POS AM 1 as4a4v2.htm POST EFFECTIVE AMENDMENT VERSION 4 DATED 7-30-01 Amscan Holdings, Inc. Form S-4 - Amentment No. 4

As filed with the Securities and Exchange Commission on July 30, 2001 .
Registration No. 333-45457

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
POST-EFFECTIVE AMENDMENT NO. 4
to
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------------------------
AMSCAN HOLDINGS, INC.*
(Exact name of Registrant as specified in its charter)
--------------------------

Delaware
(State or other jurisdiction of
incorporation or organization)

5110
(Primary standard industrial
Classification Code Number)

13-3911462
(I.R.S. employer
identification number)

Amscan Holdings, Inc.
80 Grasslands Road
Elmsford, New York 10523
(914) 345-2020
(Address, including zip code, and telephone number, including
area code, of the Registrant’s principal executive offices)

James M. Harrison
President
Amscan Holdings, Inc.
80 Grasslands Road
Elmsford, New York 10523
(914) 345-2020
(Name, address, including zip code and telephone number,
including area code, of agent for service)

Copies of all communications to:

Paul G. Hughes, Esq.
Cummings & Lockwood
P. O. Box 120, Four Stamford Plaza
Stamford, Connecticut 06904-0120
(203) 327-1700

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

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G check the following box. [ ]

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

* TABLE OF ADDITIONAL REGISTRANTS

Name, Address and Telephone Number	State or Other Jurisdiction of Incorporation or Organization	Primary Standard Industry Classification Number	I.R.S. Employer Identification Number
Amscan Inc............................	New York	5110	13-1771359
Trisar, Inc.............................	California	5110	95-3420659
Am-Source, LLC....................	Rhode Island	5110	05-0518427
Anagram International, Inc........	Minnesota	5110	41-1372523
Anagram International Holdings, Inc....................................	Minnesota	5110	41-1755837
Anagram International, LLC......	Nevada	5110	41-1794849
SSY Realty Corp....................	New York	6519	13-3500756
JCS Realty Corp.....................	New York	6519	13-3431738
Anagram Eden Prairie Property Holdings LLC....................	Delaware	6519	41-1918309

_____________

*	The address of these additional registrants is 80 Grasslands Road, Elmsford, New York 10523. Their telephone number is (914) 345-2020.

EXPLANATORY NOTE

This Registration Statement originally related to the registration of an aggregate principal amount of $110,000,000 of 9 7/8% Senior Subordinated Notes due 2007 of Amscan Holdings, Inc. All of those notes were exchanged for equal principal amounts of Amscan Holdings, Inc.'s 9 7/8% Senior Subordinated Notes due 2007. Amscan Holdings, Inc. filed Amendment No. 1 to this Registration Statement on September 30, 1998, Amendment No. 2 to this Registration Statement on August 4, 1999, Amendment No. 3 to this Registration Statement on May 24, 2000 and is now filing Amendment No. 4 to this Registration Statement, to continue the registration's effectiveness and thereby enable Goldman, Sachs & Co., Spear Leeds & Kellogg, L.P. and other broker-dealer subsidiaries of Goldman, Sachs & Co. or Spear, Leeds & Kellogg, L.P. (the "Goldman Entities") to continue to resell the Notes in market-making transactions. The complete Prospectus relating to the resale by the Goldman Entities of the currently outstanding Notes follows immediately after this Explanatory Note.

[AMSCAN LOGO]

Amscan Holdings, Inc.

9 7/8% Senior Subordinated Notes due 2007
(Guaranteed by certain Amscan Holdings, Inc.'s subsidiaries as described herein)

This Prospectus applies to certain of the issued and outstanding 9 7/8% Senior Subordinated Notes due 2007 (the "Notes") of Amscan Holdings, Inc. ("Amscan Holdings"). The Notes are fully and unconditionally guaranteed on a senior subordinated basis, jointly and severally, by each of Amscan Holdings' domestic subsidiaries. Interest on the Notes is payable semiannually on June 15 and December 15 of each year. See "Description of Notes."

The Notes are general, unsecured obligations ranking pari passu with all senior subordinated debt of Amscan Holdings and each of the subsidiary guarantors. The Notes are senior in right of payment to all present and future subordinated indebtedness, if any, of Amscan Holdings and the subsidiary guarantors. As of March 31, 2001, the senior debt of Amscan Holdings and all of its subsidiaries was approximately $162.7 million. See "Risk Factors-- Substantial Leverage; Ability to Service Indebtedness."

Subject to certain other conditions, Amscan Holdings also may redeem the Notes in whole or part on or after December 15, 2002. Upon certain types of changes of control of Amscan Holdings, it must redeem the Notes in accordance with certain terms set forth herein. See "Prospectus Summary -- Summary of Terms of Notes" and "Description of Notes."

See "Risk Factors," commencing on page 9, for a discussion of certain factors that should be considered before investing in the Notes.

Neither the Securities and Exchange Commission (the "SEC") nor any state securities commission has approved these securities or determined that this Prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

This Prospectus has been prepared for and is to be used by Goldman, Sachs & Co. ("Goldman Sachs"), Spear Leeds & Kellogg, L.P. ("Spear Leeds") and other broker-dealer subsidiaries of Goldman Sachs or Spear Leeds (the "Goldman Entities") in connection with offers and sales in market-making transactions of the Notes. Amscan Holdings will not receive any of the proceeds of such sales. Goldman Entities may act as a principal or agent in such transactions. The Notes may be offered in negotiated transactions or otherwise.

Goldman, Sachs & Co.

Spear Leeds & Kellogg, L.P.

The date of this Prospectus is July 30, 2001 .

You must rely only on this Prospectus or other information Amscan Holdings directly refers you to. Amscan Holdings has not authorized anyone to provide you with any other information. You may assume the accuracy of the contents of this Prospectus only through the date hereof. If you live in a jurisdiction that prohibits the offering or sale of the Notes, you may not purchase the Notes.

AVAILABLE INFORMATION

Amscan Holdings and all of its subsidiaries that guarantee the Notes filed with the SEC a Registration Statement on Form S-4 under the Securities Act of 1933 with respect to the Notes. This Prospectus is a part of that Registration Statement but does not contain certain exhibits and financial statement schedules to the Registration Statement. For a more complete description of the Notes, the business and financial prospects of Amscan Holdings, you can refer to the Registration Statement and its exhibits and schedules.

Amscan Holdings presently files reports as if it were subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, Amscan Holdings files periodic reports with the SEC that include information about itself and the guarantor subsidiaries. In addition, Amscan Holdings will send to each holder of Notes copies of annual reports and quarterly reports containing the information required to be filed under the Exchange Act. So long as Amscan Holdings files periodic reports under the Exchange Act, it will furnish the information filed with the SEC to The Bank of New York (successor to IBJ Schroder Bank & Trust Company), which is the trustee representing the Note holders, and to each Note holder.

Amscan Holdings files reports and other information electronically with the SEC. The SEC maintains an Internet site (http://www.sec.gov) that enables you to obtain and review such materials regarding Amscan Holdings and all other registrants that file electronically. You also can inspect and copy such materials at the SEC's public reference facilities at 450 Fifth Street, N.W., Washington, D.C. 20549 and the regional offices of the SEC located at 7 World Trade Center, New York, New York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Additionally, you may obtain and copy such materials from the Public Reference Section of the SEC, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its public reference facilities in New York, New York and Chicago, Illinois at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

PROSPECTUS SUMMARY

You should read the following summary in conjunction with the more detailed information, financial statements and notes to the financial statements appearing elsewhere in this Prospectus. "We," "our" and "us" when used in this Prospectus refer collectively to Amscan Holdings and its consolidated subsidiaries. The Summary is qualified in its entirety by such materials.

The Company

Amscan Holdings designs, manufactures and distributes decorative party goods, offering one of the broadest and deepest product lines in the industry. Our products include paper and plastic tableware (such as plates, napkins, tablecovers, cups and cutlery), accessories (such as invitations, thank-you cards, table and wall decorations, wedding cake tops and balloons) and novelties (such as games and party favors). We have also introduced new product lines encompassing home, baby and wedding products for general gift giving or self-purchase. We sell our products to party goods superstores, independent card and gift retailers, mass merchandisers and other distributors which market our products in more than 25,000 retail outlets throughout the world, including North America, South America, Europe, Asia and Australia.

Amscan Holdings is a leading supplier to the party superstore distribution channel. Our sales to superstores represented approximately 48% of total sales in 2000 and have grown at a compound annual growth rate of 13% from 1997 to 2000. See "Risk Factors."

The current management of Amscan Holdings has established a strong industry position and is committed to the Company's future success. The management team and other key employees committed $6.4 million (including restricted stock grants) to Amscan Holdings' recapitalization, which was effected through a merger with Confetti Acquisition, Inc. ("Confetti"), a Goldman Sachs affiliate, in December of 1997. In addition, Garry Kieves, who was the beneficial owner of all of the capital stock of Anagram International, Inc. ("Anagram") prior to its acquisition by Amscan Holdings in September 1998, effectively invested $13.0 million in Amscan Holdings Common Stock when Amscan Holdings acquired Anagram.

Growth Trends

Amscan Holdings' sales and cash flows have grown substantially over the past five years. From 1995 to 2000, our sales and adjusted earnings before interest, income taxes, depreciation and amortization (adjusted for non-recurring items, other income or expenses, and minority interests) (see Note 7 in "Selected Historical Consolidated Financial and Other Data"), also known as adjusted EBITDA, have grown at compound annual rates of 14% and 12%, respectively. During the same period, Amscan Holdings' adjusted EBITDA margins ranged from approximately 19% in 1995 to 17% in 2000. EBITDA margin for the year 2000 was lower principally as a result of additional bad debt reserves relating to the bankruptcy of certain customers and costs associated with the development of a specialty sales force. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Competitive Strengths

We believe we maintain competitive advantages in the following areas:

	•	Strengthen Position as a Leading Provider to Party Goods Superstores. The Company offers convenient “one-stop shopping” for both large superstore and small retailers and seeks to increase its proportionate share of sales volume and shelf space in these stores .

	•	Offer the Broadest and Deepest Product Line in the Industry. The Company strives to offer the broadest and deepest product line in the industry. The Company helps retailers boost average purchase volume per consumer through coordinated ensembles that promote “add on” purchases.

	•	Offer the Broadest and Deepest Product Line in the Industry. The Company strives to offer the broadest and deepest product line in the industry. The Company helps retailers boost average purchase volume per consumer through coordinated ensembles that promote “add on” purchases .

	•	Diversify Distribution Channels, Product Offering and Geographic Presence. The Company seeks, through internal growth and acquisitions, to expand its distribution capabilities, increase its presence in additional retail channels and further broaden and deepen its product line.

	•	Provide Superior Customer Service. The Company strives to achieve average fill rates in excess of 95% and to ensure short turnaround times.

	•	Maintain Product Design Leadership. The Company will continue investing in art and design to support a steady supply of fresh ideas and create complex, unique ensembles that appeal to consumers and are difficult to replicate.

	•	Maintain State-of-the-Art Manufacturing and Distribution Technology. The Company intends to maintain technologically advanced production and distribution systems in order to enhance product quality, manufacturing efficiency, cost control and customer satisfaction.

	•	Pursue Attractive Acquisitions. The Company believes that opportunities exist to make acquisitions of complementary businesses to leverage the Company’s existing marketing, distribution and production capabilities, expand its presence in the various retail channels, further broaden and deepen its product line and penetrate international markets. The Company receives inquiries from time to time with respect to the possible acquisition by the Company of other entities and the Company intends to pursue acquisition opportunities.

The Majority Shareholder, GS Capital Partners II, L.P. and Affiliated Investment Funds

The GS Capital Partners family of funds is the primary vehicle that The Goldman Sachs Group, Inc. ("GS Group") uses to make privately negotiated equity and equity-related investments in non-real estate transactions. GS Capital Partners II, L.P. and its affiliated offshore investment funds were formed in May 1995 with total committed capital of $1.75 billion, $300 million of which was committed by GS Group, with the remainder committed by institutional and individual investors.

GS Capital Partners II, L.P. and affiliated funds (collectively, "GSCP") invested approximately $61.9 million in connection with Amscan Holdings' merger with Confetti Acquisition Corp. in December of 1997 and holds approximately 72.8% of the outstanding shares of Amscan Holdings' Common Stock. In March 2001, GSCP invested an additional $6.0 million in Amscan Holdings when it purchased 40 shares of the Company's Series A Redeemable Convertible Preferred Stock, constituting all of the outstanding shares of such series. See "CAPITALIZATION" and "OWNERSHIP OF CAPITAL STOCK."

CAPITALIZATION

The following table sets forth the capitalization of Amscan Holdings as of March 31, 2001. The information set forth below should be read in conjunction with Amscan Holdings' Consolidated Financial Statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this Prospectus.

As of March 31, 2001
(Dollars in thousands)

	Cash and cash equivalents............................	$ 864 ======
	Total debt (including current portion):
	Revolving Credit Facility (1).....................	$ 8,050
	Term Loan.............................................	150,844
	Notes.....................................................	110,000
	Mortgage obligation.................................	2,074
	Capital leases and other.............................	1,768
	Total debt............................................	272,736
	Redeemable convertible preferred stock (2)	6,000
	Redeemable Common Stock..........................	28,768
	Stockholders' deficit (3).................................	(83,924)
	Total capitalization.................................	$223,580 =======

__________

(1)	Amscan Holdings has the ability to borrow up to $50 million pursuant to its Revolving Credit Facility (as defined below). The Revolving Credit Facility is available to the Company for working capital purposes and acquisitions, subject to certain limitations and restrictions. See "Description of Senior Debt."

(2)	In March 2001, GSCP purchased 40 shares of Amscan Holdings’ Series A Redeemable Convertible Preferred Stock for $6.0 million.

(3)	Upon completion of the Transaction (as defined herein) in December 1997, Amscan Holdings had a negative net worth for accounting purposes. In the merger, GSCP paid $61.9 million for approximately 82.5% of Amscan Holdings’ Common Stock. In addition, certain employees of Amscan Holdings acquired and the Estate (as defined herein) retained approximately 7.5% and 10%, respectively, of Amscan Holdings Common Stock which, based upon the price per share paid by GSCP, had an

aggregate value of approximately $13.1 million. Combined with GSCP’s payment of $61.9 million, these holdings had an aggregate value of approximately $75.0 million at December 19, 1997.

SUMMARY OF TERMS OF NOTES

Issuer....................................	Amscan Holdings, Inc.

Securities Outstanding........................	$110.0 million principal amount of 9 7/8% Senior Subordinated Notes due December 15, 2007.

Maturity Date......................	December 15, 2007.

Guarantees..........................	Amscan Holdings' payment obligation under the Notes is jointly and severally guaranteed on a senior subordinated basis by all of Amscan Holdings' domestic subsidiaries. These guarantees are subordinated to the guarantees of senior debt these subsidiaries issued under Amscan Holdings' bank credit agreement. See "Description of Notes-- Senior Subordinated Guarantees."

Interest Payment Dates....................................	Interest accrues at an annual rate of 9 7/8% and is payable in cash semi-annually in arrears on June 15 and December 15 of each year.

Optional Redemption.........................	Except as described below, Amscan Holdings may not redeem the Notes prior to December 15, 2002. From and after December 15, 2002, Amscan Holdings may redeem the Notes, in whole or in part, from time to time, at the redemption prices set forth herein, together with accrued and unpaid interest, if any, to the date of redemption.

Mandatory Redemption; Change of Control................................	At any time on or prior to December 15, 2002, Amscan Holdings may redeem the Notes as a whole but not in part upon the occurrence of a Change of Control (as defined in the Indenture under which the Notes were issued). Any such redemption would be at a redemption price equal to 100% of the principal amount thereof plus the applicable premium, together with accrued and unpaid interest, if any, to the date of redemption.

	If Amscan Holdings does not redeem the Notes upon a Change of Control, then it must offer to purchase the Notes. The purchase price for the Notes would be 101% of the aggregate principal amount of the Notes, plus accrued and unpaid interest, if any, to the date of purchase. If a Change of Control were to occur, Amscan Holdings may not have the financial resources to repay all of its obligations under its bank credit agreement, the Indenture under which the Notes were issued (the “Indenture”) and the other indebtedness that would become payable upon the Change of Control. See “Risk Factors — Payment Upon a Change of Control” and “Description of Notes.”

Ranking..............................	The Notes are general, unsecured obligations of Amscan Holdings. They are subordinated in right of payment to all of its senior debt, rank pari passu with all of its senior subordinated debt and are senior in right of payment to all of its existing and future subordinated debt. The claims of holders of the Notes are subordinated to the senior debt of Amscan Holdings and the guarantor subsidiaries. The aggregate of such senior debt as of March 31, 2001 was approximately $162.7 million. $158.9 million of the senior debt was fully secured borrowings under Amscan Holdings' bank credit agreement. See "Capitalization" and "Description of Notes-- Subordination."

Certain Restrictive
Covenants............................

The Indenture contains certain restrictive covenants that, among other things, limit the ability of Amscan Holdings and its Restricted Subsidiaries (as defined on page 59 ) to incur additional indebtedness and issue Disqualified Stock (as defined on page 55 ), to pay dividends or distributions or to make investments in certain other Restricted Payments (as defined on page 44 ), to enter into certain transactions with affiliates, to dispose of assets, to incur liens securing pari passu and subordinated indebtedness of Amscan Holdings and to engage in mergers and consolidations. See “Description of Notes.”

RISK FACTORS

See "Risk Factors" beginning on page 9 for a discussion of certain factors that should be considered before investing in the Notes.

SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected historical consolidated financial and other data for the five years ended December 31, 2000 are derived from the audited consolidated financial statements of Amscan Holdings. The selected historical consolidated financial data for the three month periods ended March 31, 2001 and 2000 and for the twelve months ended March 31, 2001 are derived from unaudited financial statements. The unaudited financial statements include all adjustments, consisting of normal recurring accruals, which Amscan Holdings considers necessary for a fair presentation of the financial position and the results of operations for these periods.

Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2001. The data should be read in conjunction with the consolidated financial statements, related notes, and other financial information included herein.

The historical consolidated data should be read in conjunction with "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and other financial information contained elsewhere in this Prospectus.

SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER DATA
(Dollars in millions)


                                                                                       Twelve
                                                                                       Months     Three Months
                                                                                       Ended          Ended
                                                Years Ended December 31,              March 31,     March 31,
                                       ----------------------------------------       --------  ----------------
                                    1996      1997       1998       1999      2000      2001     2000     2001
                                  --------  --------   --------   --------  --------  --------  -------  -------

Statements of
operations data (1):
Net sales .....................   $  192.7  $  209.9   $  235.3   $  306.1  $  325.5  $  335.7  $  77.4  $  87.5
Cost of sales .................      124.9     137.5      151.3      194.6     206.9     214.9     47.3     55.3
                                  --------  --------   --------   --------  --------  --------  -------  -------
Gross profit ..................       67.8      72.4       84.0      111.5     118.6     120.8     30.1     32.2
Selling expenses ..............       11.8      13.7       17.2       24.5      30.6      32.1      7.0      8.5
General and administrative
  expenses ....................       17.2      17.3       20.6       30.7      31.9      32.4      7.8      8.0
Provision for doubtful accounts        2.3       3.8        3.3        2.9       7.1       7.1      0.5      0.5
Art and development costs .....        4.0       4.0        6.0        8.6       8.5       8.5      2.0      2.1
Non-recurring charges (2) .....                                        1.0
Restructuring charges (3) .....                             2.4                  0.5       0.5
Non-recurring charges in
  connection with the
  Transaction (4) .............                 22.1
Non-recurring compensation in
  connection with the IPO (5)..       15.5
Special bonuses (5) ...........        4.2
                                  --------  --------   --------   --------  --------  --------  -------  -------
Income from operations ........       12.8      11.5       34.5       43.8      40.0      40.2     12.8     13.1
Interest expense, net .........        6.7       3.9       23.0       26.4      26.4      26.3      6.6      6.6
Other expense (income), net ...        0.4      (0.1)      (0.1)       --        0.1       0.1      --       0.1
                                  --------  --------   --------   --------  --------  --------  -------  -------
Income before income taxes and
minority interests ............        5.7       7.7       11.6       17.4      13.5      13.8      6.2      6.4
Income tax expense ............        2.0       7.7        4.8        7.1       5.3       5.4      2.4      2.5
Minority interests ............        1.6       0.2        0.1        0.1       0.1       0.1      0.1      --
                                  --------  --------   --------   --------  --------  --------  -------  -------
Net income (loss) .............   $    2.1  $   (0.2)  $    6.7   $   10.2  $    8.1  $    8.3  $   3.7  $   3.9
                                  ========  ========   ========   ========  ========  ========  =======  =======

Pro forma data
  relating to change
  in tax status:
Income before income
  taxes .......................   $    4.1
Pro forma income taxes (6) ....        1.8
                                  --------
Pro forma net income (6) ......   $    2.3
                                  ========

Non-GAAP financial
data:
Adjusted EBITDA (7) ...........   $   37.7  $   40.1   $   45.6   $   56.9  $   55.0  $   55.6  $  16.3  $  16.9
Adjusted EBITDA margin ........       19.5%     19.1%      19.4%      18.6%     16.9%     16.6%    21.1%    19.3%

SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER DATA, CONTINUED
(Dollars in millions)


                                                                                         Twelve
                                                                                         Months        Three Months
                                                                                         Ended             Ended
                                                     Years Ended December 31,           March 31,          March
                                    -------------------------------------------------------------  ----------------------
                                     1996       1997      1998       1999       2000       2001       2000        2001
                                    ------     ------    ------     ------     ------     ------     ------      ------


Adjusted EBITDA to
  cash interest expense ......                             2.1x       2.2x       2.2x       2.2x       2.6x       2.7x
Adjusted EBITDA minus cash
  capital expenditures to cash
  interest expense ...........                             1.7x       1.8x       1.4x       1.4x       2.1x       1.9x
Total debt to Adjusted
  EBITDA .....................                             6.2x       4.8x       5.0x       4.9x

Other financial data:
Gross margin percentage ......       35.2%      34.5%      35.7%      36.4%      36.5%      36.0%      38.9%     36.8%
Depreciation and
  amortization ...............   $    5.1   $    6.3   $    8.5   $   12.9   $   14.5   $   14.9   $    3.5   $   3.8
Cash capital expenditures ....        7.6       10.2        7.5       12.3       18.6       20.6        2.8       4.9
Ratio of earnings to fixed
  charges(8) .................        1.7x       2.2x       1.4x       1.6x       1.5x       1.5x       1.8x      1.9x

Cash flow statement
 data:
Cash flows from operations ...   $   12.3   $    4.2   $   22.8   $   19.4   $   19.3   $   21.8   $   (0.5)  $   2.0
Cash flows from investing ....       (7.6)     (10.1)     (83.1)     (11.4)     (18.5)      20.5       (2.8)     (4.9)
Cash flows from financing ....       (6.0)     116.0      (49.8)      (8.8)       0.9        0.3        3.4       2.8



                                                      At December 31,                      At March 31,
                                 ----------------------------------------------------   ------------------
                                   1996       1997       1998       1999       2000       2000      2001
                                 --------   --------   --------   --------   --------   --------   -------
Balance sheet data:
Working capital ..............   $   45.4   $   96.8   $   71.5   $   82.2   $   83.8   $   84.1   $   91.0
Total assets .................      140.3      269.3      248.9      263.5      280.6      268.7      287.3
Total debt ...................       48.3      237.8      283.3      275.1      275.9      278.5      272.7
Redeemable convertible
  preferred stock (9) ........                                                                          6.0
Redeemable common
  stock (10) .................                             19.5       23.6       28.8       23.6       28.8
Stockholders' equity

  (deficit) ..................       67.9      (95.2)     (95.3)     (88.5)     (86.9)     (84.9)     (83.9)

Notes to Selected Historical Consolidated
Financial and Other Data

(1)	In connection with the preparation of the Selected Historical Consolidated Financial and Other Data, Amscan Holdings has reclassified certain amounts in prior years to conform to the current year presentation.

(2)	During the fourth quarter of 1999, Amscan Holdings recorded non-recurring charges of $1.0 million associated with the proposed construction of a new distribution facility. The non-recurring charges represented building costs written-off due to the relocation of the proposed site.

(3)	Amscan Holdings recorded charges of $2.4 million and $0.3 million in 1998 and 2000, respectively, in connection with the restructuring of its distribution operations. Amscan Holdings closed two facilities located in California and Canada. The restructuring charges include the non-cash write-down of $1.3 million relating to property, plant and equipment, the accrual of future lease obligations of $0.5million and severance and other costs of $0.9 million. In addition, during 2000, Amscan Holdings incurred charges of $0.2 million in connection with the consolidation of certain manufacturing operations.

(4)	In connection with Amscan Holdings’ merger in 1997, it recorded non-recurring charges of approximately $22.1 million comprised of $11.7 million in transaction costs, $7.5 million compensation payment to an officer, $1.9 million for the redemption of Amscan Holdings’ stock options and $1.0 million of debt retirement costs.

(5)	In conjunction with the initial public offering (“IPO”) in 1996, Amscan Holdings recorded non-recurring compensation expense of $15.5 million related to stock and cash payments of $12.5 million to certain executives in connection with the termination of prior employment agreements and $3.0 million for the establishment of an Employee Stock Ownership Plan for the benefit of Amscan Holdings’ domestic employees and the payment of stock bonuses to certain of such employees.

	In addition, in 1996, special bonus arrangements existed with certain members of management. In connection with the IPO, such profit sharing arrangements were substantially modified and replaced by incentives tied to the value of Amscan Holdings Common Stock.

(6)	Prior to the consummation of the IPO in 1996, Amscan Inc. and certain of its affiliates elected to be taxed as Subchapter S corporations under the Internal Revenue Code. The pro forma net income amounts give effect to pro forma income tax amounts at statutory rates (40.5%) assuming these entities had not elected Subchapter S corporation status.

(7)	“EBITDA” represents earnings before interest, income taxes, depreciation and amortization. “Adjusted EBITDA” represents EBITDA adjusted for certain non-recurring items, other income or expenses, amortization of the restricted Common Stock award, and minority interests reflected in the following table. Neither EBITDA nor Adjusted EBITDA is intended to represent cash flow from operations as defined by accounting principles generally accepted in the United States and should not be considered as an alternative to net income as an indicator of Amscan Holdings’ operating performance or to cash flows as a measure of liquidity. EBITDA and Adjusted EBITDA are presented because they are widely accepted financial indicators of a leveraged company’s ability to service and/or incur indebtedness and because management believes EBITDA and Adjusted EBITDA are relevant measures of Amscan Holdings’ ability to generate cash without regard to Amscan Holdings’ capital structure or working capital needs. EBITDA and Adjusted EBITDA as presented may not be comparable to similarly titled measures used by other companies, depending upon the non-cash charges included. When evaluating EBITDA and Adjusted EBITDA, investors should consider that EBITDA and Adjusted EBITDA (i) should not be considered in isolation but together with other factors which may influence operating and investing activities, such as changes in operating assets and liabilities and purchases of property and equipment, (ii) are not measures of performance calculated in accordance with accounting principles generally accepted in the United States, (iii) should not be construed as an alternative or substitute for income from operations, net income or cash flows from operating activities in analyzing Amscan Holdings’ operating performance, financial position or cash flows and (iv) should not be used as an indicator of Amscan Holdings’ operating performance or as a measure of its liquidity.

NOTES TO SELECTED HISTORICAL CONSOLIDATED
FINANCIAL AND OTHER DATA, CONTINUED


                                                                                   Twelve
                                                                                   Months     Three Months
                                                                                   Ended         Ended
                                            Years Ended December 31,              March 31,     March 31,
                                    ----------------------------------------     ---------- ----------------
                                  1996      1997      1998      1999      2000      2001      2000      2001
                                --------  --------  --------  --------  --------  --------  --------  ------
  EBITDA                          $15.9     $17.6     $42.9     $56.6     $54.3    $54.9      $16.2     $16.8
  Adjustments - increase
  (decrease):
     Certain non-recurring
     items and special
     bonuses................       19.8      22.1       2.4                 0.5      0.5
  Amortization of
     restricted Common
     Stock award............                  0.3       0.3       0.2       0.1      0.1
  Other expense (income), net       0.4      (0.1)     (0.1)                0.1      0.1        0.1       1.0
  Minority interests........        1.6       0.2       0.1       0.1
                                 ------    ------    ------    ------    ------   ------     ------     ------

  Adjusted EBITDA...........      $37.7     $40.1     $45.6     $56.9     $55.0    $55.6      $16.3     $16.9
                                 ======    ======    ======    ======    ======   ======     ======     ======

	(8)	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 one-third of the rental expense on operating leases representing that portion of rental expense deemed by Amscan Holdings to be attributable to interest.

	(9)	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. Also on March 30, 2001, the Company issued 40 shares of Series A Redeemable Convertible Preferred Stock for proceeds of $6.0 million. Dividends are cumulative and shall be payable annually beginning March 30, 2002, at 6% per annum. Such dividends payable on or prior to March 30, 2004, shall be payable in additional shares of Series A Redeemable Convertible Preferred Stock based on a value of $150,000 per share. Subsequent to March 30, 2004, dividends shall be payable, at the option of the Company, either in cash or additional shares of Series A Redeemable Convertible Preferred Stock.

		Each share of the Series A Redeemable Convertible Preferred Stock is convertible at the option of the holder at any time, into shares of Common Stock of the Company, $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 circumstances.

	(10)	Under the terms of a stockholders’ agreement (the “Stockholders’ Agreement”), Amscan Holdings can purchase all of the shares held by the employee stockholders, and the employees can require Amscan Holdings to purchase all of the shares held by the employee stockholders, under certain circumstances. The purchase price as prescribed in the Stockholders’ Agreement is to be determined through a market valuation of the minority-held shares or, under certain circumstances, based on cost. The aggregate amount that may be payable by Amscan Holdings to employee stockholders based on fully paid and vested shares has been classified as redeemable common stock (“Redeemable Common Stock”). Prior to December 31, 1998, the obligation to purchase employee shares was assignable to GSCP at a cost of up to $15 million.

RISK FACTORS

Substantial Leverage; Ability to Service Indebtedness

Amscan Holdings has, and will continue to have, a high level of indebtedness. As of March 31, 2001, Amscan Holdings (i) had approximately $272.7 million of consolidated indebtedness, (ii) had redeemable convertible preferred stock of approximately $6.0 million, (iii) had Redeemable Common Stock of approximately $28.8 million, and (iv) had a consolidated stockholders' deficit of approximately $83.9 million. Of the total of approximately $289 million Amscan Holdings paid in connection with its December 1997 merger, approximately $227 million (79%) was funded with debt. Amscan Holdings' ratio of earnings to fixed charges was 1.5x for the year ended December 31, 2000. Its interest expense, net, for the year ended December 31, 2000 was approximately $26.4 million. Moreover, Amscan Holdings may increase its indebtedness in the future, subject to limitations imposed by the Indenture and the Amscan Holdings' bank credit agreement. See "Capitalization."

Amscan Holdings may need to refinance a portion of the principal payments at the maturity of the Notes. In addition, Amscan Holdings' high indebtedness could prevent it from repurchasing all of the Notes tendered to it as required upon the occurrences of certain changes of control of Amscan Holdings. See "Description of Senior Debt" and "Description of Notes."

Based upon the current level of operations and anticipated growth, Amscan Holdings believes that available cash flow, together with available borrowings under its bank credit agreement, will be adequate to meet its anticipated future requirements for working capital and operating expenses, to finance potential acquisitions and to service its debt requirements as they become due. However, Amscan Holdings' business may not generate sufficient cash flow from operations or future borrowings may not be available in an amount sufficient to enable Amscan Holdings to service its indebtedness, including the Notes, or to make necessary or desirable capital expenditures or acquisitions, and any refinancing may not be available on commercially reasonable terms or at all. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." Amscan Holdings' debt service obligations could cause important consequences, including the following:

	(a)	impairing Amscan Holdings’ ability to obtain additional financing for acquisitions, working capital, capital expenditures or other purposes on favorable terms;

	(b)	reducing the access to loans at competitive long-term rates that would otherwise be available for operations and future business opportunities; and

	(c)	being unduly susceptible to decreases in cash flow, increases in expenses and downturns in the economy generally.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

In addition, Amscan Holdings' bank credit agreement and the Indenture limit the ability of Amscan Holdings, among other things, to borrow additional funds and to dispose of assets, and require that Amscan Holdings maintain certain financial ratios. Amscan Holdings' failure to comply with these covenants could cause an event of default that could have a material adverse effect on Amscan Holdings.

Subordination; Asset Encumbrances

The Notes are subordinated in right of payment to all senior debt of Amscan Holdings. At March 31, 2001, Amscan Holdings had approximately $162.7 million of senior debt, $158.9 million of which was secured borrowings. In addition, the Notes are effectively subordinated to indebtedness and other liabilities of Amscan Holdings' foreign subsidiaries. The indebtedness and other liabilities of Amscan Holdings' foreign subsidiaries were approximately $5.9 million at March 31, 2001.

Accordingly, in the event of Amscan Holdings' insolvency, liquidation, or other winding-up or upon a default or acceleration of any senior debt, Amscan Holdings will be required to repay in full the holders of all such senior debt and all creditors of its subsidiaries before making any payments to holders of the Notes. In addition, if there is a default under senior debt, Amscan Holdings would not be able to make any payments on the Notes for a period which could last as long as 179 days after the default is cured or waived. In addition, any debt that Amscan Holdings' domestic subsidiaries are permitted to incur under the Indenture will be structurally senior to the Notes. See "Description of Notes."

Amscan Holdings also has granted to its bank lenders security interests in substantially all of its current and future assets, including a pledge of all of the issued and outstanding shares of capital stock of its domestic subsidiaries. The domestic subsidiaries also have granted to such lenders security interests in substantially all of their current and future assets. In the event Amscan Holdings or one of the subsidiary guarantors defaults on the secured indebtedness, the secured lenders could foreclose

on their collateral. Such a foreclosure would materially adversely affect the financial condition of Amscan Holdings and the value of the Notes. See "Description of Senior Debt."

Holding Company Structure

Amscan Holdings conducts all of its business through subsidiaries and has no operations or significant assets other than the stock of its subsidiaries. To meet its debt service obligations, Amscan Holdings depends solely on its subsidiaries' cash flow and distributions.

As a result of Amscan Holdings' holding company structure, holders of the Notes will be structurally junior to all creditors of the Amscan Holdings subsidiaries that have not guaranteed the Notes. In the event of the insolvency, liquidation, or other winding-up of the non-guarantor subsidiaries, Amscan Holdings will not receive funds until the payment in full of the claims of the creditors of the non-guarantor subsidiaries. Any such event could result in Amscan Holdings' being unable to meet its obligations under the Notes.

Dependence on Key Personnel

Our success will continue to depend to a significant extent on our executives, managers and other key personnel. Although Amscan Holdings has entered into employment agreements with certain employees, we may not be able to retain these executives or other managers and key personnel or to attract additional qualified management in the future. The loss of the services of Gerald C. Rittenberg, Chief Executive Officer, or James M. Harrison, President, Chief Financial Officer and Treasurer, could have an adverse effect on our financial condition or results of operations. We do not maintain key-man life insurance on either of these executives.

Affiliation with Goldman Sachs May Result in Conflicts of Interests With Holders of the Notes

GSCP currently holds approximately 72.8% of the outstanding shares of Amscan Holdings' Common Stock and all of Amscan Holdings' outstanding shares of redeemable convertible preferred stock. As a result, GSCP controls Amscan Holdings and may elect all of its directors, appoint new management and approve any action requiring the approval of its stockholders. Furthermore, GSCP is controlled indirectly by GS Group and, as a result, GS Group and Goldman Sachs each may be deemed to be affiliates of Amscan Holdings. There can be no assurance that the interests of GS Group and Goldman Sachs will not conflict with the interests of the holders of the Notes. See "Management" and "Ownership of Capital Stock."

Payment Upon a Change of Control

Upon the occurrence of a Change of Control (as defined in the Indenture) of Amscan Holdings, each holder of Notes may require Amscan Holdings to repurchase all or a portion of such holder's Notes at 101% of their principal amount, together with accrued and unpaid interest, if any, to the date of repurchase. If a Change of Control were to occur, Amscan Holdings may not have the financial resources to repay all of its obligations under its bank credit agreement, the Indenture and the other indebtedness that would become payable upon the occurrence of such Change of Control.

Risks Relating to Our Business

Concentration of Customer Sales and Credit Risk. The level of our sales to party goods superstores has resulted in a significant concentration of sales and unsecured trade receivables with such customers. While we believe that adequate provisions for bad debts have been made in our financial statements, should we be unable to collect receivables from our party superstore customers to any significant extent our financial condition and results of operations could be adversely affected. From time to time, we have provided additional reserves or restructured accounts receivables because of the credit condition of certain customers.

For the year ended December 31, 2000, sales to the corporate and franchise stores of Party City Corporation ("Party City") represented 12% and 13%, respectively, of consolidated net sales. If Party City were to significantly reduce their volume of purchases from us for any reason, our financial condition and results of operations could be adversely affected. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources."

Importance of Identifying Design Trends and Consumer Preferences. In manufacturing and distributing party goods, Amscan Holdings' success depends in part on its ability to anticipate the tastes and preferences of party goods retailers and consumers. Amscan Holdings' strategy has depended to a significant extent on the regular introduction of new designs which are attractive and distinctive. Amscan Holdings' failure to anticipate, identify or react appropriately to changes in consumer tastes could,

among other things, lead to excess inventories and significant markdowns or a shortage of products and foregone sales, any of which could have an adverse effect on Amscan Holdings' financial condition or results of operations.

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. Certain of these competitors control licenses for widely recognized images, such as cartoon or motion picture characters, which could provide them with a competitive advantage. Generally we have developed our own designs rather than pursuing licensing opportunities. Through its acquisition of Anagram, however, the Company controls various licenses which are used in the production of balloons.

Impact of Changing Raw Material Costs. Paper is the principal raw material in our products. Paper accounts for approximately 35-40% of the annual cost of production of our paper plates, cups and napkins. Any significant increase in the cost of paper would increase our raw material costs. Competitive conditions will determine how much of any raw material cost increase can be passed on to party goods retailers. While historically we have been able to pass on raw material cost increases to our customers, if we cannot pass future raw materials cost increases to the party goods retailers, our financial condition and results of operations would be adversely affected.

Risks Associated with Further Expansion Through Acquisitions. Although no acquisitions are now pending, Amscan Holdings intends to pursue acquisition opportunities. Various risks accompany acquisitions. The risks include problems inherent in integrating new businesses, including potential loss of customers and key personnel and potential disruption of operations. Businesses acquired by Amscan Holdings also may not generate sufficient revenues or profits or satisfy strategic objectives. If Amscan Holdings incurs additional debt to finance an acquisition, it would become more leveraged. Additional leverage could make it more difficult for Amscan Holdings to meet its obligations under the Notes. See "Business-- Company Strategy."

Seasonality

Because so many holidays fall in the fourth quarter, our business is somewhat seasonal, and, as a result, the quarterly results of operations may not be indicative of those for a full year. Third quarter sales generally are significantly higher than sales for the rest of the year. Conversely, fourth quarter sales are generally lower because retailers sell through inventories purchased during the third quarter. The overall growth rate of our sales in recent years has, in part, offset this sales variability. However, given Amscan Holdings' highly leveraged position, this seasonality poses a somewhat heightened risk to its financial condition and the value of the Notes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Quarterly Results."

Trading Market for the Notes

The trading market for the Notes has been limited. This could prevent the Note holders from selling their Notes or decrease the price of sale of the Notes. The Goldman Entities make a market in the Notes but may discontinue such activity in their sole discretion at any time, for any reason and without notice.

Fraudulent Conveyance

Management of Amscan Holdings believes that the indebtedness represented by the Senior Subordinated Guarantees and the Notes was incurred for proper purposes and in good faith, and that as a result of, and after giving effect to, the offerings of the notes (the "Original Notes") for which the Notes were exchanged in 1998 and the Notes, based on forecasts, asset valuations and other financial information, Amscan Holdings was and will be solvent, had and will have sufficient capital for carrying on its business and was and is able to pay its debts as they mature. See "Risk Factors-- Substantial Leverage; Ability to Service Indebtedness." Notwithstanding management's belief, however, if a court of competent jurisdiction in a suit by an unpaid creditor or a representative of creditors were to find that, at the time of the incurrence of such indebtedness, Amscan Holdings or the Guarantors were insolvent, were rendered insolvent by reason of such incurrence, were engaged in a business or transaction for which its remaining assets constituted unreasonably small capital, intended to incur, or believed that they would incur, debts beyond their ability to pay such debts as they matured, or intended to hinder, delay or defraud their creditors, and that the indebtedness was incurred for less than reasonably equivalent value, then such court could, among other things, (a) void all or a portion of Amscan Holdings' or the Guarantors' obligations to holders of the Notes, the effect of which would be that holders of the Notes may not be repaid in full and/or (b) subordinate Amscan Holdings' or the Guarantors' obligations to holders of the Notes to other existing and future indebtedness of Amscan Holdings to a greater extent than would otherwise be the case, the effect of which would be to entitle such other creditors to be paid in full before any payment could be made on the Notes or the Senior Subordinated Guarantees.

Note Resale Procedures

Each broker-dealer that holds Notes for its own account as a result of market-making activities or other trading activities may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such Notes.

