registration Statement
            on Form S-1 (Registration No. 333-14107))

10(14)      Form of Indemnification Agreement between the Company and each of
            the directors of the Company (incorporated by reference to Exhibit
            10(o) to Amendment No. 2 to the Registrant's Registration Statement
            on Form S-1 (Registration No. 333-14107))

10(15)      Employment Agreement, dated as of January 1, 2002, by and among the
            Company and James F. Flanagan (incorporated by reference to Exhibit
            10(p) to the Registrant's Annual Report on Form 10-K for the year
            ended December 31, 2001 (Commission File No. 000-21827))

10(16)      Employment Agreement, dated as of June 19, 2003, by and among the
            Company and Gerald C. Rittenberg (incorporated by reference to
            Exhibit 10(b) to the Registrant's Current Report on Form 10-Q for
            the quarter ended September 30, 2003 (Commission File No.
            000-21827))

10(17)      Employment Agreement, dated as of June 19, 2003, by and among the
            Company and James M. Harrison (incorporated by reference to Exhibit
            10(c) to the Registrant's Current Report on Form 10-Q for the
            quarter ended September 30, 2003 (Commission File No. 000-21827))

10(18)      Agreement and Plan of Merger, dated as of March 26, 2004, by and
            among Amscan Holdings, Inc., AAH Holdings Corporation and AAH
            Acquisition Corporation (incorporated by reference to Exhibit 2.1 to
            the Registrant's Current Report on Form 8-K dated March 29, 2004
            (Commission File No. 000-21827))

10(19)      Form of Support Agreement, dated as of March 26, 2004, by and among
            AAH Holdings Inc. and Stockholder (incorporated by reference to
            Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated
            March 29, 2004 (Commission File No. 000-21827))

10(20)      Press Release, dated as of March 29, 2004, jointly issued by Amscan
            Holdings, Inc., Berkshire Partners LLC and Weston Presidio
            (incorporated by reference to Exhibit 99.1 to the Registrant's
            Current Report on Form 8-K dated March 29, 2004 (Commission File No.
            000-21827))

12          Statement re: computation of ratio of earnings to fixed charges

14          Code of Business Conduct (incorporated by reference to Exhibit 14 to
            the Registrant's Current Report on Form 10-K for the year ended
            December 31, 2003 (Commission File No. 000-21827))

21          Subsidiaries of the Registrant (incorporated by reference to Exhibit
            21 to the Registrant's Registration Statement on Form S-1
            (Registration No. 333-90404))

23          Consent of Ernst & Young LLP

31.1        Certification by Chief Executive Officer Pursuant to Rule 15d-14 (a)

31.2        Certification by Chief Financial Officer Pursuant to Rule 15d-14 (a)

32          Certification of Chief Executive Officer and Chief Financial Officer
            Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
            906 of the Sarbanes-Oxley Act of 2002
</TABLE>

     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
     SECTION 15(D) OF THE ACT BY


                                       36
<PAGE>
   REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF
                                    THE ACT.

         The Company will not send to its security holders an annual report for
the year ended December 31, 2004. In April 2004, the Company sent proxy
soliciting materials with respect to its annual meeting of security holders held
on April 21, 2004.

                                   SIGNATURES

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

                              AMSCAN HOLDINGS, INC.

                           By: /s/ Michael A. Correale
                               -----------------------
                               Michael A. Correale
                             Chief Financial Officer

Date:  March 31, 2005

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

<TABLE>
<CAPTION>
             Signature                                Title                        Date
             ---------                                -----                        ----
<S>                                       <C>                                 <C>
/s/ Robert J. Small
---------------------                     Chairman of the Board of            March 31, 2005
Robert J. Small                           Directors

/s/ Michael F. Cronin
--------------------
Michael F. Cronin                         Director                            March 31, 2005

/s/ Kevin M. Hayes
--------------------
Kevin M. Hayes                            Director                            March 31, 2005

/s/ Jordan A. Kahn
--------------------
Jordan A. Kahn                            Director                            March 31, 2005

/s/ Richard K. Lubin
--------------------
Richard K. Lubin                          Director                            March 31, 2005

/s/ John R. Ranelli
--------------------
John R. Ranelli                           Director                            March 31, 2005



/s/ Gerald C. Rittenberg                  Chief Executive Officer and         March 31, 2005
------------------------                  Director
Gerald C. Rittenberg


/s/ James M. Harrison                     President, Chief Operating Officer  March 31, 2005
---------------------                     and Director
James M. Harrison
</TABLE>


                                       37
<PAGE>
<TABLE>
<S>                                       <C>                                 <C>
/s/ Michael A. Correale                   Chief Financial Officer             March 31, 2005
-----------------------                   (principal financial and
Michael A. Correale                       accounting officer)
</TABLE>


                                       38
<PAGE>
                                    FORM 10-K
                           ITEM 8, ITEM 15(A) 1 AND 2

                              AMSCAN HOLDINGS, INC.
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                        AND FINANCIAL STATEMENT SCHEDULE
                                DECEMBER 31, 2004

<TABLE>
<CAPTION>
                                                                                                           Page
                                                                                                           ----
<S>                                                                                                        <C>
    Report of Independent Registered Public Accounting Firm......................................          F-2

    Consolidated Balance Sheets at December 31, 2004 (Successor) and December 31, 2003
        (Predecessor)............................................................................          F-3

    Consolidated Statements of Operations for the Eight Months Ended December 31, 2004
        (Successor), the Four Months Ended April 30, 2004 (Predecessor), and the Years
        Ended December 31, 2003 and 2002 (Predecessor) ..........................................          F-4

    Consolidated Statements of Stockholders' Equity (Deficit) for the Eight Months Ended
        December 31, 2004 (Successor), the Four Months Ended April 30, 2004 (Predecessor),
        and the Years Ended December 31, 2003 and 2002 (Predecessor).............................          F-5

    Consolidated Statements of Cash Flows for the Eight Months Ended December 31, 2004
         (Successor), the Four Months Ended April 30, 2004 (Predecessor),
         and the Years Ended December 31, 2003 and 2002 (Predecessor)............................          F-7

    Notes to Consolidated Financial Statements...................................................          F-9



    Financial Statement Schedule for the Eight Months Ended December 31, 2004
      (Successor), the Four Months Ended April 30, 2004 (Predecessor), and the
      Years Ended December 31, 2003 and 2002 (Predecessor):

    Schedule II - Valuation and Qualifying Accounts..............................................          F-39
</TABLE>




All other schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are inapplicable and therefore have been omitted.


                                      F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
Amscan Holdings, Inc.

We have audited the accompanying consolidated balance sheet of Amscan Holdings,
Inc. as of December 31, 2004 (Successor Company) and 2003 (Predecessor Company),
and the related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the period from May 1, 2004 through December 31,
2004 (Successor Company), the period from January 1, 2004 through April 30,
2004, and for each of the two years in the period ended December 31, 2003
(Predecessor Company). Our audits also included the financial statement schedule
listed in the Index at Item 15(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly we express no
such opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the Successor Company consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of Amscan Holdings, Inc. at December 31, 2004, and the consolidated
results of its operations and its cash flows for the period from May 1, 2004
through December 31, 2004, in conformity with U.S. generally accepted accounting
principles. Further, in our opinion, the Predecessor Company consolidated
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of the Predecessor Company at December 31,
2003, and the consolidated results of its operations and its cash flows for the
period from January 1, 2004 through April 30, 2004, and for each of the two
years in the period ended December 31, 2003, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

                                                           /s/ Ernst & Young LLP

Stamford, Connecticut
March 25, 2005


                                      F-2
<PAGE>
                              AMSCAN HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                                                                              ----------------------------
                                                                                                 2004             2003
                                                                                                 ----             ----
                                                                                              (SUCCESSOR)     (PREDECESSOR)
<S>                                                                                           <C>             <C>
                                                          ASSETS

Current assets:
   Cash and cash equivalents..............................................................      $  4,252      $  31,462
   Accounts receivable, net of allowances of $2,593 and $2,825, respectively..............        83,968         75,682
   Inventories, net of allowances.........................................................        88,159         85,137
   Prepaid expenses and other current assets..............................................        15,241          9,730
                                                                                               ---------        -------
         Total current assets.............................................................       191,620        202,011
Property, plant and equipment, net........................................................        96,134         96,494
Goodwill, net.............................................................................       282,921         71,986
Tradenames................................................................................        33,500
Intangible assets, net....................................................................        23,289            333
Other assets..............................................................................        19,802         11,278
                                                                                               ---------       --------
         Total assets.....................................................................      $647,266       $382,102
                                                                                               =========       ========

                        LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND COMMON SECURITIES
                                              AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Loans and notes payable................................................................     $   2,025
   Accounts payable.......................................................................        36,842       $ 34,916
   Accrued expenses.......................................................................        20,980         20,121
   Income taxes payable...................................................................         2,594          3,178
   Current portion of long-term obligations...............................................         2,807         23,237
                                                                                               ---------       --------
         Total current liabilities........................................................        65,248         81,452
Long-term obligations, excluding current portion..........................................       384,993        272,272
Deferred income tax liabilities...........................................................        43,175         18,040
Other.....................................................................................         3,417          2,414
                                                                                               ---------       --------
         Total liabilities................................................................       496,833        374,178

Redeemable convertible preferred stock ($0.10 par value; 100 shares authorized;
         44.94 shares issued and outstanding at December 31, 2003)........................                        7,045
Redeemable common securities..............................................................         3,705          9,498

Commitments and Contingencies.............................................................

Stockholders' equity (deficit):
   Preferred Stock ($0.01 par value; 10,000.00 shares authorized; none issued and
      outstanding at December 31, 2004)...................................................
   Common Stock ($0.01 par value; 40,000.00 shares authorized; 13,962.38 shares
      issued and outstanding at December 31, 2004)........................................
   Common Stock ($0.10 par value; 3,000 shares authorized; 1,217.92 shares
         issued and outstanding at December 31, 2003).....................................
   Additional paid-in capital.............................................................       136,819         26,682
   Unamortized restricted Common Stock award, net.........................................                         (155)
   Notes receivable from stockholders.....................................................                         (680)
   Retained earnings (deficit)............................................................         8,564        (34,020)
   Accumulated other comprehensive income (loss)..........................................         1,345           (446)
                                                                                               ---------       --------
         Total stockholders' equity (deficit).............................................       146,728         (8,619)
                                                                                               ---------       --------
         Total liabilities, redeemable convertible preferred stock and common
           securities and stockholders' equity (deficit)..................................      $647,266       $382,102
                                                                                               =========       ========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>

                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                             EIGHT MONTHS ENDED   FOUR MONTHS ENDED           YEARS ENDED
                                                                DECEMBER 31,         APRIL 30,                 DECEMBER 31,
                                                                   2004                 2004                2003          2002
                                                                -----------         -------------      ----------------------------
                                                                (Successor)         (Predecessor)      (Predecessor)  (Predecessor)
<S>                                                          <C>                  <C>                  <C>              <C>
Net sales .................................................      $ 265,556            $ 133,660          $ 402,816      $ 385,603
Cost of sales .............................................        178,210               88,247            269,125        252,980
                                                                 ---------            ---------          ---------      ---------
         Gross profit .....................................         87,346               45,413            133,691        132,623

Operating expenses:
Selling expenses ..........................................         23,529               12,430             36,515         34,619
General and administrative expenses .......................         21,410               10,145             31,925         32,056
Provision for doubtful accounts ...........................          1,308                  729              2,588          3,008
Art and development costs .................................          6,713                3,332              9,395         10,301
Non-recurring expenses related to the Transactions ........                              11,757
Write-off of deferred financing and IPO-related costs .....                                                                 2,261
 Restructuring charges ....................................                                                  1,007          1,663
                                                                 ---------            ---------          ---------      ---------
         Total operating expenses .........................         52,960               38,393             81,430         83,908
                                                                 ---------            ---------          ---------      ---------
         Income from operations ...........................         34,386                7,020             52,261         48,715

Interest expense, net .....................................         19,124                8,384             26,368         21,792
Undistributed loss in unconsolidated joint venture ........          1,168                   89
Gain on sales of available-for-sale securities ............                                 (47)            (1,486)
Other (income) expense, net ...............................           (286)                 (11)                52           (311)
                                                                 ---------            ---------          ---------      ---------
         Income (loss) before income taxes and minority
          interests .......................................         14,380               (1,395)            27,327         27,234

Income tax expense (benefit) ..............................          5,679                 (551)            10,065         10,757
Minority interests ........................................            137                   46                 99             12
                                                                 ---------            ---------          ---------      ---------

         Net income (loss) ................................          8,564                 (890)            17,163         16,465
         Dividend on redeemable convertible preferred stock                                 136                399            376
                                                                 ---------            ---------          ---------      ---------
         Net income (loss) applicable to common shares ....      $   8,564            $  (1,026)         $  16,764      $  16,089
                                                                 =========            =========          =========      =========
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>
                              AMSCAN HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT),
  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 (PREDECESSOR), THE FOUR MONTHS
                       ENDED APRIL 30, 2004 (PREDECESSOR),
            AND THE EIGHT MONTHS ENDED SEPTEMBER 30, 2004 (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      UNAMORTIZED
                                                                       RESTRICTED       NOTES                ACCUMULATED
                                                         ADDITIONAL     COMMON      RECEIVABLE    (DEFICIT)     OTHER
                                       COMMON    COMMON    PAID-IN   STOCK AWARDS,      FROM       RETAINED  COMPREHENSIVE
PREDECESSOR                            SHARES     STOCK    CAPITAL        NET       STOCKHOLDERS   EARNINGS       LOSS      TOTAL
-----------                            ------     -----    -------        ---       ------------   --------       ----      -----
<S>                                   <C>       <C>      <C>         <C>            <C>           <C>        <C>           <C>
Balance at December 31, 2001 ........ 1,133.49  $     --   $    299    $    (94)     $   (601)    $(74,016)    $ (2,893)   $(77,305)
   Net income .......................                                                               16,465                   16,465
   Net change in cumulative
       translation adjustment .......                                                                             1,304       1,304
   Change in fair value of interest
       rate swaps and foreign
       exchange contracts, net
       of taxes .....................                                                                              (996)       (996)
                                                                                                                             ------
           Comprehensive income .....                                                                                        16,773
   Grant of restricted Common
       Stock award ..................     3.00                  465        (465)                                                 --
   Issuance of Common Stock in
       connection with acquisition ..    96.78               15,000                                                          15,000
   Increase in redeemable Common
       Stock due to vesting of
       restricted Common Stock
       award ........................                          (574)                                                           (574)
   Amortization of restricted
       Common Stock awards ..........                                       236                                                 236
   Accretion of interest income .....                                                     (37)                                  (37)
   Redeemable convertible
       preferred stock dividends ....                          (376)                                                           (376)
                                      --------  --------   --------    --------      --------     --------     --------    --------
Balance at December 31, 2002 ........ 1,233.27  $     --   $ 14,814    $   (323)     $   (638)    $(57,551)    $ (2,585)   $(46,283)
                                      ========  ========   ========    ========      ========     ========     ========    ========
</TABLE>

                                   -Continued-


                                      F-5
<PAGE>
                              AMSCAN HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT),
  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 (PREDECESSOR), THE FOUR MONTHS
                       ENDED APRIL 30, 2004 (PREDECESSOR),
            AND THE EIGHT MONTHS ENDED SEPTEMBER 30, 2004 (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                               UNAMORTIZED    NOTES                  ACCUMULATED
                                                   ADDITIONAL  RESTRICTED  RECEIVABLE     RETAINED      OTHER
                                  COMMON    COMMON  PAID-IN   COMMON STOCK    FROM        EARNINGS   COMPREHENSIVE
PREDECESSOR                       SHARES     STOCK  CAPITAL    AWARDS, NET STOCKHOLDERS   (DEFICIT)     LOSS            TOTAL
-----------                       ------     -----  -------    ----------- ------------   ---------     ----            -----
<S>                              <C>        <C>    <C>        <C>          <C>            <C>        <C>              <C>
Balance at December 31, 2002 ..  1,233.27   $   --  $ 14,814     $   (323)    $   (638)   $(57,551)    $ (2,585)      $(46,283)
   Net income .................                                                             17,163                      17,163
   Net change in
      cumulative
      translation
      adjustment ..............                                                                           2,161          2,161
   Change in fair
      value of
      available-for-sale
      securities,
      net of income taxes .....                                                                             949            949
   Reclassification
      adjustment for
      available-for-sale
      securities sold
      during the period,
      net of income taxes .....                                                                            (899)          (899)
   Change in fair value of
      interest rate swap
      and foreign exchange
      contracts, net of
      income taxes ............                                                                             (72)           (72)
                                                                                                                        ------
        Comprehensive income ..                                                                                         19,302
   Exercise of stock options,
      including income tax
      benefits ................      6.65                910                                                               910
   Amortization of
      restricted Common
      Stock awards ............                                       168                                                  168
   Increase in redeemable
      Common Stock due to
      exercise of stock
      options and vesting
      of restricted
      Common Stock award ......                       (1,537)                                                           (1,537)
   Decrease in redeemable
      Common Stock due to
      the expiration of
      redemption feature ......                       13,597                                 6,000                      19,597
   Decrease in redeemable
      Common Stock due to
      change in market value
      of Common Stock .........                           50                                   368                         418
   Increase in redeemable
      Common Stock due to
      employee purchases of
      Common Stock ............                         (753)                                                             (753)
   Purchase and retirement of
      redeemable Common Stock
      held by officers ........     (22.0)
   Accretion of interest income                                                    (42)                                    (42)
   Redeemable convertible
      preferred stock dividend                          (399)                                                             (399)
                                 --------   ------  --------     --------     --------    --------     --------       --------
Balance at December 31, 2003 ..  1,217.92   $   --  $ 26,682     $   (155)    $   (680)   $(34,020)    $   (446)      $ (8,619)
                                 ========   ======  ========     ========     ========    ========     ========       ========
</TABLE>

