SECURITIES & EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549
                                    Form 10-K
(Mark one)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Act of 1934
     (Fee required) for the fiscal year ended December 30, 2000, or
[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934 (No fee required) for the transition period from
     _______________to _________________

Commission file number 0-14800

                              X-RITE, INCORPORATED
   --------------------------------------------------------------------------
               (Exact name of registrant as specified in charter)

                 Michigan                              38-1737300
     -------------------------------              --------------------
     (State or other jurisdiction of               (I.R.S. Employer
      incorporation or organization)               identification No.)

   3100 44th Street, SW, Grandville, MI                   49418
--------------------------------------------------------------------------
 (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code (616) 534-7663
                                                          --------------
Securities registered pursuant to Section 12(b) of the Act: (none)
Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.10 per share
                         ----------------------------
                               (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes [X]  No [ ]

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

As of March 1, 2001,  21,380,502  shares of the  registrant's  common stock, par
value $.10 per share, were outstanding. The aggregate market value of the common
stock held by non-affiliates  of the registrant (i.e.,  excluding shares held by
executive officers, directors and control persons as defined in Rule 405, 17 CFR
230.405) on that date was  $154,330,881  computed  at the closing  price on that
date.

Portions  of the  Company's  Proxy  Statement  for the 2001  Annual  Meeting  of
Shareholders  are  incorporated  by reference  into Part III.  Exhibit  Index is
located at Page 35.
<PAGE>
PART I


ITEM 1. BUSINESS

(a)  General Development of Business
------------------------------------
X-Rite,  Incorporated  ("X-Rite" or the  "Company")  was organized as a Michigan
corporation in 1958. The business currently  conducted by the Company is largely
an outgrowth of the Company's x-ray marking and identification system introduced
in 1961. The Company's  silver recovery  equipment,  introduced in 1968, and its
first quality  control  instruments,  introduced in 1975, were developed to meet
the needs of film  processors,  a customer  class known to the Company  from its
sales of radio-opaque x-ray marking tape.

The  Company  has  expanded  its  product  offerings  by  concentrating  on  its
instrument  technologies and developing  expertise in the fields of light, shape
and color  measurement.  Pursuant  to that  strategy,  X-Rite  has  successfully
developed  and  marketed  numerous  quality  control  instruments,  software and
accessories.

The  Company  made its initial  public  offering of common  stock  during  1986.
Proceeds from that public  offering were used to finance the  construction  of a
new  building  for office,  manufacturing  and  warehouse  needs,  purchase  new
production and laboratory equipment, retire debt and provide working capital.

X-Rite has grown through internal  expansion and through  acquisitions.  In 1993
the Company established two foreign sales and service subsidiaries; X-Rite GmbH,
Cologne, Germany and X-Rite Asia-Pacific Limited, Hong Kong. In 1994 the Company
purchased a foreign sales and service  subsidiary,  X-Rite  Limited,  Congleton,
Cheshire, England, and acquired certain assets of Colorgen, Inc. ("Colorgen"), a
Massachusetts-based  manufacturer  of retail  point-of-purchase  paint  matching
systems. In 1995 the Company acquired all of the outstanding stock of Labsphere,
Inc. ("Labsphere") of North Sutton, New Hampshire. Labsphere was founded in 1981
and is a leading  manufacturer of light measurement and light source integrating
systems and instrumentation. In 1997, the Company acquired substantially all the
assets of Light Source Computer Images, Inc. ("Light Source"). Light Source is a
California-based producer of scanning,  imaging and print optimization software.
In 1998, the Company established a French subsidiary,  X-Rite Mediterranee SARL,
which acquired the branch of an X-Rite dealer  located near Paris.  In 2000, the
Company acquired substantially all the assets of Optronik,  GmbH ("Optronik") of
Berlin,   Germany.   Optronik  is  a  leading   developer  and  manufacturer  of
non-contact,  on-line  color and light  measurement  technologies  for web based
processes.  Optronik's facilities are the Company's first research,  development
and  manufacturing  facilities  in Europe.  Also in 2000,  the Company  formed a
domestic   subsidiary,   Coherix   Corporation   ("Coherix"),   which   acquired
substantially  all the assets of the HoloVision  Products Group of Veridian-ERIM
International. The Coherix product line uses tunable laser technology to provide
three  dimensional  mapping of the surface of  physical  objects.  In 2000,  the
Company formed a strategic venture capital group, XR Ventures,  LLC. The group's
purpose is to direct and manage  X-Rite's  holdings in start up companies in the
high technology field.


(b)  Financial Information About Operating Segments
---------------------------------------------------
For purposes of the consolidated  financial  statements included as part of this
report,  all operations of the Company are classified in one operating  segment:
quality control instruments and accessories.  Accordingly,  no separate industry
segment information is presented.
<PAGE>
(c)  Narrative Description of Business
--------------------------------------

Principal Products
The  Company  primarily  manufactures  and  sells  proprietary  quality  control
instruments  which utilize  advanced  electronics and optics  technologies.  The
principal types of products include:

Densitometers
X-Rite's  first  densitometer  was  introduced  in 1975.  A  densitometer  is an
instrument  that  measures  optical  or  photographic  density,   compares  that
measurement to a reference  standard,  and signals the result to the operator of
the instrument. There are two types of densitometers;  transmission densitometer
and reflection densitometer.

A  transmission  densitometer  measures the amount of light that is  transmitted
through film.  Some models are designed for use in controlling  variables in the
processing of x-ray film in medical and  non-destructive  testing  applications.
Other  models  are  designed  to be used to  control  process  variables  in the
production of  photo-transparencies,  such as  photographic  film and microfilm.
Reflection  densitometers measure the amount of incident light that is reflected
from a surface, such as ink on paper.

X-Rite introduced its spectrodensitometer in 1990 which combines the function of
a densitometer with the functions of a colorimeter and a spectrophotometer  (see
following  paragraphs) to provide  measurements  for monitoring and  controlling
color reproduction. Also introduced in 1990 was the scanning densitometer, which
is used for controlling the color of printed inks in graphic arts applications.

In 1994 the Company began  delivering  densitometer  based  products for digital
imaging  applications.  Products which  calibrate  image  setters,  raster image
processors  and digital  printers were the initial  entrants into the market for
use in desktop publishing and computer based printing activities.

In 1998 X-Rite  launched  its 500 series  spectrodensitometer  which is the only
hand held densitometer equipped with a spectral engine. Spectral engines are the
most  accurate  type  of  measurement   engines  available  and  offer  precise,
repeatable and reliable measurements for pressroom quality control.

The Company  continued to expand the 500 series in 1999 with the introduction of
the  micro-spot  spectrodensitometer.   This  device  is  the  first  hand  held
measurement  instrument  to  accurately  read color bars and related micro sized
color control elements as small as 1/16" (1.6mm).

The Company  introduced  the Auto  Tracking  Densitometer  (ATD) for News during
2000. Designed specifically for newspaper presses, ATD News measures and reports
density levels from continuous  color rules as well as automating the process of
evaluating and adjusting gray balance in newspaper production.

Sensitometers
Sensitometers  have been  manufactured  by X-Rite since 1975. This instrument is
used to expose various types of  photographic  film in a very precise manner for
comparison  to a reference  standard.  The exposed  film is  processed  and then
"read"  with a  densitometer  to  determine  the  extent of  variation  from the
standard.

Colorimeters
In 1989 the Company introduced its first colorimeter. Colorimeters measure light
much  like the human eye using  red,  green and blue  receptors  and are used to
measure printed colors on packages, labels, textiles and other materials where a
product's appearance is critical for buyer acceptance.  In 1990 X-Rite added the
spectrocolorimeter  which is a combination  instrument that performs colorimeter
functions by applying  spectrophotometric  techniques and  principles  (see next
paragraph), thereby greatly improving the accuracy and reliability
<PAGE>
of the instrument.

Spectrophotometers and Accessories
The  spectrophotometer,  introduced  in 1990,  is  related  to the  colorimeter;
however,  it measures  light at many points  over the entire  visible  spectrum,
generally with the high degree of accuracy required in laboratory  measurements.
Spectrophotometers are used in color formulation for materials such as plastics,
paints, inks, ceramics and metals.

In 1991 the Company introduced a multi-angle  spectrophotometer which is used to
measure  the  color  of  metallic  finishes.   This  instrument  is  useful  for
controlling  the color  consistency of automotive  paints and other metallic and
pearlescent   coatings.   In   1992   the   Company   introduced   a   spherical
spectrophotometer  which measures the color of textured  surfaces and is used in
the textile, paint and plastics industries.

During 1993 and 1994, X-Rite introduced a group of color formulation and quality
control software packages designed for use with its spectrophotometer  products.
This software is generally  combined with a computer and an instrument  and sold
as a turn-key system.  Marketing  efforts with respect to this family of related
products are being directed at packaging  material printers,  textile,  plastic,
paint, ink and coatings manufacturers.

In 1994 and 1995,  X-Rite  introduced  products  developed for desktop  graphics
professionals.  One of the  instruments in this product  category is a hand-held
spectrophotometer  which  captures  color from almost any item and sends it to a
personal  computer.  Once  there,  the color can be used in a variety of graphic
design  applications,  previewed and prepared for output,  and organized  into a
custom  electronic  color  library;  colors  can  also be  transmitted  to other
personal computers anywhere in the world using X-Rite's ColorMail software.

Another  1995  introduction  was  the  auto-tracking   spectrophotometer.   This
instrument  is used in the graphic  arts  industry to help control hard to match
colors such as pastels, reflex blue, dark reds and colors used in corporate logo
standards.

The 1995  acquisition  of Labsphere  expanded  the  Company's  product  lines to
include   standard   accessories   which  are  compatible  with  a  majority  of
commercially available spectrophotometers  worldwide. These accessories extend a
spectrophotometer's capabilities and enhance its performance.

In  1999  the   company   introduced   the  DTP41/T   series  of   auto-tracking
spectrophotometer.   These  instruments  enable  the  automated  measurement  of
transparent and semi-transparent  material, as well as prints. In addition, they
provide transmission and ultraviolet capabilities.  This technology is ideal for
use in commercial photo labs, print for pay centers and research facilities.

In 1999 the SP60,SP62,  and SP64 portable  sphere  spectrophotometer  series was
introduced.  These  instruments  were designed to provide a fast,  precise,  and
accurate color  measurement on a wide array of materials  ranging from paper and
paint to plastics and textiles.

