<PAGE>

                                  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 SEPTEMBER 30, 2001
                        COMMISSION FILE NUMBERS: 333-44473
                                                 333-77905

                             THE HOLMES GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

MASSACHUSETTS                                                04-2768914
(STATE OR OTHER JURISDICTION                                 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)

ONE HOLMES WAY, MILFORD MASSACHUSETTS                        01757
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                     (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.

                          YES [X]                NO [ ]
<PAGE>
                             THE HOLMES GROUP, INC.

                                    FORM 10-Q

                         QUARTER ENDED SEPTEMBER 30, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE

<S>                                                                         <C>
PART I.  FINANCIAL INFORMATION                                                3

ITEM 1.  FINANCIAL STATEMENTS                                                 3

            CONSOLIDATED BALANCE SHEET AT
            DECEMBER 31, 2000 AND SEPTEMBER 30, 2001 (UNAUDITED)              3

            CONSOLIDATED STATEMENT OF INCOME FOR
            THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
            SEPTEMBER 30, 2001 (UNAUDITED)                                    4

            CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE
            NINE MONTHS ENDED SEPTEMBER 30, 2000 AND
            SEPTEMBER 30, 2001 (UNAUDITED)                                    5

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                        6

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                                 21

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK          27

PART II. OTHER INFORMATION                                                   27

         SIGNATURES                                                          29
</TABLE>



                                       2
<PAGE>
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                             THE HOLMES GROUP, INC.
                           CONSOLIDATED BALANCE SHEET
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,   SEPTEMBER 30,
                                                                                   2000       2001 (UNAUDITED)
                                                                                -----------   ----------------

<S>                                                                             <C>           <C>
ASSETS
Current assets:
    Cash and cash equivalents ...............................................    $   3,017       $   5,461
    Accounts receivable, net of allowance of $9,622 and $3,345 respectively.       124,499         123,910
    Inventories .............................................................      131,050         133,585
    Prepaid expenses and other current assets ...............................        6,457           3,788
    Deferred income taxes ...................................................       14,725          14,749
                                                                                 ---------       ---------
      Total current assets ..................................................      279,748         281,493

    Assets held for sale ....................................................        1,624             261
    Property and equipment, net .............................................       67,582          67,782
    Goodwill, net ...........................................................       83,779          81,597
    Deposits and other assets ...............................................        5,850           6,213
    Debt issuance costs, net ................................................       15,286          14,090
                                                                                 ---------       ---------
                                                                                 $ 453,869       $ 451,436
                                                                                 =========       =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Current portion of other liabilities ....................................    $     784       $     855
    Current portion of credit facility ......................................        7,250           8,076
    Accounts payable ........................................................       30,179          61,863
    Accrued expenses ........................................................       33,345          36,302
    Accrued income taxes ....................................................        4,717           8,440
                                                                                 ---------       ---------
      Total current liabilities .............................................       76,275         115,536

Credit facility .............................................................      225,175         195,225
Long-term debt ..............................................................      135,186         135,269
Other long-term liabilities .................................................        7,055           7,698
Deferred income taxes .......................................................        4,704           4,704

Commitments and contingencies Stockholders' equity(deficit):
  Common stock, $.001 par value.  Authorized 25,000,000 shares as of
      December 31, 2000 and 28,500,000 shares as of September 30, 2001;
      issued and outstanding 20,307,995 shares at December 31, 2000 and
      20,302,995 shares at September 30, 2001 ...............................           20              20
  Additional paid in capital ................................................       67,915          68,874
  Accumulated other comprehensive income ....................................          241            (281)
  Treasury stock, at cost (18,620,450 shares) ...............................      (62,058)        (62,076)
  Retained earnings (deficit) ...............................................         (644)        (13,533)
                                                                                 ---------       ---------
      Total stockholders' equity (deficit) ..................................        5,474          (6,996)
                                                                                 ---------       ---------
                                                                                 $ 453,869       $ 451,436
                                                                                 =========       =========
</TABLE>

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



                                       3
<PAGE>
                             THE HOLMES GROUP, INC.
                  CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED                 NINE MONTHS ENDED
                                                           SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,    SEPTEMBER 30,
                                                                2000                2001          2000             2001
                                                           -------------    -------------    -------------    -------------

<S>                                                        <C>              <C>              <C>              <C>
Net sales ..............................................       $ 118,435        $ 163,099        $ 358,528        $ 421,304
Cost of goods sold .....................................          77,859          118,726          252,134          314,304
                                                               ---------        ---------        ---------        ---------
  Gross profit .........................................          40,576           44,373          106,394          107,000
                                                               ---------        ---------        ---------        ---------

Operating expenses:
  Selling ..............................................          15,920           17,185           50,769           48,687
  General and administrative ...........................           7,556            9,600           23,745           28,573
  Product development ..................................           2,760            3,341            8,271            8,213
  Restructuring costs...................................              --               --              --             1,445
  Plant closing costs ..................................              --              550              340              550
  Amortization of goodwill and other intangible assets .             665              649            1,991            1,949
                                                               ---------        ---------        ---------        ---------
    Total operating expenses ...........................          26,901           31,325           85,116           89,417
                                                               ---------        ---------        ---------        ---------
    Operating profit ...................................          13,675           13,048           21,278           17,583
                                                               ---------        ---------        ---------        ---------
Other income and expense:
  Interest and other expense, net ......................           9,164            8,155           27,710           28,593
                                                               ---------        ---------        ---------        ---------
Income (loss) before income taxes and equity in earnings
  from joint venture ...................................           4,511            4,893           (6,432)         (11,010)
Income tax expense .....................................           3,169            1,324            2,637            3,755
Equity in earnings from joint venture ..................             275              516              611            1,876
                                                               ---------        ---------        ---------        ---------
    Net income (loss) ..................................       $   1,617       $    4,085       $   (8,458)       $ (12,889)
                                                               =========        =========        =========        =========
</TABLE>

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


                                       4
<PAGE>
                             THE HOLMES GROUP, INC.
                CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                             NINE MONTHS ENDED
                                                                                 SEPTEMBER 30, 2000    SEPTEMBER 30, 2001
                                                                                 ------------------    ------------------

<S>                                                                              <C>                   <C>
Cash flows from operating activities:
  Net income (loss) ..........................................................           $ (8,458)            $(12,889)
  Adjustments to reconcile net income (loss) to net cash provided by (used
  for) operating activities:
    Depreciation and amortization ............................................             12,675               11,934
    Amortization of debt issuance costs, discounts and other non-cash
      interest expense .......................................................              2,613                4,630
    Restructuring and asset impairment charges ...............................                --                   718
    Change in allowance for doubtful accounts ................................             (2,170)              (6,277)
    (Gain) loss on disposal of assets ........................................                --                  (559)
    Deferred income taxes ....................................................             (3,285)                 (24)

    Changes in operating assets and liabilities:
      Accounts receivable ....................................................             31,036                6,866
      Inventories ............................................................            (48,548)              (2,535)
      Prepaid expenses and other current assets ..............................              8,870                2,863
      Deposits and other assets ..............................................             (3,243)              (4,163)
      Accounts payable .......................................................              7,253               31,456
      Accrued expenses .......................................................             (6,614)               2,957
      Accrued income taxes ...................................................              1,455                3,723
                                                                                          --------             --------
    Net cash provided by (used for) operating activities .....................             (8,416)              38,700
                                                                                          --------             --------

Cash flows from investing activities:
  Proceeds from sale of assets held for sale and business divestitures .......              4,753                2,053
  Distribution of earnings from joint venture ................................              1,100                1,360
  Purchases of property and equipment ........................................            (19,621)             (11,095)
  Cash received from joint venture partner, net ..............................              1,141                  700
                                                                                          --------             --------
    Net cash used for investing activities ...................................            (12,627)              (6,982)
                                                                                          --------             --------
Cash flows from financing activities:
  Borrowings (repayment) of credit facility, net of issuance costs ...........             15,063              (29,124)
  Principal payments on capital lease obligations ............................               (139)                 --
                                                                                          --------             --------
    Net cash provided by (used for) financing activities .....................             14,924              (29,124)
                                                                                          --------             --------

Effect of exchange rate changes on cash ......................................                113                 (150)
                                                                                          --------             --------

Net increase (decrease) in cash and cash equivalents .........................             (6,006)                2,444
Cash and cash equivalents, beginning of period ...............................              6,647                 3,017
                                                                                          --------             --------
Cash and cash equivalents, end of period .....................................             $  641             $   5,461
                                                                                          ========             ========
Supplemental disclosure of cash flow information:
   Cash paid for interest ....................................................           $ 21,274             $  21,967
   Cash paid for (refund of) income taxes ....................................           $ (4,864)            $     143
</TABLE>

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



                                       5
<PAGE>
                             THE HOLMES GROUP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001

1.   NATURE OF BUSINESS

     The Holmes Group, Inc. ("THG"), formerly known as Holmes Products Corp.,
     along with its wholly-owned subsidiary, The Rival Company ("Rival") and its
     subsidiaries, acquired on February 5, 1999, designs, develops, imports and
     sells consumer durable goods, including fans, heaters, humidifiers, air
     purifiers, small kitchen electric appliances, personal care appliances,
     filters and accessories and lighting products, to retailers throughout the
     United States and Canada, and to a lesser extent, Europe, Latin America and
     Asia.