                                  -Continued-


                                      F-6
<PAGE>
                              AMSCAN HOLDINGS, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT),
  FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 (PREDECESSOR), THE FOUR MONTHS
                       ENDED APRIL 30, 2004 (PREDECESSOR),
            AND THE EIGHT MONTHS ENDED SEPTEMBER 30, 2004 (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     UNAMORTIZED      NOTES                  ACCUMULATED
                                                         ADDITIONAL  RESTRICTED    RECEIVABLE    RETAINED       OTHER
                                      COMMON     COMMON   PAID-IN   COMMON STOCK      FROM       EARNINGS   COMPREHENSIVE
                                      SHARES      STOCK   CAPITAL      AWARD      STOCKHOLDERS   (DEFICIT)  (LOSS) INCOME   TOTAL
                                      -------     -----   -------      -----      ------------  ---------    ------------   -----
<S>                                  <C>        <C>      <C>        <C>           <C>           <C>           <C>          <C>
PREDECESSOR
Balance at December 31, 2003  ......  1,217.92  $    --  $ 26,682   $    (155)    $    (680)    $ (34,020)    $    (446)   $ (8,619)
   Net loss ........................                                                                 (890)                     (890)
   Net change in cumulative
     translation adjustment ........                                                                               (673)       (673)
   Change in fair value of
     available-for-sale securities,
     net of income taxes ...........                                                                                (22)        (22)
   Reclassification adjustment for
     available-for-sale securities
     sold during the period,
     net of income taxes ...........                                                                                (28)        (28)
   Reclassification adjustment for
     interest rate swap contract
     terminated in connection with
     the Transactions, net of
     income taxes ..................                                                                                408         408
   Change in fair value of interest
     rate swap and foreign exchange
     contracts, net of income taxes                                                                                 306         306
                                                                                                                           --------
       Comprehensive loss ..........                                                                                           (899)
   Amortization of restricted
     Common Stock award ............                                       52                                                    52
   Redeemable convertible preferred
     stock dividend ................                         (136)                                                             (136)
   Repayment of note receivable from
     stockholder ...................                                                     25                                      25
   Accretion of interest income ....                                                    (14)                                    (14)
                                     ---------  -------  --------   ---------     ---------     ---------     ---------    --------
Balance at April 30, 2004 ..........  1,217.92  $    --  $ 26,546   $    (103)    $    (669)    $ (34,910)    $    (455)   $ (9,591)
                                     =========  =======  ========   =========     =========     =========     =========    ========

SUCCESSOR

   Net income ......................                                                            $   8,564                   $ 8,564
   Net change in cumulative
     translation adjustment ........                                                                              1,702       1,702
   Change in fair value of interest
     rate swaps and foreign exchange
     contracts, net of income taxes                                                                                (357)       (357)
                                                                                                                           --------
       Comprehensive income ........                                                                                          9,909
   Issuance of shares of Common
     Stock in connection with
     the Transactions .............. 13,962.38           $140,524                                                           140,524
   Reclassification of common
     securities to Redeemable
     common securities .............                       (3,705)                                                           (3,705)
                                     ---------  -------   -------   ---------     ---------     ---------     ---------    --------
Balance at December  31, 2004 ...... 13,962.38  $    --  $136,819   $      --     $      --     $   8,564     $   1,345    $146,728
                                     =========  =======  ========   =========     =========     =========     =========    ========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>
                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                      EIGHT MONTHS ENDED FOUR MONTHS ENDED      YEARS ENDED
                                                                      ------------------ -----------------      -----------
                                                                           DECEMBER 31,      APRIL 30,          DECEMBER 31,
                                                                           ------------      ---------          ------------
                                                                              2004             2004            2003         2002
                                                                              ----             ----            ----         ----
                                                                           (Successor)     (Predecessor)  (Predecessor)(Predecessor)
<S>                                                                    <C>                 <C>            <C>          <C>
Cash flows provided by operating activities:
   Net income (loss) ....................................................  $   8,564        $    (890)       $  17,163    $  16,465
   Adjustments to reconcile net income (loss) to net cash provided by
     operating activities:
     Depreciation and amortization expense ..............................      9,519            5,296           16,119       13,962
     Amortization of deferred financing costs ...........................      1,022              709            2,131        1,202
     Amortization of restricted Common Stock awards .....................                          52              168          236
     Provision for doubtful accounts ....................................      1,308              729            2,588        3,008
     Deferred income tax expense (benefit) ..............................      3,638           (2,220)           5,231        4,869
     (Gain) loss on disposal of property, plant and equipment ...........         (4)             (35)             122         (254)
     Undistributed loss in unconsolidated joint venture .................      1,168               89
     Debt retirement costs incurred in connection with the Transactions .                       6,209
     Write-off of deferred financing costs ..............................                       5,548                         1,460
     Gain on sales of available-for-sale securities .....................                         (47)          (1,486)
     Non-cash restructuring charges .....................................                                          104
     Changes in operating assets and liabilities, net of acquisitions:
       Decrease (increase) in accounts receivable .......................      1,552          (15,247)          (3,628)      (7,934)
       (Increase) decrease in inventories ...............................     (6,594)           6,229            7,113      (15,391)
       (Increase) decrease in prepaid expenses, other current assets
         and other, net .................................................       (527)          (1,001)           2,250       (2,027)
       Increase (decrease) in accounts payable, accrued expenses
         and income taxes payable .......................................      5,116            3,991           (5,713)       4,733
                                                                           ---------        ---------        ---------    ---------
           Net cash provided by operating activities ....................     24,762            9,412           42,162       20,329

Cash flows used in investing activities:
   Cash paid to consummate the Transactions .............................   (529,982)
   Cash paid in connection with acquisition .............................                                                   (13,548)
   Capital expenditures .................................................     (7,709)          (3,726)         (12,525)     (17,712)
   Proceeds from sale of available-for-sale securities ..................                          65            2,005
   Proceeds from disposal of property, plant and equipment ..............        559               53              204          530
                                                                           ---------        ---------        ---------    ---------
           Net cash used in investing activities ........................   (537,132)          (3,608)         (10,316)     (30,730)
Cash flows provided by (used in) financing activities:
   Proceeds from loans, notes payable and long-term obligations, net of
       debt issuance costs (including original issue discount in 2002)
       of $13,084 and $6,032 in 2004 and 2002, respectively .............    368,941                                        163,968
   Repayment of loans, notes payable and long-term obligations ..........     (1,768)         (21,251)          (3,723)    (152,351)
   Capital contributions in connection with the Transactions ............    139,024
   Debt retirement costs paid in connection with the Transactions .......                      (6,209)
   Proceeds from the exercise of Common Stock options ...................                                          831
   Loans to officers under notes ........................................                                                      (200)
   Purchase of Common Stock from officers ...............................                                       (3,300)
   Repayment of notes receivable from officers ..........................                          25            1,990
                                                                           ---------        ---------        ---------    ---------
           Net cash provided by (used in) financing activities ..........    506,197          (27,435)          (4,202)      11,417
Effect of exchange rate changes on cash and cash equivalents ............      1,188             (594)           1,418          368
                                                                           ---------        ---------        ---------    ---------
           Net (decrease) increase in cash and cash equivalents .........     (4,985)         (22,225)          29,062        1,384
Cash and cash equivalents at beginning of period ........................      9,237           31,462            2,400        1,016
                                                                           ---------        ---------        ---------    ---------
Cash and cash equivalents at end of period ..............................  $   4,252        $   9,237        $  31,462    $   2,400
                                                                           =========        =========        =========    =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:

           Interest .....................................................  $  16,208        $   6,531        $  22,982    $  20,506
           Income taxes .................................................      3,287            1,002            4,395        6,158
</TABLE>



                                      F-8
<PAGE>
                              AMSCAN HOLDINGS, INC.

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
                             (DOLLARS IN THOUSANDS)

Supplemental information on non-cash activities (dollars in thousands):

In connection with the Transactions (see Note 1), certain officers of the
Company exchanged 8.2417 of their shares of common stock of the Predecessor (as
defined hereafter) for 150 shares of common stock of the Successor (as defined
hereafter) with an equivalent value of $1,500. In addition, the aforementioned
officers exchanged their vested options to purchase 8.411 shares of Predecessor
common stock, which had an intrinsic value of $900, for vested options to
purchase 98.182 shares of Common Stock under the Successor equity incentive plan
with an intrinsic value of $737 and a fair value of $880.

Capital lease obligations of $31, $207, $143 and $53 were incurred during the
eight months ended December 31, 2004 (Successor), the four months ended April
30, 2004 (Predecessor), and the years ended December 31, 2003 and 2002
(Predecessor), respectively.

In December 2004, the Successor acquired a 20% ownership in a French party goods
company in exchange for its French wholly-owned metallic balloon distribution
subsidiary. The Company accounts for its investment in the French party goods
company using the cost method.

In December 2003, the Predecessor acquired the balloon assets of a competitor,
in exchange for 50.1% of the common stock of its wholly-owned metallic balloon
distribution subsidiary located in Mexico, thereby creating a joint venture to
distribute certain metallic balloons principally in Mexico and Latin America.
The Company accounts for its investment in the joint venture using the equity
method.

          See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004


NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

      Amscan Holdings, Inc. ("Amscan" or the "Company") was incorporated on
October 3, 1996 for the purpose of becoming the holding company for Amscan Inc.
and certain affiliated entities in connection with an initial public offering of
its Common Stock. On December 19, 1997, Amscan and Confetti Acquisition, Inc.
("Confetti"), a newly formed Delaware corporation affiliated with GS Capital
Partners II, L.P. and certain other private investment funds managed by Goldman,
Sachs & Co. ("Goldman Sachs") (collectively, "GSCP"), entered into a merger
pursuant to an agreement (the "Merger Agreement") providing for a
recapitalization of Amscan in which Confetti was merged with and into Amscan
(the "Merger"), with Amscan as the surviving privately-held corporation.

      The Company designs, manufactures, contracts for manufacture and
distributes party goods, including metallic balloons, gifts and stationery,
throughout the world, including in North America, South America, Europe, Asia
and Australia.

THE TRANSACTIONS

      On March 26, 2004, Amscan signed an agreement providing for a merger of
Amscan with AAH Acquisition Corporation, or AAH Acquisition, a wholly-owned
subsidiary of AAH Holdings Corporation, or AAH Holdings, an entity jointly
controlled by funds affiliated with Berkshire Partners LLC and Weston Presidio
(together the "Principal Investors"). On April 30, 2004, the merger with AAH
Acquisition was consummated, with Amscan continuing as the surviving entity and
as a wholly-owned subsidiary of AAH Holdings, a privately held corporation.
Under the terms of the agreement, the equity interests in Amscan of GSCP, and
all other stockholders, other than certain management investors, were cancelled
in exchange for the right to receive cash. Cash paid to consummate the
acquisition totaled $529,982,000 and was financed with initial borrowings
(before deducting deferred financing costs of $13,084,000) consisting of a
$205,000,000 term loan under a new senior secured credit facility which includes
a $50,000,000 revolving loan facility, the proceeds from the issuance of
$175,000,000 of 8.75% senior subordinated notes due 2014, an equity
contribution, including the Principal Investors and employee stockholders, of
$140,524,000 borrowings under the revolver of $23,551,000 and available cash on
hand. Certain existing employee shareholders participated in the Transactions
(as defined hereafter) by purchasing approximately 296.91 shares of common
stock. The Chief Executive Officer and the President of the Company exchanged
5.4945 and 2.7472 of their shares of common stock of the Predecessor for 100 and
50 shares of common stock of the Successor with an equivalent value of
$1,000,000 and $500,000, respectively. In addition, the Chief Executive Officer
and President of the Company exchanged vested options to purchase 5.607 and
2.804 shares of Predecessor common stock, which had intrinsic values of $600,000
and $300,000, respectively, for vested options to purchase 98.182 shares of
Successor Common Stock under the Successor's equity incentive plan with
intrinsic values of $492,000 and $245,000 and fair values of $590,000 and
$290,000, respectively. The acquisition has been accounted for under the
purchase method of accounting which required that the Successor adjust its
assets and liabilities to their relative fair values. In order to reflect the
ultimate beneficial ownership of the Successor, the capital structure disclosed
in the Successor financial statements is the capital structure of AAH Holdings.

      The purchase price has been allocated based upon preliminary estimates of
the fair value of net assets acquired at the date of acquisition. The final
allocations will be based on independent valuations that have not yet been
completed and will be subject to change when the valuations are completed during
the second quarter of 2005. The Company does not expect the final allocation to
be significantly different from the preliminary estimates currently reflected in
consolidated financial statements. The purchase price was principally allocated
to accounts receivable ($91,200,000), inventories ($81,600,000), property plant
and equipment ($94,400,000), goodwill ($282,921,000), other intangible assets
($60,300,000), prepaid expenses and other current and non-current assets
($21,400,000), accounts payable, accrued expenses and other current and
non-current liabilities of ($101,800,000). Effective December 31, 2004 the
Company changed its preliminary estimates of the purchase price allocation and
recorded the related effect of the change on depreciation and amortization
expense, (a decrease of approximately $1,653,000) during the fourth quarter of
2004. The acquisition was structured as a purchase of common stock and,
accordingly, the amortization of intangible assets is not deductible for income
tax purposes. The goodwill is not amortizable (see Note 2).

      Concurrent with the acquisition, the following financing transactions were
also consummated: the repayment of a term loan of $147,724,000 under our then
existing senior secured credit facility and the termination of all


                                      F-10
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

commitments thereunder; the redemption of $87,200,000 of the $110,000,000
aggregate principal amount outstanding of our 9.875% senior subordinated notes
due 2007 for $93,500,000 or 103.542% of the principal amount of such notes plus
accrued and unpaid interest following our tender offer and consent solicitation;
and repayment of a $8,500,000 mortgage obligation with a financial institution
(the acquisition together with the foregoing financing transactions are referred
to herein collectively as the "Transactions").

      On May 31, 2004, the remaining outstanding 9.875% senior subordinated
notes due 2007 were redeemed pursuant to the redemption notice. The Company
financed the redemption with borrowings under its new revolving credit facility.

      The new senior subordinated notes were sold to the initial purchasers on
April 30, 2004, and were subsequently resold to qualified institutional buyers
and non-U.S. persons in reliance upon Rule 144A and Regulation S under the
Securities Act of 1933 (the "Note Offering"). In connection with the Note
Offering, the Company entered into a Registration Rights Agreement, which
granted holders of the new notes certain exchange and registration rights. In
August 2004, the Company filed with the Securities and Exchange Commission a
Registration Statement on Form S-4 offering to exchange registered notes for the
notes issued in connection with the Note Offering. The terms of the notes and
the exchange notes are substantially identical. The exchange was completed in
October 2004.

      In connection with the Transactions, the Predecessor recorded
non-recurring expenses of $11,757,000 comprised of $6,209,000 of debt retirement
costs and the write-off of $5,548,000 of deferred financing costs associated
with the repayment of debt.

      The following unaudited pro forma information assumes the Transactions had
occurred on January 1, 2004 and 2003, respectively. The pro forma information,
as presented below, is not necessarily indicative of the results that would have
been obtained had the Transactions occurred on January 1, 2004 and 2003, nor is
it necessarily indicative of the Company's future results (dollars in
thousands):

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                    ------------------------
                                                     2004           2003
                                                     ----           ----
<S>                                                 <C>           <C>
 Net sales....................................      $399,216      $402,816
 Net income...................................       $17,171       $15,531
</TABLE>

      The pro forma net income amounts reflect the following items: (i)
adjustments for interest expense from new borrowings related to the Transactions
and the elimination of historical interest on debt repaid in the Transactions,
(ii) management fees to be paid to our Principal Investors, (iii) the
elimination of non-recurring expenses related to the Transactions, (iv) the
elimination of the increase in cost of sales in 2004 arising from the
revaluation of inventories as a result of purchase price allocation, (v)
adjustments to depreciation and amortization expense arising from the valuation
of property, plant and equipment and amortizable intangible assets, as a result
of a preliminary purchase price allocation , and (vi) the related income tax
effects of the above items based upon a pro forma effective income tax rate of
39.5%.


                                      F-11
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

Basis of Presentation

      The consolidated financial statements include the accounts of Amscan
Holdings and all majority-owned and controlled entities. All material
intercompany balances and transactions have been eliminated in consolidation.

Acquisition

      On February 19, 2002, the Company purchased all of the outstanding common
stock of M&D Balloons, Inc. (since renamed M&D Industries, Inc. ("M&D
Industries")), a Manteno, Illinois-based manufacturer of metallic and plastic
balloons, from American Greetings Corporation ("American Greetings") for
$27,500,000 plus certain other related costs of $1,048,000. The Company financed
the acquisition by borrowing $13,548,000 under its revolving credit facility and
issuing 96.774 shares of its Common Stock to American Greetings. The Company
purchased M&D Industries to supplement its existing balloon operations. American
Greetings continues to distribute metallic balloons under a supply agreement
with the Company. The acquisition has been accounted for under the provisions of
SFAS No. 141, "Business Combinations," and, accordingly, the operating results
of M&D Industries have been included in the Company's consolidated financial
statements since the date of acquisition.

      The purchase price was allocated based upon the estimated fair value of
net assets acquired at the date of acquisition. Such allocations were based on
studies and valuations. The excess of the purchase price over tangible net
assets acquired was allocated to intangible assets consisting of licensing
agreements in the amount of $1,070,000, which the Predecessor amortized using
the straight-line method over the lives of the contracts (one to three years
with an average life of 2.7 years), and goodwill in the amount of $15,606,000,
which was not amortized.