The Company also released QA 2000 in 1999, a turnkey  software  package designed
to enhance and support the new multi-angle  sphere  spectrophotometer  products.
This product is a user  friendly  Windows based  software  that utilizes  client
/server database  technology.  The network capabilities allow for multiple users
in different locations to access a single database.

In 2000, the Company introduced Formulation-Master 2001. Formulation-Master 2001
is an enhanced  version of three separate  software  packages,  Plastic  Master,
Paint Master and QA-Master 2000,  that will allow all color assurance  processes
to be performed with one streamlined software program.
<PAGE>
Point-of-Purchase Paint Matching Systems
In 1993 the Company  introduced  computerized  point-of-purchase  paint matching
systems  for use by paint  stores,  hardware  stores,  mass  merchants  and home
improvement centers.  After successfully  establishing its own line of products,
the  Company  acquired  certain  assets  of  Colorgen  in 1994.  Colorgen  had a
significant share of the U.S. point-of-purchase paint matching market. With that
acquisition,  X-Rite has established a significant market presence in the retail
point-of-purchase architectural paint matching business.

Integrating Spheres and Integrating Sphere Systems
With  the  acquisition  of  Labsphere,  X-Rite  added  integrating  spheres  and
integrating  sphere  systems  to  its  product  lines.  Applications  for  these
instruments  include testing  incandescent and fluorescent lamp output,  testing
light  emitting  diodes and fiber  optics;  calibration  of remote  sensors  and
reflectance and transmittance light measurements.

Reflectance Materials and Coatings
Labsphere  is also an OEM  supplier of  proprietary  reflectance  materials  and
coating  services.  These  materials  and services are used in such  products as
photographic processing equipment,  check scanning systems, x-ray film analysis,
backlight illuminators and surface profiling equipment.

Other Products
For many years,  X-Rite has also  manufactured  silver  recovery  equipment  and
radio-opaque  marking tape.  Collectively,  these other products  represent less
than five percent of the Company's consolidated net sales.

Sales of the Company's  products are made by its own sales personnel and through
independent manufacturer's  representatives.  Certain products not sold directly
to end users are  distributed in the U.S.  through a network of fifteen  hundred
independent  dealers and  outside  the U.S.  through  four  hundred  independent
dealers in fifty foreign countries. Independent dealers are managed and serviced
by the Company's sales staff and by independent sales representatives.

New Product and Industry Segment Information
During the past twelve months, the Company has not made any public  announcement
of, or otherwise made public  information about, a new product or a new industry
segment which would require the investment of a material amount of the Company's
assets or which would otherwise result in a material cost.

Raw Materials
With  very  few   exceptions,   raw  materials  and  components   necessary  for
manufacturing  products and  providing  services are  generally  available  from
several sources. The Company does not foresee any unavailability of materials or
components which would have a material adverse effect on its overall business in
the near term.

Patents and Trademarks
The Company owns 37 U.S.  patents and 19 foreign  patents which are  significant
for products it  manufactures.  The Company  currently has 6 U.S. and 18 foreign
patent  applications  on file.  While the Company  follows a policy of obtaining
patent  protection  for its  products,  it does not believe that the loss of any
existing  patent,  or failure to obtain any new  patents,  would have a material
adverse impact on its competitive position.

Seasonality
The  Company's  business is generally  not subject to seasonal  variations  that
would significantly impact sales, production or net income.

Working Capital Practices

The Company  does not believe that it or the industry in general has any special
practices  or  special  conditions  affecting  working  capital  items  that are
significant for an understanding of the Company's business.
<PAGE>
Significant Customers
No single customer  accounted for more than 10% of total net sales in 2000, 1999
or 1998. The Company does not believe that the loss of any single customer would
have a material adverse effect on the Company.

Backlog
The  Company's  backlog of scheduled  but  unshipped  orders was $8.9 million at
March 1, 2001 and $6.8  million at March 1, 2000.  The March 1, 2001  backlog is
expected to be filled during the current fiscal year.

Competition
The Company has few competitors  producing  competing  medical and  photographic
instruments and believes its share in that market is substantial.

There are  approximately ten firms producing  competing  products in the graphic
arts/digital  imaging  categories,   and  approximately  five  manufacturers  of
competing products in the color and appearance market.

The primary  basis of  competition  for all the  Company's  products is quality,
design and service.  The Company believes that superior quality and features are
competitive advantages for its products.

Research, Development and Engineering
During 2000,  1999 and 1998,  respectively,  the Company  expensed  $11,771,000,
$10,689,000 and $10,044,000 on research, development and engineering. X-Rite has
no customer sponsored research and development activities.

Human Resources
As of  March  1,  2001,  the  Company  employed  745  persons;  634 in its  U.S.
operations and 111 in its foreign  subsidiaries.  The Company  believes that its
relations with employees are excellent.

(d)  Financial Information About Foreign and Domestic Operations
----------------------------------------------------------------
See Note 1 to the consolidated financial statements contained in Part II, Item 8
of this report.
<PAGE>
ITEM 2.  PROPERTIES

The Company owns or leases properties throughout the world, listed below are the
principal properties owned or leased as of March 1, 2001:
                                                                  Owned
        Location                   Principal Uses               or Leased
  ----------------------    ---------------------------         ---------
  Grandville, MI            Manufacturing, R,D&E, sales,          Owned
                            customer service, warehouse
                            and administration

  Grandville, MI            Sales and training                    Leased


  Ann Arbor, MI             Manufacturing, R,D&E, sales,
                            customer service, and warehouse       Leased

  North Sutton, NH          Manufacturing, R,D& E, sales,         Owned
                            customer service, warehouse
                            and administration

  Littleton, MA             Customer service, R,D&E, and          Leased
                            sales

  Poynton, England          Sales and customer service            Leased

  Cologne, Germany          Sales and customer service            Leased

  Berlin, Germany           Manufacturing, R,D& E, sales,
                            customer service, warehouse           Leased
                            and administration

  Quarry Bay, Hong Kong     Sales and customer service            Leased

  Brno, Czech Republic      Sales                                 Leased

  MASSY, France             Sales and customer service            Leased


Collectively,  X-Rite and its subsidiaries own approximately 288,000 square feet
of space and lease approximately  58,000 square feet.  Management  considers all
the  Company's  properties  and  equipment to be well  maintained,  in excellent
operating condition, and suitable and adequate for their intended purposes.

ITEM 3.  LEGAL PROCEEDINGS

The  Company is not  presently  engaged in any  material  litigation  within the
meaning  of Item  103 of  Regulation  S-K.  The  Company  is  involved  in legal
proceedings and litigation arising in the ordinary course of business.

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

Not applicable,  no matters were submitted to a vote of security  holders during
the fourth quarter of the year end December 30, 2000.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table lists the names,  ages and positions of all of the Company's
executive  officers.  Officers are elected annually by the Board of Directors at
the first  meeting of the Board  following the Annual  Meeting of  Shareholders.
Except as discussed, each of the
<PAGE>
named  officers  has served the Company in an  executive  capacity for more than
five years.

                                                           Position
         Name          Age             Position           Held Since
--------------------  -----  ---------------------------  ----------
Richard E. Cook         55   President and Chief             1998 (1)
                               Executive Officer
Bernard J. Berg         57   Senior Vice President,          1983
                               Engineering
Duane F. Kluting        51   Vice President,
                               Chief Financial Officer       1992
Jeffrey L. Smolinski    39   Vice President, Operations      1994
Joan Mariani Andrew     42   Vice President, Sales &
                               Marketing                     1995

(1) Prior to joining  X-Rite,  Mr. Cook was the  President  and Chief  Operating
Officer of  Cascade  Engineering,  a  developer  and  producer  of plastic  mold
injection  technology  and  products.  Mr. Cook held that position for more than
five years.
<PAGE>
                                  PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
         MATTERS

The  Company's  common  stock is quoted in the NASDAQ - National  Market  System
under the symbol  XRIT.  As of March 1, 2001,  there  were  approximately  1,500
shareholders  of record.  Ranges of high and low sales  prices  reported  by The
NASDAQ  National  Market  System  for the past two  fiscal  years  appear in the
following table.
<TABLE>
                                                            Dividends
                                           High     Low     Per Share
                                          ------   ------   ---------
      <S>                                 <C>      <C>      <C>
      Year Ended December 30, 2000:
         Fourth Quarter                   $ 9.00   $ 5.00     $.025
         Third Quarter                     11.75     8.00      .025
         Second Quarter                    13.50     8.56      .025
         First Quarter                     13.25     6.00      .025
      Year Ended January 1, 2000:
         Fourth Quarter                     7.44     5.75      .025
         Third Quarter                      7.75     6.31      .025
         Second Quarter                     7.75     6.00      .025
         First Quarter                      8.87     6.18      .025
</TABLE>
The Board of  Directors  intends to  continue  paying  dividends  at the current
quarterly rate of 2.5 cents per share in the foreseeable  future, and retain the
balance of the Company's earnings for use in the expansion of its businesses.


ITEM 6. SELECTED FINANCIAL DATA

Quarterly financial data are summarized as follows:
<TABLE>
                                 (in thousands except per share data)

                                                                   Diluted
                                       Gross    Operating  Net     Earnings
     Quarter                  Sales    Profit   Income     Income  Per Share
---------------------------  -------  -------  ---------  -------  --------
2000:
<S>                         <C>       <C>       <C>       <C>        <C>
  First                      $26,134  $17,123   $ 5,259    $3,556    $.17
  Second                      26,232   16,756     5,215     3,616     .17
  Third                       23,087   14,619     2,963     1,863     .09
  Fourth                      27,996   18,008     4,636     3,373     .15
                             -------  -------   -------    ------    ----
                            $103,449  $66,506   $18,073   $12,408    $.58
                            ========  =======   =======   =======    ====
1999:
  First                      $23,688  $15,855   $ 4,376   $ 2,983    $.14
  Second                      24,331   16,107     4,956     3,326     .15
  Third                       23,764   15,420     4,613     3,104     .14
  Fourth                      28,426   18,609     6,308     4,236     .19
                             -------  -------   -------   -------    ----
                            $100,209  $65,991   $20,253   $13,649    $.62
                            ========  =======   =======   =======    ====
</TABLE>
<PAGE>
Selected financial data for the five years ended December 30, 2000 is summarized
as follows:
<TABLE>
                                 (in thousands except per share data)
                             2000      1999      1998      1997      1996
                           -------   -------   -------   -------   -------
<S>                       <C>       <C>        <C>       <C>       <C>
Net sales                 $103,449  $100,209   $94,811   $96,991   $84,394
Net income                  12,408    13,649     6,862    18,022    15,381
Net income per share:
  Basic                        .59       .65       .33       .85       .73
  Diluted                      .58       .62       .32       .85       .73
Dividends per share            .10       .10       .10       .10       .10