     Holmes Products (Far East) Limited ("HPFEL") and its subsidiaries
     manufacture, source and sell consumer durable goods, including fans,
     heaters and humidifiers and kitchen electrics, mainly to THG. HPFEL
     operates facilities in Hong Kong, Taiwan and The People's Republic of
     China.

     HPFEL is a wholly-owned subsidiary of THG. Prior to the recapitalization
     transaction described in Note 4, THG and HPFEL were both directly or
     indirectly 80%-owned subsidiaries of Asco Investments Ltd., a subsidiary of
     Pentland Group plc ("Pentland").

2.   BASIS OF CONSOLIDATION

     The accompanying unaudited financial statements include the accounts of THG
     and its wholly-owned subsidiaries, Rival, HPFEL, Holmes Manufacturing
     Corp., Holmes Air (Taiwan) Corp. and Holmes Motor Corp. The accompanying
     unaudited financial statements also include the accounts of Rival's direct
     and indirect wholly-owned subsidiaries, Bionaire International B.V., Patton
     Building Products, Inc. (which has subsequently been merged into Rival),
     Patton Electric Company, Inc. (which has subsequently been merged into
     Rival), Patton Electric (Hong Kong) Limited, Rival Consumer Sales
     Corporation, The Holmes Group Canada, Ltd., Rival de Mexico S.A. de C.V.
     and Waverly Products Company, Ltd. and HPFEL's wholly-owned subsidiaries,
     Esteem Industries Ltd., Raider Motor Corp., Dongguan Huixin Electrical
     Products Company, Ltd., Holmes Products (Europe) Ltd., Dongguan Holmes
     Products Ltd. and Dongguan Raider Motor Corp. Ltd. All significant
     inter-company balances and transactions have been eliminated.

     THG and its consolidated subsidiaries, including Rival, HPFEL and their
     respective subsidiaries, are referred to herein as the "Company."

3.   ACQUISITION

     On February 5, 1999, THG completed its acquisition of Rival for an
     aggregate of $279.6 million, including $129.4 million cash paid in
     connection with a tender offer for all of the outstanding shares of Common
     Stock of Rival (including payments to optionees), $142.9 million to
     refinance Rival's outstanding debt and $7.3 million in acquisition costs.
     The acquisition was made utilizing cash on hand, borrowings under an
     amended and restated Credit Facility entered into in connection with the
     acquisition, the issuance of $31.3 million of senior subordinated notes and
     proceeds of $50.0 million from the sale of THG's common stock to investment
     funds affiliated with THG's majority shareholder, certain members of
     Holmes' management and to certain other co-investors. This acquisition has
     been accounted for as a purchase, and the results of operations of Rival
     have been included in the consolidated financial statements since the date
     of acquisition. The excess of the purchase price over the fair value of the
     net assets acquired was approximately $88.5 million and $88.7 million,
     before $6.9 million and $4.9 million of accumulated amortization at
     September 30, 2001 and December 31, 2000, respectively, and is being
     amortized on a straight-line basis over 35 years.


                                       6
<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In connection with the acquisition, THG recorded a restructuring reserve of
     $6.4 million as an assumed liability in accordance with EITF 95-3,
     "Recognition of Liabilities in Connection with a Purchase Business
     Combination."

     Management determined that certain restructuring actions would be required
     to effectively integrate the Rival operations into THG. These restructuring
     actions were comprised primarily of the elimination of certain overlapping
     positions within the management and support staff layers of the combined
     company, relocation of key home environment personnel from Kansas City, MO
     to Milford, MA, consolidation of the Rival Hong Kong and Canadian offices
     into other existing local offices, and closure of the Warrensburg, MO
     manufacturing facility.

     These actions resulted in the elimination of 216 Rival employees from a
     combination of the Rival Warrensburg facility and the Kansas City, Canada
     and Hong Kong offices. The remaining severance for these employees will be
     paid during the remainder of fiscal 2001 and fiscal 2002.

     Exit costs related to these restructuring plans are comprised primarily of
     lease exit costs for Canada and Hong Kong and facility closure and exit
     costs related to the Warrensburg facility. At December 31, 1999, the Hong
     Kong consolidation was completed resulting in exit costs of $0.1 million.
     The Montreal, Canada and the Warrensburg, Missouri facility closures were
     completed during fiscal 2000. The Warrensburg facility was sold during the
     first quarter of 2001 which resulted in a gain of approximately $559,000.
     Proceeds from the sale were approximately $1,965,000.

     On June 28, 2001, the Company announced that the Sedalia, Missouri
     manufacturing plant would be closed. The activities of this plant will be
     moved to the other existing plants in Clinton, Missouri and Jackson,
     Mississippi. As a result, approximately 300 additional manufacturing,
     engineering and office positions were eliminated. In connection with the
     foregoing, the Company recorded a $727,000 restructuring charge for the
     severance and other employee related costs in accordance with EITF 94-3 "
     Liability Recognition for Certain Employee Termination Benefits and Other
     Costs to Exit an Activity (including Certain Costs Incurred in a
     Restructuring)". Severance costs for these employees will be paid during
     the remainder of 2001 and into 2002. Additionally, the Company recorded a
     $718,000 charge for restructuring associated with the Sedalia plant
     closure. These charges represent asset write-downs of redundant property,
     plant and equipment and facility exit costs. The remaining net book value
     of the Sedalia plant has been shown as assets held for sale in the
     consolidated September 30, 2001 balance sheet. Additionally, wind down
     costs of approximately $550,000, which are expensed as incurred, have been
     included as plant closing costs in the consolidated statement of income for
     the three and nine months ended September 30, 2001.

     The reserve activity for fiscal 2001 is as follows (in thousands):

<TABLE>
<CAPTION>
                                           Employee        Facility         Total
                                        Severance and      Exit and        Accrued
                                       Relocation Costs   Other Costs   Restructuring
                                       ----------------   -----------   -------------
<S>                                    <C>                <C>           <C>
     Balance at December 31, 2000         $   712         $   233         $   945
     Restructuring charges .......            727             718           1,445
     Cash payments/adjustments
      recorded in fiscal 2001 ....           (600)           (901)         (1,501)
                                          -------         -------         -------
     Balance at September 30, 2001        $   839         $    50         $   889
</TABLE>

     The cash payments/adjustments recorded in fiscal 2001 primarily include the
     cash payments made for severance in the first nine months of 2001 and the
     write down recorded in connection with the Sedalia plant closure.


                                       7
<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     Following the Rival acquisition, the Company divested two of Rival's
     non-core business units. On October 8, 1999, the Company sold the assets of
     Rival's sump and utility pump division for $11.4 million. The proceeds
     received for the assets exceeded the net asset values recorded by $0.7
     million. On December 21, 1999, the Company sold the net assets of Rival's
     industrial and building supply products businesses for proceeds of $9.7
     million, net of contingent consideration of $2.7 million. The contingent
     consideration was based on certain performance metrics and actual final
     inventory counts. Excluding the contingent consideration, the book value of
     the assets sold exceeded the proceeds by $5.5 million. Due to the proximity
     of the transactions to the original Rival acquisition date, the net loss on
     these transactions of $4.7 million was recorded as an increase to goodwill.

4.   RECAPITALIZATION

     On November 26, 1997, the Company and its stockholders consummated an
     agreement to perform the following: (i) the stockholders of HPFEL
     contributed their shares of common stock to THG in exchange for 2,750,741
     shares of THG's common stock (ii) THG issued 4,718,579 shares of its common
     stock to outside investors and certain executive officers of the Company
     for approximately $15.5 million, net of related issuance costs, (iii) the
     Company repaid all amounts outstanding to Pentland affiliates and repaid
     all amounts outstanding on the Company's trade acceptances, including
     accrued interest, and (iv) THG redeemed 18,620,450 shares of its common
     stock held by Pentland for approximately $62.1 million. In connection with
     these transactions, THG issued $105.0 million of 9 7/8% Senior Subordinated
     Notes due in November 2007 and borrowed $27.5 million under a new line of
     credit facility.

     The transactions described above have been accounted for as a leveraged
     recapitalization of the Company. The Company has retained its historical
     cost basis of accounting, due to the significant minority shareholders
     which remained. The shares redeemed from Pentland have been recorded as
     treasury stock, at cost.

5.   UNAUDITED INTERIM FINANCIAL STATEMENTS

     In the opinion of management, the accompanying unaudited condensed
     consolidated financial statements contain all adjustments, consisting of
     normal recurring accruals, considered necessary for a fair presentation of
     the Company's financial position as of September 30, 2001 and the Company's
     results of operations and cash flows for the nine months ended September
     30, 2000 and 2001. This interim financial information and notes thereto
     should be read in conjunction with the Company's Annual Report on Form 10-K
     for the year ended December 31, 2000. Due to the seasonality of the
     Company's business, the Company's consolidated results of operations for
     the three and nine month periods ended September 30, 2001 are not
     necessarily indicative of the results to be expected for any other interim
     period or the entire fiscal year.

