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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549


FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

COMMISSION FILE NUMBERS: 333-44473
333-77905


THE HOLMES GROUP, INC.

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


|                                                                               |  |                                                
|------------------------------------------------------------------------------ |  | -----------------------------------------------
|MASSACHUSETTS
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION)   |  | 04-2768914
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
|                                                                               |  |                                                
|ONE HOLMES WAY, MILFORD MASSACHUSETTS
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) |  | 01757
(ZIP CODE)                               

(508) 634-8050
(REGISTRANTS TELEPHONE NUMBER)

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.

YESx
NOo

INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

YESo
NOx





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TABLE OF CONTENTS



|                                  |                                                                                               |                                            |  |  |  |  |  | 
|--------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION    
|                                  | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                  |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                                  |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                                  |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                                  |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                                  | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                  | ITEM 3. QUANTIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            
|                                  | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION       
|                                  | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                                  | ITEM 5. OTHER INFORMATION                                                                    
|SIGNATURES                       
|CERTIFICATION OF PETER J. MARTIN 
|CERTIFICATION OF JOHN M. KELLIHER



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##### Table of Contents



THE HOLMES GROUP, INC.
FORM 10-Q

QUARTER ENDED JUNE 30, 2003

TABLE OF CONTENTS

|         |  |                                                                                                                    |  |      
|-------- |  | ------------------------------------------------------------------------------------------------------------------ |  | -----
|         |  |                                                                                                                    |  | PAGE 
|PART I.  |  | FINANCIAL INFORMATION:                                                                                             |  |      
|ITEM 1.  |  | FINANCIAL STATEMENTS                                                                                               |  |      
|         |  | CONSOLIDATED BALANCE SHEETS AT JUNE 30, 2003 (UNAUDITED), DECEMBER 31,
2002 AND JUNE 30, 2002 (UNAUDITED)          |  | 3    
|         |  | CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTHS
AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 |  | 4    
|         |  | CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS
ENDED JUNE 30, 2003 AND 2002                  |  | 5    
|         |  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                         |  | 6-23 
|ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                              |  | 24-30
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                         |  | 30   
|ITEM 4.  |  | CONTROLS AND PROCEDURES                                                                                            |  | 31   
|PART II. |  | OTHER INFORMATION:                                                                                                 |  |      
|ITEM 1.  |  | LEGAL PROCEEDINGS                                                                                                  |  | 32   
|ITEM 5.  |  | OTHER INFORMATION                                                                                                  |  | 32   
|         |  | SIGNATURES AND OFFICER CERTIFICATES                                                                                |  | 33-35

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS


THE HOLMES GROUP, INC.




CONSOLIDATED BALANCE SHEETS


|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |         |  
|---------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------------------------ | ------- | ------------------------------------------------- | ------- | ------------ | ------- | ----------- | ------- | - | ------- | ------- | ------- | -
|                                               |                                                                                                     |                                      |         | JUNE 30,                                          |         | DECEMBER 31, |         | JUNE 30,   
|                                               |                                                                                                     |                                      |         | 2003                                              |         | 2002         |         | 2002       
|                                               |                                                                                                     |                                      |         | (UNAUDITED)                                       |         |              |         | (UNAUDITED)
|                                               |                                                                                                     |                                      |         |                                                   |         |              |        
|                                               |                                                                                                     |                                      |         | (in thousands except share and per share amounts)
|ASSETS                                         |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|Current assets:                                |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|                                               | Cash and cash equivalents                                                                           |                                      | $       | 6,386                                             |         |              | $       | 8,426       |         |   | $       | 5,770   |        
|                                               | Accounts receivable, net                                                                            |                                      |         | 74,058                                            |         |              |         | 128,409     |         |   |         | 84,068  |        
|                                               | Inventories                                                                                         |                                      |         | 127,022                                           |         |              |         | 110,236     |         |   |         | 120,594 |        
|                                               | Prepaid expenses and other current assets                                                           |                                      |         | 3,843                                             |         |              |         | 4,817       |         |   |         | 9,747   |        
|                                               | Deferred income taxes                                                                               |                                      |         | 5,067                                             |         |              |         | 5,067       |         |   |         | 5,249   |        
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|                                               |                                                                                                     | Total current assets                 |         |                                                   | 216,376 |              |         |             | 256,955 |   |         |         | 225,428 |  
|Assets held for sale                           |                                                                                                     |                                      | 405     |                                                   |         |              | 6,466   |             |         |   | 6,288   |        
|Property and equipment, net                    |                                                                                                     |                                      | 43,044  |                                                   |         |              | 42,446  |             |         |   | 62,424  |        
|Deposits and other assets                      |                                                                                                     |                                      | 1,162   |                                                   |         |              | 837     |             |         |   | 4,847   |        
|Debt issuance costs, net                       |                                                                                                     |                                      | 7,683   |                                                   |         |              | 10,184  |             |         |   | 13,863  |        
|Deferred income taxes                          |                                                                                                     |                                      | 5,956   |                                                   |         |              | 5,956   |             |         |   | 5,774   |        
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|                                               |                                                                                                     | $                                    | 274,626 |                                                   |         | $            | 322,844 |             |         | $ | 318,624 |        
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|Current liabilities:                           |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|                                               | Accounts payable                                                                                    |                                      |         | 35,703                                            |         |              |         | 44,267      |         |   |         | 45,620  |        
|                                               | Current portion of Credit Facility                                                                  |                                      |         | 9,078                                             |         |              |         | 9,078       |         |   |         | 8,778   |        
|                                               | Accrued income taxes                                                                                |                                      |         | 7,518                                             |         |              |         | 7,405       |         |   |         | 6,495   |        
|                                               | Accrued expenses and other current liabilities                                                      |                                      |         | 38,123                                            |         |              |         | 53,101      |         |   |         | 38,272  |        
|                                               | Deferred income taxes                                                                               |                                      |         | 3,124                                             |         |              |         | 2,967       |         |   |         | 2,194   |        
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|                                               |                                                                                                     | Total current liabilities            |         |                                                   | 93,546  |              |         |             | 116,818 |   |         |         | 101,359 |  
|Long-term portion of Credit facility           |                                                                                                     |                                      | 142,090 |                                                   |         |              | 166,556 |             |         |   | 169,895 |        
|Senior Subordinated Notes                      |                                                                                                     |                                      | 99,587  |                                                   |         |              | 99,544  |             |         |   | 99,503  |        
|Pension obligation                             |                                                                                                     |                                      | 7,974   |                                                   |         |              | 5,840   |             |         |   |        |        
|Other liabilities                              |                                                                                                     |                                      | 7,775   |                                                   |         |              | 7,613   |             |         |   | 7,050   |        
|Deferred income taxes                          |                                                                                                     |                                      | 1,241   |                                                   |         |              | 989     |             |         |   | 1,125   |        
|Commitments and contingencies                  |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|Stockholders equity (deficit):                |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |        
|                                               | Common
stock, $.001 par value. Authorized 28,500,00 shares;Issued and outstanding 20,302,995 shares |                                      |         | 20                                                |         |              |         | 20          |         |   |         | 20      |        
|                                               | Additional paid in capital                                                                          |                                      |         | 68,874                                            |         |              |         | 68,874      |         |   |         | 68,874  |        
|                                               | Accumulated other comprehensive income (loss)                                                       |                                      |         | (6,524                                            | )       |              |         | (7,231      | )       |   |         | 543     |        
|                                               | Treasury stock, at cost (18,627,450 shares)                                                         |                                      |         | (62,076                                           | )       |              |         | (62,076     | )       |   |         | (62,076 | )      
|                                               | Retained earnings (deficit)                                                                         |                                      |         | (77,881                                           | )       |              |         | (74,103     | )       |   |         | (67,669 | )      
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|                                               |                                                                                                     | Total stockholders equity (deficit) |         |                                                   | (77,587 | )            |         |             | (74,516 | ) |         |         | (60,308 | )
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        
|                                               |                                                                                                     | $                                    | 274,626 |                                                   |         | $            | 322,844 |             |         | $ | 318,624 |        
|                                               |                                                                                                     |                                      |         |                                                   |         |              |         |             |         |   |         |         |        

The accompanying notes are an integral part of these consolidated financial statements

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THE HOLMES GROUP, INC.




CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |         |  
|--------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | - | ------------------ | ----- | ---------------- | - | ------------- | ----- | ------------- | - | ------- | ------ | - | - | ------- | ------- | -
|                                                                                                                                  |                            |   | THREE MONTHS ENDED |       | SIX MONTHS ENDED
|                                                                                                                                  |                            |   |                    |       |                 
|                                                                                                                                  |                            |   | June 30, 2003      |       | June 30, 2002    |   | June 30, 2003 |       | June 30, 2002
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |              
|                                                                                                                                  |                            |   | (in thousands)     |       | (in thousands)  
|Net sales                                                                                                                         |                            | $ | 115,752            |       |                  | $ | 131,912       |       |               | $ | 231,052 |        |   | $ | 249,254 |        
|Cost of sales                                                                                                                     |                            |   | 82,858             |       |                  |   | 99,599        |       |               |   | 165,751 |        |   |   | 188,491 |        
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|Gross profit                                                                                                                      |                            |   | 32,894             |       |                  |   | 32,313        |       |               |   | 65,301  |        |   |   | 60,763  |        
|Selling and administrative expenses                                                                                               |                            |   | 27,494             |       |                  |   | 26,908        |       |               |   | 55,326  |        |   |   | 52,041  |        
|Restructuring costs                                                                                                               |                            |   | 1,730              |       |                  |   |              |       |               |   | 1,609   |        |   |   | 1,787   |        
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|Operating income                                                                                                                  |                            |   | 3,670              |       |                  |   | 5,405         |       |               |   | 8,366   |        |   |   | 6,935   |        
|Other expense (income):                                                                                                           |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|                                                                                                                                  | Interest expense           |   |                    | 6,281 |                  |   |               | 7,142 |               |   |         | 12,870 |   |   |         | 15,098  |  
|                                                                                                                                  | Gain on sale of business   |   |                    |      |                  |   |               |      |               |   |         |       |   |   |         | (9,088  | )
|                                                                                                                                  | Gain on retirement of debt |   |                    |      |                  |   |               |      |               |   |         |       |   |   |         | (22,388 | )
|                                                                                                                                  | Other, net                 |   |                    | (958  | )                |   |               | 723   |               |   |         | (1,196 | ) |   |         | (280    | )
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|                                                                                                                                  |                            |   | 5,323              |       |                  |   | 7,865         |       |               |   | 11,674  |        |   |   | (16,658 | )      
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|Income (loss) before income taxes, equity in earnings from joint venture,
and cumulative effect of change in accounting principle |                            |   | (1,653             | )     |                  |   | (2,460        | )     |               |   | (3,308  | )      |   |   | 23,593  |        
|Income tax expense (benefit)                                                                                                      |                            |   | 526                |       |                  |   | (2,009        | )     |               |   | 1,469   |        |   |   | (3,434  | )      
|Equity in earnings from joint venture                                                                                             |                            |   | (517               | )     |                  |   | (741          | )     |               |   | (999    | )      |   |   | (1,341  | )      
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|Income (loss) before cumulative change in accounting principle                                                                    |                            |   | (1,662             | )     |                  |   | 290           |       |               |   | (3,778  | )      |   |   | 28,368  |        
|Cumulative effect of change in accounting principle                                                                               |                            |   |                   |       |                  |   |              |       |               |   |        |        |   |   | (79,838 | )      
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        
|Net income (loss)                                                                                                                 |                            | $ | (1,662             | )     |                  | $ | 290           |       |               | $ | (3,778  | )      |   | $ | (51,470 | )      
|                                                                                                                                  |                            |   |                    |       |                  |   |               |       |               |   |         |        |   |   |         |        

The accompanying notes are an integral part of these consolidated financial statements

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THE HOLMES GROUP, INC.




CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |         |         |         |  
|------------------------------------------------- | ------------------------------------------------------------------------------------------ | -------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ------ | ---------------- | ------- | -------- | ------- | ------- | ------- | -
|                                                  |                                                                                            |                                                                |                                                |                                           |        | SIX MONTHS ENDED
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                 
|                                                  |                                                                                            |                                                                |                                                |                                           |        | June 30,         |         | June 30,
|                                                  |                                                                                            |                                                                |                                                |                                           |        | 2003             |         | 2002    
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |         
|                                                  |                                                                                            |                                                                |                                                |                                           |        | (in thousands)  
|Cash flows from operating activities:             |                                                                                            |                                                                |                                                |                                           |        |                  |         |         
|                                                  | Net loss                                                                                   |                                                                | $                                              | (3,778                                    | )      |                  | $       | (51,470  | )      
|                                                  | Adjustments to reconcile net loss to net cash provided by (used for)
operating activities: |                                                                |                                                |                                           |        |                  |         |          |        
|                                                  |                                                                                            | Depreciation and amortization                                  |                                                |                                           | 5,437  |                  |         |          | 6,462   |        
|                                                  |                                                                                            | Amortization of debt related costs and other non-cash interest |                                                |                                           | 3,337  |                  |         |          | 3,291   |        
|                                                  |                                                                                            | Provision for (recovery of) doubtful accounts                  |                                                |                                           | (305   | )                |         |          | 557     |        
|                                                  |                                                                                            | Loss on disposal of assets                                     |                                                |                                           | 5      |                  |         |          | 132     |        
|                                                  |                                                                                            | Gain on sale of business                                       |                                                |                                           |       |                  |         |          | (9,088  | )      
|                                                  |                                                                                            | Gain on retirement of debt                                     |                                                |                                           |       |                  |         |          | (22,388 | )      
|                                                  |                                                                                            | Cumulative effect of change in accounting principle            |                                                |                                           |       |                  |         |          | 79,838  |        
|                                                  |                                                                                            | Deferred income taxes                                          |                                                |                                           |       |                  |         |          | (2,602  | )      
|                                                  |                                                                                            | Restructuring and other asset impairment charges               |                                                |                                           | 1,122  |                  |         |          | 1,687   |        
|                                                  |                                                                                            | Pension plan settlement charge, net                            |                                                |                                           | 1,335  |                  |         |          |        |        
|                                                  |                                                                                            | Changes in operating assets and liabilities:                   |                                                |                                           |        |                  |         |          |         |        
|                                                  |                                                                                            |                                                                | Accounts receivable                            |                                           |        | 53,178           |         |          |         | 55,164  |        
|                                                  |                                                                                            |                                                                | Inventories                                    |                                           |        | (16,786          | )       |          |         | (21,897 | )      
|                                                  |                                                                                            |                                                                | Prepaid expenses and other current assets      |                                           |        | (148             | )       |          |         | (1,843  | )      
|                                                  |                                                                                            |                                                                | Deposits and other assets                      |                                           |        | (1,249           | )       |          |         | (2,466  | )      
|                                                  |                                                                                            |                                                                | Accounts payable                               |                                           |        | (8,564           | )       |          |         | 8,394   |        
|                                                  |                                                                                            |                                                                | Accrued expenses and other current liabilities |                                           |        | (14,035          | )       |          |         | (4,699  | )      
|                                                  |                                                                                            |                                                                | Accrued income taxes                           |                                           |        | 113              |         |          |         | 38      |        
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|                                                  |                                                                                            | Net cash provided by operating activities                      |                                                |                                           | 19,662 |                  |         |          | 39,110  |        
|Cash flows from investing activities:             |                                                                                            |                                                                |                                                |                                           |        |                  |         |         
|                                                  | Proceeds from sale of business and assets held for sale                                    |                                                                |                                                | 6,192                                     |        |                  |         | 15,100   |        
|                                                  | Distribution of earnings from joint venture                                                |                                                                |                                                | 1,478                                     |        |                  |         | 1,522    |        
|                                                  | Purchases of property and equipment                                                        |                                                                |                                                | (5,906                                    | )      |                  |         | (7,547   | )      
|                                                  | Cash received from joint venture partner                                                   |                                                                |                                                | 293                                       |        |                  |         |         |        
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|                                                  |                                                                                            |                                                                |                                                | Net cash provided by investing activities |        |                  | 2,057   |          |         |         | 9,075   |  
|Cash flows from financing activities:             |                                                                                            |                                                                |                                                |                                           |        |                  |         |         
|                                                  | Repayments of Credit Facility                                                              |                                                                |                                                | (24,466                                   | )      |                  |         | (39,209  | )      
|                                                  | Redemption of Senior Subordinated Notes                                                    |                                                                |                                                |                                          |        |                  |         | (11,549  | )      
|                                                  | Debt issuance costs                                                                        |                                                                |                                                |                                          |        |                  |         | (1,579   | )      
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|                                                  |                                                                                            |                                                                |                                                | Net cash used for financing activities    |        |                  | (24,466 | )        |         |         | (52,337 | )
|Effect of exchange rate changes on cash           |                                                                                            |                                                                | 707                                            |                                           |        |                  | (193    | )       
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|Net decrease in cash and cash equivalents         |                                                                                            |                                                                | (2,040                                         | )                                         |        |                  | (4,345  | )       
|Cash and cash equivalents, beginning of period    |                                                                                            |                                                                | 8,426                                          |                                           |        |                  | 10,115  |         
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|Cash and cash equivalents, end of period          |                                                                                            | $                                                              | 6,386                                          |                                           |        | $                | 5,770   |         
|                                                  |                                                                                            |                                                                |                                                |                                           |        |                  |         |          |        
|Supplemental disclosure of cash flow information: |                                                                                            |                                                                |                                                |                                           |        |                  |         |         
|                                                  | Cash paid for interest                                                                     |                                                                | $                                              | 9,713                                     |        |                  | $       | 12,154   |        
|                                                  | Cash paid for income taxes                                                                 |                                                                | $                                              | 1,311                                     |        |                  | $       | 425      |        