Total assets               125,683   107,819    95,444    92,468    78,951
Long-term debt                 -0-       -0-       -0-       -0-       -0-
</TABLE>


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

The issues  discussed in management's  discussion and analysis should be read in
conjunction with the Company's  consolidated  financial  statements and notes to
the consolidated financial statements

The  following  table  sets  forth   information   derived  from  the  Company's
consolidated statements of income expressed as a percentage of net sales:

<TABLE>
                                    2000       1999       1998
                                   -----      -----      -----
   <S>                             <C>        <C>        <C>
   Net sales                       100.0%     100.0%     100.0%
   Cost of sales                    35.7       34.1       34.4
                                   -----      -----      -----
     Gross profit                   64.3       65.9       65.6

   Operating expenses:
     Selling & marketing            21.0       20.1       21.7
     General & administrative       14.5       14.9       15.5
     Research, development &
       engineering                  11.4       10.7       10.6
     Write-down of digital
       imaging assets                -          -          7.0
                                   -----      -----      -----
                                    46.9       45.7       54.8
                                   -----      -----      -----
     Operating income               17.4       20.2       10.8

   Other income                      1.0        0.8        0.4
                                   -----      -----      -----
     Income before income taxes     18.4       21.0       11.2

   Income taxes                      6.5        7.4        4.0
                                   -----      -----      -----
     Net income                     11.9%      13.6%       7.2%
                                   ======     ======     ======
</TABLE>
<PAGE>
Net Sales

Net sales in 2000 were $103.4 million, a Company record and a 3.2% increase over
1999 sales of $100.2  million.  Sales in 1999 were an increase of 5.7% over 1998
sales of 94.8 million.

New product  introductions  in 2000 helped the  Printing,  Labsphere and Imaging
business units record 20.2%, 11.8% and 3.3% sales increases,  respectively.  The
Coatings business unit experienced a 7.3% decrease in sales during 2000.

We are particularly  pleased by our continued growth in markets outside of North
America.   Revenues  in  local  currencies  grew   approximately   28%  and  20%
respectively,  in Asia and Europe in 2000 as compared to 1999. These sales gains
were mitigated somewhat by weakness in the major European currencies as compared
to the U.S.  dollar.  Had exchange rates remained  stable in 2000 as compared to
1999,  consolidated sales as reported would have increased by approximately $2.6
million dollars.

Lower  demand in the retail  paint  matching and  aftermarket  auto  refinishing
markets  in the  Coatings  industry  were  primary  factors  in  domestic  sales
decreasing 1.0% in 2000 as compared to 1999.

Price increases had a nominal effect on sales levels in 2000, 1999 and 1998.

Gross Profit

Gross profit margin  dropped  slightly  during 2000 due to the impact of foreign
exchange rates and competitive pricing pressures.  Gross profit percentages were
64.3%, 65.9% and 65.6% in 2000, 1999 and 1998, respectively.

Selling and Marketing Expenses

Over  the  past  three  years,  the  Company  has  significantly  increased  its
investment in sales and marketing  programs  outside North America.  Selling and
marketing  expenditures were $21.7,  $20.1 and $20.5 million for 2000, 1999, and
1998,  respectively.  In 2000,  costs increased 8.0% over 1999, while 1999 costs
were 1.9% lower than in 1998. These  investments have been targeted at expanding
X-Rite's global marketing  reach.  These efforts have been rewarded by growth in
Europe  and Asia  over the past two  years.  The  Company  intends  to  continue
investing to expand its global presence in 2001, as well as to serve new markets
such as telecommunications and biomedicine.

General and Administrative

General and administrative expenses in 2000, 1999 and 1998 were $15.0, $15.0 and
$14.7 million  respectively.  Inflationary and actual expense growth in 2000 was
offset by efficiencies  gained through facilities  consolidation and the effects
of foreign exchange rates. Expenses increased 1.4% in 1999 over 1998 due to wage
inflation and corporate wide technology upgrades.

Research Development and Engineering

Research, Development and Engineering (RD&E) costs in 2000 were $11.8 million as
compared to $10.7  million in 1999,  a 10.3%  increase.  RD&E costs in 1998 were
$10.0 million.  The above expenses  include costs of $.03, $1.7 and $1.8 million
in 2000,  1999 and 1998,  respectively,  associated  with a west coast  research
center which was closed in the first quarter of 2000.

The year over year increase in RD&E for 2000 reflects  X-Rite's  emphasis on new
product  development  for its core color  measurement  applications,  as well as
research and development directed toward creating measurement  solutions for new
markets.   We  expect  research  investment  will  continue  to  grow  with  the
integration of the Optronik and Coherix product  development  teams into X-Rite.
(see Acquisitions and Investments below)
<PAGE>
In  addition  to the RD&E  costs  reported  as  operating  expenses,  costs were
incurred to develop new  software  products in each of the last three years that
were not included  with RD&E  expenses.  Those costs were  capitalized,  and the
related  amortization  expense was  included in cost of sales (see Note 2 to the
accompanying  consolidated  financial  statements).  Software  development costs
capitalized  totaled  $1.6,  $1.3  and $1.2  million  in  2000,  1999 and  1998,
respectively.

Write-Down of Digital Imaging Assets

The  Company  recognized  a  nonrecurring  charge of $6.7  million  in the third
quarter of 1998 for the write-down of certain digital imaging assets  associated
with the 1997 acquisition of Light Source Computer  Images,  Inc. (see Note 8 to
the accompanying  consolidated financial  statements).  Increased competition in
the digital  imaging  business and a continued  rapid  decline in the demand for
certain  digital imaging  instruments,  software and technology were the primary
factors that led the Company to  reevaluate  the markets Light Source sells into
and the Light Source  product lines,  which then forced the  recognition of this
charge.

Other Income

Other income in 2000,  1999 and 1998 consists  primarily of interest  income and
foreign exchange gains and losses. The Company's investment portfolio is made up
of short term tax exempt municipal bonds, mutual funds and corporate securities.
Year over year growth in other  income is due  primarily  to the growth of funds
available for investment.

Income Taxes

The effective tax rate has remained  essentially  unchanged at approximately 35%
during the last three years.

Inflation

The Company has  experienced  the effects of inflation  on its business  through
increases in the cost of services,  employee  compensation  and fringe benefits.
Although  modest  adjustments  to selling  prices have  deterred  the effects of
inflation,  the Company  continues to explore ways to improve  productivity  and
reduce operating costs. The Company does not anticipate any significant  adverse
impact from inflation in the coming year.

Approximately  80% of the Company's  transactions  are invoiced and paid in U.S.
dollars.

Liquidity and Capital Resources

Cash flow from operations in 2000 was $20.5 million, compared to $20.4 and $17.9
million for 1999 and 1998, respectively.  Net income was the principal source of
cash from operations.  Certain  expenses  included in net income did not require
the use of cash. The most significant  non-cash  expenses in 2000, which totaled
$5.7 million, were depreciation and amortization. For 1999 and 1998 depreciation
and amortization charges were $5.9 and $5.8 million,  respectively. The largest,
single  non-cash  expense  in 1998 was for the  write-down  of  digital  imaging
assets, which was $6.7 million.

Cash and  short-term  investments  at December 30, 2000,  were $31.1  million as
compared to $29.0  million at January 1, 2000. We are pleased with our growth in
liquidity in 2000, as it was an active year for X-Rite in terms of  acquisitions
and  investments   (see   Acquisitions   and  Investments   below)  and  capital
expenditures.  At December  30, 2000,  the Company had working  capital of $61.7
million as compared to $60.9  million at January 1, 2000.  Its ratios of current
assets  to  current  liabilities  were  5.9:1  and  9.7:1  for  2000  and  1999,
respectively.  Current  liabilities  were $12.5 million at December 30, 2000, an
increase of $5.5 million over 1999. The increase in current  liabilities and the
reduction  of the current  ratio was due to an  increase in taxes  payable and a
corresponding increase in current tax assets.
<PAGE>
In addition to funding ongoing operations,  the Company expects to use its funds
for future acquisitions,  capital expenditures,  stock repurchases,  new product
development and expansion of our marketing efforts.

Since going public in 1986,  the Company has funded its  operations,  investing,
acquisitions and financing  activities from internally  generated cash flows and
cash reserves.  Management  anticipates that X-Rite's current liquidity,  future
cash flows and credit line will be sufficient to fund the Company's  operations,
life insurance premiums,  capital expenditures and dividends for the foreseeable
future.  Should additional funding be necessary,  additional short- or long-term
borrowing  arrangements  are the most probable  alternatives for meeting capital
resource and liquidity needs.  The Company  maintains a revolving line of credit
in the amount of $20 million. The line was not used during 2000.

X-Rite's  short-term  investments consist primarily of tax free municipal bonds,
high grade corporate bonds, mutual funds and preferred stocks. Historically, the
cost of the Company's investments has approximated market value.

Capital  expenditures of $4.1 million were made in 2000. These expenditures were
made  primarily  for  machinery,  equipment,  building  improvements,   computer
hardware and  software.  Capital  expenditures  in 1999 were $4.3  million.  The
Company  anticipates  making capital  expenditures in 2001 of approximately $5.0
million.

In September  2000 the Board of Directors  authorized a common stock  repurchase
program of up to one  million  shares of  outstanding  stock.  The timing of the
program  and  amount  of the  stock  repurchases  will be  dictated  by  overall
financial  and market  conditions.  At  December  30,  2000,  no shares had been
repurchased.

During  1998,  the Company  announced it had entered  into  agreements  with its
founding  shareholders  for the future  purchase by the Company of 4.54  million
shares, or 21.3 percent of the Company's outstanding stock at December 30, 2000.
The stock  purchases will occur following the later of the death of each founder
and his spouse. The cost of the redemption agreements will be funded by proceeds
from life insurance  policies  totaling $160 million,  or $35.24 per share to be
repurchased.  The price the  Company  will pay the  founders'  estates for these
shares will reflect a 10 percent  discount from the market  price,  although the
discounted price may not be less than $10 per share or more than $25 per share.

At the maximum price,  the aggregate  stock purchases will total $113.5 million.
The Company  anticipates that certain stock purchases will not coincide with the
receipt of insurance proceeds; therefore, borrowed funds may be needed from time
to time to finance the Company's purchase  obligations.  Insurance was purchased
at the $160 million level in order to cover both the maximum aggregate  purchase
price and  anticipated  borrowing  costs.  Life  insurance  premiums  total $4.3
million each year while all the policies  remain in effect.  Of the $4.3 million
paid in 2000 and 1999, approximately $1.0 and $1.2 million,  respectively,  were
classified as expense.