      The following unaudited pro forma information assumes the M&D Industries
acquisition had occurred on January 1, 2002. The pro forma information, as
presented below, is not necessarily indicative of the results that would have
been obtained had the transaction occurred on January 1, 2002, nor is it
necessarily indicative of the Company's future results (dollars in thousands):


<TABLE>
<CAPTION>
      Year Ended December 31, 2002:
<S>                                                               <C>
          Net sales....................................           $389,710
          Net income...................................             16,858
</TABLE>

      The net income amounts reflect adjustments for interest expense from
additional borrowings necessary to finance the acquisition and amortization of
other intangible assets, net of related income tax effect based upon a pro forma
effective tax rate of 39.5%. The unaudited pro forma information gives effect
only to adjustments described above and does not reflect management's estimate
of any anticipated cost savings or other benefits as a result of the
acquisition.

Investments

      In December 2004, the Successor acquired a 20% ownership in a French party
goods company in exchange for its French metallic balloon distribution business,
valued at $1.4 million on the date of exchange. The Successor accounts for its
investment in the French party goods company using the cost method.

      In December 2003, the Predecessor acquired the balloon assets of a
competitor, in exchange for 50.1% of the common stock of its wholly-owned
metallic balloon distribution subsidiary located in Mexico, thereby creating a
joint venture to distribute metallic balloons principally in Mexico and Latin
America. The Company accounts for its investment in the joint venture using the
equity method. The Company's investment in the joint venture totaled $2.5
million on the date of exchange. The results of operations for the investment in
the joint venture


                                      F-12
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

are included in the accompanying consolidated financial statements from the date
of exchange. At December 31, 2004, retained earnings included undistributed
losses of $1,168,000 related to the unconsolidated joint venture. Prior to the
date of transfer, the Predecessor's consolidated financial statements included
the accounts of its wholly-owned Mexican balloon distribution subsidiary.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash Equivalents

      Highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.

Inventories

      Substantially all inventories of the Company are valued at the lower of
cost (principally on the first-in, first-out method) or market.

Long-Lived and Intangible Assets

      Property, plant and equipment are stated at cost. Machinery and equipment
under capital leases are stated at the present value of the minimum lease
payments at the inception of the lease. Depreciation is calculated principally
on the straight-line method over the estimated useful lives of the assets.
Machinery and equipment held under capital leases and leasehold improvements are
amortized on a straight-line basis over the shorter of the lease term or the
estimated useful life of the asset.

      At December 31, 2004 and 2003, goodwill totaled $282,921,000 and
$71,986,000 respectively. Goodwill represents the excess of the purchase price
of acquired companies over the estimated fair value of the net assets acquired.
Effective January 1, 2002, the Company adopted SFAS No. 141 and Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets"
("SFAS No. 142"). SFAS No. 141 revises the accounting treatment for business
combinations to require the use of purchase accounting and prohibit the use of
the pooling-of-interests method of accounting for business combinations
initiated after June 30, 2001. SFAS No. 142 revises the accounting for goodwill
to eliminate the amortization of goodwill on transactions consummated after June
30, 2001 and of all other goodwill as of January 1, 2002. As a result, the
Company stopped recording goodwill amortization as of January 1, 2002.
Intangible assets with definite lives will continue to be amortized over their
useful lives. SFAS No. 142 also requires goodwill and other intangible assets
with indefinite lives to be reviewed for impairment each year and more
frequently if circumstances indicate a possible impairment. During 2004, the
Company completed its review and determined that goodwill and other intangible
assets with indefinite lives were not impaired.

      Other intangible assets acquired in the Transaction, net of amortization
of $56,789,000 at December 31, 2004, were comprised as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                      Amortization     Gross Carrying         Accumulated
                                         Period            Amount            Amortization        Net Balance
                                         ------            ------            ------------        -----------
<S>                                   <C>              <C>                   <C>                 <C>
   Tradenames.......................                       $33,500,000                            $33,500,000
   Copyrights / designs and other...      2-3               12,800,000          $2,889,000          9,911,000
   Customer lists / relationships...      15                14,000,000             622,000         13,378,000
                                                           -----------          ----------        -----------
                                                           $60,300,000          $3,511,000        $56,789,000
                                                           ===========          ==========        ===========
</TABLE>

      Tradenames are not amortized because they have indefinite useful lives and
are tested at least annually for impairment. The amortization expense for
finite-lived intangible assets for the eight months ended December 31, 2004 was
$3,511,000. Estimated amortization expense for each of the next five years will
be approximately $5,266,500, $5,199,800, $2,244,400, $933,300 and $933,300,
respectively.

      At December 31, 2003, other intangible assets, net of amortization, of
$333,000, was comprised of licensing agreements which were amortized using the
straight-line method over the lives of the contracts (one to three years with an
average life of 2.7 years). Accumulated amortization was $3,737,000 at December
31, 2003. Amortization


                                      F-13
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

of other intangible assets for the four months ended April 30, 2004, and the two
years ended December 31, 2003, and 2002 was $112,000, $362,000, and $375,000,
respectively.

      The Company reviews the recoverability of its long-lived assets, including
definite-lived intangible assets other than goodwill, whenever facts and
circumstances indicate that the carrying amount may not be fully recoverable.
For purposes of recognizing and measuring impairment, the Company evaluates
long-lived assets other than goodwill based upon the lowest level of independent
cash flows ascertainable to evaluate impairment. If the sum of the undiscounted
future cash flows expected over the remaining asset life is less than the
carrying value of the assets, the Company may recognize an impairment loss. The
impairment related to long-lived assets is measured as the amount by which the
carrying amount of the assets exceeds the fair value of the asset. When fair
values are not readily available, the Company estimates fair values using
expected discounted future cash flows.

      Goodwill and tradenames are reviewed for potential impairment, on an
annual basis or more frequently if circumstances indicate a possible impairment,
by comparing the fair value of a reporting unit with its carrying amount,
including goodwill. If the carrying amount of a reporting unit exceeds its fair
value, the excess, if any, of the fair value of the reporting unit over amounts
allocable to the unit's other assets and liabilities is the implied fair value
of goodwill. If the carrying amount of a reporting unit's goodwill exceeds the
implied fair value of that goodwill, an impairment loss will be recognized in an
amount equal to that excess. The fair value of a reporting unit refers to the
amount at which the unit as a whole could be sold in a current transaction
between willing parties.

Deferred Financing Costs and Original Issue Discount

      Deferred financing costs (included in other assets) and original issue
discount (netted against the related debt) are both amortized to interest
expense using the interest method over the lives of the related debt.

Revenue Recognition

      The Company's terms of sale are generally F.O.B. shipping point and,
accordingly, title and the risks and rewards of ownership are generally
transferred to the customer, and revenue is recognized, when goods are shipped.
The Company estimates reductions to revenues for volume-based rebate programs at
the time sales are recognized.

Doubtful Accounts

      The Company maintains allowances for doubtful accounts for estimated
losses resulting from the inability of the Company's customers to make required
payments. A considerable amount of judgment is required in assessing the
ultimate realization of these receivables including consideration of our history
of receivable write-offs, the level of past due accounts and the economic status
of our customers. If the financial condition of the Company's customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required.

Shipping and Handling

      Outbound shipping and handling costs billed to customers are included in
net sales. The costs of shipping and handling incurred by the Company are
included in cost of sales.

Royalty Agreements

      The Company enters into royalty agreements that allow the Company to use
licensed designs on certain of its products. These contracts require the Company
to pay royalties, generally based on the sales of such product, and may require
guaranteed minimum royalties, a portion of which may be paid in advance. The
Company matches royalty expense with revenue by recording royalties at the time
of sale, at the greater of the contractual rate or an effective rate calculated
based on the guaranteed minimum royalty and the Company's estimate of sales
during the contract period. If a portion of the guaranteed minimum royalty is
determined not to be recoverable, the unrecoverable portion is charged to
expense at that time. Guaranteed minimum royalties paid in advance are recorded
in the consolidated balance sheets as other assets.

Catalogue Costs

      The Company expenses costs associated with the production of annual
catalogues when incurred.


                                      F-14
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

Art and Development Costs

      Art and development costs are primarily internal costs that are not easily
associated with specific designs, some of which may not reach commercial
production. Accordingly, the Company expenses these costs as incurred.

Derivative Financial Instruments

      The Company accounts for derivative financial instruments pursuant to
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133, as amended and
interpreted, requires that all derivative financial instruments be recognized on
the balance sheet at fair value and establishes criteria for both the
designation and effectiveness of hedging activities. The Company may use
derivatives in the management of interest rate and foreign currency exposure.
SFAS No. 133 requires the Company to formally document the assets, liabilities
or other transaction the Company designates as hedged items, the risk being
hedged and the relationship between the hedged items and the hedging
instruments. The Company must measure the effectiveness of the hedging
relationship at the inception of the hedge and on an on-going basis.

      For derivative financial instruments that qualify as fair value hedges,
the gain or loss on the instrument and the offsetting loss or gain on the hedged
item attributable to the hedged risk are recognized in current earnings during
the period of the change in fair values. For derivative financial instruments
that qualify as cash flow hedges (i.e., hedging the exposure to variability in
expected future cash flows that is attributable to a particular risk), the
effective portion of the gain or loss on the derivative instrument is reported
as a component of other comprehensive income and reclassified into earnings in
the same period or periods during which the hedged transaction affects earnings.
The ineffective portion of a cash flow hedge, if any, is determined based on the
dollar-offset method (i.e., the gain or loss on the derivative financial
instrument in excess of the cumulative change in the present value of future
cash flows of the hedged item) and is recognized in current earnings during the
period of change. As long as hedge effectiveness is maintained, the Company's
interest rate swap arrangements and foreign currency exchange agreements qualify
for hedge accounting as cash flow hedges. (See Note 18)

Marketable Securities

      The Company accounts for marketable securities in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." The
Company classified its marketable securities as available-for-sale securities.
Such securities were stated at fair value based on quoted market prices and
consisted of shares of common stock of a customer that the Company received in
connection with the customer's reorganization in bankruptcy. Unrealized holding
gains or losses were included in stockholders' deficit as a separate component
of accumulated other comprehensive loss. The specific identification method was
used to compute realized gains or losses on marketable securities.

      The Company regularly reviews its marketable securities for impairment
based on criteria that include the extent to which the investment's carrying
value exceeds its related market value, the duration of the market decline, the
ability to hold to recovery and the financial strength and specific prospects of
the issuer of the security. Unrealized losses that are other than temporary, if
any, are recognized in earnings. (See Note 10)

Income Taxes

      The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109, "Accounting for Income Taxes." Under the asset and liability
method of SFAS No. 109, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets and
liabilities and operating loss and tax credit carryforwards applying enacted
statutory tax rates in effect for the year in which the differences are expected
to reverse. Deferred tax assets are reduced by a valuation allowance when, in
the judgment of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized.

Stock-Based Compensation

      Effective with the consummation of the Transactions (see Note 1), the
Successor has elected to apply the fair value recognition provisions of SFAS No.
123, as amended by Financial Accounting Standards No. 148 ("SFAS 148"),
Accounting for Stock-Based Compensation -- Transition and Disclosure . SFAS No.
123 permits entities to recognize as expense, over the vesting period, the fair
value of all stock-based awards on the date of grant. Alternatively, SFAS No.
123 allows entities to apply the provisions of Accounting Principles Board
Opinion ("APB")


                                      F-15
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

No. 25, "Accounting for Stock Issued to Employees," which requires the
recognition of compensation expense at the date of grant only if the current
market price of the underlying stock exceeds the exercise price, and to provide
pro forma net income disclosures for employee stock option grants as if the fair
value based method defined in SFAS No. 123 had been applied. SFAS No. 148
provides alternative methods of transition to FAS 123's fair value method of
accounting for stock-based employee compensation and amends the disclosure
provisions of FAS 123. (See Recently Issued Accounting Standards).

      Prior to the Transactions, the Predecessor elected to apply the intrinsic
value method of Accounting Principle Board Opinion No. 25 for awards granted
under its stock-based compensation plans and to provide the pro forma
disclosures required by SFAS No. 123. Accordingly, no compensation cost has been
recognized in connection with the issuance of options under the Amscan Holdings,
Inc. 1997 Equity Incentive Plan, the Predecessor's prior plan, through April 30,
2004 as all options were granted with exercise prices equal to the estimated
fair market value of the Common Stock on the date of grant.

      Had the Company determined stock-based compensation based on the fair
value of the options granted at the grant date, consistent with the method
prescribed under SFAS No. 123, the Predecessor's net loss would have been
increased or net income would have been reduced to amounts indicated below
(dollars in thousands):

<TABLE>
<CAPTION>
                                               FOUR MONTHS       YEAR ENDED        YEAR ENDED
                                               ENDED APRIL       DECEMBER 31,      DECEMBER 31,
                                                 30, 2004            2003             2002
                                                 --------            ----             ----
<S>                                            <C>               <C>               <C>
Net (loss) income:
     As reported ...........................        $(890)       $   17,163           $16,465
     Less: Total stock-based employee
       compensation expense determined under
       the fair value based method for all
       awards, net of income taxes of $125,
       $193 and $337, respectively..........          192              296                517
                                                  -------          -------            -------
SFAS No. 123 pro forma net (loss) income....      $(1,082)         $16,867            $15,948
                                                  =======          =======            =======
</TABLE>

      It has been assumed that the estimated fair value of the options granted
in 2003 and 2002 under the 1997 Equity Incentive Plan is amortized on a straight
line basis to compensation expense, net of taxes, over the vesting period of the
grant, ranging from 2.5 to 5.0 years. The estimated fair value of each option on
the date of grant was determined using the minimum value method with the
following assumptions: dividend yield of 0%, risk-free interest rate of 3.9% and
expected lives of 2.5 and 7.0 years.

      In connection with the Transactions, all unvested options granted prior to
the Transactions vested immediately on April 30, 2004 and, except for those held
by the Chief Executive Officer and the President (see Note 1), all were
exercised. The Chief Executive Officer and the President exchanged 5.607 and
2.804 vested options to purchase shares of Amscan Common Stock, which had
intrinsic values of $600,000 and $300,000, respectively, for vested options to
purchase 65.455 and 32.727 shares of AAH Holdings Common Stock under the new
equity incentive plan with intrinsic values of $492,000 and $245,000 and
estimated fair values of $590,000 and $290,000, respectively. Such options were
recorded as part of the purchase price allocations and have been classified as
redeemable common securities on the Company's consolidated balance sheet. No
additional options have been granted by the Successor.


                                      F-16
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

Accumulated Other Comprehensive Income (Loss)

      Accumulated other comprehensive income (loss) at December 31, 2004 and
2003 consisted of the Company's foreign currency translation adjustment, the
fair value of interest rate swap and foreign exchange contracts qualifying as
hedges (see Notes 18 and 19) and unrealized holding gains on marketable
securities (see Note 10).

Foreign Currency Transactions and Translation

      The functional currencies of the Company's foreign operations are the
local currencies in which they operate. Realized foreign currency exchange gains
or losses resulting from the settlement of receivables or payables in currencies
other than the functional currencies are credited or charged to operations.
Unrealized gains or losses on foreign currency transactions are insignificant.
The balance sheets of foreign subsidiaries are translated into U.S. dollars at
the exchange rates in effect on the balance sheet date. The results of
operations of foreign subsidiaries are translated into U.S. dollars at the
average exchange rates effective for the periods presented. The differences from
historical exchange rates are recorded as comprehensive income (loss) and are
included as a component of accumulated other comprehensive loss.

Concentration of Credit Risk

      While the Company's customers are geographically dispersed throughout
North America, South America, Europe, Asia and Australia, there is a
concentration of sales made to and accounts receivable from the stores that
operate in the party superstore distribution channel. At December 31, 2004 and
2003, Party City Corporation ("Party City"), the Company's largest customer,
with 248 corporate-owned and operated stores at December 31, 2004, accounted for
24% and 13%, respectively, of consolidated accounts receivable, net. For the
eight months ended December 31, 2004, the four months ended April 30, 2004 and
the years ended December 31, 2003 and 2002, sales to Party City's
corporate-owned and operated stores represented 14%, 14%, 12%, and 13% of net
sales, respectively. For the eight months ended December 31, 2004, the four
months ended April 30, 2004 and the years ended December 31, 2003 and 2002,
sales to Party City's franchisee-owned and operated stores (totaling 259 stores
at December 31, 2004) represented 13%, 14%, 13% and 14% of net sales,
respectively. No other group or combination of customers subjected the Company
to a concentration of credit risk. Although the Company believes its
relationships with Party City and its franchisees are good, if they were to
significantly reduce their volume of purchases from the Company, the Company's
financial condition and results of operations could be materially adversely
affected.

Use of Estimates

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

Recently Issued Accounting Standards

      The Financial Accounting Standards Board ("FASB") recently issued SFAS No.
151, "Inventory Costs", an amendment of Accounting Research Bulletin ("ARB") No.
43, Chapter 4. Adoption of SFAS No. 151 is required by the year beginning
January 1, 2006. We plan to adopt SFAS No. 151 no later than that date. The
amendments made by SFAS No. 151 clarify that abnormal amounts of idle facility
expense, freight, handling costs and wasted materials (spoilage) should be
recognized as current-period charges and requires the allocation of fixed
production overheads to inventory based on the normal capacity of the production
facilities. While SFAS No. 151 enhances ARB 43 and clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs and wasted
material (spoilage), the statement also removes inconsistencies between ARB 43
and International Accounting Standard 2 and amends ARB 43 to clarify that
abnormal amounts of costs should be recognized as period costs. Under some
circumstances, according to ARB 43, the above listed costs may be so abnormal as
to require treatment as current period charges. SFAS No. 151 requires these
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal" and requires allocation of fixed production
overheads to the costs of conversion. This statement will apply to our
businesses if they become subject to "abnormal costs" as defined in SFAS No.
151. We are currently evaluating the impact, if any, that adoption of SFAS No.
151 will have on our consolidated statement of operations and consolidated
balance sheet.