6.   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 80%
     of the inventories and the last-in, first-out method (LIFO) for the
     remaining 20% of the inventory. Inventories are as follows:



                                       8
<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

<TABLE>
<CAPTION>
     (in thousands)                     December 31, 2000     September 30, 2001
                                        -----------------     ------------------

<S>                                          <C>                   <C>
     Finished goods                          $ 97,375              $103,589
     Raw materials and Work-in-process         33,299                30,296
                                             --------              --------
                                              130,674               133,885
     LIFO allowance                               376                  (300)
                                             --------              --------
                                             $131,050              $133,585
                                             ========              ========
</TABLE>

7.   LONG-TERM DEBT

     Senior Subordinated Notes

     In connection with the recapitalization transactions described in Note 4
     and the Rival acquisition described in Note 3, THG issued $105.0 million
     and $31.3 million, respectively, in senior subordinated notes, maturing on
     November 15, 2007 (the "Notes"). The Notes bear interest at 9 7/8%, payable
     semi-annually on May 15 and November 15. No principal is due until the
     maturity date.

     The Notes are subordinated to the Company's other debt, including the
     Credit Facility (as described below) and capital leases. The Notes are
     guaranteed by THG's current and future domestic subsidiaries (see Note 12)
     on a full, unconditional and joint and several basis, but are otherwise
     unsecured.

     THG can, at its option, redeem the Notes at any time after November 15,
     2002, subject to a fixed schedule of redemption prices which declines from
     104.9% to 100% of the face value. However, THG may redeem up to $43.3
     million of the Notes prior to such date at a price of 109.875% of face
     value upon issuance of equity securities. Additionally, upon certain sales
     of stock or assets or a change of control of THG, THG must offer to
     repurchase all or a portion of the Notes at a redemption price of 101% of
     face value.

     The Notes contain certain restrictions and covenants, including limitations
     (based on certain financial ratios) on THG's ability to pay dividends,
     repurchase stock or incur additional debt (other than borrowings under the
     Credit Facility and other enumerated exceptions). The Notes are
     cross-defaulted to payment defaults under the Credit Facility.

     Credit Facility

     The Company entered into an amended and restated Credit Facility agreement
     in February, 1999 in connection with the Rival acquisition. The Credit
     Facility consisted of a tranche A term loan of $40.0 million that matures
     February 5, 2005, a tranche B term loan of $85.0 million that matures
     February 5, 2007 and a $180.0 million revolving credit facility that
     matures February 5, 2005. Availability under the Credit Facility is reduced
     by outstanding letters of credit. As of September 30, 2001, the Company's
     availability was $67.4 million, net of outstanding letters of credit
     totaling $8.1 million and our outstanding balance of $95.2 million. The
     Credit Facility bears interest at variable rates based on either the prime
     rate or eurodollar, at the Company's option, plus a margin which, in the
     case of the tranche A term loan and the revolving credit facility, varies
     depending upon certain financial ratios. The Credit Facility, and the
     guarantees thereof by the Company's domestic subsidiaries, are secured by
     substantially all of the Company's domestic and certain foreign assets. The
     Credit Facility is cross-defaulted to the Notes Indentures.


                                       9
<PAGE>
                          THE HOLMES GROUP, INC. NOTES
               TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The Company's financial performance in the fourth quarter of 2000 resulted
     in a default, as of December 31, 2000, of certain financial ratio covenants
     in the Credit Facility as previously amended. The lending group agreed to a
     Forbearance Agreement with respect to such defaults on April 13, 2001. On
     May 7, 2001, the Credit Facility was further amended to waive the defaults
     and to revise certain of the financial ratio covenants through June 30,
     2002. In addition, the maximum revolving credit availability under the
     Credit Facility has been increased from $140.0 million to an aggregate of
     $180.0 million through January 31, 2002, decreasing to an aggregate of
     $155.0 million through July 1, 2002 and $115.0 million thereafter, subject
     at all times to a borrowing base formula.

     As partial consideration for the amendments and the limited waiver, the
     Company issued warrants to the lenders to acquire up to 5% of THG's common
     stock on a fully-diluted basis. The warrants are exercisable at a price of
     $5.04 per share, and expire May 7, 2006. Additionally, the majority
     stockholder agreed to provide a $43.5 million guarantee in support of the
     increased revolving credit commitment. The fair value of the warrants was
     approximately $1.0 million and was recorded as a charge to interest expense
     during 2001.

     The Credit Facility as amended, and the Notes Indentures include certain
     financial and operating covenants, which, among other things, restrict the
     ability of the Company to incur additional indebtedness, grant liens, make
     investments and take certain other actions. The ability of the Company to
     meet its debt service obligations will be dependent upon the future
     performance of the Company, which will be impacted by general economic
     conditions and other factors. See "Management's Discussion and Analysis of
     Financial Condition and Results of Operations - Forward-Looking
     Statements."

     Long term debt consists of the following:

<TABLE>
<CAPTION>
     (in thousands)                                                   December 31, 2000   September 30,2001
                                                                      -----------------   -----------------
<S>                                                                   <C>                 <C>
     Credit Facility, with a weighted average interest rate of
       10.1% and 8.5% at December 31, 2000 and September 30, 2001,
       respectively ................................................           $232,425            $203,301
     9 7/8% Senior Subordinated Notes, net of unamortized
       discount of $1.1 million at December 31, 2000 and $1.0
       million at September 30, 2001, respectively .................            135,186             135,269
                                                                               --------            --------
     Total debt ....................................................            367,611             338,570
     Less current maturities .......................................              7,250               8,076
                                                                               --------            --------
     Long-term debt ................................................           $360,361            $330,494
</TABLE>

     Effective May 7, 1999 the Company entered into an interest rate collar
     transaction agreement with its lending bank. The interest rate collar
     consists of a cap rate of 6.5% and a floor rate of 4.62%. The one-time
     premium payment for the collar was $225,000 and the agreement terminates
     March 31, 2002. Quarterly on the last business day of March, June,
     September and December beginning September 30, 1999 if the LIBOR interest
     rate at the lending bank is greater than the cap rate, the lending bank
     agrees to pay the Company a notional amount as described in the agreement
     multiplied by the number of days in that quarter over 365 days times the
     difference between the LIBOR rate and the cap rate. If on the other hand
     the LIBOR rate is less than the floor rate, the Company would have to pay
     the lending bank based on the same calculation. If the LIBOR rate is
     between the cap and floor rate, no payments would be necessary by either
     party. The LIBOR interest rate at September 30, 2001 was 2.59%, therefore
     the Company will owe approximately $456,000 in the fourth quarter to the
     lending bank.


                                       10
<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

8.   COMPREHENSIVE INCOME

     The Company adopted Statement of Financial Accounting Standards No. 130,
     "Reporting Comprehensive Income." This Statement establishes standards for
     reporting comprehensive income and its components in financial statements.
     Comprehensive income consists of net earnings and foreign currency
     translation adjustments as presented in the following table.

<TABLE>
<CAPTION>
                                                       Three months ended
     (in thousands)                            September 30, 2000  September 30, 2001
                                               ------------------  ------------------

<S>                                            <C>                 <C>
     Net Earnings (loss) ....................        $1,617          $  4,085
     Foreign currency translation adjustments           613              (213)
                                                     -------           -------

       Comprehensive income (loss) ..........        $2,230          $  3,872
</TABLE>


<TABLE>
<CAPTION>
                                                         Nine months ended
     (in thousands)                            September 30, 2000  September 30, 2001
                                               ------------------  ------------------

<S>                                            <C>                 <C>
     Net Earnings (loss) ....................        $(8,458)        $(12,889)
     Foreign currency translation adjustments            111             (522)
                                                     --------         --------

       Comprehensive income (loss) ..........        $(8,347)        $(13,411)
</TABLE>

9.   BUSINESS SEGMENTS

     The Company adopted SFAS No. 131, "Disclosure about Segments of an
     Enterprise and Related Information" ("SFAS 131"), during 1998. SFAS 131
     established standards for reporting information about business segments in
     annual financial statements. It also established standards for related
     disclosures about products and services, major customers and geographic
     areas. Business segments are defined as components of a business about
     which separate financial information is available that is evaluated
     regularly by the chief operating decision maker, or decision making group,
     in deciding how to allocate resources and in assessing performance. The
     business segments are managed separately because each segment represents a
     strategic business unit whose main business is entirely different. The
     adoption of SFAS 131 did not affect the Company's results of operations or
     financial position.

     The Company currently manages its operations through three business
     segments: consumer durables, international and Far East. The consumer
     durables segment sells products including fans, heaters, humidifiers, air
     purifiers, Crock-Pot (R) slow cookers, toasters, ice cream freezers, can
     openers, showerheads, massagers and lighting products to retailers
     throughout the U.S. 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 and distribution
     channels. The international segment sells the Company's products outside
     the U.S. The Far East segment is the manufacturing and sourcing operation
     located primarily at HPFEL.