The Company's most significant  financing activities in 2000 were the payment of
dividends to shareholders  and the proceeds from  liquidation of investments due
to the expiration of the Light Source Computer Images, Inc. escrow fund.

During the last three years  dividends were paid at a rate of 10 cents per share
or approximately  $2.1 million dollars annually.  At the present time, the Board
of Directors intends to continue payments at this rate.

During 2000 the escrow fund  established  as part of the  agreement  to purchase
Light  Source  Computer  Images  Inc.  in  1997  expired.  (see  Note  8 to  the
accompanying  consolidated  financial statements) The contingent elements of the
underlying escrow agreement were not met, thereby releasing the Company from any
additional  obligations  with respect to the escrow fund. The investments in the
escrow fund were liquidated and the proceeds returned to the Company.
<PAGE>
Acquisitions and Investments

2000 was an active year in terms of acquisitions and technology investments.  We
acquired the assets of two measurement  technology  companies for  approximately
$4.5 million.  In addition,  we formed a strategic venture capital group focused
specifically on high technology investments.

In  the  third  quarter  of  2000,   the  Company   announced  the  purchase  of
substantially  all of the  assets  of  Optronik  GmbH by X-Rite  GmbH.  Based in
Berlin,  Germany,  Optronik is a leading provider of color and light measurement
instrumentation  and  software.  Focused  primarily  on on-line  color and light
measurement for web based processes,  its non-contact  measurement  technologies
are new to  X-Rite.  The  Berlin  location  gives  X-Rite  its  first  research,
development and manufacturing capabilities in Europe.

Also in the third quarter we announced the purchase of substantially  all of the
assets of the HoloVision  Products Group of Veridian-ERIM  International.  These
assets were  purchased by a newly  formed  subsidiary  of X-Rite  named  Coherix
Corporation (formerly known as HoloVision Acquisition Company).

The  products of Coherix use tunable  laser  technology  to  accurately  map the
surface of physical objects for a variety of industrial applications.  Currently
the technology is used to provide noncontact measurement  applications requiring
a three  dimensional  perspective.  The  measurement  of shape  complements  the
traditional X-Rite  technologies of color and light measurement.  The ability to
provide high resolution,  non contact, spatial measurement will elevate X-Rite's
exposure to many dynamic markets, such as electronic components,  micromachines,
telecommunications  and biomedicine.  Coherix is located in Ann Arbor, Michigan,
but will also be  conducting  research,  development  and  manufacturing  at the
X-Rite headquarters in Grandville, Michigan.

XR  Ventures,  LLC is a  strategic  venture  capital  group  formed  in 2000 and
majority owned by X-Rite.  Its mission is to direct and manage X-Rite's holdings
in start up companies in high technology  fields.  Our partners in the group are
Dr. Peter M. Banks and Mr. James A. Knister.  Both have had extensive careers as
executives in technology companies. In addition to their roles with XR Ventures,
both serve on the Board of Directors of X-Rite, Incorporated.  The venture group
seeks  out,  but is not  restricted  to  companies  with  technologies  that are
directly  related to current X-Rite  technologies,  or technologies  that we are
interested  in  pursuing  including   biosensors,   micro  mechanical   systems,
telecommunication components and information technologies. At December 30, 2000,
the fund held minority positions in seven companies,  with a total investment of
approximately $4.6 million.

FORWARD-LOOKING STATEMENTS:

This  discussion and analysis of financial  condition and results of operations,
as well as other sections of our Form 10-K, contain  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section  21E of the  Securities  Exchange  Act,  as  amended,  that are based on
management's  beliefs,   assumptions,   current   expectations,   estimates  and
projections about the industries it serves,  the economy,  and about the Company
itself.  Words  such as  "anticipates,"  "believes,  "  "estimates,"  "expects,"
"likely," "plans,"  "projects,"  "should,"  variations of such words and similar
expressions  are intended to identify  such forward  looking  statements.  These
statements are not guarantees of future  performance  and involve certain risks,
uncertainties,  and  assumptions  that are  difficult  to predict with regard to
timing, extent, likelihood and degree of occurrence.  Therefore,  actual results
and outcomes may  materially  differ from what may be expressed or forecasted in
such forward looking statements. Furthermore, X-Rite, Incorporated undertakes no
obligation to update, amend or clarify forward looking statements,  whether as a
result of new information, future events or otherwise.
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Registrant's market risk sensitive financial  instruments do not subject the
Registrant to material market risk exposures.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  following  report,  financial  statements  and notes are included with this
report:

    Report of Independent Public Accountants
    Consolidated Balance Sheets
    Consolidated Statements of Temporary and Permanent Shareholders' Investment
    Consolidated Statements of Income
    Consolidated Statements of Permanent Shareholders' Investment
    Consolidated Statements of Cash Flows
    Notes to Consolidated Financial Statements
<PAGE>
                    Report of Independent Public Accountants




To the Shareholders of X-Rite, Incorporated:

We  have  audited  the  accompanying  consolidated  balance  sheets  of  X-Rite,
Incorporated (a Michigan  corporation)  and subsidiaries as of December 30, 2000
and January 1, 2000,  and the related  consolidated  statements of temporary and
permanent shareholders'  investment,  income, permanent shareholders' investment
and cash flows for each of the three  years in the  period  ended  December  30,
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We conducted our audits in accordance with 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 financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of X-Rite,  Incorporated  and
subsidiaries  as of December  30,  2000 and January 1, 2000,  and the results of
their  operations and their cash flows for each of the three years in the period
ended  December 30, 2000, in conformity  with  accounting  principles  generally
accepted in the United States.



                                        /s/ Arthur Andersen LLP



Grand Rapids, Michigan,
January 30, 2001
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
<TABLE>
                                             December 30,     January 1,
                                                 2000           2000
                                             -----------    -----------
ASSETS
<S>                                          <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                  $18,595,000    $ 6,898,000
  Short-term investments                      12,469,000     22,129,000
  Accounts receivable, less allowances of
  $1,149,000 in 2000 and $1,110,000 in 1999   19,463,000     20,249,000
  Inventories                                 15,800,000     15,410,000
  Deferred taxes                               6,503,000      1,642,000
  Prepaid expenses and other current assets    1,427,000      1,565,000
                                             -----------    -----------
      Total current assets                    74,257,000     67,893,000

PLANT AND EQUIPMENT:
  Land                                         2,278,000      2,278,000
  Buildings and improvements                  15,872,000     15,501,000
  Machinery and equipment                     14,904,000     13,368,000
  Furniture and office equipment              13,284,000     13,169,000
  Construction in progress                       574,000         90,000
                                             -----------    -----------
                                              46,912,000     44,406,000
  Less accumulated depreciation              (25,046,000)   (23,351,000)
                                             -----------    -----------
                                              21,866,000     21,055,000

OTHER ASSETS:
  Costs in excess of net assets acquired      10,604,000      8,036,000
  Cash surrender values founders policies      9,918,000      6,616,000
  Other noncurrent assets                      9,038,000      4,219,000
                                             -----------    -----------
                                              29,560,000     18,871,000
                                             -----------    -----------

                                            $125,683,000   $107,819,000
                                            ============    ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS--Continued
<TABLE>
                                             December 30,    January 1,
                                                 2000           2000
                                             -----------    -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S>                                          <C>            <C>
CURRENT LIABILITIES:
  Accounts payable                           $ 2,456,000    $ 2,277,000
  Accrued liabilities--
    Payroll and employee benefits              2,603,000      2,043,000
    Income taxes                               5,063,000        325,000
    Other                                      2,423,000      2,352,000
                                             -----------    -----------
      Total current liabilities               12,545,000      6,997,000



TEMPORARY SHAREHOLDERS' INVESTMENT:
  Value of shares subject to redemption
   agreements; 4,540,000 shares issued
   and outstanding in 2000 and 1999           45,400,000     45,400,000


PERMANENT SHAREHOLDERS' INVESTMENT:
  Preferred stock, $.10 par value,
    5,000,000 shares authorized; none issued      -              -
  Common stock, $.10 par value, 50,000,000
    shares authorized; 16,797,321 and
    16,700,896 shares issued and outstanding
    in 2000 and 1999 respectively,
    not subject to redemption agreements       1,680,000      1,670,000
  Additional paid-in capital                   5,993,000      8,439,000
  Retained earnings                           61,639,000     51,347,000
  Shares in escrow; 257,064 in 1999               -          (4,820,000)
  Accumulated other comprehensive loss        (1,574,000)    (1,214,000)
                                             -----------    -----------
                                              67,738,000     55,422,000
                                             -----------    -----------

                                            $125,683,000   $107,819,000
                                            =============  ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF TEMPORARY AND PERMANENT SHAREHOLDERS' INVESTMENT

<TABLE>
For the years ended December 30, 2000, January 1, 2000
 and January 2,1999
                                                                                            Total Temporary
                                                     Temporary            Permanent         and Permanent
                                                     Shareholders'        Shareholders'     Shareholders'
                                                     Investment           Investment        Investment
                                                     ----------           ------------      --------------
<S>                                                  <C>                 <C>                <C>
 Balances January 3, 1998                            $    -              $ 86,080,000       $ 86,080,000

Allocation of Permanent Shareholders' Investment
 to Temporary Shareholders' Investment,
 4,540,000 shares                                     45,400,000          (45,400,000)            -

 Net changes in Permanent Shareholders Investment         -                 4,039,000          4,039,000
                                                      ----------          -----------        -----------
 Balances January 2, 1999                             45,400,000           44,719,000         90,119,000

 Net changes in Permanent Shareholders Investment         -                10,703,000         10,703,000
                                                    ------------         ------------        -----------
 Balances January 1, 2000                             45,400,000           55,422,000        100,822,000

 Net changes in Permanent Shareholders Investment         -                12,316,000         12,316,000
                                                    ------------         ------------        -----------
 Balances December  30, 2000                        $ 45,400,000         $ 67,738,000      $ 113,138,000
                                                    ============         ============      =============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
                                            For the year ended
                                  ---------------------------------------
                                  December 30,    January 1,    January 2,
                                      2000          2000          1999
                                  -----------   -----------   -----------
<S>                              <C>           <C>            <C>
Net sales                        $103,449,000  $100,209,000   $94,811,000
Cost of sales                      36,943,000    34,218,000    32,579,000
                                  -----------   -----------   -----------
  Gross profit                     66,506,000    65,991,000    62,232,000