                                      F-17
<PAGE>
      Effective May 1, 2004, the Successor adopted the fair-value-based method
of accounting for stock options and the expense recognition provisions of SFAS
No. 123, as amended by SFAS No. 148, Accounting for Stock-Based Compensation --
Transition and Disclosure. In December 2004, the FASB issued SFAS 123R,
Share-Based Payment (Revised 2004), which requires companies to recognize in the
income statement the fair value of all employee share-based payments, including
grants of employee stock options as well as compensatory employee stock purchase
plans, for interim periods beginning after June 15, 2005 and will become
effective for the Company for the quarter ending September 30, 2005. Although
the Company has not determined whether the adoption of SFAS 123R will result in
amounts that are similar to the current pro forma disclosures under SFAS 123,
the Company is evaluating the requirements under SFAS 123R including the
valuation methods and support for the assumptions that underlie the valuation of
the awards, as well as the transition methods (modified prospective transition
method or the modified retrospective transition method). Under the "modified
prospective" method, compensation cost is recognized beginning with the
effective date (a) based on the requirements of SFAS No. 123(R) for all
share-based payments granted after the effective date and (b) based on the
requirements of SFAS No. 123 for all awards granted to employees prior to the
effective date of SFAS No. 123(R) that remain unvested on the effective date.
The "modified retrospective" method includes the requirements of the modified
prospective method but also permits entities to restate based on the amounts
previously recognized under SFAS No. 123 for purposes of pro forma disclosures
either (a) all prior periods presented or (b) prior interim period of the year
of adoption.

      On December 21, 2004, the FASB issued FASB Staff Position ("FSP") 109-1
and 109-2. FSP 109-1 provides guidance on the application of SFAS No. 109,
"Accounting for Income Taxes", with regard to the tax deduction on qualified
production activities provision within H.R. 4520 The American Jobs Creation Act
of 2004 (Act) that was enacted on October 22, 2004. FSP 109-2 provides guidance
on a special one-time dividends received deduction on the repatriation of
certain foreign earnings to qualifying U.S. taxpayers. The Act contains numerous
provisions related to corporate and international taxation including repeal of
the Extraterritorial Income ("ETI") regime, creation of a new Domestic
Production Activities ("DPA") deduction and a temporary dividends received
deduction related to repatriation of foreign earnings. The Act contains various
effective dates and transition periods related to its provisions. Under the
guidance provided in FSP 109-1 the new DPA deduction will be treated as a
"special deduction" as described in SFAS No. 109. As such, the special deduction
has no effect on the Company's deferred tax assets and liabilities existing at
the enactment date. Rather, the impact of this deduction will be reported in the
period in which the deduction is claimed on our income tax return. The repeal of
ETI and its replacement with a DPA deduction were not in effect in 2004 and
therefore, did not have an affect on our income tax provision for the year ended
December 31, 2004. We do not expect the net effect of the phase-out of the ETI
deduction and phase-in of the new DPA deduction to result in a material impact
on our effective income tax rate in 2005. In FSP 109-2, the Financial Accounting
Standards Board acknowledged that, due to the proximity of the Act's enactment
date to many companies' year-ends and the fact that numerous provisions within
the Act are complex and pending further regulatory guidance, many companies may
not be in a position to assess the impacts of the Act on their plans for
repatriation or reinvestment of foreign earnings. Therefore, the FSP provided
companies with a practical exception to the permanent reinvestment standards of
SFAS No. 109 and APB No. 23 by providing additional time to determine the amount
of earnings, if any, that they intend to repatriate under the Act's provisions.
We are not yet in a position to decide whether, and to what extent, we might
repatriate foreign earnings to the U.S. Therefore, under the guidance provided
in FSP 109-2, no deferred tax liability has been recorded in connection with the
repatriation provisions of the Act. We are currently analyzing the impact of the
temporary dividends received deduction provisions contained in the Act.

      Other pronouncements issued by the FASB or other authoritative accounting
standards groups with future effective dates are either not applicable or not
significant to our consolidated financial statements.

NOTE 3 - INVENTORIES

      Inventories at December 31, 2004 and 2003 consisted of the following
(dollars in thousands):

<TABLE>
<CAPTION>
                                                               2004             2003
                                                               ----             ----
                                                           (Successor)     (Predecessor)
<S>                                                        <C>             <C>
 Finished goods..........................................     $70,896          $74,258
 Raw materials...........................................      11,080            8,842
 Work-in process.........................................       7,167            4,762
                                                              -------           ------
                                                               89,143           87,862
 Less:  reserve for slow moving and obsolete inventory...        (984)          (2,725)
                                                              -------          -------
                                                              $88,159          $85,137
                                                              =======          =======
</TABLE>


                                      F-18
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET

      Property, plant and equipment, net at December 31, 2004 and 2003 consisted
of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                             ESTIMATED
                                                                                  2004           2003       USEFUL LIVES
                                                                                  ----           ----       ------------
                                                                              (Successor)     (Predecessor)
<S>                                                                           <C>             <C>           <C>
         Machinery and equipment...........................................      $46,168       $ 100,357        3-15
         Buildings.........................................................       40,818          38,676        31-40
         Data processing equipment.........................................        2,724          22,057         3-5
         Leasehold improvements............................................        2,446          11,032        2-20
         Furniture and fixtures............................................        2,830           4,778         10
         Land..............................................................        7,156           7,144
                                                                                ---------        -------
                                                                                 102,142         184,044
         Less:  accumulated depreciation ..................................       (6,008)        (87,550)
                                                                                --------         -------
                                                                                $ 96,134         $96,494
                                                                                ========         =======
</TABLE>

      Depreciation expense related to property, plant and equipment was
$6,008,000, $5,184,000, $15,757,000, and $13,587,000 for the eight months ended
December 31, 2004, the four months ended April 30, 2004 and the years ended
December 31, 2003 and 2002, respectively.

Lease Agreements

      The Company is obligated under various capital leases for certain
machinery and equipment which expire on various dates through 2008 (see Note 6).
At December 31, 2004 and 2003, the amount of machinery and equipment and related
accumulated amortization recorded under capital leases and included within
property, plant and equipment, net consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                    2004           2003
                                                                                    ----           ----
                                                                                 (Successor)   (Predecessor)
<S>                                                                             <C>            <C>
     Machinery and equipment................................................         $372         $4,427
     Less: accumulated amortization.........................................          (25)        (3,747)
                                                                                     ----        -------
                                                                                     $347        $   680
                                                                                     ====        =======
</TABLE>

      Amortization of assets held under capitalized leases is included in
depreciation expense.

NOTE 5 - LOANS AND NOTES PAYABLE

      On April 30, 2004, in connection with the consummation of the
Transactions, all borrowings under the then existing credit agreement were
repaid and the facility was terminated. In addition, the Company entered into a
new senior credit facility (the "Credit Facility") (see Note 6) which includes a
$50,000,000 revolving credit facility (the "Revolver"). Loans under the Revolver
expire on April 30, 2010 and bear interest, at the option of the Company, at the
index rate plus, based on performance, a margin ranging from 0.75% to 1.50% per
annum, or at LIBOR plus, based on performance, a margin ranging from 1.75% to
2.50% per annum. At December 31, 2004, the Company had borrowings under the
Revolver totaling $2,025,000 at a floating interest rate of 6.75%. Standby
letters of credit of $7,346,000 were outstanding and the Company had borrowing
capacity of $40,629,000 under the terms of the Revolver at December 31, 2004.

      The Credit Facility contains financial covenants and maintenance tests,
including a minimum interest coverage test and a maximum total leverage test,
and restrictive covenants, including restrictions on our ability to make capital
expenditures or pay dividends. The Credit Facility is secured by substantially
all of our assets and the assets of some of our subsidiaries, and by a pledge of
all of our domestic subsidiaries' capital stock and a portion of our wholly
owned foreign subsidiaries' capital stock.

      At December 31, 2003, the Company had no borrowings under the then
existing revolving loans. Standby


                                      F-19
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

letters of credit of $7,077,000 were outstanding and the Company had borrowing
capacity of approximately $22,923,000 under the terms of the then existing
revolving loans at December 31, 2003.

      In addition to the Revolver, at December 31, 2004 we have a 400,000
Canadian dollar denominated revolving credit facility which bears interest at
the Canadian prime rate plus 0.6% and expires on June 30, 2005, a 1,000,000
British Pound Sterling denominated revolving credit facility which bears
interest at the U.K. base rate plus 1.75% and expires on May 31, 2005, and a
$1,000,000 revolving credit facility which bears interest at LIBOR plus 1.0% and
expires on December 31, 2005. We expect to renew these revolving credit
facilities upon expiration. No borrowings were outstanding under these revolving
credit facilities at December 31, 2004 and 2003.

NOTE 6 - LONG-TERM OBLIGATIONS

      Long-term obligations at December 31, 2004 and 2003 consisted of the
following (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                 2004            2003
                                                                                                 ----            ----
                                                                                             (Successor)     (Predecessor)
<S>                                                                                          <C>             <C>
         8.750% senior subordinated notes (a)................................................   $175,000
         9.875% senior subordinated notes (b)................................................                  $110,000
         Term loan due 2012 (c)..............................................................    203,975
         Term loan due 2007, net of unamortized discount of $1,274 (d).......................                   167,026
         Mortgage obligations (e)............................................................      8,454         18,188
         Note payable (f)....................................................................                        31
         Capital lease obligations (g).......................................................        371            264
                                                                                                 -------       --------
                  Total long-term obligations................................................    387,800        295,509
         Less: current portion...............................................................     (2,807)       (23,237)
                                                                                                --------       --------
         Long-term obligations, excluding current portion....................................   $384,993       $272,272
                                                                                                ========       ========
</TABLE>

      On April 30, 2004, in connection with the consummation of the
Transactions, all borrowings under the then existing credit agreement were
repaid and the facility was terminated. In addition, $87,200,000 in aggregate
principal amount of our 9.875% senior subordinated notes due 2007 were accepted
in a tender offer and a redemption notice was issued for the remaining senior
subordinated notes (see Note 1). The aggregate cost to purchase the 9.875%
senior subordinated notes tendered pursuant to the tender offer was
approximately $93,500,000, or 103.542% of the principal amount of such 9.875%
senior subordinated notes plus accrued and unpaid interest. On May 31, 2004, the
remaining $22,800,000 in aggregate principal amount of the outstanding 9.875%
senior subordinated notes were redeemed pursuant to the redemption notice for
$23,551,000 or at a price of 103.292% of the principal amount of such notes,
plus accrued and unpaid interest.

      The acquisition was financed with initial borrowings consisting of a
$205,000,000 term loan (the "Term Loan") under the Credit Facility (see Note 5),
the proceeds from the issuance of $175,000,000 of 8.75% senior subordinated
notes due 2014, equity contributions by our Principal Investors and employee
stockholders of $140,524,000, borrowings under the Revolver of $23,551,000 and
approximately $2,900,000 of cash on hand.

      Borrowings under the Credit Facility and the $175,000,000 of 8.75% senior
subordinated notes due 2014 are guaranteed jointly and severally, fully and
unconditionally, by our wholly-owned domestic subsidiaries (the "Guarantors")
(see note 20).

      The Company is required to make prepayments under the terms of the Credit
Facility under certain circumstances, including upon certain asset sales and
certain issuances of debt or equity securities. Such mandatory prepayments will
be applied to prepay the Term Loan first (on a pro rata basis) and thereafter to
prepay the Revolver and to reduce the commitments thereunder. The Company may
prepay, in whole or in part, borrowings under the Term Loan, without penalty. In
addition, the Company may prepay borrowings under or reduce commitments under
the Revolver, in whole or in part, without penalty. Subject to certain
exceptions, all borrowings under the Credit Facility, and all guarantees are
secured by all existing and after-acquired personal property of the Company and
the Guarantors, including, subject to certain exceptions, a pledge of all the
stock of domestic subsidiaries owned by the


                                      F-20
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

Company or any of the Guarantors and a portion of our wholly owned foreign
subsidiaries' capital stock, and first priority liens on after-acquired real
property and leasehold interests of the Company and the Guarantors. The
guarantees are joint and several guarantees, and are irrevocable, full and
unconditional.

      (a)   The $175,000,000 senior subordinated notes due 2014 will bear
            interest at a rate equal to 8.75% per annum. Interest is payable
            semi-annually on May 1 and November 1 of each year. The senior
            subordinated notes are redeemable at the option of the Company, in
            whole or in part, at any time on or after May 1, 2009, at redemption
            prices ranging from 104.375% to 100%, plus accrued and unpaid
            interest to the date of redemption. In addition, at any time prior
            to May 1, 2007, up to an aggregate of 35% of the principal amount of
            the senior subordinated notes will be redeemable at the option of
            the Company, on one or more occasions, from the net proceeds of
            public or private sales of common stock of, or contributions to the
            common equity capital of the Company at a price of 108.75% of the
            principal amount of the senior subordinated notes, together with
            accrued and unpaid interest, if any, to the date of redemption;
            provided that at least 65% of the aggregate principal amount of
            senior subordinated notes remain outstanding immediately after each
            such redemption. If a Change of Control, as defined in the note
            indenture, were to occur, the Company will be obligated to make an
            offer to purchase the senior subordinated notes, in whole or in
            part, at a price equal to 101% of the aggregate principal amount of
            the senior subordinated notes, plus accrued and unpaid interest, if
            any, to the date of purchase. If a Change of Control were to occur,
            the Company may not have the financial resources to repay all of its
            obligations under the Credit Facility, the note indenture and the
            other indebtedness that would become payable upon the occurrence of
            such Change of Control.

      (b)   The 9.875% senior subordinated notes were redeemed in connection
            with the Transactions. The notes bore interest at a rate of 9.875%
            per annum. Interest was payable semi-annually on June 15 and
            December 15 of each year.

      (c)   Our Term Loan provides for amortization (in quarterly installments)
            of 1.0% per annum through June 30, 2010, and will then amortize in
            equal quarterly payments through June 30, 2012. The Term Loan bears
            interest, at the option of the Company, at the index rate plus 1.75%
            per annum or at LIBOR plus 2.75% per annum. At December 31, 2004,
            the Term Loan was $203,975,000 and the floating interest rate was
            4.72%. To hedge the risk associated with fluctuations in interest
            rates, the Company entered into two interest rate swap transactions
            with a financial institution during 2004, for an initial aggregate
            notional amount of $17,425,000 increasing over three years to
            $62,597,000. The interest rate swap contracts require the Company to
            settle the difference in interest obligations quarterly. Net
            payments to the counterparty under the swap contracts for the eight
            months ended December 31, 2004, which have been recorded as
            additional interest expense, were as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                     NOTIONAL                                   ADDITIONAL
             DATE OF CONTRACT         AMOUNT        TERM       FIXED RATE    INTEREST EXPENSE
             ----------------         ------       -------     ----------    ----------------
<S>          <C>                     <C>           <C>           <C>              <C>
             June 25, 2004........   $10,429       3 years       4.13%            $115
             July 2, 2004.........   $ 6,953       3 years       3.80%              65
                                                                                 -----
                                                                                  $180
                                                                                 =====
</TABLE>

      (d)   The term loan due 2007 was repaid in connection with the
            Transactions as noted above. The term loan was funded at a 1%
            original issue discount and provided for amortization (in quarterly
            installments) of 1% of the principal amount thereof per annum
            through June 15, 2006, and would then have amortized in equal
            quarterly payments through June 15, 2007. The term loan bore
            interest, at the option of the Company, at the index rate plus 3.50%
            per annum or at LIBOR plus 4.50% per annum, with a LIBOR floor of
            2.0%. At December 31, 2003, the interest rate on the term loan was
            6.50%. The original issue


                                      F-21
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

            discount was amortized to interest expense using the interest method
            over the life of the term loan. In March of 2004, the Company was
            required to make a $20,151,000 prepayment of the term loan based on
            the Company's excess cash flows, as defined, for the year ended
            December 31, 2003.

      (e)   In conjunction with the construction of a new distribution facility,
            on December 21, 2001, the Company borrowed $10,000,000 each from a
            financial institution and the New York State Job Development
            Authority, pursuant to the terms of a first and second lien mortgage
            note, respectively. The first lien mortgage note bore interest at
            LIBOR plus 2.75% and required monthly payments based on a 180-month
            amortization period with a balloon payment upon maturity in January
            2010. However, the Company utilized an interest rate swap agreement
            to effectively fix the loan rate at 8.40% for the term of the loan.
            The interest rate swap contract required the Company to settle the
            difference in interest obligations monthly. Net payments to the
            counterparty under the swap contracts for the four months ended
            April 30, 2004 and years ended December 31, 2003 and 2002,
            respectively, which were recorded as additional interest expense,
            were $129,000, $404,000 and $343,000. On April 30, 2004, in
            connection with the Transactions, the first lien mortgage note was
            paid in full and, as a result, the related interest rate swap
            agreement was terminated at a cost of $673,600. The second lien
            mortgage note bore interest at a rate of 3.41% and 3.31% at December
            31, 2004 and 2003, respectively, and is subject to review and
            adjustment semi-annually based on the New York State Job Development
            Authority's confidential internal protocols. The second lien loan is
            for a term of 96 months and requires monthly payments based on a
            180-month amortization period with a balloon payment upon maturity
            in January 2010. The principal amount outstanding under the first
            lien mortgage as of December 31, 2003 was $8,722,000. The principal
            amounts outstanding under the second lien mortgage as of December
            31, 2004 and 2003, were $8,454,000 and $9,021,000, respectively. At
            December 31, 2004, the new distribution facility had a carrying
            value of $29,867,000.