The accompanying notes are an integral part of these consolidated financial statements

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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003

1.     UNAUDITED INTERIM FINANCIAL STATEMENTS

The financial information included in this Form 10-Q of The Holmes Group, Inc.
(THG or the Company) for the periods ended June 30, 2003 and 2002 is
unaudited. However, such information includes all adjustments (including all
normal recurring adjustments) which, in the opinion of management, are
considered necessary for a fair presentation of the consolidated results for
those periods. The results of operations for the periods ended June 30, 2003
and 2002 are not necessarily indicative of the results of operations that may
be expected for the complete fiscal year. The year-end condensed balance sheet
data was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The Company
filed its audited consolidated financial statements for the year ended December
31, 2002 on Form 10-K which included all information and footnotes necessary
for such presentation.

Certain amounts in the financial statements for prior periods have been
reclassified to conform to the current period presentation.

2.     RECENTLY ISSUED ACCOUNTING STANDARDS

The Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64,
Amendment of FASB Statement No. 13, and Technical Corrections in April 2002.
This statement updates, clarifies and simplifies existing accounting
pronouncements. Specifically, the statement rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, FASB Statement No.
64, Extinguishment of Debt Made to Satisfy Sinking Fund Requirements and FASB
Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This
statement also amends FASB Statement No. 13, Accounting for Leases and
certain other existing authoritative pronouncements to make technical
corrections or clarifications. FAS 145 became effective for THG related to the
rescission of FAS 4 and FAS 64 on January 1, 2003. FAS 145 was effective
related to the amendment of FAS 13 for all transactions occurring after May 15,
2002. All other provisions of FAS 145 became effective for financial
statements issued after May 15, 2002. In accordance with the new standard, the
Company reclassified the gain related to the Senior Notes repurchase, which was
treated as an extraordinary item in 2002, as a component of other income in the
consolidated statement of operations.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities. This interpretation explains how to identify
variable interest entities and how an enterprise assesses its interest in a
variable interest entity to decide whether to consolidate that entity. This
interpretation requires existing unconsolidated variable interest entities to
be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. Variable interest entities
that effectively disperse risk will not be consolidated unless a single party
holds an interest or combination of interest that effectively recombines risks
that were previously dispersed. This interpretation applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
As of July 1, 2003, the standard applies to variable interest entities in which
an enterprise holds a variable interest that it acquired before February 1,
2003. The adoption of FIN 46 should not have a material effect on the
Companys financial position or results of operations.

In April 2003, the FASB issued FAS
No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging. FAS 149 amends and clarifies
financial accounting and reporting for derivative instruments and
hedging activities to ensure consistent reporting for contracts with
comparable characteristics. The Company adopted FAS 149 on
July 1, 2003 with no material impact on the Companys
financial position or results of operations.

In May 2003, the FASB issued FAS
No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150
established standards for how to classify and measure certain
financial instruments with characteristics of both liabilities and
equity. The provisions of FAS 150 are effective immediately for
all financial instruments entered into or modified after May 31,
2003. The Company adopted these provisions as of June 1, 2003
with no material impact on the Companys financial position or
results of operations. For all other instruments, the Standard goes
into effect as of July 1, 2003, except for mandatorily
redeemable financial instruments of a non-public entity, which is
effective for existing or new contracts as of January 1, 2004.
The Company is currently in process of assessing the impact of these
provisions.

In May 2003 the Emerging Issues Task
Force (EITF) reached consensus on EITF Issue
No. 01-08, Determining Whether an Arrangement is a
Lease, which is intended to provided guidance in determining
whether an arrangement should be considered a lease subject to the
requirements of FAS 13, Accounting for Leases. The
Task Force reached a consensus that the evaluation of whether an
arrangement contains a lease within the scope of FAS 13 should
be based on the substance of the arrangement using certain guidance
specified in the consensus. EITF 01-08 is required to be applied
to Company arrangements agreed or committed to, modified, or acquired
in business combinations initiated after July 1, 2003. The
Company is currently in process of assessing the impact of
EITF 01-08.

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THE HOLMES GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

3.     CHANGE IN ACCOUNTING PRINCIPLE

In June 2001, the FASB issued Statement of Financial Accounting Standards No.
142, Goodwill and Other Intangible Assets. Under FAS 142, goodwill and
intangible assets with indefinite lives are no longer amortized, but are
reviewed annually for potential impairment by comparing the carrying value to
the fair value of the reporting unit to which they are assigned. FAS 142
requires that goodwill be tested for impairment at the reporting unit level at
adoption utilizing a two-step methodology. The provisions of FAS 142 were
effective for the Companys 2002 fiscal year and, accordingly, the Company
adopted the new standard effective January 1, 2002. The Companys consolidated
balance sheet as of December 31, 2001 included goodwill with a net book value
of $79.8 million as a result of the Rival acquisition in 1999. In accordance
with the new standard, the Company ceased goodwill amortization as of the
beginning of fiscal 2002.

In connection with adopting this standard, the Company established a policy to
value goodwill and other intangible assets using a discounted cash flow method.
With the assistance of independent valuation consultants, the Company
completed the transitional testing of goodwill using a measurement date of
January 1, 2002. The results of the transitional impairment testing indicated
that the carrying values of the goodwill asset for both the home environment
and kitchen reporting units significantly exceeded the estimated fair value of
the units. Accordingly, step two of the testing, which measures the amount of
asset impairment, was completed in 2002. As a result, a non-cash impairment
charge of $79.8 million was recognized as a change in accounting principle as
of the beginning of 2002. The impairment charge, which relates to the
Companys Consumer Durables segment, was $79.8 million on a before and
after-tax basis.

4.     INVENTORIES

All inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method on approximately 93% of the
inventories and the last-in, first-out method (LIFO) for the remaining 7% of
the inventory. Inventories are as follows (in thousands):

|                |  |               |         |                   |  |               |         |   |  |   |         |  
|--------------- |  | ------------- | ------- | ----------------- |  | ------------- | ------- | - |  | - | ------- | -
|                |  | June 30, 2003 |         | December 31, 2002 |  | June 30, 2002
|                |  |               |         |                   |  |              
|Finished goods  |  | $             | 113,177 |                   |  | $             | 95,789  |   |  | $ | 98,553  |  
|Raw materials   |  |               | 11,758  |                   |  |               | 12,501  |   |  |   | 20,391  |  
|Work in process |  |               | 2,274   |                   |  |               | 2,312   |   |  |   | 2,075   |  
|                |  |               |         |                   |  |               |         |   |  |   |         |  
|                |  |               | 127,209 |                   |  |               | 110,602 |   |  |   | 121,019 |  
|LIFO allowance  |  |               | (187    | )                 |  |               | (366    | ) |  |   | (425    | )
|                |  |               |         |                   |  |               |         |   |  |   |         |  
|                |  | $             | 127,022 |                   |  | $             | 110,236 |   |  | $ | 120,594 |  
|                |  |               |         |                   |  |               |         |   |  |   |         |  

5.     RESTRUCTURING CHARGES AND OTHER BUSINESS DIVESTITURES

On February 5, 1999, the Company completed its acquisition of The Rival Company
for an aggregate purchase price of $279.6 million. The acquisition was
accounted for as a purchase, and the results of operations of Rival are
included in the consolidated financial statements since the date of
acquisition. Since the acquisition, the Company has taken several restructuring
actions to integrate Rivals operations into THG, to enhance efficiencies and
to reduce costs. In January 2002, the Company announced the closing of its
Sedalia, Missouri distribution center. The activities of this facility were
moved to the other existing distribution centers. In connection with this
facility closure, the Company recorded restructuring charges totaling
$1,787,000 in the first quarter of 2002. For the 2002 fiscal year,
restructuring charges related to this facility closure totaled $4,898,000,
which included $4,220,000 of asset write-downs of redundant property and
equipment to their estimated net realizable value, facility exit costs of
$612,000 and $66,000 in severance payments for employees who elected not to
transfer to other facilities.

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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

On December 2, 2002, the Company announced the closure of its remaining US
manufacturing operations effective January 31, 2003, in an effort to
enhance efficiencies and to reduce operating costs. The production activities
of the facilities in Flowood, Mississippi, Sweet Springs, Missouri and Clinton,
Missouri have been shifted to the Companys expanded manufacturing complex in
southern China and to other independent suppliers in the Far East. As part of
this restructuring action, the Company also announced the closure of an
administrative office in Kansas City, Missouri and the phase out of two
distribution and service centers in Clinton, Missouri and Worcester,
Massachusetts during the first half of 2003. As a result of these changes, the
Company recorded restructuring charges totaling $23,108,000 during the fourth
quarter of 2002. The charges included $3,935,000 for severance payments to 706
employees, $15,670,000 of non-cash asset write-downs of redundant property and
equipment to their estimated net realizable value, $1,531,000 of liabilities
related to outstanding lease obligations and facility exit costs of $1,972,000.

Approximately 655 employees were separated during the first six months of 2003
as a result of the facility closings. The Company expects to pay the remaining
severance and facility exit costs which are accrued as of June 30, 2003 during
the balance of fiscal 2003 and fiscal 2004. A reconciliation of the
restructuring reserve activity for the six months ended June 30, 2003 is as
follows:

|                             |  |                  |        |               |  |               |        |   |  |   |        |  
|---------------------------- |  | ---------------- | ------ | ------------- |  | ------------- | ------ | - |  | - | ------ | -
|                             |  | Employee         |        | Facility Exit |  | Total        
|                             |  | Severance and    |        | and Other     |  | Accrued      
|                             |  | Relocation Costs |        | Costs         |  | Restructuring
|                             |  |                  |        |               |  |              
|                             |  | (in thousands)  
|Balance at December 31, 2002 |  | $                | 3,631  |               |  | $             | 3,452  |   |  | $ | 7,083  |  
|Cash Payments                |  |                  | (3,033 | )             |  |               | (1,087 | ) |  |   | (4,120 | )
|Adjustments                  |  |                  |       |               |  |               | (214   | ) |  |   | (214   | )
|                             |  |                  |        |               |  |               |        |   |  |   |        |  
|Balance at June 30, 2003     |  | $                | 598    |               |  | $             | 2,151  |   |  | $ | 2,749  |  
|                             |  |                  |        |               |  |               |        |   |  |   |        |  

During the first half of 2003, the Company incurred $1,609,000 of expenses
associated with the 2002 restructuring actions which were not accrued at
December 31, 2002 in accordance with Emerging Issues Task Force Issue No. 94-3.
The restructuring expenses in the first six months of 2003 included a non-cash
charge of $1,335,000 related to the Companys pension plan for employees at the
closed manufacturing facilities. This charge, which was accrued in accordance
with the provisions of Financial Accounting Standards Board No. 88, Employers
Accounting for Settlements and Curtailments of Defined Benefit Pension Plans
and for Termination Benefits, includes a partial plan settlement of $1,665,000
due to lump sum benefits paid to terminated employees at the closed facilities,
partially offset by a pension plan curtailment gain of $330,000 that was
recorded in the first quarter of 2003. In addition, cost of sales in the first
six months of 2003 includes $868,000 of unfavorable manufacturing variances
incurred during the shutdown of the domestic facilities and $223,000 of freight
costs associated with the transfer of distribution activities from Missouri to
a new facility in California.

Assets held for sale in the consolidated balance sheet at June 30, 2003
includes $405,000 related to the facilities which were closed in January 2003.
During the second quarter of 2003, the Company sold two facilities in Missouri
and certain manufacturing equipment for cash proceeds of
$6.2 million. While there was no significant gain or loss
related to these asset sales, restructuring charges in the second quarter of 2003
were reduced by $214,000 as actual facility exit costs were lower than the
amounts accrued at December 31, 2002. The Company expects to sell the majority
of the remaining assets in the second half of 2003.

On January 14, 2002, the Company sold substantially all of the assets of its
Pollenex® division, which marketed personal care products, for approximately
$15.1 million. The cash proceeds received in this transaction exceeded the net
assets of the business, which consisted primarily of inventory and property and
equipment, by approximately $9.5 million, resulting in a gain during 2002. In
the first half of 2002, other income in the consolidated statement of
operations included a gain of $9.1 million related to this transaction.

8



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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

6.     LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

|                                                                                     |  |               |         |                   |  |               |         |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------- | ------- | ----------------- |  | ------------- | ------- | - |  | - | ------- | -
|                                                                                     |  | June 30, 2003 |         | December 31, 2002 |  | June 30, 2002
|                                                                                     |  |               |         |                   |  |              
|Revolving Credit Facility                                                            |  | $             | 69,109  |                   |  | $             | 84,209  |   |  | $ | 83,009  |  
|Term Loan A due February 2005                                                        |  |               | 10,443  |                   |  |               | 15,397  |   |  |   | 19,332  |  
|Term Loan B due February 2007                                                        |  |               | 71,616  |                   |  |               | 76,028  |   |  |   | 76,332  |  
|                                                                                     |  |               |         |                   |  |               |         |   |  |   |         |  
|Total Credit Facility                                                                |  |               | 151,168 |                   |  |               | 175,634 |   |  |   | 178,673 |  
|9 7/8% Senior Subordinated Notes, net of
unamortized discount, due November 15, 2007 |  |               | 99,587  |                   |  |               | 99,544  |   |  |   | 99,503  |  
|                                                                                     |  |               |         |                   |  |               |         |   |  |   |         |  
|Total Debt                                                                           |  |               | 250,755 |                   |  |               | 275,178 |   |  |   | 278,176 |  
|Less current maturities of Credit Facility                                           |  |               | (9,078  | )                 |  |               | (9,078  | ) |  |   | (8,778  | )
|                                                                                     |  |               |         |                   |  |               |         |   |  |   |         |  
|                                                                                     |  | $             | 241,677 |                   |  | $             | 266,100 |   |  | $ | 269,398 |  
|                                                                                     |  |               |         |                   |  |               |         |   |  |   |         |  

Credit Facility

Under the Fifth Amendment to the Companys Credit Facility, which was executed
in March 2002, the lenders have committed to a Revolving Credit Loan A of $131
million and a Revolving Credit Loan B of $40 million. Revolving Credit Loan B
is supported by the guarantee of investment funds managed by Berkshire
Partners, the Companys majority shareholder. The maturity date of Revolving
Credit Loan B is July 1, 2004. The maturity date of Revolving Credit Loan A is
February 5, 2005, although the availability under the Revolving Credit Loan A
commitment will terminate on July 1, 2004 unless otherwise approved by a
majority of the lenders. Actual availability under these Revolving Credit
facilities is subject to a borrowing base formula based on inventory and
accounts receivable.