Resale of Notes

Based on an interpretation by the staff of the SEC set forth in no-action letters issued to third parties, Amscan Holdings believes that the Notes may be offered for resale, resold and otherwise transferred in the ordinary course of business by any holder of such Notes (other than any such holder which is an "affiliate" of Amscan Holdings within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Notes are acquired in the ordinary course of such holder's business and such holder does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of such Notes. However, any holder who acquired Notes in exchange for the Original Notes intending to participate in a distribution of the Notes may not rely on the position the SEC enunciated in Exxon Capital Holdings Corporation (available April 13, 1989), Morgan Stanley & Co., Incorporated (available June 5, 1991) or similar no-action letters regarding private placements of debt. Rather, such a Note holder must comply with the registration and prospectus delivery requirements of the Securities Act before offering to sell the Notes. In addition, before reselling the Notes, a Note holder should confirm that there is an effective registration statement containing the information required by Item 507 of Regulation S-K of the SEC.

THE TRANSACTION

Certain Agreements

On December 19, 1997 Confetti was merged with and into Amscan Holdings, with Amscan Holdings as the surviving corporation, pursuant to that certain Agreement and Plan of Merger dated August 10, 1997. The primary purpose of the merger was the recapitalization of Amscan Holdings. However, the merger also entailed a series of related transactions and the execution and delivery of various other documents including certain employment agreements with Amscan Holdings' officers, a stockholders' agreement among the stockholders of Amscan Holdings, a tax indemnification agreement among Amscan Holdings, the Estate of John A. Svenningsen (the "Estate") and Ms. Christine Svenningsen, and various bank credit facilities (the merger, together with all of such related transactions and agreements, the "Transaction"). The Transaction was financed with an equity contribution of approximately $67.5 million (including contributions of Amscan Holdings' Common Stock by certain employee stockholders and issuances of restricted Common Stock), $117 million from a senior term loan (the "Term Loan") provided under a bank credit agreement and $110 million from the issuance of the Notes.

USE OF PROCEEDS

This Prospectus is delivered in connection with the sale of Notes by Goldman Sachs in market-making transactions. Amscan Holdings will not receive any of the proceeds from such transactions.

CAPITALIZATION

The following table sets forth the capitalization of Amscan Holdings as of March 31, 2001. The information set forth below should be read in conjunction with the Consolidated Financial Statements and the related notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained elsewhere in this Prospectus.

As of March 31, 2001
(Dollars in thousands)

	Cash and cash equivalents........................	$ 864 ======
	Total debt (including current portion):
	Revolving Credit Facility (1)..................	$ 8,050
	Term Loan..........................................	150,844
	Notes..................................................	110,000
	Mortgage obligation..............................	2,074
	Capital leases and other..........................	1,768
	Total debt........................................	272,736
	Redeemable convertible preferred stock (2)...	6,000
	Redeemable Common Stock......................	28,768
	Stockholders' deficit (3).............................	(83,924)
	Total capitalization.............................	$223,580 =======

⁽¹⁾	Amscan Holdings has the ability to borrow up to $50 million pursuant to its Revolving Credit Facility (as defined below). The Revolving Credit Facility is available to the Company for working capital purposes and acquisitions, subject to certain limitations and restrictions. See “Description of Senior Debt.”
⁽²⁾	In March 2001, GSCP purchased 40 shares of Amscan Holdings’ Series A Redeemable Convertible Preferred Stock for 6.0 million.
⁽³⁾	Upon completion of the Transaction in 1997, Amscan Holdings had a negative net worth for accounting purposes. In the merger, GSCP paid $61.9 million for approximately 82.5% of Amscan Holdings’ Common Stock. In addition, certain employees of Amscan Holdings acquired, and the Estate retained, approximately 7.5% and almost 10%, respectively, of Amscan Holdings’ Common Stock which, based upon the price per share paid by GSCP, had an aggregate value of approximately $13.1 million. Combined with GSCP’s payment of $61.9 million, these holdings had an aggregate value of approximately $75.0 million at December 19, 1997.

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. Despite consolidation in the party goods superstore channel, the retail distribution of party goods continues to shift from smaller independent stores and designated departments within drug, discount or department store chains to superstores dedicated to retailing party goods. In part due to the success of the superstore channel, party goods manufacturers broadened their product lines to support the celebration of a greater number of occasions. The industry's growth has been directly affected by these changes.

Our revenues are generated from sales of approximately 36,000 SKU's consisting of paper and plastic tableware, accessories and novelties for all occasions. Tableware (plates, cups, cutlery, napkins and tablecovers) is our core product category, generating approximately 46% of revenues in 2000. Coordinated accessories (e.g., balloons, banners and gifts) and novelties (e.g., party favors) are offered to complement our tableware products. To serve our customers better, we have made significant additions to our product line including the introduction of expanded gift lines. Our gift line encompasses home, baby and wedding products for general gift giving or self-purchase and are being distributed through a newly aligned sales force. Through increased spending on internal product development as well as through acquisitions, we have had a net increase of approximately 28,300 SKU's since 1991. Revenue growth primarily has been the result of increased orders from our party goods superstore customers (new stores and increased same-store sales) and price increases.

Our gross profit is principally influenced by product mix and paper costs. Products manufactured by Amscan, primarily tableware and metallic balloons, represented over 60% of our sales in 2000 . We have made significant additions to our manufacturing capacity which have allowed us to increase manufacturing efficiencies and improve gross margins. We believe that our manufacturing capabilities enable us to lower product cost, ensure product quality and be more responsive to customer demands. We have historically been able to adjust our prices in response to changes in paper prices.

Results of Operations

Three Months Ended March 31, 2001 Compared to Three Months Ended MarchF 31, 2000

Percentage of Net Sales


                                                            Three Months Ended March 31,
                                                            ----------------------------
                                                                   2001      2000
                                                                  ------    ------
Net sales ..................................................      100.0%    100.0%
Cost of sales ..............................................       63.2      61.1
                                                                  -----     -----
    Gross profit ...........................................       36.8      38.9
Operating expenses:
    Selling expenses .......................................        9.7       9.1
    General and administrative expenses ....................        9.8      10.6
    Art and development costs ..............................        2.4       2.6
                                                                  -----     -----
Total operating expenses ...................................       21.9      22.3
                                                                  -----     -----
    Income from operations..................................       14.9      16.6
Interest expense, net ......................................        7.5       8.5
Other expense, net .........................................        0.1       0.1
                                                                  -----     -----
    Income before income taxes and minority interests.......        7.3       8.0
Income tax expense .........................................        2.9       3.2
Minority interests
                                                                  -----     -----
    Net income .............................................        4.4%      4.8%
                                                                  =====     =====

Net sales of $87.5 million for the three months ended March 31, 2001 were $10.1 million higher than net sales for the three months ended March 31, 2000. The increase in net sales reflects increased sales of party goods and gift items to independent party goods and specialty stores, as well as increased sales of solid color tableware to superstores under a program which began in the second quarter of 2000.

Gross profit for the first quarter of 2001 of 36.8% was 2.1% lower than the corresponding period in 2000 as incremental margin achieved as a result of increased sales was more than offset by lower margins attributable to product mix, principally solid color tableware, sales to other distributors and the impact of foreign currency fluctuations on international sales margin.

Selling expenses of $8.5 million for the first quarter of 2001 were $1.5 million higher than those of the corresponding period in 2000 and increased to 9.7% of net sales from 9.1% of net sales. The increase in selling expenses reflects the continued development of a specialty sales force, which has nearly doubled since the beginning of 2000, and increased marketing initiatives.

General and administrative expenses for the three months ended March 31, 2001 of $8.5 million was $0.3 million higher as compared to the first quarter of 2000 but decreased as a percent of net sales by 0.8% to 9.8%, reflecting the increase in net sales noted above.

Art and development costs of $2.1 million for the first quarter of 2001, were comparable to the corresponding period in 2000. As a percentage of net sales, art and development costs were 2.4% for the first quarter of 2001 as compared to 2.6% for the corresponding period of 2000.

Interest expense of $6.6 million for the first quarter of 2001 was comparable to the corresponding period in 2000. However, during the three-month period ended March 31, 2001, the Company capitalized $0.2 million of interest on debt associated with the construction of its new distribution facility (see "Liquidity and Capital Resources").

Income taxes for the first quarter of 2001 and 2000 were based upon estimated consolidated effective income tax rates of 39.5% for the years ending December 31, 2001 and 2000.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Percentage of Net Sales

                                                              Year Ended December 31,
                                                              -----------------------
                                                                 2000       1999
                                                                ------     ------
Net sales ................................................       100.0%     100.0%
Cost of sales ............................................        63.5       63.6
                                                                 -----      -----
    Gross profit .........................................        36.5       36.4
Operating expenses:
    Selling expenses .....................................         9.4        8.0
    General and administrative expenses ..................         9.8       10.0
    Provision for doubtful accounts ......................         2.2        1.0
    Art and development costs ............................         2.6        2.8
    Non-recurring charges ................................                    0.3
    Restructuring charges ................................         0.2
                                                                 -----      -----
Total operating expenses .................................        24.2       22.1
                                                                 -----      -----
    Income from operations ...............................        12.3       14.3
Interest expense, net ....................................         8.1        8.6
Other expense (income), net
                                                                 -----      -----
    Income before income taxes and minority interests ....         4.2        5.7
Income tax expense .......................................         1.7        2.4
Minority interests
                                                                 -----      -----
    Net income ...........................................         2.5%       3.3%
                                                                 =====      =====

Net sales for the year ended December 31, 2000 of $325.5 million, were $19.4 million higher than for the year ended December 31, 1999. The increase in net sales principally reflects increased sales of printed ensembles, accessories and gift items to independent party goods and specialty stores, as well as increased sales of solid color tableware to superstores. These gains were partially offset by: lower fourth quarter sales of New Year related theme products as 1999 benefited from the celebration of the Millennium; a reduction in sales to international customers; and a decline in sales of licensed products to mass merchant distributors. Increased sales to independent party goods and specialty stores are attributable to a realignment of the Company's independent sales force begun in the first quarter of 1999.

Gross profit for the year ended December 31, 2000 of $118.7 million, or 36.5% of net sales, was comparable to the corresponding period in 1999 as incremental margins achieved as a result of higher sales were offset by lower margins attributable to product mix, particularly the solid color tableware.

Selling expenses of $30.6 million for the year ended December 31, 2000 were $6.2 million higher than those of the corresponding period in 1999 and increased to 9.4% of net sales from 8.0% of net sales. The increase in selling expenses reflects the continued development of a specialty sales force, which has doubled since the beginning of 1999, and increased marketing initiatives relating to gift product lines.

General and administrative expenses of $32.0 million for the year ended December 31, 2000 increased by $1.3 million as compared to 1999, yet decreased by 0.2% to 9.8% of net sales. The increase of $1.3 million reflects additional depreciation and amortization associated with new data processing equipment, increased professional service fees and increased costs associated with the development of e-commerce business opportunities.

The provision for doubtful accounts for the year ended December 31, 2000 increased by $4.2 million to $7.1 million and from 1.0% to 2.2% of net sales. During the second quarter of 2000, two of our customers filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. As a result of the filings, we charged $3.4 million and $1.0 million to the provision for doubtful accounts during the second and fourth quarters of 2000, respectively, to fully provide for the accounts receivable balances due to us from these customers. On a combined basis, these two customers accounted for approximately 1.9% of consolidated net sales for the year ended December 31, 2000. Approximately 50% of the locations previously owned by these two customers have been acquired by other customers and continue to operate as party stores. We do not believe the potential loss of sales from the closed locations will have a material adverse effect on our future results of operations or its financial condition. We also charged $1.6 million to the provision for doubtful accounts during the fourth quarter of 2000 which represented the remaining accounts receivable balance from a customer that filed for bankruptcy during 1999.

Art and development costs of $8.5 million for the year ended December 31, 2000 were $0.2 million lower than in 1999. The art and development costs for the year ended December 31, 1999 included higher levels of certain start-up costs associated

with the development of new product lines. As a percentage of net sales, art and development costs were 2.6% for the year ended December 31, 2000 as compared to 2.8% for 1999.

During the fourth quarter of 2000, we recorded charges of $0.3 million relating to the restructuring of our distribution operations begun in 1998 and $0.2 million in connection with the consolidation of certain manufacturing operations.

During the fourth quarter of 1999, we recorded non-recurring charges of $1.0 million in association with the proposed construction of a new distribution facility. The non-recurring charges represented building costs written-off due to the relocation of the proposed site.

Interest expense, net, of $26.4 million for the year ended December 31, 2000 was comparable to 1999, principally as a result of a higher average interest rate (9.26% in 2000 versus 8.16% in 1999), offset by the impact of lower average borrowings.

Income taxes for the years ended December 31, 2000 and 1999 were provided for at consolidated effective income tax rates of 39.50% and 40.85%, respectively. The effective income tax rates exceed the federal statutory income tax rate primarily due to state income taxes.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Percentage of Net Sales

                                                              Year Ended December 31,
                                                              -----------------------
                                                                 1999       1998
                                                                ------     ------
Net sales ................................................       100.0%     100.0%
Cost of sales ............................................        63.6       64.3
                                                                 -----      -----
    Gross profit .........................................        36.4       35.7
Operating expenses:
    Selling expenses .....................................         8.0        7.3
    General and administrative expenses ..................        10.0        8.8
    Provision for doubtful accounts ......................         1.0        1.4
    Art and development costs ............................         2.8        2.5
    Non-recurring charges ................................         0.3
    Restructuring charges ................................                    1.0
                                                                 -----      -----
Total operating expenses .................................        22.1       21.0
                                                                 -----      -----
    Income from operations ...............................        14.3       14.7
Interest expense, net ....................................         8.6        9.8
Other expense (income), net
                                                                 -----      -----
    Income before income taxes and minority interests ....         5.7        4.9
Income tax expense .......................................         2.4        2.0
Minority interests
                                                                 -----      -----
    Net income ...........................................         3.3%       2.9%
                                                                 =====      =====

Net sales for the year ended December 31, 1999 of $306.1 million, were $70.8 million or 30.1% higher than for the year ended December 31, 1998. The increase in net sales includes approximately $44.2 million of incremental sales from Anagram, which was acquired in mid September of 1998, as well as increased sales to superstores and independent party goods stores. The increased sales to superstores and independent party goods stores are principally attributable to a realignment of our independent sales force in 1999 in connection with the introduction of our new gift lines, a strong solid color tableware program and stronger than usual seasonal sales as a result of the celebration of the Millennium. During the year ended December 31, 1999, we added approximately 10,000 SKU's to our product line, of which approximately 1,000 related to the newly introduced gift lines.

Gross profit for the year ended December 31, 1999 was $111.5 million, or 36.4% of net sales, as compared to 35.7% for the year ended December 31, 1998. The improvement in gross profit margin principally resulted from increased efficiencies gained at the manufacturing level.

Selling expenses for the year ended December 31, 1999 increased by $7.3 million to $24.5 million and, as a percentage of net sales from 7.3% to 8.0%. The increase in selling expenses reflected the inclusion of approximately $5.0 million of incremental selling expenses from Anagram, which historically operates at a higher level of expense as a percentage of sales. The remaining increase in selling expenses principally resulted from the addition of several new product catalogues and the realignment of the independent sales force in 1999.

General and administrative expenses of $30.7 million for the year ended December 31, 1999 increased by $10.1 million as compared to the year ended December 31, 1998. The increase reflected the additional amortization of goodwill and other intangible assets arising from the acquisition of Anagram as well as the inclusion of Anagram results, which historically operates at a higher level of expense as a percentage of sales.

The provision for doubtful accounts for the year ended December 31, 1999 decreased by $0.4 million to $2.9 million and as a percentage of net sales from 1.4% to 1.0%. During the first quarter of 1999, Party City experienced financial difficulties which were addressed during the fourth quarter of 1999 through new financing arrangements.

Art and development costs of $8.7 million for the year ended December 31, 1999 were $2.7 million higher than the prior year. As a percentage of sales, art and development costs increased to 2.8% in 1999 from 2.5% in 1998. The increase in costs reflected our investment in additional art and product development staff associated with the development of the new gift lines.

In the second quarter of 1998, we commenced a restructuring of our distribution operations to reduce costs and improve operating efficiencies. We closed two distribution facilities located in California and Canada which resulted in the elimination of a total of approximately 100 positions. The restructuring was substantially completed by December 1998. We recorded restructuring charges of approximately $2.4 million, or 1.0% of sales for the year ended December 31, 1998. The restructuring charges included the non-cash write-down of $1.3 million relating to property, plant and equipment, the accrual of future lease obligations of $0.5 million and severance and other costs of $0.6 million.

Interest expense, net, of $26.4 million for the year ended December 31, 1999 increased by $3.4 million as compared to 1998 mainly due to higher average borrowings principally as a result of the acquisition of Anagram .

Income taxes for the years ended December 31, 1999 and 1998 were provided for at consolidated effective income tax rates of 40.85% and 41.5%, respectively. The effective income tax rates exceed the federal statutory income tax rate primarily due to state income taxes.

Liquidity and Capital Resources

At March 31, 2001, we had an outstanding variable rate term loan ("Term Loan") of $150.8 million provided under a bank credit agreement (the "Bank Credit Facilities"), together with senior subordinated notes of $110.0 million (the "Notes") (collectively, the "Financings"). The Term Loan matures in December 2004 and provides for amortization (in quarterly installments) of one percent of the principal amount thereof per year for the first five years and 32.3% and 62.7% of the principal amount thereof in the sixth and seventh years, respectively. The Term Loan bears interest, at our option, at the lenders' customary base rate plus 1.625% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus 2.625% per annum. At March 31, 2001, the floating interest rate on the Term Loan was 8.11%. The Notes bear interest at a rate of 9 7/8% per annum and mature in December 2007. We are required to make prepayments on the Bank Credit Facilities under certain circumstances, including upon certain asset sales and issuance of debt or equity securities and based on cash flows, as defined.

In addition to the Term Loan, the Bank Credit Facilities provide for revolving loan borrowings of up to $50 million (the "Revolving Credit Facility"). The Revolving Credit Facility, expires on December 31, 2002, bears interest, at the option of Amscan Holdings, at the lenders' customary base rate plus, based on certain terms, a range of 1.00% to 1.50% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus, based on certain terms, a range of 2.00% to 2.50% per annum. Interest on balances outstanding under the Revolving Credit Facility are subject to adjustment in the future based on our performance. At March 31, 2001, Amscan Holdings had borrowing capacity of approximately $37.4 million under the Revolving Credit Facility.

At March 31, 2001, Amscan Holdings had three interest rate swap contracts outstanding with a financial institution and Goldman Sachs Capital Markets, L.P. ("GSCM") covering $76.0 million of its Term Loan at fixed effective interest rates ranging from 7.68% to 9.30% .

On March 30, 2001, the Board of Directors of Amscan Holdings authorized 500 shares of preferred stock, $0.10 par value, and designated 100 shares as Series A Redeemable Convertible Preferred Stock. Also on March 30, 2001, Amscan Holdings issued 40 shares of Series A Redeemable Convertible Preferred Stock to GSCP for proceeds of $6.0 million.

In October 2000, we purchased property for the construction of a new domestic distribution facility for $4.9 million and entered into a contract for the design and construction of the new facility with an estimated cost, excluding capitalized interest, of $22.1 million. Through March 31, 2001, we incurred costs of $5.3 million relating to the construction of the new facility, including $0.4 million of capitalized interest costs. The expenditures were financed through March 31, 2001 by borrowings under the Revolving Credit Facility. We intend to permanently finance both the purchase of property and the construction of the facility using the proceeds from the issuance of the Series A Redeemable Convertible Preferred Stock of $6.0 million noted above, long-term borrowings totaling $20 million, and working capital of $1.0 million. We have obtained firm commitments totaling $20 million for the permanent financings from both the New York Job Development Authority and a financial institution. We have amended and restated the Bank Credit Facilities to provide for, among other things, the additional borrowings and future capital expenditures for the construction of the new facility.

Based upon the current level of operations and anticipated growth, we anticipate that our operating cash flow, together with available borrowings under the Revolving Credit Facility, will be adequate to meet our anticipated future requirements for working capital and operating expenses and to service our debt requirements as they become due. However, Amscan Holdings' ability to make scheduled payments of principal on, or to pay interest on, or to refinance its indebtedness and to satisfy its other obligations will depend upon its future performance, which, to a certain extent, will be subject to general economic, financial, competitive, business and other factors beyond its control.

The Financings may affect our ability to make future capital expenditures and potential acquisitions. However, management believes that current asset levels provide adequate capacity to support our operations for at least the next 12 months. As of March 31, 2001, we did not have material commitments for capital expenditures other than for the construction of a new domestic distribution facility.

Cash Flow Data - Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000

During the three months ended March 31, 2001, net cash provided by operating activities totaled $2.0 million, an increase of $2.5 million as compared to the corresponding period in 2000. Net cash flow provided by operating activities before changes in other operating assets and liabilities for the three months ended March 31, 2001 and 2000, was $8.6 million and $8.1 million, respectively. Net cash used as a result of changes in other operating assets and liabilities for the three months ended March 31, 2001 and 2000, was $6.6 million and $8.6 million, respectively.

During the three months ended March 31, 2001, net cash used in investing activities of $4.9 million included payments of $2.3 million associated with the construction of a new domestic distribution facility and additional investments primarily in manufacturing equipment. Net cash used in investing activities during the first quarter of 2000 of $2.8 million principally reflected increased levels of capital expenditures for manufacturing machinery and equipment.

During the three months ended March 31, 2001, net cash provided by financing activities was $2.8 million and primarily consisted of proceeds from the issuance of the Series A Redeemable Convertible Preferred Stock totaling $6.0 million and proceeds from short-term working capital borrowings, partially offset by the repayment of a portion of the Term Loan, and repayment of other long-term obligations. During the comparable period in 2000, net cash provided by financing activities of $3.4 million principally consisted of the proceeds from short-term working capital borrowings, partially offset by the scheduled repayment and a $1.3 million prepayment of the Term Loan, and repayment of other long-term obligations.

Cash Flow Data - Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

For the year ended December 31, 2000, net cash provided by operating activities totaled $19.3 million, or $0.2 million lower than for the year ended December 31, 1999. Net cash flow provided by operating activities before changes in other operating assets and liabilities for the years ended December 31, 2000 and 1999, was $32.9 million and $31.9 million, respectively. Net cash used as a result of changes in other operating assets and liabilities for the years ended December 31, 2000 and 1999, was $13.7 million and $12.5 million, respectively, and reflects a growth in accounts receivable and inventory consistent with the growth in operations.

During the year ended December 31, 2000, net cash used in investing activities of $18.5 million included payments of $7.9 million associated with the purchase of property for and the construction of a new domestic distribution facility and additional investments principally in manufacturing equipment. Net cash used in investing activities during the year ended December 31, 1999 consisted of $11.4 million of capital expenditures including an upgrade of the Company's data processing systems and investment in additional manufacturing equipment.

During the year ended December 31, 2000, net cash provided by financing activities of $0.9 million primarily consisted of proceeds from net short-term borrowings under the Revolving Credit Facility for working capital needs and the new distribution facility, partially offset by the scheduled repayment and a $1.3 million prepayment of the Term Loan, and repayment of other long-term obligations. During the year ended December 31, 1999, net cash used in financing activities of $8.8 million principally consisted of scheduled payments of long-term obligations partially offset by the proceeds from short-term working capital borrowings.

Cash Flow Data - Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

For the year ended December 31, 1999, net cash provided by operating activities totaled $19.4 million, or $3.3 million lower than for the year ended December 31, 1998. The lower cash flow from operations reflected an increase in our net accounts receivable balance as a result of higher sales and increased sales with extended terms and higher levels of inventory to support the introduction of new gift lines and new sales programs, partially offset by higher earnings and an increase in trade accounts payable.

Net cash used in investing activities during the year ended December 31, 1999 consisted of $11.4 million of capital expenditures including an upgrade of our data processing systems and investment in additional manufacturing equipment. Net cash used in investing activities during the year ended December 31, 1998 totaled $83.1 million and was comprised of $78.4 million of cash paid for the acquisitions of Anagram and the remaining 25% interest in our U.K. based subsidiary, and $7.5 million for capital expenditures partially offset by proceeds received from the sale of our Canadian distribution facility and other assets in connection with our restructuring plan.

During the year ended December 31, 1999, net cash used in financing activities of $8.8 million principally consisted of scheduled payments of long-term obligations partially offset by the proceeds from short-term working capital borrowings. During the year ended December 31, 1998, net cash used in financing activities of $49.8 million consisted of payments of $93.2 million to former shareholders whose investment in Amscan Holdings' Common Stock was converted into the right to receive cash in connection with the Merger in December of 1997 and the scheduled repayment of debt offset by net proceeds of $59.1 million from additional borrowings in connection with the acquisition of Anagram, and the issuance of Amscan Holdings' Common Stock to employees.

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 on our financial condition or future results of operations.

Recently Issued Accounting Standards

Pronouncements issued by the Financial Accounting Standards Board or other authoritative accounting standards groups with future effective dates are either not applicable or not significant to Amscan Holdings' 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 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 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 our sales to party goods 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 goods superstores, several of which are privately held and have expanded rapidly in recent years, (3) our failure to anticipate changes in tastes and preferences of party goods retailers and consumers, (4) our introduction of new product lines, (5) the introduction of new products by our competitors, (6) our inability to increase prices to recover fully future increases in raw material prices, especially increases in paper prices, (7) the loss of key employees, (8) changes in general business conditions, (9) other factors which might be described from time to time in Amscan Holdings' filings with the SEC, and (10) other factors which are beyond our control. Consequently, all of the forward-looking statements made herein are qualified by these cautionary

statements, and the actual results or developments anticipated 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 continued 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 future operations and capital needs and our flexibility to respond to changing business and economic conditions and business opportunities.

Quarterly Results (Unaudited)

As a result of the seasonal nature of certain of our products, the quarterly results of operations may not be indicative of those for a full year. Third quarter sales are generally the highest of the year due to a combination of increased sales to consumers of our products during summer months as well as initial shipments of seasonal holiday merchandise as retailers build inventory. Conversely, fourth quarter sales are generally lower as retailers sell through inventories purchased during the third quarter. However, fourth quarter sales in 2000 were stronger due to the overall growth rate of our sales which has offset, in part, this sales variability. Fourth quarter sales in 1999 were higher than prior quarters and were primarily attributable to stronger seasonal sales as a result of the celebration of the Millennium. Promotional activities, including special dating terms, particularly with respect to Halloween and Christmas products sold in the third quarter, result in higher accounts receivables balances and higher interest costs to support these balances, which generally causes a lower profitability in the fourth quarter. The following table sets forth the historical net sales, gross profit, income from operations and net income (loss) of Amscan Holdings for 2000 and 1999 by quarter.


                                             For the Three Months Ended
                           -------------------------------------------------------------
                           March 31         June 30       September 30       December 31
                           --------         --------      ------------       -----------

2000
Net sales ............     $ 77,377         $ 78,758        $ 83,365        $ 86,048
Gross profit .........       30,064           28,395          30,343          29,874
Income from operations       12,839            7,335(a)       11,675           8,141(a)
Net income ...........        3,709              448(a)        3,009             950(a)

1999
Net sales ............     $ 76,440           73,203          74,853          81,616
Gross profit .........       28,320           26,072          27,205          29,883
Income from operations        6,344(b)         9,866          11,801(b)       15,769(b)(c)
Net (loss) income ....          (85)(b)        1,929           3,090(b)        5,273(b)(c)

	(a)	During the second quarter of 2000, two of our customers filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. As a result of the filings, we charged $3.4 million and $1.0 million to the provision for doubtful accounts during the second and fourth quarters of 2000, respectively, to fully provide for the accounts receivable balances due to us from these customers. On a combined basis, these two customers accounted for approximately 1.9% of our consolidated net sales for the year ended December 31, 2000. Approximately 50% of the locations previously owned by these two customers have been acquired by other customers and continue to operate as party stores. We do not believe the potential loss of sales from the closed locations will have a material adverse effect on our future results of operations or our financial condition. We also charged $1.6 million to the provision for doubtful accounts during the fourth quarter of 2000 which represented the remaining accounts receivable balance from a customer that filed for bankruptcy during 1999

	(b)	During the first quarter of 1999, our largest customer, Party City, announced that it would be in default of certain covenants of its credit facility and, as a result, we established a related allowance for doubtful accounts and sales allowances which approximated one half of the account and note receivable balance of $15.8 million due from Party City, including $6.0 million charged to the provision for doubtful accounts during the first quarter of 1999. Reflecting Party City’s improved financial condition, the provision was decreased by $1.9 million during the third quarter and the remainder of the provision of $4.1 million was reversed during the fourth quarter of 1999.

(c)

Quantitative and Qualitative Disclosures About Market Risk

Amscan Holdings' earnings are affected by changes in interest rates as a result of its issuance of variable rate indebtedness. However, Amscan Holdings utilizes interest rate swap agreements to manage the market risk associated with fluctuations in interest rates. If market interest rates for Amscan Holdings' variable rate indebtedness averaged 2% more than the interest rate actually paid for the three month periods ended March 31, 2001 and 2000, its interest expense, after considering the effects of its interest rate swap agreements, would have increased, and income before taxes and minority interests would have decreased by, $0.4 million and $0.2 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rates on Amscan Holdings' borrowing cost, short-term investment balances, 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 its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in Amscan Holdings' financial structure.

Amscan Holdings' earnings are also affected by fluctuations in the value of the U.S. dollar as compared to foreign currencies, predominantly in European countries, as a result of the sales of its products in foreign markets. Foreign currency forward contracts are used periodically to hedge against the earnings effects of such fluctuations. A uniform 10% strengthening in the value of the dollar relative to the currencies in which Amscan Holdings' foreign sales are denominated would have resulted in a decrease in gross profit of $0.4 million for each of the three month periods ended March 31, 2001 and 2000, 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 also affect the volume of sales or the foreign currency sales price as competitors' products become more or less attractive. Amscan Holdings' 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.

BUSINESS

General

We design, manufacture and distribute decorative party goods, offering one of the broadest and deepest product lines in the industry. Our products include paper and plastic tableware (such as plates, napkins, tablecovers, cups and cutlery), accessories (such as invitations, thank-you cards, table and wall decorations and balloons) and novelties (such as games and party favors). We have also introduced new product lines encompassing home, baby and wedding products for general gift giving or self-purchase. Our products are sold to party goods superstores, independent card and gift retailers, mass merchandisers and other distributors which sell our products in more than 25,000 retail outlets throughout the world, including North America, South America, Europe, Asia and Australia.

We currently offer over 350 product ensembles, generally containing 30 to 150 coordinated items. These ensembles comprise a wide variety of products to accessorize a party including matching invitations, tableware, decorations, party favors and thank-you cards. 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 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, baby and bridal showers and anniversaries, while our theme-oriented ensembles include Hawaiian luaus, Mardi Gras, '50's rock-and-roll parties and casino nights.

In addition to our long-standing relationships with independent card and gift retailers, we are a leading supplier to the party goods superstore distribution channel. Despite consolidations in the party goods superstore channel, party goods superstores continue to grow, providing consumers with a one-stop source for all of their party needs, generally at discounted prices. Our sales to party goods superstores represented approximately 48% of total sales in 2000. While the number of superstores that we supply has grown at a compound annual growth rate ("CAGR") of 5% from 1997 to 2000, our sales to superstores have grown by a 13% CAGR during the same period. With Amscan products occupying an increasing share of superstore shelf space in many product categories, we believe we are well positioned to take advantage of continued growth in the party superstore channel.

We have also continued to broaden our presence in the gift shop, supermarket, and other smaller independent retail channels. This has been accomplished, in part, by the utilization of a strong presence in the gift shop, supermarket and other channels resulting from the acquisition of Anagram International, Inc. and certain related companies (collectively, Anagram) to bring party goods to these markets. We also realigned our sales force in 1999 to focus more closely on these channels. To further achieve sales growth and expansion, we introduced new product lines in 1999 encompassing home, baby and wedding gifts which are being distributed through our sales force. Our recent expansion initiatives have been primarily funded by current operations.

Our sales and cash flows have grown substantially over the past five years. From 1995 to 2000, sales and Adjusted EBITDA (adjusted for non-recurring items, other income or expenses, and minority interests) (see Note 7 in "Selected Historical Consolidated Financial and Other Data") have grown at compound annual rates of 14% and 12%, respectively. During the same period, Adjusted EBITDA margins (i.e., as a percentage of net sales) ranged from approximately 19% in 1995 to 17% in 2000. EBITDA margin for the year 2000 was lower principally as a result of additional bad debt reserves relating to the bankruptcy of certain customers and costs associated with the development of a specialty sales force. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Revenues and Adjusted EBITDA Growth

Party Goods Industry Overview

According to industry analyst reports, the U.S. decorative party goods industry (including tableware, accessories and novelties) has grown significantly over the past decade. We believe this growth is driven by several factors including favorable demographics and consumer spending patterns, the emergence of the party superstore channel and growth in the number of party events celebrated and party products available to consumers.

We believe that demographic trends favor continued growth in decorative party goods sales. According to the United States Bureau of the Census, between 1997 and 2005, the population in the 10-19 year old age bracket is expected to increase by approximately 10%, and population in the 20-24 year old age bracket is expected to increase by approximately 15%. This suggests an increase in celebrations revolving around teenagers and young adults including confirmations, bar mitzvahs, graduations and bridal and baby showers. In addition, the 45-54 year old age bracket is expected to increase by over 20% by 2005. We believe that this population segment is a key buying group of party goods for children and grandchildren, as well as products for adult milestone events including birthdays, anniversaries and retirements.

Another factor contributing to growth in the decorative party goods industry has been the emergence of party goods superstores. We believe that superstores are popular among consumers because of the large variety of merchandise and substantial discounts they offer. We believe that party goods sales volumes have also increased, in part, as a result of:

	•	the creation of new product ensembles both in response to consumer demand and as a means of stimulating customer purchases;

	•	the broadening of product lines through the addition of new items and new accessories within ensembles;

	•	larger retail environments allowing retailers to employ marketing techniques which result in increased average sales per customer; and

	•	the celebration of an increased number of party themes and events, such as Hawaiian luaus, Mardi Gras, ‘50‘s rock-and-roll parties and casino nights.

We believe that by introducing products for new types of celebrations, offering multiple product ensembles for individual celebrations (such as multiple Halloween or birthday ensembles) and increasing the number of "add-on" accessories, party goods suppliers have increased the frequency and volume of consumer purchases of decorative party goods.

Competitive Strengths

	•	Leading Supplier to the High Growth and High Volume Party Goods Superstore Channel. In addition to our long-standing base of business with independent card and party retailers, we believe that our products account for an increasing portion of the retail sales by major superstore chains, including Party City, Factory Card OutletPaper Warehouse Inc. and Party Concepts Inc. Approximately 48% of our sales were generated from superstores in 2000. Despite consolidations in the party goods superstore channel, superstores continue to grow, providing consumers with a one-stop source for all of their party needs, generally at discounted prices.

	•	Single Source Supplier of Decorative Party Goods. We provide one of the most extensive product lines of decorative party goods in the industry, serving a wide variety of occasions. We produce over 350 different ensembles, generally containing 30 to 150 coordinated SKU’s within each ensemble. With 36,000 SKU’s, we are a one-stop shopping, single-source supplier to retailers of decorative party goods. We believe this breadth of product line provides enough variety that competing retailers can each purchase our products and still differentiate themselves by the product they market to the end consumer.

	•	Strong Customer Relationships. We have built strong relationships with our customer base which operate more than 25,000 retail outlets. We strive to provide superior service and, by involving retailers in product development and marketing, seek to become a strategic partner to our customers.

	•	Product Design Leadership. We believe one of our strengths is our leadership in creating innovative designs and party items. We believe our product designs have a level of color, complexity and style that are attractive to consumers and difficult to replicate. We offer coordinated accessories and novelties which, we believe, complement our tableware designs, enhancing the appeal of our tableware products and encouraging “add on” impulse purchases.

	•	Strong and Committed Management Team. Our management team has built the business into an industry leader with integrated design, manufacturing, and distribution capabilities. The management team and other key employees committed $6.4 million (including restricted stock grants) to the Transaction. In addition, the chief executive officer of Anagram, effectively invested $13 million in Amscan Holdings’ Common Stock when Amscan Holdings acquired Anagram. Amscan Holdings paid a portion of the purchase price for Anagram in Common Stock.

Strategy

We seek to become the primary source for consumers' party goods requirements. The key elements of our strategy are as follows:

	•	Strengthen Position as a Leading Provider of Party Goods. We offer convenient “one-stop shopping” for both large superstore and small retailers and seek to increase our proportionate share of sales volume and shelf space in these stores.

	•	Offer the Broadest and Deepest Product Line in the Industry. We strive to offer the broadest and deepest product line in the industry. We help retailers boost average purchase volume per consumer through coordinated ensembles that promote “add on” purchases.

	•	Diversify Distribution Channels, Product Offering and Geographic Presence. We seek, through internal growth and acquisitions, to expand our distribution capabilities , increase our presence in additional retail channels and further broaden and deepen our product line.

	•	Provide Superior Customer Service. We strive to achieve average fill rates in excess of 95% and to ensure short turnaround times.

	•	Maintain Product Design Leadership. We will continue investing in art and design to support a steady supply of fresh ideas and create complex, unique ensembles that appeal to consumers and are difficult to replicate.

	•	Maintain State-of-the-Art Manufacturing and Distribution Technology. We intend to maintain technologically advanced production and distribution systems in order to enhance product quality, manufacturing efficiency, cost control and customer satisfaction.

	•	Pursue Attractive Acquisitions. We believe that opportunities exist to make acquisitions of complementary businesses to leverage our existing marketing, distribution and production capabilities, expand our presence in the various retail channels, further broaden and deepen our product line and penetrate international markets. We receive inquiries from time to time with respect to the possible acquisition of other entities, and we intend to pursue acquisition opportunities.

Business Operations

Product Design

Our 100 person in-house design staff develops our party goods. From the designs and concepts developed by our artists, we select those we believe best to replace or to supplement our existing product ensembles each year. During 2000, we introduced approximately 50 new ensembles.

Product Line

The major categories of products which we offer are tableware, accessories and novelties. The percentages of sales for each product category for 2000, 1999 and 1998 are set forth in the following table:

                                 2000       1999       1998
                                 ----       ----       ----
 Tableware................       46%          45%        57%
 Accessories..............        39          38         26
 Novelties................        15          17         17
                                 ----       ----       ----
                                 100%        100%       100%
                                 ====        ===        ===

Products. The following table sets forth the principal products in each of the three categories:

Tableware	Accessories	Novelties
Decorated	Balloons	Buttons
Paper Plates	Banners	Candles
Paper Napkins	Cascades	Cocktail Picks
Paper Tablecovers	Caketops	Games
Paper Cups	Confetti	Mugs
	Crepe	Noise Makers
	Cutouts	Party Favors
	Decorative Tissues	Party Hats
	Flags	Pinatas
	Gifts	Pom Poms
Solid Color	Gift Bags	T-shirts
Paper and Plastic Plates	Gift Wrap
Paper Napkins	Guest Towels
Paper and Plastic	Honeycomb Centerpieces
Tablecovers	Invitations and Notes
Paper and Plastic Cups	Ribbons and Bows
Plastic Cutlery	Signs

Occasions. We supply party goods and gifts for the following types of occasions:

Seasonal	Everyday	Themes
New Year's	Anniversaries	Casino Night
Valentine's Day	Bar Mitzvahs	Fall
St. Patrick's Day	Birthdays	Fiesta
Easter	Christenings	Fifties Rock-and-Roll
Passover	Confirmations	Hawaiian Luau
Fourth of July	First Communions	Mardi Gras
Halloween	Graduations	Patriotic
Thanksgiving	Retirements	Religious
Hanukkah	Showers	Sports
Christmas	Weddings	Summer Fun

Tableware. We believe that tableware products are the initial focus of consumers in planning a party, since these items are necessary in connection with the consumption of food and beverages. To distinguish our tableware from that of our competitors, we seek to create a broad range of unique designs for our products. In addition, our tableware products are priced competitively and affordably, having suggested retail prices (based upon quantity and product) ranging between $1.50 and $11.45 .

Accessories and Novelty Items. We believe that consumers are attracted to our tableware due to the breadth and array of accessory and novelty items. Unified displays of complete ensembles in retail stores are designed to enhance the appeal of our tableware and encourage the impulse buying of accessories and novelties. We believe that by offering a broad product line, we increase the number of products sold per customer transaction.

Manufactured Products

Items we manufacture accounted for over 60% of our sales in 2000. State-of-the-art printing, forming, folding and packaging equipment support our manufacturing operations. Our facilities in Kentucky, New York, Rhode Island, Minnesota and Mexico produce paper and plastic plates, napkins, cups, metallic balloons and other party and novelty items. This vertically integrated manufacturing capability provides us the opportunity to better control costs and monitor product quality, manage inventory investment and provide efficient order fulfillment.

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 our production costs per unit. In addition, we manufacture products for third parties allowing us to maintain a satisfactory level of equipment utilization.

Purchased Products

We purchase the remainder of our products from independently-owned manufacturers, many of whom are located in the Far East and with whom we have long-standing relationships. The two largest such suppliers operate as exclusive suppliers to us and represent relationships which have been in place for more than ten years. We believe that the quality and price of the products manufactured by these suppliers provide a significant competitive advantage. Our business, however, is not dependent upon any single source of supply for products manufactured for us by third parties.