      (f)   In conjunction with the 1998 acquisition of the remaining 25%
            interest in its subsidiary, Amscan Holdings Limited, the Company
            issued a non-interest bearing note to the former shareholder which
            was paid in April 2004. At December 31, 2003, the note to the former
            shareholder totaled $31,000.

      (g)   The Company has entered into various capital leases for machinery
            and equipment with implicit interest rates ranging from 7.70% to
            8.80% which extend to 2008.

      At December 31, 2004, maturities of long-term obligations consisted of the
following (dollars in thousands):

<TABLE>
<CAPTION>
                                                         LONG-TERM DEBT              CAPITAL
                                                           OBLIGATIONS          LEASE OBLIGATIONS           TOTAL
                                                         --------------         -----------------         --------
<S>      <C>                                             <C>                    <C>                       <C>
         2005..........................................     $   2,627                   $180              $  2,807
         2006..........................................         2,619                    146                 2,765
         2007..........................................         2,619                     45                 2,664
         2008..........................................         2,619                      -                 2,619
         2009..........................................         2,619                      -                 2,619
         Thereafter....................................       374,326                      -               374,326
                                                            ---------                   ----              --------
         Long-term obligations.........................     $ 387,429                   $371              $387,800
                                                            =========                   ====              ========
</TABLE>

NOTE 7 - PROVISION FOR DOUBTFUL ACCOUNTS

          During the second quarter of 2003, a customer filed a voluntary
petition for relief under Chapter 11 of


                                      F-22
<PAGE>
                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

the United States Bankruptcy Code and as a result, the Company charged a total
of $3.3 million to the provision for doubtful accounts, of which approximately
$1,800,000 and $1,500,000 were charged during 2003 and 2002, respectively. This
customer accounted for approximately 2.1% of the Company's consolidated net
sales for the year ended December 31, 2003.

NOTE 8 - NON-RECURRING EXPENSES RELATED TO THE TRANSACTIONS AND WRITE-OFF OF
DEFERRED FINANCING AND IPO-RELATED COSTS

      In connection with the Transactions in April 2004, the Company recorded
non-recurring expenses of $11,757,000 comprised of $6,200,000 of debt retirement
costs and the write-off of $5,600,000 of deferred financing costs associated
with the repayment of debt in connection with the Transactions.

      During the fourth quarter of 2002, the Company amended and restated its
bank credit facilities with various lenders (see Notes 5 and 6) which resulted
in a $1,460,000 write-off of deferred financing costs associated with the
previous facility.

      In June 2002, the Company filed a registration statement with the
Securities and Exchange Commission for an initial public offering ("IPO") of its
Common Stock. However, during the fourth quarter of 2002, the Company decided
not to pursue the IPO of shares of its Common Stock, given the valuations
available in the equity markets at that time, which resulted in a $801,000
write-off of costs associated with the offering. In March 2003, the Company
filed a Form RW with the Securities and Exchange Commission withdrawing its
registration statement.

NOTE 9 - RESTRUCTURING CHARGES

      During the years ended December 31, 2003 and 2002, the Company incurred
restructuring charges of $1,007,000 and $1,663,000, respectively, resulting from
the consolidation of certain domestic and foreign distribution operations and
the ongoing integration of M&D Industries.

NOTE 10 - MARKETABLE SECURITIES

      Marketable securities with fair value of $102,000 are included in other
current assets on the consolidated balance sheet at December 31, 2003.
Marketable securities consisted of shares of common stock of a customer that the
Company received in connection with the customer's reorganization in bankruptcy.
At December 31, 2003, a gross unrealized gain of $83,000 was recorded, net of
income taxes of $33,000, in stockholders' deficit as a component of accumulated
other comprehensive loss.

      During the year ended December 31, 2003, the Company sold shares of these
marketable securities and received net proceeds of approximately $2,005,000 and
recognized a gain of $1,486,000. In April 2004, the Company sold the common
stock held at December 31, 2003 and received net proceeds of $65,000 and
recognized a gain of $47,000. For the purpose of computing the gains, cost was
based on the fair value of the shares on the initial date received by the
Company.

NOTE 11 - EMPLOYEE BENEFIT PLANS

      Certain subsidiaries of the Company maintain profit-sharing plans for
eligible employees providing for annual discretionary contributions to a trust.
Eligible employees are full-time domestic employees who have completed a certain
length of service, as defined, and attained a certain age, as defined. The plans
require the subsidiaries to match 25% to 100% of voluntary employee
contributions to the plan, up to the first 6% of an employee's annual salary.
Profit sharing expense for the eight months ended December 31, 2004, the four
months ended April 30, 2004 and the years ended December 31, 2003 and 2002
totaled $1,362,000, $938,000, $2,943,000 and $3,054,000, respectively.


                                      F-23
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

NOTE 12 - STOCK OPTION PLAN

      Following the consummation of the Transactions, the Company adopted the
AAH Holdings Corporation 2004 Equity Incentive Plan (the "Equity Incentive
Plan") under which the Company may grant incentive awards in the form of options
to purchase shares of Company Common Stock ("Company Stock Options") and shares
of restricted and unrestricted Company Common Stock to certain directors,
officers, employees and consultants of the Company and its affiliates. A
committee of the Company's board of directors (the "Committee"), or the board
itself in the absence of a Committee, is authorized to make grants and various
other decisions under the Equity Incentive Plan. Unless otherwise determined by
the Committee, any participant granted an award under the Equity Incentive Plan
must become a party to, and agree to be bound by, the stockholders' agreement.
Company Stock Option awards under the Equity Incentive Plan reserved and
available for grant total 1,702.9316 and may include incentive stock options,
nonqualified stock options, or both types of Company Stock Options. Company
Stock Options are nontransferable (except under certain limited circumstances)
and, unless otherwise determined by the Committee, have a term of ten years.

      In connection with the Transactions, all options granted under the
Predecessor's 1997 Equity Incentive Plan vested immediately on April 30, 2004
and, except for those held by the Chief Executive Officer and the President (see
Note 1), all were exercised. Income tax benefit of $4,890,000 associated with
the exercise of the options was recorded in connection with the Transactions The
Chief Executive Officer and the President exchanged 5.607 and 2.804 vested
options to purchase shares of Amscan Holdings Common Stock, which had intrinsic
values of $600,000 and $300,000, respectively, for vested options to purchase
65.455 and 32.727 shares of AAH Common Stock under the new equity incentive plan
with intrinsic values of $492,000 and $245,000 and estimated fair values of
$590,000 and $290,000, respectively. The fair value of such options were
recorded as part of the purchase price allocations and have been classified as
redeemable common securities on the Company's consolidated balance sheet. No
additional options have been granted by the Company. Total amount of options
outstanding at December 31, 2004 under the Equity Incentive Plan was 98.182, of
which all were exercisable at an exercise price of $2,500.

      In June 2003, the Company granted 25 options to each of the Chief
Executive Officer and the President that would have vested and become
exercisable two and one-half years from the date of grant and would have expired
on the third anniversary of the date of grant. All other options granted under
the Predecessor stock incentive plan (the "1997 Equity Incentive Plan") vested
in five equal annual installments from the Company's the grant date and had a
term of ten years. The options were non-transferable (except under certain
limited circumstances).

      The following table summarizes the changes in outstanding options under
the Predecessor's 1997 Equity Incentive Plan for the four months ended April 30,
2004, and the years ended December 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                                          Average Fair Market
                                                             Average       Value of Options
                                            Options      Exercise Price     at Grant Date
                                            -------      --------------     -------------
<S>                                        <C>           <C>              <C>
      Outstanding at December 31, 2001      133.379
            Granted...............            2.500        $155,000            $55,257
            Canceled..............           (1.000)        150,000
            Canceled..............           (2.805)         75,000
                                            -------
      Outstanding at December 31, 2002      132.074
            Granted...............           50.000         150,000             21,850
            Granted...............           30.000         150,000             53,474
            Exercised.............           (6.648)        125,000
            Canceled..............          (18.941)         79,730
                                            -------
      Outstanding at December 31, 2003      186.485
            Exercised / Exchanged          (186.485)        113,715
                                            -------
      Outstanding at April 30, 2004           -
                                            =======

      Exercisable at December 31, 2003       98.147          82,086
</TABLE>


                                      F-24
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

NOTE 13- INCOME TAXES

            A summary of domestic and foreign income (loss) before income taxes
and minority interest follows (dollars in thousands):

<TABLE>
<CAPTION>
                                     EIGHT MONTHS ENDED  FOUR MONTHS ENDED    YEARS ENDED DECEMBER 31,
                                     ------------------  -----------------    ------------------------
                                      DECEMBER 31, 2004    APRIL 30,2004        2003           2002
                                      -----------------    -------------        ----           ----
                                         (Successor)       (Predecessor)    (Predecessor)  (Predecessor)
<S>                                  <C>                 <C>                <C>            <C>
      Domestic.....................        $10,076            $(2,233)         $24,974        $28,172
      Foreign......................          4,304                838            2,353           (938)
                                           -------            -------          -------        --------
      Total........................        $14,380            $(1,395)         $27,327        $27,234
                                           =======            ========         =======        =======
</TABLE>

      The income tax expenses (benefit) consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                     EIGHT MONTHS ENDED  FOUR MONTHS ENDED    YEARS ENDED DECEMBER 31,
                                     ------------------  -----------------    ------------------------
                                      DECEMBER 31, 2004    APRIL 30,2004        2003           2002
                                      -----------------    -------------        ----           ----
                                         (Successor)       (Predecessor)    (Predecessor)  (Predecessor)
<S>                                  <C>                 <C>                <C>            <C>
      Current:
        Federal.................          $  523              $ 1,103         $ 3,368        $ 5,452
        State...................             100                  219             709            993
        Foreign.................           1,418                  347             757           (557)
                                          ------              --------        -------        --------
         Total current provision           2,041                1,669           4,834          5,888
      Deferred:
        Federal.................            2950               (1,894)          4,531          4,422
        State...................             688                 (326)            700            591
        Foreign.................                                    -               -           (144)
                                           -----              --------        -------        --------
         Total deferred provision
         (benefit)                         3,638               (2,220)          5,231          4,869
                                          ------              --------        -------        --------
      Income tax expense
         (benefit)..............          $5,679              $  (551)        $10,065        $10,757
                                          ======              ========        =======        ========
</TABLE>

      Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Deferred income tax
assets and liabilities from domestic jurisdictions consisted of the following at
December 31 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                    2004             2003
                                                                                    ----             ----
                                                                                 (Successor)     (Predecessor)
<S>                                                                              <C>             <C>
Current deferred income tax assets:
      Inventory valuation..................................                         $ 2,194            $1,862
      Allowance for doubtful accounts......................                             697               798
      Accrued liabilities..................................                             609               156
      Charitable contributions carryforward................                             219                73
      Tax loss carryforward................................                           2,431
      Tax credit carryforward..............................                             815                 -
                                                                                    --------          --------
        Current deferred income tax assets (included in
           prepaid expenses and other current assets)......                         $ 6,965           $ 2,889
                                                                                    ========          ========


Non-current deferred income tax liabilities, net:
      Property, plant and equipment........................                         $17,683           $17,950
      Intangible assets....................................                          13,108
      Amortization of goodwill and other intangibles.......                          12,758             1,165
      Royalty reserves.....................................                            (102)             (297)
      Interest rate swap and foreign exchange contracts....                            (231)             (714)
      Other................................................                             (41)              (64)
                                                                                    --------          --------
         Non-current deferred income tax liabilities, net..                         $43,175           $18,040
                                                                                    ========          ========
</TABLE>


                                      F-25
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

      At December 31, 2004, the Company had a net operating loss carryforward of
approximately $6,200,000 which expires in 2023. At December 31, 2004 the Company
had foreign tax credit and alternative minimum tax credit carryforwards of
$595,000 and $220,000, respectively.

      A non-current foreign deferred income tax asset of $789,000 and $733,000
at December 31, 2004 and 2003, respectively, is primarily attributable to
non-current obligations recognized in connection with the acquisition of Anagram
International Inc. and certain related companies ("Anagram") in 1998 and is
included in non-current assets, net.

      The difference between the Company's effective income tax rate and the
federal statutory income tax rate is reconciled below:

<TABLE>
<CAPTION>
                                           EIGHT MONTHS ENDED  FOUR MONTHS ENDED    YEARS ENDED DECEMBER 31,
                                           ------------------  -----------------    ------------------------
                                            DECEMBER 31, 2004    APRIL 30,2004        2003           2002
                                            -----------------    -------------        ----           ----
                                               (Successor)       (Predecessor)    (Predecessor)  (Predecessor)
<S>                                        <C>                 <C>                <C>            <C>
      Provision at federal
         statutory income tax rate.......         35.0%               35.0%            35.0%          35.0%
      State income tax, net
         of federal income tax benefit...          3.1                 4.9              3.6            3.8
      Other..............................          1.4                (0.4)            (1.8)           0.7
                                                  -----               -----            -----          -----
      Effective income tax rate..........         39.5%               39.5%            36.8%          39.5%
                                                  =====               =====            =====          =====
</TABLE>

      At December 31, 2004, the Company's share of the cumulative undistributed
earnings of foreign subsidiaries was approximately $20,220,000. No provision has
been made for U.S. or additional foreign taxes on the undistributed earnings of
foreign subsidiaries because such earnings are expected to be reinvested
indefinitely in the subsidiaries' operations. It is not practical to estimate
the amount of additional tax that might be payable on these foreign earnings in
the event of distribution or sale; however, under existing law, foreign tax
credits would be available to substantially reduce incremental U.S. taxes
payable on amounts repatriated.

      October 22, 2004, H.R. 4520 The American Jobs Creation Act of 2004 (Act)
was enacted. The Act contains numerous provisions related to corporate and
international taxation including repeal of the Extraterritorial Income (ETI)
regime, creation of a new Domestic Production Activities (DPA) deduction and a
temporary dividends received deduction related to repatriation of foreign
earnings. The Act contains various effective dates and transition periods
related to its provisions. Under the guidance provided in FSP 109-1 the new DPA
deduction will be treated as a "special deduction" as described in SFAS No. 109.
As such, the special deduction has no effect on the Company's deferred tax
assets and liabilities existing at the enactment date. Rather, the impact of
this deduction will be reported in the period in which the deduction is claimed
on our income tax return. The repeal of ETI and its replacement with a DPA
deduction were not in effect in 2004 and therefore, did not have an affect on
our income tax provision for the year ended December 31, 2004. We do not expect
the net effect of the phase-out of the ETI deduction and phase-in of the new DPA
deduction to result in a material impact on our effective income tax rate in
2005. In FSP 109-2, the FASB acknowledged that, due to the proximity of the
Act's enactment date to many companies' year-ends and the fact that numerous
provisions within the Act are complex and pending further regulatory guidance,
many companies may not be in a position to assess the impacts of the Act on
their plans for repatriation or reinvestment of foreign earnings. Therefore, the
FSP provided companies with a practical exception to the permanent reinvestment
standards of SFAS No. 109 and APB No. 23 by providing additional time to
determine the amount of earnings, if any, that they intend to repatriate under
the Act's provisions. We are not yet in a position to decide whether, and to
what extent, we might repatriate foreign earnings to the U.S. Therefore, under
the guidance provided in FSP 109-2, no deferred tax liability has been recorded
in connection with the repatriation provisions of the Act. We are currently
analyzing the impact of the temporary dividends received deduction provisions
contained in the Act.

NOTE 14- CAPITAL STOCK

      At December 31, 2004, the Company's authorized capital stock consisted of
10,000.00 shares of preferred stock, $0.01 par value, of which no shares were
issued or outstanding and 40,000.00 shares of Common Stock, $0.01 par value, of
which 13,962.38 shares were issued and outstanding.

      In connection with the Transactions (see Note 1), certain existing
employee stockholders purchased 296.91 shares of AAH Common Stock based at the
same price and terms per share as paid by the other equity investors. Under the
terms of the new AAH Holdings Corporation stockholders' agreement dated April
30, 2004, and the Amscan Holdings, Inc. amended and restated stockholders'
agreement, which terminated on April 30, 2004, the Company has an option to
purchase all of the shares of common stock held by former employees and, under
certain


                                      F-26
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

circumstances, former employee stockholders can require the Company to purchase
all of the shares held by the former employee. The purchase price as prescribed
in the stockholders' agreements is to be determined through a market valuation
of the minority-held shares or, under certain circumstances, based on cost, as
defined therein. The aggregate amount that may be payable by us to all employee
stockholders based on fully paid and vested common securities is classified as
redeemable common securities on the consolidated balance sheet at the estimated
fair market value of the common stock, with a corresponding adjustment to
stockholders' equity (deficit). At December 31, 2004, the aggregate amount that
may be payable by the Company to employee stockholders and employee
optionholders, based on the estimated market value, was approximately
$3,705,000. As there is no active market for the Company's Common Stock, the
Company estimated the fair value of its Common Stock based on the valuation of
Company Common Stock issued in connection with the Transactions.

      At December 31, 2003, employee stockholders held 63.33 of fully paid and
vested Predecessor Common Stock under the terms of the AHI stockholders'
agreement, which included similar requirements under which former employees
could require the Predecessor to purchase all of the shares held by the employee
stockholders. At December 31, 2003, the aggregate amount that could have been
payable by the Predecessor was approximately $9,498,000 and was classified as
redeemable Common Stock on the consolidated balance sheets

      The Company's Chief Executive Officer and its President exchanged 5.4945
and 2.7472 of their shares of Amscan Holdings Common Stock for 100 and 50 shares
of AAH Common Stock with an equivalent value of $1,000,000 and $500,000,
respectively. In addition, the Chief Executive Officer and the President
exchanged 5.607 and 2.804 vested options to purchase shares of Amscan Holdings
Common Stock, which had intrinsic values of $600,000 and $300,000, respectively,
for vested options to purchase 65.455 and 32.727 shares of AAH Common Stock
under the new equity incentive plan with intrinsic values of $492,000 and
$245,000 and estimated fair values of $590,000 and $290,000, respectively. The
fair value of the AAH options was included in the equity contribution related to
the Transactions; however as the options are options to purchase redeemable
common stock their estimated redemption value is classified as redeemable common
securities on the consolidated balance sheet.