Operating expenses:
  Selling & marketing              21,685,000    20,096,000    20,478,000
  General & administrative         14,977,000    14,953,000    14,749,000
  Research, development &
    engineering                    11,771,000    10,689,000    10,044,000
  Write-down of digital
    imaging assets                     -              -         6,694,000
                                  -----------   -----------   -----------
                                   48,433,000    45,738,000    51,965,000
                                  -----------   -----------   -----------
  Operating income                 18,073,000    20,253,000    10,267,000

Other income                        1,090,000       827,000       425,000
                                  -----------   -----------   -----------
  Income before income taxes       19,163,000    21,080,000    10,692,000

Income taxes                        6,755,000     7,431,000     3,830,000
                                  -----------   -----------   -----------

  NET INCOME                      $12,408,000   $13,649,000    $6,862,000
                                  ===========   ===========   ===========

Earnings per share:

  Basic                                  $.59          $.65          $.33
                                         ====          ====          ====
  Diluted                                $.58          $.62          $.32
                                         ====          ====          ====
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF PERMANENT SHAREHOLDERS' INVESTMENT
<TABLE>
                                                                                Accumulated
                                                                                  Other          Total
                                         Additional                            Comprehensive    Permanent
                               Common     Paid-in     Retained     Shares in      Income      Shareholders'
                                Stock     Capital     Earnings      Escrow        (Loss)       Investment
                             ----------  ----------  -----------  -----------  -------------  ------------
<S>                          <C>         <C>         <C>          <C>           <C>            <C>
BALANCES,
    JANUARY 3, 1998          $2,115,000  $7,876,000  $79,969,000  $(3,449,000)   $(431,000)    $86,080,000

Net income                         -           -       6,862,000         -            -          6,862,000
Cash dividends declared
  of $.10 per share                -           -      (2,092,000)     (25,000)        -         (2,117,000)
Issuance of 28,798 shares
  of common stock under
  employee benefit plans          3,000     267,000         -            -            -            270,000
Purchase of 72,764 shares
  by escrow fund                   -           -            -      (1,320,000)        -         (1,320,000)
Value of shares subject to
  redemption agreements        (454,000)       -      (44,946,000)                             (45,400,000)
Translation adjustment             -           -            -            -         344,000         344,000
                             ----------  ----------  -----------  -----------    ---------     -----------
BALANCES,
 JANUARY 2, 1999              1,664,000   8,143,000   39,793,000   (4,794,000)     (87,000)     44,719,000

Net income                         -           -      13,649,000         -            -         13,649,000
Cash dividends declared
  of $.10 per share                -           -      (2,095,000)     (26,000)        -         (2,121,000)
Issuance of 62,717 shares
  of common stock under
  employee benefit plans          6,000     296,000         -            -            -            302,000
Translation adjustment             -           -            -            -        (659,000)       (659,000)
Unrealized loss on short-term
  investments                      -           -            -            -        (468,000)       (468,000)
                             ----------  ----------  -----------  -----------    ---------     ------------
BALANCES,
 JANUARY 1, 2000              1,670,000   8,439,000   51,347,000   (4,820,000)  (1,214,000)     55,422,000

Net income                         -           -      12,408,000         -            -         12,408,000
Cash dividends declared
  of $.10 per share                -           -      (2,116,000)     (13,000)        -         (2,129,000)
Issuance of 96,425 shares
  of common stock under
  employee benefit plans         10,000     467,000         -            -            -            477,000
Sale of 257,264 shares
  by escrow fund                         (2,913,000)                4,833,000                    1,920,000
Translation adjustment             -           -            -            -        (522,000)       (522,000)
Unrealized gain on short-term
  investments                      -           -            -            -         162,000         162,000
                             ----------  ----------  -----------  -----------    ---------     -----------
BALANCES,
 DECEMBER 30, 2000           $1,680,000  $5,993,000  $61,639,000  $      -     $(1,574,000)   $ 67,738,000
                             ==========  ==========  ===========  ============  ============   ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
                                                                       For the year ended
                                                           ---------------------------------------
                                                           December 30,    January 1,    January 2,
                                                                2000          2000          1999
                                                            -----------   -----------   -----------
<S>                                                        <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                               $ 12,408,000  $ 13,649,000   $ 6,862,000
  Adjustments to reconcile net income to net
    cash provided by operating activities-
      Depreciation and amortization                           5,717,000     5,862,000     5,836,000
      Provision for doubtful accounts                           388,000       412,000       266,000
      Deferred income taxes                                  (4,669,000)     (246,000)   (2,629,000)
      Write-down of digital imaging assets                          -             -       6,694,000
      Other                                                      18,000       (58,000)      (15,000)
      Changes in operating assets and liabilities
        net of effects from acquisitions:
          Accounts receivable                                   335,000    (1,576,000)    1,189,000
          Inventories                                           415,000       278,000      (623,000)
          Other current and noncurrent assets                   144,000      (547,000)      892,000
          Accounts payable                                      217,000       638,000       163,000
          Income taxes payable                                4,738,000       135,000       (69,000)
          Other accrued liabilities                             792,000     1,818,000      (624,000)
                                                             -----------   -----------   -----------
     Net cash provided by operating activities               20,503,000    20,365,000    17,942,000

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities of investments                     2,606,000     1,258,000     2,030,000
  Proceeds from sales of investments                         19,420,000    19,875,000     5,323,000
  Purchases of investments                                  (12,378,000)  (24,473,000)  (16,056,000)
  Capital expenditures                                       (4,140,000)   (4,343,000)   (4,176,000)
  Acquisitions, less cash acquired                           (4,505,000)         -         (382,000)
  Investment in founders' life insurance                     (3,302,000)   (3,525,000)   (3,091,000)
  Purchases of other assets                                  (6,238,000)   (1,373,000)   (1,279,000)
  Other investing activities                                    (16,000)       85,000       113,000
                                                            ------------  ------------  ------------
     Net cash (used for) investing activities                (8,553,000)  (12,496,000)  (17,518,000)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends paid                                             (2,129,000)   (2,121,000)   (2,117,000)
  Issuance of common stock                                      477,000       302,000       270,000
  Proceeds from sales of escrow investments                   1,920,000        -              -
                                                            -----------   -----------   -----------
     Net cash provided by (used for) financing activities       268,000    (1,819,000)   (1,847,000)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
  CASH EQUIVALENTS                                             (521,000)     (688,000)      151,000
                                                            -----------   ------------   -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         11,697,000     5,362,000    (1,272,000)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                6,898,000     1,536,000     2,808,000
                                                            -----------   -----------   -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                    $18,595,000    $6,898,000    $1,536,000
                                                            ===========   ===========   ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1--THE COMPANY AND OTHER INFORMATION

X-Rite,  Incorporated and its subsidiaries (individually "X-Rite" and all of its
subsidiaries the "Company") are engaged in the development, manufacture and sale
of  technically   sophisticated   instrumentation  and  user  friendly  software
solutions for a wide variety of color, light and shape measurement applications,
including corporate branding, medical diagnostics, consumer products and on-line
commerce.  Principal  markets  for the  Company's  products  include  the paint,
plastic, textile, packaging,  photographic, graphic arts and medical industries,
in addition to commercial and research laboratories.  Based on the nature of its
products, the Company considers its business to be a single operating segment.

Products  are sold  worldwide  through the  Company's  own sales  personnel  and
through  independent  sales  representatives.  The Company is  headquartered  in
Grandville,  Michigan  and  has  other  domestic  operations  in New  Hampshire,
Massachusetts and Michigan.  In addition,  the Company has locations in Germany,
England, Hong Kong, the Czech Republic and France.  Manufacturing is done in the
United States and Germany.

Geographic sales information is as follows:
<TABLE>
                                        2000         1999         1998
                                    -----------  -----------  -----------
  <S>                               <C>          <C>          <C>
  Domestic sales:
    U.S. operations                 $65,136,000  $65,732,000  $62,875,000
  International sales:
    U.S. operations export sales
      to unaffiliated customers      12,002,000   11,023,000   14,628,000
    Foreign subsidiary sales         26,311,000   23,454,000   17,308,000
                                    -----------  -----------  -----------
                                     38,313,000   34,477,000   31,936,000
                                    -----------  -----------  -----------
                                   $103,449,000 $100,209,000  $94,811,000
                                    ===========  ===========  ===========
</TABLE>
No single customer  accounted for more than 10% of total net sales in 2000, 1999
or 1998.


NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation:
The  consolidated   financial   statements   include  the  accounts  of  X-Rite,
Incorporated  and its  majority  owned  domestic and foreign  subsidiaries.  All
significant inter-company accounts and transactions have been eliminated.

Effective  January 1, 1997,  the Company  adopted a 4-4-5  quarterly  accounting
cycle to  accommodate  manufacturing  schedules  that were  developed to improve
customer  service.  Accordingly,  2000 ended on December 30, 2000, 1999 ended on
January 1, 2000, and 1998 ended on January 2, 1999. The Company's 2000, 1999 and
1998 results from operations would have been approximately the same if the years
had ended on December 31 rather than on December 30, 2000,  January 1, 2000, and
January 2, 1999.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Cash and Cash Equivalents:
The Company considers all highly liquid financial instruments with maturities of
three months or less when purchased to be cash equivalents.

Short-Term Investments:
Short-term investments consist primarily of tax free municipal bonds, high grade
corporate  bonds,  mutual  funds  and  preferred  stocks.  All of the  Company's
short-term  investments  are  stated  at  market  value  and are  classified  as
available for sale.  Adjustments  to market value are included in  comprehensive
income  (see  Note 3)  Short-term  investments  at  December  30,  2000  include
securities  with original  maturities of greater than three months and remaining
maturities of less than one year.

Inventories:
Inventories are stated at the lower of cost,  determined on a first-in first-out
basis, or market. Components of inventories are summarized as follows:
<TABLE>
                                     December 30,    January 1,
                                         2000          2000
                                     -----------   -----------
       <S>                           <C>           <C>
       Raw materials                 $ 7,024,000   $ 6,351,000
       Work in process                 4,903,000     5,381,000
       Finished goods                  3,873,000     3,678,000
                                     -----------   -----------
                                     $15,800,000   $15,410,000
                                     ===========   ===========
</TABLE>
Plant, Equipment and Depreciation:
Plant and  equipment  are  stated  at cost and  include  expenditures  for major
renewals and  betterments.  Maintenance and repairs that do not extend the lives
of the  respective  assets are  charged to  expense  as  incurred.  Depreciation
expense is computed  using the  straight-line  method over the estimated  useful
lives  of the  related  assets.  Estimated  depreciable  lives  are as  follows:
buildings and  improvements,  5 to 40 years;  machinery and  equipment,  3 to 10
years; and furniture and office equipment, 3 to 10 years.