In connection with the Fifth Amendment, the Company entered into a guarantee
fee arrangement with Berkshire Partners which provides for a fee of 2.25% per
annum, compounded annually, on the $40 million Revolving Credit Loan B
commitment, less the portion of this facility designated as subordinated debt
funding loans (which portion is subordinated to the other obligations under the
Credit Facility). The guarantee fee related to the subordinated debt funding
loan is calculated at 20% per annum, compounded annually. At June 30, 2003,
the subordinated debt funding loan totaled $12.8 million. The guarantee fees
have not been paid, but have been accrued and are included as non-cash interest
in the statement of operations for 2002 and 2003. Payment of these fees is
subordinated to the Companys obligations under the Credit Facility.

As of June 30, 2003, December 31, 2002 and June 30, 2002, the Companys
availability under the revolving credit portions of the Credit Facility was $46
million, $62.7 million and $41.2 million, respectively, net of outstanding
letters of credit. The Credit Facility bears interest at variable rates based
on either the prime rate or Eurodollar rate at the Companys option, plus a
margin which, in the case of the Term Loan A and a portion of the Revolving
Credit Facility, varies depending upon certain financial ratios. The weighted
average interest rate of borrowings under the Credit Facility was 5.3% at June
30, 2003, 5.6% at December 31, 2002 and 5.8% at June 30, 2002. The Credit
Facility, and the guarantees thereof by the Companys domestic subsidiaries,
are collateralized by substantially all of the Companys domestic and certain
foreign assets.

Senior Subordinated Notes

The Companys Senior Subordinated Notes were issued as part of a
recapitalization transaction in 1997 ($105 million) and to partially finance
the Rival acquisition in 1999 ($31.3 million). The Notes, which are due
November 15, 2007, are subordinated to the Companys other debt, including the
Credit Facility.

In conjunction with the Fifth Amendment of the Credit Facility, as described
above, the Company repurchased from two Berkshire Partners investment funds an
aggregate principal amount of approximately $36.2 million of the Senior
Subordinated Notes. The purchase price of the Notes, representing Berkshire
Partners cost, was $11.5 million plus accrued interest, which was funded with
proceeds of the Revolving Credit Loan B described above. The Notes repurchased
were retired and cancelled. This transaction resulted in a gain on the early
retirement of debt totaling $22.4 million, which has been reflected in the
consolidated statement of operations for the six months ended June 30, 2002.
This gain is net of approximately $1.9 million of debt issuance costs, $0.3 million of debt issuance discount associated with the
Senior Subordinated

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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

Notes and $0.1 million
of transaction fees. A provision for income taxes was not recorded in
connection with this transaction as the Company has offset the gain with
available net operating loss carry forwards. In accordance with the provisions
of FAS 145, this gain, which was originally reported as an extraordinary item
in 2002, has been reclassified as a component of other income in the statement
of operations. The Company may consider repurchases of additional Notes in the
future, and may utilize the proceeds of the Credit Facility for this purpose.

7.     COMPREHENSIVE INCOME (LOSS)

Comprehensive income consists of net earnings and foreign currency translation
as presented in the following table (in thousands):

|                                         |  |                    |        |                  |  |               |     |               |  |   |        |   |  |   |         |  
|---------------------------------------- |  | ------------------ | ------ | ---------------- |  | ------------- | --- | ------------- |  | - | ------ | - |  | - | ------- | -
|                                         |  | Three months ended |        | Six months ended
|                                         |  |                    |        |                 
|                                         |  | June 30, 2003      |        | June 30, 2002    |  | June 30, 2003 |     | June 30, 2002
|                                         |  |                    |        |                  |  |               |     |              
|Net income (loss)                        |  | $                  | (1,662 | )                |  | $             | 290 |               |  | $ | (3,778 | ) |  | $ | (51,470 | )
|Foreign currency translation adjustments |  |                    | 408    |                  |  |               | 403 |               |  |   | 707    |   |  |   | 545     |  
|                                         |  |                    |        |                  |  |               |     |               |  |   |        |   |  |   |         |  
|Comprehensive income (loss)              |  | $                  | (1,254 | )                |  | $             | 693 |               |  | $ | (3,071 | ) |  | $ | (50,925 | )
|                                         |  |                    |        |                  |  |               |     |               |  |   |        |   |  |   |         |  

8.     BUSINESS SEGMENTS

The Company currently manages its operations through three business segments:
Consumer Durables, International and Far East Manufacturing. The Consumer
Durables segment sells products including fans, heaters, humidifiers, air
purifiers, lighting products, Crock-Pot ® slow cookers and other small kitchen
electric appliances to retailers throughout the United States. The Consumer
Durables segment is made up of home environment products and kitchen electric
products, which are considered one business segment due to the similar customer
base, distribution channels, and economic characteristics. The International
segment sells the Companys products outside the United States, predominantly
in Canada, Latin America and Europe. The Far East Manufacturing segment
represents the Companys manufacturing and sourcing operations located
primarily at Holmes Products (Far East) Limited (HPFEL).

Summary financial information for each reportable segment for the three month
and six month periods ended June 30, 2003 and 2002 is as follows (in
thousands):

|               |                       |                    |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |         |   | 
|-------------- | --------------------- | ------------------ | - | -------- | - | -------- | - | ------------- |  | ------------ | - | ------ |  |  | - | -------- | - | ------------ | - | ------- | - | 
|               |                       |                    |   | Consumer |   |          |   |               |  |              |   |        |  |  |   |          |   | Consolidated
|               |                       |                    |   | Durables |   | Far East |   | International |  | Eliminations |   | Total 
|               |                       |                    |   |          |   |          |   |               |  |              |   |       
|               |                       | Three
Months Ended |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |         |   | 
|June 30, 2003: |                       |                    |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |        
|               | Net sales             |                    | $ | 95,245   |   |          | $ | 65,474        |  |              | $ | 14,899 |  |  | $ | (59,866  | ) |              | $ | 115,752 |  
|               | Segment income (loss) |                    |   | (6,219   | ) |          |   | 4,207         |  |              |   | 34     |  |  |   | 316      |   |              |   | (1,662  | )
|June 30, 2002: |                       |                    |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |        
|               | Net sales             |                    | $ | 114,114  |   |          | $ | 80,558        |  |              | $ | 13,558 |  |  | $ | (76,318  | ) |              | $ | 131,912 |  
|               | Segment income (loss) |                    |   | (4,879   | ) |          |   | 5,692         |  |              |   | 272    |  |  |   | (795     | ) |              |   | 290     |  
|               |                       | Six
Months Ended   |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |         |   | 
|June 30, 2003: |                       |                    |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |        
|               | Net sales             |                    | $ | 191,561  |   |          | $ | 148,236       |  |              | $ | 28,630 |  |  | $ | (137,375 | ) |              | $ | 231,052 |  
|               | Segment income (loss) |                    |   | (12,685  | ) |          |   | 8,493         |  |              |   | 275    |  |  |   | 139      |   |              |   | (3,778  | )
|June 30, 2002: |                       |                    |   |          |   |          |   |               |  |              |   |        |  |  |   |          |   |              |   |        
|               | Net sales             |                    | $ | 217,224  |   |          | $ | 151,941       |  |              | $ | 23,349 |  |  | $ | (143,260 | ) |              | $ | 249,254 |  
|               | Segment income (loss) |                    |   | 17,696   |   |          |   | 11,450        |  |              |   | 412    |  |  |   | (1,190   | ) |              |   | 28,368  |  

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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

In 2002, income for the Consumer Durables segment includes the gains of
$22,388,000 related to the repurchase of the Companys Senior Subordinated
Notes and $9,088,000 realized on the sale of the Pollenex® business, but
excludes the goodwill impairment charge of $79,838,000 related to the adoption
of FAS 142.

The following information is summarized by geographic area (in thousands):

|                   |                                  |  |        |         |          |  |               |        |                    |  |   |        |  |  |   |         | 
|------------------ | -------------------------------- |  | ------ | ------- | -------- |  | ------------- | ------ | ------------------ |  | - | ------ |  |  | - | ------- | 
|                   |                                  |  | United |         |          |  |               |        |                    |  |   |        |  |  |  
|                   |                                  |  | States |         | Far East |  | International |        | Consolidated Total
|                   |                                  |  |        |         |          |  |               |        |                   
|Net Sales:         |                                  |  |        |         |          |  |               |        |                    |  |   |        |  |  |   |        
|                   | Three months ended June 30, 2003 |  | $      | 94,550  |          |  | $             | 6,513  |                    |  | $ | 14,689 |  |  | $ | 115,752 | 
|                   | Three months ended June 30, 2002 |  |        | 114,114 |          |  |               | 4,240  |                    |  |   | 13,558 |  |  |   | 131,912 | 
|                   | Six months ended June 30, 2003   |  |        | 189,972 |          |  |               | 13,006 |                    |  |   | 28,074 |  |  |   | 231,052 | 
|                   | Six months ended June 30, 2002   |  |        | 217,224 |          |  |               | 8,681  |                    |  |   | 23,349 |  |  |   | 249,254 | 
|Long-lived assets: |                                  |  |        |         |          |  |               |        |                    |  |   |        |  |  |   |        
|                   | June 30, 2003                    |  |        | 10,089  |          |  |               | 34,041 |                    |  |   | 456    |  |  |   | 44,586  | 
|                   | December 31, 2002                |  |        | 16,226  |          |  |               | 33,028 |                    |  |   | 495    |  |  |   | 49,749  | 
|                   | June 30, 2002                    |  |        | 40,224  |          |  |               | 32,782 |                    |  |   | 553    |  |  |   | 73,559  | 

Net sales are grouped based on the geographic origin of the transaction. The
Companys manufacturing entities in the Far East sell completed products to the
subsidiaries of The Holmes Group at intercompany transfer prices which reflect
managements estimate of amounts which would be charged by an unrelated third
party. These sales are excluded from the above table and are eliminated in
consolidation. The remaining Far East sales are to the Companys motor
manufacturing joint venture with General Electric or to unrelated third
parties.

9.     STOCK-BASED COMPENSATION

During the first quarter of fiscal 2003, the Company adopted the disclosure
provisions of Statement of Financial Accounting Standards No. 148, Accounting
for Stock Based Compensation  Transition and Disclosure. FAS No. 148 amends
FAS No. 123, Accounting for Stock-Based Compensation, to provide two
additional alternative transition methods if a company voluntarily decides to
change its method of accounting for stock-based employee compensation to the
fair-value method. FAS No. 148 also amends the disclosure requirements of
FAS No. 123 by requiring that companies make quarterly disclosures regarding
the pro forma effects of using the fair-value method of accounting for
stock-based compensation, effective for interim periods beginning after
December 15, 2002.

The Companys stock-based compensation plan is described fully in Note 9 to the
Companys consolidated financial statements for the year ended December 31,
2002, as contained in the Annual Report on Form 10-K. The Company accounts for
this plan under the recognition and measurement principles of APB Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations.
The following table provides the effect on net income (loss) if the Company had
applied the fair value recognition provisions of SFAS No. 123, to stock-based
compensation:

|                                                                                        |  |                    |        |                  |  |          |      |          |  |   |        |   |  |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | -------- | ---- | -------- |  | - | ------ | - |  | - | ------- | -
|                                                                                        |  | Three Months Ended |        | Six Months Ended
|                                                                                        |  |                    |        |                 
|                                                                                        |  | June 30,           |        | June 30,         |  | June 30, |      | June 30,
|                                                                                        |  | 2003               |        | 2002             |  | 2003     |      | 2002    
|                                                                                        |  |                    |        |                  |  |          |      |         
|Reported net income (loss)                                                              |  | $                  | (1,662 | )                |  | $        | 290  |          |  | $ | (3,778 | ) |  | $ | (51,470 | )
|Stock-based employee
compensation included in
net loss                                  |  |                    |       |                  |  |          |     |          |  |   |       |   |  |   |        |  
|Stock-based employee
compensation determined
under the fair value
method for all awards |  |                    | (271   | )                |  |          | (291 | )        |  |   | (546   | ) |  |   | (582    | )
|                                                                                        |  |                    |        |                  |  |          |      |          |  |   |        |   |  |   |         |  
|Pro forma net loss                                                                      |  | $                  | (1,933 | )                |  | $        | (1   | )        |  | $ | (4,324 | ) |  | $ | (52,052 | )
|                                                                                        |  |                    |        |                  |  |          |      |          |  |   |        |   |  |   |         |  

10.     PRODUCT WARRANTIES

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting and Disclosure Requirements for Guarantees. The Company adopted
FIN 45 effective January 1, 2003 and will apply the provisions of the new
interpretation to any guarantees issued or modified after that date. The
Company issues warranties to consumers for certain of its home environment and kitchen appliances.

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THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

Warranty costs, representing the value of
replacement goods sent to consumers making warranty claims, are expensed as
incurred. The Company maintains a warranty reserve for consumer claims in
process at the end of the period. A reconciliation of the warranty reserve for
the six months ended June 30, 2003 is as follows (in thousands):

|                                             |  |   |      |  
|-------------------------------------------- |  | - | ---- | -
|Balance at beginning of period               |  | $ | 375  |  
|Accruals for warranties issued during period |  |   | 312  |  
|Settlements made during the period           |  |   | (108 | )
|                                             |  |   |      |  
|Balance at end of period                     |  | $ | 579  |  
|                                             |  |   |      |  

11.     CONTINGENCIES

The Company is involved in litigation and is the subject of claims arising in
the normal course of its business. In the opinion of management, based upon
discussions with legal counsel, no existing litigation or claims will have a
materially adverse effect on the Companys financial position or results of
operations or cash flows.

12.     CONDENSED CONSOLIDATING INFORMATION

The Companys Senior Subordinated Notes are guaranteed by Rival and its
domestic subsidiary and Holmes Manufacturing Corp. (Manufacturing), Holmes
Motor Corp. (Motor) and Holmes Air (Taiwan) Corp. (Taiwan), but are not
guaranteed by THGs other subsidiary, HPFEL, or Rivals five foreign
subsidiaries. The guarantor subsidiaries are directly or indirectly
wholly-owned by THG, and the guarantees are full, unconditional and joint and
several. The following condensed consolidating financial information presents
the financial position, results of operations and cash flows of (i) THG, as
parent, as if it accounted for its subsidiaries on the equity method, (ii)
Rival (on a consolidated basis following its acquisition by THG, Manufacturing,
Motor and Taiwan, the guarantor subsidiaries, and (iii) HPFEL, Bionaire
International B.V., The Holmes Group Canada, Ltd., Waverly Products Company,
Ltd., and Rival de Mexico S.A. de C.V., the non-guarantor subsidiaries. There
were no transactions between Rival, Manufacturing, Motor and Taiwan during any
of the periods presented. Taiwan and Manufacturing had no revenues or
operations during the periods presented. As further described in Note 16 of the
Companys financial statements for the year ended December 31, 2002, which are
included in its Annual Report on Form 10-K, certain of HPFELs subsidiaries in
China have restrictions on distributions to their parent companies.