      At December 31, 2003, an officer of the Company held 3.00 shares of Common
Stock (the "Restricted Stock"), which were to vest in December 2004 under the
terms of his employment agreement. In connection with the Transactions, the 3.00
shares of Restricted Stock vested immediately on April 30, 2004 (see Note 1).
During the four months ended April 30, 2004, and the two years ended December
31, 2003 and 2002, the Company recorded the amortization of Restricted Stock of
$52,000, $168,000 and $236,000, respectively, as compensation expense, which is
included in general and administrative expenses in the Company's consolidated
statements of operations.

      At December 31, 2003, the Company held a note receivable from a former
officer for $655,000, which bore interest at 6.65% and was to mature in March
2009. In connection with the Transactions, the note receivable from the former
officer was repaid on April 30, 2004. In addition, at December 31, 2003, the
Company held a note receivable from a former employee for $25,000, which bore
interest at Libor plus 2% and matured and was repaid in January 2004. These
notes arose in connection with the issuance of shares of Common Stock and were
reported on the consolidated balance sheet at December 31, 2003, as an increase
in stockholders' deficit.

      On January 10, 2003, an executive officer of a wholly-owned subsidiary and
stockholder terminated his employment with the Company and, on April 9, 2003,
exercised options to purchase 6.648 shares of the Company's Common Stock at
$125,000 per share or for $831,000 (exclusive of an income tax benefit of
$79,000). The former officer's right to put 126.648 shares of Common Stock back
to the Company expired during 2003, and, as a result, the Company recorded a
decrease in redeemable Common Stock and a decrease in stockholders' deficit of
$19,597,000 (a $13,597,000 increase in additional paid-in capital and a
$6,000,000 decrease in deficit).

      In June 2003, the Stock Incentive Plan was amended by the Board of
Directors increasing the total number of shares of Common Stock reserved and
available for grant from 150 to 200. In June 2003, the Chief Executive Officer
and the President were each granted options to purchase 25 shares of Common
Stock at $150,000 per share.

      In June 2003, the Company purchased 16 shares of Common Stock from its
Chief Executive Officer at a price of $150,000 per share, for an aggregate cost
of $2,400,000. The Chief Executive Officer used a portion of the proceeds to
repay his outstanding loan balance of $1,588,000. The Company retired the 16
shares of Common Stock.


                                      F-27
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

      In July 2003, the Company purchased 6 shares of Common Stock from its
President at a price of $150,000 per share, for an aggregate cost of $900,000.
The President used a portion of the proceeds to repay his outstanding loan
balance of $402,000. The Company retired the 6 shares of Common Stock.

      In January 2004 and December 2003, the estate of John A. Svenningsen (the
"Estate") sold its shares of Common Stock to Goldman Sachs and other current
shareholders, including 5.02 shares to employees of the Company. In December
2003, the sale of 5.02 shares to employees increased redeemable Common Stock by
$753,000.

      On March 30, 2001, the Board of Directors authorized 500 shares of
preferred stock, $0.10 par value, and designated 100 shares as Series A
Redeemable Convertible Preferred Stock ("Series A Redeemable Convertible
Preferred Stock"). Also on March 30, 2001, the Company issued 40 shares of
Series A Redeemable Convertible Preferred Stock to GSCP for proceeds of $6.0
million. In connection with the Transactions on April 30, 2004, the Company
redeemed all outstanding shares of Series A Redeemable Convertible Preferred
Stock, including accrued dividends of $34,000. Dividends were cumulative and
payable annually, at 6% per annum. On March 30, 2002, 2003 and 2004, the annual
dividends were distributed in additional shares of Series A Redeemable
Convertible Preferred Stock. Dividends payable on or prior to March 30, 2004,
were payable in additional shares of Series A Redeemable Convertible Preferred
Stock. Subsequent to March 30, 2004, dividends were to be payable, at the option
of the Company, either in cash or additional shares of Series A Redeemable
Convertible Preferred Stock. At December 31, 2003, accrued dividends aggregated
$303,372 and were included in redeemable convertible preferred stock on the
consolidated balance sheet.

      Each share of the Series A Redeemable Convertible Preferred Stock was
convertible at the option of the holder, at any time, into one share of Common
Stock of the Company, $0.10 par value. At December 31, 2003, the redeemable
convertible preferred stock was convertible into Common Stock at a price of
$150,000 per common share. As of December 31, 2003, there were 46.97 shares of
Common Stock reserved for such conversion.

      The Company has not paid any dividends on the Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company
currently intends to retain its earnings for working capital, repayment of
indebtedness, capital expenditures and general corporate purposes. In addition,
the Company's current credit facility and the indenture governing its notes
contain restrictive covenants which have the effect of limiting the Company's
ability to pay dividends or distributions to its stockholders.


NOTE 15- COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS

Lease Agreements
      The Company has several non-cancelable operating leases principally for
office, distribution and manufacturing facilities, showrooms, and warehouse
equipment that expire on various dates through 2017. These leases generally
contain renewal options and require the Company to pay real estate taxes,
utilities and related insurance.


                                      F-28
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

      At December 31, 2004, future minimum lease payments under all operating
leases consisted of the following (dollars in thousands):

<TABLE>
<S>         <C>                                      <C>
            2005...................................  $11,502
            2006...................................    9,713
            2007...................................    7,841
            2008...................................    5,187
            2009...................................    5,050
            Thereafter.............................   22,706
                                                    --------
                                                     $61,999
                                                    ========
</TABLE>

      Rent expense for the eight months ended December 31, 2004, the four months
ended April 30, 2004, and the years ended December 31, 2003 and 2002, was
$7,610,000, $3,768,000, $13,267,000 and $12,705,000, respectively.

Royalty Agreements
      The Company has entered into royalty agreements with various licensors of
copyrighted and trademarked characters and designs that are used on the
Company's products which require royalty payments based on sales of the
Company's products, and, in some cases, include annual minimum royalties.

      At December 31, 2004, the Company's commitment to pay future minimum
royalties was as follows (dollars in thousands):

<TABLE>
<S>         <C>                                      <C>
            2005...................................  $ 2,707
            2006...................................    3,517
            2007...................................    2,324
            2008...................................    1,889
            2009...................................      399
                                                     -------
                                                     $10,836
                                                     =======
</TABLE>

      Royalty expense for the eight months ended December 31, 2004, the four
months ended April 30, 2004, and the years ended December 31, 2003 and 2002, was
$3,885,000, $2,126,000, $6,522,000 and $6,192,000 respectively.

Legal Proceedings
      The Company is a party to certain claims and litigation in the ordinary
course of business. The Company does not believe any of these proceedings will
result, individually or in the aggregate, in a material adverse effect upon its
financial condition or future results of operations.

Related Party Transactions
       Goldman Sachs and its affiliates received fees totaling $8,123,000 for
services provided in connection with the Transactions. No fees were paid to
Goldman Sachs and its affiliates in 2003. For the year ended December 31, 2002,
the Company paid Goldman Sachs and its affiliates transaction fees of
$3,231,572.

       In connection with the Transactions, the Company executed a management
agreement with Berkshire Partners LLC and Weston Presidio. Pursuant to the
management agreement, Berkshire Partners LLC and Weston Presidio will be paid
annual management fees of $833,333 and $416,667, respectively. For the eight
months ended December 31, 2004, management fees to Berkshire Partners LLC and
Weston Presidio were $556,000 and $277,000, respectively. At December 31, 2004,
accrued management fees payable to Berkshire Partners LLC and Weston Presidio
totaled $139,000 and $277,000, respectively and are included in accrued expenses
on the consolidated balance sheet. Although the indenture governing the 8.75%
senior subordinated notes will permit the payments under the management
agreement, such payments will be restricted during an event of default under the
notes and will be subordinated in right of payment to all obligations due with
respect to the notes in the event of a bankruptcy or similar proceeding of
Amscan.

      During the four months ended April 30, 2004, and the years ended December
31, 2003 and 2002, the Company sold $836,000, $7,400,000, and $7,500,000
respectively, of metallic balloons and other party goods to American Greetings
Corporation, a minority stockholder from February 2002 through the date of the
Transactions.


                                      F-29
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

Trade accounts receivable from American Greetings at December 31, 2003 was
$1,937,000.

      In June 2003, the Company purchased 16 shares of Company Common Stock from
its Chief Executive Officer at a price of $150,000 per share, or for an
aggregate cash purchase price of $2,400,000, of which $2,115,000 was paid in
June 2003 and $285,000 was paid in July 2003. The Chief Executive Officer used a
portion of the proceeds to repay an outstanding loan balance of $1,588,000. The
Company retired the 16 shares of Predecessor Common Stock in 2003.

      In July 2003, the Company purchased 6 shares of Company Common Stock from
its President at a price of $150,000 per share, or for an aggregate cash
purchase price of $900,000. The President used a portion of the proceeds to
repay an outstanding loan balance of $402,000. The Company retired the 6 shares
of Predecessor Common Stock in 2003.

NOTE 16 - SEGMENT INFORMATION

Industry Segment
      The Company manages its operations as one industry segment which involves
the design, manufacture, contract for manufacture and distribution of party
goods, including decorative party goods, metallic balloons, stationery and gift
items.

Geographic Segments
      The Company's export sales, other than those intercompany sales reported
below as sales between geographic areas, are not material. Sales between
geographic areas primarily consist of sales of finished goods for distribution
in foreign markets. No single foreign operation is significant to the Company's
consolidated operations. Sales between geographic areas are made at cost plus a
share of operating profit.

      The Company's geographic area data are as follows (dollars in thousands):

<TABLE>
<CAPTION>
      SUCCESSOR:                                           DOMESTIC    FOREIGN  ELIMINATIONS   CONSOLIDATED
                                                           --------    -------  ------------   ------------
<S>                                                        <C>        <C>       <C>            <C>
      EIGHT MONTHS ENDED DECEMBER 31, 2004
      Sales to unaffiliated customers.....                 $227,733   $ 37,823                    $265,556
      Sales between geographic areas......                   11,539                $(11,539)
                                                           --------   --------     ---------      --------
      Net sales...........................                 $239,272   $ 37,823     $(11,539)      $265,556
                                                           ========    =======     =========      ========

      Income from operations..............                 $ 29,893   $  3,588     $    905       $ 34,386
                                                           ========   ========     =========
      Interest expense, net...............                                                          19,124
      Undistributed loss in unconsolidated
        joint venture.....................                                                           1,168
      Other income, net...................                                                            (286)
                                                                                                  ---------
      Income before income taxes and
        minority interests................                                                        $ 14,380
                                                                                                  ========

      Long-lived assets...................                 $469,816   $  8,729     $(22,899)      $455,646
                                                           ========   ========     =========      ========
</TABLE>


                                      F-30
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

<TABLE>
<CAPTION>
      PREDECESSOR:                                         DOMESTIC    FOREIGN  ELIMINATIONS   CONSOLIDATED
                                                           --------    -------  ------------   ------------
<S>                                                        <C>        <C>       <C>            <C>
      FOUR MONTHS ENDED APRIL 30, 2004
      Sales to unaffiliated customers.....                 $115,939    $17,721                    $133,660
      Sales between geographic areas......                    5,487                 $(5,487)
                                                           --------    -------      --------      ---------
      Net sales...........................                 $121,426    $17,721      $(5,487)      $133,660
                                                           ========    =======      ========      =========

      Income from operations..............                 $  5,517    $ 1,156      $    347      $  7,020
                                                           ========    =======      ========
      Interest expense, net...............                                                           8,384
      Undistributed loss in unconsolidated
         joint venture....................                                                              89
      Gain on sale of available-for-sale
         securities.......................                                                             (47)
      Other income, net...................                                                             (11)
                                                                                                  ---------
      Loss before income taxes and
         minority interests...............                                                        $ (1,395)
                                                                                                  =========

      Long-lived assets...................                 $187,796    $ 8,473     $(25,224)      $171,045
                                                           ========    =======     =========      =========
</TABLE>


<TABLE>
<CAPTION>
      PREDECESSOR:                                         DOMESTIC    FOREIGN  ELIMINATIONS   CONSOLIDATED
                                                           --------    -------  ------------   ------------
<S>                                                        <C>        <C>       <C>            <C>
      2003
      Sales to unaffiliated customers.....                 $346,575    $56,241                    $402,816
      Sales between geographic areas......                   20,533                $(20,533)
                                                           --------    -------     ---------      --------
      Net sales...........................                 $367,108    $56,241     $(20,533)      $402,816
                                                           ========    =======     =========      ========

      Income from operations..............                 $ 47,341    $ 3,680     $   1,240      $ 52,261
                                                           ========    =======     =========
      Interest expense, net...............                                                          26,368
      Gain on sale of available-for-sale
         securities.......................                                                          (1,486)
      Other expense, net..................                                                              52
                                                                                                  ---------
      Income before income taxes and
         minority interests...............                                                        $ 27,327
                                                                                                  =========

      Long-lived assets...................                 $194,261    $ 8,729     $(22,899)      $180,091
                                                           ========    =======     =========      =========
</TABLE>


<TABLE>
<CAPTION>
      PREDECESSOR:                                         DOMESTIC    FOREIGN  ELIMINATIONS   CONSOLIDATED
                                                           --------    -------  ------------   ------------
<S>                                                        <C>        <C>       <C>            <C>
      2002
      Sales to unaffiliated customers.....                 $332,187    $53,416                    $385,603
      Sales between geographic areas......                   18,398                $(18,398)
                                                           --------    -------     ---------      ---------
      Net sales...........................                 $350,585    $53,416     $(18,398)      $385,603
                                                           ========    =======     =========      =========

      Income from operations..............                 $ 46,481    $ 1,410     $    824       $ 48,715
                                                           ========    =======     =========
      Interest expense, net...............                                                          21,792
      Other income, net...................                                                            (311)
                                                                                                  ---------
      Income before income taxes and
         minority interests...............                                                        $ 27,234
                                                                                                  =========

      Long-lived assets...................                 $204,292    $ 7,620     $(25,185)      $186,727
                                                           ========    =======     =========      =========
</TABLE>


NOTE 17 - FAIR VALUE OF FINANCIAL INSTRUMENTS

       The carrying amounts for cash and cash equivalents, accounts receivables,
prepaid expenses and other current assets, accounts payable, accrued expenses
and other current liabilities approximate fair value at December 31, 2004 and
2003 because of the short-term maturity of those instruments or their variable
rates of interest.

      The carrying amounts of the Company's $175,000,000 senior subordinated
notes at December 31, 2004 approximated fair value based on market price. The
estimated fair value of the Company's $110,000,000 senior subordinated notes at
December 31, 2003 was $111,100,000. The carrying amounts of the Company's
borrowings under its Credit Facility and other revolving credit facilities
approximate fair value because such obligations generally bear interest at
floating rates.


                                      F-31
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

The carrying amounts for other long-term debt approximate fair value at December
31, 2004 and 2003, based on the discounted future cash flow of each instrument
at rates currently offered for similar debt instruments of comparable maturity.


NOTE 18 - DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES

      All derivative financial instruments that qualify for hedge accounting,
such as interest rate swaps and foreign currency exchange agreements, are
recognized on the consolidated balance sheets at fair value and changes in fair
value are recognized periodically in either income or stockholders' equity
(deficit) (as a component of other comprehensive income). For derivative
financial instruments that are designated and qualify as a cash flow hedge
(i.e., hedging the exposure to variability in expected future cash flows that is
attributable to a particular risk), the effective portion of the gain or loss on
the derivative instrument is reported as a component of other comprehensive
income and reclassified into earnings in the same period or periods during which
the hedged transaction affects earnings. The ineffective portion of a cash flow
hedge, if any, is determined based on the dollar-offset method (i.e., the gain
or loss on the derivative financial instrument in excess of the cumulative
change in the present value of future cash flows of the hedged item) and is
recognized in current earnings during the period of change. As long as hedge
effectiveness is maintained, the Company's interest rate swap arrangements and
foreign currency exchange agreements qualify for hedge accounting as cash flow
hedges.

Interest Rate Risk Management
      As part of the Company's risk management strategy, the Company
periodically uses interest rate swap agreements to hedge the variability of cash
flows on floating rate debt obligations (see Note 6). Accordingly, the interest
rate swap agreements are reflected in the consolidated balance sheets at fair
value and the related gains and losses on these contracts are deferred in
stockholders' equity (deficit) and recognized in interest expense over the same
period in which the related interest payments being hedged are recognized in
income. The fair value of the interest rate swap is the estimated amount that
the counterparty would receive or pay to terminate the swap agreement at the
reporting date, taking into account current interest rates and the current
creditworthiness of the swap counterparty.

      To effectively fix the interest rate on a portion of its new term loan
(see Note 6), the Company entered into two interest rate swap agreements with a
financial institution during 2004, for an initial aggregate notional amount of
$17,425,000, increasing over three years to $62,597,000. At December 31, 2004,
this hedge had an unrealized net loss of $184,000, which was included in
accumulated other comprehensive income (loss) (see Note 19). No components of
the agreements are excluded in the measurement of hedge effectiveness. As this
hedge is 100% effective, there is no current impact on earnings due to hedge
ineffectiveness. The fair value of interest rate contracts at December 31, 2004
and 2003 of ($304,000) and ($810,000), respectively, are reported in accrued
expenses of the consolidated balance sheet.