Raw Materials

The principal raw material used by us in our products is paper. We have historically been able to change our product prices in response to changes in raw material costs. While we currently purchase such raw material from a relatively small number of sources, paper is available from a number of sources. We believe current suppliers could be replaced without adversely affecting our 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 10,000 retail accounts. These professionals have, on average, been affiliated with us for three years. In addition to this seasoned sales team, we utilize a select group of manufacturers' representatives to handle specific account situations. International customers are generally serviced by employees of our foreign subsidiaries. To support our sales and marketing efforts, we produce four main product catalogues annually, three catalogues for seasonal products and one catalogue for everyday products. We also produce additional catalogues to market our metallic balloons, gift products and other specialty items such as stickers and confetti.

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

Distribution and Systems

We ship products from distribution warehouses which employ computer assisted systems. Our distribution warehouses are principally located in New York. As a result of the acquisition of Anagram, we distribute our metallic balloons domestically from facilities in New York and Minnesota. Products for foreign markets are shipped from our distribution warehouses in Mexico, England, Spain, France, Australia and Japan. We are currently constructing a new domestic warehouse facility in Chester, New York in conjunction with the consolidation of several of our distribution facilities. The planned consolidation may result in restructuring charges in subsequent periods.

Many of our sales orders are generated electronically through hand-held units with which the sales force and many customers are equipped. Specifically, orders are entered into the hand-held units and then transmitted over telephone lines to our mainframe computer, where they are processed for shipment. This electronic order entry expedites the order processing which in turn improves our ability to fill customer merchandise needs accurately and quickly.

E-Commerce

We have successfully pursued opportunities to have our products listed on the sites of various Internet retailers. We have also developed a website to enable our key customers to access real time information regarding the status of existing orders, stock availability, and to place new orders. In addition, we have also begun making portions of our catalogues available to retailers over the internet.

Customers

Our customers are principally party goods superstores, independent card and party retailers, mass merchandisers and other distributors. We have also expanded our presence in the gift shop, supermarket and other smaller independent retail channels. In the aggregate, we supply more than 25,000 retail outlets both domestically and internationally.

Revenue Breakdown by Retail Channel

We have a diverse customer base. Only one customer, Party City, accounted for more than 10% of our sales in 2000. For the years ended December 31, 2000, 1999 and 1998, sales to Party City's corporate stores represented 12%, 10% and 13% of consolidated net sales, respectively. For the years ended December 31, 2000, 1999 and 1998, sales to Party City's franchise stores represented 13%, 9% and 10% of consolidated net sales, respectively. Although we believe our relationships with Party City and its franchisees are good, if they were to reduce their volume of purchases from us significantly, our financial condition and future results of operations could be materially adversely affected.

Competition

We compete on the basis of diversity and quality of product designs, breadth of product line, product availability, price, reputation and customer service. We have many competitors with respect to one or more of our products but believe that there are few competitors which manufacture and distribute products with the complexity of design and breadth of product offerings that we do. Furthermore, we believe that our design and manufacturing processes create an efficiency 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 licenses for widely recognized images, such as cartoon or motion picture characters, which could provide them with a competitive advantage. We have pursued a strategy of developing our own designs and generally have not pursued licensing opportunities. Through our acquisition of Anagram, however, we control several licenses which Anagram uses for its production of balloons.

Intellectual Property and Licenses

We own copyrights on the designs we create and use on our products. We own 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. Except for Anagram, we do not depend on licenses to any material degree in our business and, therefore, do not incur any material licensing expenses. Anagram holds approximately 130 licenses allowing it to use various cartoon and other characters on its balloons. None of Anagram's licenses is individually material to its business.

Employees

As of March 31, 2001 , we had approximately 1,800 employees, none of whom is represented by a labor union. We consider our relationship with our employees to be good.

Facilities

We maintain our corporate headquarters in Elmsford, New York and conduct our principal design, manufacturing and distribution operations at the following facilities:

Location	Principal Activity	Square Feet	Owned or Leased (with Expiration Date)
Elmsford, New York	Executive Offices; design and art production of paper party products and decorations	77,200 square feet	Leased (expiration date: December 31, 2007)
Harriman, New York	Manufacture of paper napkins and cups	75,000 square feet	Leased (expiration date: March 31, 2006)
Providence, Rhode Island	Manufacture and distribution of plastic plates, cups and bowls	51,000 square feet	Leased (expiration date: June 30, 2008)
Louisville, Kentucky	Manufacture and distribution of paper plates	189,000 square feet	Leased (expiration date: March 31, 2003)
Newburgh, New York	Manufacture and distribution of solid color party products	455,000 square feet	Leased (expiration date: May 31, 2004)
Eden Prairie, Minnesota	Manufacture and distribution of balloons and accessories	115,600 square feet	Owned
Tijuana, Mexico	Manufacture and distribution of party and wedding products	75,000 square feet	Leased (expiration date: June 30, 2004)
Chester, New York (1)	Distribution of party products and decorations	287,000 square feet	Owned
Goshen, New York	Distribution of seasonal party products and decorations	130,000 square feet	Leased (expiration date: August 31, 2002)

Location	Principal Activity	Square Feet	Owned or Leased (with Expiration Date)
Milton Keynes, England	Distribution of party products and decorations throughout United Kingdom and Europe	110,000 square feet	Leased (expiration date: June 30, 2017)
Saint Denis, France	Distribution of balloons and accessories	6,800 square feet	Leased (expiration date: March 31, 2005)
Madrid, Spain	Distribution of balloons and accessories	6,700 square feet	Leased (expiration date: April 1, 2004)
Melbourne, Australia	Distribution of party products and decorations in Australia and Asia	10,000 square feet	Owned
Blacktown, Australia	Distribution of party products and decorations in Australia and Asia	4,900 square feet	Leased (expiration date: October 31, 2003)
Mexico City, Mexico	Distribution of balloons and accessories	6,600 square feet	Leased (expiration date: January 15, 2002)
Quebec, Canada	Sales and administrative offices	14,700 square feet	Leased (expiration date: March 31, 2002)

(1)	Property subject to a ten-year mortgage securing a loan in the original principal amount of $5,925,000 bearing interest at a rate of 8.51%. Such loan matures in September 2004. The principal amount outstanding as of March 31, 2001 was approximately $2,074,000

In conjunction with the consolidation of several of our distribution facilities, we are currently constructing a new domestic facility in Chester, New York. We purchased property for the construction of the new facility for $4.9 million in October 2000, and entered into a contract for the design and construction of the new facility with an estimated cost, excluding capitalized interest, of $22.1 million.

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 contracts. 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 either will be able to secure renewal terms or enter into leases for alternative locations at market terms.

Organization

The business of Amscan Inc. was founded by John Svenningsen and his family in 1947, and in December 1996, Amscan Holdings completed its IPO. Amscan Holdings was organized on October 3, 1996 to become the holding company for the businesses previously conducted by its principal subsidiary, Amscan Inc., and certain affiliated companies. These affiliated companies include Trisar, Inc., which manufactures and distributes certain products, Amscan Distributors (Canada) Ltd. and Amscan Svenska AB, each of which distributes the products, SSY Realty Corp., which owns certain real estate leased to us, Am-Source, Inc., our supplier of plastic plates, cups and bowls, and certain companies located in Great Britain, Australia, Germany and Mexico which distribute products. We operate in a single operating segment.

The principal executive offices of Amscan Holdings are located at 80 Grasslands Road, Elmsford, New York 10523 and its telephone number at such address is (914) 345-2020.

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 results of operations.

MANAGEMENT

Directors and Executive Officers

Set forth below are the names, ages and positions with Amscan Holdings of the persons who are currently serving as directors and executive officers.

Name	Age	Position
Terence M. O'Toole	41	Director, Chairman of the Board
Sanjeev K. Mehra	42	Director
Joseph P. DiSabato	34	Director
Gerald C. Rittenberg	48	Chief Executive Officer and Director
James M. Harrison	49	President, Chief Financial Officer, Treasurer and Director
Garry Kieves	52	Senior Vice President

Terence M. O'Toole is a Managing Director of Goldman Sachs in the Principal Investment Area. He joined Goldman Sachs in 1983. He is a member of Goldman Sachs' Principal Investment Area Investment Committee and its Stone Street Fund Investment Committee. Mr. O'Toole serves on the Boards of Directors of AMF Bowling, Inc., Western Wireless Corporation, , Orion Power Holdings and several privately held companies on behalf of Goldman Sachs. He holds a B.S. degree from Villanova University and an M.B.A. from the Stanford Graduate School of Business.

Sanjeev K. Mehra is a Managing Director of Goldman Sachs in the Principal Investment Area. He joined Goldman Sachs in 1986 . He is a member of Goldman Sachs' Principal Investment Area Investment Committee and its Stone Street Fund Investment Committee. Mr. Mehra serves on the Boards of Directors of Promedco Management Company, Madison River Telephone Company, L.L.C., Hexcel Corporation, Endwave Corporation and several privately held companies on behalf of Goldman Sachs. He holds an A.B. from Harvard University and an M.B.A. from the Harvard Graduate School of Business Administration.

Joseph P. DiSabato is a Managing Director of Goldman Sachs in the Principal Investment Area. He joined Goldman Sachs in 1988, worked as a Financial Analyst until 1991, and returned in 1994 as an Associate. Mr. DiSabato serves on the Board of Directors of Madison River Telephone Company, L.L.C. and several privately held companies on behalf of Goldman Sachs. He holds a B.S. from the Massachusetts Institute of Technology and an M.B.A. from the Anderson Graduate School of Management.

Gerald C. Rittenberg became Chief Executive Officer upon consummation of the Transaction. Prior to that time, Mr. Rittenberg served as the President of the predecessor to Amscan Holdings, Amscan Inc., from April 1996 to October 1996 , and served as President of Amscan Holdings from the time of its formation in October 1996. From May 1997 until December 1997, Mr. Rittenberg served as Acting Chairman of the Board. From 1991 to April 1996, he was Executive Vice President-- Product Development of Amscan Inc.

James M. Harrison became President, Chief Financial Officer and Treasurer upon consummation of the Transaction. Prior to that time, Mr. Harrison served as the Chief Financial Officer of the predecessor to Amscan Holdings, Amscan Inc., from August 1996 to February 1997, and served as Chief Financial Officer and Secretary of Amscan Holdings since February 1997. From 1993 to 1995, Mr. Harrison was the Executive Vice President, Chief Operating Officer, Secretary, Treasurer and a member of the Board of Directors of The C.R. Gibson Company, a manufacturer and distributor of paper gift products.

Garry Kieves became Senior Vice President of Amscan Holdings in September 1998 when Amscan Holdings acquired Anagram. Prior to September 1998, Mr. Kieves had served as President of Anagram International, Inc. for more than five years.

Mr. O'Toole, Mr. Mehra and Mr. DiSabato became directors of Amscan Holdings in 1997 upon consummation of the Transaction. Mr. Rittenberg and Mr. Harrison became directors of Amscan Holdings in 1998.

Executive Compensation and Related Information

Summary Compensation Table

The following table sets forth information concerning the compensation earned for the past three years for Amscan Holdings' Chief Executive Officer and all other executive officers of Amscan Holdings as of December 31, 2000 whose aggregate salary

and bonus for 2000 exceeded $100,000. The amounts shown include compensation for services in all capacities that were provided to Amscan Holdings or its subsidiaries. Amounts shown were paid by Amscan Holdings' principal subsidiary, Amscan Inc., except for payments to or on behalf of Garry Kieves, which were paid by Anagram. Prior to the Transaction, Amscan Holdings granted stock options on shares of Amscan Holdings' Common Stock ("Company Stock Options") pursuant to the 1996 Stock Option Plan for Key Employees (the "Prior Stock Plan"). Following the Transaction, stock options ("New Options") were granted pursuant to a new stock incentive plan and related option agreement (together, the "Option Documents") adopted by Amscan Holdings. At the time of the Transaction, certain employees converted Company Stock Options into options to purchase shares of Common Stock ("Rollover Options").

Name and Principal Position

Year

Salary

Bonus (a)

Long Term
Compensation
No. of Securities Under-
lying Options Granted

All Other
Compensation (b)

Gerald C. Rittenberg Chief Executive Officer	2000 1999	$295,000 295,000 295,000	$500,000 450,000 395,000		$8,505 7,255 6,532

James M. Harrison President, Chief Financial Officer and Treasurer	2000 1999 1998	$275,000 275,000 275,000	$450,000 400,000 350,000		$9,027 5,399 6,286

Garry Kieves Senior Vice President	2000 1999 1998	$240,000 240,000 72,900(c)		6.648(d)	$16,388 13,289 929

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

(b)	Represents contributions under the Profit Sharing & Savings Plan, as well as insurance premiums paid by Amscan Holdings with respect to term life insurance for the benefit of the named executive officer.

(c)	Mr. Kieves became an employee and Senior Vice President of Amscan Holdings on September 17, 1998.

(d)	Represents the New Options granted to Mr. Kieves in connection with the acquisition of Anagram in 1998. In addition, 10 Common Stock warrants valued at $225,000 were issued to Mr. Kieves in connection with the Anagram acquisition.

Option Grants

No options under the Option Documents were issued to directors and executive officers of Amscan Holdings during 2000 .

Fiscal 2000 Year End Option Values

Number of Securities
Underlying Unexercised Options

Value of Unexercised In the Money
Options at Fiscal Year End

Name

Exercisable

Unexercisable

Exercisable

Unexercisable

Gerald C. Rittenberg	9.989	6.659	$749,175	499,425

James M. Harrison	9.760	6.508	761,373	507,696

Garry Kieves	2.659	3.989	66,475	99,725

The valuation of unexercised in the money options is based on the valuation of Amscan Holdings Common Stock of $150,000 per share. No New Options or Rollover Options were exercised in the most recent fiscal year.

For a further description of the New Options and Rollover Options granted to the executives named in the Summary Compensation Table, see "Employment Arrangements" below.

Employment Arrangements

Employment Agreement with Gerald C. Rittenberg. Under the Employment Agreement between Amscan Holdings and Gerald C. Rittenberg, dated as of August 10, 1997 (the "Rittenberg Employment Agreement"), Mr. Rittenberg serves as Chief Executive Officer of Amscan Holdings for a term expiring December 17, 2001 and which will be extended automatically for successive additional one-year periods , unless either Amscan Holdings gives Mr. Rittenberg, or Mr. Rittenberg gives Amscan Holdings, written notice of the intention not to extend the term no less than twelve months prior to the end of the term. During 2000, Mr. Rittenberg received $295,000 and will receive during 2001 an annual base salary of $309,750 which will be increased by 5% at the beginning of each new term. Mr. Rittenberg will be eligible for an annual bonus for each calendar year comprised of (i) a non-discretionary bonus equal to 50% of his annual base salary if certain operational and financial targets determined by the Board of Directors in consultation with Mr. Rittenberg are attained and (ii) a discretionary bonus awarded in the sole discretion of the 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 Mr. Rittenberg's employment were to be terminated by Amscan Holdings other than for cause, death or disability, Amscan Holdings 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, "Accrued Obligations") plus (2) severance pay equal to his annual base salary, provided, however, that in connection with a termination by Amscan Holdings other than for cause following a Sale Event (as defined below), such severance pay will be equal to Mr. Rittenberg's annual base salary multiplied by the number of years Amscan Holdings elects as the Restriction Period (as defined below) in connection with the non-competition provisions. Upon termination of Mr. Rittenberg's employment by Amscan Holdings for cause, death, 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 Amscan Holdings other than for cause or (2) by reason of his death or disability, or 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 (the "Restriction Period"), Mr. Rittenberg shall 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 which is in competition with the business of Amscan Holdings, or any of its subsidiaries or controlled affiliates, in any country in which Amscan Holdings or any of its 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 (a "Competitor"), provided, however, that if Mr. Rittenberg's employment is terminated by Amscan Holdings other than for cause following a Sale Event, the Restriction Period will be instead a one, two or three-year period at the election of Amscan Holdings. For purposes of the Rittenberg Employment Agreement, "Sale Event" means either (1) the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) that is a Competitor, other than GSCP, of a majority of the outstanding voting stock of Amscan Holdings or (2) the sale or other disposition (other than by way of merger or consolidation) of all or substantially all of the assets of Amscan Holdings and its subsidiaries taken as a whole to any person or group of persons that is a Competitor, provided, however, that an underwritten initial public offering of shares of Amscan Holdings Common Stock pursuant to a registration statement under the Securities Act will not constitute a Sale Event. 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 business relationships with Amscan Holdings and (b) inducing any employee of Amscan Holdings to terminate his or her employment or offering employment to such persons, in each case subject to certain conditions.

Pursuant to the Rittenberg Employment Agreement, Mr. Rittenberg contributed to Confetti immediately prior to the Transaction, 272,728 shares of Amscan Holdings Common Stock in exchange for 60.0 shares of Confetti Common Stock, having an aggregate value equal to approximately $4.5 million, which shares of Confetti Common Stock were valued at the purchase price for which GSCP purchased common shares of Confetti immediately prior to the Transaction (the "New Purchase Price"). At the time of the Transaction, such shares of Confetti Common Stock were converted into 60.0 shares of Amscan Holdings' Redeemable Common Stock as the surviving company in the Transaction (as converted, the "Rollover Stock").

Also pursuant to the Rittenberg Employment Agreement, following the Transaction, Mr. Rittenberg was granted New Options to purchase 16.648 shares of Amscan Holdings' Common Stock at $75,000 per share. Such New Options vest in equal annual installments over a five-year period and are subject to forfeiture upon termination of Mr. Rittenberg's employment if not vested and exercised within certain time periods specified in the Option Documents. Unless sooner exercised or forfeited as provided in the Option Documents, the New Options will expire on the tenth anniversary of the Transaction in 2007 .

Mr. Rittenberg is not permitted to sell, assign, transfer, pledge or otherwise encumber any New Options, shares of Rollover Stock or shares of Redeemable Common Stock acquired upon exercise of the New Options, except as provided in the Stockholders' Agreement and the Option Documents, and the shares of Rollover Stock and shares of Redeemable Common Stock acquired upon exercise of the New Options are subject to the terms of the Stockholders' Agreement.

Employment Agreement with James M. Harrison. Under the Employment Agreement, dated August 10, 1997, by and between Amscan Holdings and James M. Harrison (the "Harrison Employment Agreement"), Mr. Harrison serves as President of Amscan Holdings for a term expiring December 17, 2001 and which will be extended automatically. During 2000, Mr. Harrison received $275,000 and, during 2001, will receive an annual base salary of $288,750 which will be increased by 5% at the beginning of each new term. The Harrison Employment Agreement contains provisions for additional terms, salary increases during any 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, with the exception of the provision for an election by Amscan Holdings of a one, two or three-year Restriction Period following a Sale Event; under the Harrison Employment Agreement, the Restriction Period is fixed at three years and severance pay is fixed at one year's annual base salary.

Pursuant to the Harrison Employment Agreement, following the Transaction, Mr. Harrison was granted New Options to purchase 13.874 shares of Amscan Holdings' Common Stock at $75,000 per share. Such New Options were granted on terms similar to those granted pursuant to the Rittenberg Employment Agreement.

Additionally, under the Harrison Employment Agreement, Mr. Harrison converted, as of the time of the Transaction, his Company Stock Options to purchase 50,000 shares of Amscan Holdings Common Stock into Rollover Options to purchase 2.394 shares of Amscan Holdings' Common Stock. The Rollover Options have an exercise price per share (the "Rollover Exercise Price") equal to $54,545. Mr. Harrison also received at the time of the Transaction a cash bonus equal to $176,041 in connection therewith. The Rollover Options were granted pursuant to the Option Documents and on the same terms as the New Options other than the exercise price.

Pursuant to the Harrison Employment Agreement, Mr. Harrison was granted immediately prior to the Transaction, 15.0 shares of Confetti Common Stock (the "Restricted Stock"), having an aggregate value of $1,125,000, based on the New Purchase Price, which shares were converted in the Transaction into 15.0 shares of Amscan Holdings' Common Stock. During the Stock Restricted Period (as defined below), the Restricted Stock will be forfeitable and may not be sold, assigned, transferred, pledged or otherwise encumbered by Mr. Harrison. For purposes of the Harrison Employment Agreement, the "Stock Restricted Period" means the period beginning on the date of grant of the Restricted Stock and ending on the earliest of (i) the occurrence of an IPO (as such term is defined in the Stockholders' Agreement); (ii) immediately prior to the consummation of a transaction or series of transactions, approved by the Board of Directors, pursuant to which a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act), other than Goldman Sachs or any of its affiliates, acquires a majority of the outstanding voting stock of Amscan Holdings; and (iii) the termination of Mr. Harrison's employment with Amscan Holdings, (1) because of his death, (2) by Amscan Holdings without cause, (3) by Mr. Harrison because of Amscan Holdings' material breach of its obligations under the Harrison Employment Agreement, (4) by Mr. Harrison if Amscan Holdings imposes on him duties or work conditions materially burdensome to him which are inconsistent with his prior duties and work conditions or (5) because of Mr. Harrison's disability; provided, however, that the Stock Restricted Period ended with respect to 25% of the shares of Restricted Stock on January 1, 1998 and as to 8.33% on each of January 1, 1999 and 2000. With respect to the remaining Restricted Stock, the Stock Restriction Period terminates on January 1, 2007. Pursuant to the Harrison Employment Agreement, upon the voluntary or involuntary termination of Mr. Harrison's employment during the Stock Restricted Period for any reason other than a reason listed in clause (iii) of the preceding sentence, all shares of Restricted Stock (with respect to which the Stock Restricted Period has not then ended) will be forfeited and returned to Amscan Holdings without payment.

Mr. Harrison is not permitted to sell, assign, transfer, pledge or otherwise encumber any New Options, Rollover Options, shares of Restricted Stock or shares of Amscan Holdings' Common Stock acquired upon exercise of the New Options or Rollover Options (in either case, "Option Shares"), except as provided in the Stockholders' Agreement and the Option Documents, and the shares of Restricted Stock and Option Shares will be subject to the terms of the Stockholders' Agreement.

Employment Agreement with Garry Kieves. Under the Employment Agreement dated August 6, 1998, by and between Amscan Holdings and Garry Kieves (the "Kieves Employment Agreement"), Mr. Kieves is employed as Senior Vice President of Amscan Holdings and President of Anagram for a period of three years at an annual base salary of $250,000. The Kieves Employment Agreement contains provisions for automatic extensions for additional one-year periods, salary increases during any additional terms, discretionary bonus payments, severance and other benefits, and definitions of disability. The Kieves Employment Agreement also provides that upon termination of employment he may not, for a period of three years, be employed

by, or associated in any manner with, any business which is in competition with Amscan Holdings. The Kieves Employment Agreement may be terminated by Amscan Holdings upon the death or permanent disability of Mr. Kieves, or for "cause" or without "cause."

Options were granted to Mr. Kieves on terms similar to those granted pursuant to the Rittenberg Employment Agreement. Mr. Kieves will not be permitted to sell, assign, transfer, pledge or otherwise encumber any New Options, shares of Common Stock, Redeemable Common Stock or Option Shares, except as provided in the Stockholders' Agreement and the Option Documents, and the shares of Common Stock and Option Shares are subject to the terms of the Stockholders' Agreement.

Amscan Holdings, Inc. 1997 Stock Incentive Plan

Following consummation of the Transaction, Amscan Holdings adopted the Amscan Holdings, Inc. 1997 Stock Incentive Plan (the "Stock Incentive Plan") under which it may grant incentive awards in the form of shares of Amscan Holdings' Common Stock ("Restricted Stock Awards"), options to purchase shares of Amscan Holdings' Common Stock ("Company 1997 Stock Options") and stock appreciation rights ("Stock Appreciation Rights") to certain directors, officers, employees and consultants ("Participants") of Amscan Holdings and its affiliates. The total number of shares of Amscan Holdings' Common Stock reserved and available for grant under the Stock Incentive Plan , as amended, is 150 shares. A committee of Amscan Holdings' 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 Stock Incentive Plan. Unless otherwise determined by the Committee, any Participant granted an award under the Stock Incentive Plan must become a party to, and agree to be bound by, the Stockholders' Agreement.

Company 1997 Stock Option awards under the Stock Incentive Plan may include incentive stock options, nonqualified stock options, or both types of Company 1997 Stock Options, in each case with or without Stock Appreciation Rights. Company 1997 Stock Options are nontransferable (except under certain limited circumstances) and, unless otherwise determined by the Committee, have a term of ten years. Upon a Participant's death or when the Participant's employment with Amscan Holdings or its applicable affiliate is terminated for any reason, such Participant's previously unvested Company 1997 Stock Options are forfeited and the Participant or his or her legal representative may, within three months (if termination of employment is for any reason other than death) or one year (in the case of the Participant's death), exercise any previously vested Company 1997 Stock Options. Stock Appreciation Rights may be granted in conjunction with all or part of any Company 1997 Stock Option award, and are exercisable, subject to certain limitations, only in connection with the exercise of the related Company 1997 Stock Option. Upon termination or exercise of a Company 1997 Stock Option, any related Stock Appreciation Rights terminate and are no longer exercisable. Stock Appreciation Rights are transferable only with the related Company 1997 Stock 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 Stock Incentive Plan, all outstanding Company 1997 Stock Options and Stock Appreciation Rights 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 Stock 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. Amscan Holdings' board of directors and the Committee have authority to amend the Stock Incentive Plan and awards granted thereunder, subject to the terms of the Stock Incentive Plan.

Compensation of Directors

The Company currently does not compensate its directors other than for expense reimbursement.

Stock Performance Graph

Amscan Holdings' Common Stock has not traded publicly since December 19, 1997. For this reason a graph indicating the relative performance of Amscan Holdings' Common Stock price to other standard measures has not been included since it would provide no meaningful information.

Compensation Committee Policies

During 2000, compensation of executive officers of Amscan Holdings was paid according to the terms of existing employment agreements and, accordingly, the Compensation Committee did not make any decisions in 2000 in connection with compensation paid to the Chief Executive Officer and other executive officers of Amscan Holdings named in the Summary Compensation Table.

Compensation Committee Interlocks and Insider Participation

To the knowledge of Amscan Holdings, no relationship of the type described in Item 402(j)(3) of Regulation S-K existed during 2000 with respect to Amscan Holdings.

OWNERSHIP OF CAPITAL STOCK

The following table sets forth certain information concerning ownership of shares of Amscan Holdings' Common Stock by: (i) persons who are known by Amscan Holdings to own beneficially more than 5% of the outstanding shares of Amscan Holdings' Common Stock; (ii) each director of Amscan Holdings; (iii) each executive officer of Amscan Holdings named in the Summary Compensation Table; and (iv) all directors and executive officers of Amscan Holdings named in the Summary Compensation Table as a group.


                                                   Shares of Company       Percentage
                                                     Common Stock           of Class
Name of Beneficial Owner                           Beneficially Owned     Outstanding(a)
------------------------                           ------------------     --------------

Gerald C. Rittenberg (b) ...................             69.989                6.1%
James M. Harrison (c) ......................             24.760                2.2
Garry Kieves, Garry Kieves Retained
   Annuity Trust and Garry Kieves
   Irrevocable Trust, in aggregate (d) .....            132.659               11.6
Terence M. O'Toole (e) .....................              --                   --
Sanjeev K. Mehra (f) .......................              --                   --
Joseph P. DiSabato (g) .....................              --                   --
Estate of John A. Svenningsen ..............            100.0                  8.8
   c/o Kurzman & Eisenberg LLP
   One North Broadway, Suite 1004
   White Plains, New York 10601
The Goldman Sachs Group, Inc. (h) ..........            865.0                 73.8
   85 Broad Street
   New York, New York 10004

All directors and executive officers as
a group (6 persons) (i) ....................            227.408               19.5

(a)	The amounts and percentage of Amscan Holdings Common Stock beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which he has no economic interest.

(b)	Includes 9.989 shares which could be acquired by Mr. Rittenberg within 60 days upon exercise of options.

(c)	Includes 9.760 shares which could be acquired by Mr. Harrison within 60 days upon exercise of options.

(d)	Includes 2.659 shares which could be acquired by Mr. Kieves within 60 days upon exercise of options and 10 shares that could be acquired upon exercise of warrants.

(e)	Mr. O’Toole, who is a Managing Director of Goldman Sachs, disclaims beneficial ownership of the shares of Amscan Holdings’ Common Stock that are owned by GS Group and its affiliates, except to the extent of his pecuniary interest therein, if any.

(f)	Mr. Mehra, who is a Managing Director of Goldman Sachs, disclaims beneficial ownership of the shares of Amscan Holdings’ Common Stock that are owned by GS Group and its affiliates, except to the extent of his pecuniary interest therein, if any.
(g)	Mr. DiSabato, who is a Managing Director of Goldman Sachs, disclaims beneficial ownership of the shares of Amscan Holdings’ Common Stock that are owned by GS Group and its affiliates, except to the extent of his pecuniary interest therein, if any.

(h)	GS Group may be deemed to own beneficially and indirectly in the aggregate 825.0 shares of Amscan Holdings Common Stock and 40.0 shares of Series A Redeemable Convertible Preferred Stock through the investment partnerships GS Capital Partners II, L.P. (which owns approximately 517.6 shares of Amscan Holdings’ Common Stock and 25.1 shares of Series A Redeemable Convertible Preferred Stock), GS Capital Partners II Offshore, L.P. (which owns approximately 205.8 shares of Amscan Holdings’ Common Stock and 9.976 shares of Series A Redeemable Convertible Preferred Stock), Goldman Sachs & Co. Verwaltungs GmbH as nominee for GS Capital Partners II (Germany) C.L.P. (which owns approximately 19.1 shares of Amscan Holdings’ Common Stock and 0.924 shares of Series A Redeemable Convertible Preferred Stock), Stone Street Fund 1997, L.P. (which owns approximately 55.5 shares of Amscan Holdings’ Common Stock and 2.692 shares of Series A Redeemable Convertible Preferred Stock) and Bridge Street Fund 1997, L.P. (which owns approximately 27.0 shares of Amscan Holdings’ Common Stock and 1.308 shares of Series A Redeemable Convertible Preferred Stock) (collectively the “Limited Partnerships”), of each of which affiliates of GS Group are the general partner or managing general partner. Each share of Series A Redeemable Convertible Preferred Stock is convertible at any time at the option of the holder into one share of Amscan Holdings’ Common Stock. GS Group disclaims beneficial ownership of the shares reported herein as beneficially owned by the Limited Partnerships except to the extent of its pecuniary interest therein. The Limited Partnerships share voting and investment power with GS Group.
(i)	Includes 22.408 shares which could be acquired by the executive officers within 60 days upon exercise of options and 10 shares which could be acquired by Mr. Kieves upon exercise of warrants.

Stockholders' Agreement

As of December 19, 1997, Amscan Holdings entered into the Stockholders' Agreement with GSCP, the Estate and certain Amscan Holdings employees listed as parties thereto (including the Estate, the "Non-GSCP Investors"). The following discussion summarizes the terms of the Stockholders' Agreement which Amscan Holdings believes are material to an investor in Amscan Holdings' debt or equity securities. This summary is qualified in its entirety by reference to the full text of the Stockholders' Agreement, a copy of which is filed with the SEC, and which is incorporated herein by reference. The Stockholders' Agreement provides, among other things, for (i) the right of the Non-GSCP Investors to participate in, and the right of GSCP to require the Non-GSCP Investors to participate in, certain sales of Amscan Holdings' Common Stock by GSCP, (ii) prior to an initial public offering (as defined in the Stockholders' Agreement) of stock of Amscan Holdings, certain rights of Amscan Holdings to purchase, and certain rights of the Non-GSCP Investors (other than the Estate) to require Amscan Holdings to purchase (except in the case of termination of employment by such Non-GSCP Investors) all, but not less than all, of the shares of Amscan Holdings' Common Stock owned by a Non-GSCP Investor (other than the Estate) upon the termination of employment or death of such Non-GSCP Investor, at prices determined in accordance with the Stockholders' Agreement and (iii) certain additional restrictions on the rights of the Non-GSCP Investors to transfer shares of Amscan Holdings' Common Stock. The Stockholders' Agreement also contains certain provisions granting GSCP and the Non-GSCP Investors certain rights in connection with registrations of Amscan Holdings' Common Stock in certain offerings and provides for indemnification and certain other rights, restrictions and obligations in connection with such registrations. The Stockholders' Agreement will terminate (i) with respect to the rights and obligations of and restrictions on GSCP and the Non-GSCP Investors in connection with certain restrictions on the transfer of shares of Amscan Holdings' Common Stock, when GSCP and its affiliates no longer hold at least 40% of the outstanding shares of Amscan Holdings' Common Stock, on a fully diluted basis; provided that the Stockholders' Agreement will terminate in such respect in any event if Amscan Holdings enters into certain transactions resulting in GSCP, its affiliates, the Non-GSCP Investors, and each of their respective permitted transferees, owning less than a majority of the outstanding voting power of the entity surviving such transaction; and (ii) with respect to the registration of Amscan Holdings' Common Stock in certain offerings, with certain exceptions, on the earlier of (1) the date on which there are no longer any registrable securities outstanding (as determined under the Stockholders' Agreement) and (2) the twentieth anniversary of the Stockholders' Agreement.

DESCRIPTION OF SENIOR DEBT

In order to fund Amscan Holdings' recapitalization and its transaction costs, to refinance certain existing outstanding indebtedness, and for general corporate purposes Amscan Holdings (i) originally issued the notes that have been exchanged for the currently outstanding Notes and (ii) entered into the Revolving Credit Agreement and the AXEL Credit Agreement providing

for the Revolving Credit Facility and the Term Loan, respectively. In September 1998, Amscan Holdings entered into an amended and restated Revolving Credit Agreement and an amended and restated AXEL Credit Agreement in connection with Amscan Holdings' acquisition of Anagram, and in September 2000 such agreements were further amended to facilitate the construction and financing of Amscan Holdings' new domestic distribution facility. (The Revolving Credit Agreement and the AXEL Credit Agreement are referred to together as the "Bank Credit Facilities"). The execution of the Bank Credit Facilities, the borrowings necessary to complete the Transaction and the delivery of required documentation thereunder occurred at the time of closing of the Transaction.

The following summary of the material provisions of the Revolving Credit Agreement and the AXEL Credit Agreement does not purport to be complete, and is qualified by reference to the full text of such agreements, which have been filed as exhibits to the Registration Statement of which this Prospectus is a part.

The Term Loan will mature in December 2004, and will provide for amortization (in quarterly installments) of one percent of the original principal amount thereof per year for the first five years and 32.3% and 62.7% of the principal amount thereof in the sixth and seventh years, respectively. The Term Loan bears interest, at Amscan Holdings' option, at the lenders' customary base rate plus 1.625% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus 2.625% per annum. Amscan Holdings will be required to make future scheduled amortization payments on the Term Loan as follows:

For the Year Ending:	Amortization
December 31, 2001	$ 1,559,000
December 31, 2002	1,559,000
December 31, 2003	50,354,000
December 31, 2004	97,762,000
Total	$151,234,000 =========

Amscan Holdings is obligated to obtain interest rate protection, pursuant to interest rate swaps, caps or other similar arrangements satisfactory to GS Credit Partners, with respect to a notional amount of not less than half of the aggregate amount outstanding under the Term Loan.

In addition, Amscan Holdings will be required to make prepayments on the Bank Credit Facilities under certain circumstances, including upon certain asset sales and issuance of debt or equity securities, subject to certain exceptions. Amscan Holdings will also be required to make prepayments on the Bank Credit Facilities in an amount equal to 75% (to be reduced to 50% for any fiscal year in which Amscan Holdings' Consolidated Leverage Ratio (as defined in the Bank Credit Facilities) is less than 3.75 to 1.0) of Amscan Holdings' Excess Cash Flow (as defined in the Bank Credit Facilities) for each fiscal year, commencing with the fiscal year ended December 31, 1998. Such mandatory prepayments will be applied to prepay the Term Loan first (on a pro rata basis) and thereafter to prepay the Revolving Credit Facility and to reduce the commitments thereunder. Amscan Holdings may prepay, in whole or in part, borrowings under the Term Loan. Call protection provisions also apply to mandatory prepayments of borrowings under the Term Loan except for prepayments from Excess Cash Flow. Amscan Holdings may prepay borrowings under or reduce commitments for the Revolving Credit Facility, in whole or in part, without penalty.

The Revolving Credit Facility expires on December 31, 2002 and bears interest, at the option of Amscan Holdings, at the lenders' customary base rate plus, based on certain terms, a range of 1.00% to 1.50% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus, based on certain terms, a range of 2.00% to 2.50% per annum. Interest on balances outstanding under the Revolving Credit Facility are subject to adjustment in the future based on Amscan Holdings' performance. Amounts drawn on the Revolving Credit Facility for working capital purposes are also subject to an agreed upon borrowing base and periodic reduction of outstanding balances. All borrowings under the Revolving Credit Facility are subject to mandatory prepayments upon the occurrence of certain events as described above.

The Bank Credit Facilities are guaranteed by each of the domestic subsidiaries of Amscan Holdings (each, a "Guarantor"; collectively, the "Guarantors"). Subject to certain exceptions, all extensions of credit to Amscan Holdings and all guarantees are secured by all existing and after-acquired personal property of Amscan Holdings and the Guarantors, including, subject to certain exceptions, a pledge of all of the stock of all subsidiaries owned by Amscan Holdings or any of the Guarantors and first priority liens on after-acquired real property fee and leasehold interests of Amscan Holdings and the Guarantors.

The Bank Credit Facilities contain certain financial covenants, as well as additional affirmative and negative covenants, constraining Amscan Holdings. Amscan Holdings must maintain a minimum Consolidated Adjusted EBITDA (as defined in the Bank Credit Facilities) of not less than an amount ranging from $53.3 million for the four Fiscal Quarter (as defined in the Bank Credit Facilities) period ended March 31, 2001 to $60.0 million for the four Fiscal Quarter period ending December 31, 2002. Amscan Holdings is required to maintain a Fixed Charge Coverage Ratio (defined in the Bank Credit Facilities as the ratio of (a)

Consolidated Adjusted EBITDA to (b) Consolidated Fixed Charges (as defined in the Bank Credit Facilities)) of not less than a ratio of 1.10 to 1.00 for the four Fiscal Quarter period ended March 31, 2001 to a ratio of 1.15 to 1.00 for the four Fiscal Quarter period ending December 31, 2002. Amscan Holdings must not permit the ratio of Consolidated Total Debt (as defined in the Bank Credit Facilities) to Consolidated Adjusted EBITDA on the last day of any four Fiscal Quarter period to exceed a ratio ranging from 5.30 to 1.00 for such period ended March 31, 2001 to 4.45 to 1.00 for such period ending December 31, 2002.

Borrowings under the Revolving Credit Facilities are subject to customary affirmative and negative covenants including, but not limited to, limitations on other indebtedness, liens, investments, guarantees, restricted junior payments (dividends, redemptions and payments on subordinated debt), mergers and acquisitions, sales of assets, capital expenditures, leases, transactions with affiliates, conduct of business and other provisions customary for financings of this type, including exceptions and baskets.

The Revolving Credit Agreement permits business acquisitions in the same line of business as Amscan Holdings and its subsidiaries subject to certain restrictions, and permits borrowings thereunder to finance such acquisitions as long as Amscan Holdings is in compliance with its financial covenants on a pro forma basis for the four fiscal quarters most recently completed prior to the consummation of such acquisition. In addition, the pro forma ratio of total senior indebtedness to EBITDA for the four fiscal quarters most recently completed prior to the consummation of such acquisition shall not exceed 3.5:1.0.

Borrowings under the Revolving Credit Facility are subject to customary events of default (with customary grace periods), including without limitation failure to make payments when due, defaults under other indebtedness, noncompliance with covenants, breach of representations and warranties, bankruptcy, judgments in excess of specified amounts, invalidity of guarantees, impairment of security interests in collateral and "changes of control."

Borrowings under the Term Loan are subject to affirmative covenants identical to those set forth above with respect to borrowings under the Revolving Credit Facility and negative covenants substantially as set forth in the Notes, including limitations on the incurrence of indebtedness, investments, guarantees, restricted payments (dividends, redemptions and payments on subordinated debt), mergers, sales of assets, transactions with affiliates and other provisions customary for financings of this type. The Term Loan also contains a negative covenant restricting liens similar to the lien covenant in the Revolving Credit Facility.

Borrowings under the Term Loan are subject to events of default substantially as set forth in the Notes; provided that there is (i) an immediate default for principal payment defaults, (ii) a three-day grace period for interest payment defaults, (iii) a cross default to the Revolving Credit Facility and other debt with an aggregate principal amount of $5 million or more in the event such default is not cured within twenty business days and (iv) an immediate default if (1) prior to a Qualified Public Offering (as defined in the Bank Credit Facilities), GSCP II and its affiliates cease to own and control 51% or more of the voting power of Amscan Holdings' securities, (2) after a Qualified Public Offering, a person or group acquires beneficial ownership of Amscan Holdings' securities representing greater voting power than GSCP II and its affiliates or (3) a Change of Control as defined in the Indenture occurs.

The Indenture permits the Bank Credit Facilities to be amended, modified, renewed, refunded, refinanced or replaced (in whole or in part) from time to time.

Other Senior Debt

As of March 31, 2001, Amscan Holdings had approximately $6.3 million in outstanding indebtedness and capital lease obligations. Amscan Holdings' distribution center in Chester, New York, is subject to a ten-year mortgage securing a loan in the original principal amount of $5,925,000 bearing interest at a rate of 8.51%. Such mortgage loan matures in September 2004. The principal amount outstanding as of March 31, 2001 was approximately $2,074,000. The remaining amounts of indebtedness outstanding relate to capital leases for Amscan Holdings' machinery and equipment and will be due and payable at scheduled maturities through 2003 as well as notes to former employees and short-term bank borrowings.