                                       11

<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     The "International and Other category" in 2001 represents the international
     segment. For 2000, the "other category" represented the international
     segment and the divested industrial and building supply segment combined,
     as neither accounted for over 10% of net sales individually. Summary
     financial information for each reportable segment for the three and nine
     month periods ended September 30, 2001 and 2000 is as follows (in
     thousands):

<TABLE>
<CAPTION>
                            Consumer                    International                      Consolidated
THREE MONTHS ENDED          Durables      Far East        and Other       Eliminations         Total
                           ---------      --------      -------------     ------------     ------------

<S>                        <C>            <C>           <C>               <C>              <C>
September 30, 2001

Net sales ............     $ 145,332      $104,323        $ 13,159         $ (99,715)       $ 163,099
Operating income(loss)         5,590         6,576             962               (80)          13,048

September 30, 2000

Net sales ............     $ 105,526      $ 70,380        $ 10,441         $ (67,912)       $ 118,435
Operating income(loss)         9,142         5,284            (532)             (219)          13,675


NINE MONTHS ENDED

September 30, 2001

Net sales ............     $ 369,569      $232,323        $ 35,489         $(216,077)       $ 421,304
Operating income(loss)        (3,235)       18,356           1,807               655           17,583

September 30, 2000

Net sales ............     $ 316,028      $186,638        $ 32,646         $(176,784)       $ 358,528
Operating income(loss)         9,639        14,749          (2,951)             (159)          21,278
</TABLE>

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

<TABLE>
<CAPTION>
                                                                          Other        Consolidated
                                         United States     Far East    International       Total
                                         -------------     --------    -------------   ------------

<S>                                      <C>               <C>         <C>             <C>
Net sales:
  Three months ended September 30, 2001    $145,332        $  4,608       $ 13,159       $163,099
  Three months ended September 30, 2000     105,703           2,468         10,264        118,435

  Nine months ended September 30, 2001     $369,569        $ 16,246       $ 35,489       $421,304
  Nine months ended September 30, 2000      318,213           9,854         30,461        358,528

Identifiable assets:
  September 30, 2001 ..................      35,202          32,241            600         68,043
  December 31, 2000 ...................      37,777          30,654            775         69,206
</TABLE>

     Net sales are grouped based on the geographic origin of the transaction.
     The "Other International" category is comprised of sales of products that
     originated in Europe, Mexico, Latin America and Canada.

     The Company's manufacturing entities in the Far East sell completed
     products to THG in the United States at intercompany transfer prices which
     reflect management's estimate of amounts which would be charged by an
     unrelated third party. These sales are eliminated in consolidation. The
     remaining Far East sales are to unrelated third parties.



                                       12
<PAGE>
                             THE HOLMES GROUP, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10.  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 and cash flows.

11.  RECLASSIFICATIONS

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

12.  CONDENSED CONSOLIDATING INFORMATION

     The senior subordinated notes described in Note 7 were issued by THG and
     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 15 of the Company's audited financial
     statements for the year ended December 31, 2000, included in the Company's
     Form 10-K, as amended, as filed with the Securities and Exchange
     Commission, certain of HPFEL's subsidiaries in China have restrictions on
     distributions to their parent companies.



                                       13
<PAGE>
        CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 2000 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      GUARANTOR       NON-GUARANTOR
                                       PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                      ---------      ------------     -------------     ------------     ------------

                                                                     (IN THOUSANDS)
<S>                                   <C>            <C>              <C>               <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents .....     $     175       $     959         $   1,883               --        $   3,017
  Accounts receivable, net ......        51,725          49,459            23,315               --          124,499
  Inventories ...................        51,181          52,637            32,396        $  (5,164)         131,050
  Prepaid expenses and other
     current assets .............         2,922              74             3,461               --            6,457
  Deferred income taxes .........         5,300           9,911              (486)              --           14,725
  Due from affiliates ...........       223,445              89            29,138         (252,672)              --
                                      ---------       ---------         ---------        ---------        ---------
     Total current assets .......       334,748         113,129            89,707         (257,836)         279,748
                                      ---------       ---------         ---------        ---------        ---------
Assets held for sale ............            --           1,624                --               --            1,624
Property and equipment, net .....         5,482          30,671            31,429               --           67,582
Goodwill, net ...................            --          83,779                --               --           83,779
Deposits and other assets .......        21,806           3,110               511           (4,291)          21,136
Investments in consolidated
  subsidiaries ..................        41,217              --                --          (41,217)              --
                                      ---------       ---------         ---------        ---------        ---------
                                      $ 403,253       $ 232,313         $ 121,647        $(303,344)       $ 453,869
                                      =========       =========         =========        =========        =========
LIABILITIES AND STOCKHOLDERS'
  EQUITY (DEFICIT)
Current liabilities:
 Current portion of
     other liabilities ..........     $      --       $      --         $     784               --        $     784
 Current portion of
     credit facility ............         7,250              --                --               --            7,250
 Accounts payable ...............         7,367          (2,261)           29,264        $  (4,191)          30,179
 Accrued expenses ...............        15,835          12,298             5,212               --           33,345
 Accrued income taxes ...........           (10)          2,521             2,206               --            4,717
 Due to affiliates ..............         6,976         221,939            23,757         (252,672)              --
                                      ---------       ---------         ---------        ---------        ---------
     Total current liabilities ..        37,418         234,497            61,223         (256,863)          76,275
                                      ---------       ---------         ---------        ---------        ---------
Credit facility .................       225,175              --                --               --          225,175
                                      ---------       ---------         ---------        ---------        ---------
Long-term debt ..................       135,186              --                --               --          135,186
                                      ---------       ---------         ---------        ---------        ---------
Other long-term liabilities .....            --              --             7,055               --            7,055
                                      ---------       ---------         ---------        ---------        ---------
Deferred income taxes ...........            --           4,704                --               --            4,704
                                      ---------       ---------         ---------        ---------        ---------

STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock, $.001 par value .            20               2                --               (2)              20
  Common stock, $1 par value ....            --              --               100             (100)              --
  Additional paid in capital ....        67,915              --                --               --           67,915
  Accumulated other comprehensive
     income .....................           241              --               241             (241)             241
  Treasury stock ................       (62,058)             --                --               --          (62,058)
  Retained earnings(deficit) ....          (644)         (6,890)           53,028          (46,138)            (644)
                                      ---------       ---------         ---------        ---------        ---------
     Total stockholders' equity
       (deficit) ................         5,474          (6,888)           53,369          (46,481)           5,474
                                      ---------       ---------         ---------        ---------        ---------
                                      $ 403,253       $ 232,313         $ 121,647        $(303,344)       $ 453,869
                                      =========       =========         =========        =========        =========
</TABLE>



                                       14
<PAGE>
        CONSOLIDATING BALANCE SHEET AT SEPTEMBER 30, 2001 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      GUARANTOR       NON-GUARANTOR
                                       PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                      ---------      ------------     -------------     ------------     ------------

                                                                     (IN THOUSANDS)
<S>                                   <C>            <C>              <C>               <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents .....     $   1,416       $     236         $   3,809               --        $   5,461
  Accounts receivable, net ......        45,230          59,880            18,800               --          123,910
  Inventories ...................        37,311          75,195            25,678        $  (4,599)         133,585
  Prepaid expenses and other
     current assets .............         2,011              37             1,740               --            3,788
  Deferred income taxes .........         5,300           9,911              (462)              --           14,749
  Due from affiliates ...........       187,132              89            91,602         (278,823)              --
                                      ---------       ---------         ---------        ---------        ---------
     Total current assets .......       278,400         145,348           141,167         (283,422)         281,493
                                      ---------       ---------         ---------        ---------        ---------
Assets held for sale ............            --             261                --               --              261
Property and equipment, net .....         6,005          28,936            32,841               --           67,782
Goodwill, net ...................            --          81,597                --               --           81,597
Deposits and other assets .......        21,186           2,836             1,172           (4,891)          20,303
Investments in consolidated
  subsidiaries ..................        73,113              --                --          (73,113)              --
                                      ---------       ---------         ---------        ---------        ---------
                                      $ 378,704       $ 258,978         $ 175,180        $(361,426)       $ 451,436
                                      =========       =========         =========        =========        =========
LIABILITIES AND STOCKHOLDERS'
  EQUITY (DEFICIT)
Current liabilities:
 Current portion of
     other liabilities ..........     $      --       $      --         $     855               --        $     855
 Current portion of
     credit facility ............         8,076              --                --               --            8,076
 Accounts payable ...............         3,583           7,937            55,234        $  (4,891)          61,863
 Accrued expenses ...............        18,796          11,702             5,804               --           36,302
 Accrued income taxes ...........         1,266           2,747             4,427               --            8,440
 Due to affiliates ..............        23,485         227,397            27,841         (278,723)              --
                                      ---------       ---------         ---------        ---------        ---------
     Total current liabilities ..        55,206         249,783            94,161         (283,614)         115,536
                                      ---------       ---------         ---------        ---------        ---------
Credit facility .................       195,225              --                --               --          195,225
                                      ---------       ---------         ---------        ---------        ---------
Long-term debt ..................       135,269              --                --               --          135,269
                                      ---------       ---------         ---------        ---------        ---------
Other long-term liabilities .....            --              --             7,698               --            7,698
                                      ---------       ---------         ---------        ---------        ---------
Deferred income taxes ...........            --           4,704                --               --            4,704
                                      ---------       ---------         ---------        ---------        ---------