Software Development Costs:
Development  costs  incurred in the  research  and  development  of new software
products and enhancements to existing software products are expensed as incurred
until technological  feasibility is achieved. After technological feasibility is
achieved,  any additional  development costs are capitalized and amortized using
the straight-line method over a three year period.

The  Company  capitalized  $1,572,000,  $1,334,000  and  $1,248,000  of software
development costs during 2000, 1999 and 1998, respectively. Amortization expense
was $1,405,000,  $1,249,000 and $1,107,000 in 2000, 1999 and 1998, respectively.
The net  capitalized  software  development  costs included in other assets were
$2,356,000  and  $2,160,000  as of  December  30,  2000  and  January  1,  2000,
respectively.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Costs in Excess of Net Assets Acquired and Other Long Lived Assets:
Costs  in  excess  of net  assets  acquired  resulted  primarily  from  the 1995
acquisition  of Labsphere,  Inc.,  the 1997  acquisition  of the assets of Light
Source  Computer  Images,  Inc.  (see Note 8) and the 2000  acquisitions  of the
assets of Optronik GmbH and the HoloVision  Products group. The costs associated
with the  Labsphere  acquisition  are being  amortized  using the  straight-line
method  over twenty  years.  The costs  associated  with the  Optronik  GmbH and
HoloVision   Products  Group   acquisitions   are  being   amortized  using  the
straight-line  method over ten years.  The costs resulting from the Light Source
acquisition were written off in 1998 (see Note 8).  Accumulated  amortization of
excess  acquisition costs was $3,445,000 and $2,790,000 at December 30, 2000 and
January 1, 2000, respectively.

The Company evaluates the recoverability of its long lived assets by determining
whether  unamortized  balances  can be  recovered  through  undiscounted  future
operating cash flows over the remaining  lives of the assets in accordance  with
the provisions of Statement of Financial Accounting Standards (SFAS) No. 121. If
the sum of the expected future cash flows is less than the carrying value of the
assets,  an impairment  loss is recognized  for the excess of the carrying value
over the fair value.  The estimated fair value is determined by discounting  the
expected  future  cash  flows at a rate  that  would be  required  for a similar
investment with like risks.

Investments Carried at Cost:
Included  in  other  noncurrent  assets  in  2000,  is  $4,610,000   related  to
investments made by the Company's  strategic venture capital group, XR Ventures,
LLC. The Company  funds  acquisitions  made by XR Ventures,  LLC and in exchange
receives its investment  back in full before any  distributions  are made.  Each
individual  investment represents less than 20% of the outstanding voting common
stock of the  respective  investee.  Because  the  Company is unable to exercise
significant  influence  over  the  operating  and  financial  policies  of  each
respective  investee,  the  investments  have been recorded at cost. The Company
periodically  evaluates  the  carrying  value of each  investment  to  determine
whether a decline in fair value below the respective  cost has occurred.  If the
decline is determined to be other than temporary, the carrying value is adjusted
to the then current  fair value as the new cost basis and a loss is  recognized.
No such write downs occurred in 2000.

Temporary and Permanent Shareholders' Investment:
During 1998 the Company entered into  agreements with its founding  shareholders
for the  future  redemption  of 4.54  million  shares  or  21.3  percent  of its
outstanding  stock at  December  30, 2000 (see Note 7).  These  shares have been
reclassified on the balance sheet to a temporary equity account.

The  Company  records  the  results  of its  operations  and  all  other  equity
transactions as a component of permanent shareholders' investment.

Income Taxes:
The  provision  for income taxes is based on earnings  reported in the financial
statements.  Deferred income taxes are recognized for all temporary  differences
between tax and financial reporting.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Revenue Recognition:
Revenue is  recognized  when earned in  accordance  with  applicable  accounting
standards,   including   American  Institute  of  Certified  Public  Accountants
Statement  of Position  97-2,  as amended.  Revenue  from sales of products  and
services is recognized when a purchase order has been received,  the product has
been  shipped or the  service has been  performed,  the sales price is fixed and
determinable and collection of any resulting receivable is probable.

Advertising Costs:
Advertising  costs are charged to operations in the period  incurred and totaled
$1,737,000, $2,047,000 and $2,389,000 in 2000, 1999 and 1998, respectively.

Per Share Data:
Basic  earnings  per share  ("EPS") are  computed by dividing  net income by the
weighted-average  number of common shares  outstanding in each year. Diluted EPS
is  computed  by dividing  net income by the  weighted-average  number of common
shares  outstanding  plus all shares that would have been  outstanding  if every
potentially   dilutive  common  share  had  been  issued.  The  following  table
reconciles the numerators and denominators used in the calculations of basic and
diluted EPS for each of the last three years:
<TABLE>
                                       2000          1999          1998
                                    ----------   -----------   -----------
  <S>                              <C>           <C>           <C>
  Numerators:
    Net income numerators for
      both basic and diluted EPS   $12,408,000   $13,649,000   $ 6,862,000
                                    ==========   ===========   ===========
  Denominators:
    Denominators for basic EPS
      Weighted-average common
        shares outstanding          21,171,963    20,951,692    20,913,400
    Potentially dilutive shares
      Shares subject to
        redemption agreements          358,722     1,155,096       159,522
      Stock options                     37,768         6,985        58,630
                                    ----------    ----------    ----------
    Denominators for diluted EPS    21,568,453    22,113,773    21,131,552
                                    ==========    ==========    ==========
</TABLE>
During 2000,  1999 and the fourth  quarter of 1998,  certain  shares  subject to
redemption agreements (see Note 7) were considered dilutive.

Certain  exercisable  stock  options  were not included in the  calculations  of
diluted EPS because  option  prices were greater than average  market prices for
the periods  presented.  The number of stock options  outstanding  at the end of
each year  presented  not  included  in the  calculation  of diluted EPS and the
ranges of exercise prices were 1,005,800 and $7.03 - $19.50 in 2000, 984,500 and
$7.03 - $19.50 in 1999, and 583,000 and $14.50 - $19.50 in 1998.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued

Foreign Currency Translation:
Foreign  currency balance sheet accounts are translated into U.S. dollars at the
exchange rate in effect at year end. Income statement accounts are translated at
the  average  rate  of  exchange  in  effect  during  the  year.  The  resulting
translation  adjustments  are  recorded  as a  component  of  accumulated  other
comprehensive income (loss) in the statements of shareholders' investment. Gains
and losses  arising from  remeasuring  foreign  currency  transactions  into the
appropriate currency are included in net income.

Use of Estimates:
The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial  statements and accompanying notes.
Actual results could differ from those estimates;  however,  management believes
that any subsequent revisions to estimates used would not have a material effect
on the financial condition or results of operations of the Company.

New Accounting Standard:
On December 31, 2000, the Company  adopted SFAS No. 133, as amended by SFAS Nos.
137 and 138.  These  statements  establish  accounting  and reporting  standards
requiring that  derivative  instrument be recorded in the balance sheet as asset
and liability  measured at current fair value and that changes in a derivative's
fair value be  recognized  currently in the  determination  of net income unless
specific hedge accounting criteria are met. The impact of adopting this standard
was not material to the Company.

Reclassifications:
Certain prior year  information has been  reclassified to conform to the current
year presentation.


NOTE 3--COMPREHENSIVE INCOME

Comprehensive  income consisted of net income,  foreign currency translation and
unrealized  loss  on  short-term   investments,   which  are  presented  in  the
accompanying  statements  of  shareholders'  investment.   Comprehensive  income
totaled $  12,048,000,  $  12,522,000  and $ 7,206,000  in 2000,  1999 and 1998,
respectively.


NOTE 4--REVOLVING CREDIT AGREEMENT

The Company  maintains a revolving  line of credit  agreement  with a bank which
provides for maximum  borrowings of  $20,000,000  with interest at 1.5% over the
"Effective Federal Funds Rate" (5.41% at December 30, 2000).

The  borrowings are unsecured and no  compensating  balances are required by the
agreement.  There were no significant  borrowings  under this  agreement  during
2000, 1999 or 1998.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 5--INCOME TAXES

The provision for income taxes consisted of the following:
<TABLE>
                                    2000         1999        1998
                                 ----------   ----------   ----------
  <S>                           <C>           <C>          <C>
  Current
    Federal                     $10,988,000   $7,386,000   $6,111,000
    State                           254,000      256,000      220,000
    Foreign                          15,000       35,000      128,000
                                 ----------   ----------   ----------
                                 11,257,000    7,677,000    6,459,000
  Deferred
    Federal                      (4,502,000)    (246,000)  (2,629,000)
                                 ----------   ----------   ----------
                                 $6,755,000   $7,431,000   $3,830,000
                                 ==========   ==========   ==========
</TABLE>
The preceding table excludes a tax benefit in 2000 of $167,000 related to market
value adjustments on short-term investments, which is recorded as a component of
other comprehensive income.

The provisions for income taxes  reflected  effective tax rates of 35.3%,  35.3%
and 35.8% in 2000, 1999 and 1998,  respectively,  compared to the U.S. statutory
rate of 35%. The  Company's  effective  tax rates were  impacted by state income
taxes, goodwill amortization, benefits from a foreign sales corporation and life
insurance premiums.

Major  components of the Company's  deferred tax assets and  liabilities  are as
follows:
<TABLE>
                                            December 30,    January 1,
                                                2000          2000
                                             ----------    ----------
<S>                                          <C>           <C>
Assets:
  Inventory reserves                         $  610,000    $  947,000
  Accounts receivable reserves                  209,000       105,000
  Amortization of intangible assets           2,282,000     2,629,000
  Deferred income                             5,008,000         -
  Financial accruals and reserves
    not currently deductible                    997,000       638,000
                                              ----------    ----------
                                             $9,106,000    $4,319,000
                                             ==========    ==========
Liabilities:
  Depreciation                               $  181,000    $  143,000
  Software development costs                    820,000       756,000
  Other                                          50,000        34,000
                                             ----------    ----------
                                            $ 1,051,000    $  933,000
                                             ==========    ==========
</TABLE>
Cash  expended for income taxes was  $6,809,000,  $7,551,000  and  $5,733,000 in
2000, 1999 and 1998, respectively.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 6--EMPLOYEE BENEFIT AND STOCK PLANS

The  Company  maintains  401(k)  retirement  savings  plans for the  benefit  of
substantially  all full  time  U.S.  employees.  Participant  contributions  are
matched by the Company  based on  applicable  matching  formulas.  The Company's
matching expense for the plans was $557,000, $469,000 and $473,000 in 2000, 1999
and 1998, respectively.