DESCRIPTION OF NOTES

General

Amscan Holdings issued the Notes pursuant to that certain Indenture among Amscan Holdings, the Guarantors and IBJ Schroder Bank & Trust Company, as trustee, which has been succeeded by The Bank of New York, as trustee (the "Trustee"). The discussion below summarizes the terms of the Notes that Amscan Holdings believes are material to an investor in the Notes. This summary does not purport to be complete and is qualified in its entirety by reference to the full text of the agreements underlying this discussion, copies of which are filed as exhibits to the Registration Statement of which this Prospectus is a part,

and are incorporated by reference herein. The definitions of certain terms used in the following summary are set forth below under the caption "— Certain Definitions."

As of December 19, 1997, all of Amscan Holdings' Subsidiaries were Restricted Subsidiaries. However, under certain circumstances, Amscan Holdings will be able to designate current or future Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the restrictive covenants set forth in the Indenture.

Principal, Maturity and Interest

The Notes are general unsecured obligations of Amscan Holdings, limited in aggregate principal amount, together with any outstanding Notes, to $200 million, of which $110 million is outstanding. Notes issued hereafter ("Additional Notes") may be issued in one or more series from time to time, subject to compliance with the covenants contained in the Indenture, provided, that no Additional Note may be issued at a price that would cause such Additional Note to have "original issue discount" within the meaning of Section 1273 of the Code. Any Additional Notes will have the same terms, including interest rate, maturity and redemption provisions, as the Notes.

The Notes will mature on December 15, 2007. Interest on the Notes will accrue at the rate of 9 7/8% per annum and will be payable in cash semi-annually in arrears on June 15 and December 15 to holders of record on the immediately preceding June 1 and December 1. Interest on the Notes will accrue from the later of the issue date (in the case of newly issued Notes) or the most recent date to which interest has been paid. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months.

Principal, premium, if any, and interest on the Notes is payable at the office or agency of Amscan Holdings maintained for such purpose within the City and State of New York or, at the option of Amscan Holdings, payment of interest may be made by check mailed to the holders of the Notes at their respective addresses set forth in the register of holders of Notes; provided, however, that all payments with respect to Global Notes (as defined below) and definitive Notes the holders of which have given wire transfer instructions to Amscan Holdings at least 10 Business Days prior to the applicable payment date will be required to be made by wire transfer of immediately available funds to the accounts specified by the holders thereof. Until otherwise designated by Amscan Holdings, its office or agency in New York will be the office of the Trustee maintained for such purpose. The Notes were, and, to the extent applicable, shall be issued in minimum denominations of $1,000 and integral multiples thereof.

Settlement and Payment

Payments by Amscan Holdings in respect of the Notes (including principal, premium, if any, and interest) will be made in immediately available funds as provided above. The Notes are trading in the Depository's settlement system, and any secondary market trading activity is, therefore, required by the Depository to be settled in immediately available funds. No assurance can be given as to the effect, if any, of such settlement arrangements on trading activity in the Notes.

Because of time-zone differences, the securities account of Euroclear or Cedel Bank participants (each, a "Member Organization") purchasing an interest in a Global Note from a Participant (as defined herein) that is not a Member Organization will be credited during the securities settlement processing day (which must be a business day for Euroclear or Cedel Bank, as the case may be) immediately following the Depository Trust Company ("DTC") settlement date. Transactions in interests in a Global Note settled during any securities settlement processing day will be reported to the relevant Member Organization on the same day. Cash received in Euroclear or Cedel Bank as a result of sales of interests in a Global Note by or through a Member Organization to a Participant that is not a Member Organization will be received with value on the DTC settlement date, but will not be available in the relevant Euroclear or Cedel Bank cash account until the business day following settlement in DTC.

Subordination

The Notes are unsecured senior subordinated indebtedness of Amscan Holdings ranking pari passu with all other existing and future senior subordinated indebtedness of Amscan Holdings. The payment of all Obligations in respect of the Notes are subordinated, as set forth in the Indenture, in right of payment to the prior payment in full in cash or Cash Equivalents of all Senior Debt, whether outstanding on the date of the Indenture or thereafter incurred.

The Indenture provides that, upon any distribution to creditors of Amscan Holdings in a liquidation or dissolution of Amscan Holdings or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to Amscan Holdings or its property, an assignment for the benefit of creditors or any marshaling of Amscan Holdings' assets and liabilities, the holders of Senior Debt will be entitled to receive payment in full of all Obligations due in respect of such Senior Debt (including interest after the commencement of any such proceeding at the rate specified in the documents relating to the applicable Senior Debt,

whether or not the claim for such interest is allowed as a claim in such proceeding), or provision will be made for payment in cash or Cash Equivalents or otherwise in a manner satisfactory to the holders of such Senior Debt, before the holders of Notes will be entitled to receive any Securities Payment (other than payments in Permitted Junior Securities) and until all Obligations with respect to Senior Debt are paid in full, or provision is made for payment in cash or Cash Equivalents or otherwise in a manner satisfactory to the holders of such Senior Debt, any Securities Payment (other than any payments in Permitted Junior Securities) to which the holders of Notes would be entitled will be made to the holders of Senior Debt (except that holders of Notes may receive payments made from the trust described under "— Legal Defeasance and Covenant Defeasance").

The Indenture also provides that Amscan Holdings may not make any Securities Payment (other than payments in Permitted Junior Securities) upon or in respect of the Notes (except from the trust described under "— Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of the principal of, premium, if any, or interest on Designated Senior Debt occurs and is continuing, or any judicial proceeding is pending to determine whether any such default has occurred or (ii) any other default occurs and is continuing with respect to Designated Senior Debt that permits, or would permit, with the passage of time or the giving of notice or both, holders of the Designated Senior Debt to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from Amscan Holdings or the holders of any Designated Senior Debt. Securities Payments on the Notes may and shall be resumed (a) in the case of a payment default on Designated Senior Debt, upon the date on which such default is cured or waived or shall have ceased to exist, unless another default, event of default or other event that would prohibit such payment shall have occurred and be continuing, or all Obligations in respect of such Designated Senior Debt shall have been discharged or paid in full and (b) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received by the Trustee. No new period of payment blockage may be commenced unless and until 360 days have elapsed since the first day of effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been subsequently cured or waived for a period of not less than 180 days. In the event that, notwithstanding the foregoing, Amscan Holdings makes any Securities Payment (other than payments in Permitted Junior Securities) to the Trustee or any holder of a Note prohibited by the subordination provisions, then and in such event such Securities Payment will be required to be paid over and delivered forthwith to the holders of Senior Debt.

The Indenture further requires that Amscan Holdings promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default.

As a result of the subordination provisions described above, in the event of a liquidation or insolvency of Amscan Holdings, holders of Notes may recover less ratably than creditors of Amscan Holdings who are holders of Senior Debt. See "Risk Factors." The amount of Senior Debt outstanding at March 31, 2001 was approximately $162.7 million. The Indenture limits, subject to certain financial tests, the amount of additional Indebtedness, including Senior Debt, that Amscan Holdings and its Restricted Subsidiaries can incur. See "—Certain Covenants— Incurrence of Indebtedness and Issuance of Disqualified Stock."

"Bank Debt" means all Obligations in respect of the Indebtedness outstanding under the Bank Credit Agreement together with any amendment, modification, renewal, refunding, refinancing or replacement (in whole or part) from time to time of such Indebtedness.

"Bank Hedging Obligations" means all present and future Hedging Obligations of Amscan Holdings, whether existing now or in the future, that are secured by the Bank Credit Agreement (or other agreement evidencing Bank Debt or other Senior Debt) or any of the collateral documents executed from time to time in connection therewith.

"Designated Senior Debt" means (i) so long as the Bank Debt is outstanding, the Bank Debt, (ii) the Bank Hedging Obligations and (iii) any Senior Debt permitted under the Indenture the principal amount of which is $15 million or more and that has been designated by Amscan Holdings as "Designated Senior Debt" and as to which the Trustee has been given written notice of such designation.

"Permitted Junior Securities" means, with respect to any payment or distribution of any kind, equity securities or subordinated securities of Amscan Holdings or any successor obligor provided for by a plan of reorganization or readjustment that, in the case of any such subordinated securities, are subordinated in right of payment to all Senior Debt that may at the time be outstanding to at least the same extent as the Notes are so subordinated as provided in the Indenture.

"Securities Payment" means any payment or distribution of any kind, whether in cash, property or securities (including any payment or distribution deliverable by reason of the payment of any other Indebtedness subordinated to the Notes) on account of the principal of (and premium, if any) or interest on the Notes or on account of the purchase or redemption or other acquisition of or satisfaction of obligations with respect to the Notes by Amscan Holdings or any Subsidiary.

"Senior Debt" means (i) the Bank Debt, (ii) the Bank Hedging Obligations and (iii) any other Indebtedness Amscan Holdings is permitted to incur under the terms of the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes. Notwithstanding anything to the contrary in the foregoing, Senior Debt does not include (1) any liability for federal, state, local or other taxes owed or owing by Amscan Holdings, (2) any Indebtedness of Amscan Holdings to any of its Restricted Subsidiaries or other Affiliates (other than Goldman Sachs and its Affiliates, including GS Credit Partners), (3) any trade payables, (4) that portion of any Indebtedness that is incurred in violation of the Indenture, (5) Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to Amscan Holdings, (6) any Indebtedness, Guarantee or obligation of Amscan Holdings which is contractually subordinate in right of payment to any other Indebtedness, Guarantee or obligation of Amscan Holdings; provided, however, that this clause (6) does not apply to the subordination of liens or security interests covering particular properties or types of assets securing Senior Debt, (7) Indebtedness evidenced by the Notes and (8) Capital Stock.

Senior Subordinated Guarantees

Amscan Holdings' payment obligations under the Notes are jointly and severally guaranteed on a senior subordinated basis (the "Senior Subordinated Guarantees") by each Restricted Subsidiary of Amscan Holdings (other than a Restricted Subsidiary organized under the laws of a country other than the United States) and each other Subsidiary that becomes a guarantor under the Bank Credit Agreement The obligations of each Guarantor under its Senior Subordinated Guarantee will be subordinated to its Guarantee of all Obligations under the Bank Credit Agreement (the "Senior Guarantees") and will be limited so as not to constitute a fraudulent conveyance under applicable law. See, however, "Risk Factors — Fraudulent Conveyance."

The Indenture provides that no Guarantor may consolidate with or merge with or into (whether or not such Guarantor is the surviving Person) another Person whether or not affiliated with such Guarantor unless (i) subject to the provisions of the following paragraph, the Person formed by or surviving any such consolidation or merger (if other than such Guarantor) assumes all the obligations of such Guarantor, pursuant to a supplemental indenture in form and substance reasonably satisfactory to the Trustee, under the Notes and the Indenture; (ii) immediately after giving effect to such transaction, no Default or Event of Default exists; and (iii) Amscan Holdings would be permitted by virtue of its pro forma Fixed Charge Coverage Ratio to incur, immediately after giving effect to such transaction, at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the covenant described below under the caption "—Incurrence of Indebtedness and Issuance of Disqualified Stock." The Indenture provides that the foregoing will not prevent the merger, consolidation or sale of assets between Guarantors or between Amscan Holdings and any Guarantor.

The Indenture provides that in the event of a sale or other disposition of all or substantially all of the assets of any Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition (including, without limitation, by foreclosure) of all of the capital stock of any Guarantor, then such Guarantor (in the event of a sale or other disposition, by way of such a merger, consolidation or otherwise (including, without limitation, by foreclosure), of all of the capital stock of such Guarantor) or the Person acquiring the property (in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor) will be automatically released and relieved of any obligations under its Senior Subordinated Guarantee; provided that the Net Proceeds of such sale or other disposition are applied, as and if required, in accordance with the applicable provisions of the Indenture. In addition, if any Guarantor is released and relieved of all obligations it may have as a guarantor under the Bank Credit Agreement, then such Guarantor will also be automatically released and relieved of any obligations under its Senior Subordinated Guarantee. See "—Repurchase at the Option of Holders— Asset Sales."

Certain Amscan Holdings' operations, including a substantial portion of its operations outside the United States, are conducted through Subsidiaries that are not Guarantors. Amscan Holdings is dependent upon the cash flow of those Subsidiaries to meet its obligations, including its obligations under the Notes. The Notes are effectively subordinated to all indebtedness and other liabilities (including trade payables and capital lease obligations) of the Subsidiaries that are not Guarantors, which were approximately $5.9 million (excluding inter-company payables to Amscan Holdings) at March 31, 2001 . Any right of Amscan Holdings to receive assets of any of such Subsidiaries upon the latter's liquidation or reorganization (and the consequent right of the holders of the Notes to participate in those assets) is effectively subordinated to the claims of such Subsidiary's creditors, except to the extent that Amscan Holdings or a Guarantor is itself recognized as a creditor of such Subsidiary, in which case the claims of Amscan Holdings would still be subordinate to any security in the assets of such Subsidiary and any indebtedness of such Subsidiary senior to that held by Amscan Holdings or a Guarantor. See "Risk Factors— Holding Company Structure."

Optional Redemption

Except as described below, the Notes are not redeemable at Amscan Holdings' option prior to December 15, 2002. From and after December 15, 2002, the Notes will be subject to redemption at the option of Amscan Holdings, in whole or in part, upon not less than 30 nor more than 60 days' written notice, at the Redemption Prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the twelve-month period beginning on December 15 of each of the years indicated below:

Year	Percentage of Principal Amount
2002	104.937%
2003	103.292
2004	101.646
2005 and thereafter	100.000

At any time on or prior to December 15, 2002, upon the occurrence of a Change of Control, Amscan Holdings may redeem the Notes, in whole but not in part, at a redemption price equal to the principal amount thereof plus the Applicable Premium plus accrued and unpaid interest, if any, to the date of redemption. Notice of redemption of the Notes pursuant to this paragraph shall be mailed to holders of the Notes not more than 30 days following the occurrence of a Change of Control.

"Applicable Premium" means, with respect to a Note, the greater of (i) 1.0% of the then outstanding principal amount of such Note and (ii)(a) the present value of all remaining required interest and principal payments due on such Note and all premium payments relating thereto assuming a redemption date of December 15, 2002, computed using a discount rate equal to the Treasury Rate plus 50 basis points minus (b) the then outstanding principal amount of such Note minus (c) accrued interest thereon paid on the redemption date.

"Treasury Rate" means the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) which has become publicly available at least two business days prior to the date fixed for redemption (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the then remaining term to December 15, 2002; provided, however, that if the then remaining term to December 15, 2002 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the then remaining term to December 15, 2002 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

Selection and Notice

If less than all of the Notes are to be redeemed at any time, selection of such Notes for redemption will be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided that the unredeemed portion of any Note redeemed in part shall equal $1,000 or an integral multiple thereof.

Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at such holder's registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. On and after the redemption date, unless Amscan Holdings defaults in payment of the redemption price, interest ceases to accrue on Notes or portions of them called for redemption.

Mandatory Redemption; Sinking Fund Payments

Except as set below under "—Repurchase at the Option of Holders," Amscan Holdings is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Repurchase at the Option of Holders

Change of Control

Upon the occurrence of a Change of Control, each holder of Notes will have the right to require Amscan Holdings to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, including liquidated damages, if any, thereon to the date of repurchase. Within 30 days following any Change of Control, the Company will mail a notice to each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes pursuant to the procedures required by the Indenture and described in such notice. Amscan Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control.

On a date that is no earlier than 30 days nor later than 60 days from the date that Amscan Holdings mails notice of the Change of Control to the holders (the "Change of Control Payment Date"), Amscan Holdings will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee for cancellation the Notes so accepted together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by Amscan Holdings. The Paying Agent will promptly mail to each holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any. Amscan Holdings will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the holders of the Notes to require that Amscan Holdings repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. Such a transaction could occur, and could have an effect on the Notes, without constituting a Change of Control.

Amscan Holdings will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by Amscan Holdings and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer.

The existence of a holder's right to require Amscan Holdings to repurchase such holder's Notes upon the occurrence of a Change of Control may deter a third party from seeking to acquire Amscan Holdings in a transaction that would constitute a Change of Control.

Asset Sales

The Indenture provides that Amscan Holdings will not, and will not permit any of its Restricted Subsidiaries to, cause, make or suffer to exist an Asset Sale unless (i) Amscan Holdings (or the Restricted Subsidiary, as the case may be) receives consideration at the time of such Asset Sale at least equal to the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) of the assets or Equity Interests issued or sold or otherwise disposed of and (ii) at least 80% of the consideration therefor received by Amscan Holdings or such Restricted Subsidiary is in the form of cash or Cash Equivalents; provided that the amount of (x) any liabilities (as shown on Amscan Holdings' or such Restricted Subsidiary's most recent balance sheet) of Amscan Holdings or any Restricted Subsidiary (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any guarantee thereof) that are assumed by the transferee of any such assets pursuant to a customary novation agreement that releases Amscan Holdings or such Restricted Subsidiary from further liability, (y) any Excludable Current Liabilities, and (z) any notes or other obligations received by Amscan Holdings or any such Restricted Subsidiary from such transferee that are immediately converted by Amscan Holdings or such Restricted Subsidiary into cash (to the extent of the cash received), shall be deemed to be cash for purposes of this provision.

Within 365 days after Amscan Holdings' or any Restricted Subsidiary's receipt of the Net Proceeds of any Asset Sale (or in the case of an Asset Sale involving the Specified Real Estate, by the later of (i) June 30, 1999 or (ii) the date 365 days after receipt of such Net Proceeds) Amscan Holdings or such Restricted Subsidiary may apply the Net Proceeds from such Asset Sale, at its option, (i) to permanently repay or reduce Obligations under the Bank Credit Agreement (and to correspondingly reduce

commitments with respect thereto) or other Senior Debt, (ii) to secure Letter of Credit Obligations to the extent related letters of credit have not been drawn or been returned undrawn, and/or (iii) to an investment in any one or more businesses, capital expenditures or acquisitions of other assets, in each case, used or useful in a Principal Business; provided, that such Net Proceeds may, at Amscan Holdings' option, be deemed to have been applied pursuant to this clause (iii) to the extent of any expenditures by Amscan Holdings made to invest in, acquire or construct businesses, properties or assets used in a Principal Business within one year preceding the date of such Asset Sale. Pending the final application of any such Net Proceeds, Amscan Holdings or such Restricted Subsidiary may temporarily reduce Indebtedness under a revolving credit facility, if any, or otherwise invest such Net Proceeds in Cash Equivalents. The Indenture provides that any Net Proceeds from the Asset Sale that are not used as provided and within the time period set forth in the first sentence of this paragraph will be deemed to constitute "Excess Proceeds."

When the aggregate amount of Excess Proceeds exceeds $15 million, Amscan Holdings will be required to make offers to all holders of Notes and to the holders of any other Senior Subordinated Indebtedness the terms of which so require (each an "Asset Sale Offer") to purchase the maximum principal amount of Notes and such other Senior Subordinated Indebtedness, that is an integral multiple of $1,000, that may be purchased out of the Excess Proceeds at an offer price in cash in an amount equal to 100% of the aggregate principal amount thereof (or 100% of the accreted value thereof, in case of Senior Subordinated Indebtedness issued at a discount), plus accrued and unpaid interest thereon to the date fixed for the closing of such offer, in accordance with the procedures set forth in the Indenture. The Excess Proceeds shall be allocated to the respective Asset Sale Offers for the Notes and such other Senior Subordinated Indebtedness in proportion to their relative principal amounts (or accreted value, as applicable). The Indenture provides that Amscan Holdings may, in lieu of making an Asset Sale Offer for other Senior Subordinated Indebtedness, satisfy its obligation under the governing agreement with respect thereto by applying the Excess Proceeds allocated thereto to the prepayment, redemption or public or private repurchase of such Senior Subordinated Indebtedness.

Amscan Holdings will commence any required Asset Sale Offer with respect to Excess Proceeds within ten Business Days after the date that the aggregate amount of Excess Proceeds exceeds $15 million by mailing the notice required pursuant to the terms of the Indenture, with a copy to the Trustee. To the extent that the aggregate amount of Notes (and such other Senior Subordinated Indebtedness) tendered pursuant to any required Asset Sale Offer is less than the Excess Proceeds allocated thereto, Amscan Holdings may use any remaining Excess Proceeds (x) to offer to redeem or purchase other Senior Subordinated Indebtedness or Subordinated Indebtedness (a "Subordinated Asset Sale Offer") in accordance with the provisions of the indenture or other agreement governing such other Senior Subordinated Indebtedness or Subordinated Indebtedness or (y) for any other purpose not prohibited by the Indenture. If the aggregate principal amount of Notes tendered pursuant to any Asset Sale Offer exceeds the amount of Excess Proceeds allocated thereto, the Notes so tendered shall be purchased on a pro rata basis, based upon the principal amount tendered. Upon completion of any such Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

Amscan Holdings will comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws and regulations are applicable in connection with the repurchase of the Notes as a result of an Asset Sale.

The Bank Credit Agreement prohibits Amscan Holdings from purchasing any Notes, and also provides that certain change of control events with respect to Amscan Holdings will constitute a default thereunder. Any future credit agreements or other agreements relating to Senior Debt to which Amscan Holdings becomes a party may contain similar restrictions and provisions. In the event a Change of Control occurs or an Asset Sale Offer is required to be made at a time when Amscan Holdings is prohibited from purchasing Notes, Amscan Holdings could seek the consent of its lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If Amscan Holdings does not obtain such a consent or repay such borrowings, it will remain prohibited from purchasing Notes. In such case, while Amscan Holdings' failure to purchase tendered Notes would constitute an Event of Default under the Indenture, the subordination provisions of the Indenture would likely have the practical effect of restricting payments to the holders of the Notes.

Certain Covenants

Restricted Payments

The Indenture provides that Amscan Holdings will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of Amscan Holdings' or any of its Restricted Subsidiaries' Equity Interests (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of Amscan Holdings or dividends or distributions payable to Amscan Holdings or any Restricted Subsidiary); (ii) purchase, redeem, defease or otherwise acquire or retire for value any Equity Interests of Amscan Holdings; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Indebtedness, except for a payment of principal or interest at Stated Maturity; or (iv) make any Restricted Investment (all such payments and other actions set forth in clauses (i) through (iv) above being collectively referred to as "Restricted Payments"), unless, at the time of and after giving effect to such Restricted Payment:

	(a) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

	(b) Amscan Holdings would, at the time of such Restricted Payment and immediately after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described below under the caption "—Incurrence of Indebtedness and Issuance of Disqualified Stock"; and

	(c) such Restricted Payment, together with the aggregate of all other Restricted Payments made by Amscan Holdings and its Restricted Subsidiaries after the date of the Indenture (including Restricted Payments permitted by clause (i) of the next succeeding paragraph, but excluding all other Restricted Payments permitted by the next succeeding paragraph), is less than the sum of (i) 50% of the Consolidated Net Income of Amscan Holdings for the period (taken as one accounting period) from the beginning of the first fiscal quarter commencing after the date of the Indenture to the end of Amscan Holdings' most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Directors, of marketable securities received by Amscan Holdings from the issue or sale since the date of the Indenture of Equity Interests (including Retired Capital Stock (as defined below)) of Amscan Holdings or of debt securities of Amscan Holdings that have been converted into such Equity Interests (other than Refunding Capital Stock (as defined below) or Equity Interests or convertible debt securities of Amscan Holdings sold to a Restricted Subsidiary and other than Disqualified Stock or debt securities that have been converted into Disqualified Stock), plus (iii) 100% of the aggregate amounts contributed to the common equity capital of Amscan Holdings since the date of the Indenture, plus (iv) 100% of the aggregate amounts received in cash and the fair market value of marketable securities (other than Restricted Investments) received from (x) the sale or other disposition of Restricted Investments made by Amscan Holdings and its Restricted Subsidiaries since the date of the Indenture or (y) the sale of the stock of an Unrestricted Subsidiary or the sale of all or substantially all of the assets of an Unrestricted Subsidiary to the extent that a liquidating dividend is paid to Amscan Holdings or any Subsidiary from the proceeds of such sale, plus (v) 100% of any dividends received by Amscan Holdings or a Wholly Owned Restricted Subsidiary after the date of the Indenture from an Unrestricted Subsidiary, plus (vi) $10 million.

	The foregoing provisions will not prohibit:

	(i) the payment of any dividend within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of the Indenture;

	(ii) the redemption, repurchase, retirement or other acquisition of any Equity Interests of Amscan Holdings or any Restricted Subsidiary (the "Retired Capital Stock") or any Subordinated Indebtedness, in each case, in exchange for, or out of the proceeds of, the substantially concurrent sale (other than to a Restricted Subsidiary) of Equity Interests of Amscan Holdings (other than any Disqualified Stock) (the "Refunding Capital Stock");

	(iii) the defeasance, redemption or repurchase of Subordinated Indebtedness with the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;

	(iv) the redemption, repurchase or other acquisition or retirement for value of any Equity Interests of Amscan Holdings or any Restricted Subsidiary held by any member of Amscan Holdings' (or any of its Subsidiaries') management pursuant to any management equity subscription agreement or stock option or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests shall not exceed the sum of $5 million in any twelve-

	month period plus the aggregate cash proceeds received by Amscan Holdings during such twelve-month period from any issuance of Equity Interests by Amscan Holdings to members of management of Amscan Holdings and its Subsidiaries; provided that the amount of any such net cash proceeds that are utilized for any such redemption, repurchase, retirement or other acquisition shall be excluded from clause (c)(ii) of the immediately preceding paragraph;

	(v) Investments in Unrestricted Subsidiaries or in Joint Ventures having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (v) that are at that time outstanding, not to exceed $15 million plus 5% of the increase in Total Assets since the Closing Date (as defined herein) at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

	(vi) repurchases of Equity Interests deemed to occur upon exercise or conversion of stock options, warrants, convertible securities or other similar Equity Interests if such Equity Interests represent a portion of the exercise or conversion price of such options, warrants, convertible securities or other similar Equity Interests;

	(vii) the making and consummation of a Subordinated Asset Sale Offer in accordance with the provisions described under the caption entitled "—Repurchase at the Option of Holders— Asset Sales"; and

	(viii) any dividend or distribution payable on or in respect of any class of Equity Interests issued by a Restricted Subsidiary; provided that such dividend or distribution is paid on a pro rata basis to all of the holders of such Equity Interests in accordance with their respective holdings of such Equity Interests;

provided, further, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (iv), (v) or (vii) above, no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

As of March 31, 2001 , all of Amscan Holdings' Subsidiaries were Restricted Subsidiaries. Amscan Holdings will not permit any Unrestricted Subsidiary to become a Restricted Subsidiary except pursuant to the last sentence of the definition of "Unrestricted Subsidiary." For purposes of designating any Restricted Subsidiary as an Unrestricted Subsidiary, all outstanding Investments by Amscan Holdings and its Restricted Subsidiaries (except to the extent repaid) in the Subsidiary so designated will be deemed to be Restricted Payments in an amount equal to the book value of such Investment at the time of such designation. Such designation will only be permitted if a Restricted Payment in such amount would be permitted at such time and if such Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. Unrestricted Subsidiaries will not be subject to any of the restrictive covenants set forth in the Indenture.

The amount of all Restricted Payments (other than cash) shall be the fair market value (evidenced by a resolution of the Board of Directors set forth in an Officers' Certificate delivered to the Trustee) on the date of the Restricted Payment of the asset(s) proposed to be transferred by Amscan Holdings or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. Not later than the date of making any Restricted Payment, Amscan Holdings shall deliver to the Trustee an Officers' Certificate stating that such Restricted Payment is permitted and setting forth the basis upon which the calculations required by the covenant "Restricted Payments" were computed, which calculations may be based upon Amscan Holdings' latest available financial statements.

Incurrence of Indebtedness and Issuance of Disqualified Stock

The Indenture provides that Amscan Holdings will not, and will not permit any of its Subsidiaries to, directly or indirectly, create, incur, issue, assume, guaranty or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, "incur" and correlatively, an "incurrence" of) any Indebtedness (including Acquired Debt) and that Amscan Holdings will not issue any Disqualified Stock; provided, however, that Amscan Holdings may incur Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock if the Fixed Charge Coverage Ratio for Amscan Holdings for the most recent four full fiscal quarters for which internal financial statements are available at the time of such incurrence would have been at least 2.00 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the Disqualified Stock had been issued, as the case may be, and the application of the proceeds therefrom had occurred at the beginning of such four-quarter period.

The foregoing provisions will not apply to:

(a) the incurrence by Amscan Holdings (and the Guarantee thereof by the Guarantors) of Indebtedness under the Bank Credit Agreement and the issuance of letters of credit thereunder (with letters of credit being deemed to have a principal amount equal to the aggregate maximum amount then available to be drawn thereunder, assuming compliance with all conditions for drawing) up to an aggregate principal amount of $167 million outstanding at any one time, less principal repayments of term loans and permanent commitment reductions with respect to revolving loans and letters of credit under

	the Bank Credit Agreement (in each case, other than in connection with an amendment, refinancing, refunding, replacement, renewal or modification) made after the date of the Indenture;

	(b) the incurrence by Amscan Holdings or any of its Restricted Subsidiaries of any Existing Indebtedness;

	(c) the incurrence by Amscan Holdings or any of its Restricted Subsidiaries of Indebtedness represented by the Notes (other than any Additional Notes);

	(d) Indebtedness (including Acquired Debt) incurred by Amscan Holdings or any of its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal), assets or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets), in an aggregate principal amount not to exceed $15 million plus 5% of the increase in Total Assets since the Closing Date ;

	(e) Indebtedness incurred by Amscan Holdings or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers' compensation claims or self-insurance, or other Indebtedness with respect to reimbursement type obligations regarding workers' compensation claims;

	(f) intercompany Indebtedness between or among Amscan Holdings and any of its Restricted Subsidiaries and Guarantees by Amscan Holdings of Indebtedness of any Restricted Subsidiary or by a Restricted Subsidiary of Indebtedness of any other Restricted Subsidiary or Amscan Holdings;

	(g) Hedging Obligations that are incurred (1) for the purpose of fixing or hedging interest rate or currency exchange rate risk with respect to any Indebtedness that is permitted by the terms of the Indenture to be outstanding or (2) for the purpose of fixing or hedging currency exchange rate risk with respect to any purchases or sales of goods or other transactions or expenditures made or to be made in the ordinary course of business and consistent with past practices as to which the payment therefor or proceeds therefrom, as the case may be, are denominated in a currency other than U.S. dollars;

	(h) obligations in respect of performance and surety bonds and completion guarantees provided by Amscan Holdings or any Restricted Subsidiary in the ordinary course of business;

	(i) the incurrence by Amscan Holdings or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund, Indebtedness that was permitted by the Indenture to be incurred;

	(j) the incurrence by Amscan Holdings' Unrestricted Subsidiaries of Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to constitute an incurrence of Indebtedness by a Restricted Subsidiary; and

	(k) the incurrence by Amscan Holdings of additional Indebtedness (including pursuant to the Bank Credit Agreement) not otherwise permitted hereunder in an amount under this clause (k) not to exceed $25 million in aggregate principal amount (or accreted value, as applicable) outstanding at any one time .

For purposes of calculating the Fixed Charge Coverage Ratio, the Indenture permits, among other things, Amscan Holdings to give pro forma effect to acquisitions, and the cost savings expected to be realized in connection with such acquisitions, that have occurred or are occurring since the beginning of the applicable four-quarter reference period (or during the immediately preceding four quarters). These adjustments and the other adjustments permitted under the definition of Fixed Charge Coverage Ratio will be in addition to the pro forma adjustments permitted to be included in pro forma financial statements prepared in accordance with GAAP or Article 11 of Regulation S-X under the Exchange Act.

Anti-Layering Provision

The Indenture provides that (i) Amscan Holdings will not directly or indirectly incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes and (ii) no Guarantor will directly or indirectly incur, create, issue, assume, guarantee or otherwise become liable for any Indebtedness that is subordinate or junior in right of payment to the Senior Guarantees and senior in any respect in right of payment to the Senior Subordinated Guarantees.

Except for the limitations on the incurrence of debt described above under the caption "—Incurrence of Indebtedness and Issuance of Disqualified Stock," the Indenture does not limit the amount of debt that is pari passu with the Notes.

Liens

The Indenture provides that Amscan Holdings will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien that secures obligations under any Senior Subordinated Indebtedness or Subordinated Indebtedness on any asset or property now owned or hereafter acquired by Amscan Holdings or any of its Restricted Subsidiaries, or on any income or profits therefrom, or assign or convey any right to receive income therefrom to secure any Senior Subordinated Indebtedness or Subordinated Indebtedness, unless the Notes are equally and ratably secured with the obligations so secured or until such time as such obligations are no longer secured by a Lien; provided, that in any case involving a Lien securing Subordinated Indebtedness, such Lien is subordinated to the Lien securing the Notes to the same extent that such Subordinated Indebtedness is subordinated to the Notes.

Dividend and Other Payment Restrictions Affecting Subsidiaries

The Indenture provides that Amscan Holdings will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any other distributions to Amscan Holdings or any of its Restricted Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest or participation in, or measured by, its profits, or (b) pay any indebtedness owed to Amscan Holdings or any of its Restricted Subsidiaries, (ii) make loans or advances to Amscan Holdings or any of its Restricted Subsidiaries or (iii) sell, lease or transfer any of its properties or assets to Amscan Holdings or any of its Restricted Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (a) Existing Indebtedness as in effect on the date of the Indenture, (b) the Bank Credit Agreement and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof, provided that the Bank Credit Agreement and any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings thereof are no more restrictive taken as a whole with respect to such dividend and other payment restrictions than those terms included in the Bank Credit Agreement on the date of the Indenture, (c) the Indenture and the Notes, (d) applicable law, (e) any instrument governing Indebtedness or Capital Stock of a Person acquired by Amscan Holdings or any of its Restricted Subsidiaries as in effect at the time of such acquisition (except to the extent such Indebtedness was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired, provided that, in the case of Indebtedness, such Indebtedness was permitted by the terms of the Indenture to be incurred, (f) customary non-assignment or net worth provisions in leases and other agreements entered into in the ordinary course of business and consistent with past practices, (g) purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the nature described in clause (iii) above on the property so acquired, (h) Permitted Refinancing Indebtedness, provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are no more restrictive than those contained in the agreements governing the Indebtedness being refinanced, (i) any Mortgage Financing or Mortgage Refinancing that imposes restrictions on the real property securing such Indebtedness, (j) any Permitted Investment, (k) contracts for the sale of assets, including, without limitation customary restrictions with respect to a Restricted Subsidiary pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock or assets of such Restricted Subsidiary or (l) customary provisions in joint venture agreements and other similar agreements.

Merger, Consolidation or Sale of All or Substantially All Assets

The Indenture provides that Amscan Holdings may not consolidate or merge with or into (whether or not Amscan Holdings is the surviving corporation), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions to, another Person unless (i) Amscan Holdings is the surviving corporation or the Person formed by or surviving any such consolidation or merger (if other than Amscan Holdings) or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made is a corporation organized or existing under the laws of the United States, any state thereof or the District of Columbia; (ii) the Person formed by or surviving any such consolidation or merger (if other than Amscan Holdings) or Person to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made assumes all the obligations of Amscan Holdings under the Notes and the Indenture pursuant to a supplemental Indenture in form reasonably satisfactory to the Trustee; (iii) immediately after such transaction no Default or Event of Default exists; and (iv) except in the case of a merger of Amscan Holdings with or into a Wholly Owned Restricted Subsidiary or, the Person formed by or surviving any such consolidation or merger (if other than Amscan Holdings), or to which such sale, assignment, transfer, lease, conveyance or other disposition shall have been made will, at the time of such transaction and after giving pro forma effect thereto as if such transaction had occurred at the beginning of the applicable four-quarter period, be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the first paragraph of the covenant described above under the caption "—Incurrence of Indebtedness and Issuance of Disqualified Stock." Notwithstanding the foregoing clauses (iii) and (iv), (a) any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to Amscan Holdings and (b) Amscan Holdings may merge with an Affiliate incorporated solely for the purpose of reincorporating Amscan Holdings in another jurisdiction.

Transactions with Affiliates

The Indenture provides that Amscan Holdings will not, and will not permit any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is on terms that are no less favorable to Amscan Holdings or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Amscan Holdings or such Restricted Subsidiary with an unrelated Person and (ii) Amscan Holdings delivers to the Trustee (a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5 million, a resolution of the Board of Directors set forth in an Officers' Certificate certifying that such Affiliate Transaction complies with clause (i) above and (if there are any disinterested members of the Board of Directors) that such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors and (b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $10 million, or with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $5 million as to which there are no disinterested members of the Board of Directors, an opinion as to the fairness to the holders of the Notes of such Affiliate Transaction from a financial point of view issued by an accounting, appraisal or investment banking firm of national standing.

The foregoing provisions will not apply to the following: (i) transactions between or among Amscan Holdings and/or any of its Restricted Subsidiaries; (ii) Restricted Payments or Permitted Investments permitted by the provisions of the Indenture described above under "—Restricted Payments"; (iii) the payment of all fees, expenses and other amounts relating to the Transaction; (iv) the payment of reasonable and customary regular fees to, and indemnity provided on behalf of, officers, directors, employees or consultants of Amscan Holdings or any Restricted Subsidiary; (v) the transfer or provision of Amscan Holdings inventory, goods or services by Amscan Holdings or any Restricted Subsidiary in the ordinary course of business to any Affiliate on terms that are customary in the industry or consistent with past practices, including with respect to price and volume discounts; (vi) the execution of, or the performance by Amscan Holdings or any of its Restricted Subsidiaries of its obligations under the terms of, any financial advisory, financing, underwriting or placement agreement or any other agreement relating to investment banking or financing activities with Goldman Sachs or any of its Affiliates including, without limitation, in connection with acquisitions or divestitures, in each case to the extent that such agreement was approved by a majority of the disinterested members of Amscan Holdings' Board of Directors in good faith; (vii) payments, advances or loans to employees that are approved by a majority of the disinterested members of Amscan Holdings' Board of Directors in good faith; (viii) the performance of any agreement as in effect as of the date of the Indenture or any transaction contemplated thereby (including pursuant to any amendment thereto so long as any such amendment is not disadvantageous to the holders of the Notes in any material respect); (ix) the existence of, or the performance by Amscan Holdings or any of its Restricted Subsidiaries of its obligations under the terms of, any stockholders agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the date of the Indenture and any similar agreements which it may enter into thereafter, provided, however, that the existence of, or the performance by Amscan Holdings or any of its Restricted Subsidiaries of obligations under, any future amendment to any such existing agreement or under any similar agreement entered into after the date of the Indenture shall only be permitted by this clause (ix) to the extent that the terms of any such amendment or new agreement are not otherwise disadvantageous to the holders of the Notes in any material respect; (x) transactions permitted by, and complying with, the provisions of the covenant described under "—Merger, Consolidation or Sale of All or Substantially All Assets"; and (xi) transactions with suppliers or other purchases or sales of goods or services, in each case in the ordinary course of business (including, without limitation, pursuant to joint venture agreements) and otherwise in compliance with the terms of the Indenture which are fair to Amscan Holdings or its Restricted Subsidiaries, in the reasonable determination of a majority of the disinterested members of Amscan Holdings' Board of Directors or an executive officer thereof, or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party.

Issuances of Guarantees of Indebtedness

The Indenture provides that Amscan Holdings will not permit any Restricted Subsidiary, directly or indirectly, to Guarantee or pledge any assets to secure the payment of any other Indebtedness unless such Restricted Subsidiary either (i) is a Guarantor or (ii) simultaneously executes and delivers a supplemental indenture to the Indenture providing for the Guarantee of the payment of all Obligations with respect to the Notes by such Restricted Subsidiary, which Guarantee shall be senior to such Restricted Subsidiary's Guarantee of or pledge to secure any other Indebtedness that constitutes Subordinated Indebtedness and subordinated to such Restricted Subsidiary's Guarantee of or pledge to secure any other Indebtedness that constitutes Senior Debt to the same extent as the Notes are subordinated to Senior Debt. In addition, the Indenture provides that (x) if Amscan Holdings shall, after the date of the Indenture, create or acquire any new Restricted Subsidiary (other than a Restricted Subsidiary organized under the laws of a country other than the United States), then such newly created or acquired Restricted Subsidiary shall execute a Senior Subordinated Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture

and (y) if Amscan Holdings shall (whether before or after the date of the Indenture) create or acquire any other new Subsidiary that becomes a guarantor under the Bank Credit Agreement, then such newly created or acquired Subsidiary shall execute a Senior Subordinated Guarantee and deliver an opinion of counsel in accordance with the terms of the Indenture. Notwithstanding the foregoing, any such Senior Subordinated Guarantee shall provide by its terms that it shall be automatically and unconditionally released and discharged upon certain mergers, consolidations, sales and other dispositions (including, without limitation, by foreclosure) pursuant to the terms of the Indenture. In addition, if any Guarantor is released and relieved of all obligations it may have as a guarantor under the Bank Credit Agreement, then such Guarantor will also be automatically released and relieved of any obligations under its Senior Subordinated Guarantee. See "—Senior Subordinated Guarantees." The form of such Senior Subordinated Guarantee is attached as an exhibit to the Indenture.