STOCKHOLDERS' EQUITY (DEFICIT):
  Common stock, $.001 par value .            20               2                --               (2)              20
  Common stock, $1 par value ....            --              --               100             (100)              --
  Additional paid in capital ....        68,874              --                --               --           68,874
  Accumulated other comprehensive
     income .....................          (281)             --              (281)             281             (281)
  Treasury stock ................       (62,076)             --                --               --          (62,076)
  Retained earnings(deficit) ....       (13,533)          4,489            73,502          (77,991)         (13,533)
                                      ---------       ---------         ---------        ---------        ---------
     Total stockholders' equity
       (deficit) ................        (6,996)          4,491            73,321          (77,812)          (6,996)
                                      ---------       ---------         ---------        ---------        ---------
                                      $ 378,704       $ 258,978         $ 175,180        $(361,426)       $ 451,436
                                      =========       =========         =========        =========        =========
</TABLE>

                                       15
<PAGE>
                         CONSOLIDATING INCOME STATEMENT
              THREE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      GUARANTOR       NON-GUARANTOR
                                        PARENT       SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                      ---------      ------------     -------------     ------------     ------------

                                                                  (IN THOUSANDS)
<S>                                   <C>            <C>              <C>               <C>              <C>
Net sales ....................        $ 57,462         $ 48,131        $ 80,754         $(67,912)        $118,435
Cost of goods sold ...........          39,192           36,219          70,141          (67,693)          77,859
                                      --------         --------        --------         --------         --------
  Gross profit (loss) ........          18,270           11,912          10,613             (219)          40,576
                                      --------         --------        --------         --------         --------
Operating expenses:
  Selling ....................           7,364            6,022           2,534               --           15,920
  General and administrative .           3,508            1,415           2,633               --            7,556
  Product development ........           2,208              552              --               --            2,760
  Amortization of goodwill and
     other intangible assets .              --              650              15               --              665
                                      --------         --------        --------         --------         --------
  Total operating expenses ...          13,080            8,639           5,182               --           26,901
                                      --------         --------        --------         --------         --------
  Operating profit (loss) ....           5,190            3,273           5,431             (219)          13,675
                                      --------         --------        --------         --------         --------
Other income and expense:
  Other (income) expense, net               --               --              --               --               --
  Interest and other expense,
     net .....................           9,706              118            (660)              --            9,164
                                      --------         --------        --------         --------         --------
     Total other (income)
       expense ...............           9,706              118            (660)              --            9,164
                                      --------         --------        --------         --------         --------
Income (loss) before income
  taxes and equity in income
  of and equity in earnings
  from joint venture .........          (4,516)           3,155           6,091             (219)           4,511
Equity in earnings from joint
  venture ....................             275               --              --               --              275
Income tax expense (benefit) .           2,640               --             529               --            3,169
                                      --------         --------        --------         --------         --------
Income (loss) before equity in
  income of consolidated
  subsidiaries ...............          (6,881)           3,155           5,562             (219)           1,617
Equity in income of
  consolidated subsidiaries ..           8,498               --              --           (8,498)              --
                                      --------         --------        --------         --------         --------
Net income (loss) ............        $  1,617         $  3,155        $  5,562         $ (8,717)        $  1,617
                                      ========         ========        ========         ========         ========
</TABLE>



                                       16
<PAGE>
                         CONSOLIDATING INCOME STATEMENT
              THREE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                   GUARANTOR       NON-GUARANTOR
                                    PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                   ---------      ------------     -------------     ------------     ------------

                                                                  (IN THOUSANDS)
<S>                                <C>            <C>              <C>               <C>              <C>
Net sales ....................     $  68,176       $  77,156         $ 117,482        $ (99,715)       $ 163,099
Cost of goods sold ...........        51,950          61,343           105,068          (99,635)         118,726
                                   ---------       ---------         ---------        ---------        ---------
  Gross profit (loss) ........        16,226          15,813            12,414              (80)          44,373
                                   ---------       ---------         ---------        ---------        ---------
Operating expenses:
  Selling ....................         9,683           5,174             2,328               --           17,185
  General and administrative .         6,080             972             2,548               --            9,600
  Product development ........         2,535             806                --               --            3,341
  Plant closing costs   ......            --             550                --               --              550
  Amortization of goodwill and
     other intangible assets .            --             649                --               --              649
                                   ---------       ---------         ---------        ---------        ---------
  Total operating expenses ...        18,298           8,151             4,876               --           31,325
                                   ---------       ---------         ---------        ---------        ---------
  Operating profit (loss) ....        (2,072)          7,662             7,538              (80)          13,048
                                   ---------       ---------         ---------        ---------        ---------
Other income and expense:
  Other (income) expense, net            250              51              (695)              --             (394)
  Interest and other expense,
     net .....................         5,690           2,861                (2)              --            8,549
                                   ---------       ---------         ---------        ---------        ---------
     Total other (income)
       expense ...............         5,940           2,912              (697)              --            8,155
                                   ---------       ---------         ---------        ---------        ---------
Income (loss) before income
  taxes and equity in income
  of and equity in earnings
  from joint venture .........        (8,012)          4,750             8,235              (80)           4,893
Equity in earnings from joint
  venture ....................           516              --                --               --              516
Income tax expense (benefit) .           594              --               730               --            1,324
                                   ---------       ---------         ---------        ---------        ---------
Income (loss) before equity in
  income of consolidated
  subsidiaries ...............        (8,090)          4,750             7,505              (80)           4,085
Equity in income of
  consolidated subsidiaries ..        12,175              --                --          (12,175)              --
                                   ---------       ---------         ---------        ---------        ---------
Net income (loss) ............     $   4,085      $    4,750         $   7,505        $ (12,255)       $   4,085
                                   =========       =========         =========        =========        =========
</TABLE>


                                       17
<PAGE>
                         CONSOLIDATING INCOME STATEMENT
               NINE MONTHS ENDED SEPTEMBER 30, 2000 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      GUARANTOR       NON-GUARANTOR
                                       PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                      ---------      ------------     -------------     ------------     ------------

                                                                     (IN THOUSANDS)
<S>                                   <C>            <C>              <C>               <C>              <C>
Net sales ....................        $ 178,340         $ 141,520         $ 215,452        $(176,784)       $ 358,528
Cost of goods sold ...........          135,401           108,357           185,001         (176,625)         252,134
                                      ---------         ---------         ---------        ---------        ---------
  Gross profit (loss) ........           42,939            33,163            30,451             (159)         106,394
                                      ---------         ---------         ---------        ---------        ---------
Operating expenses:
  Selling ....................           22,090            21,739             6,940               --           50,769
  General and administrative .            9,161             5,965             8,619               --           23,745
  Product development ........            6,518             1,753                --               --            8,271
  Plant closing costs ........               --               340                --               --              340
  Amortization of goodwill and
     other intangible assets .               --             1,946                45               --            1,991
                                      ---------         ---------         ---------        ---------        ---------
  Total operating expenses ...           37,769            31,743            15,604               --           85,116
                                      ---------         ---------         ---------        ---------        ---------
  Operating profit (loss) ....            5,170             1,420            14,847             (159)          21,278
                                      ---------         ---------         ---------        ---------        ---------
Other income and expense:
  Other (income) expense, net                --                --                --               --
  Interest and other expense,
     net .....................           28,551               154              (995)              --           27,710
                                      ---------         ---------         ---------        ---------        ---------
     Total other (income)
       expense ...............           28,551               154              (995)              --           27,710
                                      ---------         ---------         ---------        ---------        ---------
Income (loss) before income
  taxes and equity in income
  of and equity in earnings
  from joint venture .........          (23,381)            1,266            15,842             (159)          (6,432)
Equity in earnings from joint
  venture ....................              611                --                --               --              611
Income tax expense (benefit) .            1,462               (85)            1,260               --            2,637
                                      ---------         ---------         ---------        ---------        ---------
Income (loss) before equity in
  income of consolidated
  subsidiaries ...............          (24,232)            1,351            14,582             (159)          (8,458)
Equity in income of
  consolidated subsidiaries ..           15,774                --                --          (15,774)              --
                                      ---------         ---------         ---------        ---------        ---------
Net income (loss) ............        $  (8,458)        $   1,351         $  14,582        $ (15,933)       $  (8,458)
                                      =========         =========         =========        =========        =========
</TABLE>


                                       18
<PAGE>
                         CONSOLIDATING INCOME STATEMENT
               NINE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      GUARANTOR       NON-GUARANTOR
                                       PARENT        SUBSIDIARIES     SUBSIDIARIES      ELIMINATIONS     CONSOLIDATED
                                      ---------      ------------     -------------     ------------     ------------
                                                                     (IN THOUSANDS)

