Document 3NnavkOzGzoeG6qDzV7QNbR23

MAFCO CONSOLIDATED GROUP INC (Form- 10-K, Received. 03/28/1997 00.00.00) Page 5 of 116 cigar distribution channels, (iv) improve manufacturing processes and raw material procurement and (v) pursue selectively strategic acquisitions The Company's ability to implement its business strategy successfully will be dependent on business, financial and other factors beyond the Company's control, including, among others, prevailing changes m consumer preferences, access to sufficient quantities of raw materials, availability of trained laborers and changes m tobacco products regulation There can be no assurance that the Company will continue to be successful in implementing its business strategy or that the Company's net sales, operating margin and net margin will continue to increase at rates similar to those experienced by the Company in 1996. PRODUCTS 3 The Company manufactures cigars in all subcategories and at all price levels The Company also manufactures its own cigar boxes and man-made wrapper, filler and binder and little-cigar filters. Premium Cigars Premium cigars are generally hand made and primarily sell at retail price points above $1 00 per cigar. The Company's premium cigars are primarily long-filler, large cigars that have high quality natural leaf wrappers and binders The Company uses tobaccos of the best grades for its premium cigars. Such tobaccos are combined according to brand-specified formulas to create the "filler" of each cigar. In order to make hand made cigars, "binder" tobacco is hand-wrapped around filler to create the "bunch" which is placed into a mold Then, "wrapper" tobacco is hand-wrapped around the bunch, creatmg a premium cigar. In the Company's premium cigars, the wrapper, binder and filler are natural tobacco leaf. The Company's premium cigars include the well-known H UPMANN, MONTECRISTO, DON DIEGO, TE-AMO, SANTA DAMIANA, ROYAL JAMAICA, PRIMO DEL REY and MONTECRUZ brands as well as other recognized brand names The Company's premium cigars are manufactured in its Dominican Republic and Honduras facilities, except for TE-AMO, which is manufactured in Mexico and purchased from a third party. Mass Market Cigars Mass market cigars are machine made and generally have a retail pnce point of $1 00 or less per cigar. Mass market cigars use less expensive tobacco than premium cigars. The Company uses a variety of techniques and grades of tobacco to produce mass market cigars which compete at all the pnce points in the mass cigar market Mass market cigars include large cigars (weighing three pounds per 1,000 cigars or more) and little cigars (weighing less than three pounds per 1,000 cigars). Mass market large cigars generally consist of filler tobacco that is wrapped first with a binder and then with a wrapper. The more expensive mass market large cigars combine natural leaf wrapper and man made binder made from tobacco ingredients instead of natural binder, with filler threshed into short, uniform pieces In less expensive mass market large cigars, man-made wrapper made primarily from tobacco ingredients replaces natural tobacco leaf. The Company adds flavors and/or plastic tips to certain of its popularly priced mass market large cigars The Company's major mass market brands in the middle pnce range mclude ANTONIO Y CLEOPATRA, DUTCH MASTERS, EL PRODUCTO, BACKWOODS, SUPER VALUE and SUPRE SWEETS The Company's MURIEL brand is in the less expensive range httt>.//www edearoro com/EFX dll/EDGARpro dlPFetchFihngHTMLl?ID=969943&Ses 10/19/2003