Reports

The Indenture provides that, whether or not required by the rules and regulations of the SEC, so long as any Notes are outstanding, Amscan Holdings will furnish to the Holders of the Notes (i) all quarterly and annual financial information that would be required to be contained in a filing with the SEC on Forms 10-Q and 10-K if Amscan Holdings were required to file such Forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by Amscan Holdings' certified independent accountants and (ii) all current reports that would be required to be filed with the SEC on Form 8-K if Amscan Holdings were required to file such reports. In addition, whether or not required by the rules and regulations of the SEC, Amscan Holdings will file a copy of all such information and reports with the SEC for public availability (unless the SEC will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, Amscan Holdings and the Guarantors have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders of the Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A (d)(4) under the Securities Act.

Events of Default and Remedies

The Indenture provides that each of the following constitutes an Event of Default with respect to the Notes: (i) default for 30 days in the payment when due of interest on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment when due of the principal of or premium, if any, on the Notes (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by Amscan Holdings for 30 days after notice from the Trustee or the holders of at least 25% in principal amount of the then outstanding Notes to comply with the provisions described under "—Change of Control," "—Restricted Payments," "—Incurrence of Indebtedness and Issuance of Disqualified Stock" or "—Merger, Consolidation or Sale of All or Substantially All Assets"; (iv) failure by Amscan Holdings for 60 days after notice from the Trustee or the holders of at least 25% in principal amount of the then outstanding Notes to comply with any of its other agreements in the Indenture or the Notes; (v) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Amscan Holdings or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Amscan Holdings or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now exists or is created hereafter, which default results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness the maturity of which has been so accelerated, aggregates $15 million or more; (vi) failure by Amscan Holdings or any of its Restricted Subsidiaries to pay final judgments aggregating in excess of $15 million, which judgments are not paid, discharged or stayed for a period of 60 days; (vii) certain events of bankruptcy or insolvency with respect to Amscan Holdings or any of its Restricted Subsidiaries; (viii) except as permitted by the Indenture, any Senior Subordinated Guarantee shall be held in any judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect (except by its terms) or any Guarantor, or any Person acting on behalf of any Guarantor, shall deny or disaffirm its obligations under its Senior Subordinated Guarantee.

If any Event of Default occurs and is continuing, the Trustee or the holders of at least 25% in principal amount of the then outstanding Notes may declare all the Notes to be due and payable immediately. Upon such declaration the principal, interest and premium, if any, shall be due and payable immediately; provided, however, that so long as Senior Debt or any commitment therefor is outstanding under the Bank Credit Agreement, any such notice or declaration shall not be effective until the earlier of (a) five Business Days after such notice is delivered to the Representative for the Bank Debt or (b) the acceleration of any Indebtedness under the Bank Credit Agreement. Notwithstanding the foregoing, in the case of an Event of Default arising from certain events of bankruptcy or insolvency, with respect to Amscan Holdings, any Significant Restricted Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Restricted Subsidiary, all outstanding Notes will become due and payable without further action or notice. Holders of the Notes may not enforce the Indenture or the Notes except as provided in the Indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the

Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest) if it determines that withholding notice is in their interest.

In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Amscan Holdings with the intention of avoiding payment of the premium that Amscan Holdings would have had to pay if Amscan Holdings then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to December 15, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of Amscan Holdings with the intention of avoiding the prohibition on redemption of the Notes prior to December 15, 2002, then the premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes.

The holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of interest on, or the principal of and premium, if any, on, the Notes.

Amscan Holdings is required to deliver to the Trustee annually a statement regarding compliance with the Indenture and is required, upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default.

No Personal Liability of Directors, Officers, Employees and Stockholders

No past, present or future director, officer, employee, incorporator or stockholder of Amscan Holdings or any Guarantor, as such, shall have any liability for any obligations of Amscan Holdings or the Guarantors under the Notes, the Senior Subordinated Guarantees or the Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release were part of the consideration for issuance of the Notes.

Legal Defeasance and Covenant Defeasance

Amscan Holdings may, at its option and at any time, elect to have all obligations of itself and the Guarantors discharged with respect to the outstanding Notes and the Senior Subordinated Guarantees ("Legal Defeasance") except for (i) the rights of holders of outstanding Notes to receive payments in respect of the principal of and premium, if any, and interest on such Notes when such payments are due from the trust referred to below, (ii) Amscan Holdings' obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and Amscan Holdings' obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, Amscan Holdings may, at its option and at any time, elect to have its obligations and the obligations of the Guarantors released with respect to certain covenants that are described in the Indenture and the Senior Subordinated Guarantees ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes and the Senior Subordinated Guarantees. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described under "—Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes and the Senior Subordinated Guarantees.

In order to exercise either Legal Defeasance or Covenant Defeasance, (i) Amscan Holdings or the Guarantors must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in U.S. dollars, non-callable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of and premium, if any, and interest on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and Amscan Holdings or the Guarantors must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, Amscan Holdings or the Guarantors shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) Amscan Holdings or the Guarantors have received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of the Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, Amscan Holdings or the Guarantors shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same

times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under, any material agreement or instrument (other than the Indenture) to which Amscan Holdings or any of its Restricted Subsidiaries is a party or by which Amscan Holdings or any of its Restricted Subsidiaries is bound; (vi) Amscan Holdings or the Guarantors must have delivered to the Trustee an opinion of counsel to the effect that after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable bankruptcy, insolvency, reorganization or similar laws affecting creditors' rights generally; (vii) Amscan Holdings or the Guarantors must deliver to the appropriate Trustee an Officers' Certificate stating that the deposit was not made by Amscan Holdings or the Guarantors, as applicable, with the intent of preferring the holders of Notes over the other creditors of Amscan Holdings or the Guarantors, as applicable, with the intent of defeating, hindering, delaying or defrauding creditors of Amscan Holdings or the Guarantors, as applicable, or others; and (viii) Amscan Holdings or the Guarantors must deliver to the Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with.

Transfer and Exchange

A holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and Amscan Holdings may require a holder to pay any taxes and fees required by law or permitted by the Indenture. Amscan Holdings is not required to transfer or exchange any Note selected for redemption. Also, Amscan Holdings is not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed.

The registered holder of a Note will be treated as the owner of it for all purposes.

Book-Entry, Delivery and Form

The Notes generally are represented by one or more fully-registered global notes (collectively, the "Global Note"). The Global Note was deposited upon issuance with the Depository and registered in the name of the Depository or a nominee of the Depository (the "Global Note Registered Owner"). Except as set forth below, the Global Note may be transferred, in whole and not in part, only to another nominee of the Depository or to a successor of the Depository or its nominee.

The Depository is a limited-purpose trust company that was created to hold securities for its participating organizations (collectively, the "Participants" or the "Depository's Participants") and to facilitate the clearance and settlement of transactions in such securities between Participants through electronic book-entry changes in accounts of its Participants. The Depository's Participants include securities brokers and dealers (including Goldman Sachs), banks and trust companies, clearing corporations and certain other organizations. Access to the Depository's system is also available to other entities such as banks, brokers, dealers and trust companies (collectively, the "Indirect Participants" or the "Depository's Indirect Participants") that clear through or maintain a custodial relationship with a Participant, either directly or indirectly. Persons who are not Participants may beneficially own securities held by or on behalf of the Depository only through the Depository's Participants or the Depository's Indirect Participants.

Amscan Holdings expects that pursuant to procedures established by the Depository, ownership of interests in the Global Note will be shown on, and the transfer of ownership thereof will be effected only through, records maintained by the Depository (with respect to the interests of the Depository's Participants), the Depository's Participants and the Depository's Indirect Participants. The laws of some states require that certain persons take physical delivery in definitive form of securities that they own. Consequently, the ability to transfer Notes is limited to that extent.

Except as described below, owners of interests in the Global Note will not have Notes registered in their names, will not receive physical delivery of Notes in definitive form and will not be considered the registered owners or holders thereof under the Indenture for any purpose.

Payments in respect of the principal of and premium, if any, and interest on any Notes registered in the name of the Global Note Registered Owner will be payable by the Trustee to the Global Note Registered Owner in its capacity as the registered holder under the Indenture. Under the terms of the Indenture, Amscan Holdings and the Trustee will treat the persons in whose names the Notes, including the Global Note, are registered as the owners thereof for the purpose of receiving such payments and for any and all other purposes whatsoever. Consequently, neither Amscan Holdings, the Trustee nor any agent of Amscan Holdings or the Trustee has or will have any responsibility or liability for (i) any aspect of the Depository's records or any Participant's records relating to or payments made on account of beneficial ownership interests in the Global Note, or for

maintaining, supervising or reviewing any of the Depository's records or any Participant's records relating to the beneficial ownership interests in the Global Note or (ii) any other matter relating to the actions and practices of the Depository or any of its Participants. Amscan Holdings believes, however, that it is the current practice of the Depository, upon receipt of any payment in respect of securities such as the Notes (including principal and interest), to credit the accounts of the relevant Participants with the payment on the payment date, in the amounts proportionate to their respective holdings in principal amount of beneficial interests in the relevant security as shown on the records of the Depository unless the Depository has reason to believe it will not receive payment on such payment date. Payments by the Participants and the Indirect Participants to the beneficial owners of the Notes will be governed by standing instructions and customary practices and will be the responsibility of the Participants or the Indirect Participants and will not be the responsibility of the Depository, the Trustee or Amscan Holdings. Neither Amscan Holdings nor the Trustee will be liable for any delay by the Depository or any of its Participants in identifying the beneficial owners of the Notes, and Amscan Holdings and the Trustee may conclusively rely on and will be protected in relying on instruction from the Global Note Registered Owner for all purposes.

The Global Note is exchangeable for definitive Notes if (i) the Depository notifies Amscan Holdings that it is unwilling or unable to continue as Depository of the Global Note and Amscan Holdings thereupon fails to appoint a successor Depository, (ii) Amscan Holdings, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Notes in definitive registered form, (iii) there shall have occurred and be continuing an Event of Default or any event which after notice or lapse of time or both would be an Event of Default with respect to the Notes or (iv) as provided in the following paragraph. Such definitive Notes shall be registered in the names of the owners of the beneficial interests in the Global Note as provided by the Participants. Notes issued in definitive form will be in fully registered form, without coupons, in minimum denominations of $1,000 and integral multiples thereof. Upon issuance of Notes in definitive form, the Trustee is required to register the Notes in the name of, and cause the Notes to be delivered to, the person or persons (or the nominee thereof) identified as the beneficial owners as the Depository shall direct.

A Note in definitive form will be issued upon the resale, pledge or other transfer of any Note or interest therein to any person or entity that does not participate in the Depository. Transfers of certificated Notes may be made only by presentation of Notes, duly endorsed, to the Trustee for registration of transfer on the Note Register maintained by the Trustee for such purposes.

The information in this section concerning the Depository and the Depository's book-entry system has been obtained from sources that Amscan Holdings believes to be reliable, but Amscan Holdings takes no responsibility for the accuracy thereof.

Certificated Securities

If (i) Amscan Holdings notifies the Trustee in writing that the Depository is no longer willing or able to act as a depository and Amscan Holdings is unable to locate a qualified successor within 90 days or (ii) Amscan Holdings, at its option, notifies the Trustee in writing that it elects to cause the issuance of Notes evidenced by registered, definitive certificates ("Certificated Securities") under the Indenture, then, upon surrender by the Global Note Holder of its Global Note, Notes in such form will be issued to each person that the Global Note Holder and the Depository identify as being the beneficial owner of the related Note.

Neither Amscan Holdings nor the Trustee will be liable for any delay by the Global Note Holder or the Depository in identifying the beneficial owners of Notes and Amscan Holdings and the Trustee may conclusively rely on, and will be protected in relying on, instructions from the Global Note Holder or the Depository for all purposes.

Amendment, Supplement and Waiver

Except as provided in the next two succeeding paragraphs, the Indenture and the Notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a purchase of, or tender offer or exchange offer for, such Notes).

Without the consent of each holder affected, an amendment or waiver may not (with respect to any Notes held by a nonconsenting holder): (i) reduce the principal amount of Notes whose holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under "--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount thereof and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of

the Indenture relating to waivers of past Defaults or the rights of holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the covenants described above under "—Repurchase at the Option of Holders") or (viii) make any change in the foregoing amendment and waiver provisions.

Notwithstanding the foregoing, without the consent of any holder of Notes, Amscan Holdings and the Trustee may amend or supplement the Indenture or the Notes to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of Amscan Holdings' obligations to holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the holders of Notes or that does not adversely affect the legal rights under the Indenture of any such holder, or to comply with requirements of the SEC in order to effect or maintain the qualification of the Indenture under the Trust Indenture Act.

Concerning the Trustee

The Indenture contains certain limitations on the rights of the Trustee, should the Trustee become a creditor of Amscan Holdings, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if the Trustee acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign.

The holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder, unless such holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense.

Certain Definitions

Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided.

"Acquired Debt" means, with respect to any specified Person, (i) Indebtedness of any other Person existing at the time such other Person is merged with or into or became a Restricted Subsidiary of such specified Person, including, without limitation, Indebtedness incurred in connection with, or in contemplation of, such other Person's merging with or into or becoming a Restricted Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien encumbering any asset acquired by such specified Person.

"Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise; provided that beneficial ownership of 10% or more of the voting securities of a Person shall be deemed to be control.

"Asset Sale" means:

	(i) the sale, conveyance, transfer or other disposition (whether in a single transaction or a series of related transactions) of property or assets (including by way of a sale and leaseback) of Amscan Holdings or any Restricted Subsidiary (each referred to in this definition as a "disposition") or

	(ii) the issuance or sale of Equity Interests of any Restricted Subsidiary (whether in a single transaction or a series of related transactions),

	in each case, other than:

	(a) a disposition of Cash Equivalents or goods held for sale in the ordinary course of business or obsolete equipment or other obsolete assets in the ordinary course of business consistent with past practices of Amscan Holdings;

	(b) the disposition of all or substantially all of the assets of Amscan Holdings in a manner permitted pursuant to the provisions described above under the covenant entitled "—Merger, Consolidation, or Sale of All or Substantially All Assets" or any disposition that constitutes a Change of Control pursuant to the Indenture;

	(c) any disposition that is a Restricted Payment or Permitted Investment that is permitted under the covenant described above under "—Restricted Payments";

	(d) any individual disposition, or series of related dispositions, of assets with an aggregate fair market value of less than $2.5 million;

	(e) any sale of an Equity Interest in, or Indebtedness or other securities of, an Unrestricted Subsidiary; and

	(f) foreclosures on assets.

"Asset Sale Offer" has the meaning set forth under the caption "—Repurchase at the Option of Holders— Asset Sales."

"Bank Credit Agreement" means one or more credit agreements to be entered into by and among Amscan Holdings and the financial institutions party thereto providing a portion of the financing for the Transaction, as well as financing for Amscan Holdings' ongoing requirements, including any related notes, guarantees, collateral documents, instruments and agreements executed in connection therewith, and in each case as amended, modified, renewed, refunded, refinanced or replaced (in whole or in part) from time to time.

"Capital Lease Obligation" means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized on a balance sheet in accordance with GAAP.

"Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership, partnership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person (but excluding customary employee incentive or bonus arrangements, and customary earn-out provisions granted in connection with acquisition transactions and providing for aggregate payouts not in excess of $5 million per year).

"Cash Equivalents" means (i) United States dollars, (ii) securities issued or directly and fully guaranteed or insured by the United States government or any agency or instrumentality thereof, (iii) certificates of deposit and eurodollar time deposits with maturities of one year or less from the date of acquisition, bankers' acceptances with maturities not exceeding one year and overnight bank deposits, in each case with any domestic bank having capital and surplus in excess of $500 million and a Keefe Bank Watch Rating of "B" (or the equivalent rating under a substantially similar ratings system if Keefe Bank Watch Ratings are no longer published) or better, (iv) repurchase obligations with a term of not more than seven days for underlying securities of the types described in clauses (ii) and (iii) above entered into with any financial institution meeting the qualifications specified in clause (iii) above and (v) commercial paper having the highest rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's Corporation (or in their absence, an equivalent rating from another nationally recognized securities rating agency) and in each case maturing within one year after the date of acquisition.

"Change of Control" means the occurrence of any of the following:

	(i) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of transactions, of all or substantially all of the assets of Amscan Holdings and its Restricted Subsidiaries, taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) other than the Permitted Holders and their Related Parties;

	(ii) Amscan Holdings becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Permitted Holders or any of their Related Parties, in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the aggregate voting power of the Voting Stock of Amscan Holdings, and such Person or group beneficially owns Voting Stock having greater aggregate voting power than the Permitted Holders and their Related Parties; or

(iii) a majority of the members of the Board of Directors of Amscan Holdings cease to be Continuing Directors.

"Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus (i) an amount equal to any extraordinary loss plus any net loss realized in connection with an Asset Sale (to the extent such losses were deducted in computing such Consolidated Net Income), plus (ii) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries for such period, to the extent that such provision for taxes was deducted in computing such Consolidated Net Income, plus (iii) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued and whether or not capitalized (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), to the extent that any such expense was deducted in computing such Consolidated Net Income, plus (iv) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash operating expenses that were paid in a prior period) and other non-cash charges of such Person and its Restricted Subsidiaries for such period to the extent that such depreciation, amortization and other non-cash charges were deducted in computing such Consolidated Net Income, minus (v) cash outlays that were made by such Person or any of its Restricted Subsidiaries during such period in respect of any item that was reflected as a non-cash charge in a prior period, provided that such non-cash charge was added to Consolidated Net Income in determining Consolidated Cash Flow for such prior period.

"Consolidated Net Income" means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, determined in accordance with GAAP; provided that (i) the Net Income (but not loss) for such period of any Person that is not a Restricted Subsidiary or that is accounted for by the equity method of accounting shall be included only to the extent of the amount of dividends or distributions paid in cash to the referent Person or a Wholly Owned Restricted Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of that Net Income is not at the date of determination permitted without any prior governmental approval (that has not been obtained) or, directly or indirectly, by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Restricted Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition shall be excluded, (iv) the cumulative effect of a change in accounting principles shall be excluded and (v) the Net Income of any Unrestricted Subsidiary shall be excluded, whether or not distributed to Amscan Holdings or one of its Restricted Subsidiaries.

"Continuing Directors" means, as of any date of determination, any member of the Board of Directors who (i) was a member of such Board of Directors on the date of the Indenture or (ii) was nominated for election or elected to such Board of Directors with, or whose election to such Board of Directors was approved by, the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election or (iii) is any designee of the Permitted Holders or their Affiliates or was nominated by the Permitted Holders or their Affiliates or any designees of the Permitted Holders or their Affiliates on the Board of Directors.

"Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default.

"Disqualified Stock" means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date on which the Notes mature.

"Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock).

"Excludable Current Liabilities" means, with respect to the consideration received by Amscan Holdings in connection with any Asset Sale, (i) each trade payable incurred in the ordinary course of business of Amscan Holdings or any Restricted Subsidiary, (ii) each current liability that is in an amount less than $50,000 on an individual basis, and (iii) each liability due within 90 days of the date of consummation of such Asset Sale, in the case of each of clauses (i) through (iii), that is assumed by the transferee of the assets that are subject to such Asset Sale pursuant to customary assumption provisions.

"Existing Indebtedness" means Indebtedness of Amscan Holdings and its Restricted Subsidiaries (other than Indebtedness under the Bank Credit Agreement) in existence on the date of the Indenture, until such amounts are repaid.

"Fixed Charge Coverage Ratio" means with respect to any Person for any period, the ratio of the Consolidated Cash Flow of such Person and its Restricted Subsidiaries for such period to the Fixed Charges of such Person and its Restricted Subsidiaries

for such period. In the event that Amscan Holdings or any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any Indebtedness (other than revolving credit borrowings) or issues Preferred Stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated but on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such issuance or redemption of Preferred Stock, as if the same had occurred at the beginning of the applicable four-quarter reference period.

In calculating the Fixed Charge Coverage Ratio, acquisitions will be given pro forma effect as follows:

	(i)	(A) acquisitions that have been made or are being made by Amscan Holdings or any of its Restricted Subsidiaries during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date (including through mergers or consolidations and including any related financing transactions) shall be deemed to have occurred on the first day of the four-quarter reference period, and

		(B) for purposes of determining the pro forma effects of any such acquisition, Consolidated Cash Flow shall be increased to reflect the annualized amount of any cost savings expected by Amscan Holdings to be realized in connection with such acquisition (from steps to be taken not later than the first anniversary of such acquisition, and without reduction for any non-recurring charges expected in connection with such acquisition), as set forth in an Officers’ Certificate signed by Amscan Holdings’ chief executive and chief financial officers (which shall be determinative of such matters) which states (x) the amount of such increase, (y) that such increase is based on the reasonable beliefs of the officers executing such Officers’ Certificate at the time of such execution (and that estimates of cost savings from prior acquisitions have been reevaluated and updated) and (z) that any related incurrence of Indebtedness is permitted pursuant to the Indenture.

	(ii)	Consolidated Cash Flow shall be further increased to reflect the annualized amount of any cost savings expected by Amscan Holdings but not yet realized in respect of any acquisition made by Amscan Holdings during the four fiscal quarters immediately preceding the four-quarter reference period prior to the Calculation Date, to the extent such cost savings are (x) expected to result from steps taken not later than the first anniversary of the relevant acquisition and (y) determined and certified as set forth in clause (i) above.

In addition, in calculating the Fixed Charge Coverage Ratio, discontinued operations will be given pro forma effect as follows:

	(1)	the Consolidated Cash Flow attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of on or prior to the Calculation Date, shall be excluded; and

	(2)	the Fixed Charges attributable to discontinued operations, as determined in accordance with GAAP, and operations or businesses disposed of on or prior to the Calculation Date, shall be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of Amscan Holdings or any of its Restricted Subsidiaries following the Calculation Date.

"Fixed Charges" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capital Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated interest expense of such Person and its Restricted Subsidiaries that was capitalized during such period, (iii) any interest expense on Indebtedness of another Person that is Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the product of (a) all cash dividend payments (and non-cash dividend payments in the case of a Person that is a Restricted Subsidiary) paid to any Person other than Amscan Holdings or a Restricted Subsidiary on any series of Preferred Stock of such Person, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person paying the dividend, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP.

"GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as have been approved by a significant segment of the accounting profession, which are in effect on the date of the Indenture.

"Government Securities" means securities that are (a) direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged or (b) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Security or a specific payment of principal of or interest on any such Government Security held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Security or the specific payment of principal of or interest on the Government Security evidenced by such depository receipt.

"Guarantee" means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including, without limitation, letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness.

"Guarantors" means each Subsidiary of Amscan Holdings that executes a Senior Subordinated Guarantee in accordance with the provisions of the Indenture, and, in each case, their respective successors and assigns, while such Senior Subordinated Guarantee is outstanding.

"Hedging Obligations" means, with respect to any Person, the obligations of such Person under (i) currency exchange or interest rate swap agreements, currency exchange or interest rate cap agreements and currency exchange or interest rate collar agreements and (ii) other agreements or arrangements designed to protect such Person against fluctuations in currency exchange or interest rates.

"Indebtedness" means, with respect to any Person, any indebtedness of such Person, whether or not contingent, in respect of borrowed money or evidenced by bonds, notes, debentures or similar instruments or letters of credit (or reimbursement agreements in respect thereof) or banker's acceptances or representing Capital Lease Obligations or the balance deferred and unpaid of the purchase price of any property or representing any Hedging Obligations, except any such balance that constitutes an accrued expense or trade payable, if and to the extent any of the foregoing indebtedness (other than letters of credit and Hedging Obligations) would appear as a liability upon a balance sheet of such Person prepared in accordance with GAAP, as well as all indebtedness of others secured by a Lien on any asset of such Person (whether or not such indebtedness is assumed by such Person) and, to the extent not otherwise included, the Guarantee by such Person of any Indebtedness of any other Person.

"Independent Financial Advisor" means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing that is not an Affiliate of Amscan Holdings and that is, in the judgment of Amscan Holdings' Board of Directors, qualified to perform the task for which it has been engaged.

"Investments" means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the forms of direct or indirect loans (including guarantees of Indebtedness or other obligations), advances (other than cash advances made to suppliers with respect to current or anticipated purchases of inventory in the ordinary course of business) or capital contributions (excluding commission, travel and similar advances to officers and employees made in the ordinary course of business), purchases or other acquisitions of Indebtedness, Equity Interests or other securities (directly from the issuer thereof or from third parties) together with all items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP; provided that an acquisition of Equity Interests or other securities by Amscan Holdings for consideration consisting of common equity securities of Amscan Holdings shall not be deemed to be an Investment. If Amscan Holdings or any Subsidiary of Amscan Holdings sells or otherwise disposes of any Equity Interests of any direct or indirect Subsidiary of Amscan Holdings such that, after giving effect to any such sale or disposition, Amscan Holdings no longer owns, directly or indirectly, greater than 50% of the outstanding Equity Interests of such Subsidiary, Amscan Holdings shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Equity Interests of such Subsidiary not sold or disposed of.

"Joint Ventures" means all corporations, partnerships, associations or other business entities (i) that are engaged in a Principal Business and (ii) of which 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by Amscan Holdings or one or more of its Restricted Subsidiaries (or a combination thereof).

"Letter of Credit Obligations" means all Obligations in respect of Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries with respect to letters of credit issued pursuant to the Bank Credit Agreement, which Indebtedness shall be deemed to consist of (a) the aggregate maximum amount then available to be drawn under all such letters of credit (the determination of

such maximum amount to assume compliance with all conditions for drawing), and (b) the aggregate amount that has then been paid by, and not reimbursed to, the issuers under such letters of credit.

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law (including any conditional sale or other title retention agreement, any lease in the nature thereof, any option or other agreement to sell or give a security interest in and any filing of or agreement to give any financing statement under the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).

"Mortgage Financing" means the incurrence by Amscan Holdings or a Restricted Subsidiary of any Indebtedness secured by a mortgage or other Lien on real property acquired or improved by Amscan Holdings or any Restricted Subsidiary of Amscan Holdings after the date of the Indenture.

"Mortgage Refinancing" means the incurrence by Amscan Holdings or a Restricted Subsidiary of any Indebtedness secured by a mortgage or other Lien on real property subject to a mortgage or other Lien existing on the date of the Indenture or created or incurred subsequent to the date of the Indenture as permitted by the terms of the Indenture and owned by Amscan Holdings or any Restricted Subsidiary of Amscan Holdings.

"Net Income" means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends, excluding, however, (i) any gain (but not loss), together with any related provision for taxes on such gain (but not loss), realized in connection with (a) any Asset Sale (including, without limitation, dispositions pursuant to sale and leaseback transactions) or (b) the disposition of any securities by such Person or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person or any of its Restricted Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss), together with any related provision for taxes on such extraordinary or nonrecurring gain (but not loss).

"Net Proceeds" means the aggregate cash proceeds received by Amscan Holdings or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration received in any Asset Sale), net of the direct costs relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees, and brokerage and sales commissions) and any relocation expenses incurred as a result thereof, taxes paid or payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements), amounts required to be applied to the repayment of Indebtedness (other than Bank Debt) secured by a Lien on the asset or assets that were the subject of such Asset Sale and any reserve for adjustment in respect of the sale price of such asset or assets established in accordance with GAAP.

"Non-Guarantor Subsidiary" means each Subsidiary of Amscan Holdings that is not a Guarantor.

"Non-Recourse Debt" means Indebtedness of an Unrestricted Subsidiary (i) as to which neither Amscan Holdings nor any of its Restricted Subsidiaries (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise), or (c) constitutes the lender; and (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries to declare a default on such other Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries or cause the payment thereof to be accelerated or payable prior to its stated maturity; and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of Amscan Holdings or any of its Restricted Subsidiaries.

"Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

"Officers' Certificate" means a certificate signed on behalf of Amscan Holdings, by two officers of Amscan Holdings, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of Amscan Holdings, that meets the requirements set forth in the Indenture.

"Permitted Holders" means Goldman Sachs and any of its Affiliates.

"Permitted Investments" means (a) any Investment in Amscan Holdings or in a Restricted Subsidiary of Amscan Holdings (including the acquisition of any Equity Interest in a Restricted Subsidiary); (b) any Investment in cash and Cash Equivalents; (c) any Investment by Amscan Holdings or any Restricted Subsidiary of Amscan Holdings in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary or (B) such Person, in one transaction or a series of related

transactions, is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, Amscan Holdings or a Restricted Subsidiary; (d) any Investment made as a result of the receipt of consideration not constituting cash or Cash Equivalents from an Asset Sale that was made pursuant to and in compliance with the covenant described above under "—Repurchase at the Option of Holders— Asset Sales"; (e) any Investment existing on the date of the Indenture; (f) any Investment by Restricted Subsidiaries in other Restricted Subsidiaries and Investments by Subsidiaries that are not Restricted Subsidiaries in other Subsidiaries that are not Restricted Subsidiaries; (g) advances to employees not in excess of $2.5 million outstanding at any one time; (h) any Investment acquired by Amscan Holdings or any of its Restricted Subsidiaries (A) in exchange for any other Investment or accounts receivable held by Amscan Holdings or any such Restricted Subsidiary in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other Investment or accounts receivable or (B) as a result of a foreclosure by Amscan Holdings or any of its Restricted Subsidiaries with respect to any secured Investment or other transfer of title with respect to any secured Investment in default; (i) Hedging Obligations; (j) loans and advances to officers, directors and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business; (k) Investments the payment for which consists exclusively of Equity Interests (exclusive of Disqualified Stock) of Amscan Holdings; and (l) additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (l) that are at that time outstanding, not to exceed $15 million plus 5% of the increase in Total Assets since the Closing Date at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value).

"Permitted Refinancing Indebtedness" means any Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund other Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries in whole or in part; provided that: (i) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so extended, refinanced, renewed, replaced, defeased or refunded (plus the amount of reasonable expenses incurred in connection therewith); (ii) such Permitted Refinancing Indebtedness has a final maturity date on or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date later than the final maturity date of the Notes, and is subordinated in right of payment to the Notes, on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness is incurred either by Amscan Holdings or by the Restricted Subsidiary who is the obligor on the Indebtedness being extended, refinanced, renewed, replaced, defeased or refunded.

"Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity.

"Preferred Stock" means any Equity Interest with preferential right of payment of dividends or upon liquidation, dissolution, or winding up.

"Principal Business" means (i) the design, manufacture and distribution of party goods and related products, including, but not limited to, tableware (such as plates, cups, cutlery, napkins and table covers), decorations, banners, balloons, novelties, horns, party hats, party favors, stationery, invitations, greeting cards, gift wrap, ribbons, gift boxes, gift bags, giftware, costumes, masks and makeup and (ii) any activity or business incidental, directly related or similar to those set forth in clause (i) of this definition, or any business or activity that is a reasonable extension, development or expansion thereof or ancillary thereto.

"Regulation S" means Regulation S promulgated under the Securities Act.

"Related Parties" means any Person controlled by the Permitted Holders, including any partnership of which any of the Permitted Holders or their Affiliates is a general partner.

"Repurchase Offer" means an offer made by Amscan Holdings to purchase all or any portion of the Notes pursuant to the provisions described under the covenants entitled "— Repurchase at the Option of Holders— Change of Control" or "— Repurchase at the Option of Holders— Asset Sales."

"Restricted Investment" means an Investment other than a Permitted Investment.

"Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect Subsidiary of an Unrestricted Subsidiary; provided, however, that upon the occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted Subsidiary, such Subsidiary shall be included in the definition of Restricted Subsidiary.

"Rule 144A" means Rule 144A promulgated under the Securities Act.

"Senior Guarantees" means the Guarantees by the Guarantors of Obligations under the Bank Credit Agreement.

"Senior Subordinated Guarantees" means the Guarantees by the Guarantors of the Obligations under the Indenture and the Notes.

"Senior Subordinated Indebtedness" means the Notes and any other indebtedness which ranks pari passu in right of payment to the Notes.

"Significant Restricted Subsidiary" means any Restricted Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation is in effect on the date of the Indenture.

"Specified Real Estate" means the real properties owned by Amscan Holdings or its Subsidiaries as of the date of the Indenture, comprising the distribution facilities in Chester, New York, and Melbourne, Australia.

"Stated Maturity" means, with respect to any installment of interest or principal on, or any other payments with respect to, any series of Indebtedness, the date on which such payment of interest or principal or other payment (including any sinking fund payment) was scheduled, or required to be paid, but shall not include any acceleration of such payment or any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof.

"Subordinated Asset Sale Offer" has the meaning set forth under the caption "-- Repurchase at the Option of Holders-- Asset Sales."

"Subordinated Indebtedness" means any Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries which is expressly by its terms subordinated in right of payment to any other Senior Subordinated Indebtedness.

"Subsidiary" means, with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the total voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof).

"Total Assets" means, with respect to any Person, the total consolidated assets of such Person and its Restricted Subsidiaries, as shown on the most recent balance sheet of such Person.

"Unrestricted Subsidiary" means any Subsidiary (other than the Guarantors or any successor to any of them) that is designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board Resolution, but only to the extent that such Subsidiary: (a) has no Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement, contract, arrangement or understanding with Amscan Holdings or any Restricted Subsidiary unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Amscan Holdings or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates; (c) is a Person with respect to which neither Amscan Holdings nor any of its Restricted Subsidiaries has any direct or indirect obligation (x) to subscribe for additional Equity Interests or (y) to maintain or preserve such Person's financial condition or to cause such Person to achieve any specified levels of operating results; (d) has not guaranteed and does not otherwise directly or indirectly provide credit support for any Indebtedness of Amscan Holdings or any of its Restricted Subsidiaries; and (e) has at least one director on its board of directors that is not a director or executive officer of Amscan Holdings or any of its Restricted Subsidiaries and has at least one executive officer that is not a director or executive officer of Amscan Holdings or any of its Restricted Subsidiaries. Any such designation by the Board of Directors shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board Resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under "Certain Covenants — Restricted Payments." If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and, so long as such Unrestricted Subsidiary remains a Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of Amscan Holdings as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described under "— Incurrence of Indebtedness and Issuance of Disqualified Stock," Amscan Holdings shall be in default of such covenant). Amscan Holdings' Board of Directors may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such

designation shall be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of Amscan Holdings of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described under "Certain Covenants— Incurrence of Indebtedness and Issuance of Disqualified Stock" and (ii) no Default or Event of Default would be in existence following such designation.

"Voting Stock" means, with respect to any Person, any class or series of capital stock of such Person that is ordinarily entitled to vote in the election of directors thereof at a meeting of stockholders called for such purpose, without the occurrence of any additional event or contingency.

"Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment, by (ii) the then outstanding principal amount of such Indebtedness.

"Wholly Owned Restricted Subsidiary" is any Wholly Owned Subsidiary that is a Restricted Subsidiary.

"Wholly Owned Subsidiary" of any Person means a Subsidiary of such Person all of the outstanding Capital Stock or other ownership interests of which (other than directors' qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person.

DESCRIPTION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE NOTES

The following is a summary of certain federal income tax consequences associated with the acquisition, ownership, and disposition of the Notes by holders who acquire the Notes as an investment. The following summary does not discuss all of the aspects of federal income taxation that may be relevant to such a prospective holder of the Notes in light of his or her particular circumstances, or to certain types of holders (including dealers in securities, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, S corporations, and except as discussed below, foreign corporations, persons who are not citizens or residents of the United States and persons who hold the Notes as part of a hedge, straddle, "synthetic security" or other integrated investment) which are subject to special treatment under the federal income tax laws. This discussion also does not address the tax consequences to nonresident aliens or foreign corporations that are subject to United States federal income tax on a net basis on income with respect to a Note because such income is effectively connected with the conduct of a U.S. trade or business. Such holders generally are taxed in a similar manner to U.S. Holders (as defined below); however, certain special rules apply. In addition, this discussion is limited to holders who hold the Notes as capital assets within the meaning of Section 1221 of the Code. This summary also does not describe any tax consequences under state, local, or foreign tax laws.

The discussion is based upon the Code, Treasury Regulations, IRS rulings and pronouncements and judicial decisions all in effect as of the date hereof, all of which are subject to change at any time by legislative, judicial or administrative action. Any such changes may be applied retroactively in a manner that could adversely affect a holder of the Notes. Amscan Holdings has not sought and will not seek any rulings or opinions from the IRS or counsel with respect to the matters discussed below. There can be no assurance that the IRS will not take positions concerning the tax consequences of the purchase, ownership or disposition of the Notes which are different from those discussed herein.

Persons considering the purchase, ownership or disposition of Notes should consult their own tax advisors with respect to the U.S. federal income tax consequences that may apply to them, as well as the application of state, local, foreign and other tax laws.

Certain Federal Income Tax Consequences to U.S. Holders

A U.S. Holder is any holder who or which is (i) a citizen or resident of the United States; (ii) a domestic corporation or domestic partnership; (iii) an estate other than a "foreign estate" as defined in Section 7701(a)(31) of the Code; or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust.

Taxation of Stated Interest. In general, U.S. Holders of the Notes will be required to include interest received thereon in taxable income as ordinary income at the time it accrues or is received, in accordance with the holder's regular method of accounting for federal income tax purposes.

Effect of Optional Redemption and Repurchase. Under certain circumstances Amscan Holdings may be entitled to redeem a portion of the Notes. In addition, under certain circumstances, each holder of Notes will have the right to require Amscan Holdings to repurchase all or any part of such holder's Notes. Treasury Regulations contain special rules for determining the yield to maturity and maturity on a debt instrument in the event the debt instrument provides for a contingency that could result in the acceleration or deferral of one or more payments. Amscan Holdings does not believe that these rules should apply to either Amscan Holdings' right to redeem Notes or to the holders' rights to require Amscan Holdings to repurchase Notes. Therefore, Amscan Holdings has no present intention of treating such redemption and repurchase provisions of the Notes as affecting the computation of the yield to maturity or maturity date of the Notes.

Sale or other Taxable Disposition of the Notes. The sale, exchange, redemption, retirement or other taxable disposition of a Note will result in the recognition of gain or loss to a U.S. Holder in an amount equal to the difference between (a) the amount of cash and fair market value of property received in exchange therefor (except to the extent attributable to the payment of accrued but unpaid stated interest) and (b) the holder's adjusted tax basis in such Note.

A U.S. Holder's basis in a Note acquired in exchange for an originally issued note that was exchanged for a currently outstanding Note (each such exchanged note, an "Original Note") should be the same as such U.S. Holder's basis in the Original Notes exchanged therefor. Otherwise, a U.S. Holder's initial tax basis in a Note purchased by such holder will be equal to the price paid for the Note.

Any gain or loss on the sale or other taxable disposition of a Note generally will be capital gain or loss. Payments on such disposition for accrued interest not previously included in income will be treated as ordinary interest income.

Backup Withholding. The backup withholding rules require a payor to deduct and withhold a tax if (i) the payee fails to furnish a taxpayer identification number ("TIN") in the prescribed manner, (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect, (iii) the payee has failed to report properly the receipt of "reportable payments" and the IRS has notified the payor that withholding is required, or (iv) the payee fails to certify under the penalty of perjury that such payee is not subject to backup withholding. If any one of the events discussed above occurs with respect to a holder of Notes, Amscan Holdings, its paying agent or other withholding agent will be required to withhold a tax equal to 31% of any "reportable payment" made in connection with the Notes of such holder. A "reportable payment" includes, among other things, amounts paid in respect of interest on a Note. Any amounts withheld from a payment to a holder under the backup withholding rules will be allowed as a refund or credit against such holder's federal income tax, provided that the required information is furnished to the IRS. Certain holders (including, among others, corporations and certain tax-exempt organizations) are not subject to backup withholding.

Market Discount and Premium

If a U.S. Holder of a Note has a tax basis in the Note that is less than its "stated redemption price at maturity," the amount of the difference will be treated as "market discount" for U.S. federal income tax purposes, unless such difference is less than a specified de minimis amount. Under the market discount rules of the Code, a U.S. Holder will be required to treat any principal payment on, or any gain on the sale, exchange, retirement or other disposition of, a Note as ordinary income to the extent of any accrued market discount that has not previously been included in income. Market discount generally accrues on a straight-line basis over the term of a debt instrument remaining after the acquisition. A U.S. Holder may not be allowed to deduct immediately all or a portion of the interest expense on any indebtedness incurred or continued to purchase or to carry such Note (or the Original Note for which the Note was exchanged, as the case may be). A U.S. Holder may elect to include market discount in income currently as it accrues (either on a straight-line basis or, if the U.S. Holder so elects, on a constant yield basis), in which case the interest deferral rule set forth in the preceding sentence will not apply. Such an election will apply to all bonds acquired by the U.S. Holder on or after the first day of the first taxable year to which such election applies and may be revoked only with the consent of the IRS.

If a U.S. Holder purchases a Note (or purchased the Original Note for which the Note was exchanged, as the case may be) for an amount greater than the sum of all amounts payable on the Note (or Original Note) after the purchase date, other than stated interest, such holder will be considered to have purchased such Note (or such Original Note) with "amortizable bond premium" equal in amount to such excess, and may elect (in accordance with applicable Code provisions) to amortize such premium, using a constant yield method over the remaining term. The amount amortized in any year will be treated as a reduction of the U.S. Holder's interest income from the Note in such year. A U.S. Holder that elects to amortize bond premium must reduce its tax basis in the Note by the amount of the premium amortized in any year. An election to amortize bond premium applies to all taxable debt obligations then owned and thereafter acquired by the U.S. Holder and may be revoked only with the consent of the IRS.