12



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THE HOLMES GROUP, INC.
CONDENSED CONSOLIDATING BALANCE SHEET AT JUNE 30, 2003 (IN
THOUSANDS)
(UNAUDITED)

|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |         |  
|--------------------------------------- | ---------------------------------------------- | ------------------------------------ | ------- | ------- | ------- | ------------ | ------ | ------------ | ------- | ------------- | ------- | ------------ | ------- | - | -------- | -------- | -------- | - | ------- | ------- | ------- | -
|                                        |                                                |                                      |         |         |         |              |        | Guarantor    |         | Non-Guarantor |         |              |         |   |          |          |          |  
|                                        |                                                |                                      |         | Parent  |         | Subsidiaries |        | Subsidiaries |         | Eliminations  |         | Consolidated
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |             
|Assets                                  |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current assets:                         |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Cash and cash equivalents                      |                                      | $       | 2,679   |         |              | $      | (488         | )       |               | $       | 4,195        |         |   |          |         |          |   | $       | 6,386   |        
|                                        | Accounts receivable, net                       |                                      |         | 12,519  |         |              |        | 36,290       |         |               |         | 25,249       |         |   |          |         |          |   |         | 74,058  |        
|                                        | Inventories                                    |                                      |         | 40,473  |         |              |        | 50,090       |         |               |         | 41,769       |         |   | $        | (5,310   | )        |   |         | 127,022 |        
|                                        | Prepaid expenses and other current assets      |                                      |         | 2,415   |         |              |        | 58           |         |               |         | 1,370        |         |   |          |          |          |   |         | 3,843   |        
|                                        | Deferred income taxes                          |                                      |         | 4,689   |         |              |        | 378          |         |               |         |             |         |   |          |          |          |   |         | 5,067   |        
|                                        | Due from affiliates                            |                                      |         | 283,283 |         |              |        | 89           |         |               |         | 88,497       |         |   |          | (371,869 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|                                        |                                                | Total current assets                 |         |         | 346,058 |              |        |              | 86,417  |               |         |              | 161,080 |   |          |          | (377,179 | ) |         |         | 216,376 |  
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|Assets held for sale                    |                                                |                                      |        |         |         |              | 405    |              |         |               |        |              |         |   |         |          |          |   | 405     |        
|Property and equipment, net             |                                                |                                      | 9,183   |         |         |              | 205    |              |         |               | 33,656  |              |         |   |         |          |          |   | 43,044  |        
|Deposits and other assets               |                                                |                                      | 5,534   |         |         |              | 1      |              |         |               | 840     |              |         |   | (5,213   | )        |          |   | 1,162   |        
|Debt issuance costs, net                |                                                |                                      | 7,683   |         |         |              |       |              |         |               |        |              |         |   |         |          |          |   | 7,683   |        
|Deferred income taxes                   |                                                |                                      | 5,513   |         |         |              | 443    |              |         |               |        |              |         |   |         |          |          |   | 5,956   |        
|Investment in consolidated subsidiaries |                                                |                                      | 23,159  |         |         |              |       |              |         |               | 3,701   |              |         |   | (26,860  | )        |          |   |        |        
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|                                        |                                                | $                                    | 397,130 |         |         | $            | 87,471 |              |         | $             | 199,277 |              |         | $ | (409,252 | )        |          | $ | 274,626 |        
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|Liabilities and Stockholders Equity    |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current liabilities:                    |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Accounts payable                               |                                      |         | 5,405   |         |              |        | 559          |         |               |         | 34,952       |         |   |          | (5,213   | )        |   |         | 35,703  |        
|                                        | Current portion of Credit Facility             |                                      |         | 9,078   |         |              |        |             |         |               |         |             |         |   |          |         |          |   |         | 9,078   |        
|                                        | Accrued income taxes                           |                                      |         | 3,135   |         |              |        | (1,271       | )       |               |         | 5,654        |         |   |          |         |          |   |         | 7,518   |        
|                                        | Deferred income taxes                          |                                      |         | (2,144  | )       |              |        | 2,582        |         |               |         | 2,686        |         |   |          |         |          |   |         | 3,124   |        
|                                        | Accrued expenses and other current liabilities |                                      |         | 18,950  |         |              |        | 11,390       |         |               |         | 7,783        |         |   |          |         |          |   |         | 38,123  |        
|                                        | Due to affiliates                              |                                      |         | 199,784 |         |              |        | 142,105      |         |               |         | 33,681       |         |   |          | (375,570 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|                                        |                                                | Total current liabilities            |         |         | 234,208 |              |        |              | 155,365 |               |         |              | 84,756  |   |          |          | (380,783 | ) |         |         | 93,546  |  
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|Long-term portion of Credit facility    |                                                |                                      | 142,090 |         |         |              |       |              |         |               |        |              |         |   |         |          |          |   | 142,090 |        
|Long-term debt                          |                                                |                                      | 99,587  |         |         |              |       |              |         |               |        |              |         |   |         |          |          |   | 99,587  |        
|Pension obligation                      |                                                |                                      | 200     |         |         |              | 7,774  |              |         |               |        |              |         |   |         |          |          |   | 7,974   |        
|Other long-term liabilities             |                                                |                                      |        |         |         |              |       |              |         |               | 7,775   |              |         |   |         |          |          |   | 7,775   |        
|Deferred income taxes                   |                                                |                                      | (1,368  | )       |         |              | 861    |              |         |               | 1,748   |              |         |   |         |          |          |   | 1,241   |        
|Stockholders equity (deficit):         |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Common stock, $.001 par value                  |                                      |         | 20      |         |              |        | 2            |         |               |         |             |         |   |          | (2       | )        |   |         | 20      |        
|                                        | Common stock, $1 par value                     |                                      |         |        |         |              |        |             |         |               |         | 3,810        |         |   |          | (3,810   | )        |   |         |        |        
|                                        | Additional paid in capital                     |                                      |         | 68,874  |         |              |        |             |         |               |         |             |         |   |          |         |          |   |         | 68,874  |        
|                                        | Accumulated other comprehensive income         |                                      |         | (6,524  | )       |              |        |             |         |               |         | 517          |         |   |          | (517     | )        |   |         | (6,524  | )      
|                                        | Treasury stock                                 |                                      |         | (62,076 | )       |              |        |             |         |               |         |             |         |   |          |         |          |   |         | (62,076 | )      
|                                        | Retained earnings (deficit)                    |                                      |         | (77,881 | )       |              |        | (76,531      | )       |               |         | 100,671      |         |   |          | (24,140  | )        |   |         | (77,881 | )      
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|                                        |                                                | Total stockholders equity (deficit) |         |         | (77,587 | )            |        |              | (76,529 | )             |         |              | 104,998 |   |          |          | (28,469  | ) |         |         | (77,587 | )
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        
|                                        |                                                | $                                    | 397,130 |         |         | $            | 87,471 |              |         | $             | 199,277 |              |         | $ | (409,252 | )        |          | $ | 274,626 |        
|                                        |                                                |                                      |         |         |         |              |        |              |         |               |         |              |         |   |          |          |          |   |         |         |        

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THE HOLMES GROUP, INC.
CONDENSED CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 2002 (IN THOUSANDS)

|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |         |         |  
|--------------------------------------- | ---------------------------------------------- | ------------------------------------ | ------- | ------- | ------- | ------------ | ------- | ------------ | ------- | ------------- | ------- | ------------ | ------- | - | -------- | -------- | -------- | - | ------- | ------- | ------- | -
|                                        |                                                |                                      |         |         |         |              |         | Guarantor    |         | Non-Guarantor |         |              |         |   |          |          |          |  
|                                        |                                                |                                      |         | Parent  |         | Subsidiaries |         | Subsidiaries |         | Eliminations  |         | Consolidated
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |             
|Assets                                  |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current assets:                         |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Cash and cash equivalents                      |                                      | $       | 2,599   |         |              | $       | (488         | )       |               | $       | 6,315        |         |   |          |         |          |   | $       | 8,426   |        
|                                        | Accounts receivable, net                       |                                      |         | 21,383  |         |              |         | 77,428       |         |               |         | 29,598       |         |   |          |         |          |   |         | 128,409 |        
|                                        | Inventories                                    |                                      |         | 30,357  |         |              |         | 53,394       |         |               |         | 31,935       |         |   | $        | (5,450   | )        |   |         | 110,236 |        
|                                        | Prepaid expenses and other current assets      |                                      |         | 2,360   |         |              |         | 237          |         |               |         | 2,220        |         |   |          |         |          |   |         | 4,817   |        
|                                        | Deferred income taxes                          |                                      |         | 4,689   |         |              |         | 378          |         |               |         |             |         |   |          |         |          |   |         | 5,067   |        
|                                        | Due from affiliates                            |                                      |         | 283,734 |         |              |         | 89           |         |               |         | 84,673       |         |   |          | (368,496 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total current assets                 |         |         | 345,122 |              |         |              | 131,038 |               |         |              | 154,741 |   |          |          | (373,946 | ) |         |         | 256,955 |  
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Assets held for sale                    |                                                |                                      |        |         |         |              | 6,466   |              |         |               |        |              |         |   |         |          |          |   | 6,466   |        
|Property and equipment, net             |                                                |                                      | 9,073   |         |         |              | 238     |              |         |               | 33,135  |              |         |   |         |          |          |   | 42,446  |        
|Deposits and other assets               |                                                |                                      | 5,212   |         |         |              | 1       |              |         |               | 515     |              |         |   | (4,891   | )        |          |   | 837     |        
|Debt issuance costs, net                |                                                |                                      | 10,184  |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 10,184  |        
|Deferred income taxes                   |                                                |                                      | 5,513   |         |         |              | 443     |              |         |               |        |              |         |   |         |          |          |   | 5,956   |        
|Investment in consolidated subsidiaries |                                                |                                      | 16,247  |         |         |              |        |              |         |               | 3,701   |              |         |   | (19,948  | )        |          |   |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | $                                    | 391,351 |         |         | $            | 138,186 |              |         | $             | 192,092 |              |         | $ | (398,785 | )        |          | $ | 322,844 |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Liabilities and Stockholders Equity    |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current liabilities:                    |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Accounts payable                               |                                      |         | 4,604   |         |              |         | 7,709        |         |               |         | 36,845       |         |   |          | (4,891   | )        |   |         | 44,267  |        
|                                        | Current portion of Credit Facility             |                                      |         | 9,078   |         |              |         |             |         |               |         |             |         |   |          |         |          |   |         | 9,078   |        
|                                        | Accrued income taxes                           |                                      |         | 3,543   |         |              |         | (1,074       | )       |               |         | 4,936        |         |   |          |         |          |   |         | 7,405   |        
|                                        | Deferred income taxes                          |                                      |         | (1,892  | )       |              |         | 2,582        |         |               |         | 2,277        |         |   |          |         |          |   |         | 2,967   |        
|                                        | Accrued expenses and other current liabilities |                                      |         | 28,741  |         |              |         | 17,846       |         |               |         | 6,514        |         |   |          |         |          |   |         | 53,101  |        
|                                        | Due to affiliates                              |                                      |         | 156,324 |         |              |         | 178,249      |         |               |         | 37,624       |         |   |          | (372,197 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total current liabilities            |         |         | 200,398 |              |         |              | 205,312 |               |         |              | 88,196  |   |          |          | (377,088 | ) |         |         | 116,818 |  
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Long-term portion of Credit Facility    |                                                |                                      | 166,556 |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 166,556 |        
|Senior Subordinated Notes               |                                                |                                      | 99,544  |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 99,544  |        
|Pension obligation                      |                                                |                                      |        |         |         |              | 5,840   |              |         |               |        |              |         |   |         |          |          |   | 5,840   |        
|Other liabilities                       |                                                |                                      |        |         |         |              |        |              |         |               | 7,613   |              |         |   |         |          |          |   | 7,613   |        
|Deferred income taxes                   |                                                |                                      | (631    | )       |         |              | 861     |              |         |               | 759     |              |         |   |         |          |          |   | 989     |        
|Stockholders equity (deficit):         |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Common stock, $.001 par value                  |                                      |         | 20      |         |              |         | 2            |         |               |         |             |         |   |          | (2       | )        |   |         | 20      |        
|                                        | Common stock, $1 par value                     |                                      |         |        |         |              |         |             |         |               |         | 3,810        |         |   |          | (3,810   | )        |   |         |        |        
|                                        | Additional paid in capital                     |                                      |         | 68,874  |         |              |         |             |         |               |         |             |         |   |          |         |          |   |         | 68,874  |        
|                                        | Accumulated other comprehensive income         |                                      |         | (7,231  | )       |              |         |             |         |               |         | (189         | )       |   |          | 189      |          |   |         | (7,231  | )      
|                                        | Treasury stock                                 |                                      |         | (62,076 | )       |              |         |             |         |               |         |             |         |   |          |         |          |   |         | (62,076 | )      
|                                        | Retained earnings (deficit)                    |                                      |         | (74,103 | )       |              |         | (73,829      | )       |               |         | 91,903       |         |   |          | (18,074  | )        |   |         | (74,103 | )      
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total stockholders equity (deficit) |         |         | (74,516 | )            |         |              | (73,827 | )             |         |              | 95,524  |   |          |          | (21,697  | ) |         |         | (74,516 | )
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | $                                    | 391,351 |         |         | $            | 138,186 |              |         | $             | 192,092 |              |         | $ | (398,785 | )        |          | $ | 322,844 |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        

