<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

(MARK ONE)

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE FISCAL YEAR ENDED DECEMBER 30, 2001.

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM _________ TO _________

                         COMMISSION FILE NUMBER: 0-25848

                                    SLI, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                 OKLAHOMA                            73-1412000
                 --------                            ----------
         (State of Incorporation)                   (IRS Employer
                                                 Identification No.)

                500 CHAPMAN STREET, CANTON, MASSACHUSETTS, 02021
               --------------------------------------------------
               (Address of Principal Executive Offices, Zip Code)

                                 (781) 828-2948
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

         Securities registered under Section 12(b) of the Exchange Act:

                                                     NAME OF EACH EXCHANGE
                  TITLE OF EACH CLASS                 ON WHICH REGISTERED
                  -------------------                ---------------------
         Common Stock, par value $.01 per share     New York Stock Exchange

       Securities registered under Section 12(g) of the Exchange Act: NONE

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

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

         As of December 30, 2001, there were approximately 33,405,229 shares
outstanding of the registrant's Common Stock, par value $.01 per share, its only
class of common stock, and the aggregate market value of the Common Stock held
by non-affiliates of the registrant (approximately 24,996,275 shares) was
approximately $71,239,384, as computed by reference to the NYSE closing price of
such common equity, $2.85, as of the same date.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Proxy statement pursuant to Section 14(a) of the Securities Exchange
Act of 1934 for use in connection with the registrant's 2002 Annual Meeting of
Shareholders.


<PAGE>

            CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS

         The discussion in this Report contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
significantly from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Risk Factors," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business," as well as those discussed elsewhere
in this Report. Statements contained in this Report that are not historical
facts are forward-looking statements that are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. A number of important
factors could cause the Company's actual results for 2002 and beyond to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. These factors include, without limitation, those listed
below in "Risk Factors."

                                  RISK FACTORS

INTERNATIONAL OPERATIONS

         At December 30, 2001, the Company had 37 manufacturing facilities, as
well as sales offices and distribution facilities in more than 30 countries and
sells its products worldwide. For Fiscal 2001, approximately 79% and 86% of the
Company's net sales and gross margins, respectively, were derived from
operations outside the United States. As a result of its international
operations, the Company is subject to risks associated with operating in foreign
countries, including limitations on remittance of dividends and other payments
by foreign subsidiaries, hyperinflation in certain foreign countries, imposition
of investment and other restrictions by foreign governments, trade barriers, the
effects of income and withholding taxes and governmental expropriation. Although
such risks have not had a material adverse effect on the Company to date, no
assurance can be given that such risks will not have a material adverse effect
on the Company in the future.

FOREIGN CURRENCIES AND INTEREST RATE RISK

         A significant amount of the Company's net sales are generated in
foreign currencies. For Fiscal 2001, approximately 65% of the Company's net
sales were denominated in European currencies, 21% in U.S. dollars, and the
remaining 14% in other currencies. Costs of the Company are primarily incurred
in the same currencies and in percentages which are not materially different
from the net sales percentages. Since the Company's financial statements are
denominated in U.S. dollars, devaluation and changes in exchange rates between
the dollar and other currencies have had and will have an impact on the reported
results of the Company. The Company may, from time to time, hedge specifically
identified committed cash flows in foreign currencies using forward currency
sale or purchase contracts. In addition, international operations are subject to
a number of other currency risks, including, among others, currency exchange
controls, transfer restrictions and rate fluctuations.

COMPETITION

         The global lighting industry in which the Company operates is highly
competitive. The Company competes primarily on the basis of brand awareness,
price, product quality, design and engineering, customer service and
distribution strength. Competitors range from large global diversified companies
such as Philips Electronics N.V. ("Philips"), General Electric Corp. ("General
Electric"), Siemens A.G. ("Siemens") and its North American subsidiary,
Osram-Sylvania, Inc. ("Osram"), Matsushita Corp. and Toshiba Corp. to small
brokers representing Pacific Rim manufacturers. Many of these competitors offer
products which are substantially identical to those offered by the Company. In
addition, certain of the Company's competitors are significantly larger than the
Company and devote a substantial amount of money to research and development. As
a result of these competitive pressures, there can be no assurance that the
Company will be able to compete effectively or increase prices in the future.
Price increases by the Company, price reductions by competitors, decisions by
the Company with regard to maintaining profit margins rather than market share,
or other competitive or market factors or strategies could adversely affect the
Company's market share or results of operations. Competition could prevent the
institution of price increases or could require price reductions or increased
spending on research and development and marketing and sales which could
adversely effect the Company's results of operations.