Certain U.S. Federal Income Tax Consequences for Non-U.S. Holders

This section discusses special rules applicable to a Non-U.S. Holder of Notes. This summary does not address the tax consequences to stockholders, partners or beneficiaries in a Non-U.S. Holder. For purposes hereof, a "Non-U.S. Holder" is any person who is not a U.S. Holder and is not subject to U.S. federal income tax on a net basis on income with respect to a Note because such income is effectively connected with the conduct of a U.S. trade or business.

Interest. Payments of interest to a Non-U.S. Holder that do not qualify for the portfolio interest exception discussed below will be subject to withholding of U.S. federal income tax at a rate of 30% unless a U.S. income tax treaty applies to reduce the rate of withholding. To claim a treaty reduced rate, the Non-U.S. Holder must provide a properly executed Form 1001.

Interest that is paid to a Non-U.S. Holder on a Note will not be subject to U.S. income or withholding tax if the interest qualifies as "portfolio interest." Generally, interest on the Notes that is paid by Amscan Holdings will qualify as portfolio interest if (i) the Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of Amscan Holdings entitled to vote; (ii) the Non-U.S. Holder is not a controlled foreign corporation that is related to Amscan Holdings actually or constructively through stock ownership for U.S. federal income tax purposes; (iii) the Non-U.S. Holder is not a bank receiving interest on a loan entered into in the ordinary course of business; and (iv) either (x) the beneficial owner of the Note provides Amscan Holdings or its paying agent with a properly executed certification on IRS Form W-8 (or a suitable substitute form) signed under penalties of perjury that the beneficial owner is not a "U.S. person" for U.S. federal income tax purposes and that provides the beneficial owner's name and address, or (y) a securities clearing organization, bank or other financial institution that holds customers' securities in the ordinary course of its business holds the Note and certifies to Amscan Holdings or its agent under penalties of perjury that the IRS Form W-8 (or a suitable substitute) has been received by it from the beneficial owner of the Note or a qualifying intermediary and furnishes the payor a copy thereof.

Treasury regulations (the "Withholding Regulations") provide alternative methods for satisfying the certification requirements described in clause (iv) above. The Withholding Regulations also require, in the case of Notes held by a foreign partnership, that (x) the certification described in clause (iv) above be provided by the partners and (y) the partnership provide certain information, including its taxpayer identification number. A look-through rule will apply in the case of tiered partnerships.

Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S. Holder on the sale, exchange or retirement of the Notes, will generally not be subject to U.S. federal income tax or withholding unless (i) the Non-U.S. Holder is an individual who was present in the U.S. for 183 days or more in the taxable year of the disposition and meets certain other requirements; or (ii) the Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code applicable to certain individuals who renounce their U.S. citizenship or terminate long-term U.S. residency. If a Non-U.S. Holder falls under (ii) above, the holder will be taxed on the net gain derived from the sale under the graduated U.S. federal income tax rates that are applicable to U.S. citizens and resident aliens, and may be subject to withholding under certain circumstances. If a Non-U.S. Holder falls under (i) above, the holder generally will be subject to U.S. federal income tax at a rate of 30% on the gain derived from the sale (or reduced treaty rate) and may be subject to withholding in certain circumstances.

U.S. Information Reporting and Backup Withholding Tax. Backup withholding generally will not apply to a Note issued in registered form that is beneficially owned by a Non-U.S. Holder if the certification of Non-U.S. Holder status is provided to Amscan Holdings or its agent as described above in "Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders-- Interest," provided that the payor does not have actual knowledge that the holder is a U.S. person. Amscan Holdings may be required to report annually to the IRS and to each Non-U.S. Holder the amount of interest paid to, and the tax withheld, if any, with respect to each Non-U.S. Holder.

If payments of principal and interest are made to the beneficial owner of a Note by or through the foreign office of a custodian, nominee or other agent of such beneficial owner, or if the proceeds of the sale of Notes are paid to the beneficial owner of a Note through a foreign office of a "broker" (as defined in the pertinent Regulations), the proceeds will not be subject to backup withholding (absent actual knowledge that the payee is a U.S. person). Information reporting (but not backup withholding) will apply, however, to a payment by a foreign office of a custodian, nominee, agent or broker that is (i) a U.S. person, (ii) a controlled foreign corporation for U.S. federal income tax purposes, or (iii) a foreign person that derives 50% or more of its gross income from the conduct of a U.S. trade or business for a specified three-year period or by a foreign office of certain other persons; unless the broker has in its records documentary evidence that the holder is a Non-U.S. Holder and certain conditions are met (including that the broker has no actual knowledge that the holder is a U.S. Holder) or the holder otherwise establishes an exemption. Payment through the U.S. office of a custodian, nominee, agent or broker is subject to both backup withholding at a rate of 31% and information reporting, unless the holder certifies that it is a Non-U.S. Holder under penalties of perjury or otherwise establishes an exemption.

Any amount withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's U.S. federal income tax liability, provided that certain information is provided by the holder to the IRS.

PLAN OF DISTRIBUTION

This Prospectus is to be used by the Goldman Entities in connection with offers and sales of the Notes in market-making transactions effected from time to time. The Goldman Entities may act as a principal or agent in such transactions, including as agent for the counterparty when acting as principal or as agent for both counterparties, and may receive compensation in the form of discounts and commissions, including from both counterparties when it acts as agent for both. Such sales will be made at prevailing market prices at the time of sale, at prices related thereto or at negotiated prices.

Affiliates of Goldman Sachs currently own approximately 72.8% of Amscan Holdings' Common Stock. See "Ownership of Capital Stock." The Goldman Entities have informed Amscan Holdings that they do not intend to confirm sales of the Notes to any accounts over which they exercise discretionary authority without the prior specific written approval of such transactions by the customer.

Amscan Holdings has been advised by the Goldman Entities that, subject to applicable laws and regulations, the Goldman Entities currently intend to make a market in the Notes. However, the Goldman Entities are not obligated to do so and any such market-making may be interrupted or discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed by the Securities Act and the Exchange Act. There can be no assurance that an active trading market will develop or be sustained. See "Risk Factors— Trading Market for the Notes."

Goldman Sachs has provided investment banking services to Amscan Holdings in the past and may provide such services and financial advisory services to Amscan Holdings in the future. Goldman Sachs acted as purchaser in connection with the initial sale of the Original Notes and received an underwriting discount of approximately $3.3 million in connection therewith. See "Management— Certain Relationships and Related Transactions."

Goldman Sachs and Amscan Holdings have entered into a registration rights agreement with respect to the use by Goldman Sachs of this Prospectus. Pursuant to such agreement, Amscan Holdings agreed to bear substantially all registration expenses incurred under such agreement, and Amscan Holdings agreed to indemnify Goldman Sachs against certain liabilities, including liabilities under the Securities Act.

EXPERTS

The consolidated financial statements of Amscan Holdings at December 31, 2000 and 1999, and for each of the three years in the period ended December 31, 2000, appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

VALIDITY OF THE NOTES

The validity of the Notes was passed upon for Amscan Holdings by Wachtell, Lipton, Rosen & Katz, New York, New York, counsel to Amscan Holdings in connection with the offer and sale of the Original Notes and the Notes.

                              AMSCAN HOLDINGS, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                        AND FINANCIAL STATEMENT SCHEDULE

                          Year Ended December 31, 2000


    Consolidated  Financial  Statements as of December 31, 2000 and 1999 and for
    each of the years in the three-year period ended December 31, 2000:

                                                                        Page

    Report of Independent Auditors ..................................    F-2

    Consolidated Balance Sheets .....................................    F-3

    Consolidated Statements of Income ...............................    F-4

    Consolidated Statements of Stockholders' Deficit ................    F-5

    Consolidated Statements of Cash Flows ...........................    F-6

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



Financial Statement Schedule for the three years ended December 31, 2000:


    Schedule II - Valuation and Qualifying Accounts..................    F-32



Unaudited Consolidated Financial Statements as of March 31, 2001 and for the
Three Months Ended March 31, 2001 and 2000:


    Consolidated Balance Sheets .....................................    F-33

    Consolidated Statements of Income ...............................    F-34

    Consolidated Statement of Stockholders' Deficit .................    F-35

    Consolidated Statements of Cash Flows ...........................    F-36

    Notes to Consolidated Financial Statements ......................    F-37

    Supplemental Information ........................................    F-42

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

F-1

REPORT OF INDEPENDENT AUDITORS

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

We have audited the accompanying consolidated balance sheets of Amscan Holdings, Inc. as of December 31, 2000 and 1999, and the related consolidated statements of income, stockholders' deficit and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule as of and for each of the three years in the period ended December 31, 2000, as listed in the accompanying index. 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 auditing standards generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Amscan Holdings, Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule as of and for each of the three years in the period ended December 31, 2000, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

Stamford, Connecticut
March 15, 2001,		/s/ ERNST & YOUNG LLP
except for paragraphs 4, 5 and 6
of Note 12, as to which the
date is March 30, 2001.

F-2

                           AMSCAN HOLDINGS, INC.
                        CONSOLIDATED BALANCE SHEETS
                           (Dollars in thousands)

                                                                                    December 31,    
                                                                                  2000         1999
                                     ASSETS
Current assets:
   Cash and cash equivalents ...............................................    $  1,469    $    849
   Accounts receivable, net of allowances of $5,246 and $6,172, respectively      62,678      56,896
   Inventories .............................................................      71,539      59,193
   Prepaid expenses and other current assets ...............................       9,272      11,802
                                                                                --------    --------
         Total current assets ..............................................     144,958     128,740
Property, plant and equipment, net .........................................      69,198      61,709
Intangible assets, net .....................................................      59,360      63,331
Other assets, net ..........................................................       7,111       9,707
                                                                                --------    --------
         Total assets ......................................................    $280,627    $263,487
                                                                                ========    ========

         LIABILITIES, REDEEMABLE COMMON STOCK AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Loans and notes payable .................................................    $ 10,335    $  4,688
   Accounts payable ........................................................      28,820      18,967
   Accrued expenses ........................................................      17,091      16,332
   Income taxes payable ....................................................       1,198       2,963
   Current portion of long-term obligations ................................       3,754       3,562
                                                                                --------    --------
         Total current liabilities .........................................      61,198      46,512
Long-term obligations, excluding current portion ...........................     261,815     266,891
Deferred income tax liabilities ............................................      13,314      12,001
Other ......................................................................       2,413       3,030
                                                                                --------    --------
         Total liabilities .................................................     338,740     328,434

Redeemable Common Stock ....................................................      28,768      23,582

Commitments and Contingencies

Stockholders' deficit:
   Common Stock ............................................................        --          --
   Additional paid-in capital ..............................................         233         225
   Unamortized restricted Common Stock award, net ..........................        (354)       (405)
   Notes receivable from stockholders ......................................        (548)       (664)
   Deficit .................................................................     (83,867)    (86,797)
   Accumulated other comprehensive loss ....................................      (2,345)       (888)
                                                                                --------    --------
         Total stockholders' deficit .......................................     (86,881)    (88,529)
                                                                                --------    --------

         Total liabilities, redeemable Common Stock and stockholders' deficit   $280,627    $263,487
                                                                                ========    ========

See accompanying notes to consolidated financial statements.

F-3

                            AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF INCOME
                           (Dollars in thousands)


                                                       For the Years Ended December 31,
                                                        2000         1999         1998

Net sales .......................................    $ 325,548    $ 306,112    $ 235,294
Cost of sales ...................................      206,872      194,632      151,324
                                                     ---------    ---------    ---------
         Gross profit ...........................      118,676      111,480       83,970

Operating expenses:
   Selling expenses .............................       30,642       24,455       17,202
   General and administrative expenses ..........       31,958       30,694       20,612
   Provision for doubtful accounts ..............        7,133        2,906        3,336
   Art and development costs ....................        8,453        8,650        5,972
   Non-recurring charges ........................                       995
   Restructuring charges ........................          500                     2,400
                                                     ---------    ---------    ---------
         Total operating expenses ...............       78,686       67,700       49,522
                                                     ---------    ---------    ---------
         Income from operations .................       39,990       43,780       34,448

Interest expense, net ...........................       26,355       26,365       22,965
Other expense (income), net .....................           96           35         (121)
                                                     ---------    ---------    ---------
Income before income taxes and minority interests       13,539       17,380       11,604

Income tax expense ..............................        5,348        7,100        4,816
Minority interests ..............................           75           73           79
                                                     ---------    ---------    ---------
         Net income .............................    $   8,116    $  10,207    $   6,709
                                                     =========    =========    =========

See accompanying notes to consolidated financial statements.

F-4

                            AMSCAN HOLDINGS, INC.
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
             For the Years Ended December 31, 2000, 1999 and 1998
                            (Dollars in thousands)

                                                             Unamortized
                                                             Restricted      Notes                  Accumulated
                                               Additional      Common      Receivable                  Other
                                      Common    Paid-in     Stock Award,      from                 Comprehensive
                                      Stock     Capital          Net      Stockholders   Deficit        Loss        Total

Balance at December 31, 1997 .....  $   --     $   --       $ (835)       $  (750)      $(92,912)  $   (722)      $(95,219)
   Net income ....................                                                         6,709                     6,709
   Net change in cumulative
      translation adjustment .....                                                                     (528)          (528)
                                                                                                                  --------
         Comprehensive income ....                                                                                   6,181
   Reclassification of Common
      Stock to Redeemable
         Common Stock ............                                                        (4,781)                   (4,781)
   Issuance of 10 Common Stock
      warrants ...................                 225                                                                 225
   Accretion in redeemable
      Common Stock ...............                                                        (1,985)                   (1,985)
   Amortization of restricted
      Common Stock award .........                             260                                                     260
   Payments received on notes
      receivable from stockholders                                             32                                       32
                                     -------    -------     ------        --------      --------   --------       --------
Balance at December 31, 1998 .....      --         225        (575)          (718)       (92,969)    (1,250)       (95,287)
   Net income ....................                                                        10,207                    10,207
   Net change in cumulative
      translation adjustment .....                                                                      362            362
                                                                                                                  --------
         Comprehensive income ....                                                                                  10,569
   Accretion in redeemable
      Common Stock ...............                                                        (4,035)                   (4,035)
   Amortization of restricted
      Common Stock award .........                             170                                                     170
   Payments received on notes
     receivable from stockholders                                              54                                       54
                                    --------   --------   --------       --------       --------   --------       --------
Balance at December 31, 1999 .....      --         225        (405)          (664)       (86,797)      (888)       (88,529)
   Net income ....................                                                         8,116                     8,116
   Net change in cumulative
      translation adjustment .....                                                                   (1,457)        (1,457)
                                                                                                   --------
         Comprehensive income ....                                                                                   6,659
   Accretion in redeemable
      Common Stock and other .....                   8                                    (5,186)                   (5,178)
   Amortization of restricted
      Common Stock award .........                              51                                                      51
   Payments received on notes
     receivable from stockholders                                             116                                      116
                                    --------   --------   --------       --------       --------   --------       --------
Balance at December 31, 2000 .....  $   --     $   233   $    (354)      $   (548)      $(83,867)  $ (2,345)      $(86,881)
                                    ========   ========   ========       ========       ========   ========       ========

See accompanying notes to consolidated financial statements.

F-5

                              AMSCAN HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

                                                                                 For the Years Ended December 31,
                                                                                   2000        1999        1998
Cash flows from operating activities:
   Net income ................................................................  $   8,116   $  10,207   $   6,709
   Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization ...........................................     14,487      12,931       8,501
     Amortization of deferred financing costs ................................        902         870         748
     (Gain) loss on disposal of property and equipment .......................         (9)         86         (22)
     Provision for doubtful accounts .........................................      7,133       2,906       3,336
     Restructuring and other non-recurring charges ...........................        500         995       2,400
     Amortization of restricted Common Stock award ...........................         51         170         260
     Deferred income tax provision ...........................................      1,761       3,764       2,441
     Changes in operating assets and liabilities, net of acquisitions:
       Increase in accounts receivable .......................................    (12,895)    (14,297)     (1,124)
       (Increase) decrease in inventories ....................................    (12,346)     (4,612)      6,853
       Decrease (increase) in prepaid expenses and other current assets
            and other, net ...................................................      2,989      (2,164)      1,588
       Increase (decrease) in accounts payable, accrued expenses
          and income taxes payable ...........................................      8,569       8,579      (8,928)
                                                                                ---------   ---------   ---------
          Net cash provided by operating activities ..........................     19,258      19,435      22,762

Cash flows from investing activities:
   Cash paid for acquisitions ................................................                            (78,382)
   Capital expenditures ......................................................    (18,576)    (11,632)     (7,514)
   Proceeds from disposal of property, plant and equipment ...................        101         216       2,769
                                                                                ---------   ---------   ---------
Net cash used in investing activities ........................................    (18,475)    (11,416)    (83,127)

Cash flows from financing activities:
   Net proceeds from sale of Common Stock ....................................                                181
   Payments to acquire Common Stock in the Merger ............................        (21)        (29)    (93,155)
   Proceeds from loans, notes payable and long-term obligations
      net of debt issuance costs of $964 in 1998 .............................      5,647         450      59,064
   Repayment of loans, notes payable and long-term obligations ...............     (4,884)     (9,242)    (15,917)
   Other .....................................................................        124          54          65
                                                                                ---------   ---------   ---------
           Net cash provided by (used in) financing activities ...............        866      (8,767)    (49,762)
Effect of exchange rate changes on cash ......................................     (1,029)        480        (295)
                                                                                ---------   ---------   ---------
           Net increase (decrease) in cash and cash equivalents ..............        620        (268)   (110,422)
           Cash and cash equivalents at beginning of year ....................        849       1,117     111,539
                                                                                ---------   ---------   ---------
Cash and cash equivalents at end of year .....................................  $   1,469   $     849   $   1,117
                                                                                =========   =========   =========

Supplemental disclosures of cash flow information: Cash paid during the period
for:
           Interest ..........................................................  $  26,047   $  25,278   $  23,174
           Income taxes ......................................................  $   5,352   $     950   $   2,558

See accompanying notes to consolidated financial statements.

F-6

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(Dollars in thousands)

Supplemental information on noncash activities (dollars in thousands):

Capital lease obligations of $651 and $200 were incurred in 1999 and 1998, respectively. There were no capital lease obligations incurred in 2000.

In connection with the acquisition of Anagram International, Inc. and certain related companies in 1998, the Company issued 120 shares of redeemable Common Stock (see Note 12) valued at $12,600 and issued warrants to purchase 10 shares of the Company's Common Stock for $125 per share valued at $225 (expiring on September 17, 2008) to the former owner of Anagram International, Inc.

See accompanying notes to consolidated financial statements.

F-7

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements
December 31, 2000

Note 1 - Organization and Description of Business

Amscan Holdings, Inc. ("Amscan Holdings" and, together with its subsidiaries, "AHI" 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 Common Stock ("IPO") involving the sale of 4,000,000 shares of its Common Stock at $12.00 per share completed on December 18, 1996. On January 8, 1997, an additional 422,400 shares of Common Stock were sold at $12.00 per share to cover the over-allotments as provided for in the underwriting agreement between the Company and the underwriters associated with the IPO.

On December 19, 1997, Amscan Holdings 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. (collectively, "GSCP"), entered into a Merger pursuant to an agreement (the "Merger Agreement") providing for a recapitalization of Amscan Holdings in which Confetti was merged with and into Amscan Holdings (the "Merger"), with Amscan Holdings as the surviving corporation. Pursuant to certain employment arrangements, certain employees of the Company, at that time, purchased an aggregate of 10 shares of Company Common Stock following the Merger (see Note 12). The Merger was accounted for as a recapitalization and, accordingly, the historical basis of the Company's assets and liabilities was not impacted by the Merger.

Amscan Holdings and its subsidiaries design, manufacture, contract for manufacture and distribute party and novelty goods principally in North America, South America, Europe, Asia and Australia.

Basis of Presentation
The consolidated financial statements include the accounts of Amscan Holdings and its subsidiaries. All material intercompany balances and transactions have been eliminated in consolidation.

Acquisitions
On September 17, 1998, the Company completed the acquisition (the "Acquisition") of all the capital stock of Anagram International, Inc., a Minneapolis-based metallic balloon manufacturer and distributor, and certain related companies (collectively, "Anagram"), pursuant to a Stock Purchase Agreement (the "Stock Purchase Agreement") dated August 6, 1998, in a transaction valued at approximately $87,225,000, plus certain other related costs.

The Company financed the Acquisition with $40,000,000 of senior term debt, $20,000,000 of additional revolving credit borrowings, cash on hand, the issuance of 120 shares of the Company's redeemable Common Stock valued at $12,600,000 and the issuance of 10 warrants to purchase shares of the Company's Common Stock at $125,000 per share valued at $225,000.

The Acquisition was accounted for under the purchase method of accounting, and, accordingly, the operating results of Anagram have been included in the Company's consolidated financial statements since the date of acquisition. The excess of the aggregate purchase price over the fair market value of net assets acquired (principally goodwill) approximated $58,858,000 and is being principally amortized on a straight-line basis over 25 years.

The following summarized unaudited pro forma financial information assumes the Acquisition had occurred on January 1, 1998 (dollars in thousands):

Year Ended December 31, 1998:
         Net sales .........................................      $278,754
         Net income ........................................      $  4,843

The unaudited pro forma consolidated financial information does not purport to be indicative of actual results that would have been achieved had the Acquisition been consummated on the date or for the periods indicated or results of operations as of any future date or for any future period.

F-8

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

In May 1998, the Company acquired the remaining 25% interest in its U.K. based subsidiary, Amscan Holdings Limited, for approximately $1,703,000. In conjunction with the acquisition, the Company issued a non-interest bearing note to the former shareholder in the amount of 350,000 pounds sterling (approximately $589,000) which is payable over five years. The acquisition has been accounted for as a purchase and the excess purchase price over the fair value of the net assets acquired of $957,000 is being amortized on a straight line basis over 30 years.

The results of operations attributable to the additional 25% interest in Amscan Holdings Limited are included in the accompanying financial statements from the date of acquisition. The pro forma results of operations adjusted for the aforementioned acquisition for the periods presented are not significant, and, accordingly, pro forma information has not been provided.

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 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 estimated useful life of the asset.

Intangible assets of $59,360,000 and $63,331,000 at December 31, 2000 and 1999, respectively, are comprised principally of goodwill, net of amortization. Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the net assets acquired. Goodwill is being amortized on a straight-line basis over periods ranging from 25 to 30 years. Accumulated amortization was $9,898,000 and $6,362,000 at December 31, 2000 and 1999, respectively.

The Company systematically reviews the recoverability of its long-lived and intangible assets by comparing the unamortized carrying value of such assets to the related anticipated undiscounted future cash flows. Any impairment related to long-lived assets is measured by reference to the assets’ fair market value, and any impairment related to goodwill is measured against discounted cash flows. Impairments are charged to expense when such determination is made.

Deferred Financing Costs
Deferred financing costs (included in other assets) are amortized to interest expense using the interest method over the lives of the related debt.

Revenue Recognition
The Company recognizes revenue from product sales when the goods are shipped to the customers.

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 the Company’s estimate of total sales of related products. If all or a portion

F-9

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

of the minimum guarantee subsequently appears not to be recoverable, the unrecoverable portion is charged to expense at that time.

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

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

Interest Rate Swap Agreements
The Company enters into interest rate swap agreements to limit the effect of increases in the interest rates on any floating rate debt. Payments or receipts are accrued as interest rates change and are recorded as adjustments to interest expense.

Income Taxes
The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards (“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
The Company accounts for stock based awards in accordance with the provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." 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”) 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. The Company has elected to apply the recognition provisions of APB No. 25 and has provided the pro forma disclosures required by SFAS No. 123 (see Note 10).

Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss at December 31, 2000, 1999, and 1998 consisted solely of the Company’s foreign currency translation adjustment.

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, which result 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 exchanges 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 in comprehensive income (loss) and are included as a component of accumulated other comprehensive loss.

Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial

F-10

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

Accounting Standard (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and, in June 1999 and June 2000, issued SFAS No. 137 and No. 138 as amendments thereto. These statements provide a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities, requiring all derivatives to be recognized on the balance sheet at fair value and establishing standards for the recognition of changes in such fair value. These statements are effective for fiscal years beginning after June 15, 2000. The Company is obligated to obtain interest rate protection, pursuant to interest rate swaps, caps or other similar arrangements satisfactory to GS Credit Partners, with respect to a notional amount of not less than one-half of the aggregate amount outstanding under a senior term loan (see Note 6). As long as hedge effectiveness is maintained, the Company’s interest rate arrangements qualify for hedge accounting as cash flow hedges under SFAS No. 133 as amended by SFAS 138. The Company has adopted these statements effective January 1, 2001. Because of the Company’s limited use of derivatives, management does not anticipate the adoption of SFAS No. 133 will have a significant effect on earnings or the financial position of the Company.

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 which operate in the party goods superstore channel of distribution. At December 31, 2000 and 1999, Party City Corporation (“Party City”) the Company’s largest customer with 451 corporate and franchise stores, accounted for 19% and 21%, respectively, of consolidated accounts receivable, net. For the years ended December 31, 2000, 1999, and 1998, sales to Party City’s corporate stores represented 12%, 10% and 13% of consolidated net sales, respectively. For the years ended December 31, 2000, 1999, and 1998, sales to Party City’s franchise stores represented 13%, 9% and 10% of consolidated net sales, respectively. No other group or combination of customers subjected the Company to a concentration of credit risk. During the first quarter of 1999, Party City experienced financial difficulties which were addressed during the fourth quarter of 1999 through new financing arrangements. Additionally, Party City entered into an agreement with its trade vendors, including Amscan, whereby, among other things, the vendors received promissory notes for one-third of their then existing accounts receivable balances. The Company reclassified the amount of its note ($2.2 million at December 31, 1999) from accounts receivable to prepaid expenses and other current assets upon receipt of the note. The note was paid in January 2000. Although the Company believes its relationships with Party City and its franchisees are good, if they were to reduce their volume of purchases from the Company significantly, the Company’s financial condition and results of operations could be materially adversely affected.

Reclassifications
In connection with the preparation of the accompanying financial statements, the Company has reclassified certain amounts in prior year financial statements to conform to the current year presentation.

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 financial statements and accompanying notes. Actual results could differ from those estimates.

Note 3 - Inventories

Inventories at December 31, 2000 and 1999 consisted of the following (dollars in thousands):

                                                                 2000       1999
      Finished goods ........................................  $ 61,680   $ 50,278
      Raw materials .........................................     7,614      6,706
      Work-in process .......................................     4,677      4,238
                                                               --------   --------
                                                                 73,971     61,222
      Less:  reserve for slow moving and obsolete inventory..    (2,432)    (2,029)
                                                               --------   --------
                                                               $ 71,539   $ 59,193
                                                               ========   ========

F-11

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

Note 4 - Property, Plant and Equipment, Net

Major classifications of property, plant and equipment at December 31, 2000 and 1999 consisted of the following (dollars in thousands):

                                                              2000        1999     Useful Lives
         Machinery and equipment ........................  $  69,909   $  63,356       3-15
         Buildings ......................................     11,984      12,010      31-40
         Data processing equipment ......................     20,985      19,618        5
         Leasehold improvements .........................      4,198       3,786       2-20
         Furniture and fixtures .........................      5,529       3,579        10
         Construction in progress .......................      2,976
         Land ...........................................      7,123       2,237
                                                           ---------   ---------
                                                             122,704     104,586
         Less:  accumulated depreciation and amortization    (53,506)    (42,877)
                                                           ---------   ---------
                                                           $  69,198   $  61,709
                                                           =========   =========

Depreciation and amortization expense was $10,882,000, $9,271,000 and $7,179,000 for the years ended December 31, 2000, 1999 and 1998, respectively.

In October 2000, the Company purchased property for the construction of a new domestic distribution facility for $4.9 million and entered into a contract for the design and construction of the new facility with an estimated cost, excluding capitalized interest, of $22.1 million. Through December 31, 2000, the Company incurred costs of $3.0 million relating to the construction of the new facility, including $0.2 million of capitalized interest costs. The expenditures were financed through December 31, 2000 by borrowings under the Company’s revolving credit facility. The Company intends to permanently finance both the purchase of property and the construction of the facility using proceeds from an issuance of preferred stock of $6 million (see Note 12), long term borrowings totaling $20 million, and working capital of $1.0 million. The Company has obtained firm commitments totaling $20 million for the permanent financings from both the New York Job Development Authority and a financial institution. The Company has amended and restated its Bank Credit Facilities to provide for, among other things, the additional borrowings and future capital expenditures for the construction of the new facility.

Note 5 - Loans and Notes Payable

Loans and notes payable outstanding at December 31, 2000 and 1999 consisted of the following (dollars in thousands):

                                                                                         2000     1999
         Revolving credit line with interest at the Eurodollar rate plus 2.00%
              (8.78%, at December 31, 2000) .......................................    $ 6,000  $  --
         Revolving credit line with interest at the prime rate plus 0.625% to 1.25%
              (weighted average rate of 10.43% and 9.67% at December 31, 2000
              and 1999, respectively) .............................................      4,335    4,210
         Revolving credit line with interest at LIBOR plus 1.0%
              (7.0% at  December 31, 1999) ........................................       --        375
         Revolving credit line with interest at the U.K. bank rate plus 1.75%
              (7.5% at December 31, 1999) .........................................       --        103
                                                                                       -------  -------
                                                                                       $10,335  $ 4,688
                                                                                       =======  =======

F-12

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

On December 19, 1997, the Company entered into Bank Credit Facilities (see Note 6) which include a $50,000,000 revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility expires on December 31, 2002 and bears interest, at the option of the Company, at the lenders’ customary base rate plus, based on certain terms, a range of 1.00% to 1.50% per annum or at the lenders’ customary reserve adjusted Eurodollar rate plus, based on certain terms, a range of 2.00 % to 2.50% per annum. Interest on balances outstanding under the Revolving Credit Facility are subject to adjustment in the future based on the Company’s performance. Amounts drawn on the Revolving Credit Facility are also subject to an agreed upon borrowing base and periodic reduction of outstanding balances. All borrowings under the Revolving Credit Facility are guaranteed by the Company’s domestic subsidiaries and are subject to mandatory prepayments upon the occurrence of certain events (see Note 6).

In October 2000, the Company amended and restated its credit agreements to provide for, among other things, the additional borrowings and future capital expenditures for the construction of the new domestic distribution facility (see Note 4).

In addition to the Revolving Credit Facility, the Company has a $400,000 Canadian dollar denominated revolving credit facility which bears interest at the Canadian prime rate and expires on June 15, 2001, 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 June 1, 2001 and $1,000,000 revolving credit facility which bears interest at LIBOR plus 1.0% and expires on January 31, 2002. No borrowings were outstanding under the Canadian dollar denominated revolving credit facility at December 31, 2000 and 1999.

The weighted average interest rates on loans and notes payable outstanding at December 31, 2000 and 1999 were 9.47% and 9.40%, respectively.

Note 6 - Long-Term Obligations

Long-term obligations at December 31, 2000 and 1999 consisted of the following (dollars in thousands):

                                                              2000        1999
         Senior subordinated notes (a) ..................  $ 110,000   $ 110,000
         Term loan (b) ..................................    151,234     154,057
         Mortgage obligation (c) ........................      2,222       2,814
         Notes payable (d) ..............................        486         734
         Capital lease obligations (e) ..................      1,627       2,848
                                                           ---------   ---------
                  Total long-term obligations ...........    265,569     270,453
         Less: current portion ..........................     (3,754)     (3,562)
                                                           ---------   ---------
         Long-term obligations, excluding current portion  $ 261,815   $ 266,891
                                                           =========   =========

On December 19, 1997, the Company issued $110,000,000 aggregate principal amount of 9 7/8% senior subordinated notes due in 2007 (the “Notes”) and entered into bank credit agreements (the “Bank Credit Facilities”) providing for borrowings in the aggregate principal amount of approximately $117,000,000 under a term loan (the “Term Loan”) and revolving loan borrowings of up to $50,000,000 under a revolving credit facility (the “Revolving Credit Facility”) (see Note 5) (collectively, the “Financings”). The Company is required to make prepayments on the Bank Credit Facilities under certain circumstances, including upon certain asset sales and issuance of debt or equity securities, subject to certain exceptions. Such mandatory prepayments will be applied to prepay the Term Loan first (on a pro rata basis) and thereafter to prepay the Revolving Credit Facility and to reduce the commitments thereunder. The Company may prepay, in whole or in part, borrowings under the Term Loan. A prepayment of $1.3 million was made by the Company on the Term Loan during the first quarter of 2000 as required based on its cash flows. Call protection provisions apply to certain mandatory prepayments of borrowings under the Term Loan. The Company may prepay borrowings under or reduce commitments for the Revolving Credit Facility, in whole or in part, without penalty. The Bank Credit Facilities are guaranteed by the Company’s domestic subsidiaries (the

F-13

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

“Guarantors”) (see Note 16). Subject to certain exceptions, all extensions of credit to the Company 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 of the stock of all subsidiaries owned by the Company or any of the Guarantors 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, irrevocable and full and unconditional, limited to the largest amount that would not render such guarantee obligations under the guarantee subject to avoidance under any applicable federal or state fraudulent conveyance or similar law. The Company has amended and restated its credit agreements to provide for, among other things, the additional borrowings and future capital expenditures for the construction of the new domestic distribution facility (see Note 4).

(a)

The Notes bear interest at a rate equal to 9 7/8% per annum. Interest is payable semi-annually on June 15 and December 15 of each year. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after December 15, 2002, at redemption prices ranging from 104.937% to 100%, plus accrued and unpaid interest to the date of redemption. In addition, at any time on or prior to December 15, 2002, the Notes may also be redeemed as a whole but not in part at the option of the Company upon the occurrence of a Change of Control, as defined in the note indenture, at a redemption price equal to 100% of the principal amount thereof plus the Applicable Premium, as defined in the note indenture, together with accrued and unpaid interest, if any, to the date of redemption. If the Company does not redeem the Notes upon a Change of Control, the Company will be obligated to make an offer to purchase the Notes, in whole or in part, at a price equal to 101% of the aggregate principal amount of the 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 Bank Credit Facilities, the note indenture and the other indebtedness that would become payable upon the occurrence of such Change of Control.

(b)

The Term Loan matures in December 2004 and provides for amortization (in quarterly installments) of one percent of the principal amount thereof per year for the first five years and 32.3% and 62.7% of the principal amount thereof in the sixth and seventh years, respectively. The Term Loan bears interest, at the option of the Company, at the lenders' customary base rate plus 1.625% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus 2.625% per annum. At December 31, 2000 and 1999, the floating interest rate on the Term Loan was 9.28% and 8.52%, respectively. The Company is obligated to obtain interest rate protection, pursuant to interest rate swaps, caps or other similar arrangements satisfactory to GS Credit Partners, with respect to a notional amount of not less than one-half of the aggregate amount outstanding under the Term Loan. The Company is currently involved in three interest rate swap transactions with Goldman Sachs Capital Markets, L.P. ("GSCM") and a financial institution covering $76,000,000 of its outstanding borrowings under the Term Loan. The interest rate swap contracts require the Company to settle the difference in interest obligations quarterly. Net payments (receipts) to (from) the counterparty under the swap contracts for the years ended December 31, 2000, 1999 and 1998, respectively, which have been recorded as additional (reduction of) interest expense, were as follows (dollars in thousands):

                                                                        Additional (Reduction of)
                              Notional                                      Interest Expense     
     Date of contract          Amount      Term         Fixed Rate      2000       1999     1998
     December 31, 1997....    $57,330     3 years          8.36%      $   167    $   868   $   677
     September 30, 1998...    $35,000     3 years          7.68%         (592)      (203)      (44)
     September 17, 1999...    $31,000     2 years          9.30%           (8)        74        --
     December 29, 2000....    $10,000     0.75 years       8.90%           --         --        --
                                                                      -------    -------   -------
                                                                      $  (433)   $   739   $   633
                                                                      =======    =======   =======

F-14

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

(c)	At December 31, 2000 and 1999, the Company had a mortgage obligation payable to a financial institution relating to a distribution facility due September 13, 2004. The mortgage is collateralized by the related real estate asset of the Company and its interest rate is 8.51%.
(d)	In conjunction with the acquisition of Amscan Holdings Limited in 1998, the Company issued a non-interest bearing note to the former shareholder which is payable through April 2004 (see Note 1). At December 31, 2000 and 1999, the note to the former shareholder was $347,000 and $493,000, respectively. Prior to the Acquisition, Anagram issued a note payable to a former employee of Anagram which is payable through March 2002 at a fixed interest rate of 10%. At December 31, 2000 and 1999, the note to the former employee was $139,000 and $241,000, respectively.
(e)	The Company has entered into various capital leases for machinery and equipment with implicit interest rates ranging from 4.71% to 9.50% which extend to 2003.

At December 31, 2000, maturities of long-term obligations (including interest) consisted of the following (dollars in thousands):

                                                 Mortgage, Notes         Capital
                                                    and Loans       Lease Obligations         Total
              2001 .......................          $   2,536           $   1,470           $   4,006
              2002 .......................              2,402                 161               2,563
              2003 .......................             51,119                  47              51,166
              2004 .......................             98,253                --                98,253
              2005 .......................               --                  --                  --
              Thereafter .................            110,000                --               110,000
                                                    ---------           ---------           ---------
                                                      264,310               1,678             265,988
              Amount representing interest               (368)                (51)               (419)
                                                    ---------           ---------           ---------
              Long-term obligations ......          $ 263,942           $   1,627           $ 265,569
                                                    =========           =========           =========

Note 7 - Provision for Doubtful Accounts

During the second quarter of 2000, two of the Company’s customers filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code. As a result of the filings, the Company charged $3.4 million and $1.0 million to the provision for doubtful accounts during the second and fourth quarters of 2000, respectively, to fully provide for the accounts receivable balances due to the Company from these customers. On a combined basis, these two customers accounted for approximately 1.9% of the Company’s consolidated net sales for the year ended December 31, 2000. Approximately 50% of the locations previously owned by these two customers have been acquired by other customers and continue to operate as party stores. The Company does not believe the potential loss of sales from the closed locations will have a material adverse effect on the Company’s future results of operations or its financial condition. The Company also charged $1.6 million to the provision for doubtful accounts during the fourth quarter of 2000 which represented the remaining accounts receivable balance from a customer that filed for bankruptcy during 1999.

Note 8 - Non-Recurring Items

The Company recorded charges of $0.3 million and $2.4 million in 2000 and 1998, respectively, in connection with the restructuring of its distribution operations. The Company closed two facilities located in California and Canada. The restructuring charges include the non-cash write-down of $1.3 million relating to property, plant and equipment, the accrual of future lease obligations of $0.5 million and severance and other costs of $0.9 million. In addition, during 2000, the Company incurred charges of $0.2 million in connection with the consolidation of certain manufacturing operations.

F-15

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

During the fourth quarter of 1999, the Company recorded non-recurring charges of $1.0 million in association with the proposed construction of a new distribution facility. The non-recurring charges represented building costs written-off due to the relocation of the proposed site.

Note 9 - 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 years ended December 31, 2000, 1999 and 1998 totaled $2,220,000, $1,906,000 and $1,822,000, respectively.

Note 10 - Stock Option Plan

The Company adopted the Amscan Holdings, Inc. Stock Incentive Plan (the “1997 Stock Incentive Plan”) in 1997. The 1997 Stock Incentive Plan is administered by the Board of Directors. Under the terms of the 1997 Stock Incentive Plan, as amended, the Board may award Company Common Stock, stock options and stock appreciation rights to certain directors, officers, employees and consultants of the Company and its affiliates. The vesting periods for awards are determined by the Board at the time of grant. As of December 31, 2000, there were 150 shares of Company Common Stock reserved for issuance under the 1997 Stock Incentive Plan. The 1997 Stock 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 options granted under the 1997 Stock Incentive Plan vest in equal installments on each of the first five anniversaries of the grant date. The options are non-transferable (except under certain limited circumstances) and have a term of ten years. The following table summarizes the changes in outstanding options under the 1997 Stock Incentive Plan for the years ended December 31, 2000, 1999 and 1998:

                                                                         Average         Average Fair Market
                                                         Options      Exercise Price     Value at Grant Date
              Outstanding at December 31, 1997           101.176
                       Granted ...............             4.450         $ 75,000             $ 26,737
                       Granted ...............             6.648          125,000               24,562
                       Canceled ..............            (0.555)          75,000
                                                        --------
              Outstanding at December 31, 1998           111.719
                       Granted ...............            20.680          125,000               44,562
                       Canceled ..............            (2.444)          93,387
                                                        --------
              Outstanding at December 31, 1999           129.955
                       Granted ...............             3.750          125,000               44,562
                       Granted ...............             4.500          150,000               53,474
                       Exercised .............            (0.096)          54,545
                       Exercised .............            (0.037)          75,000
                       Canceled ..............            (0.143)          54,545
                       Canceled ..............            (0.962)          75,000
                                                        --------
              Outstanding at December 31, 2000           136.967

              Exercisable at December 31, 1998            20.124           71,961
              Exercisable at December 31, 1999            42.018           73,713
              Exercisable at December 31, 2000            67.267           77,256

F-16

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

The average exercise price for options outstanding as of December 31, 2000 was $86,281 with exercise prices ranging from $54,545 to $150,000. The average remaining contractual life of those options was 7.5 years.