<S>                                   <C>            <C>              <C>               <C>              <C>
Net sales ....................        $ 175,662         $ 193,907         $ 267,812        $(216,077)       $ 421,304
Cost of goods sold ...........          146,773           151,189           233,074         (216,732)         314,304
                                      ---------         ---------         ---------        ---------        ---------
  Gross profit (loss) ........           28,889            42,718            34,738              655          107,000
                                      ---------         ---------         ---------        ---------        ---------
Operating expenses:
  Selling ....................           26,233            15,013             7,441               --           48,687
  General and administrative .           16,916             4,523             7,134               --           28,573
  Product development ........            6,982             1,231                --               --            8,213
  Restructuring charges ......               --             1,445                --               --            1,445
  Plant closing costs   ......               --               550                --               --              550
  Amortization of goodwill and
     other intangible assets .               --             1,949                --               --            1,949
                                      ---------         ---------         ---------        ---------        ---------
  Total operating expenses ...           50,131            24,711            14,575               --           89,417
                                      ---------         ---------         ---------        ---------        ---------
  Operating profit (loss) ....          (21,242)           18,007            20,163              655           17,583
                                      ---------         ---------         ---------        ---------        ---------
Other income and expense:
  Other (income) expense, net               590              (152)           (1,109)              --             (671)
  Interest and other expense,
     net .....................           21,266             8,029               (31)              --           29,264
                                      ---------         ---------         ---------        ---------        ---------
     Total other (income)
       expense ...............           21,856             7,877            (1,140)              --           28,593
                                      ---------         ---------         ---------        ---------        ---------
Income (loss) before income
  taxes and equity in income
  of and equity in earnings
  from joint venture .........          (43,098)           10,130            21,303              655          (11,010)
Equity in earnings from joint
  venture ....................            1,876                --                --               --            1,876
Income tax expense (benefit) .            1.535                --             2,220               --            3,755
                                      ---------         ---------         ---------        ---------        ---------
Income (loss) before equity in
  income of consolidated
  subsidiaries ...............          (42,757)           10,130            19,083              655          (12,889)
Equity in income of
  consolidated subsidiaries ..           29,868                --                --          (29,868)              --
                                      ---------         ---------         ---------        ---------        ---------
Net income (loss) ............        $ (12,889)        $  10,130         $  19,083        $ (29,213)       $ (12,889)
                                      =========         =========         =========        =========        =========
</TABLE>


                                       19
<PAGE>
                 CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
          NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                           GUARANTOR       NON-GUARANTOR
                                                             PARENT       SUBSIDIARIES      SUBSIDIARIES     CONSOLIDATED
                                                            --------      ------------      ------------     ------------

<S>                                                         <C>           <C>              <C>               <C>
NINE MONTHS ENDED SEPTEMBER 30, 2000
Net cash provided by (used in) operating activities         $(32,073)         $  2,416          $ 21,241         $ (8,416)
                                                            --------          --------          --------         --------
Cash flows from investing activities:
  Distribution of earnings from joint venture ......           1,100                --                --            1,100
  Cash received from joint venture partner .........              --                --             1,141            1,141
  Proceeds from assets held for sale
    And business divestitures ......................             701             4,052                --            4,753
  Purchases of property and equipment ..............          (2,170)           (4,715)          (12,736)         (19,621)
                                                            --------          --------          --------         --------
                                                                (369)             (663)          (11,595)         (12,627)
                                                            --------          --------          --------         --------
Cash flows from financing activities:
  Borrowings (repayments) on credit facility,
    net of issuance costs ..........................          15,063                --                --           15,063
  Principal payments on capital lease obligations ..              --                --              (139)            (139)
  Other net activity with Parent ...................          16,378            (2,520)          (13,858)              --
                                                            --------          --------          --------         --------
    Net cash provided by (used for) financing
      activities ...................................          31,441            (2,520)          (13,997)          14,924
                                                            --------          --------          --------         --------
Effect of exchange rate changes on cash ............              --                --               113              113
                                                            --------          --------          --------         --------
Net (decrease) in cash and cash equivalents.........          (1,001)             (767)           (4,238)          (6,006)
Cash and cash equivalents, beginning of period .....             192               795             5,660            6,647
                                                            --------          --------          --------         --------
Cash and cash equivalents, end of period ...........        $   (809)         $     28          $  1,422         $    641
                                                            ========          ========          ========         ========

NINE MONTHS ENDED SEPTEMBER 30, 2001

Net cash provided by operating activities ..........        $  1,314          $ 35,188          $  2,198         $ 38,700
                                                            --------          --------          --------         --------
Cash flows from investing activities:
  Distribution of earnings from joint venture ......           1,360                --                --            1,360
  Cash received from joint venture partner .........              --                --               700              700
  Proceeds from assets held for sale
    And business divestitures ......................           2,053                --                --            2,053
  Purchases of property and equipment ..............          (1,952)           (2,048)           (7,095)         (11,095)
                                                            --------          --------          --------         --------
                                                               1,461            (2,048)           (6,395)          (6,982)
                                                            --------          --------          --------         --------
Cash flows from financing activities:
  Borrowings (repayments) on credit facility,
    net of issuance costs ..........................         (29,124)               --                --          (29,124)
  Other net activity with Parent ...................          27,590           (33,863)            6,273               --
                                                            --------          --------          --------         --------
    Net cash provided by (used for) financing
      activities ...................................          (1,534)          (33,863)            6,273          (29,124)
                                                            --------          --------          --------         --------

Effect of exchange rate changes on cash ............              --                --              (150)            (150)
                                                            --------          --------          --------         --------

Net increase (decrease) in cash and cash equivalents           1,241              (723)            1,926            2,444
Cash and cash equivalents, beginning of period .....             175               959             1,883            3,017
                                                            --------          --------          --------         --------
Cash and cash equivalents, end of period ...........        $  1,416          $    236          $  3,809         $  5,461
                                                            ========          ========          ========         ========
</TABLE>


                                       20
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

OVERVIEW

The Holmes Group, Inc., formerly known as Holmes Products Corp., is a leading
developer, manufacturer and marketer of quality, branded home appliances,
including home environment, small kitchen and personal care appliances. Our home
environment products include fans, heaters, humidifiers and air purifiers. We
believe that we have a leading U.S. market share in each of these product
categories. Our kitchen appliances include Crock-Pot(R) slow cookers, can
openers, ice cream freezers and other similar small kitchen electric appliances.
In some of these categories we hold a leading market share. Our personal care
products include massagers and showerheads. We believe that our strong market
position and success are attributable to our continuous product innovation,
engineering and manufacturing expertise, close customer partnerships, breadth of
product offerings, reputation for quality, and presence and experience in the
Far East.

Our products are sold under the Holmes(R), Rival(R), Crock-Pot(R), White
Mountain(R), Pollenex(R), Bionaire(R), Patton(R), Family Care(R) and Titan(R)
brand names. These 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. We
believe that the strength, scope and visibility of our retail account base
provide a competitive advantage with respect to brand recognition, access to
shelf space and penetration of the consumer market.

Sales of our products are highly seasonal, and counter-seasonal weather can
adversely affect our results of operations. Within the home environment product
line, sales of fans occur predominantly from January through June, and sales of
heaters and humidifiers occur predominantly from July through December. Although
kitchen appliances, personal care products and certain home environment products
such as air purifiers and lighting products are used year-round, the nature of
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, because
many of the kitchen and personal care products we sell are given as gifts, we
sell more of these products in anticipation of the holiday season. When holiday
shipments are combined with seasonal products such as heaters and humidifiers,
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 heater,
humidifier and air purifier products.

On February 5, 1999 Holmes completed its acquisition of Rival. In connection
with the acquisition, as described in Note 3 of the Company's Notes to
Consolidated Financial Statements included herein, we issued an additional $31.3
million of senior subordinated notes due in November 2007, bearing interest at 9
7/8%, and amended and restated our existing $100 million credit facility to have
a total availability of $325 million. We also sold $50 million of common stock
in a private placement to investment funds affiliated with Berkshire Partners
LLC (Holmes' majority shareholder), and to members of management and certain
other co-investors. The initial borrowings under the credit facility, together
with the net proceeds of the equity investment and the offering of the Notes,
were used to consummate the Rival acquisition, refinance Rival's then existing
indebtedness, and pay the fees and expenses of the transaction.

Holmes had completed a recapitalization transaction in November 1997, in which
it issued $105 million of senior subordinated notes due in November 2007,
bearing interest at 9 7/8%, and entered into a $100 million line of credit
facility, of which approximately $27.5 million was initially drawn. The proceeds
of these borrowings were used to repay all existing indebtedness (primarily a


                                       21
<PAGE>
line of credit and other current debt facilities) and redeem a significant
portion of the previous majority shareholder's common stock. Accordingly,
commencing in November 1997, we had a significantly higher level of borrowing
and a corresponding higher level of interest expense than in the past. The Rival
acquisition and the related financing transactions consummated on February 5,
1999 further increased our indebtedness and interest expense substantially.

COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30,
2000

Net Sales. Net sales for the third quarter of fiscal 2001, which ended September
30, 2001, were $163.1 million compared to $118.4 million for the third quarter
of fiscal 2000, which ended September 30, 2000, an increase of $44.7 million or
37.8%. This increase was primarily due to increased shipments of kitchen
electric products over the corresponding period of 2000. Home environment
shipments also increased over 2000 levels in nearly every category.
International shipments also increased in the third quarter of 2001 versus the
third quarter of 2000, driven by shipments in Mexico and Latin America, Europe
and in the Far East. The Far East increase were due to increased sales to our
motor joint venture with General Electric.

Gross Profit. Gross profit for the third quarter of 2001 was $44.4 million
compared to $40.6 million for the third quarter of 2000, an increase of $3.8
million or 9.4%. As a percentage of net sales, gross profit decreased to 27.2%
for the third quarter of 2001 from 34.3% for the third quarter of 2000. Gross
profit was positively impacted primarily by the increase in kitchen electrics
and home environment volume over the third quarter of 2000. Offsetting the
volume increases were higher discounts and allowances in the third quarter of
2001 versus 2000. Also offsetting the volume increases was a shift in sales mix
and higher sales of low margin closeouts.