<PAGE>

SOURCES OF RAW MATERIALS

         For Fiscal 2001, the Company purchased approximately 30% of its
incandescent glass shells from a Belgium based joint venture between Philips and
Osram. The joint venture agreement automatically renews for a two-year term
unless notice of termination is provided by either party 12 months prior to the
automatic renewal date. The Company purchases approximately 60% of its
fluorescent glass tubing from Osram. The Osram agreement automatically renews
for a one-year term unless notice of termination is provided by either party 24
months prior to the automatic renewal date. As a result of the 2000 acquisition
of a glass manufacturer, the Company has reduced its purchases from Osram,
compared to prior years. Osram has taken the Company to arbitration to force the
Company to return to prior levels. The Company feels strongly that it will win
the arbitration hearing. As of the date hereof, the Company has not received
notice of termination for either agreement. There can be no assurance that such
agreements will be renewed in the future. The Company purchases certain of its
other raw materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all light emitting diodes
("LEDs") used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company acquired a European company primarily
engaged in the production of LEDs, which now supplies the Company with a small
portion of its LED requirements. In addition, the Company has entered into a
joint venture to establish a North American manufacturing plant for the
production of surface mount LEDs. Any interruption in the supply of incandescent
glass shells, fluorescent glass tubing, LEDs or significant fluctuations in the
prices of other raw materials could have an adverse effect on the Company's
operations.

ENVIRONMENTAL MATTERS

         The Company's operations are subject to federal, state, local and
foreign laws and regulations relating to the storage, handling, generation,
treatment, emission, release, discharge and disposal of certain substances and
wastes. While the Company believes that it is currently in material compliance
with those laws and regulations, there can be no assurance that the Company will
not incur significant costs to remediate violations of such laws and
regulations, particularly in connection with the Company's acquisitions of
existing operating facilities or to comply with changes in existing laws and
regulations (or the enforcement thereof). Such costs could have a material
adverse effect on the Company's results of operations.

DEPENDENCE ON KEY PERSONNEL

         The Company is dependent to a significant extent upon the efforts and
abilities of its President, Chief Executive Officer and principal shareholder,
Mr. Frank M. Ward. The loss of the services of Mr. Ward could have a material
adverse effect on the Company.

OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDERS

         Mr. Ward owns approximately 25% of the outstanding shares of Common
Stock of the Company. As a result of such ownership, Mr. Ward has the ability to
exert significant influence on the policies and affairs of the Company and
corporate actions requiring shareholder approval, including the election of the
members of the Board of Directors. This concentration of ownership could have
the effect of delaying, deferring or preventing a change of control of the
Company, including any business combination with an unaffiliated party, and
could also affect the price that investors might be willing to pay for shares of
Common Stock.

VOLATILITY OF MARKET PRICE FOR COMMON STOCK

         From time to time, there may be significant volatility in the market
price for the Common Stock. Operating results of the Company, changes in general
economic conditions and the financial markets, or other developments affecting
the Company or its competitors could cause the market price for the Common Stock
to fluctuate substantially.


                                       2
<PAGE>

                                     PART I

ITEM 1. BUSINESS

GENERAL

         The Company believes that it is one of the six largest full-line
lighting companies in the world, offering lamps and fixtures. Primarily through
its acquisition-based growth strategy, the Company has developed from a
specialized U.S. manufacturer and supplier of miniature lighting products into
one of the world's largest vertically integrated manufacturer and supplier of
lighting products and systems to the industrial, commercial and consumer
markets.

         The Company offers a complete range of lighting products throughout the
world. The Company's product categories include lamps, fixtures and miniature
lighting assemblies. The lamp products produced by the Company include
incandescent, fluorescent, compact fluorescent, high intensity discharge
("HID"), halogen, and special and miniature lamps. The Company's commercial and
industrial fixture lines consist primarily of fluorescent ceiling mounted
fixtures; its accent and decorative fixture lines range from simple downlights
and spotlights to high performance lighting fixtures for art galleries and
museums. Fixture products also include decorative lighting fixtures and table
lamps for the retail market. Miniature lighting assemblies manufactured by the
Company are used in various product applications, including automobile message
centers, and aviation and telecommunications status arrays.

         The Company's strategy is to operate as a vertically integrated, highly
automated, manufacturer providing "one stop" lighting solutions for its
customers' lighting requirements by offering discrete lighting components,
value-added integrated products and specialized lighting services. The Company's
overall strategic view is to focus on the growth prospects of core business
activities and to divest itself of non-core products, services and markets
within the general lighting business. The Company is able to offer its global
customers extensive design, engineering and manufacturing capabilities, while at
the same time providing local, responsive service. The Company has 37
manufacturing facilities, as well as sales offices and distribution facilities
in more than 30 countries. The Company's customers include wholesalers, original
equipment manufacturers ("OEMs"), retailers, architects, designers and
contractors.