The Company has adopted the disclosure-only provisions of SFAS No. 123. Accordingly, no compensation cost has been recognized in connection with the issuance of options under the stock option plan 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 Company's net income would have been reduced to amounts indicated below (dollars in thousands):

                                                                          Years Ended December 31,     
                                                                      2000           1999          1998
         Net income:
                  As reported.............................           $8,116        $10,207       $6,709
                  SFAS No. 123 pro forma..................           $7,606        $ 9,793       $6,355

It has been assumed that the estimated fair value of the options granted in 2000, 1999 and 1998 under the 1997 Stock Incentive Plan is amortized on a straight line basis to compensation expense, net of taxes, over the vesting period of the grant, which is five 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 6.50%, and expected lives of seven years.

Note 11- Income Taxes

A summary of domestic and foreign pre-tax income follows (dollars in thousands):

                                                                           Years Ended December 31,     
                                                                       2000           1999          1998
         Domestic  .......................................          $ 9,639         $14,035        $10,945
         Foreign  ........................................            3,900           3,345            659
                                                                     ------         -------        -------
         Total  ..........................................          $13,539         $17,380        $11,604
                                                                    =======         =======        =======

The provision for income taxes consisted of the following (dollars in thousands):

                                                                          Years Ended December 31,     
                                                                      2000           1999          1998
         Current:
                Federal ..................................           $1,551          $1,734         $1,648
                State.....................................              688             490            455
                Foreign...................................            1,348           1,112            272
                                                                     ------          ------         ------
                  Total current provision.................            3,587           3,336          2,375
         Deferred:
                Federal...................................            1,528           2,745          1,911
                State.....................................              233             772            542
                Foreign...................................                -             247            (12)
                                                                     ------          ------         ------
                  Total deferred provision................            1,761           3,764          2,441
                                                                     ------          ------         ------
         Income tax expense...............................           $5,348          $7,100         $4,816
                                                                     ======          ======         ======

F-17

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

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):

                                                                                              2000            1999
Current deferred tax assets:
         Allowance for doubtful accounts..............................................      $ 1,196         $ 1,331
         Accrued liabilities..........................................................          256             312
         Inventories..................................................................        1,247           1,158
         Charitable contributions carryforward........................................        1,016           1,222
         Other........................................................................          146             286
                                                                                            -------         -------
              Current deferred tax assets (included in prepaid expenses and other
                current assets).......................................................      $ 3,861         $ 4,309
                                                                                            =======         =======


                                                                                              2000            1999
Non-current deferred tax liabilities, net:
         Property, plant and equipment................................................      $13,076         $12,275
         Future taxable income resulting from a change in
              accounting method for tax purposes......................................          433             219
         Royalty reserves.............................................................          (95)           (462)
         Other........................................................................         (100)            (31)
                                                                                            -------         -------
              Non-current deferred tax liabilities, net...............................      $13,314         $12,001
                                                                                            =======         =======

A non-current foreign deferred tax asset of $464,000 and $533,000 at December 31, 2000 and 1999, respectively, is attributable to non-current obligations recognized in connection with the Acquisition and is included in non-current other assets, net. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

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

                                                                                    Years Ended December 31,    
                                                                                2000          1999          1998
         Provision at federal statutory income tax rate..................       34.0%         35.0%         35.0%
         State income tax, net of federal tax benefit....................        4.5           4.8           6.1
         Other...........................................................        1.0           1.1           0.4
                                                                                ----          ----          ----
         Effective income tax rate.......................................       39.5%         40.9%         41.5%
                                                                                ====          ====          ====

At December 31, 2000, the Company’s share of the cumulative undistributed earnings of foreign subsidiaries was approximately $13,542,000. 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.

F-18

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

Note 12- Capital Stock

At December 31, 2000 and 1999, the Company’s authorized capital stock consisted of 3,000 shares of common stock, $0.10 par value, of which 1,132.54 and 1,132.41 shares, respectively, were issued and outstanding.

At December 31, 2000 and 1999, the Company held notes receivable, from current officers and a former officer of the Company, with balances totaling $548,000 and $664,000, respectively. These notes arose in connection with the Merger in 1997 whereby the Company lent the officers, at that time, money to acquire an aggregate of 10 shares of Common Stock at the then fair market value. The note from a current officer was paid during 2000. The note from the other current officer bears interest at 6.07% and matures in March of 2001. The note from the former officer bears interest at 6.65% and matures in March 2009. The notes receivable are shown on the balance sheets as an increase in stockholders’ deficit.

At December 31, 2000, there were 200.62 shares of Common Stock held by employees of which 1.33 shares were not yet fully paid and 7.50 shares were subject to future vesting provisions. Under the terms of a stockholders’ agreement (“Stockholders’ Agreement”), the Company can purchase all of the shares held by the employee stockholders, and the employees can require the Company to purchase all of the shares held by the employee stockholders, under certain circumstances. The purchase price as prescribed in the Stockholders’ Agreement is to be determined through a market valuation of the minority-held shares or, under certain circumstances, based on cost. At December 31, 2000, and 1999, the aggregate amount that may be payable by the Company to employee stockholders based on fully paid and vested shares, was approximately $28,768,000 and $23,582,000, respectively, and has been classified as redeemable Common Stock.

On March 30, 2001, the Board of Directors authorized 500 of its 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. Dividends are cumulative and shall be payable annually beginning March 30, 2002, at 6% per annum. Such dividends payable on or prior to March 30, 2004, shall be payable in additional shares of Series A Redeemable Convertible Preferred Stock. Subsequent to March 30, 2004, dividends shall be payable, at the option of the Company, either in cash or additional shares of Series A Redeemable Convertible Preferred Stock.

Each share of the Series A Redeemable Convertible Preferred Stock is convertible at the option of the holder at any time into shares of Common Stock of the Company, $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. As of March 30, 2001, there were 40 shares of Company Common Stock reserved for such conversion.

The Series A Redeemable Convertible Preferred Stock is not redeemable on or prior to March 30, 2004. To the extent the Company shall have funds legally available to redeem these shares, the Company may redeem these shares, in whole or, with the consent of the holders of a majority of the outstanding Series A Redeemable Convertible Preferred Stock, in part, at a redemption of $150,000 per share, in cash, together with accrued and unpaid dividends. To the extent the Company shall have funds legally available to redeem these shares on March 30, 2008, the Company is required to redeem all outstanding shares of Series A Redeemable Convertible Preferred Stock at a redemption price per share equal to $150,000 in cash, together with accrued and unpaid dividends.

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.

F-19

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

Note 13- Commitments, Contingencies and Related Party Transactions

Lease Agreements
The Company is obligated under various capital leases for certain machinery and equipment which expire on various dates through October 1, 2003 (see Note 6). At December 31, 2000 and 1999, the amount of machinery and equipment and related accumulated amortization recorded under capital leases and included with property, plant and equipment consisted of the following (dollars in thousands):

                                                                       2000           1999


       Machinery and equipment  ...............................      $ 7,147        $ 7,147
       Less: accumulated amortization  ........................       (3,938)        (3,749)
                                                                     -------        -------
                                                                     $ 3,209        $ 3,398
                                                                     =======        =======

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

The Company has several noncancelable 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.

At December 31, 2000, future minimum lease payments under all operating leases consisted of the following (dollars in thousands):

                  2001  ...................................      $ 9,830
                  2002  ...................................        7,656
                  2003  ...................................        4,623
                  2004  ...................................        3,172
                  2005  ...................................        2,518
                  Thereafter  .............................       13,051
                                                                 -------
                                                                 $40,850
                                                                 =======

Rent expense for the years ended December 31, 2000, 1999 and 1998 was $9,040,000, $9,038,000, and $7,601,000, respectively, of which $166,000 and $233,000 for the years 1999 and 1998, respectively, related to leases with related parties. In addition, during 1999, the Company terminated its operating lease with related parties for warehouse space that expired on December 31, 2000. As an incentive to terminate the lease prior to its expiration, the Company received a fee of $200,000.

Royalty Agreements
In conjunction with the Acquisition, the Company has entered into royalty agreements with various licensers of copyrighted and trademarked characters and designs used on the Company’s balloons which require royalty payments based on sales of the Company’s products, or in some cases, annual minimum royalties.

At December 31, 2000 future minimum royalties payable was as follows (dollars in thousands):

                  2001.....................................       $  937
                  2002.....................................          600
                  2003.....................................          200
                                                                  ------
                                                                  $1,737
                                                                  ======

F-20

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

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
On October 1, 1999, the Company issued a $1,000,000 line of credit to the Chief Executive Officer of the Company, which expires on December 31, 2001. Amounts borrowed under the line are secured by a lien on the equity interests which the chief executive officer has in the Company. In addition, amounts borrowed under the line bear interest at the Company’s incremental borrowing rate in effect during the time such loan is outstanding (interest at 8.63% and 9.75% at December 31, 2000 and 1999, respectively) which is due and payable on a quarterly basis. At December 31, 2000 and 1999, the Chief Executive Officer had borrowings outstanding of $620,600 and $600,000, respectively, under the line of credit which have been included in other assets.

Pursuant to the stockholder’s agreement, Goldman Sachs has the exclusive right (if it so elects) to perform certain investment banking and similar services for the Company on customary terms. Goldman Sachs may from time to time receive customary fees for services rendered to the Company. For the years ended December 31, 2000, and 1998, Amscan paid Goldman Sachs and its affiliates service fees of $350,000, and $400,000, respectively. No fees were paid to Goldman Sachs in 1999.

On March 30, 2001, the Company issued 40 shares of Series A Redeemable Convertible Preferred Stock to GSCP, for proceeds of $6.0 million (see Note 12).

Note 14 - Segment Information

Industry Segments
The Company operates in one operating segment which involves the design, manufacture, contract for manufacture and distribution of party goods.

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 the foreign markets. No single foreign operation is significant to the Company’s consolidated operations. Intersegment sales between geographic areas are made at cost plus a share of operating profit.

The Company’s geographic area data for each of the three fiscal years ended December 31, 2000, 1999 and 1998 were as follows (dollars in thousands):

                                                             Domestic     Foreign    Eliminations  Consolidated
         2000
         Sales to unaffiliated customers .................   $ 280,461   $  45,087                  $ 325,548
         Sales between geographic areas ..................      20,408                $ (20,408)         --
                                                             ---------   ---------    ---------     ---------
         Net sales .......................................   $ 300,869   $  45,087    $ (20,408)    $ 325,548
                                                             =========   =========    =========     =========

         Income from operations ..........................   $  35,415   $   4,575                  $  39,990
                                                             =========   =========
         Interest expense, net ...........................                                             26,355
         Other expense, net ..............................                                                 96
                                                                                                    ---------
         Income before income taxes and minority interests                                          $  13,539
                                                                                                    =========

         Long-lived assets ...............................   $ 128,635   $   7,034                  $ 135,669
                                                             =========   =========                  =========

F-21

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000


                                                                             Domestic     Foreign   Eliminations  Consolidated
         1999
         Sales to unaffiliated customers ................................   $ 258,304    $  47,808                $ 306,112
         Sales between geographic areas .................................      20,977                 $ (20,977)        --
                                                                            ---------    ---------    ---------    ---------
         Net sales ......................................................   $ 279,281    $  47,808    $ (20,977)   $ 306,112
                                                                            =========    =========    =========    =========

         Income from operations .........................................   $  39,609    $   4,171                 $  43,780
                                                                            =========    =========
         Interest expense, net ..........................................                                             26,365
         Other expense, net .............................................                                                 35
                                                                                                                   ---------
         Income before income taxes and minority interests ..............                                          $  17,380
                                                                                                                   =========

         Long-lived assets ..............................................   $ 127,062    $   7,685                 $ 134,747
                                                                            =========    =========                 =========

                                                                             Domestic     Foreign   Eliminations  Consolidated
         1998
         Sales to unaffiliated customers ................................   $ 203,232    $  32,062                 $ 235,294
         Sales between geographic areas .................................      10,643          146    $ (10,789)        --
                                                                            ---------    ---------    ---------    ---------
         Net sales ......................................................   $ 213,875    $  32,208    $ (10,789)   $ 235,294
                                                                            =========    =========    =========    =========

         Income from operations .........................................   $  33,332    $   1,116                 $  34,448
                                                                            =========    =========
         Interest expense, net ..........................................                                             22,965
         Other income, net ..............................................                                               (121)
                                                                                                                   ---------
         Income before income taxes and minority interests ..............                                          $  11,604
                                                                                                                   =========

         Long-lived assets ..............................................   $ 120,588    $  14,004                 $ 134,592
                                                                            =========    =========                 =========

Note 15 - Fair Value of Financial Instruments

The carrying amounts for cash and cash equivalents, accounts receivables, deposits and other current assets, loans and notes payable, accounts payable, accrued expenses and other current liabilities approximate fair value at December 31, 2000 and 1999 because of the short-term maturity of those instruments or their variable rates of interest.

The carrying amount of the Company’s Notes approximates fair value at December 31, 2000 and 1999, based on the quoted market price of similar debt instruments. The carrying amounts of the Company’s borrowings under its Bank Credit Facilities and other revolving credit facilities approximate fair value because such obligations generally bear interest at floating rates. The carrying amounts for other long-term debt approximates fair value at December 31, 2000 and 1999, based on the discounted future cash flow of each instrument at rates currently offered for similar debt instruments of comparable maturity.

F-22

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

Note 16 - Condensed Consolidating Financial Information (Unaudited)

The Notes and borrowings under the Bank Credit Facilities are guaranteed jointly and severally, fully and unconditionally, by the Guarantors (see Notes 5 and 6).

Non-guarantor companies (“Non-guarantors”) include the following:

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

The following consolidating information presents consolidating balance sheets as of December 31, 2000 and 1999, and the related consolidating statements of income and cash flows for each of the years in the three-year period ended December 31, 2000 for the combined Guarantors and the combined Non-guarantors and elimination entries necessary to consolidate the entities comprising the combined companies.

F-23

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING BALANCE SHEET
December 31, 2000
(Dollars in thousands)
(Unaudited)


                                                          Amscan
                                                       Holdings and    Combined
                                                         Combined        Non-
                                                        Guarantors    Guarantors   Eliminations  Consolidated
ASSETS
Current assets:
     Cash and cash equivalents .....................    $     610     $     859                   $   1,469
     Accounts receivable, net ......................       53,833         8,845                      62,678
     Inventories ...................................       65,674         6,332     $    (467)       71,539
     Prepaid expenses and other current assets .....        8,082         1,190                       9,272
                                                        ---------     ---------     ---------     ---------
     Total current assets ..........................      128,199        17,226          (467)      144,958
Property, plant and equipment, net .................       67,991         1,207                      69,198
Intangible assets, net .............................       54,220         5,140                      59,360
Other assets, net ..................................       25,296         7,216       (25,401)        7,111
                                                        ---------     ---------     ---------     ---------
     Total assets ..................................    $ 275,706     $  30,789     $ (25,868)    $ 280,627
                                                        =========     =========     =========     =========


LIABILITIES, REDEEMABLE COMMON STOCK
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Loans and notes payable .......................    $  10,335     $    --                     $  10,335
     Accounts payable ..............................       27,420         1,400                      28,820
     Accrued expenses ..............................       13,229         3,862                      17,091
     Income taxes payable ..........................          842           356                       1,198
     Current portion of long-term
       obligations .................................        3,649           105                       3,754
                                                        ---------     ---------     ---------     ---------
     Total current liabilities .....................       55,475         5,723                      61,198
Long-term obligations, excluding
  current portion ..................................      261,573           242                     261,815
Deferred income tax liabilities ....................       13,314                                    13,314
Other ..............................................        2,990        14,689     $ (15,266)        2,413
                                                        ---------     ---------     ---------     ---------
     Total liabilities .............................      333,352        20,654       (15,266)      338,740

Redeemable Common Stock ............................       28,768                                    28,768

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

Stockholders' (deficit) equity:
     Common Stock ..................................                        339          (339)         --
     Additional paid-in capital ....................          233           658          (658)          233
     Unamortized restricted Common Stock
        award, net .................................         (354)                                     (354)
     Notes receivable from stockholders ............         (548)                                     (548)
     (Deficit) retained earnings ...................      (83,400)       11,341       (11,808)      (83,867)
     Accumulated other comprehensive loss ..........       (2,345)       (2,203)        2,203        (2,345)
                                                        ---------     ---------     ---------     ---------
         Total stockholders' (deficit) equity ......      (86,414)       10,135       (10,602)      (86,881)
                                                        ---------     ---------     ---------     ---------
         Total liabilities, redeemable Common
            Stock and stockholders' (deficit) equity    $ 275,706     $  30,789     $ (25,868)    $ 280,627
                                                        =========     =========     =========     =========

F-24

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING BALANCE SHEET
December 31, 1999
(Dollars in thousands)
(Unaudited)


                                                          Amscan
                                                       Holdings and    Combined
                                                         Combined        Non-
                                                        Guarantors    Guarantors   Eliminations  Consolidated

ASSETS
Current assets:
     Cash and cash equivalents .....................    $     141     $     708                   $     849
     Accounts receivable, net ......................       46,212        10,684                      56,896
     Inventories ...................................       53,486         6,207     $    (500)       59,193
     Prepaid expenses and other current assets .....       10,809           993                      11,802
                                                        ---------     ---------     ---------     ---------
     Total current assets ..........................      110,648        18,592          (500)      128,740
Property, plant and equipment, net .................       60,502         1,207                      61,709
Intangible assets, net .............................       57,595         5,736                      63,331
Other assets, net ..................................       25,354           965       (16,612)        9,707
                                                        ---------     ---------     ---------     ---------
     Total assets ..................................    $ 254,099     $  26,500     $ (17,112)    $ 263,487
                                                        =========     =========     =========     =========


LIABILITIES, REDEEMABLE COMMON STOCK
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Loans and notes payable .......................    $   4,585     $     103                   $   4,688
     Accounts payable ..............................       17,611         1,356                      18,967
     Accrued expenses ..............................       11,685         4,647                      16,332
     Income taxes payable ..........................        2,279           684                       2,963
     Current portion of long-term
       obligations .................................        3,443           119                       3,562
                                                        ---------     ---------     ---------     ---------
     Total current liabilities .....................       39,603         6,909                      46,512
Long-term obligations, excluding
  current portion ..................................      266,517           374                     266,891
Deferred income tax liabilities ....................       11,989            12                      12,001
Other ..............................................          437         9,641     $  (7,048)        3,030
                                                        ---------     ---------     ---------     ---------
     Total liabilities .............................      318,546        16,936        (7,048)      328,434

Redeemable Common Stock ............................       23,582                                    23,582

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

Stockholders' (deficit) equity:
     Common Stock ..................................                        339          (339)
     Additional paid-in capital ....................          225           658          (658)          225
     Unamortized restricted Common Stock
        award, net .................................         (405)                                     (405)
     Notes receivable from stockholders ............         (664)                                     (664)
     (Deficit) retained earnings ...................      (86,297)        9,188        (9,688)      (86,797)
     Accumulated other comprehensive loss ..........         (888)         (621)          621          (888)
                                                        ---------     ---------     ---------     ---------
         Total stockholders' (deficit) equity ......      (88,029)        9,564       (10,064)      (88,529)
                                                        ---------     ---------     ---------     ---------
         Total liabilities, redeemable Common
            Stock and stockholders' (deficit) equity    $ 254,099     $  26,500     $ (17,112)    $ 263,487
                                                        =========     =========     =========     =========

F-25

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2000
(Dollars in thousands)
(Unaudited)


                                            Amscan
                                         Holdings and    Combined
                                           Combined        Non-
                                          Guarantors    Guarantors   Eliminations  Consolidated

Net sales .............................    $ 301,600     $  44,024    $ (20,076)    $ 325,548
Cost of sales .........................      198,582        28,399      (20,109)      206,872
                                           ---------     ---------    ---------     ---------
         Gross profit .................      103,018        15,625           33       118,676
Operating expenses:
    Selling expenses ..................       25,019         5,623                     30,642
    General and administrative expenses       27,014         5,136         (192)       31,958
    Provision for doubtful accounts ...        6,896           237                      7,133
    Art and development costs .........        8,453                                    8,453
    Restructuring charges .............          500                                      500
                                           ---------     ---------    ---------     ---------
         Income from operations .......       35,136         4,629          225        39,990
Interest expense, net .................       25,725           630                     26,355
Other (income) expense, net ...........       (2,642)          393        2,345            96
                                           ---------     ---------    ---------     ---------
         Income before income taxes
           and minority interests .....       12,053         3,606       (2,120)       13,539
Income tax expense ....................        3,970         1,378                      5,348
Minority interests ....................                         75                         75
                                           ---------     ---------    ---------     ---------
         Net income ...................    $   8,083     $   2,153    $  (2,120)    $   8,116
                                           =========     =========    =========     =========

F-26

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 1999
(Dollars in thousands)
(Unaudited)


                                            Amscan
                                         Holdings and    Combined
                                           Combined        Non-
                                          Guarantors    Guarantors   Eliminations  Consolidated

Net sales .............................    $ 279,988     $  47,477    $ (21,353)    $ 306,112
Cost of sales .........................      184,031        31,952      (21,351)      194,632
                                           ---------     ---------    ---------     ---------
         Gross profit .................       95,957        15,525           (2)      111,480
Operating expenses:
    Selling expenses ..................       19,015         5,440                     24,455
    General and administrative expenses       25,599         5,287         (192)       30,694
    Provision for doubtful accounts ...        2,288           618                      2,906
    Art and development costs .........        8,650                                    8,650
    Non-recurring charges .............          995                                      995
                                           ---------     ---------    ---------     ---------
         Income from operations .......       39,410         4,180          190        43,780
Interest expense, net .................       25,735           630                     26,365
Other (income) expense, net ...........       (2,513)          193        2,355            35
                                           ---------     ---------    ---------     ---------
         Income before income taxes
           and minority interests .....       16,188         3,357       (2,165)       17,380
Income tax expense ....................        5,979         1,121                      7,100
Minority interests ....................                         73                         73
                                           ---------     ---------    ---------     ---------
         Net income ...................    $  10,209     $   2,163    $  (2,165)    $  10,207
                                           =========     =========    =========     =========

F-27

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 1998
(Dollars in thousands)
(Unaudited)


                                            Amscan
                                         Holdings and    Combined
                                           Combined        Non-
                                          Guarantors    Guarantors   Eliminations  Consolidated

Net sales .............................    $ 215,650     $  31,808     $ (12,164)    $ 235,294
Cost of sales .........................      142,190        21,871       (12,737)      151,324
                                           ---------     ---------     ---------     ---------
         Gross profit .................       73,460         9,937           573        83,970
Operating expenses:
    Selling expenses ..................       13,408         3,794                      17,202
    General and administrative expenses       16,537         4,267          (192)       20,612
    Provision for doubtful accounts ...        2,767           569                       3,336
    Art and development costs .........        5,972                                     5,972
    Restructuring charges .............        2,033           367                       2,400
                                           ---------     ---------     ---------     ---------
         Income from operations .......       32,743           940           765        34,448
Interest expense, net .................       22,684           281                      22,965
Other income, net .....................         (833)          (58)          770          (121)
                                           ---------     ---------     ---------     ---------
         Income before income taxes
           and minority interests .....       10,892           717            (5)       11,604
Income tax expense ....................        4,350           466                       4,816
Minority interests ....................                         79                          79
                                           ---------     ---------     ---------     ---------
         Net income ...................    $   6,542     $     172     $      (5)    $   6,709
                                           =========     =========     =========     =========

F-28

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2000
(Dollars in thousands)
(Unaudited)


                                                                            Amscan
                                                                         Holdings and   Combined
                                                                           Combined        Non-
                                                                          Guarantors   Guarantors  Eliminations  Consolidated

Cash flows from operating activities:
   Net income .........................................................    $  8,191     $ 2,153     $  (2,228)     $  8,116
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ...................................      13,940         547                      14,487
      Amortization of deferred financing costs ........................         902                                     902
      (Gain) loss on disposal of property and equipment ...............           8         (17)                         (9)
      Provision for doubtful accounts .................................       6,896         237                       7,133
      Restructuring charges ...........................................         500                                     500
      Amortization of restricted Common Stock award ...................          51                                      51
      Deferred income tax provision ...................................       1,526         235                       1,761
      Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable ................     (14,553)      1,658                     (12,895)
            (Increase) decrease in inventories ........................     (12,220)        (93)          (33)      (12,346)
            Decrease (increase) in prepaid expenses and other
               current assets and other, net ..........................       2,105      (1,377)        2,261         2,989
            Increase (decrease) in accounts payable, accrued
               expenses and income taxes payable ......................       9,895      (1,326)                      8,569
                                                                           --------     -------     ---------      --------
            Net cash provided by operating activities .................      17,241       2,017          --          19,258

Cash flows from investing activities:
   Capital expenditures ...............................................     (18,092)       (484)                    (18,576)
   Proceeds from disposal of property and equipment ...................           9          92                         101
                                                                           --------     --------    ---------      --------
            Net cash used in investing activities .....................     (18,083)       (392)                    (18,475)

Cash flows from financing activities:
   Payments to acquire Common Stock in the Merger .....................         (21)                                    (21)
   Proceeds from loans, notes payable and long-term obligations .......       5,750        (103)                      5,647
   Repayment of loans, notes payable and long-term obligations ........      (4,738)       (146)                     (4,884)
   Other ..............................................................         513        (389)                        124
                                                                           --------     --------    ---------      --------
            Net cash provided by (used in) financing activities               1,504        (638)         --             866
Effect of exchange rate changes on cash ...............................        (193)       (836)                     (1,029)
                                                                           --------     --------    ---------      --------
            Net increase in cash and cash equivalents .................         469         151                         620
Cash and cash equivalents at beginning of year ........................         141         708                         849
                                                                           --------     --------    ---------      --------
Cash and cash equivalents at end of year...............................    $    610     $   859     $    --        $  1,469
                                                                           ========     ========    =========      ========

F-29

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1999
(Dollars in thousands)
(Unaudited)


                                                                    Amscan
                                                                 Holdings and   Combined
                                                                   Combined        Non-
                                                                  Guarantors   Guarantors    Eliminations  Consolidated

Cash flows from operating activities:
   Net income .................................................    $ 10,209      $ 2,163       $(2,165)      $ 10,207
   Adjustments to reconcile net income to net
     cash provided by (used in) operating activities:
      Depreciation and amortization ...........................      12,327          604                       12,931
      Amortization of deferred financing costs ................         870                                       870
      (Gain) loss on disposal of property and equipment .......          (2)          88                           86
      Provision for doubtful accounts .........................       2,288          618                        2,906
      Non-recurring charges ...................................         995                                       995
      Amortization of restricted Common Stock award ...........         170                                       170
      Deferred income tax provision ...........................       3,517          247                        3,764
      Changes in operating assets and liabilities:
            Increase in accounts receivable ...................      (9,701)      (4,596)                     (14,297)
            (Increase) decrease in inventories ................      (5,270)         656             2         (4,612)
            (Increase) decrease in prepaid expenses and other
               current assets and other, net ..................      (8,255)       3,928         2,163         (2,164)
            Increase (decrease) in accounts payable, accrued
               expenses and income taxes payable ..............      12,765       (4,186)                       8,579
                                                                   --------     --------       -------       --------
            Net cash provided by (used in) operating activities      19,913         (478)          --          19,435

Cash flows from investing activities:
   Capital expenditures .......................................     (11,459)        (173)                     (11,632)
   Proceeds from disposal of property and equipment ...........         201           15                          216
                                                                   --------     --------       -------       --------
            Net cash used in investing activities .............     (11,258)        (158)                     (11,416)

Cash flows from financing activities:
   Payments to acquire Common Stock in the Merger .............         (29)                                      (29)
   Proceeds from loans, notes payable and long-term obligations         375           75                          450
   Repayment of loans, notes payable and long-term obligations       (9,116)        (126)                      (9,242)
   Other ......................................................         729         (675)                          54
                                                                   --------     --------       -------       --------
            Net cash used in financing activities .............      (8,041)        (726)          --          (8,767)
Effect of exchange rate changes on cash .......................        (996)       1,476                          480
                                                                   --------     --------       -------       --------
            Net (decrease) increase in cash and cash
              equivalents .....................................        (382)         114                         (268)
Cash and cash equivalents at beginning of year ................         523          594                        1,117
                                                                   --------     --------       -------       --------
Cash and cash equivalents at end of year ......................    $    141     $    708       $   --        $    849
                                                                   ========     ========       =======       ========

F-30

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
(Dollars in thousands)
(Unaudited)


                                                                    Amscan
                                                                 Holdings and    Combined
                                                                   Combined         Non-
                                                                  Guarantors    Guarantors   Eliminations  Consolidated

Cash flows from operating activities:
   Net income ................................................    $   6,542     $     172     $      (5)    $   6,709
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ..........................        7,954           547                       8,501
      Amortization of deferred financing costs ...............          748                                       748
      Loss (gain) on disposal of property and equipment ......            2           (24)                        (22)
      Provision for doubtful accounts ........................        2,767           569                       3,336
      Restructuring charges ..................................        1,999           401                       2,400
      Amortization of restricted Common Stock award ..........          260                                       260
      Deferred income tax provision  (benefit) ...............        2,469           (28)                      2,441
      Changes in operating assets and liabilities, net of
        acquisitions:
            (Increase) decrease in accounts receivable .......       (1,138)           14                      (1,124)
            Decrease in inventories ..........................        4,701         2,026           126         6,853
            Decrease (increase) in prepaid expenses and other
              current assets and other, net ..................        3,609        (2,493)          472         1,588
            Increase in accounts payable, accrued expenses
              and income taxes payable .......................       (8,372)         (556)                     (8,928)
                                                                  ---------     ---------     ---------     ---------
            Net cash provided by operating activities ........       21,541           628           593        22,762

Cash flows from investing activities:
   Cash paid for acquisitions ................................      (78,382)                                  (78,382)
   Capital expenditures ......................................       (7,334)         (180)                     (7,514)
   Proceeds from disposal of property and equipment ..........        2,694            75                       2,769
                                                                  ---------     ---------     ---------     ---------
            Net cash used in investing activities ............      (83,022)         (105)                    (83,127)

Cash flows from financing activities:
   Net proceeds from sale of  Capital Stock ..................          181                                       181
   Payments to acquire Common Stock in the Merger ............      (93,155)                                  (93,155)
   Proceeds from loans, notes payable and long-term
     obligations net of debt issuance costs of $964 ..........       59,036            28                      59,064
   Repayment of loans, notes payable and long-term obligations      (15,432)         (485)                    (15,917)
   Other .....................................................           65           400          (400)           65
                                                                  ---------     ---------     ---------     ---------
            Net cash used in financing activities ............      (49,305)          (57)         (400)      (49,762)
Effect of exchange rate changes on cash ......................          605          (707)         (193)         (295)
                                                                  ---------     ---------     ---------     ---------
            Net decrease in cash and cash equivalents ........     (110,181)         (241)          --       (110,422)
Cash and cash equivalents at beginning of year ...............      110,704           835                     111,539
                                                                  ---------     ---------     ---------     ---------
Cash and cash equivalents at end of year .....................    $     523     $  594        $     --      $   1,117
                                                                  =========     =========     =========     =========

F-31

SCHEDULE II
AMSCAN HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands)


                                                                 Beginning                                          Ending
                                                                  Balance       Write-offs        Additions         Balance
Allowance for Doubtful Accounts:
    For the year ended:
       December 31, 1998....................................      $5,693          $5,459          $6,641 (1)        $6,875
       December 31, 1999....................................       6,875           3,609           2,906             6,172
       December 31, 2000....................................       6,172           8,059           7,133             5,246


                                                                 Beginning                                          Ending
                                                                  Balance       Write-offs        Additions         Balance
Inventory Reserves:
    For the year ended:
       December 31, 1998....................................      $1,162          $  906          $1,336            $1,592
       December 31, 1999....................................       1,592           1,824           2,261             2,029
       December 31, 2000....................................       2,029           1,075           1,478             2,432

(1)	Includes approximately $3,305 of an allowance for doubtful accounts in connection with receivables purchased in the 1998 acquisition of Anagram.

F-32

AMSCAN HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

                                                                                  March 31,    December 31,
                                                                                    2001          2000    
                                                                                (Unaudited)      (Note)
                                     ASSETS
Current assets:
   Cash and cash equivalents ................................................    $     864     $   1,469
   Accounts receivable, net of allowances ...................................       67,553        62,678
   Inventories ..............................................................       70,148        71,539
   Prepaid expenses and other current assets ................................       11,830         9,272
                                                                                 ---------     ---------
         Total current assets ...............................................      150,395       144,958
Property, plant and equipment, net ..........................................       71,094        69,198
Intangible assets, net ......................................................       58,304        59,360
Other assets, net ...........................................................        7,468         7,111
                                                                                 ---------     ---------

         Total assets .......................................................    $ 287,261     $ 280,627
                                                                                 =========     =========

            LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
                               AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Short-term obligations ...................................................    $   8,103     $  10,335
   Accounts payable .........................................................       25,907        28,820
   Accrued expenses .........................................................       18,093        17,091
   Income taxes payable .....................................................        3,775         1,198
   Current portion of long-term obligations .................................        3,495         3,754
                                                                                 ---------     ---------
         Total current liabilities ..........................................       59,373        61,198
Long-term obligations, excluding current portion ............................      261,138       261,815
Deferred income tax liabilities .............................................       13,602        13,314
Other .......................................................................        2,304         2,413
                                                                                 ---------     ---------
         Total liabilities ..................................................      336,417       338,740

Redeemable convertible preferred stock ......................................        6,000          --
Redeemable Common Stock .....................................................       28,768        28,768

Stockholders' deficit:
   Common Stock .............................................................         --            --
   Additional paid-in capital ...............................................          258           233
   Unamortized restricted Common Stock award, net ...........................         (342)         (354)
   Notes receivable from stockholders .......................................         (565)         (548)
   Deficit ..................................................................      (79,992)      (83,867)
   Accumulated other comprehensive loss .....................................       (3,283)       (2,345)
                                                                                 ---------     ---------
         Total stockholders' deficit ........................................      (83,924)      (86,881)
                                                                                 ---------     ---------
         Total liabilities, redeemable convertible preferred and Common Stock
           and stockholders' deficit ........................................    $ 287,261     $ 280,627
                                                                                 =========     =========

Note: The balance sheet at December 31, 2000 has been derived from the audited consolidated financial statements at that date.

See accompanying notes to consolidated financial statements.

F-33

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
(Unaudited)


                                                           Three Months Ended March 31,
                                                                2001         2000
Net sales ................................................    $ 87,506     $ 77,377
Cost of sales ............................................      55,317       47,313
                                                              --------     --------
         Gross profit ....................................      32,189       30,064

Operating expenses:
   Selling expenses ......................................       8,496        7,016
   General and administrative expenses ...................       8,525        8,199
   Art and development costs .............................       2,085        2,010
                                                              --------     --------
         Total operating expenses ........................      19,106       17,225
                                                              --------     --------
         Income from operations ..........................      13,083       12,839

Interest expense, net ....................................       6,575        6,590
Other expenses, net ......................................         111           69
                                                              --------     --------
         Income before income taxes and minority interests       6,397        6,180

Income tax expense .......................................       2,527        2,441
Minority interests .......................................          (5)          30
                                                              --------     --------
         Net income ......................................    $  3,875     $  3,709
                                                              ========     ========

See accompanying notes to consolidated financial statements.

F-34

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)

                                                                    Unamortized
                                                                    Restricted      Notes                  Accumulated
                                                      Additional      Common      Receivable                  Other
                                             Common    Paid-in     Stock Award,      from                 Comprehensive
                                             Stock     Capital          Net      Stockholders   Deficit        Loss         Total

Balance at December 31, 2000 ........        $  --     $  233        $ (354)       $ (548)     $(83,867)     $(2,345)     $(83,867)

Net Income ..........................                                                             3,875                      3,875
Net change in cumulative
 translation adjustment .............                                                                           (804)         (804)
Cumulative effect of a change in
 accounting principle, net of taxes
 (see Notes 5 and 9) ................                                                                           (227)         (227)
Change in fair value of interest rate
 swaps, net of taxes (see Notes 5 and
 9) .................................                                                                             93            93
                                                                                                                          --------
    Comprehensive income ............                                                                                        2,937

Issuance of notes receivable, net
 of payments ........................                      25                         (17)                                       8
Amortization of restricted
 Common Stock award .................                                    12                                                     12
                                             --------  ------        ------        ------      --------      -------      --------

Balance at March 31, 2001 ...........        $  --     $  258        $ (342)       $ (565)     $(79,992)     $(3,283)     $(83,924)
                                             ========  ======        ======        ======      ========      =======      ========

See accompanying notes to consolidated financial statements.

F-35

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

                                                                           Three Months Ended March 31,
                                                                                 2001        2000    
Cash flows from operating activities:
    Net income ............................................................    $ 3,875     $ 3,709
    Adjustments to reconcile net income to net cash provided by (used in)
       operating activities:
       Depreciation and amortization ......................................      3,800       3,451
       Amortization of deferred financing costs ...........................        249         218
       Amortization of restricted Common Stock award ......................         12          13
       Provision for doubtful accounts ....................................        465         467
       Deferred income tax expense ........................................        160         220
       Changes in operating assets and liabilities:
           Increase in accounts receivable ................................     (6,340)     (4,407)
           Decrease (increase) in inventories .............................      1,391      (2,353)
           (Increase) decrease in prepaid expenses and other current assets     (1,430)        425
           Increase (decrease) in accounts payable, accrued expenses and
             income taxes payable .........................................        570      (1,604)
       Other, net .........................................................       (724)       (638)
                                                                               -------     -------
          Net cash provided by (used in) operating activities .............      2,028        (499)

Cash flows from investing activities:
    Capital expenditures ..................................................     (4,856)     (2,809)
    Proceeds from sale of property and equipment ..........................       --             2
                                                                               -------     -------
          Net cash used in investing activities ...........................     (4,856)     (2,807)

Cash flows from financing activities:
    Proceeds from issuance of redeemable convertible preferred stock ......      6,000        --
    Proceeds from short-term obligations ..................................         53       5,312
    Repayment of loans, notes payable and long-term obligations ...........     (3,221)     (1,999)
    Other .................................................................        (30)         75
                                                                               -------     -------
          Net cash provided by financing activities .......................      2,802       3,388

Effect of exchange rate changes on cash and cash equivalents ..............       (579)        (92)
                                                                               -------     -------
          Net decrease in cash and cash equivalents .......................       (605)        (10)
Cash and cash equivalents at beginning of period ..........................      1,469         849
                                                                               -------     -------
Cash and cash equivalents at end of period ................................    $   864     $   839
                                                                               =======     =======

Supplemental Disclosures:
               Interest paid ..............................................    $ 4,026     $ 3,696
                   Income taxes paid ......................................    $   418     $   735

See accompanying notes to consolidated financial statements.

F-36

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)

Note 1 - Organization and Description of Business

Amscan Holdings, Inc. ("Amscan Holdings" and, together with its subsidiaries, "AHI" or the "Company") was incorporated on October 3, 1996 for the purpose of becoming the holding company for Amscan Inc. and certain affiliated entities. AHI designs, manufactures, contracts for manufacture and distributes party and novelty goods and gifts principally in North America, South America, Europe, Asia and Australia.

Note 2 - Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. The results of operations may be affected by seasonal factors such as the timing of holidays or industry factors that may be specific to a particular period, such as movement in and the general level of raw material costs. For further information, see the consolidated financial statements and notes thereto included in Amscan Holdings' Annual Report on Form 10-K for the year ended December 31, 2000.

In connection with the preparation of the accompanying unaudited consolidated financial statements, the Company has reclassified certain amounts in prior periods to conform to the current year presentation.

Note 3 - Inventories

Inventories consisted of the following (dollars in thousands):

                                                                    March 31,   December 31,
                                                                      2001          2000   
            Finished goods .....................................    $ 60,589     $ 61,680
            Raw materials ......................................       6,601        7,614
            Work-in-process ....................................       5,180        4,677
                                                                    --------     --------
                                                                      72,370       73,971
            Less: reserve for slow moving and obsolete inventory      (2,222)      (2,432)
                                                                    --------     --------
                                                                    $ 70,148     $ 71,539
                                                                    ========     ========

Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or market.

Note 4 - Income Taxes

The consolidated income tax expense for the three months ended March 31, 2001 and 2000 was determined based upon estimates of the Company's consolidated effective income tax rates for the years ending December 31,

F-37

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

2001 and 2000, respectively. The differences between the consolidated effective income tax rate and the U.S. Federal statutory rate are primarily attributable to state income taxes and the effects of foreign operations.

Note 5 - Comprehensive Income

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

                                                                                        Three Months Ended March 31,
                                                                                              2001        2000    

                 Net income ...........................................................     $ 3,875     $ 3,709
                 Net change in cumulative translation adjustment ......................        (804)       (178)
                 Cumulative effect of a change in accounting principle to
                   recognize the fair value of the Company's interest rate swap
                   contracts, net of taxes (see Note 9) ...............................        (227)       --
                 Change in fair value of the Company's interest rate swap
                   contracts, net of taxes (see Note 9) ...............................          93        --
                                                                                            -------     -------
                                                                                            $ 2,937     $ 3,531
                                                                                            =======     =======

         Accumulated other comprehensive loss consisted of (dollars in thousands):
                                                                                            March 31,  December 31,
                                                                                              2001        2000    

                  Cumulative translation adjustment....................................     $(3,149)    $(2,345)
                  Interest rate swap contracts qualifying as hedges, net of taxes
                    (see Note 9).......................................................        (134)       --
                                                                                            -------     -------
                                                                                            $(3,283)    $(2,345)
                                                                                            =======     =======

Note 6 - Capital Stock

On March 30, 2001, the Board of Directors authorized 500 of 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 GS Capital Partners II, L.P. and certain other private investment funds managed by Goldman, Sachs & Co. (collectively, “GSCP”), for proceeds of $6.0 million. Dividends are cumulative and shall be payable annually beginning March 30, 2002, at 6% per annum. Such dividends payable on or prior to March 30, 2004, shall be payable in additional shares of Series A Redeemable Convertible Preferred Stock based on a value of $150,000 per share. Subsequent to March 30, 2004, dividends shall be payable, at the option of the Company, either in cash or additional shares of Series A Redeemable Convertible Preferred Stock.