Selling Expenses. Selling expenses for the third quarter of 2001 were $17.2
million compared to $15.9 million for the third quarter of 2000, an increase of
$1.3 million or 8.2%. As a percentage of net sales, selling expenses decreased
to 10.5% for the third quarter of 2001 from 13.4% for the third quarter of 2000.
The selling expense increase was due primarily to freight costs and co-operative
advertising on the sales increase noted above.

General and Administrative Expenses. General and administrative expenses for the
third quarter of 2001 were $9.6 million compared to $7.6 million for the third
quarter of 2000, an increase of $2.0 million or 26.3%. As a percentage of net
sales, general and administrative expenses decreased to 5.9% for the third
quarter of 2001 from 6.4% for the third quarter of 2000. The increase in general
and administrative expense was attributable to a number of factors including
bank and consulting fees associated with the May 7, 2001 amended credit
facility, as well as insurance costs and increased investment in our management
information systems ("MIS") infrastructure. Excluding the impact of the
consulting expenses related to the bank amendment, general and administrative
expenses were approximately 5.0% of net sales during the three months ended
September 30, 2001.

Product Development Expenses. Product development expenses for the third quarter
of 2001 were $3.3 million compared to $2.8 million for the third quarter of
2000, a increase of $0.5 million or 17.9%. The expenditures in 2001 relate to
the development of a number of new products in the home environment and kitchen
product lines.

Restructuring Costs. There were no restructuring costs for the third quarter of
2001 or 2000.

Plant Closing Costs. Plant closing costs in the third quarter of 2001 were $0.6
million. These were associated with the closing of the Sedalia, Missouri
manufacturing plant.

Interest and Other Expense, Net. Interest and other expense, net for the third
quarter of 2001 was $8.2 million compared to $9.2 million for the third quarter
of 2000, an decrease of $1.0 million or 10.9%. The decrease in interest expense
was primarily due to lower interest rates during the third quarter of 2001
versus 2000.



                                       22
<PAGE>
Income Tax Expense. The income tax expense for the third quarter of 2001 was
$1.3 million compared to $3.2 million in 2000. The income tax expense in 2001
was largely due to the establishment of a valuation reserve primarily against
losses experienced in the U.S. and a tax expense on income taxed in foreign
jurisdictions.

Equity in Earnings from Joint Venture. We recorded $0.5 million in equity in
earnings from our joint venture with General Electric for the shipment of motors
from the Joint Venture in 2001 versus $0.3 million in the third quarter of 2000.

Net Income. As a result of the foregoing factors, our net income for the third
quarter of 2001 was $4.1 million, compared to net income of $1.6 million in the
third quarter of 2000.

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000

Net Sales. Net sales for the first nine months of fiscal 2001, which ended
September 30, 2001, were $421.3 million compared to $358.5 million for the first
nine months of fiscal 2000, which ended September 30, 2000, an increase of $62.8
million or 17.5%. Excluding the sales related to the residual sourcing
agreements for the pump and industrial businesses, which were divested in the
fourth quarter of 1999, net sales increased approximately 18.8% versus the first
nine months of 2000. This increase was primarily due to increased shipments of
kitchen electric products over the corresponding period of 2000. International
shipments also increased in the first nine months of 2001 versus the first nine
months of 2000, driven by shipments in Mexico and Latin America, Europe and in
the Far East. The Far East increase was due to increased sales by our motor
joint venture with General Electric. Lastly, home environment shipments
increased over the prior year. Sales for the divested businesses in the first
nine months of 2000 were $4.6 million pursuant to supply agreements with the
buyers.

Gross Profit. Gross profit for the first nine months of 2001 was $107.0 million
compared to $106.4 million for the first nine months of 2000, an increase of
$0.6 million or 0.6%. As a percentage of net sales, gross profit decreased to
25.4% for the first nine months of 2001 from 29.7% for the first nine months of
2000. Gross profit was positively impacted primarily by volume increases in
both kitchen electrics and several home environment product categories over the
2000 levels. Offsetting the volume increases was an increase in discounts and
allowances during the first nine months of 2001 versus 2000. Additionally,
there was carryover fan inventory from the cooler 2000 summer season that
shipped with higher 2000 season costs. Distribution and warehousing costs also
increased due to the higher fan carryover inventory from the 2000 summer
season. We also had higher levels of low margin closeouts.

Selling Expenses. Selling expenses for the first nine months of 2001 were $48.7
million compared to $50.8 million for the first nine months of 2000, a decrease
of $2.1 million or 4.1%. As a percentage of net sales, selling expenses
decreased to 11.6% for the first nine months of 2001 from 14.2% for the first
nine months of 2000. The selling expense decrease was due to a reduction in
several sales and marketing expenses such as selling commissions, sales samples,
print and trade advertising and sales travel expenses. These reductions resulted
from our effort to lower spending throughout the Company.

General and Administrative Expenses. General and administrative expenses for the
first nine months of 2001 were $28.6 million compared to $23.7 million for the
first nine months of 2000, an increase of $4.9 million or 20.7%. As a percentage
of net sales, general and administrative expenses increased to 6.8% for the
first nine months of 2001 from 6.6% for the nine months of 2000. The increase in
general and administrative expense was attributable to a number of factors
including increased bank and consulting fees associated with the May 7, 2001
amended Credit Facility, insurance expense and MIS infrastructure. Excluding the
impact of the additional consulting costs related to the May 7, 2001 amendment,
General and Administrative Expenses were approximately 6.4% of net sales.


                                       23
<PAGE>
Product Development Expenses. Product development expenses for the first nine
months of 2001 were $8.2 million compared to $8.3 million for the first nine
months of 2000, a decrease of $0.1 million or 1.2%. The decreased expenditures
in 2001 reflects the integration of the Holmes and Rival product development
activities into one central department.

Restructuring Costs. Restructuring costs for the first nine months of 2001 were
$1.4 million. These costs related to the closure of the Sedalia, Missouri
manufacturing plant announced in June 2001. The costs were made up of certain
employee termination benefits and property, plant and equipment write-downs.

Plant Closing Costs. Plant closing costs in the first nine months of 2001 were
$0.6 million. The closing costs were associated with the closing of the Sedalia,
Missouri manufacturing plant.

Interest and Other Expense, Net. Interest and other expense, net for the first
nine months of 2001 was $28.6 million compared to $27.7 million for the first
nine months of 2000, an increase of $0.9 million or 3.2%. The increase was due
to increased debt levels during the first nine months of 2001 versus 2000,
offset by lower interest rates. Additionally, we recorded as interest expense
approximately $1.0 million with respect to the warrants issued as part of the
amended Credit Facility and limited waiver dated May 7, 2001.

Income Tax Expense. The income tax expense for the first nine months of 2001 was
$3.8 million compared to $2.6 million in 2000. The income tax expense in 2001
was largely due to the establishment of a valuation reserve primarily against
losses experienced in the U.S. and a tax expense on income taxed in foreign
jurisdictions.

Equity in Earnings from Joint Venture. We recorded $1.9 million in equity in
earnings from our joint venture with General Electric for the shipment of motors
from the joint venture in 2001 versus $0.6 million in the first nine months of
2000.

Net Loss. As a result of the foregoing factors, our net loss for the first nine
months of 2001 was $12.9 million, compared to a net loss of $8.5 million in the
first nine months of 2000.

LIQUIDITY AND CAPITAL RESOURCES

Analysis of Cash Flows.

Following the recapitalization transaction in November 1997 and the Rival
acquisition in February 1999, we have funded our liquidity requirements with
cash flows from operations and borrowings under the Credit Facility. Our primary
liquidity requirements are for working capital 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 recently amended Credit Facility
will be sufficient to meet our liquidity needs for the next twelve months,
during which time we will continue to carefully evaluate our financing
requirements.

Cash (used for) provided by operations for the nine months ended September 30,
2000 and 2001 was $(8.4)million and $38.7 million, respectively. Cash provided
by operations in the first nine months of 2001 primarily reflected a $31.5
million increase in accounts payable due to the increased use of OEM purchases
to support the higher sales levels.

Cash used for investing for the nine months ended September 30, 2000 and 2001
was $12.6 million and $7.0 million, respectively. Cash used for investing in the
first nine months of 2001 reflected capital expenditures of approximately $11.1
million offset by additional cash received from our joint venture partner as
part of their contribution towards joint venture capital equipment. We also
received $1.4 million in earnings distributions from the joint venture.
Additionally, we received $2.1 million in proceeds from the sale of the
Warrensburg, Missouri facility and manufacturing machinery.


                                       24
<PAGE>
Cash provided by (used for) financing activities for the nine months ended
September 30, 2000 and 2001 was $14.9 million and $(29.1) million, respectively.
Cash used for financing in the first nine months of 2001 reflected repayments
under the Credit Facility using cash flows from operations.

Financing Arrangements.