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##### Table of Contents



THE HOLMES GROUP, INC.
CONDENSED CONSOLIDATING BALANCE SHEET AT JUNE 30, 2002 (IN
THOUSANDS)
(UNAUDITED)

|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |         |         |  
|--------------------------------------- | ---------------------------------------------- | ------------------------------------ | ------- | ------- | ------- | ------------ | ------- | ------------ | ------- | ------------- | ------- | ------------ | ------- | - | -------- | -------- | -------- | - | ------- | ------- | ------- | -
|                                        |                                                |                                      |         |         |         |              |         | Guarantor    |         | Non-Guarantor |         |              |         |   |          |          |          |  
|                                        |                                                |                                      |         | Parent  |         | Subsidiaries |         | Subsidiaries |         | Eliminations  |         | Consolidated
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |             
|Assets                                  |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current assets:                         |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Cash and cash equivalents                      |                                      | $       | 1,974   |         |              | $       | (489         | )       |               | $       | 4,285        |         |   |          |         |          |   | $       | 5,770   |        
|                                        | Accounts receivable, net                       |                                      |         | 14,654  |         |              |         | 49,742       |         |               |         | 19,672       |         |   |          |         |          |   |         | 84,068  |        
|                                        | Inventories                                    |                                      |         | 34,477  |         |              |         | 64,690       |         |               |         | 27,501       |         |   | $        | (6,074   | )        |   |         | 120,594 |        
|                                        | Prepaid expenses and other current assets      |                                      |         | 1,633   |         |              |         | 5,433        |         |               |         | 2,681        |         |   |          |         |          |   |         | 9,747   |        
|                                        | Deferred income taxes                          |                                      |         | 600     |         |              |         | 4,649        |         |               |         |             |         |   |          |         |          |   |         | 5,249   |        
|                                        | Due from affiliates                            |                                      |         | 283,283 |         |              |         | 89           |         |               |         | 81,464       |         |   |          | (364,836 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total current assets                 |         |         | 336,621 |              |         |              | 124,114 |               |         |              | 135,603 |   |          |          | (370,910 | ) |         |         | 225,428 |  
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Assets held for sale                    |                                                |                                      |        |         |         |              | 6,288   |              |         |               |        |              |         |   |         |          |          |   | 6,288   |        
|Property and equipment, net             |                                                |                                      | 9,978   |         |         |              | 20,064  |              |         |               | 32,382  |              |         |   |         |          |          |   | 62,424  |        
|Deposits and other assets               |                                                |                                      | 6,242   |         |         |              | 2,543   |              |         |               | 953     |              |         |   | (4,891   | )        |          |   | 4,847   |        
|Debt issuance costs, net                |                                                |                                      | 13,863  |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 13,863  |        
|Deferred income taxes                   |                                                |                                      | 5,774   |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 5,774   |        
|Investment in consolidated subsidiaries |                                                |                                      | 22,651  |         |         |              |        |              |         |               | 3,700   |              |         |   | (26,351  | )        |          |   |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | $                                    | 395,129 |         |         | $            | 153,009 |              |         | $             | 172,638 |              |         | $ | (402,152 | )        |          | $ | 318,624 |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Liabilities and Stockholders Equity    |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Current liabilities:                    |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Accounts payable                               |                                      |         | 7,833   |         |              |         | 3,752        |         |               |         | 38,926       |         |   |          | (4,891   | )        |   |         | 45,620  |        
|                                        | Current portion of Credit Facility             |                                      |         | 8,778   |         |              |         |             |         |               |         |             |         |   |          |         |          |   |         | 8,778   |        
|                                        | Accrued income taxes                           |                                      |         | (859    | )       |              |         | 3,216        |         |               |         | 4,138        |         |   |          |         |          |   |         | 6,495   |        
|                                        | Deferred income taxes                          |                                      |         | 114     |         |              |         |             |         |               |         | 2,080        |         |   |          |         |          |   |         | 2,194   |        
|                                        | Accrued expenses and other current liabilities |                                      |         | 15,403  |         |              |         | 16,127       |         |               |         | 6,742        |         |   |          |         |          |   |         | 38,272  |        
|                                        | Due to affiliates                              |                                      |         | 157,504 |         |              |         | 184,577      |         |               |         | 26,455       |         |   |          | (368,536 | )        |   |         |        |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total current liabilities            |         |         | 188,773 |              |         |              | 207,672 |               |         |              | 78,341  |   |          |          | (373,427 | ) |         |         | 101,359 |  
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|Long-term portion of Credit facility    |                                                |                                      | 169,895 |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 169,895 |        
|Long-term debt                          |                                                |                                      | 99,503  |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   | 99,503  |        
|Pension obligation                      |                                                |                                      |        |         |         |              |        |              |         |               |        |              |         |   |         |          |          |   |        |        
|Other long-term liabilities             |                                                |                                      |        |         |         |              |        |              |         |               | 7,050   |              |         |   |         |          |          |   | 7,050   |        
|Deferred income taxes                   |                                                |                                      | (2,734  | )       |         |              | 3,859   |              |         |               |        |              |         |   |         |          |          |   | 1,125   |        
|Stockholders equity (deficit):         |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        | Common stock, $.001 par value                  |                                      |         | 20      |         |              |         | 2            |         |               |         |             |         |   |          | (2       | )        |   |         | 20      |        
|                                        | Common stock, $1 par value                     |                                      |         |        |         |              |         |             |         |               |         | 3,800        |         |   |          | (3,800   | )        |   |         |        |        
|                                        | Additional paid in capital                     |                                      |         | 68,874  |         |              |         |             |         |               |         |             |         |   |          |         |          |   |         | 68,874  |        
|                                        | Accumulated other comprehensive income         |                                      |         | 543     |         |              |         |             |         |               |         | 383          |         |   |          | (383     | )        |   |         | 543     |        
|                                        | Treasury stock                                 |                                      |         | (62,076 | )       |              |         |             |         |               |         |             |         |   |          |         |          |   |         | (62,076 | )      
|                                        | Retained earnings (deficit)                    |                                      |         | (67,669 | )       |              |         | (58,524      | )       |               |         | 83,064       |         |   |          | (24,540  | )        |   |         | (67,669 | )      
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | Total stockholders equity (deficit) |         |         | (60,308 | )            |         |              | (58,522 | )             |         |              | 87,247  |   |          |          | (28,725  | ) |         |         | (60,308 | )
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        
|                                        |                                                | $                                    | 395,129 |         |         | $            | 153,009 |              |         | $             | 172,638 |              |         | $ | (402,152 | )        |          | $ | 318,624 |        
|                                        |                                                |                                      |         |         |         |              |         |              |         |               |         |              |         |   |          |          |          |   |         |        

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THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |       |  
|--------------------------------------------------------------------------- | ---------------- | - | ------ | ----- | ------------ | - | ------------ | ---- | ------------- | - | ------------ | -- | - | - | ------- | - |  | - | ------- | ----- | -
|                                                                            |                  |   |        |       |              |   | Guarantor    |      | Non-Guarantor |   |              |    |   |   |         |   | 
|                                                                            |                  |   | Parent |       | Subsidiaries |   | Subsidiaries |      | Eliminations  |   | Consolidated
|                                                                            |                  |   |        |       |              |   |              |      |               |   |             
|Net sales                                                                   |                  | $ | 29,939 |       |              | $ | 64,401       |      |               | $ | 80,373       |    |   | $ | (58,961 | ) |  | $ | 115,752 |      
|Cost of sales                                                               |                  |   | 23,271 |       |              |   | 49,040       |      |               |   | 69,824       |    |   |   | (59,277 | ) |  |   | 82,858  |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Gross profit                                                                |                  |   | 6,668  |       |              |   | 15,361       |      |               |   | 10,549       |    |   |   | 316     |   |  |   | 32,894  |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Selling and administrative expenses                                         |                  |   | 6,721  |       |              |   | 15,005       |      |               |   | 5,768        |    |   |   |        |   |  |   | 27,494  |      
|Restructuring costs                                                         |                  |   |       |       |              |   | 1,730        |      |               |   |             |    |   |   |        |   |  |   | 1,730   |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Operating
income (loss)                                                     |                  |   | (53    | )     |              |   | (1,374       | )    |               |   | 4,781        |    |   |   | 316     |   |  |   | 3,670   |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Other expense (income):                                                     |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|                                                                            | Interest expense |   |        | 6,278 |              |   |              | 4    |               |   |              | (1 | ) |   |         |  |  |   |         | 6,281 |  
|                                                                            | Other, net       |   |        | (482  | )            |   |              | (516 | )             |   |              | 40 |   |   |         |  |  |   |         | (958  | )
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|                                                                            |                  |   | 5,796  |       |              |   | (512         | )    |               |   | 39           |    |   |   |        |   |  |   | 5,323   |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Income (loss) before income taxes and
equity in earnings from joint venture |                  |   | (5,849 | )     |              |   | (862         | )    |               |   | 4,742        |    |   |   | 316     |   |  |   | (1,653  | )    
|Income tax expense                                                          |                  |   | 26     |       |              |   |             |      |               |   | 500          |    |   |   |        |   |  |   | 526     |      
|Equity in earnings from joint venture                                       |                  |   | (517   | )     |              |   |             |      |               |   |             |    |   |   |        |   |  |   | (517    | )    
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Income (loss) before equity in income of
consolidated subsidiaries          |                  |   | (5,358 | )     |              |   | (862         | )    |               |   | 4,242        |    |   |   | 316     |   |  |   | (1,662  | )    
|Equity in income of consolidated subsidiaries                               |                  |   | 3,696  |       |              |   |             |      |               |   |             |    |   |   | (3,696  | ) |  |   |        |      
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      
|Net income (loss)                                                           |                  | $ | (1,662 | )     |              | $ | (862         | )    |               | $ | 4,242        |    |   | $ | (3,380  | ) |  | $ | (1,662  | )    
|                                                                            |                  |   |        |       |              |   |              |      |               |   |              |    |   |   |         |   |  |   |         |      

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THE HOLMES GROUP, INC.

CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |        |  
|--------------------------------------------------------------------------- | ---------------- | - | ------- | ------ | ------------ | - | ------------ | ---- | ------------- | - | ------------ | --- | - | - | -------- | - |  | - | ------- | ------ | -
|                                                                            |                  |   |         |        |              |   | Guarantor    |      | Non-Guarantor |   |              |     |   |   |          |   | 
|                                                                            |                  |   | Parent  |        | Subsidiaries |   | Subsidiaries |      | Eliminations  |   | Consolidated
|                                                                            |                  |   |         |        |              |   |              |      |               |   |             
|Net sales                                                                   |                  | $ | 69,672  |        |              | $ | 119,744      |      |               | $ | 176,866      |     |   | $ | (135,230 | ) |  | $ | 231,052 |       
|Cost of sales                                                               |                  |   | 54,803  |        |              |   | 92,189       |      |               |   | 154,128      |     |   |   | (135,369 | ) |  |   | 165,751 |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Gross profit                                                                |                  |   | 14,869  |        |              |   | 27,555       |      |               |   | 22,738       |     |   |   | 139      |   |  |   | 65,301  |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Selling and administrative expenses                                         |                  |   | 15,028  |        |              |   | 29,350       |      |               |   | 10,948       |     |   |   |         |   |  |   | 55,326  |       
|Restructuring costs                                                         |                  |   |        |        |              |   | 1,609        |      |               |   |             |     |   |   |         |   |  |   | 1,609   |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Operating
income (loss)                                                     |                  |   | (159    | )      |              |   | (3,404       | )    |               |   | 11,790       |     |   |   | 139      |   |  |   | 8,366   |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Other expense (income):                                                     |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|                                                                            | Interest expense |   |         | 12,875 |              |   |              | 4    |               |   |              | (9  | ) |   |          |  |  |   |         | 12,870 |  
|                                                                            | Other, net       |   |         | (1,120 | )            |   |              | (706 | )             |   |              | 630 |   |   |          |  |  |   |         | (1,196 | )
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|                                                                            |                  |   | 11,755  |        |              |   | (702         | )    |               |   | 621          |     |   |   |         |   |  |   | 11,674  |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Income (loss) before income taxes and
equity in earnings from joint venture |                  |   | (11,914 | )      |              |   | (2,702       | )    |               |   | 11,169       |     |   |   | 139      |   |  |   | (3,308  | )     
|Income tax expense (benefit)                                                |                  |   | (931    | )      |              |   |             |      |               |   | 2,400        |     |   |   |         |   |  |   | 1,469   |       
|Equity in earnings from joint venture                                       |                  |   | (999    | )      |              |   |             |      |               |   |             |     |   |   |         |   |  |   | (999    | )     
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Income (loss) before equity in income of
consolidated subsidiaries          |                  |   | (9,984  | )      |              |   | (2,702       | )    |               |   | 8,769        |     |   |   | 139      |   |  |   | (3,778  | )     
|Equity in income of consolidated subsidiaries                               |                  |   | 6,206   |        |              |   |             |      |               |   |             |     |   |   | (6,206   | ) |  |   |        |       
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       
|Net income (loss)                                                           |                  | $ | (3,778  | )      |              | $ | (2,702       | )    |               | $ | 8,769        |     |   | $ | (6,067   | ) |  | $ | (3,778  | )     
|                                                                            |                  |   |         |        |              |   |              |      |               |   |              |     |   |   |          |   |  |   |         |       

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THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |       | 
|--------------------------------------------------------------------------- | -------------------------- | - | ------- | ----- | ------------ | - | ------------ | ---- | ------------- | - | ------------ | --- | - | - | ------- | - |  | - | ------- | ----- | 
|                                                                            |                            |   |         |       |              |   | Guarantor    |      | Non-Guarantor |   |              |     |   |   |         |   | 
|                                                                            |                            |   | Parent  |       | Subsidiaries |   | Subsidiaries |      | Eliminations  |   | Consolidated
|                                                                            |                            |   |         |       |              |   |              |      |               |   |             
|Net sales                                                                   |                            | $ | 34,609  |       |              | $ | 79,505       |      |               | $ | 94,116       |     |   |   | (76,318 | ) |  | $ | 131,912 |      
|Cost of sales                                                               |                            |   | 33,585  |       |              |   | 58,314       |      |               |   | 83,223       |     |   |   | (75,523 | ) |  |   | 99,599  |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Gross profit (loss)                                                         |                            |   | 1,024   |       |              |   | 21,191       |      |               |   | 10,893       |     |   |   | (795    | ) |  |   | 32,313  |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Selling and administrative expenses                                         |                            |   | 16,862  |       |              |   | 5,151        |      |               |   | 4,895        |     |   |   |        |   |  |   | 26,908  |      
|Restructuring costs                                                         |                            |   |        |       |              |   |             |      |               |   |             |     |   |   |        |   |  |   |        |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Operating
income (loss)                                                     |                            |   | (15,838 | )     |              |   | 16,040       |      |               |   | 5,998        |     |   |   | (795    | ) |  |   | 5,405   |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Other expense (income):                                                     |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|                                                                            | Interest expense           |   |         | 7,153 |              |   |              | (8   | )             |   |              | (3  | ) |   |         |  |  |   |         | 7,142 | 
|                                                                            | Gain on sale of business   |   |         |      |              |   |              |     |               |   |              |    |   |   |         |  |  |   |         |      | 
|                                                                            | Gain on retirement of debt |   |         |      |              |   |              |     |               |   |              |    |   |   |         |  |  |   |         |      | 
|                                                                            | Other, net                 |   |         | 757   |              |   |              | (642 | )             |   |              | 608 |   |   |         |  |  |   |         | 723   | 
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|                                                                            |                            |   | 7,910   |       |              |   | (650         | )    |               |   | 605          |     |   |   |        |   |  |   | 7,865   |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Income (loss) before income taxes and
equity in earnings from joint venture |                            |   | (23,748 | )     |              |   | 16,690       |      |               |   | 5,393        |     |   |   | (795    | ) |  |   | (2,460  | )    
|Income tax expense (benefit)                                                |                            |   | (2,583  | )     |              |   | 125          |      |               |   | 449          |     |   |   |        |   |  |   | (2,009  | )    
|Equity in earnings from joint venture                                       |                            |   | (741    | )     |              |   |             |      |               |   |             |     |   |   |        |   |  |   | (741    | )    
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Income (loss) before equity in income of
consolidated subsidiaries          |                            |   | (20,424 | )     |              |   | 16,565       |      |               |   | 4,944        |     |   |   | (795    | ) |  |   | 290     |      
|Equity in income of consolidated subsidiaries                               |                            |   | 20,714  |       |              |   |             |      |               |   |             |     |   |   | (20,714 | ) |  |   |        |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Income (loss) before change in accounting                                   |                            |   | 290     |       |              |   | 16,565       |      |               |   | 4,944        |     |   |   | (21,509 | ) |  |   | 290     |      
|Cumulative effect of change in accounting principle                         |                            |   |        |       |              |   |             |      |               |   |             |     |   |   |        |   |  |   |        |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      
|Net income (loss)                                                           |                            | $ | 290     |       |              | $ | 16,565       |      |               | $ | 4,944        |     |   | $ | (21,509 | ) |  | $ | 290     |      
|                                                                            |                            |   |         |       |              |   |              |      |               |   |              |     |   |   |         |   |  |   |         |      