      To effectively fix the interest rate of its $10,000,000 first lien
mortgage note (see Note 6), the Company entered into an interest rate swap
agreement with a financial institution for a notional amount of $10,000,000,
agreeing to receive 30-day LIBOR and to pay 5.65%. At December 31, 2003, this
hedge had an unrealized net loss of $490,000, which was included in accumulated
other comprehensive income (loss) (see Note 19). No components of the agreement
are excluded in the measurement of hedge effectiveness. As this hedge was 100%
effective, there was no impact on earnings due to hedge ineffectiveness. On
April 30, 2004, in connection with the Transactions, the first lien mortgage
note was paid in full and, as a result, the interest rate swap agreement was
terminated at a cost of $673,600.

Foreign Exchange Risk Management
      A portion of the Company's cash flows is derived from transactions
denominated in foreign currencies. The United States dollar value of
transactions denominated in foreign currencies fluctuates as the United States
dollar strengthens or weakens relative to these foreign currencies. In order to
reduce the uncertainty of foreign exchange rate movements on transactions
denominated in foreign currencies, including the British Pound Sterling and the
Euro, the Company enters into foreign exchange contracts with major
international financial institutions. These forward


                                      F-32
<PAGE>
]                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

contracts, which typically mature within one year, are designed to hedge
anticipated foreign currency transactions, primarily inter-company inventory
purchases and trade receivables. No components of the contracts are excluded in
the measurement of hedge effectiveness. The critical terms of the foreign
exchange contracts are the same as the underlying forecasted transactions;
therefore, changes in the fair value of foreign exchange contracts should be
highly effective in offsetting changes in the expected cash flows from the
forecasted transactions. At December 31, 2004 and 2003, the Company had foreign
currency exchange contracts with notional amounts of $15,400,000 and
$12,100,000, respectively. The foreign currency exchange contracts are reflected
in the consolidated balance sheets at fair value and the related gains and
losses on these contracts are deferred in stockholders' equity (deficit). The
fair value of the foreign currency exchange contracts is the estimated amount
that a counterparty would receive or pay to terminate the foreign currency
exchange contracts at the reporting date, taking into account current foreign
exchange spot rates. The fair value adjustment at December 31, 2004 and 2003 are
unrealized net losses of $173,000, and $692,000, respectively, which have been
included in accumulated other comprehensive income (loss) (see Note 19). The
Company anticipates that substantially all gains and losses in accumulated other
comprehensive income (loss) related to foreign exchange contracts will be
reclassified into earnings by December 2005. The fair value of foreign exchange
contracts at December 31, 2004 and 2003 of ($286,000) and ($997,000),
respectively, are reported in accrued expenses in the consolidated balance
sheet.


NOTE 19 - COMPREHENSIVE INCOME (LOSS)

      Comprehensive income (loss) consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                    EIGHT MONTHS     FOUR MONTHS
                                       ENDED            ENDED         YEAR ENDED       YEAR ENDED
                                    DECEMBER 31,      APRIL 30,      DECEMBER 31,      DECEMBER 31,
                                    ------------      ---------      ------------      ------------
                                        2004            2004             2003             2002
                                        ----            ----             ----             ----
                                     (SUCCESSOR)    (PREDECESSOR)    (PREDECESSOR)    (PREDECESSOR)
<S>                                 <C>             <C>              <C>              <C>
Net income (loss).................       $8,564        $(890)           $17,163         $ 16,465
Net change in cumulative
  translation adjustment..........        1,702         (673)             2,161            1,304
Change in fair value of
  available-for-sale  securities,
  net of income tax (benefit) of
  $(14) and $620, respectively.....                      (22)               949
Reclassification adjustment for
  available-for-sale securities
  sold during the period, net of
  income tax benefit of $(19) and
  $(587), respectively............                       (28)              (899)
Change in fair value of interest
  rate swap contracts, net of
  income tax (benefit) of $(120),
  $54, $101, and $(421),
  respectively....................         (184)          82                154             (644)
Reclassification adjustment for
  the interest rate swap contract
  terminated in connection with
  the Transactions, net of income
  taxes of  $266..................                       408
Change in fair value of the
  foreign exchange contracts, net
  of income tax (benefit) of
  $(113), $146, $(148) and
  $(229), respectively............         (173)         224               (226)            (352)
                                         ------        -----            -------         --------
                                         $9,909        $(899)           $19,302         $ 16,773
                                         ======        =====            =======         ========
</TABLE>


                                      F-33
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

   Accumulated other comprehensive income (loss) consisted of the following
(dollars in thousands):

<TABLE>
<CAPTION>
                                                           DECEMBER 31,  DECEMBER 31,
                                                              2004          2003
                                                           ------------  -------------
                                                           (Successor)   (Predecessor)

<S>                                                        <C>           <C>
 Cumulative translation adjustment.......................      $1,702           $686
 Unrealized gain on available-for-sale securities, net
   of income taxes of $33................................                         50
 Interest rate swap contracts, net of income tax benefit
   of $(120) and $(320), respectively....................        (184)          (490)
 Foreign exchange contracts, net of income tax benefit
   of $(113) and $(305), respectively....................        (173)          (692)
                                                               ------         ------
                                                               $1,345          $(446)
                                                               ======          =====
</TABLE>


NOTE 20 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED)

      On April 30, 2004, in connection with the consummation of the
Transactions, all borrowings under the then existing credit agreement were
repaid and the facility was terminated. In addition, $87,200,000 in aggregate
principal amount of the 9.875% senior subordinated notes due 2007 were accepted
in a tender offer and a redemption notice was issued for the remaining senior
subordinated notes (see Note 2). The aggregate cost to purchase the 9.875%
senior subordinated notes due 2007 tendered pursuant to the tender offer was
approximately $93,500,000, or 103.542% of the principal amount of such 9.875%
senior subordinated notes plus accrued and unpaid interest. On May 31, 2004, the
remaining $22,800,000 in aggregate principal amount of the outstanding 9.875%
senior subordinated notes was redeemed pursuant to the redemption notice at a
price of 103.292% of the principal amount of such notes, or $23,551,000, plus
accrued and unpaid interest.

      The acquisition was financed with initial borrowings consisting of a
$205,000,000 term loan under a new senior secured credit facility, which
includes a $50,000,000 revolving loan facility, the proceeds from the issuance
of $175,000,000 of 8.75% senior subordinated notes due 2014, the equity
contribution by our Principal Investors and employee stockholders of
$140,524,000, borrowings under the revolver of $23,551,000 and approximately
$2,900,000 of cash on hand.

      Borrowings under the new senior secured credit facility, the revolving
loan facility and the $175,000,000 of 8.75% senior subordinated notes due 2014
are guaranteed jointly and severally, fully and unconditionally, by the
following wholly-owned domestic subsidiaries of the Company (the "Guarantors"):

   -  Amscan Inc.
   -  Am-Source, LLC
   -  Anagram International, Inc.
   -  Anagram International Holdings, Inc.
   -  Anagram International, LLC
   -  M&D Industries, Inc.
   -  SSY Realty Corp.
   -  JCS Packaging Inc. (formerly JCS Realty Corp.)
   -  Anagram Eden Prairie Property Holdings LLC
   -  Trisar, Inc.


                                      F-34
<PAGE>
                              AMSCAN HOLDINGS, INC.
             Notes to Consolidated Financial Statements (Continued)
                                December 31, 2004

      Non-guarantor subsidiaries ("Non-guarantors") include the following:

   -  Amscan Distributors (Canada) Ltd.
   -  Amscan Holdings Limited
   -  Amscan (Asia-Pacific) Pty. Ltd.
   -  Amscan Partyartikel GmbH
   -  Amscan de Mexico, S.A. de C.V.
   -  Anagram International (Japan) Co., Ltd.
   -  Anagram Espana, S.A.
   -  Anagram France S.C.S.
   -  JCS Hong Kong Ltd.

      The following consolidating information presents consolidating balance
sheets as of December 31, 2004 (Successor) and 2003 (Predecessor), and the
related consolidating statements of operations and cash flows for the eight
months ended December 31, 2004 (Successor), the four months ended April 30, 2004
(Predecessor) and for each of the two years in the period ended December 31,
2003 (Predecessor) for the combined Guarantors and the combined Non-guarantors
and elimination entries necessary to consolidate the entities comprising the
combined companies.


                                      F-35
<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                           CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2004
                                   (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 AMSCAN
                                                              HOLDINGS AND     COMBINED
                                                                COMBINED         NON-
                                                               GUARANTORS     GUARANTORS     ELIMINATIONS     CONSOLIDATED
                                                               ----------     ----------     ------------     ------------
<S>                                                           <C>             <C>            <C>              <C>
ASSETS
Current assets:
    Cash and cash equivalents ............................      $   3,153      $   1,099                       $   4,252
    Accounts receivable, net of allowances ...............         72,353         11,615                          83,968
    Inventories, net of allowances .......................         77,386         11,052       $    (279)         88,159
    Prepaid expenses and other current assets ............         13,914          1,327                          15,241
                                                                ---------      ---------       ---------       ---------
        Total current assets .............................        166,806         25,093            (279)        191,620
Property, plant and equipment, net .......................         94,179          1,955                          96,134
Goodwill, net ............................................        277,699          5,222                         282,921
Tradenames ...............................................         33,500                                         33,500
Intangible assets, net ...................................         23,289                                         23,289
Other assets, net ........................................         41,875          3,331         (25,404)         19,802
                                                                ---------      ---------         -------       ---------
        Total assets                                            $ 637,348      $  35,601       $ (25,683)      $ 647,266
                                                                =========      =========       =========       =========
LIABILITIES, REDEEMABLE COMMON SECURITIES
    AND STOCKHOLDERS' EQUITY
Current liabilities:
    Loans and notes payable ..............................      $   2,025                                      $   2,025
    Accounts payable .....................................         34,918      $   1,924                          36,842
    Accrued expenses .....................................         14,425          6,555                          20,980
    Income taxes payable .................................          2,319            302       $     (27)          2,594
    Current portion of long-term obligations .............          2,627            180                           2,807
                                                                ---------      ---------       ---------       ---------
        Total current liabilities ........................         56,314          8,961             (27)         65,248
Long-term obligations, excluding current portion .........        384,802            191                         384,993
Deferred income tax liabilities ..........................         43,175                                         43,175
Other ....................................................          2,372         23,310         (22,265)          3,417
                                                                ---------      ---------       ---------       ---------
        Total liabilities ................................        486,663         32,462         (22,292)        496,833
Redeemable common securities .............................          3,705                                          3,705

Commitments and contingencies

Stockholders' equity:
    Preferred Stock ......................................                                                            --
    Common Stock .........................................                           339            (339)             --
    Additional paid-in capital ...........................        136,819                                        136,819
    Retained earnings ....................................          8,816          1,384          (1,636)          8,564
    Accumulated other comprehensive income ...............          1,345          1,416          (1,416)          1,345
                                                                ---------      ---------       ---------       ---------
               Total stockholders' equity ................        146,980          3,139          (3,391)        146,728
                                                                ---------      ---------       ---------       ---------
               Total liabilities, redeemable common
                       securities and stockholders' equity      $ 637,348      $  35,601       $ (25,683)      $ 647,266
                                                                =========      =========       =========       =========
</TABLE>

                                      F-36

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                           CONSOLIDATING BALANCE SHEET
                                DECEMBER 31, 2003
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                         AMSCAN
                                                                       HOLDINGS AND      COMBINED
                                                                        COMBINED           NON-
                                                                       GUARANTORS       GUARANTORS     ELIMINATIONS    CONSOLIDATED
                                                                       ----------       ----------     ------------    ------------
<S>                                                                    <C>              <C>            <C>             <C>
ASSETS
Current assets:
        Cash and cash equivalents .................................      $  30,740       $     722                       $  31,462
        Accounts receivable, net ..................................         63,553          12,129                          75,682
        Inventories ...............................................         75,991           9,357       $    (211)         85,137
        Prepaid expenses and other current assets .................          8,611           1,248            (129)          9,730
                                                                         ---------       ---------       ---------       ---------
        Total current assets ......................................        178,895          23,456            (340)        202,011
Property, plant and equipment, net ................................         94,789           1,705                          96,494
Goodwill, net .....................................................         66,453           5,533                          71,986
Intangible assets, net ............................................            333                                             333
Other assets, net .................................................         32,686           1,491         (22,899)         11,278
                                                                         ---------       ---------       ---------       ---------
        Total assets ..............................................      $ 373,156       $  32,185       $ (23,239)      $ 382,102
                                                                         =========       =========       =========       =========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON SECURITIES
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
        Accounts payable ..........................................      $  33,221       $   1,695                       $  34,916
        Accrued expenses ..........................................         14,156           5,965                          20,121
        Income taxes payable ......................................          3,307                       $    (129)          3,178
        Current portion of long-term obligations ..................         23,110             127                          23,237
                                                                         ---------       ---------       ---------       ---------
        Total current liabilities .................................         73,794           7,787            (129)         81,452
Long-term obligations, excluding current portion ..................        272,104             168                         272,272
Deferred income tax liabilities ...................................         18,040                                          18,040
Other .............................................................          1,083          13,133         (11,802)          2,414
                                                                         ---------       ---------       ---------       ---------
        Total liabilities .........................................        365,021          21,088         (11,931)        374,178

Redeemable convertible preferred stock ............................          7,045                                           7,045
Redeemable common securities ......................................          9,498                                           9,498

Commitments and Contingencies......................................

Stockholders' (deficit) equity:
        Common Stock ..............................................                            339            (339)             --
        Additional paid-in capital ................................         26,682             658            (658)         26,682
        Unamortized restricted Common Stock
           award, net .............................................           (155)                                           (155)
        Notes receivable from stockholders ........................           (680)                                           (680)
        (Deficit) retained earnings ...............................        (33,809)         10,292         (10,503)        (34,020)
        Accumulated other comprehensive loss ......................           (446)           (192)            192            (446)
                                                                         ---------       ---------       ---------       ---------
               Total stockholders' (deficit) equity ...............         (8,408)         11,097         (11,308)         (8,619)
                                                                         ---------       ---------       ---------       ---------
               Total liabilities, redeemable convertible
                    preferred and Common Securities and
                    stockholders' (deficit) equity ................      $ 373,156       $  32,185       $ (23,239)      $ 382,102
                                                                         =========       =========       =========       =========
</TABLE>

                                      F-37

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF OPERATIONS
                  FOR THE EIGHT MONTHS ENDED DECEMBER 31, 2004
                                   (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         AMSCAN
                                                      HOLDINGS AND      COMBINED
                                                        COMBINED          NON-
                                                       GUARANTORS      GUARANTORS      ELIMINATIONS    CONSOLIDATED
                                                       ----------      ----------      ------------    ------------
<S>                                                   <C>              <C>             <C>             <C>
Net sales ........................................      $ 239,272       $  37,823       $ (11,539)      $ 265,556
Cost of sales ....................................        165,028          24,746         (11,564)        178,210
                                                        ---------       ---------       ---------       ---------
               Gross profit ......................         74,244          13,077              25          87,346
Operating expenses:
      Selling expenses ...........................         18,959           4,570                          23,529
      General and administrative expenses ........         17,704           4,586            (880)         21,410
      Provision for doubtful accounts ............            975             333                           1,308
      Art and development costs ..................          6,713                                           6,713
                                                        ---------       ---------       ---------       ---------
               Total operating expenses ..........         44,351           9,489            (880)         52,960
                                                        ---------       ---------       ---------       ---------
               Income from operations ............         29,893           3,588             905          34,386
Interest expense, net ............................         19,022             102                          19,124
Undistributed loss in unconsolidated joint venture         (1,299)                          2,467           1,168
Other income, net ................................         (1,086)            (80)            880            (286)
                                                        ---------       ---------       ---------       ---------
               Income before income taxes and
                 minority interests ..............         13,256           3,566          (2,442)         14,380
Income tax expense ...............................          4,707             962              10           5,679
Minority interests ...............................                            137                             137
                                                        ---------       ---------       ---------       ---------
               Net income ........................      $   8,549       $   2,467       $  (2,452)      $   8,564
                                                        =========       =========       =========       =========
</TABLE>

                                      F-38

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE FOUR MONTHS ENDED APRIL 30, 2004
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   AMSCAN
                                                                HOLDINGS AND     COMBINED
                                                                  COMBINED         NON-
                                                                 GUARANTORS     GUARANTORS       ELIMINATIONS   CONSOLIDATED
                                                                 ----------     ----------       ------------   ------------
<S>                                                             <C>             <C>              <C>            <C>
Net sales ..................................................      $ 121,426       $  17,721       $  (5,487)      $ 133,660
Cost of sales ..............................................         81,845          11,796          (5,394)         88,247
                                                                  ---------       ---------       ---------       ---------
               Gross profit ................................         39,581           5,925             (93)         45,413
Operating expenses:
      Selling expenses .....................................         10,095           2,335                          12,430
      General and administrative expenses ..................          8,280           2,305            (440)         10,145
      Provision for doubtful accounts ......................            600             129                             729
      Art and development costs ............................          3,332                                           3,332
      Non-recurring expenses related to the Transactions ...         11,757                                          11,757
                                                                  ---------       ---------       ---------       ---------
               Total operating expenses ....................         34,064           4,769            (440)         38,393
                                                                  ---------       ---------       ---------       ---------
               Income from operations ......................          5,517           1,156             347           7,020
Interest expense, net ......................................          8,320              64                           8,384
Undistributed loss in unconsolidated joint venture .........           (646)                            735              89
Gain on sale of available-for-sale securities ..............            (47)                                            (47)
Other income, net ..........................................           (412)            (39)            440             (11)
                                                                  ---------       ---------       ---------       ---------
               (Loss) income before income taxes and
                  minority interests .......................         (1,698)          1,131            (828)         (1,395)
Income tax (benefit) expense ...............................           (864)            350             (37)           (551)
Minority interests .........................................                             46                              46
                                                                  ---------       ---------       ---------       ---------
               Net (loss) income ...........................           (834)            735            (791)           (890)
               Dividend on redeemable convertible
                  preferred stock ..........................            136                                             136
                                                                  ---------       ---------       ---------       ---------
               Net (loss) income applicable to common shares      $    (970)      $     735       $    (791)      $  (1,026)
                                                                  =========       =========       =========       =========
</TABLE>