         The Company is incorporated under the laws of the State of Oklahoma.
Its executive offices are located at 500 Chapman Street, Canton, Massachusetts,
02021, and its telephone number is (781) 828-2948.

OPERATING STRATEGY

         The Company's operating strategy is designed to enhance the Company's
position as a leading international designer, manufacturer and supplier of
lighting products, while at the same time increasing profitability through:

         -        improved operating efficiencies

         -        continued vertical integration and automation

         -        continued focus on responsiveness and product quality

         Improve Operating Efficiencies. The Company continues to focus its
efforts in realizing cost savings in connection with the integration of its
acquired businesses. Certain acquired businesses have operated at significantly
lower margins than the Company's base business. The Company intends on divesting
itself of non-core products, services and markets within its general lighting
business in an effort to improve operating margins associated with the acquired
businesses.

         Continue Vertical Integration and Automation. The Company intends to
continue to vertically integrate its operations by broadening the range of
components which it manufactures and uses in its lighting products. The
Company's ability to manufacture a wide array of components facilitates the
production of more complex, value-added lighting products, which generally have
higher average selling prices per unit and higher margins than discrete lighting


                                       3
<PAGE>

components. The Company intends to further increase its manufacturing
capabilities and continue to expand the automation at its facilities in order to
increase production and reduce production costs.

         Continue Focus on Responsiveness and Product Quality. The Company's
ability to conceive, design and engineer new products in a short period of time
is a significant competitive advantage. Management has developed "Competency
Centers" within its manufacturing facilities to optimize the expertise of the
Company's design, engineering, manufacturing and technical sales support teams.
In addition, the Company has developed technology to monitor and control its
production performance. As a result of various quality initiatives, the Company
has achieved a preferred supplier designation for its miniature lighting
products from several of its OEM customers, including Q-1 certification from
Ford Motor Company and a Quality Excellence award from Chrysler Corp. In
addition, certain of the Company's facilities have received QS-9000, ISO 9001
and Euro-Net ISO 9000 and 9001 certifications. Such certifications in many
instances are a pre-requisite for contractual orders, particularly with large
industrial users of the Company's products

BUSINESS STRATEGY

         The Company is positioning itself to return to acceptable profitability
levels. The Company has adopted various cost cutting initiatives by reducing
headcount and corporate expenses. The expected cost reduction for 2002 is
approximately $20.0 million.

         The Company is divesting itself of non-core businesses. In March 2002,
the Company sold one of its subsidiaries in Australia. (See Subsequent Events)

         The economic recovery will allow the Company to continue its internal
growth by:

         -        increasing sales to existing and new customers

         -        introducing new lighting technologies

         Increase Sales to Existing and New Customers. The Company focuses on
expanding its markets by designing, developing and marketing "one stop" lighting
solutions, a strategy through which the Company seeks to capitalize on
cross-selling opportunities between customers of existing and acquired
businesses. The Company seeks to use its global distribution networks and
recognized brand names, including Sylvania (outside the United States, Canada,
Mexico and Puerto Rico), to market and sell the Company's products worldwide.
Moreover, the Company's international operations have broad product lines of
consumer and industrial lamps and fixtures, which the Company plans to market
domestically.

         Introduce New Lighting Technologies. Through the introduction of new
lighting technologies, the Company has been able to participate in the high
growth and high margin segment of the lighting market. Further, because lighting
products and the related manufacturing technology are becoming increasingly
sophisticated, the Company has sought to enhance its technological capabilities
in order to fulfill its customers' outsourcing and "just-in-time" requirements
and adjust to shifts in demand. Through the acquisition of various niche
businesses operating within the lighting industry, the Company's technological
expertise has expanded, thus enabling it to manufacture more sophisticated
products. As a result of its technical know-how, the Company believes that it
can expand its business by developing new products and entering new niche
markets in which it can be one of a few leading suppliers.

         Diversify Geographic Operations. An important element of the Company's
growth strategy is to continue to establish highly automated manufacturing
operations in areas of high customer density or where manufacturing efficiencies
can be realized. The Company's operations are currently located in the Americas,
Europe and the Pacific Rim. The Company intends to continue to selectively
expand its operations internationally to better serve its existing customers and
to develop new customers.

         Strategic Alliances. The Company plans to continue to use strategic
alliances to effect its vertical and horizontal integration strategies.