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THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |         |  
|--------------------------------------------------------------------------- | -------------------------- | - | ------- | ------- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ---- | - | - | -------- | - |  | - | ------- | ------- | -
|                                                                            |                            |   |         |         |              |   | Guarantor    |        | Non-Guarantor |   |              |      |   |   |          |   | 
|                                                                            |                            |   | Parent  |         | Subsidiaries |   | Subsidiaries |        | Eliminations  |   | Consolidated
|                                                                            |                            |   |         |         |              |   |              |        |               |   |             
|Net sales                                                                   |                            | $ | 75,746  |         |              | $ | 141,478      |        |               | $ | 175,290      |      |   | $ | (143,260 | ) |  | $ | 249,254 |        
|Cost of sales                                                               |                            |   | 70,160  |         |              |   | 106,584      |        |               |   | 153,817      |      |   |   | (142,070 | ) |  |   | 188,491 |        
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Gross profit (loss)                                                         |                            |   | 5,586   |         |              |   | 34,894       |        |               |   | 21,473       |      |   |   | (1,190   | ) |  |   | 60,763  |        
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Selling and administrative expenses                                         |                            |   | 30,376  |         |              |   | 12,054       |        |               |   | 9,611        |      |   |   |          |   |  |   | 52,041  |        
|Restructuring costs                                                         |                            |   |        |         |              |   | 1,787        |        |               |   |             |      |   |   |         |   |  |   | 1,787   |        
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Operating
income (loss)                                                     |                            |   | (24,790 | )       |              |   | 21,053       |        |               |   | 11,862       |      |   |   | (1,190   | ) |  |   | 6,935   |        
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Other expense (income):                                                     |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|                                                                            | Interest expense           |   |         | 15,077  |              |   |              | 27     |               |   |              | (6   | ) |   |          |  |  |   |         | 15,098  |  
|                                                                            | Gain on sale of business   |   |         |        |              |   |              | (9,088 | )             |   |              |     |   |   |          |  |  |   |         | (9,088  | )
|                                                                            | Gain on retirement of debt |   |         | (22,388 | )            |   |              |       |               |   |              |     |   |   |          |  |  |   |         | (22,388 | )
|                                                                            | Other, net                 |   |         | 560     |              |   |              | (613   | )             |   |              | (227 | ) |   |          |  |  |   |         | (280    | )
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|                                                                            |                            |   | (6,751  | )       |              |   | (9,674       | )      |               |   | (233         | )    |   |   |         |   |  |   | (16,658 | )      
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Income (loss) before income taxes and
equity in earnings from joint venture |                            |   | (18,039 | )       |              |   | 30,727       |        |               |   | 12,095       |      |   |   | (1,190   | ) |  |   | 23,593  |        
|Income tax expense (benefit)                                                |                            |   | (2,583  | )       |              |   | (2,258       | )      |               |   | 1,407        |      |   |   |         |   |  |   | (3,434  | )      
|Equity in earnings from joint venture                                       |                            |   | (1,341  | )       |              |   |             |        |               |   |             |      |   |   |         |   |  |   | (1,341  | )      
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Income (loss) before equity in income of
consolidated subsidiaries          |                            |   | (14,115 | )       |              |   | 32,985       |        |               |   | 10,688       |      |   |   | (1,190   | ) |  |   | 28,368  |        
|Equity in income of consolidated subsidiaries                               |                            |   | (37,355 | )       |              |   |             |        |               |   |             |      |   |   | 37,355   |   |  |   |        |        
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Income (loss) before change in accounting                                   |                            |   | (51,470 | )       |              |   | 32,985       |        |               |   | 10,688       |      |   |   | 36,165   |   |  |   | 28,368  |        
|Cumulative effect of change in accounting principle                         |                            |   |        |         |              |   | (79,838      | )      |               |   |             |      |   |   |         |   |  |   | (79,838 | )      
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        
|Net income (loss)                                                           |                            | $ | (51,470 | )       |              | $ | (46,853      | )      |               | $ | 10,688       |      |   | $ | 36,165   |   |  | $ | (51,470 | )      
|                                                                            |                            |   |         |         |              |   |              |        |               |   |              |      |   |   |          |   |  |   |         |        

19



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2003 (IN THOUSANDS)
(UNAUDITED)

|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |         |         |  
|---------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | ------ | ------------ | ------ | ------------ | ------- | ------------- | ------ | ------ | ------ | - | ------ | ------- | ------- | -
|                                                     |                                                         |                                                      |         |         |        |              |        | Guarantor    |         | Non-Guarantor |        |        |        |  
|                                                     |                                                         |                                                      |         | Parent  |        | Subsidiaries |        | Subsidiaries |         | Consolidated 
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |              
|Net cash provided by operating activities            |                                                         | $                                                    | (28,772 | )       |        | $            | 40,733 |              |         | $             | 7,701  |        |        | $ | 19,662 |        
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|Cash flows from investing activities:                |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|                                                     | Proceeds from sale of business and assets held for sale |                                                      |         |        |        |              |        | 6,192        |         |               |        |       |        |   |        | 6,192   |        
|                                                     | Distribution of earnings from joint venture             |                                                      |         | 1,478   |        |              |        |             |         |               |        |       |        |   |        | 1,478   |        
|                                                     | Purchases of property and equipment                     |                                                      |         | (1,102  | )      |              |        |             |         |               |        | (4,804 | )      |   |        | (5,906  | )      
|                                                     | Cash received from joint venture partner                |                                                      |         | 293     |        |              |        |             |         |               |        |       |        |   |        | 293     |        
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|                                                     |                                                         | Net cash provided by (used for) investing activities |         |         | 669    |              |        |              | 6,192   |               |        |        | (4,804 | ) |        |         | 2,057   |  
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|Cash flows from financing activities:                |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|                                                     | Repayments of Credit Facility                           |                                                      |         | (24,466 | )      |              |        |             |         |               |        |       |        |   |        | (24,466 | )      
|                                                     | Other activity with Parent, net                         |                                                      |         | 52,649  |        |              |        | (46,925      | )       |               |        | (5,724 | )      |   |        |        |        
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|                                                     |                                                         | Net cash provided by (used for) financing activities |         |         | 28,183 |              |        |              | (46,925 | )             |        |        | (5,724 | ) |        |         | (24,466 | )
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|                                                     | Effect of exchange rate changes on cash                 |                                                      |         |        |        |              |        |             |         |               |        | 707    |        |   |        | 707     |        
|Net increase (decrease) in cash and cash equivalents |                                                         |                                                      | 80      |         |        |              |       |              |         |               | (2,120 | )      |        |   | (2,040 | )      
|Cash and cash equivalents, beginning of period       |                                                         |                                                      | 2,599   |         |        |              | (488   | )            |         |               | 6,315  |        |        |   | 8,426  |        
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        
|Cash and cash equivalents, end of period             |                                                         | $                                                    | 2,679   |         |        | $            | (488   | )            |         | $             | 4,195  |        |        | $ | 6,386  |        
|                                                     |                                                         |                                                      |         |         |        |              |        |              |         |               |        |        |        |   |        |        

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THE HOLMES GROUP, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |         |         |  
|---------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------------- | ------ | ------- | ------- | ------------ | ------ | ------------ | ------- | ------------- | ------ | ------- | ------- | - | ------ | ------- | ------- | -
|                                                     |                                                         |                                                      |        |         |         |              |        | Guarantor    |         | Non-Guarantor |        |         |         |  
|                                                     |                                                         |                                                      |        | Parent  |         | Subsidiaries |        | Subsidiaries |         | Consolidated 
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |              
|Net cash provided by operating activities            |                                                         | $                                                    | 17,974 |         |         | $            | 2,874  |              |         | $             | 18,262 |         |         | $ | 39,110 |        
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|Cash flows from investing activities:                |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|                                                     | Proceeds from sale of business and assets held for sale |                                                      |        |        |         |              |        | 15,100       |         |               |        |        |         |   |        | 15,100  |        
|                                                     | Distribution of earnings from joint venture             |                                                      |        | 1,522   |         |              |        |             |         |               |        |        |         |   |        | 1,522   |        
|                                                     | Purchases of property and equipment                     |                                                      |        | (3,354  | )       |              |        | (718         | )       |               |        | (3,475  | )       |   |        | (7,547  | )      
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|                                                     |                                                         | Net cash provided by (used for) investing activities |        |         | (1,832  | )            |        |              | 14,382  |               |        |         | (3,475  | ) |        |         | 9,075   |  
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|Cash flows from financing activities:                |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|                                                     | Repayments of Credit Facility                           |                                                      |        | (39,209 | )       |              |        |             |         |               |        |        |         |   |        | (39,209 | )      
|                                                     | Other activity with Parent, net                         |                                                      |        | 34,086  |         |              |        | (19,057      | )       |               |        | (15,029 | )       |   |        |        |        
|                                                     | Redemption of Senior Subordinated Notes                 |                                                      |        | (11,549 | )       |              |        |             |         |               |        |        |         |   |        | (11,549 | )      
|                                                     | Debt issuance costs                                     |                                                      |        | (1,579  | )       |              |        |             |         |               |        |        |         |   |        | (1,579  | )      
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|                                                     |                                                         | Net cash used for financing activities               |        |         | (18,251 | )            |        |              | (19,057 | )             |        |         | (15,029 | ) |        |         | (52,337 | )
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|                                                     | Effect of exchange rate changes on cash                 |                                                      |        |        |         |              |        |             |         |               |        | (193    | )       |   |        | (193    | )      
|Net increase (decrease) in cash and cash equivalents |                                                         |                                                      | (2,109 | )       |         |              | (1,801 | )            |         |               | (435   | )       |         |   | (4,345 | )      
|Cash and cash equivalents, beginning of period       |                                                         |                                                      | 4,083  |         |         |              | 1,312  |              |         |               | 4,720  |         |         |   | 10,115 |        
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        
|Cash and cash equivalents, end of period             |                                                         | $                                                    | 1,974  |         |         | $            | (489   | )            |         | $             | 4,285  |         |         | $ | 5,770  |        
|                                                     |                                                         |                                                      |        |         |         |              |        |              |         |               |        |         |         |   |        |        

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##### Table of Contents



THE HOLMES GROUP, INC.






|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------

BACKGROUND

The Holmes Group, Inc. is a leading developer, manufacturer and marketer of
quality, branded home appliances, including home environment and small kitchen
electric appliances. The Companys financial information includes the results
of The Rival Company since its acquisition on February 5, 1999. Our home
environment products include fans, heaters, humidifiers and air purifiers. Our
kitchen appliances include Crock-Pot® slow cookers, roaster ovens, skillets,
and deep fryers, vacuum food sealers and other similar small kitchen electric
appliances. Our products are sold under the Holmes®, Rival®, Crock-Pot®, White
Mountain®, Bionaire®, Patton®, Family Care® and Titan® brand names. We also
sell products to certain retailers under licensed brand names, including
General Electric®, Sunbeam® and Halls®. Our products are sold to consumers
through major retail chains, including mass merchants, do-it-yourself home
centers, warehouse clubs, hardware, department and specialty stores and
national drug store chains.

Sales of
most of our products follow seasonal patterns that affect our
results of operations. In general, sales of fans occur predominantly from
January through June, and sales of heaters and humidifiers occur predominantly
from July to December. Although kitchen electrics, air purifiers, lighting
products and accessories generally are used year-round, these products tend to
draw increased sales during the winter months when people are indoors and, as a
result, sales of these products tend to be greatest in advance of the winter
months from July through December. Additionally, many of our kitchen products
are given as gifts and, as such, sell at larger volumes during the holiday
season. When holiday shipments are combined with seasonal products, our sales
during the months of August through November are generally at a higher level
than during the other months of the year. In addition to the seasonal
fluctuations in sales, we experience seasonality in gross profit, as margins
realized on fan products tend to be lower than those realized on kitchen
electrics and other home environment products.

A summary of the risks and uncertainties which may affect our future
performance is presented below. Our Form 10-K for the year ended December 31,
2002 includes a more detailed discussion of the risk factors affecting our
business. Risks and uncertainties are detailed from time to time in
periodic reports
filed by the Company with the SEC, including Quarterly Reports on
Form 10-Q and Annual Reports on Form 10-K and the
Companys most recent Registration Statement on Form S-4 (File No. 333-77905).

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934. We caution investors that any forward-looking
statements presented in this report and presented elsewhere by management from
time to time are based on beliefs and assumptions made by, and information
currently available to, management. When used, the words anticipate,
believe, expect, intend, may, might, plan, estimate, project,
should, will be, will result and similar expressions, which do not relate
solely to historical matters, are intended to identify forward-looking
statements. Such statements are
subject to risks, uncertainties and assumptions and are not guarantees of
future performance, which may be affected by known or unknown risks, trends,
uncertainties and factors that are beyond our control. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated,
estimated or projected. We expressly disclaim any responsibility to update
forward-looking statements. Accordingly, past results and trends should not be
used by investors to anticipate future results or trends.

Risks and uncertainties that may affect future performance include, among
others, the following:



| |  | Our degree of leverage and continued compliance with debt covenants.                                           
|- |  | ---------------------------------------------------------------------------------------------------------------
| 
| |  | Our ability to obtain adequate
financing to replace the revolving credit facility expiring in 2004.            
| 
| |  | Our dependence on major customers and key employees.                                                           
| 
| |  | Any significant decline in purchases by our larger customers or pressure from these customers to reduce prices.
| 
| |  | The bankruptcy or loss of any major retail customer or supplier.                                               
| 
| |  | Weakness in the U.S. retail market.                                                                            
| 
| |  | The financial condition of the retail industry.                                                                
| 
| |  | The infringement or loss of our rights with respect to patents and trademarks related to our products.         
| 
| |  | Fluctuations in cost and availability of raw materials and components.                                         
| 
| |  | Product recalls and product liability claims against us or other regulatory actions.                           

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##### Table of Contents



THE HOLMES GROUP, INC.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)
|------- |  | ----------------------------------------------------------------------------------------------------



| |  | Changes in demand for the Companys products.                                                                                                                 
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Changing conditions in foreign countries.                                                                                                                     
| 
| |  | An extended interruption in the operation of our manufacturing facilities in China.                                                                           
| 
| |  | Changes in trade relations with China.                                                                                                                        
| 
| |  | Potential disruption in our supply chain due to health concerns relating to the disease known as severe acute respiratory
syndrome or other related illnesses.
| 
| |  | Currency fluctuations in our international operations.                                                                                                        
| 
| |  | Difficulties in implementing and maintaining new computer systems.                                                                                            
| 
| |  | Changes in retailer inventory management or failure of our order processing and logistical systems.                                                           
| 
| |  | Interruptions in data and communications systems.                                                                                                             
| 
| |  | Our ability to develop new and innovative products and customer acceptance of such products.                                                                  
| 
| |  | Seasonality of our operating results.                                                                                                                         
| 
| |  | Competition with other large companies that produce similar products.                                                                                         
| 
| |  | The success of our marketing and promotional programs.                                                                                                        

The risks included here are not exhaustive. Other sections of this report may
include additional factors which could adversely affect the Companys business
and financial performance. Moreover, the Company operates in a very
competitive and rapidly changing environment. New risk factors emerge from
time to time and it is not possible for management to predict all such risk
factors, nor can it assess the impact of all such risk factors on the Companys
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction
of actual results.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of
operations is based upon financial statements of The Holmes Group, Inc. which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and assumptions about future events that affect
the reported amounts in the financial statements and accompanying notes. Future
events cannot be determined with absolute certainty. Therefore, the
determination of estimates requires the exercise of judgment. Actual results
may differ from those estimates under different assumptions and conditions.

We believe the most significant accounting estimates inherent in the
preparation of the financial statements include estimates associated with
managements evaluation of the allowance for doubtful accounts and customer
deductions, reserves for inventory valuation, accruals for product returns and
the determination of liabilities related to taxation and restructuring actions.
These critical accounting policies are described in the Managements
Discussion and Analysis of Financial Condition and Results of Operations
section of our most recent Annual Report on Form 10-K.