Each share of the Series A Redeemable Convertible Preferred Stock is convertible at the option of the holder at any time, into shares of Common Stock of the Company, $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. As of March 31, 2001, there were 40 shares of Company Common Stock reserved for such conversion.

F-38

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

The Series A Redeemable Convertible Preferred Stock is not redeemable on or prior to March 30, 2004. To the extent the Company shall have funds legally available to redeem these shares, the Company may redeem these shares, in whole or, with the consent of the holders of a majority of the outstanding Series A Redeemable Convertible Preferred Stock, in part, at a redemption price of $150,000 per share, in cash, together with accrued and unpaid dividends. To the extent the Company shall have funds legally available to redeem these shares on March 30, 2008, the Company is required to redeem all outstanding shares of Series A Redeemable Convertible Preferred Stock at a redemption price per share equal to $150,000 in cash, together with accrued and unpaid dividends.

At March 31, 2001 and December 31, 2000, the Company's authorized common stock consisted of 3,000 shares of common stock, $0.10 par value, of which 1,132.88 and 1,132.54 shares, respectively, were issued and outstanding.

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 dividends or distributions to its stockholders.

Note 7 - Segment Information

Industry Segments
The Company principally operates in one industry segment which involves the design, manufacture, contract for manufacture and distribution of party and novelty goods and gifts.

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 is as follows (dollars in thousands):

                                                       Domestic     Foreign     Eliminations  Consolidated
        Three Months Ended March 31, 2001
        Sales to unaffiliated customers ........      $  76,455    $  11,051                   $  87,506
        Sales between geographic areas .........          5,700                  $  (5,700)         --
                                                      ---------    ---------     ---------     ---------
        Net sales ..............................      $  82,155    $  11,051     $  (5,700)    $  87,506
                                                      =========    =========     =========     =========

        Income from operations .................      $  12,231    $     852                   $  13,083
                                                      =========    =========
        Interest expense, net ..................                                                   6,575
        Other expense, net .....................                                                     111
                                                                                               ---------
        Income before income taxes and minority
                interests ......................                                               $   6,397
                                                                                               =========

          Long-lived assets, net at March 31, 2001    $ 130,151   $   6,715                    $ 136,866
                                                      =========   =========                    =========

F-39

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)


                                                 Domestic     Foreign     Eliminations  Consolidated
     Three Months Ended March 31, 2000
     Sales to unaffiliated customers ........    $  66,659    $  10,718                   $  77,377
     Sales between geographic areas .........        3,484                  $  (3,484)         --
                                                 ---------    ---------     ---------     ---------
     Net sales ..............................    $  70,143    $  10,718     $  (3,484)    $  77,377
                                                 =========    =========     =========     =========

     Income from operations .................    $  11,770    $   1,069                   $  12,839
                                                 =========    =========
     Interest expense, net ..................                                                 6,590
     Other expense, net .....................                                                    69
                                                                                          ---------
     Income before income taxes and minority
             interests ......................                                             $   6,180
                                                                                          =========

     Long-lived assets, net at March 31, 2000    $ 126,765    $   7,520                   $ 134,285
                                                 =========    =========                   =========

Note 8 - 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 on its financial condition or future results of operations.

Note 9 - Derivative Instruments and Hedging Activities

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," and, in June 1999 and June 2000, issued SFAS No. 137 and No. 138 as amendments thereto. These statements provide a comprehensive and consistent standard for the recognition and measurement of derivatives and hedging activities, requiring all derivatives to be recognized on the balance sheet at fair value and establishing standards for the recognition of changes in such fair value. These statements are effective for fiscal years beginning after June 15, 2000. As long as hedge effectiveness is maintained, the Company's interest rate arrangements qualify for hedge accounting as cash flow hedges under SFAS No. 133 as amended by SFAS 138. For derivative 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 remaining gain or loss on the derivative instrument in excess of the cumulative change in the present value of future cash flows of the hedged item, if any, is recognized in current earnings during the period of change. The Company has adopted these statements effective January 1, 2001. Because of the Company's limited use of derivatives, the adoption of SFAS No. 133 did not have a significant effect on earnings or the financial position of the Company.

As part of the Company's risk management strategy, the Company uses interest rate swaps to hedge variability of cash flows on its variable rate term loan (“Term Loan”). The Company is obligated to obtain interest rate protection on approximately one-half of its Term Loan, pursuant to interest rate swaps, caps or other similar arrangements satisfactory to GSCP. The Term Loan matures in December 2004 and provides for amortization (in quarterly installments) of one percent of the principal amount thereof per year for the first five years

F-40

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

and 32.3% and 62.7% of the principal amount thereof in the sixth and seventh years, respectively. The Term Loan bears interest, at the option of the Company, at the lenders' customary base rate plus 1.625% per annum or at the lenders' customary reserve adjusted Eurodollar rate plus 2.625% per annum. At March 31, 2001, the floating interest rate on the Term Loan was 8.11%. The Company is currently involved in three interest rate swap transactions with Goldman Sachs Capital Markets, L.P. and a financial institution covering $76,000,000 of its outstanding borrowings under the Term Loan. The interest rate swap contracts require the Company to settle the difference in interest obligations quarterly. Net payments to (receipts from) the counterparty under the swap contracts have been recorded as additions to (reductions of) interest expense.

The fair value of interest rate swaps is the estimated amount that the counterparty would receive or pay to terminate the swap agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the swap counterparties. At March 31, 2001, these hedges had an unrealized loss of $0.1 million, net of taxes, which has been included in the Company's accumulated other comprehensive loss (see Note 5). The ineffective portion relating to these hedges was not material during the quarter ended March 31, 2001. At March 31, 2001, the Company expects to reclassify the loss on these hedges from accumulated other comprehensive loss to earnings over the next twelve months during which the hedged transaction affects earnings. The actual amount that will be reclassified to earnings over the next twelve months will vary from this amount, as a result of changes in market conditions.

F-41

SUPPLEMENTAL INFORMATION

The Notes and borrowings under the Bank Credit Facilities are guaranteed jointly and severally, fully and unconditionally, by each of Amscan Holdings' wholly-owned domestic subsidiaries (the "Guarantors").

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

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

The following unaudited consolidating information presents consolidating balance sheets as of March 31, 2001 and 2000, and the related consolidating statements of income and cash flows for the three-month periods ended March 31, 2001 and 2000 for the combined Guarantors and the combined Non-guarantors and elimination entries necessary to consolidate the entities comprising the combined companies.

F-42

AMSCAN HOLDINGS, INC.
CONSOLIDATING BALANCE SHEET
March 31, 2001
(Dollars in thousands)
(Unaudited)


                                                                      Amscan
                                                                   Holdings and    Combined
                                                                     Combined         Non-
                                                                    Guarantors    Guarantors    Eliminations  Consolidated
ASSETS
Current assets:
     Cash and cash equivalents ..................................    $      98     $     766                   $     864
     Accounts receivable, net ...................................       59,475         8,078                      67,553
     Inventories ................................................       64,197         6,386     $    (435)       70,148
     Prepaid expenses and other current assets ..................       10,241         1,589                      11,830
                                                                     ---------     ---------     ---------     ---------
     Total current assets .......................................      134,011        16,819          (435)      150,395
Property, plant and equipment, net ..............................       70,141           953                      71,094
Intangible assets, net ..........................................       53,373         4,931                      58,304
Other assets, net ...............................................       25,855         4,812       (23,199)        7,468
                                                                     ---------     ---------     ---------     ---------
     Total assets ...............................................    $ 283,380     $  27,515     $ (23,634)    $ 287,261
                                                                     =========     =========     =========     =========


LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED AND COMMON STOCK
    AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
     Loans and notes payable ....................................    $   8,050     $      53                   $   8,103
     Accounts payable ...........................................       24,590         1,317                      25,907
     Accrued expenses ...........................................       14,417         3,676                      18,093
     Income taxes payable .......................................        3,377           398                       3,775
     Current portion of long-term  obligations ..................        3,394           101                       3,495
                                                                     ---------     ---------     ---------     ---------
     Total current liabilities ..................................       53,828         5,545                      59,373
Long-term obligations, excluding
  current portion ...............................................      260,930           208                     261,138
Deferred income tax liabilities .................................       13,602                                    13,602
Other ...........................................................        3,741        12,914     $ (14,351)        2,304
                                                                     ---------     ---------     ---------     ---------
     Total liabilities ..........................................      332,101        18,667       (14,351)      336,417

Redeemable convertible preferred stock ..........................        6,000                                     6,000
Redeemable Common Stock .........................................       28,768                                    28,768

Stockholders' (deficit) equity:
     Common Stock ...............................................                        339          (339)         --
     Additional paid-in capital .................................          258           658          (658)          258
     Unamortized restricted Common Stock
        award, net ..............................................         (342)                                     (342)
     Notes receivable from stockholders .........................         (565)                                     (565)
     (Deficit) retained earnings ................................      (79,557)       10,412       (10,847)      (79,992)
     Accumulated other comprehensive loss .......................       (3,283)       (2,561)        2,561        (3,283)
                                                                     ---------     ---------     ---------     ---------
         Total stockholders' (deficit) equity ...................      (83,489)        8,848        (9,283)      (83,924)
                                                                     ---------     ---------     ---------     ---------
         Total liabilities, redeemable convertible
            preferred and Common Stock and
             stockholders' (deficit) equity .....................    $ 283,380     $  27,515     $ (23,634)    $ 287,261
                                                                     =========     =========     =========     =========

F-43

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)

                                            Amscan
                                         Holdings and   Combined
                                           Combined        Non-
                                          Guarantors   Guarantors  Eliminations  Consolidated

Net sales .............................    $ 82,427     $ 10,566     $ (5,487)    $ 87,506
Cost of sales .........................      53,753        7,083       (5,519)      55,317
                                           --------     --------     --------     --------
         Gross profit .................      28,674        3,483           32       32,189
Operating expenses:
    Selling expenses ..................       7,182        1,314                     8,496
    General and administrative expenses       7,294        1,279          (48)       8,525
     Art and development costs ........       2,085                                  2,085
                                           --------     --------     --------     --------
         Income from operations .......      12,113          890           80       13,083
Interest expense, net .................       6,420          155                     6,575
Other (income) expense, net ...........        (416)          64          463          111
                                           --------     --------     --------     --------
         Income before income taxes
           and minority interests .....       6,109          671         (383)       6,397
Income tax expense ....................       2,266          261                     2,527
Minority interests ....................                       (5)                       (5)
                                           --------     --------     --------     --------
         Net income ...................    $  3,843     $    415     $   (383)    $  3,875
                                           ========     ========     ========     ========

F-44

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2000
(Dollars in thousands)
(Unaudited)

                                            Amscan
                                         Holdings and   Combined
                                           Combined       Non-
                                          Guarantors   Guarantors  Eliminations  Consolidated

Net sales .............................    $ 71,510     $ 10,434     $ (4,567)     $ 77,377
Cost of sales .........................      45,469        6,476       (4,632)       47,313
                                           --------     --------     --------      --------
         Gross profit .................      26,041        3,958           65        30,064
Operating expenses:
    Selling expenses ..................       5,599        1,417                      7,016
    General and administrative expenses       6,771        1,476          (48)        8,199
    Art and development costs .........       2,010                                   2,010
                                           --------     --------     --------      --------
         Income from operations .......      11,661        1,065          113        12,839
Interest expense, net .................       6,456          134                      6,590
Other (income) expense, net ...........        (549)         100          518            69
                                           --------     --------     --------      --------
         Income before income taxes
           and minority interests .....       5,754          831         (405)        6,180
Income tax expense ....................       2,110          331                      2,441
Minority interests ....................                       30                         30
                                           --------     --------     --------      --------
         Net income ...................    $  3,644     $    470     $   (405)     $  3,709
                                           ========     ========     ========      ========

F-45

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)


                                                                         Amscan
                                                                      Holdings and   Combined
                                                                        Combined       Non-
                                                                       Guarantors   Guarantors  Eliminations  Consolidated

Cash flows from operating activities:
   Net income .....................................................     $ 3,808      $   447      $  (380)      $ 3,875
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation and amortization ...............................       3,671          129                      3,800
      Amortization of deferred financing costs ....................         249                                     249
      Amortization of restricted Common Stock award ...............          12                                      12
      Provision for doubtful accounts .............................         407           58                        465
      Deferred income tax (benefit) expense .......................         (87)         247                        160
      Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable ............      (7,049)         709                     (6,340)
            Decrease (increase) in inventories ....................       1,492          (69)        (32)         1,391
            Decrease (increase) in prepaid expenses and other
               current assets .....................................         119       (1,549)                    (1,430)
            Increase (decrease) in accounts payable, accrued
               expenses and income taxes payable ..................       1,044         (474)                       570
      Other, net ..................................................      (1,673)         537         412           (724)
                                                                        -------      -------     -------        -------
            Net cash provided by operating activities .............       1,993           35        --            2,028

Cash flows from investing activities:
      Capital expenditures ........................................      (4,761)         (95)                    (4,856)
                                                                        -------      -------     -------        -------
            Net cash used in investing activities .................      (4,761)         (95)                    (4,856)

Cash flows from financing activities:
   Proceeds from issuance of redeemable convertible preferred stock       6,000                                   6,000
   Proceeds from short-term obligations ...........................        --             53                         53
   Repayment of loans, notes payable and long-term obligations ....      (3,183)         (38)                    (3,221)
   Other ..........................................................        (335)         305                        (30)
                                                                        -------      -------     -------        -------
            Net cash provided by financing activities .............       2,482          320        --            2,802
Effect of exchange rate changes on cash and cash equivalents ......        (181)         398                        579
                                                                        -------      -------     -------        -------
            Net decrease in cash and cash equivalents .............        (467)        (138)                      (605)
Cash and cash equivalents at beginning of period ..................         565          904                      1,469
                                                                        -------      -------     -------        -------
Cash and cash equivalents at end of period ........................     $    98      $   766     $  --          $   864
                                                                        =======      =======     =======        =======

F-46

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2000
(Dollars in thousands)
(Unaudited)


                                                                            Amscan
                                                                         Holdings and   Combined
                                                                           Combined       Non-
                                                                          Guarantors   Guarantors  Eliminations  Consolidated

Cash flows from operating activities:
   Net income .........................................................    $ 3,644      $   470      $  (405)       $ 3,709
   Adjustments to reconcile net income to net
     cash (used in) provided by operating activities:
      Depreciation and amortization ...................................      3,307          144                       3,451
      Amortization of deferred financing costs ........................        218                                      218
      Amortization of restricted Common Stock award ...................         13                                       13
      Provision for doubtful accounts .................................        378           89                         467
      Deferred income tax (benefit) expense ...........................        (27)         247                         220
      Changes in operating assets and liabilities:
            (Increase) decrease in accounts receivable ................     (6,887)       2,480                      (4,407)
            Increase in inventories ...................................     (2,217)         (71)         (65)        (2,353)
            Decrease (increase) in prepaid expenses and other
               current assets .........................................        911         (486)                        425
            Decrease in accounts payable, accrued
               expenses and income taxes payable ......................       (851)        (753)                     (1,604)
      Other, net ......................................................        958       (2,066)         470           (638)
                                                                           -------      -------      -------        -------
            Net cash (used in) provided by operating activities .......       (553)          54         --             (499)

Cash flows from investing activities:
   Capital expenditures ...............................................     (2,734)         (75)                     (2,809)
   Proceeds from disposal of property and equipment ...................       --              2                           2
                                                                           -------      -------      -------        -------
            Net cash used in investing activities .....................     (2,734)         (73)                     (2,807)

Cash flows from financing activities:
   Proceeds from short-term obligations ...............................      5,312                                    5,312
   Repayment of loans, notes payable and long-term obligations ........     (1,861)        (138)                     (1,999)
   Other ..............................................................         75         --                            75
                                                                           -------      -------      -------        -------
            Net cash provided by (used in) financing activities .......      3,526         (138)        --            3,388
Effect of exchange rate changes on cash and cash equivalent ...........       (300)         208                         (92)
                                                                           -------      -------      -------        -------
            Net (decrease) increase in cash and cash equivalents ......        (61)          51                         (10)
Cash and cash equivalents at beginning of period ......................        141          708                         849
                                                                           -------      -------      -------        -------
Cash and cash equivalents at end of period ............................    $    80      $   759      $  --          $   839
                                                                           =======      =======      =======        =======

F-47



You must rely only on this Prospectus or other information Amscan Holdings, Inc. directly refers you to. Amscan Holdings has not authorized anyone to provide you with any other information. You may assume the accuracy of the contents of this Prospectus only through the date hereof. If you live in a jurisdiction that prohibits the offering or sale of the Notes covered by this Prospectus, you may not purchase the Notes. ____________________ TABLE OF CONTENTS		Amscan Holdings, Inc. 9 7/8% Senior Subordinated Notes due 2007 ($110,000,000 principal amount outstanding)










Page Available Information................ ii Prospectus Summary................... 1 Risk Factors......................... 9 The Transaction...................... 12 Use of Proceeds...................... 12 Capitalization....................... 12 Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 13 Business............................. 21 Management........................... 29 Ownership of Capital Stock........... 34 Description of Senior Debt........... 35 Description of Notes................. 37 Description of Certain Federal Income Tax Consequences of an Investment in the Notes............................. 61 Plan of Distribution................. 64 Experts.............................. 64 Validity of the Notes................ 64 Index to Financial Statements........ F-1		___________________________

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware (the “DGCL”) provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation in such capacity at another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that such person’s conduct was unlawful.

Section 145 of the DGCL also provides that a corporation may indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted under similar standards, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 145 of the DGCL also provides that to the extent that a director, officer, employee or agent of a corporation is successful on the merits or otherwise in the defense of any action referred to above, or in defense of any claim, issue or matter therein, the corporation must indemnify such person against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

In accordance with Section 145 of the DGCL, Amscan Holdings’ By-laws provide that Amscan Holdings will indemnify, to the maximum extent permitted by applicable law, any person who was or is a party, or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, including any action by or in the right of Amscan Holdings to procure a judgment in its favor, by reason of the fact that such person is or was a director, officer, employee or agent of Amscan Holdings or is or was serving at the request of Amscan Holdings as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding.

Amscan Holdings’ By-laws also provide that expenses incurred by an officer or director in defending an action, suit or proceeding will be paid by Amscan Holdings in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person seeking indemnification to repay such amount in the event that it shall be ultimately determined that such person is not entitled to be indemnified by Amscan Holdings by law or pursuant to Amscan Holdings’ By-laws. Amscan Holdings’ By-laws define the term “expenses” to include, without limitation, costs of and expenses incurred in connection with or in preparation for litigation, attorneys’ fees, judgments, fines, penalties, amounts paid in settlement, excise taxes in respect of any employee benefit plan of Amscan Holdings, and interest on any of the foregoing.

Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of a corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the directors’ duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL (regarding certain illegal distributions) or (iv) for any transaction from which the director derived an improper personal benefit. Amscan Holdings’ Certificate of Incorporation provides that the personal liability of Amscan Holdings’ directors to Amscan Holdings or any of

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its stockholders for monetary damages for breach of fiduciary duty by such director as a director is limited to the fullest extent permitted by Delaware law.

Item 21. Exhibits and Financial Statement Schedules.

(a) Exhibits.

	2.1	Agreement and Plan of Merger, by and among Amscan Holdings, and Confetti Acquisition, Inc., dated as of August 10, 1997 (incorporated by reference to Exhibit 2.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

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

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

	3.2	Amended By-Laws of Amscan Holdings (incorporated by reference to Exhibit 3.2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.3	Certificate of Incorporation of Amscan Inc. (incorporated by reference to Exhibit 3.3 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.4	By-Laws of Amscan Inc. (incorporated by reference to Exhibit 3.4 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.5	Restated Articles of Incorporation of Trisar, Inc. (incorporated by reference to Exhibit 3.5 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.6	By-Laws of Trisar, Inc. (incorporated by reference to Exhibit 3.6 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.7	Original Articles of Incorporation of Am-Source, Inc. (incorporated by reference to Exhibit 3.7 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.8	By-Laws of Am-Source Inc. (incorporated by reference to Exhibit 3.8 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.9	Certificate of Incorporation of SSY Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.9 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.10	By-Laws of SSY Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.10 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.11	Certificate of Incorporation of JCS Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.11 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

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	3.12	By-Laws of JCS Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.12 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.13	Amended Articles of Incorporation of Anagram International, Inc. (incorporated by reference to Exhibit 3.1 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.14	By-Laws of Anagram International, Inc. (incorporated by reference to Exhibit 3.2 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.15	Articles of Incorporation of Anagram International Holdings, Inc. (incorporated by reference to Exhibit 3.3 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.16	By-Laws of Anagram International Holdings, Inc. (incorporated by reference to Exhibit 3.4 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.17	Articles of Organization of Anagram International, LLC (incorporated by reference to Exhibit 3.5 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.18	Operating Agreement of Anagram International, LLC (incorporated by reference to Exhibit 3.6 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.19	Certificate of Formation of Anagram Eden Prairie Property Holdings LLC (incorporated by reference to Exhibit 3.7 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.1	Indenture, dated as of December 19, 1997, by and among Amscan Holdings, the Guarantors named therein and IBJ Schroder Bank & Trust Company with respect to the Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

	4.2	Supplemental Indenture, dated as of September 17, 1998, by and among Anagram International, Inc., Anagram International Holdings, Inc., Anagram International LLC and Anagram Eden Prairie Property Holdings LLC and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.3	Senior Subordinated Guarantee, dated as of September 17, 1998, by Anagram International, Inc., Anagram International Holdings, Inc., Anagram International, LLC and Anagram Eden Prairie Property Holdings LLC (incorporated by reference to Exhibit 4.2 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.4	Warrant Agreement, dated as of August 6, 1998, by and between Amscan Holdings and Garry Kieves Retained Annuity Trust (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Current Report on Form 8-K dated August 6, 1998 (Commission File No. 000-21827)).

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	4.5	Amended and Restated Revolving Loan Credit Agreement, dated as of September 17, 1998, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank as administrative agent (incorporated by reference to Exhibit 10.1 to Amscan Holdings’ Current Report on Form 8-K dated September 7, 1998 (Commission File No. 000-21827)).

	4.6	Second Amendment and Limited Waiver to Amended and Restated Revolving Loan Credit Agreement, dated as of September 19, 2000, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent (incorporated by reference to Exhibit 4(a) to Amscan Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	4.7	Amended and Restated AXEL Credit Agreement, dated as of September 17, 1998, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank as administrative agent (incorporated by reference to Exhibit 10.2 to Amscan Holdings’ Current Report on Form 8-K dated September 25, 1998 (Commission File No. 000-21827)).

	4.8	First Amendment and Limited Waiver to Amended and Restated AXEL Credit Agreement, dated as of September 19, 2000, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent (incorporated by reference to Amscan Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	5.1	Opinion of Wachtell, Lipton, Rosen& Katz (incorporated by reference to Exhibit 5.1 to Amscan Holdings' Resgistration Statement on Form S-4 ( No. 333-45475)).

	9.1	Voting Agreement, dated August 10, 1997 among Confetti Acquisition, Inc., the Estate of John A. Svenningsen and Christine Svenningsen (incorporated by reference to Exhibit 2.2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.1	Exchange and Registration Rights Agreement, dated as of December 19, 1997, by and among Amscan Holdings and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.2	Stockholders’ Agreement, dated as of December 19, 1997, by and among Amscan Holdings and the Stockholders thereto (incorporated by reference to Exhibit 10.4 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

	10.3	Amendment No. 1 to the Stockholders' Agreement, dated as of August 6, 1998 by and among Amscan Holdings and certain stockholders of Amscan Holdings (incorporated by reference to Exhibit 10.1 to Amscan Holdings' Current Report on Form 8-K dated August 6, 1998 (Commission File No. 000-21827)).

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	10.4	Amendment No. 2 to the Stockholders’ Agreement, dated as of March 30, 2001 by and among Amscan Holdings and certain stockholders of Amscan Holdings (incorporated by reference to Amscan Holdings’ Annual Report on Form 10-K for the year ended December 31, 2000 (Commission File No. 000-21827)).

	10.5	Employment Agreement, dated as of August 10, 1997, by and between Amscan Holdings and Gerald C. Rittenberg (incorporated by reference to Exhibit 10.5 to Amscan Holdings’ Registration Statement on Form S-4 (File No 333-45457)).

	10.6	Employment Agreement, dated as of August 10, 1997, by and between Amscan Holdings and James M. Harrison (incorporated by reference to Exhibit 10.6 to Amscan Holdings’ Registration Statement on Form S-4 (No 333-45457)).

	10.7	Amendment dated December 1, 1999 to the Employment Agreement between Amscan Holdings and James M. Harrison (incorporated by reference to Exhibit 10.15 to Post-Effective Amendment No. 3 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.8	Employment Agreement between Amscan Holdings and Garry Kieves dated as of August 6, 1998 (incorporated by reference to Exhibit 99.1 to Amscan Holdings’ Current Report on Form 8-K dated August 6, 1998) (Commission File No. 000-21827).

	10.9	Amscan Holdings, Inc. 1997 Stock Incentive Plan ((incorporated by reference to Exhibit 10.7 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.10	Tax Indemnification Agreement between Amscan Holdings and John A. Svenningsen, dated as of December 18, 1996 (incorporated by reference to Exhibit 10(j) to Amscan Holdings' 1996 Annual Report on Form 10-K (Commission File No. 000-21827)).

	10.11	Tax Indemnification Agreement between Amscan Holdings, Christine Svenningsen and the Estate of John A. Svenningsen, dated as of August 10, 1997 (incorporated by reference to Exhibit 10.17 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.12	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 Amscan Holdings' Registration Statement on Form S-1 (No. 333-14107)).

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

	10.14	Line of Credit Agreement, dated October 1, 1999, by and among Amscan Holdings and Gerald C. Rittenberg (incorporated by reference to Exhibit 10(m) to Amscan Holdings' 1999 Annual Report on Form 10-K (Commission File No. 000-21827)).

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	10.15	Agreement dated as of September 14, 2000 by and between Amscan Inc. and CLAYCO Construction Company, Inc. (incorporated by reference to Exhibit 10 to Amscan Holdings' Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	12.1	Statement re: computation of ratio of earnings to fixed charges.

	21.1	Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Post-Effective Amendement No. 2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	23.1	Consent of Ernst & Young LLP.

	23.2	Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).

	24.1	Powers of Attorney (incorporated by reference to Exhibit 24.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457) and to Exhibit 24.2 to Post-Effective Amendment No. 1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	25.1	Statement of Eligibility and Qualification of Trustee on Form T-1 of IBJ Schroder Bank & Trust Company under the Trust Indenture Act of 1939 (incorporated by reference to Exhibit 25.1 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Post-Effective Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Elmsford, New York, on July 30, 2001.

AMSCAN HOLDINGS, INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: President, Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed by the following persons in the capacities and on July 30, 2001.

Name		Title

*		Chief Executive Officer and Director
Gerald C. Rittenberg

*		President, Chief Financial Officer, Treasurer and Director
James M. Harrison

*		Controller and Secretary
Michael A. Correale

*		Chairman of the Board and Director
Terence M. O'Toole

*		Director
Sanjeev K. Mehra

*		Director
Joseph P. DiSabato

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

AMSCAN INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Executive Vice President

Name		Title

*		President and Director
Gerald C. Rittenberg

*		Executive Vice President, Secretary and Director
James M. Harrison

*		Vice President, Treasurer, and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

TRISAR, INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Treasurer and Secretary

Name		Title

*		President and Director
Gerald C. Rittenberg

*		Treasurer, Secretary and Director
James M. Harrison

*		Assistant Treasurer and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

AM-SOURCE, INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Treasurer and Secretary

Name		Title

*		President
Gerald C. Rittenberg

*		Treasurer and Secretary
James M. Harrison

*		Assistant Treasurer
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

SSY REALTY CORP.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Treasurer and Secretary

Name		Title

*		President and Director
Gerald C. Rittenberg

*		Treasurer, Secretary and Director
James M. Harrison

*		Assistant Treasurer and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

JCS REALTY CORP.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Treasurer and Secretary

Name		Title

*		President and Director
Gerald C. Rittenberg

*		Treasurer, Secretary and Director
James M. Harrison

*		Assistant Treasurer and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

ANAGRAM INTERNATIONAL, INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Senior Vice President, Treasurer and Chief Financial Officer

Name		Title

*		President
Garry Kieves

*		Senior Vice President, Assistant Treasurer, Assistant Secretary and Director
Gerald C. Rittenberg

*		Senior Vice President, Treasurer, Chief Financial Officer and Director
James M. Harrison

*		Vice President, Assistant Treasurer, Secretary and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

ANAGRAM INTERNATIONAL HOLDINGS, INC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Senior Vice President, Treasurer and Chief Financial Officer

Name		Title

*		President, Chief Executive Officer and Director
Gerald C. Rittenberg

*		Senior Vice President, Treasurer, Chief Financial Officer and Director
James M. Harrison

*		Vice President, Assistant Treasurer, and Secretary and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

	ANAGRAM EDEN PRAIRIE PROPERTY HOLDINGS LLC

	By ANAGRAM INTERNATIONAL, INC., its Sole Member

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Senior Vice President, Treasurer and Chief Financial Officer

Name		Title

*		President
Garry Kieves

*		Senior Vice President, Assistant Treasurer, Assistant Secretary and Director
Gerald C. Rittenberg

*		Senior Vice President, Treasurer, Chief Financial Officer and Director
James M. Harrison

*		Vice President, Assistant Treasurer, Secretary, and Director
Michael A. Correale

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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SIGNATURES

ANAGRAM INTERNATIONAL, LLC.

	By:	/s/ James M. Harrison
		Name: James M. Harrison Title: Manager

Name		Title

*		Manager
Gerald C. Rittenberg

*		Manager (and principal financial and accounting officer)
James M. Harrison

*		Manager
Michael A. Correale

*		Manager
Garry Kieves

*		Manager
James Plutt

By: /s/ James M. Harrison
James M. Harrison Attorney-In-Fact

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EXHIBIT INDEX

	2.1	Agreement and Plan of Merger, by and among Amscan Holdings, and Confetti Acquisition, Inc., dated as of August 10, 1997 (incorporated by reference to Exhibit 2.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

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

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

	3.2	Amended By-Laws of Amscan Holdings (incorporated by reference to Exhibit 3.2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.3	Certificate of Incorporation of Amscan Inc. (incorporated by reference to Exhibit 3.3 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.4	By-Laws of Amscan Inc. (incorporated by reference to Exhibit 3.4 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.5	Restated Articles of Incorporation of Trisar, Inc. (incorporated by reference to Exhibit 3.5 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.6	By-Laws of Trisar, Inc. (incorporated by reference to Exhibit 3.6 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.7	Original Articles of Incorporation of Am-Source, Inc. (incorporated by reference to Exhibit 3.7 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.8	By-Laws of Am-Source Inc. (incorporated by reference to Exhibit 3.8 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.9	Certificate of Incorporation of SSY Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.9 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.10	By-Laws of SSY Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.10 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.11	Certificate of Incorporation of JCS Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.11 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.12	By-Laws of JCS Realty Corp. dated October 3, 1996 (incorporated by reference to Exhibit 3.12 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	3.13	Amended Articles of Incorporation of Anagram International, Inc. (incorporated by reference to Exhibit 3.1 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.14	By-Laws of Anagram International, Inc. (incorporated by reference to Exhibit 3.2 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.15	Articles of Incorporation of Anagram International Holdings, Inc. (incorporated by reference to Exhibit 3.3 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.16	By-Laws of Anagram International Holdings, Inc. (incorporated by reference to Exhibit 3.4 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.17	Articles of Organization of Anagram International, LLC (incorporated by reference to Exhibit 3.5 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.18	Operating Agreement of Anagram International, LLC (incorporated by reference to Exhibit 3.6 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	3.19	Certificate of Formation of Anagram Eden Prairie Property Holdings LLC (incorporated by reference to Exhibit 3.7 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.1	Indenture, dated as of December 19, 1997, by and among Amscan Holdings, the Guarantors named therein and IBJ Schroder Bank & Trust Company with respect to the Senior Subordinated Notes (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

	4.2	Supplemental Indenture, dated as of September 17, 1998, by and among Anagram International, Inc., Anagram International Holdings, Inc., Anagram International LLC and Anagram Eden Prairie Property Holdings LLC and IBJ Schroder Bank & Trust Company, as Trustee (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.3	Senior Subordinated Guarantee, dated as of September 17, 1998, by Anagram International, Inc., Anagram International Holdings, Inc., Anagram International, LLC and Anagram Eden Prairie Property Holdings LLC (incorporated by reference to Exhibit 4.2 to Amscan Holdings' Current Report on Form 8-K dated September 17, 1998 (Commission File No. 000-21827)).

	4.4	Warrant Agreement, dated as of August 6, 1998, by and between Amscan Holdings and Garry Kieves Retained Annuity Trust (incorporated by reference to Exhibit 4.1 to Amscan Holdings’ Current Report on Form 8-K dated August 6, 1998 (Commission File No. 000-21827)).

	4.5	Amended and Restated Revolving Loan Credit Agreement, dated as of September 17, 1998, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank as administrative agent (incorporated by reference to Exhibit 10.1 to Amscan Holdings’ Current Report on Form 8-K dated September 7, 1998 (Commission File No. 000-21827)).

	4.6	Second Amendment and Limited Waiver to Amended and Restated Revolving Loan Credit Agreement, dated as of September 19, 2000, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent (incorporated by reference to Exhibit 4(a) to Amscan Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	4.7	Amended and Restated AXEL Credit Agreement, dated as of September 17, 1998, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank as administrative agent (incorporated by reference to Exhibit 10.2 to Amscan Holdings’ Current Report on Form 8-K dated September 25, 1998 (Commission File No. 000-21827)).

	4.8	First Amendment and Limited Waiver to Amended and Restated AXEL Credit Agreement, dated as of September 19, 2000, by and among Amscan Holdings, the financial institutions parties thereto, Goldman, Sachs Credit Partners L.P., as arranger and syndication agent, and Fleet National Bank, as administrative agent (incorporated by reference to Amscan Holdings’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	5.1	Opinion of Wachtell, Lipton, Rosen & Katz (incorporated by reference to Exhibit 5.1 to Amscan Holdings' Resgistration Statement on Form S-4 ( No. 333-45475)).

	9.1	Voting Agreement, dated August 10, 1997 among Confetti Acquisition, Inc., the Estate of John A. Svenningsen and Christine Svenningsen (incorporated by reference to Exhibit 2.2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.1	Exchange and Registration Rights Agreement, dated as of December 19, 1997, by and among Amscan Holdings and Goldman, Sachs & Co. (incorporated by reference to Exhibit 10.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.2	Stockholders’ Agreement, dated as of December 19, 1997, by and among Amscan Holdings and the Stockholders thereto (incorporated by reference to Exhibit 10.4 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

	10.3	Amendment No. 1 to the Stockholders' Agreement, dated as of August 6, 1998 by and among Amscan Holdings and certain stockholders of Amscan Holdings (incorporated by reference to Exhibit 10.1 to Amscan Holdings' Current Report on Form 8-K dated August 6, 1998 (Commission File No. 000-21827)).

	10.4	Amendment No. 2 to the Stockholders’ Agreement, dated as of March 30, 2001 by and among Amscan Holdings and certain stockholders of Amscan Holdings (incorporated by reference to Amscan Holdings’ Annual Report on Form 10-K for the year ended December 31, 2000 (Commission File No. 000-21827)).

	10.5	Employment Agreement, dated as of August 10, 1997, by and between Amscan Holdings and Gerald C. Rittenberg (incorporated by reference to Exhibit 10.5 to Amscan Holdings’ Registration Statement on Form S-4 (File No 333-45457)).

	10.6	Employment Agreement, dated as of August 10, 1997, by and between Amscan Holdings and James M. Harrison (incorporated by reference to Exhibit 10.6 to Amscan Holdings’ Registration Statement on Form S-4 (No 333-45457)).

	10.7	Amendment dated December 1, 1999 to the Employment Agreement between Amscan Holdings and James M. Harrison (incorporated by reference to Exhibit 10.15 to Post-Effective Amendment No. 3 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.8	Employment Agreement between Amscan Holdings and Garry Kieves dated as of August 6, 1998 (incorporated by reference to Exhibit 99.1 to Amscan Holdings’ Current Report on Form 8-K dated August 6, 1998) (Commission File No. 000-21827).

	10.9	Amscan Holdings, Inc. 1997 Stock Incentive Plan ((incorporated by reference to Exhibit 10.7 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.10	Tax Indemnification Agreement between Amscan Holdings and John A. Svenningsen, dated as of December 18, 1996 (incorporated by reference to Exhibit 10(j) to Amscan Holdings' 1996 Annual Report on Form 10-K (Commission File No. 000-21827)).

	10.11	Tax Indemnification Agreement between Amscan Holdings, Christine Svenningsen and the Estate of John A. Svenningsen, dated as of August 10, 1997 (incorporated by reference to Exhibit 10.17 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	10.12	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 Amscan Holdings' Registration Statement on Form S-1 (No. 333-14107)).

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

	10.14	Line of Credit Agreement, dated October 1, 1999, by and among Amscan Holdings and Gerald C. Rittenberg (incorporated by reference to Exhibit 10(m) to Amscan Holdings' 1999 Annual Report on Form 10-K (Commission File No. 000-21827)).

	10.15	Agreement dated as of September 14, 2000 by and between Amscan Inc. and CLAYCO Construction Company, Inc. (incorporated by reference to Exhibit 10 to Amscan Holdings' Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (Commission File No. 000-21827)).

	12.1	Statement re: computation of ratio of earnings to fixed charges.

	21.1	Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1 to Post-Effective Amendement No. 2 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	23.1	Consent of Ernst & Young LLP.

	23.2	Consent of Wachtell, Lipton, Rosen & Katz (contained in Exhibit 5.1).

	24.1	Powers of Attorney (incorporated by reference to Exhibit 24.1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457) and to Exhibit 24.2 to Post-Effective Amendment No. 1 to Amscan Holdings' Registration Statement on Form S-4 (No. 333-45457)).

	25.1	Statement of Eligibility and Qualification of Trustee on Form T-1 of IBJ Schroder Bank & Trust Company under the Trust Indenture Act of 1939 (incorporated by reference to Exhibit 25.1 to Amscan Holdings’ Registration Statement on Form S-4 (No. 333-45457)).

* TABLE OF ADDITIONAL REGISTRANTS

EXPLANATORY NOTE

Amscan Holdings, Inc.

AVAILABLE INFORMATION

PROSPECTUS SUMMARY

The Company

Growth Trends

Competitive Strengths

SUMMARY OF TERMS OF NOTES

RISK FACTORS

Holding Company Structure

Dependence on Key Personnel

Payment Upon a Change of Control

Risks Relating to Our Business

Seasonality

Trading Market for the Notes

Fraudulent Conveyance

Note Resale Procedures

Resale of Notes

THE TRANSACTION

Certain Agreements

USE OF PROCEEDS

CAPITALIZATION

General

Results of Operations

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

Quantitative and Qualitative Disclosures About Market Risk

BUSINESS

General

Revenues and Adjusted EBITDA Growth

Party Goods Industry Overview

Competitive Strengths

Strategy

Business Operations

E-Commerce

Revenue Breakdown by Retail Channel

Competition

Intellectual Property and Licenses

Employees

Facilities

Organization

Legal Proceedings

MANAGEMENT

Directors and Executive Officers

Executive Compensation and Related Information

OWNERSHIP OF CAPITAL STOCK

DESCRIPTION OF SENIOR DEBT

Other Senior Debt

DESCRIPTION OF NOTES

General

Principal, Maturity and Interest

Settlement and Payment

Subordination

Senior Subordinated Guarantees

Optional Redemption

Selection and Notice

Mandatory Redemption; Sinking Fund Payments

Repurchase at the Option of Holders

Certain Covenants

No Personal Liability of Directors, Officers, Employees and Stockholders

Legal Defeasance and Covenant Defeasance

Transfer and Exchange

Book-Entry, Delivery and Form

Certificated Securities

Amendment, Supplement and Waiver

Concerning the Trustee

Certain Definitions

Certain Federal Income Tax Consequences to U.S. Holders

Market Discount and Premium

PLAN OF DISTRIBUTION

EXPERTS

VALIDITY OF THE NOTES

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC. Notes to Consolidated Financial Statements (continued) December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING BALANCE SHEET
December 31, 2000
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING BALANCE SHEET
December 31, 1999
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 2000
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 1999
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF INCOME
For the Year Ended December 31, 1998
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 2000
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1999
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
Notes to Consolidated Financial Statements (continued)
December 31, 2000

CONSOLIDATING STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1998
(Dollars in thousands)
(Unaudited)

SCHEDULE II
AMSCAN HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2000, 1999 and 1998
(Dollars in thousands)

AMSCAN HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

AMSCAN HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
March 31, 2001
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATING BALANCE SHEET
March 31, 2001
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF INCOME
Three Months Ended March 31, 2000
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2001
(Dollars in thousands)
(Unaudited)

AMSCAN HOLDINGS, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2000
(Dollars in thousands)
(Unaudited)