INDUSTRY OVERVIEW


                                       4
<PAGE>

         The lighting industry is a large, mature market, which is characterized
by the long life cycle of its lighting products. The global lighting industry
consists of many firms, ranging from large, multinational, multiproduct,
publicly owned companies to small, single-product, and private firms. The
industry includes three dominant firms, General Electric, Osram and Philips.
While these three companies are active in all of the major sectors of the global
lighting industry, concentration levels vary by sector and region. The lamp
market is highly concentrated whereas the fixture and miniature lighting markets
are highly fragmented. Smaller firms have found or created niches in certain
markets which have been defined by specific competencies, technologies or
differentiated products. Some specialized areas, such as normal line voltage
halogens, compact fluorescents and metal halides, have recently experienced a
rapid rate of growth.

         The lamp market is relatively stable because much of the demand is
generated by replacement needs. Increased usage and applications will depend
largely on economic growth and strengthening of the world economy, especially
housing starts and new vehicle sales. However, economic development in Eastern
Europe along with an economic recovery in Central and South America is expected
to provide accelerated growth opportunities. Aggregate sales of lamps have
demonstrated moderate cyclicality and seasonality. The fourth quarter tends to
be the industry's strongest demand period, given abbreviated daylight hours and
increased holiday light usage.

         The fixture market is highly fragmented since barriers to entry to the
market are low in comparison to the lamp manufacturing business. A large number
of suppliers are active in certain segments of the market, where they offer
products for specific applications. However, several companies offer a complete
range of interior, exterior and display and decorative fixtures for commercial
and industrial applications. Competition is based primarily on product design,
quality, brand recognition and distribution outlets. Interior fixtures
constitute the largest part of the fixture market, followed by exterior fixtures
and display and decorative fixtures. Interior fixture applications include
offices, department stores, shops, hotels, schools, factories and warehouses.
Exterior fixtures include all types of fixtures used in professional outdoor
applications such as street lighting, amenity and public lighting, port, tunnels
and security lighting. The display and decorative fixtures market includes
applications for shop window displays and other public buildings. Continued
demand will be dependent upon economic conditions throughout the world,
especially industrial and commercial construction. As with lamps, economic
development in Eastern Europe along with economic recovery in Central and South
America is expected to provide accelerated growth opportunities.

         The miniature lighting market exhibits slow product obsolescence,
stable underlying demand and moderate growth. Purchasers for miniature lighting
assemblies are primarily OEMs in the automotive, electronics and communications,
appliance and aviation industries, whose products require a wide variety of
illumination and status indicators. Miniature lamps are inserted in lighting
assemblies that may be used in circuit board and panel mount applications that
can be incorporated into a wide variety of OEM products. There has been
increased acceptance by OEMs of the use of lighting manufacturers for the
production of miniature lighting assemblies. Many OEMs have adopted and are
becoming increasingly reliant upon the outsourcing of customized assemblies, and
the Company believes that this trend will continue as OEMs attempt to (i) reduce
time to market, (ii) reduce capital investment, (iii) gain access to leading
technological solutions, and (iv) improve inventory management.

         Management believes that the following trends may also lead to
increased global use of lighting products: (i) increased lighting usage by
manufacturing and service companies, operating overtime or second and third
shifts, (ii) development of more energy-efficient and user-friendly lamps, and
(iii) increased demand by developing countries, including Eastern Europe,
Central and South America and Asia, for lighting products.

PRODUCTS AND MARKETS

         The following table sets forth the percentage of net sales by product
category for Fiscal 1999, Fiscal 2000 and Fiscal 2001.

<TABLE>
<CAPTION>
                                                  YEAR ENDED
PRODUCTS                                1/02/00    12/31/00    12/30/01
--------                                -------   ----------   --------
<S>                                     <C>       <C>          <C>

Lamps ...........................         48%         46%         46%
Fixtures ........................         22          27          38
Miniature Lighting Assemblies ...          8           8           7
Ballasts ........................          9           6           0
Service .........................          7           6           1
Other ...........................          6           7           8
                                         ---         ---         ---
     Total ......................        100%        100%        100%
                                         ===         ===         ===
</TABLE>


                                       5
<PAGE>

         The Company's manufacturing and developmental activities are focused as
follows:

         Lamps. The Company intends to continue to address the market's demands
for affordable, energy-efficient lamps with longer life cycles. In this regard,
the Company has produced and is continuing to develop, among other lighting
products, (i) compact fluorescent lamps with novel features and performance
characteristics, (ii) tungsten halogen lamps using line voltage, which have the
capability of replacing standard incandescent lamps, (iii) twin-arc high
pressure sodium ("SHP") and mercury-free SHP lamps for general lighting as well
as special applications such as film and theater use, (iv) triphosphor
fluorescent lamps with improved lumen maintenance, and (v) metal halide lamps
that combine energy efficient illumination, long lamp life, excellent color
rendition and compact lamp size. Through the introduction of a new range of
"high voltage" halogen reflector lamps, known as "Hi-Spot," which has been
supplemented with a miniature 50 millimeter line voltage lamp, the Company has
demonstrated leadership in product development in this area.