The Company may sell up to  1,000,000  shares of common  stock to its  employees
under an employee  stock  purchase  plan.  Eligible  employees  who  participate
purchase  shares  quarterly  at 85% of the market  price on the date  purchased.
During  2000,  1999 and 1998,  employees  purchased  36,940,  40,137  and 21,798
shares,  respectively.  The weighted  average fair value of shares purchased was
$9.47,  $6.77 and $13.01 in 2000,  1999 and 1998  respectively.  At December 30,
2000, 796,544 shares were available for future purchases.

The Company  has two stock  option  plans  covering  2,800,000  shares of common
stock.  These  plans  permit  options  to be granted  to key  employees  and the
Company's Board of Directors. Options are granted at market price on the date of
grant and are exercisable based on vesting  schedules  determined at the time of
grant.  No options are  exercisable  after ten years from the date of grant.  At
December  30, 2000,  1,356,893  shares were  available  for future  granting.  A
summary of shares subject to options follows:
<TABLE>
                                2000                 1999                 1998
                         --------------------  ----------------     ------------------
                                     Weighted          Weighted               Weighted
                                      Average           Average               Average
                                     Exercise          Exercise               Exercise
                           Shares     Prices   Shares   Prices      Shares     Prices
                         ---------   --------  ------- --------     ------- ----------
 <S>                     <C>         <C>       <C>          <C>     <C>         <C>
 Outstanding at
  beginning of year      1,305,200    $13.26   1,093,100    $14.54   890,100    $14.33
   Granted                 247,500      8.69     244,500      7.08   221,500     15.10
   Exercised                 -                   (10,000)     2.47    (7,000)     4.06
   Canceled                (11,400)    12.33     (22,400)    13.39   (11,500)    14.93
                         ---------               -------             --------
 Outstanding at
  end of year            1,541,300     12.53    1,305,200    13.26  1,093,100    14.54
                         =========              =========           =========
 Exercisable at
  end of year            1,274,300     13.57    1,076,500    14.27   943,100     14.25
                         =========               =======             =======
 Weighted average
  fair value of
  options granted            $4.30                 $2.85               $6.23
                             =====                 =====               =====
</TABLE>
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6--EMPLOYEE BENEFIT AND STOCK PLANS, continued

A summary of stock options outstanding at December 30, 2000 follows:
<TABLE>
                               Outstanding                 Exercisable
                    ---------------------------------   -----------------
                                          Weighted
                               Weighted    Average               Weighted
                                Average   Remaining               Average
                               Exercise  Contractual             Exercise
    Price Ranges      Shares     Price   Life (Years)    Shares    Price
  ---------------   ---------  --------  ------------   -------  --------
  <S>               <C>        <C>          <C>         <C>      <C>
  $ 6.19 - $ 7.50     401,000   $ 6.84       7.2        223,500   $ 7.07
    9.50 -  12.00     364,600    10.69       5.5        275,100    11.08
   13.00 -  15.00     270,300    13.94       6.5        270,300    13.94
   15.63 -  19.50     505,400    17.61       5.6        505,400    17.61
                    ---------                           -------
                    1,541,300    12.53       6.2      1,274,300    13.57
                    =========                         =========
</TABLE>
The Company  accounts for its employee  stock purchase plan and its stock option
plans under APB Opinion 25; therefore, no compensation costs are recognized when
employees  purchase  stock or when  stock  options  are  authorized,  granted or
exercised.  If  compensation  costs  had  been  computed  under  SFAS  No.  123,
"Accounting for Stock-Based Compensation," the Company's net income and earnings
per share (basic and diluted) would have been reduced by approximately  $726,000
and $.03 in 2000, $492,000 and $.02 in 1999, and $ 924,000 and $.04 in 1998.

For purposes of computing  compensation costs of stock options granted, the fair
value of each stock  option  grant was  estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:
<TABLE>
                                     2000          1999          1998
                                 -----------   -----------   -----------
  <S>                            <C>           <C>           <C>
  Dividend yield                     .9%           .7%           .6%
  Volatility                         54%           40%           40%
  Risk-free interest rates       5.7% - 6.7%   4.7% - 5.9%   5.5% - 5.6%
  Expected term of options         5 years       5 years       5 years
</TABLE>
Black-Scholes  is a widely  accepted stock option pricing  model,  however,  the
ultimate  value of stock options  granted will be determined by the actual lives
of options granted and future price levels of the Company's common stock.

The Company has a Cash Bonus  Conversion Plan covering  400,000 shares of stock.
This plan  provides  an  opportunity  for certain  executives  of the Company to
purchase  restricted  stock in an amount  equal to all,  or any portion of their
annual cash bonus.  Shares are issued in the name of the  employee,  who has all
rights of a shareholder,  subject to certain restrictions on transferability and
a risk of forfeiture. The forfeiture provisions lapse as to 20 percent after six
months and an additional 20 percent  annually  thereafter.  During 2000,  59,485
shares were issued under this plan, no shares were forfeited, and the forfeiture
provisions  expired on 11,273  shares.  At  December  30,  2000,  63,754  shares
remained subject to forfeiture  provisions and restrictions on  transferability.
During  1999,  12,580  shares  were  issued  under  this  plan,  no shares  were
forfeited,  and the forfeiture  provisions expired on 1,831 shares. During 1998,
no shares  were  issued  under  this plan,  no shares  were  forfeited,  and the
forfeiture provisions expired on 2,962 shares.
<PAGE>
X-RITE, INCORPORATED AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6--EMPLOYEE BENEFIT AND STOCK PLANS, continued

The Company also has a restricted  stock plan covering  400,000 shares of common
stock.  Shares awarded under this plan entitle the  shareholder to all rights of
common  stock  ownership  except  that the shares may not be sold,  transferred,
pledged,  exchanged or otherwise disposed of during the restriction  period. The
restriction  period is  determined  by a  committee,  appointed  by the Board of
Directors,  but in no event shall have a duration period in excess of ten years.
No shares were awarded in 2000,  1999 or 1998. At December 30, 2000,  there were
345,200 shares available for future awards.

NOTE 7--FOUNDERS STOCK REDEMPTION AGREEMENTS

During 1998, the Company entered into agreements with its founding  shareholders
for the  future  redemption  of 4.54  million  shares  or  21.3  percent  of the
Company's  outstanding  stock at December 30, 2000. The stock  redemptions  will
occur following the later of the death of each founder and his spouse.  The cost
of the  redemption  agreements  will be funded by proceeds  from life  insurance
policies the Company has purchased on the lives of certain of these individuals.
The price the  Company  will pay the  founders'  estates  for these  shares will
reflect a 10 percent  discount  from the  average  closing  price for the ninety
trading  days  preceding  the later death of the  founder  and his  spouse.  The
discounted price may not be less than $10 per share or more than $25 per share.

The shares subject to the agreements  have been  classified on the balance sheet
as a temporary equity account.  The classification of $45,400,000 was determined
by multiplying  the applicable  shares by the minimum  redemption  price of $10,
since the average  closing price of the Company's  common stock,  after applying
the 10 percent discount, for the ninety trading days preceding December 30, 2000
was less than $10.

NOTE 8--ACQUISITION & WRITE-DOWN OF DIGITAL IMAGING ASSETS

In May of 1997 the Company acquired substantially all the assets of Light Source
Computer Images,  Inc. ("Light Source") for $6,955,000 in cash. Light Source was
a  California-based  producer  of  scanning,   imaging  and  print  optimization
software.  The  acquisition  was  accounted  for  under the  purchase  method of
accounting and was funded by proceeds from sales of short-term investments.

The asset purchase agreement provides for future contingent consideration if net
sales of certain  products  reaches or exceeds  agreed upon sales  goals  during
twelve  month  periods  that  ended  July  1998,  1999  and  2000.  The  Company
established an escrow fund equal to the maximum  contingent  consideration  that
could be earned by the sellers. The investment of escrow funds was made in money
market securities or X-Rite common stock. This contractual  agreement expired in
July of 2000. The net sales goals of certain  products  required for the payment
of future contingent  consideration  were not met during the periods outlined in
the asset purchase agreement,  thereby releasing the Company from any additional
obligations  with respect to the escrow fund. The investments in the escrow fund
were liquidated and the proceeds returned to the Company.

During the third quarter of 1998,  increased  competition in the digital imaging
business and a continued rapid decline in the demand for certain digital imaging
instruments,  software and  technology led the Company to reevaluate its digital
imaging  markets and product  lines,  which forced the  recognition  of an asset
impairment  loss.  The non-cash,  pre-tax  write down of $6,694,000  ($4,351,000
after tax) consisted of $6,294,000 in goodwill, and $400,000 in fixed assets and
other  capitalized  start-up costs  associated  with the 1997 Light Source asset
acquisition.
<PAGE>
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

Not applicable.

                                  PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a) Directors

Information  relating to  directors  appearing  under the caption  "Election  of
Directors" in the  definitive  Proxy  Statement  for the 2001 Annual  Meeting of
shareholders and filed with the Commission is incorporated herein by reference.

(b) Officers

Information  relating  to  executive  officers is included in this report in the
last section of Part I under the caption "Executive Officers of the Registrant."

(c) Compliance With Section 16(a)

Information  concerning compliance with Section 16(a) of the Securities Exchange
Act of 1934 appearing under the caption "Compliance With Reporting Requirements"
in the definitive  Proxy  Statement for the 2001 Annual meeting of  Shareholders
and filed with the Commission is incorporated herein by reference.



ITEM 11.  EXECUTIVE COMPENSATION

The information contained under the caption "Executive  Compensation"  contained
in the definitive  Proxy  Statement for the 2001 Annual Meeting of  Shareholders
and filed with the Commission is incorporated herein by reference.



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  information   contained  under  the  captioned   "Securities  Ownership  of
Management"  contained in the  definitive  Proxy  Statement  for the 2001 Annual
Meeting of  Shareholders  and filed with the  Commission is hereby  incorporated
herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.
<PAGE>
                                  Part IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) The following  financial  statements,  all of which are set forth in Item 8,
    are filed as a part of this report:

     Report of Independent Public Accountants
     Consolidated Balance Sheets
     Consolidated Statements of Temporary and Permanent Shareholders' Investment
     Consolidated Statements of Income
     Consolidated Statements of Cash Flows
     Notes to Consolidated Financial Statements


(b) The following  report on Form 8-K was filed for the quarter ending  December
    30, 2000.  Notice of press release dated  January 19, 2001  announcing  that
    X-Rite,  Incorporated  will  conduct  a live  audio  web cast of its  fourth
    quarter conference call on January 31, 2001.