23



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##### Table of Contents



THE HOLMES GROUP, INC.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)
|------- |  | ----------------------------------------------------------------------------------------------------

RESULTS OF OPERATIONS

The following table presents our operating results for the three and six
month periods ended June 30, 2003 and 2002 as a percentage of net sales:

|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   
|----------------------------------------------------------- |  | --------------------------- | ----- | ------------------------- |  | ---- | ----- | ---- |  |  | ----- | -- |  |  | ----- | --
|                                                            |  | Three Months Ended June 30, |       | Six Months Ended June 30,
|                                                            |  |                             |       |                          
|                                                            |  | 2003                        |       | 2002                      |  | 2003 |       | 2002
|                                                            |  |                             |       |                           |  |      |       |     
|Net sales                                                   |  |                             | 100.0 | %                         |  |      | 100.0 | %    |  |  | 100.0 | %  |  |  | 100.0 | % 
|Cost of sales                                               |  |                             | 71.6  | %                         |  |      | 75.5  | %    |  |  | 71.7  | %  |  |  | 75.6  | % 
|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   
|Gross profit                                                |  |                             | 28.4  | %                         |  |      | 24.5  | %    |  |  | 28.3  | %  |  |  | 24.4  | % 
|Selling and administrative expenses                         |  |                             | 23.7  | %                         |  |      | 20.4  | %    |  |  | 24.0  | %  |  |  | 20.9  | % 
|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   
|Operating
income before restructuring costs                 |  |                             | 4.7   | %                         |  |      | 4.1   | %    |  |  | 4.3   | %  |  |  | 3.5   | % 
|Restructuring costs                                         |  |                             | 1.5   | %                         |  |      | 0.0   | %    |  |  | 0.7   | %  |  |  | 0.7   | % 
|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   
|Operating profit                                            |  |                             | 3.2   | %                         |  |      | 4.1   | %    |  |  | 3.6   | %  |  |  | 2.8   | % 
|Interest expense                                            |  |                             | 5.4   | %                         |  |      | 5.4   | %    |  |  | 5.6   | %  |  |  | 6.1   | % 
|Other expense (income), net                                 |  |                             | (0.8  | )%                        |  |      | 0.5   | %    |  |  | (0.6  | )% |  |  | (0.1  | )%
|Gain on retirement of debt                                  |  |                             |      |                           |  |      |      |      |  |  |      |    |  |  | (9.0  | )%
|Gain on sale of business                                    |  |                             |      |                           |  |      |      |      |  |  |      |    |  |  | (3.6  | )%
|Income tax expense (benefit)                                |  |                             | 0.4   | %                         |  |      | (1.4  | )%   |  |  | 0.6   | %  |  |  | (1.5  | )%
|Equity in earnings from joint venture                       |  |                             | (0.4  | )%                        |  |      | (0.6  | )%   |  |  | (0.4  | )% |  |  | (0.5  | )%
|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   
|Income (loss) before cumulative effect of
accounting change |  |                             | (1.4  | )%                        |  |      | 0.2   | %    |  |  | (1.6  | )% |  |  | 11.4  | % 
|                                                            |  |                             |       |                           |  |      |       |      |  |  |       |    |  |  |       |   

Comparison of Three Months Periods Ended June 30, 2003 and June 30, 2002

Net Sales

During the second quarter of 2003, net sales decreased $16.2 million or 12.3%
from the sales level in the comparable period of fiscal 2002. The lower
revenues occurred in both the kitchen appliance and home environment businesses
as 2003 sales in these categories were below last year by 10% and 23%, respectively, due to the
generally weak retail selling environment in the second quarter of 2003. Sales
of home environment products in 2003 were also negatively impacted by
competitive conditions in the fan product line and by the generally cool
weather in the spring season. International sales in the second quarter of
2003 increased $3.4 million or 19.1% from the 2002 level due to favorable
trends in Canada and Europe and increased motor sales to the Companys joint
venture with General Electric.

Gross Profit

Despite the lower net sales level in the period, gross profit during the second
quarter of 2003 increased $0.6 million or 1.8% above the 2002 level. The
Companys gross profit percent improved 3.9 percentage points during the second
quarter to 28.4% in 2003 as compared to 24.5% in 2002. The improved
profitability in the second quarter of 2003 was driven by the kitchen appliance
business, building on the trends established during the second half of 2002 as
well as benefiting from the transfer of production to lower cost resources in
the Far East. The Company completed the shutdown of its domestic manufacturing
operations in January 2003. Unfavorable manufacturing variances related to the
closed facilities totaled $1.3 million or 1% of net sales in the 2002 second
quarter.

Selling and Administrative Expenses

In the second quarter of 2003, operating expenses increased $0.6 million or
2.2% above the comparable period in 2002. These expenses represented 23.7% of
net sales in 2003 compared to 20.4% in 2002. Expenses in the second quarter of
2003 included a non-cash impairment charge of $1.1 million as the Company
re-evaluated its plan to use available trade credits to procure advertising
media for its consumer advertising campaign in the second half of 2003. This
charge was partially offset by a bad debt recovery of $0.9 million related to
the Kmart bankruptcy. Operating expenses in 2003 also included higher freight
costs and increased warehousing costs as the Company transitioned its
midwest
distribution operations to a new facility in California.

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##### Table of Contents



THE HOLMES GROUP, INC.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)
|------- |  | ----------------------------------------------------------------------------------------------------

Restructuring Costs

During the second quarter of 2003, the Company incurred $1.7 million of
restructuring costs associated with the facility closings that were announced
in 2002. The restructuring amount included a non-cash charge of $1.7 million
related to a partial plan settlement of its defined benefit pension plan due to
the closing of its domestic manufacturing facilities. Other restructuring
costs incurred in the second quarter of 2003 were offset by a favorable accrual
adjustment of $0.2 million as facility exit costs were lower than anticipated
due to the prompt sale of two closed facilities.

Interest Expense and Other Income

During the second quarter of 2003, interest expense decreased $0.9 million from
the comparable period of 2002 due to lower interest rates and the repurchase of
$36.2 million of the Companys Senior Subordinated Notes in March 2002. Other
income increased earnings by $1.0 million in the second quarter of 2003 due
primarily to foreign exchange gains related to international operations.

Income Taxes

During the second quarter of 2003, the Company recorded income tax expense of
$0.5 million compared to tax benefits of $2.0 million in 2002. The 2003 tax
expense was primarily related to the taxable profits of foreign operations.
The 2002 tax benefits included the effect of additional net operating loss
carrybacks which were made possible by 2002 tax law changes in the United
States.

Equity in Earnings from Joint Venture

The Companys share of the earnings of its joint venture with General Electric
totaled $0.5 million in the second quarter of 2003 down $0.2 million, or 30.2%
from the 2002 earnings level.

Net Loss

The Company incurred a net loss of $1.7 million in the second quarter of 2003
compared to net income of $0.3 million in the 2002 second quarter as
restructuring charges and increased income taxes in 2003 adversely affected the
comparison with last years results.

EBITDA

The table below includes non-GAAP financial
information to provide a better understanding of the Companys results and the
trends from which to measure performance. EBITDA, which includes our share of
our joint ventures earnings, represents income before interest expense, income
tax expense (benefit) and depreciation and amortization. EBITDA is presented
because it is a widely accepted measure to provide information regarding a
companys ability to service and/or incur debt. EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operations or other income or cash flow data prepared in accordance with
generally accepted accounting principles (GAAP), or as a measure of a companys
profitability or liquidity. Additionally, our calculation of EBITDA may differ
from that performed by other companies, and thus the amounts disclosed may not
be directly comparable to those disclosed by other companies. A reconciliation
between operating income presented in accordance with GAAP in the consolidated
statements of operations and EBITDA, along with the restructuring charges and
certain significant items which impacted results for the three months ended June 30,
2003 and 2002 is as follows:

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##### Table of Contents



THE HOLMES GROUP, INC.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)
|------- |  | ----------------------------------------------------------------------------------------------------

|                                                                                 |                                 |   |                    |        |               |   |       |      |  
|-------------------------------------------------------------------------------- | ------------------------------- | - | ------------------ | ------ | ------------- | - | ----- | ---- | -
|                                                                                 |                                 |   | Three Months Ended
|                                                                                 |                                 |   |                   
|                                                                                 |                                 |   | June 30, 2003      |        | June 30, 2002
|                                                                                 |                                 |   |                    |        |              
|Operating income  GAAP                                                          |                                 | $ | 3,670              |        |               | $ | 5,405 |     
|Depreciation and amortization, net                                               |                                 |   | 2,490              |        |               |   | 2,582 |     
|Other income (expense)                                                           |                                 |   | 958                |        |               |   | (723  | )   
|Equity in earnings from joint venture                                            |                                 |   | 517                |        |               |   | 741   |     
|                                                                                 |                                 |   |                    |        |               |   |       |     
|EBITDA                                                                           |                                 | $ | 7,635              |        |               | $ | 8,005 |     
|                                                                                 |                                 |   |                    |        |               |   |       |     
|Restructuring
and certain significant income (expense) items included in EBITDA: |                                 |   |                    |        |               |   |       |     
|                                                                                 | Pension plan settlement charge  |   |                    | (1,665 | )             |   |       |     |  
|                                                                                 | Other restructuring costs, net  |   |                    | (65    | )             |   |       |     |  
|                                                                                 | Kmart bad debt recovery         |   |                    | 904    |               |   |       |     |  
|                                                                                 | Trade credit asset impairment   |   |                    | (1,122 | )             |   |       |     |  
|                                                                                 | Credit Facility amendment costs |   |                    |       |               |   |       | (135 | )
|                                                                                 |                                 |   |                    |        |               |   |       |     
|                                                                                 |                                 | $ | (1,948             | )      |               | $ | (135  | )   
|                                                                                 |                                 |   |                    |        |               |   |       |     

Comparison of Six Month Periods Ended June 30, 2003 and June 30, 2002

Net Sales

During the first six months of 2003, net sales decreased $18.2 million or 7.3%
below the sales level in the comparable period of fiscal 2002. The kitchen
appliance product line posted a 10% sales decline due to the generally weak
retail selling environment in the first half of 2003. Sales of home
environment products in the first six months of 2003 were also below last year,
down 13% from the sales level in the first half of 2002. A decline in the fan
category due to unseasonably cool weather and competitive conditions was the
most significant factor leading to the lower sales. International sales in the
first half of 2003 increased $9.1 million or 28.4% from the 2002 level due to
favorable trends in Canada and Europe and increased motor sales to the
Companys joint venture with General Electric.

Gross Profit

Despite the sales decline, gross profit in the first six months of 2003
increased $4.5 million or 7.5% from the gross profit earned in the first half
of 2002. The Companys gross profit percent improved 3.9 percentage points
during the first half to 28.3% in 2003 as compared to 24.4% in 2002. The
profitability of the kitchen appliance business improved in the first half of 2003
as the transfer of production to China started to impact manufacturing costs
during the second quarter of 2003. While the profitability of the home
environment business in the first six months of 2003 was slightly below 2002
levels, the majority of the decline in gross profit percent was caused by the
more aggressive disposal of discontinued products. The closure of the
Companys domestic manufacturing facilities in January 2003 contributed to the
improvement in gross profit percent during 2003 as unfavorable manufacturing
variances totaled $0.9 million or 0.4% of net sales in the first six months of
2003 compared to variances of $2.7 million or 1.1% of net sales in 2002.

Selling and Administrative Expenses

During the first six months of 2003, selling and administrative expenses
increased $3.3 million or 6.3% from operating expenses in the comparable period
of 2002. As a percent to net sales, operating expenses represented 24% of
sales in 2003 compared to 20.9% in the first half of 2002. Expenses in 2003
included $0.8 million related to increased spending on new product development
efforts, additional freight costs of $1 million and $0.5 million in higher
distribution and warehousing costs. In the first six months of 2002, operating
costs included $2.3 million of expenses associated with the implementation of a
new computer system.

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THE HOLMES GROUP, INC.



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)
|------- |  | ----------------------------------------------------------------------------------------------------

Restructuring Costs

In the first six months of 2003, restructuring costs totaled $1.6 million, 10%
below the restructuring charges included in the 2002 period. The restructuring
costs in 2003 included $1.3 million of non-cash settlement charges related to
the Companys pension plan as a result of the facility closings in 2002.
During the first six months of 2003, the Company paid $4.1 million in employee
severance and facility exit costs, reducing the reserves which were established
in the fourth quarter of 2002.

Interest Expense and Other Income

During the first six months of 2003, interest expense was $2.2 million lower
than in the comparable period of 2002 due to lower interest rates and the
repurchase of $36.2 million of the Companys Senior Subordinated Notes in March
2002. Other income in 2003 was significantly lower than the first six months
of 2002 as last years amount included a $9.1 million gain on the sale of the
Companys Pollenex® business in January 2002 and a gain of $22.4 million
related to the repurchase of Senior Subordinated Notes.

Income Taxes

During the first half of 2003, the Company recorded income tax expense of $1.5
million compared to tax benefits of $3.4 million in 2002. The 2003 tax expense
was primarily related to the taxable profits of foreign operations. The 2002
tax benefits included the effect of additional net operating loss carrybacks
which were made possible by 2002 tax law changes in the United States.

Equity in Earnings from Joint Venture

The Companys share of the earnings of its joint venture with General Electric
totaled $1 million in the first six months of 2003, down $0.3 million or 25.5%
from the 2002 earnings level.

Cumulative Effect of Accounting Change

The Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, effective January 1, 2002. The
Companys consolidated balance sheet as of December 31, 2001 included goodwill
with a net book value of $79.8 million as a result of the Rival acquisition in
1999. In connection with adopting this standard, the Company, assisted by
independent valuation consultants, completed the transitional testing of
goodwill using a measurement date of January 1, 2002. The results of this
testing indicated that the carrying values of the goodwill asset for both the
home environment and kitchen reporting units significantly exceeded the
estimated fair value of the units as determined utilizing various valuation
techniques, including discounted cash flow and comparative market analysis.
Accordingly, a non-cash impairment charge has been recognized as a change in
accounting principle as of the beginning of 2002. The impairment charge was
$79.8 million on a before and after-tax basis.

Net Loss

The Company incurred a net loss of $3.8 million in the first six months of 2003
compared to a net loss of $51.5 million in the 2002 first half. The 2002 loss
included the goodwill impairment charge of $79.8 million and one-time gains of
$31.5 million related to the Pollenex® and debt retirement transactions
described above.

EBITDA

The table below includes non-GAAP financial
information to provide a better understanding of the Companys results and the
trends from which to measure performance. EBITDA, which includes our share of
our joint ventures earnings, represents income before interest expense, income
tax expense (benefit) and depreciation and amortization. EBITDA is presented
because it is a widely accepted measure to provide information regarding a
companys ability to service and/or incur debt. EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operations or other income or cash flow data prepared in accordance with
generally accepted accounting principles (GAAP), or as a measure of a companys
profitability or liquidity. Additionally, our calculation of EBITDA may differ
from that performed by other companies, and thus the amounts disclosed may not
be directly comparable to those disclosed by other companies. A reconciliation
between operating income presented in accordance with GAAP in the consolidated
statements of operations and EBITDA, along with the restructuring charges
and certain significant items for the six months ended June 30, 2003 and 2002 is as
follows:

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##### Table of Contents



THE HOLMES GROUP, INC.