We issued $105.0 million of 9 7/8% Senior Subordinated Notes due November 2007
(the "Notes") in November 1997, and an additional $31.3 million of Notes in
February, 1999. While we may repurchase Notes from time to time in open market
or privately negotiated transactions, the Notes are not redeemable at our option
prior to November 15, 2002. Thereafter, the Notes are subject to redemption at
any time at our option, in whole or in part, at stated redemption prices. Annual
interest payments on the Notes are approximately $13.5 million. The payment of
principal and interest on the Notes is subordinated to the prior payment in full
of all our senior debt, including borrowings under the Credit Facility. The
Notes are guaranteed by our domestic subsidiaries but are otherwise unsecured.

We entered into an amended and restated Credit Facility with a syndicate of
banks in February, 1999 in connection with the Rival acquisition. The Credit
Facility consisted of a tranche A term loan of $40.0 million that matures
February 5, 2005, a tranche B term loan of $85.0 million that matures February
5, 2007 and a $180.0 million revolving credit facility that matures February 5,
2005.

Availability under the Credit Facility is reduced by outstanding letters of
credit. As of September 30, 2001, our availability was $67.4 million, net of
outstanding letters of credit totaling $8.1 million and our outstanding balance
of $95.2 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 tranche A term loan 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.

Our financial performance in the fourth quarter of 2000 resulted in a default,
as of December 31, 2000, of certain financial ratio covenants in the Credit
Facility as previously amended. The lending group agreed to a Forbearance
Agreement with respect to such defaults on April 13, 2001. On May 7, 2001, the
Credit Facility was further amended to waive the defaults and to revise certain
of the financial ratio covenants through June 30, 2002. In addition, the maximum
revolving credit availability under the Credit Facility has been increased from
$140.0 million to an aggregate of $180.0 million through January 31, 2002,
decreasing to an aggregate of $155.0 million through July 1, 2002 and $115.0
million thereafter, subject at all times to a borrowing base formula. As partial
consideration for the amendments and limited waiver, we issued warrants to the
lenders to acquire up to 5% of Holmes' common stock on a fully-diluted basis.
The warrants are exercisable at a price of $5.04 per share, and expire May 7,
2006. Additionally, Berkshire Partners LLC, our equity partners, agreed to
provide a $43.5 million guarantee in support of the increased revolving credit
commitment. The fair value of the warrants was approximately $1.0 million and
was recorded as a charge to interest expense during 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 the future performance, which will be impacted by general
economic conditions and other factors. See "Forward-Looking Statements."


                                       25
<PAGE>
EVENTS OF SEPTEMBER 11,2001

None of our employees were lost or injured, and none of our properties or
records were damaged as a result of the terrorist attacks that occurred in the
United States on September 11, 2001. Although our operations during that week
were hampered by the temporary disruption, management does not believe the
impact will be material. However, at this time, we are unable to predict the
long-term impact of these events, or of the domestic and foreign response, on
either our industry as a whole or on our operations and financial condition in
particular.

FORWARD-LOOKING STATEMENTS

All statements, other than statements of historical fact, included in this
quarterly report, are or may be forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Without limiting the foregoing, the
words "believes," "anticipates," "plans," "intends," "expects," and similar
expressions are intended to identify forward-looking statements. Various
economic and competitive factors could cause actual results or events to differ
materially from those discussed in such forward-looking statements, including
without limitation, our degree of leverage (including the need to comply with
covenants in our various financing agreements), our dependence on major
customers and key personnel, the integration of the Rival acquisition (as
described herein), competition, risks associated with foreign manufacturing,
risks of the retail industry, potential product liability claims, the cost of
labor and raw materials and the other factors which are discussed in our most
recent Registration Statement on Form S-4 (File No. 333-77905), and from time to
time in our reports filed with the Securities and Exchange Commission.
Accordingly, such forward-looking statements do not purport to be predictions of
future events or circumstances and may not be realized.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141 (FAS 141), "Business Combinations" and
No. 142 (FAS 142), "Goodwill and Other Intangible Assets." FAS 141 supercedes
Accounting Principles Board Opinion No. 16, "Business Combinations." FAS 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001, establishes specific criteria for
the recognition of intangible assets separately from goodwill, and requires that
unallocated negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. Provisions of FAS 141 will be
effective for the Company's business acquisitions that are consummated after
July 1, 2001. FAS 142 supercedes Accounting Principles Board Opinion No. 17,
"Intangibles Assets," and addresses the accounting for goodwill and intangible
assets subsequent to their acquisition. Under FAS 142, goodwill and indefinite
lived intangible assets will no longer be amortized but will be tested for
impairment at least annually at the reporting unit level. In addition, the
amortization period of intangible assets with finite lives will no longer be
limited to forty years. The general provisions of FAS 142 will be effective for
the Company as of the beginning of fiscal 2002. However, certain provisions will
be effective for all business acquisitions consummated after June 30, 2001.
Management is currently in the process of quantifying the impact of adopting of
FAS 142 on the consolidated financial statements.

In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 143 (FAS 143), "Accounting for Asset
Retirement Obligations". FAS 143 requires entities to record the fair value of a
liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity is required to
capitalize the cost by increasing the carrying amount of the related long-lived
asset. Over time, the liability is accreted to its present value each period,
and the capitalized cost is depreciated over the useful life of the related
asset. FAS 143 is effective for fiscal years beginning after June 15, 2002 and
will be adopted by the Company effective fiscal 2003. The Company is in the
process of assessing the impact of the adoption of FAS 143.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (FAS 144),
which supersedes Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-lived Assets and for Long-Lived Assets to
Be Disposed Of" (FAS 121), and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" (APB 30), for the disposal of a segment of a
business. Because FAS 121 did not address the accounting for a segment of a
business accounted for as a discontinued operation under APB 30, two accounting
models existed for long-lived assets to be disposed of. FAS 144 establishes a
single accounting model, based on the framework established in FAS 121, for
long-lived assets to be disposed of. It also addresses certain significant
implementation issues under FAS 121. The provisions of FAS 144 will be effective
for the Company as of the beginning of fiscal year 2002. The Company is in the
process of assessing the impact of the adoption of FAS 144.

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments an Hedging Activities" ("SFAS 133"). SFAS
133 establishes new standards of accounting and reporting for derivative
instruments and hedging activities. SFAS 133 requires that all derivatives be
recognized at fair value in the balance sheet, and the corresponding gains and
losses be reported either in the statement of income or as a component of
comprehensive income, depending on the type of hedging relationship that exists.
We adopted SFAS 133 during 2001 and the impact was immaterial given our limited
use of derivatives.
                                       26

<PAGE>
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2001, the carrying value of our debt totaled $338.6 million
(including capital leases), which approximated its fair value. 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 September 30, 2001, the Company had fixed rate debt of $135.3 million
(including capital leases) and variable rate debt of $203.3 million. Holding
other variables constant (such as foreign exchange rates and debt levels), a one
percentage point decrease in interest rates would increase the unrealized fair
market value of fixed rate debt by approximately $6.3 million. Based on the
amounts of variable rate debt outstanding at September 30, 2001, the earnings
and cash flows impact for the next year resulting from a one percentage point
increase in interest rates would be approximately $2.0 million, holding other
variables constant.

In order to help minimize our interest rate exposure, effective May 7, 1999, we
entered into an interest rate collar transaction agreement with our agent bank.
This arrangement is described in Note 7 of Notes to Consolidated Financial
Statements.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

We are involved in various legal proceedings incident to our normal business
operations, including product liability and patent and trademark litigation.
Management believes that the outcome of such litigation will not have a material
adverse effect on our business, financial condition or results of operations. We
have product liability and general liability insurance policies in amounts
management believes to be reasonable. There can be no assurance, however, that
such insurance will be adequate to cover all potential product or other
liability claims against us. We also face exposure to voluntary or mandatory
product recalls in the event that our products are alleged to have manufacturing
or safety defects. We do 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

We held a Special Meeting in lieu of an Annual Meeting of Stockholders on
October 2, 2001. At the meeting, the following matters were approved by a vote
of 18,104,617 and 18,004,617 shares of Common Stock, respectively, out of
20,336,567 shares outstanding and eligible to vote:

     (a)  Election of Peter Martin as a Director of the Corporation; and

     (b)  Increasing the number of shares of Common Stock reserved for issuance
          under our 1997 Stock Option Plan, as amended to date, from 4,460,978
          shares to 5,960,978 shares.


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ITEM 5.  OTHER INFORMATION

Investor Conference Call

We will hold a telephone conference call on November 20, 2001 at 10 a.m.,
Eastern time in order for investors and other interested stakeholders to hear
management's views on our results of operations during the third quarter of
2001. If you are interested in accessing the call in listen-only mode, 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:

                Not applicable

          b.   Reports on Form 8-K:

               Not applicable



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<PAGE>
                                   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.

                                      THE HOLMES GROUP, INC.
                                      -------------------------------------
                                      Registrant


November 14, 2001                         By: /s/ Peter Martin
                                           --------------------------------
                                           Peter Martin, President,
                                           Chief Executive Officer
                                           (Principal Executive Officer)


November 14, 2001                         By: /s/ Ira B. Morgenstern
                                           --------------------------------
                                           Ira B. Morgenstern,
                                           Chief Financial Officer
                                           (Principal Financial and
                                           Accounting Officer)





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