['   ', ' ', '45', ' ', 'Report', 'of', 'Independent', 'Certified', 'Public', 'Accountants', '   ', '   ', '  ', '   ', '  ', '    ', '  ', '    ', '  ', '   ', ' ', '   ', ' ', ' ', '  ', '‘To', 'the', 'Board', 'of', 'Directors', 'and', 'Stockholders', 'of', 'American', 'Brands,', 'Ine.:', '‘We', 'have', 'examined', 'the', 'consolidated', 'balance', 'sheet', 'of', 'American', 'Brands,', 'Inc.', 'and', 'Subsidiaries', 'as', 'of', 'December', '31,', '1985', 'and', '1984,', 'and', 'the', 'related', 'consolidated', 'statements', 'of', 'income', 'and', 'retained', 'earnings', 'and', 'changes', 'in', 'financial', 'position', 'for', 'the', 'years', 'ended', 'December', '31,', '1985,', '1984', 'and', '1983.', 'Our', 'exam-', 'inations', 'were', 'made', 'in', 'accordance', 'with', 'generally', 'accepted', 'auditing', 'standards', 'and,', 'accordingly,', 'included', 'such', 'tests', 'of', 'che', 'accounting', 'records', 'and', 'such', 'other', 'auditing', 'procedures', 'as', 'we', 'considered', 'necessary', 'in', 'che', 'circumstances.', 'In', 'our', 'opinion,', 'the', 'aforementioned', 'financial', 'staternents', 'present', 'fairly', 'the', 'consolidated', 'financial', 'position', 'of', 'American', 'Brands,', 'Inc.', 'and', 'Subsidiaries', 'at', 'December', '31,', '1985', 'and', '1984,', 'and', 'the', 'consotidated', 'results', 'of', 'their', 'operations', 'and', 'changes', 'in', 'their', 'financial', 'position', 'for', 'the', 'years', 'ended', 'December', '31,', '1985,', '1984', 'and', '1983,', 'in', 'conformity', 'with', 'generally', 'accepted', 'acoount-', 'ing', 'principles', 'applied', 'on', 'a', 'consistent', 'basis.', 'Cangas', 'hyped', '1251', 'Avenue', 'of', 'the', 'Americas', 'New', 'York,', 'New', 'York', '10020', 'February', '3,', '[986', ' ', 'Report', 'of', 'Management', ' ', 'To', 'the', 'Stockholders', 'of', 'American', 'Brands,', 'Inc.:', 'We', 'have', 'prepared', 'the', 'consolidated', 'balance', 'sheet', 'of', 'American', 'Brands,', 'Inc.', 'and', 'Subsidiaries', 'as', 'of', 'December', '31,', '1985', 'and', '1984,', 'and', 'the', 'related', 'consolidated', 'statements', 'of', 'income', 'and', 'retained', 'earnings', 'and', 'changes', 'in', 'financial', 'position', 'for', 'the', 'years', 'ended', 'December', '31,', '1985,', '1984', 'and', '1983.', 'The', 'financial', 'statements', 'have', 'been', 'prepared', 'in', 'accordance', 'with', 'generally', 'accepted', 'accounting', 'principles,', 'Financial', 'information', 'else-', 'where', 'in', 'the', 'Annual', 'Report', 'is', 'consistent', 'with', 'that', 'in', 'the', 'financial', 'statements.', 'The', 'system', 'of', 'internal', 'controls', 'of', 'the', 'Company', 'and', 'its', 'subsidiaries', 'is', 'designed', 'to', 'provide', 'reasonable', 'assurances', 'that', 'the', 'financial', 'records', 'are', 'adequate', 'and', 'can', 'be', 'relied', 'upon', 'to', 'provide', 'information', 'for', 'che', 'preparation', 'of', 'financial', 'statements', 'and', 'that', 'established', 'policies', 'and', 'procedures', 'are', 'catefully', 'followed.', 'Independent', 'public', 'accountants', 'are', 'elected', 'annually', 'by', 'che', 'stockholders', 'of', 'the', 'Company', 'to', 'examine', 'financial', 'statements.', 'Coopers', '&', 'Lybrand,', 'independent', 'certified', 'public', 'accountants,', 'are', 'currently', 'engaged', 'to', 'perform', 'such', 'examination.', 'Their', 'examination', 'is', 'in', 'accordance', 'with', 'generally', 'accepted', 'auditing', 'standards', 'and', 'includes', 'tests', 'of', 'transactions', 'and', 'selective', 'tests', 'of', 'internal', 'accounting', 'controls.', 'The', 'Audit', 'Commitee', 'of', 'the', 'Boand', 'of', 'Directors,', 'consisting', 'solely', 'of', 'outside', 'directors,', 'meets', 'periodically', 'with', 'the', 'inde-', 'pendent', 'public', 'accountants,', 'internal', 'auditors', 'and', 'management', 'to', 'review’', 'accounting,', 'auditing', 'and', 'financial', 'reporting', 'matters.', '‘The', 'auditors', 'have', 'direct', 'access', 'to', 'the', 'Audit', 'Committee.', ' ']