(c) See Exhibit Index located on page 35.


(d) All other  schedules  required by Form 10-K Annual  Report have been omitted
    because they were  inapplicable,  included in the notes to the  consolidated
    financial  statements,  or  otherwise  not required  under the  instructions
    contained in Regulation S-X.
<PAGE>
                             SIGNATURES

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

                          X-RITE, INCORPORATED


       March 30, 2001     /s/ Richard E. Cook
                          Richard E. Cook, President and Chief Executive Officer

       March 30, 2001     /s/ Duane F. Kluting
                          Duane F. Kluting, Vice President and
                          Chief Financial Officer

Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report has been signed below on this 30th day of March,  2001,  by the following
persons on behalf of the Registrant and in the capacities indicated.

Each director of the Registrant whose signature  appears below,  hereby appoints
Richard  E.  Cook and Duane F.  Kluting,  and each of them  individually  as his
attorney-in-fact  to sign in his name and on his  behalf  as a  Director  of the
Registrant,  and to file  with the  Commission  any and all  amendments  to this
report  on Form  10-K to the same  extent  and with the same  effect  as if done
personally.


/s/ Ted Thompson                      /s/ Peter M. Banks
Ted Thompson, Director                Dr. Peter M. Banks, Director


/s/ Stanley W. Cheff                  /s/ Richard E. Cook
Stanley W. Cheff, Director            Richard E. Cook, Director


/s/ Rufus S. Teesdale                 /s/ James A. Knister
Rufus S. Teesdale, Director           James A. Knister, Director


/s/ John E. Utley                     /s/ Charles Van Namen
John E. Utley, Director               Charles Van Namen, Director


/s/ Ronald A. Vandenberg
Ronald A. VandenBerg, Director
<PAGE>
                              EXHIBIT INDEX
--------------------------------------------------------------------------

   3(a)   Restated  Articles  of  Incorporation  (filed as  exhibit to Form S-18
          dated April 10, 1986  (Registration  No.  33-3954C)  and  incorporated
          herein by reference)

   3(b)   Certificate of Amendment to Restated Articles of Incorporation  adding
          Article IX (filed as exhibit to Form 10-Q for the  quarter  ended June
          30, 1987  (Commission  File No.  0-14800) and  incorporated  herein by
          reference)

   3(c)   Certificate  of  Amendment  to  Restated   Articles  of  Incorporation
          amending Article III (filed as exhibit to Form 10-K for the year ended
          December  31, 1995  (Commission  File No.  0-14800)  and  incorporated
          herein by reference)

   3(d)   Certificate  of  Amendment  to  Restated   Articles  of  Incorporation
          amending Article IV as filed with the Michigan  Department of Consumer
          & Industry  Services (filed as exhibit to Form 10-K for the year ended
          January 2, 1999 (Commission File No. 0-14800) and incorporated  herein
          by reference)

   3(e)   Bylaws,  as amended and restated January 20, 1998 (filed as exhibit to
          Form 10-K for the year  ended  January  3, 1998  (Commission  File No.
          0-14800) and incorporated herein by reference)

   3(f)   Bylaws, as amended and restated November 18, 1999 (Commission File No.
          0-14800).

   4      X-Rite,  Incorporated  common  stock  certificate  specimen  (filed as
          exhibit to Form 10-Q for the quarter  ended June 30, 1986  (Commission
          File No. 0-14800) and incorporated herein by reference)

   5      Notice of press release dated January 19, 2001 announcing that X-Rite,
          Incorporated  will conduct a live audio web cast of its fourth quarter
          conference  call on January 31,  2001  (filed as Form 8-K  (Commission
          file No. 0-14800) and incorporated herein by reference)

The  following  material  contracts  identified  with "*"  preceding the exhibit
number are  agreements  or  compensation  plans with or  relating  to  executive
officers, directors or related parties.


 *10(a)   X-Rite,  Incorporated  Amended and  Restated  Outside  Director  Stock
          Option Plan,  effective as of September  17, 1996 (filed as exhibit to
          Form 10-Q for the quarter ended  September 30, 1996  (Commission  File
          No. 0-14800) and incorporated herein by reference)

 *10(b)   X-Rite,  Incorporated  Cash Bonus Conversion Plan (filed as Appendix A
          to the definitive  proxy statement dated April 8, 1996 relating to the
          Company's  1996  annual  meeting  (Commission  File No.  0-14800)  and
          incorporated herein by reference)

 *10(c)   Form of Indemnity  Contract  entered into between the  registrant  and
          members of the board of  directors  (filed as exhibit to Form 10-Q for
          the quarter  ended June 30, 1996  (Commission  File No.  0-14800)  and
          incorporated herein by reference)
<PAGE>
                              EXHIBIT INDEX
--------------------------------------------------------------------------

 *10(d)   Employment  Agreement  dated April 17,1998  between the registrant and
          Richard  E. Cook  (filed as  exhibit  to Form 10-K for the year  ended
          January 2, 1999 (Commission File No. 0-14800) and incorporated  herein
          by reference)

  10(e)   Asset Purchase Agreement entered into between Light Source Acquisition
          Company  and Light  Source  Computer  Images,  Inc.  including  Escrow
          Agreement by and between  Light Source  Acquisition  Company and Light
          Source  Computer  Images,  Inc. and U.S.  Trust Company of California,
          N.A. (filed as exhibit to Form 8-K dated June 2, 1997 (Commission File
          No. 0-14800) and incorporated herein by reference)

 *10(f)   Form of X-Rite,  Incorporated  Founders  Redemption  Agreement entered
          into between the registrant and certain persons,  together with a list
          of such persons  (filed as exhibit to Form 10-Q for the quarter  ended
          July 3, 1999 (Commission File No. 0-14800) and
          incorporated herein by reference)

 *10(g)   First Amendment to X-Rite,  Incorporated Founders Redemption Agreement
          dated July 16, 1999 between the registrant and Ted Thompson  (filed as
          exhibit to Form 10-Q for the  quarter  ended July 3, 1999  (Commission
          File No. 0-14800) and incorporated herein by reference)

 *10(h)   Chairman's  agreement  dated July 16, 1999 between the  registrant and
          Ted Thompson (filed as exhibit to Form 10-Q for the quarter ended July
          3, 1999  (Commission  File No.  0-14800)  and  incorporated  herein by
          reference)

 *10(i)   Employment arrangement effective upon a change in control entered into
          between the  registrant  and certain  persons  together with a list of
          such persons. (Commission File No. 0-14800) and incorporated herein by
          reference

 *10(j)   Deferred  compensation trust agreement dated November 23, 1999 between
          the registrant and Richard E. Cook.  (Commission  File No.0-14800) and
          incorporated herein by reference

 *10(k)   Operating Agreement for XR Ventures,  LLC dated September 14, 2000, by
          and between XR Ventures,  LLC the  registrant,  Dr. Peter M. Banks and
          Mr. James A. Knister.  (Commission  File No. 0-14800) and incorporated
          herein by reference

  21      Subsidiaries of the registrant

  23      Consent of independent accountants
<PAGE>
                                   Exhibit 21


                              X-RITE, INCORPORATED
                              LIST OF SUBSIDIARIES


   1.     X-Rite International,  Inc., a Barbados Corporation, is a wholly owned
          subsidiary of X-Rite, Incorporated,  being utilized as a foreign sales
          corporation.

   2.     X-Rite  Holdings,  Inc.,  a  U.S.  Corporation,   is  a  wholly  owned
          subsidiary of X-Rite, Incorporated, being utilized as a stockholder of
          certain foreign subsidiaries.

   3.     X-Rite  GmbH,  a  German  Corporation,  is  wholly  owned  by  X-Rite,
          Incorporated and X-Rite Holdings,  Inc., and being utilized as a sales
          and service office.

   4.     X-Rite Asia Pacific Limited, a Hong Kong Corporation,  is wholly owned
          by X-Rite,  Incorporated and X-Rite Holdings, Inc., and being utilized
          as a sales office.

   5.     X-Rite Ltd, a United Kingdom  Corporation,  is wholly owned by X-Rite,
          Incorporated and being utilized as a sales and service office.

   6.     X-Rite  MA,  Incorporated,  a U.S.  Corporation,  is  wholly  owned by
          X-Rite, Incorporated and being utilized as a sales and service office.

   7.     OTP,  Incorporated,  a U.S.  Corporation,  is wholly  owned by X-Rite,
          Incorporated and was used to execute a real estate transaction.

   8.     Labsphere,  Inc.,  a U.S.  Corporation,  is  wholly  owned by  X-Rite,
          Incorporated  and is a manufacturer of light  measurement  systems and
          related proprietary materials.

   9.     Labsphere  Ltd,  a United  Kingdom  Corporation,  is  wholly  owned by
          Labsphere, Incorporated and being utilized as a sales office.

  10.     X-Rite  Mediterranee  SARL, a French  Corporation,  is wholly owned by
          X-Rite,  Incorporated and X-Rite Holdings, Inc., and being utilized as
          a sales and service office.

  11.     X-Rite Global, Inc., a U.S. Corporation,  is a wholly owned subsidiary
          of X-Rite,  Incorporated,  being  utilized as a stockholder of certain
          foreign subsidiaries.

  12.     XR Ventures, LLC, a U.S. Limited Liability Corporation,  is a majority
          owned subsidiary of X-Rite, Incorporated,  being utilized as a venture
          capital company.

  13.     Coherix, Corporation, a U.S. Corporation, is majority owned by X-Rite,
          Incorporated and is a manufacturer of laser based measurement  systems
          and related proprietary materials.

  14.     Optronik GmbH, a German  Corporation,  is a wholly owned subsidiary of
          X-Rite  GmbH,  and is a  manufacturer  of color and light  measurement
          systems and related proprietary materials.
<PAGE>
Exhibit 23





                 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the incorporation of our
report  dated  January  30,  2001,  included  in this Form  10-K,  into  X-Rite,
Incorporated's  previously filed  Registration  Statement File Numbers 33-29288,
33-29290, 33-82258 and 33-82260.


                                           /s/ Arthur Andersen LLP


Grand Rapids, Michigan,
March 30, 2001.