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS  (CONTINUED)

|                                                                                 |                                 |   |                  |        |               |   |        |        |  
|-------------------------------------------------------------------------------- | ------------------------------- | - | ---------------- | ------ | ------------- | - | ------ | ------ | -
|                                                                                 |                                 |   | Six Months Ended
|                                                                                 |                                 |   |                 
|                                                                                 |                                 |   | June 30, 2003    |        | June 30, 2002
|                                                                                 |                                 |   |                  |        |              
|Operating Income  GAAP                                                          |                                 | $ | 8,366            |        |               | $ | 6,935  |       
|Depreciation and amortization, net                                               |                                 |   | 4,927            |        |               |   | 5,984  |       
|Other income                                                                     |                                 |   | 1,196            |        |               |   | 31,756 |       
|Equity in earnings from joint venture                                            |                                 |   | 999              |        |               |   | 1,341  |       
|                                                                                 |                                 |   |                  |        |               |   |        |       
|EBITDA                                                                           |                                 | $ | 15,488           |        |               | $ | 46,016 |       
|                                                                                 |                                 |   |                  |        |               |   |        |       
|Restructuring
and certain significant income (expense) items included in EBITDA: |                                 |   |                  |        |               |   |        |       
|                                                                                 | Pension plan settlement charge  |   |                  | (1,335 | )             |   |        |       |  
|                                                                                 | Other restructuring costs, net  |   |                  | (274   | )             |   |        | (1,787 | )
|                                                                                 | Gain of sale of business        |   |                  |       |               |   |        | 9,088  |  
|                                                                                 | Gain on retirement of debt      |   |                  |       |               |   |        | 22,388 |  
|                                                                                 | Kmart bad debt recovery         |   |                  | 904    |               |   |        |       |  
|                                                                                 | Trade credit asset impairment   |   |                  | (1,122 | )             |   |        |       |  
|                                                                                 | Credit Facility amendment costs |   |                  | (18    | )             |   |        | (379   | )
|                                                                                 |                                 |   |                  |        |               |   |        |       
|                                                                                 |                                 | $ | (1,845           | )      |               | $ | 29,310 |       
|                                                                                 |                                 |   |                  |        |               |   |        |       

LIQUIDITY AND CAPITAL RESOURCES

Analysis of Cash Flows

Following our recapitalization transaction in November 1997 and the acquisition
of the Rival business in February 1999, we have funded our liquidity
requirements with cash flows from operations and borrowings under our Credit
Facility. Our primary liquidity requirements are for working capital, to fund
capital expenditures and to service our indebtedness. While there can be no
assurance, we believe that existing cash resources, cash flows from operations
and borrowings under the amended Credit Facility will be sufficient to meet our
liquidity needs for the next twelve months.

The Companys $40 million Revolving Credit Loan B, which is supported by the
guarantee of Berkshire Partners, the Companys majority shareholder, matures on
July 1, 2004. While the maturity date of the Companys $131 million Revolving
Credit Loan A is February 5, 2005, the commitment terminates on July 1, 2004
unless otherwise approved by a majority of the lenders. We intend to refinance
our borrowing arrangements during the first six months of 2004.

The Companys cash and cash equivalents decreased to $6.4 million at June 30,
2003, from $8.4 million at December 31, 2002. Cash provided by operations for
the six months ended June 30, 2003 and 2002 was $19.7 million and $39.1
million, respectively. For the six months ended June 30, 2003, operating
earnings, adjusted for non-cash items, improved to $7.2 million as compared to
adjusted operating earnings of $6.4 million in the comparable period of 2002.
Changes in other operating assets and liabilities provided $12.5 million of
cash in the six months of 2003 compared to $32.7 million in 2002. Inventory
levels at June 30, 2003 totaled $127 million, an increase of $6.4 million or
5.3% over the same period of 2002. While the increased inventory levels in
2003 included higher quantities of slow cookers and ice cream freezers to help
insure a smooth transition to Far East production, the inventory increase at
the end of the second quarter in 2003 was also impacted by lower demand due to
generally slow retail selling conditions. Accounts receivable balances
decreased from the year ago levels, down $10 million or 11.9% from the
accounts receivable amount at June 30, 2002. Days sales outstanding (DSO) at
June 30, 2003, stood at 58 days, unchanged from the DSO statistic in June 2002.
During the first quarter of 2003, the Company also expended $4.1 million of
cash related to severance and other facility exit costs which were accrued as
restructuring charges at December 31, 2002.

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THE HOLMES GROUP, INC.

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS  (CONTINUED)

Cash provided by investing activities during the six months ended June 30, 2003
was $2.1 million compared to $9.1 million of cash provided in 2002. The 2002
amount includes $15.1 million in proceeds received in connection with the sale
of the Pollenex business in January 2002. During the second quarter of 2003,
the Company received cash proceeds of $6.2 million from the sale of real estate
and equipment that was formerly used in the Companys domestic manufacturing
operations which were closed in January 2003. The Company used $4.8 million of
these cash proceeds to reduce outstanding borrowings under the Credit
Facilitys term loans. The Company invested $5.9 million in capital
expenditures for property and equipment during 2003 compared to capital
expenditures of $7.5 million in the first six months of 2002. The Company
expects to spend approximately $15 million on capital expenditures in 2003,
primarily related to the expansion of our China manufacturing facilities, the
implementation of computer systems and on-going tooling costs to support
product development needs.

Cash used for financing activities for the six months ended June 30, 2003 and
2002 was $24.5 million and $52.3 million, respectively. Cash used for financing
in 2003 and 2002 reflected repayments on the Revolving Credit Facility using
cash flow from operations and also, in the 2002 first quarter, the repurchase
of a portion of the outstanding Senior Subordinated Notes and debt issuance
costs associated with the March 2002 Credit Facility amendment.

Financing Arrangements

Under the Fifth Amendment to the Companys Credit Facility, which was executed
in March 2002, the lenders have committed to a Revolving Credit Loan A of $131
million and a Revolving Credit Loan B of $40 million. Revolving Credit Loan B
is supported by the Berkshire Partners guarantee. Actual availability under
these revolving credit loans is subject to a borrowing base formula based on
inventory and accounts receivable.

During the first six months of 2003, the weighted average borrowings
outstanding under the Revolving Credit Facility totaled $71.4 million, 2% below
the average outstanding borrowings of $72.8 million in the comparable period of
2002. As of June 30, 2003, our availability was $46 million, net of
outstanding letters of credit totaling $7.1 million. The Credit Facility bears
interest at variable rates based on either the prime rate or eurodollar rate,
at our option, plus a margin which, in the case of the Term Loan A and the
Revolving Credit Facility, varies depending upon certain financial ratios. The
Credit Facility, and the guarantees thereof by our domestic subsidiaries, are
secured by substantially all of our domestic and certain foreign assets. The
Credit Facility is cross-defaulted to the Notes Indentures.

In conjunction with the Fifth
Amendment to the Credit Facility in March 2002, the Company repurchased
from two Berkshire Partners investment funds an aggregate principal amount of
approximately $36.2 million of the Senior Subordinated Notes. The purchase
price of the Notes, representing Berkshire Partners cost, was $11.5 million
plus accrued interest, which was funded with proceeds of the Revolving Credit
Loan B. The Notes repurchased were retired and cancelled. The Company may
consider repurchases of additional Notes in the future, and we may utilize the
proceeds of the Credit Facility for this purpose. As of June 30, 2003, $99.6
million of Senior Subordinated Notes were outstanding. Total debt at June 30,
2003 amounted to $250.8 million, down $27.4 million or 9.8%
from the level of
debt outstanding at June 30, 2002. Over the past two years, the Company has
repaid or retired $109.4 million of debt, reducing total debt by 30% from the
$360.2 million of debt outstanding at June 30, 2001.

The Credit Facility, as amended, and the Notes Indentures include certain
financial and operating covenants which, among other things, restrict our
ability to incur additional indebtedness, make investments and take certain
other actions. Our ability to meet our debt service obligations will be
dependent upon our future performance, which will be impacted by general
economic conditions and other factors, including those described
under the caption Forward Looking Statements.

In April 2003, the Company entered into an agreement with a financial
institution covering the sale of accounts receivable from certain
customers, including Kmart Corporation.
These arrangements are strictly for the purpose of insuring selected
receivables. The Company pays fees based upon a percentage of the gross amount
of each receivable purchased by the financial institution. In certain
circumstances, the Company is obligated to repurchase the accounts
receivable from the financial institution if the balance remains unpaid for a
period of 60 days beyond the due date of the receivable. However, if within 90
days of the repurchase transaction the customer files a voluntary or
involuntary bankruptcy petition or publicly declares a general moratorium on
payment of trade vendor obligations, the financial institution is required to
repurchase the unpaid receivable from the Company. At June 30, 2003, the
financial institution held $1.1 million of accounts receivable which had been
purchased for cash from the Company.

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##### Table of Contents



THE HOLMES GROUP, INC.

|        |  |                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------
|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS  (CONTINUED)

RECENTLY ISSUED ACCOUNTING STANDARDS

The FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections in April
2002. This statement updates, clarifies and simplifies existing accounting
pronouncements. Specifically, the statement rescinds FASB Statement No. 4,
Reporting Gains and Losses from Extinguishment of Debt, FASB Statement No.
64, Extinguishment of Debt Made to Satisfy, Sinking Fund Requirements and
FASB Statement No. 44 Accounting for Intangible Assets of Motor Carriers.
The Statement also amends FASB Statement No. 13, Accounting for Leases and
certain other existing authoritative pronouncements to make technical
corrections or clarifications. FAS No. 145 became effective for THG related to
the rescission of FAS 4, 44 and FAS 64 on
January 1, 2003. FAS 145 will be effective related to the amendment of FAS 13
for all transactions occurring after May 15, 2002. All other provisions of FAS
145 became effective for financial statements issued after May 15, 2002. In
accordance with the new standard, the Company reclassified the gain related to
the Senior Notes repurchase, which was treated as an extraordinary item in
2002, as a component of other income in the consolidated statement of
operations.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of
Variable Interest Entities. This interpretation explains how to identify
variable interest entities and how an enterprise assesses its interest in a
variable interest entity to decide whether to consolidate that entity. This
interpretation requires existing unconsolidated variable interest entities to
be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. Variable interest entities
that effectively disperse risk will not be consolidated unless a single party
holds an interest or combination of interest that effectively recombines risks
that were previously dispersed. This interpretation applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date.
As of July 1, 2003, the standard applies to variable interest entities in which
an enterprise holds a variable interest that it acquired before February 1,
2003. The adoption of FIN 46 should not have a material effect on the
Companys financial position or results of operations.

In April 2003, the FASB issued FAS
No. 149, Amendment of Statement 133 on Derivative
Instruments and Hedging. FAS 149 amends and clarifies
financial accounting and reporting for derivative instruments and
hedging activities to ensure consistent reporting for contracts with
comparable characteristics. The Company adopted FAS 149 on
July 1, 2003 with no material impact on the Companys
financial position or results of operations.

In May 2003, the FASB issued FAS
No. 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. FAS 150
established standards for how to classify and measure certain
financial instruments with characteristics of both liabilities and
equity. The provisions of FAS 150 are effective immediately for
all financial instruments entered into or modified after May 31,
2003. The Company adopted these provisions as of June 1, 2003
with no material impact on the Companys financial position or
results of operations. For all other instruments, the Standard goes
into effect as of July 1, 2003, except for mandatorily
redeemable financial instruments of a non-public entity, which is
effective for existing or new contracts as of January 1, 2004.
The Company is currently in process of assessing the impact of these
provisions.

In May 2003 the Emerging Issues Task
Force (EITF) reached consensus on EITF Issue
No. 01-08, Determining Whether an Arrangement is a
Lease, which is intended to provided guidance in determining
whether an arrangement should be considered a lease subject to the
requirements of FAS 13, Accounting for Leases. The
Task Force reached a consensus that the evaluation of whether an
arrangement contains a lease within the scope of FAS 13 should
be based on the substance of the arrangement using certain guidance
specified in the consensus. EITF 01-08 is required to be applied
to Company arrangements agreed or committed to, modified, or acquired
in business combinations initiated after July 1, 2003. The
Company is currently in process of assessing the impact of
EITF 01-08.




|        |  |                                                          
|------- |  | ---------------------------------------------------------
|ITEM 3. |  | QUANTIATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At June 30, 2003, the carrying value of our debt totaled $250.8 million. The
fair value approximated $241 million. This debt includes amounts at both fixed
and variable interest rates. For fixed rate debt, interest rate changes affect
the fair market value, but do not impact earnings or cash flows. Conversely,
for variable rate debt, interest rate changes generally do not affect the fair
market value, but do impact earnings and cash flows, assuming other factors are
held constant.

At June 30, 2003, the Company had fixed rate debt of $99.6 million and variable
rate debt of $151.2 million. Assuming a constant debt level, a one percentage
point decrease in interest rates would increase the unrealized fair market
value of fixed rate debt by approximately $4.7 million. Based on the amounts of
variable rate debt outstanding at June 30, 2003, the earnings
and cash flows impact for the next year resulting from a one percentage point
increase in interest rates would be approximately $1.5 million, holding other variables constant.

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THE HOLMES GROUP, INC.




ITEM 4.        CONTROLS AND PROCEDURES



| | (a) |  | Evaluation of disclosure controls and procedures.
| | --- |  | -------------------------------------------------

Within the 90 days prior to the date of this report, the Company carried
out an evaluation under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to
applicable federal securities laws and regulations, including
Exchange Act Rules 13a-15 and 15d-14. Based upon that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and
procedures are designed to record, process, summarize and report
financial data in an effective and timely manner sufficient to alert them to material information
relating to the Company (including its consolidated subsidiaries) required to
be included in the Companys periodic filings with the Securities and Exchange
Commission.



| | (b) |  | Changes in internal controls.
| | --- |  | -----------------------------
|

There have been no changes in the
Companys internal control over financial reporting which could
materially affect, or are reasonably likely to materially affect,
internal control over financial reporting.

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THE HOLMES GROUP, INC.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings incident to our normal
business operations, including product liability and patent and trademark
litigation. A patent infringement action, Tilia International, Inc. v. The
Rival Company, is pending in the United States District Court in San Francisco,
California. In addition, Tilia International has requested that the
International Trade Commission (ITC) investigate the Company and two
other unrelated companies. In both the federal court action and in
its complaint to the ITC, Tilia International claims that the Rival
Seal-A-Meal® vacuum seal food storage device infringes
certain patent claims allegedly owned by Tilia International. In the
federal court action, Tilia International also contends that the
Companys food storage bags infringe certain patent claims
allegedly owned by Tilia International. The Company
denies these allegations and is aggressively litigating the matter. Management
believes that the outcome of all pending litigations will not have a material
adverse effect on it business, financial condition or results of operations.
In the case of product liability litigation, the Company has product liability
and general liability insurance policies in amounts management believes to be
reasonable. The Company also faces exposure to voluntary or mandatory product
recalls in the event that our products are alleged to have manufacturing or
safety defects. The Company does not maintain product recall insurance.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

Not applicable.




ITEM 5. OTHER INFORMATION

Investor Conference Call

We will hold a telephone conference call on Thursday, August 14, 2003 at 11
a.m., Eastern Time, in order for investors and other interested stakeholders to
hear managements views on our results of operations during the first six
months of 2003. If you are interested in accessing the call, please fax the
following information to Kay Ford, Executive Assistant, at 508-422-1676:



| |  | Name of Participant(s)
|- |  | ----------------------
| 
| |  | Company Affiliation   
| 
| |  | Nature of Business    
| 
| |  | Address               
| 
| |  | Phone, Fax and E-mail 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|     |  |                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------
|a.   |  | Exhibits:                                                                                          
|     |  |                                                                                                    
|31.1 |  | Certification of Chief Executive Officer pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                    
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
|     |  |                                                                                                    
|b.   |  | Reports on Form 8-K:                                                                               

Not applicable

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THE HOLMES GROUP, INC.




SIGNATURES

Pursuant to the requirements 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.

Registrant

|                |  |                                                  
|--------------- |  | -------------------------------------------------
|August 11, 2003 |  | By: /s/ Peter J. Martin                          
|                |  |                                                  
|                |  | Peter J. Martin, President and                   
|                |  | Chief Executive Officer                          
|                |  | (Principal Executive Officer)                    
|               
|August 11, 2003 |  | By: /s/ John M. Kelliher                         
|                |  |                                                  
|                |  | John M. Kelliher, Senior Vice President and Chief
|                |  | Financial Officer                                
|                |  | (Principal Financial and                         
|                |  | Accounting Officer)                              

33