                                      F-39

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2003
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            AMSCAN
                                                         HOLDINGS AND      COMBINED
                                                           COMBINED          NON-
                                                          GUARANTORS      GUARANTORS     ELIMINATIONS    CONSOLIDATED
                                                          ----------      ----------     ------------    ------------
<S>                                                      <C>              <C>            <C>             <C>
Net sales ...........................................      $ 367,108       $  56,241       $ (20,533)      $ 402,816
Cost of sales .......................................        250,242          39,456         (20,573)        269,125
                                                           ---------       ---------       ---------       ---------
               Gross profit .........................        116,866          16,785              40         133,691
Operating expenses:
      Selling expenses ..............................         30,296           6,219                          36,515
      General and administrative expenses ...........         26,339           6,786          (1,200)         31,925
      Provision for doubtful accounts ...............          2,515              73                           2,588
      Art and development costs .....................          9,395                                           9,395
      Restructuring charges .........................            980              27                           1,007
                                                           ---------       ---------       ---------       ---------
               Total operating expenses .............         69,525          13,105          (1,200)         81,430
                                                           ---------       ---------       ---------       ---------
               Income from operations ...............         47,341           3,680           1,240          52,261

Interest expense, net ...............................         25,610             758                          26,368
Gain on sale of available-for-sale securities .......         (1,486)                                         (1,486)
Other (income) expense, net .........................         (2,928)            136           2,844              52
                                                           ---------       ---------       ---------       ---------
               Income before income taxes and
                    minority interests ..............         26,145           2,786          (1,604)         27,327

Income tax expense ..................................          9,022           1,043                          10,065
Minority interests ..................................                             99                              99
                                                           ---------       ---------       ---------       ---------
               Net income ...........................         17,123           1,644          (1,604)         17,163
               Dividend on redeemable convertible
                   preferred stock ..................            399                                             399
                                                           ---------       ---------       ---------       ---------
               Net income applicable to common shares      $  16,724       $   1,644       $  (1,604)      $  16,764
                                                           =========       =========       =========       =========
</TABLE>

                                      F-40

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2002
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                            AMSCAN
                                                         HOLDINGS AND      COMBINED
                                                           COMBINED          NON-
                                                          GUARANTORS      GUARANTORS     ELIMINATIONS    CONSOLIDATED
                                                          ----------      ----------     ------------    ------------
<S>                                                      <C>              <C>            <C>             <C>
Net sales ...........................................      $ 350,585       $  53,416       $ (18,398)      $ 385,603
Cost of sales .......................................        233,112          38,130         (18,262)        252,980
                                                           ---------       ---------       ---------       ---------
               Gross profit .........................        117,473          15,286            (136)        132,623
Operating expenses:
      Selling expenses ..............................         28,586           6,033                          34,619
      General and administrative expenses ...........         26,764           6,252            (960)         32,056
      Provision for doubtful accounts ...............          2,147             861                           3,008
      Art and development costs .....................         10,301                                          10,301
      Write-off of deferred financing and IPO-related
         costs ......................................          2,261                                           2,261
      Restructuring charges .........................            933             730                           1,663
                                                           ---------       ---------       ---------       ---------
               Total operating expenses .............         70,992          13,876            (960)         83,908
                                                           ---------       ---------       ---------       ---------
               Income from operations ...............         46,481           1,410             824          48,715

Interest expense, net ...............................         21,121             671                          21,792
Other (income) expense, net .........................         (2,182)          2,327            (456)           (311)
                                                           ---------       ---------       ---------       ---------
               Income (loss) before income taxes and
                    minority interests ..............         27,542          (1,588)          1,280          27,234

Income tax expense (benefit) ........................         10,995            (184)            (54)         10,757
Minority interests ..................................                             12                              12
                                                           ---------       ---------       ---------       ---------
               Net income (loss) ....................         16,547          (1,416)          1,334          16,465
               Dividend on redeemable convertible
                   preferred stock ..................            376                                             376
                                                           ---------       ---------       ---------       ---------
               Net income (loss) applicable to common
                  shares ............................      $  16,171       $  (1,416)      $   1,334       $  16,089
                                                           =========       =========       =========       =========
</TABLE>

                                      F-41

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                  FOR THE EIGHT MONTHS ENDED DECEMBER 31, 2004
                                   (SUCCESSOR)
                             (DOLLARS IN THOUSANDS)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                          AMSCAN HOLDINGS   COMBINED
                                                                           AND COMBINED        NON-
                                                                            GUARANTORS      GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                            ----------      ----------   ------------   ------------
<S>                                                                       <C>               <C>          <C>            <C>
Cash flows provided by (used in) operating activities:
     Net income .......................................................      $   8,549      $   2,467      $  (2,452)     $   8,564
     Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
          Depreciation and amortization expense .......................          9,070            449                         9,519
          Amortization of deferred financing costs ....................          1,022                                        1,022
          Provision for doubtful accounts .............................            975            333                         1,308
          Deferred income tax benefit .................................          3,638                                        3,638
          Gain on disposal of equipment ...............................             (1)            (3)                           (4)
          Undistributed loss in unconsolidated joint venture ..........          1,168                                        1,168
          Changes in operating assets and liabilities:
                    Decrease in accounts receivable ...................          1,350            202                         1,552
                    Increase in inventories, net ......................         (4,571)        (1,998)           (25)        (6,594)
                    (Increase) decrease in prepaid expenses, other
                       current assets and other, net ..................            (56)        (2,938)         2,467           (527)
                    Increase in accounts payable, accrued
                       expenses and income taxes payable ..............          4,212            894             10          5,116
                                                                             ---------      ---------      ---------      ---------
                    Net cash provided by (used in) operating activities         25,356           (594)            --         24,762

Cash flows used in investing activities:

     Cash paid to consummate the Transactions .........................       (529,982)                                    (529,982)
     Capital expenditures .............................................         (7,384)          (325)                       (7,709)
     Proceeds from disposal of property and equipment .................            160            399                           559
                                                                             ---------      ---------      ---------      ---------
                    Net cash used in investing activities .............       (537,206)            74             --       (537,132)

Cash flows provided by (used in) financing activities:
     Proceeds from loans, notes payable and long-term
          obligations, net of debt issuance costs of $12,705 ..........        368,941                                      368,941
     Repayment of loans, notes payable and long-term
         obligations ..................................................         (1,651)          (117)                       (1,768)
     Capital contributions in connection with the Transactions ........        139,024                                      139,024
                                                                             ---------      ---------      ---------      ---------
                    Net cash provided by (used in) financing activities        506,314           (117)            --        506,197
Effect of exchange rate changes on cash and cash equivalents ..........             43          1,145                         1,188
                                                                             ---------      ---------      ---------      ---------
                    Net decrease in cash and cash equivalents .........         (5,493)           508                        (4,985)
Cash and cash equivalents at beginning of period ......................          8,646            591                         9,237
                                                                             ---------      ---------      ---------      ---------
Cash and cash equivalents at end of period ............................      $   3,153      $   1,099      $      --      $   4,252
                                                                             =========      =========      =========      =========
</TABLE>

                                      F-42

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE FOUR MONTHS ENDED APRIL 30, 2004
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    AMSCAN HOLDINGS     COMBINED
                                                                     AND COMBINED         NON-
                                                                      GUARANTORS       GUARANTORS     ELIMINATIONS     CONSOLIDATED
                                                                      ----------       ----------     ------------     ------------
<S>                                                                 <C>                <C>            <C>              <C>
Cash flows provided by operating activities:
     Net (loss) income ...........................................      $   (834)       $    735        $   (791)        $   (890)
     Adjustments to reconcile net (loss) income to net
       cash provided by operating activities:
          Depreciation and amortization expense ..................         5,076             220                            5,296
          Amortization of deferred financing costs ...............           709                                              709
          Amortization of restricted Common Stock award ..........            52                                               52
          Provision for doubtful accounts ........................           600             129                              729
          Deferred income tax benefit ............................        (2,220)                                          (2,220)
          Gain on disposal of equipment ..........................                           (35)                             (35)
          Undistributed loss in unconsolidated joint venture .....            89                                               89
          Debt retirement costs incurred in connection with
               the Transactions ..................................         6,209                                            6,209
          Write-off of deferred financing costs ..................         5,548                                            5,548
          Gain on sale of available-for-sale securities ..........           (47)                                             (47)
          Changes in operating assets and liabilities:
                    Increase in accounts receivable ..............       (13,843)         (1,404)                         (15,247)
                    Decrease in inventories, net .................         5,833             303              93            6,229
                    Increase in prepaid expenses and other
                       current assets ............................        (2,400)            664             735           (1,001)
                    Increase in accounts payable, accrued expenses
                       and income taxes payable ..................         3,663             365             (37)           3,991
                                                                        --------        --------        --------         --------
                    Net cash provided by operating activities ....         8,435            (977)                           9,412

Cash flows used in investing activities:

     Capital expenditures ........................................        (3,205)           (521)                          (3,726)
     Proceeds from sale of available-for-sale securities .........            65                                               65
     Proceeds from disposal of property and equipment ............                            53                               53
                                                                        --------        --------        --------         --------
                    Net cash used in investing activities ........        (3,140)           (468)             --           (3,608)

Cash flows used in financing activities:
     Repayment of loans, notes payable and long-term
         obligations .............................................       (21,184)            (67)                         (21,251)
     Debt retirement costs paid in connection with the
           Transactions ..........................................        (6,209)                                          (6,209)
     Repayment of note receivable from stockholder ...............            25                                               25
                                                                        --------        --------        --------         --------
                    Net cash used in financing activities ........       (27,368)            (67)             --          (27,435)
Effect of exchange rate changes on cash and cash equivalents .....           (21)           (573)                            (594)
                                                                        --------        --------        --------         --------
                    Net decrease in cash and cash equivalents ....       (22,094)           (131)                         (22,225)
Cash and cash equivalents at beginning of period .................        30,740             722                           31,462
                                                                        --------        --------        --------         --------
Cash and cash equivalents at end of period .......................      $  8,646        $    591        $     --         $  9,237
                                                                        ========        ========        ========         ========
</TABLE>

                                      F-43

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2003
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                          AMSCAN HOLDINGS    COMBINED
                                                                           AND COMBINED        NON-
                                                                            GUARANTORS      GUARANTORS   ELIMINATIONS   CONSOLIDATED
                                                                            ----------      ----------   ------------   ------------
<S>                                                                       <C>               <C>          <C>            <C>
Cash flows provided by (used in) operating activities:
     Net income ........................................................      $ 17,123       $  1,644       $ (1,604)      $ 17,163
     Adjustments to reconcile net income to net
       cash provided by (used in) operating activities:
          Depreciation and amortization ................................        15,540            579                        16,119
          Amortization of deferred financing costs .....................         2,131                                        2,131
          Loss on disposal of property, plant and equipment ............           109             13                           122
          Provision for doubtful accounts ..............................         2,515             73                         2,588
          Amortization of restricted Common Stock awards ...............           168                                          168
          Gain on sale of available-for-sale securities ................        (1,486)                                      (1,486)
          Non-cash restructuring charges ...............................           104                                          104
          Deferred income tax provision ................................         5,231                                        5,231
          Changes in operating assets and liabilities:
                    Increase in accounts receivable ....................          (972)        (2,656)                       (3,628)
                    Decrease (increase) in inventories .................         7,553           (400)           (40)         7,113
                    Decrease (increase) in prepaid expenses, other
                       current assets and other, net ...................         1,337           (731)         1,644          2,250
                    (Increase) decrease in accounts payable, accrued
                       expenses and income taxes payable ...............        (6,547)           834                        (5,713)
                                                                              --------       --------       --------       --------
                    Net cash provided by (used in) operating activities         42,806           (644)            --         42,162

Cash flows used in investing activities:

     Capital expenditures ..............................................       (11,660)          (865)                      (12,525)
     Proceeds from sale of available-for-sale securities ...............         2,005                                        2,005
     Proceeds from disposal of property, plant and equipment ...........           117             87                           204
                                                                              --------       --------       --------       --------
                    Net cash used in investing activities ..............        (9,538)          (778)                      (10,316)

Cash flows used in financing activities:

     Proceeds from exercise of Common Stock options ....................           831                                          831
     Repayment of loans, notes payable and long-term obligations .......        (3,530)          (193)                       (3,723)
     Purchase of Common Stock from officers ............................        (3,300)                                      (3,300)
     Repayment of notes receivable from officers .......................         1,990                                        1,990
                                                                              --------       --------       --------       --------
                    Net cash used in financing activities ..............        (4,009)          (193)                       (4,202)
Effect of exchange rate changes on cash and cash equivalents ...........            (2)         1,420                         1,418
                                                                              --------       --------       --------       --------
                    Net increase (decrease) in cash and cash equivalents        29,257           (195)                       29,062
Cash and cash equivalents at beginning of year .........................         1,483            917                         2,400
                                                                              --------       --------       --------       --------
Cash and cash equivalents at end of year ...............................      $ 30,740       $    722       $     --       $ 31,462
                                                                              ========       ========       ========       ========
</TABLE>

                                      F-44

<PAGE>

                              AMSCAN HOLDINGS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                DECEMBER 31, 2004

                      CONSOLIDATING STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2002
                                  (PREDECESSOR)
                             (DOLLARS IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    AMSCAN HOLDINGS     COMBINED
                                                                      AND COMBINED        NON-
                                                                      GUARANTORS       GUARANTORS     ELIMINATIONS    CONSOLIDATED
                                                                      ----------       ----------     ------------    ------------
<S>                                                                 <C>                <C>            <C>             <C>
Cash flows provided by operating activities:
     Net income (loss) ...........................................      $  16,547       $  (1,416)      $   1,334       $  16,465
     Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
          Depreciation and amortization ..........................         13,443             519                          13,962
          Amortization of deferred financing costs ...............          1,202                                           1,202
          (Gain) loss on disposal of property, plant and equipment           (348)             94                            (254)
          Provision for doubtful accounts ........................          2,147             861                           3,008
          Write-off of deferred financing costs ..................          1,460                                           1,460
          Amortization of restricted Common Stock awards .........            236                                             236
          Deferred income tax provision (benefit) ................          5,013            (144)                          4,869
          Changes in operating assets and liabilities, net of
            acquisition:
              Increase in accounts receivable ....................         (4,528)         (3,406)                         (7,934)
              Increase in inventories ............................        (13,710)         (1,817)            136         (15,391)
              (Increase) decrease in prepaid expenses, other
                 current assets and other, net ...................         (4,949)          4,338          (1,416)         (2,027)
              Increase in accounts payable, accrued expenses
                 and income taxes payable ........................          3,665           1,122             (54)          4,733
                                                                        ---------       ---------       ---------       ---------
              Net cash provided by operating activities ..........         20,178             151              --          20,329

Cash flows used in investing activities:

     Cash paid in connection with acquisition ....................        (13,548)                                        (13,548)
     Capital expenditures ........................................        (17,248)           (464)                        (17,712)
     Proceeds from disposal of property, plant and equipment .....            481              49                             530
                                                                        ---------       ---------       ---------       ---------
              Net cash used in investing activities ..............        (30,315)           (415)                        (30,730)

Cash flows provided by (used in) financing activities:
     Proceeds from loans, notes payable and long-term obligations,
        net of debt issuance costs (including original issue
        discount) of $6,032 ......................................        163,968                                         163,968
     Repayment of loans, notes payable and long-term obligations .       (152,198)           (153)                       (152,351)
     Loans to officers under notes ...............................           (200)                                           (200)
                                                                        ---------       ---------       ---------       ---------
              Net cash provided by (used in) financing activities          11,570            (153)                         11,417
Effect of exchange rate changes on cash and cash equivalents .....            (10)            378                             368
                                                                        ---------       ---------       ---------       ---------
              Net increase (decrease) in cash and cash equivalents          1,423             (39)                          1,384
Cash and cash equivalents at beginning of year ...................             60             956                           1,016
                                                                        ---------       ---------       ---------       ---------
Cash and cash equivalents at end of year .........................      $   1,483       $     917       $      --       $   2,400
                                                                        =========       =========       =========       =========
</TABLE>

                                      F-45
<PAGE>
                                   SCHEDULE II
                              AMSCAN HOLDINGS, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       BEGINNING                                       ENDING
                                                                        BALANCE       WRITE-OFFS      ADDITIONS        BALANCE
<S>                                                                    <C>            <C>             <C>              <C>
Allowance for Doubtful Accounts:
    Predecessor:
        For the year ended December 31, 2002....................         $3,937          $1,818        $3,008          $5,127
        For the year ended December 31, 2003....................          5,127           4,890         2,588           2,825
        For the four months ended April 30, 2004................          2,825             444           729           3,110

        Successor:
        For the eight months ended December 31, 2004............         $3,110          $1,811        $1,294          $2,593
</TABLE>

<TABLE>
<CAPTION>
                                                                       BEGINNING                                       ENDING
                                                                        BALANCE       WRITE-OFFS     ADDITIONS         BALANCE
<S>                                                                    <C>            <C>             <C>              <C>
Inventory Reserves:

    Predecessor:
        For the year ended December 31, 2002....................         $3,306          $1,187        $1,259          $3,378
        For the year ended December 31, 2003....................          3,378           2,267         1,614           2,725
        For the four months ended April 30, 2004................          2,725             277           583           3,031

Successor:
        For the eight months ended December 31, 2004............         $    -          $             $  984          $  984
</TABLE>


                                      F-46