         Fixtures. Trend setting accent fixtures track both the requirements of
the marketplace and the emergence of new concept lamps, notably line voltage
halogen, metal halide and compact fluorescents. New low glare fixture
development by the Company has been launched in response to guidelines
recommended by certain international engineering industry groups for reducing
the potential harmful effects in the area of visual display units, as well as
lower wattage per square meter of illuminated surface. In addition, the Company
intends to continue to focus its efforts on providing industrial and commercial
lighting fixtures that will meet the changing performance and aesthetic
requirements of its customers. The Company also sells decorative lighting
fixtures and table lamps into the retail market.

         Miniature Lighting Assemblies. The Company's miniature lighting
assemblies are used mainly as visual fault or status indicators. Because of
competition and rapid technological change, the Company believes that many OEMs
are motivated to work with lighting manufacturers, such as the Company, in order
to gain access to advanced manufacturing facilities without an increase in their
overall capital requirements.

         The Company sells its products under a variety of brand names
throughout the world. Its flagship brand, Sylvania, is one of the world's
leading lighting brands and covers a full line of lamps, industrial and
commercial fixtures, and specialty products. Other lamp and fixture lines
include Concord, architectural and display lighting; Claude, consumer and
industrial and commercial lamps and fixtures; Lumiance, display lighting
fixtures; Linolite, residential and commercial task lighting fixtures; Le
Dauphin, high fashion table fixtures; Brilliant, decorative lighting and fixture
products; Marlin, architectural and display lighting fixtures; and Eclatec,
outdoor lighting. Miniature lighting assemblies are sold under the Chicago
Miniature Lamp and SLI Miniature Lighting labels. While the Company generally
sells its products under its own brand names, it also sells under its customers'
private brand labels, a practice which is common in the retail sector. The
Company also sells its products to other lighting companies under such
companies' brand labels.

CUSTOMERS

         The Company's customers include wholesalers, OEMs, retailers,
architects, designers and contractors. For Fiscal 2001, the Company's main
customer base for lamps and industrial and commercial fixtures was the wholesale
channel (approximately 36% of the Company's revenue, of which more than 11% was
through international electrical wholesalers such as Hagemeyer, Rexel, and
Sonepar). The retail market for lamps and fixtures is characterized by a small
number of large customers, who contributes to competitive and pricing pressure
from suppliers located in the Pacific Rim, especially in compact fluorescent
lamps, which provide an attractive combination of high unit price and low
freight cost. The professional installer market is important to the Company for
lamps and accent fixture products. These products, which the Company sells under
the Concord and Lumiance brands, are often designed pursuant to customer
specifications. The Company does not believe that any one customer accounted for
more than 5% of net sales in Fiscal 2001.


                                       6
<PAGE>

MANUFACTURING

         The Company has 37 manufacturing facilities in 12 countries, including
5 facilities in the U.S. The manufacturing operations of the Company are
vertically integrated through design, engineering, manufacturing, assembly and
sales. This integration enables the Company to control product cost more
effectively, helps ensure quality and allows the Company to offer its customers
a wide array of products and services. The Company's manufacturing capabilities
include lamp forming and cutting, socket manufacturing, glass and plastic fiber
drawing, lamp equipment manufacturing, plastic injection molding, and the
production of complex molds and dies, as well as various assembly operations. In
Fiscal 2001, the Company manufactured approximately 90% of the products sold.

         The Company's manufacturing operations are based on a number of
"Competency Centers." The production activities of each manufacturing facility
are generally specialized in the manufacturing of a particular line of related
lighting products. For example, the Company produces fluorescent lamps in
Germany, accent fixtures in the United Kingdom and miniature lighting products
in New Jersey, U.S.A. The design, engineering, manufacturing and technical
support sales teams associated with each product line are located at the related
manufacturing facility.

         The Company has specialized design and engineering capabilities which
it uses to improve its manufacturing process by automating single, labor
intensive operations within a product assembly line, as well as automating
entire product assembly lines. Most of the Company's automated manufacturing
equipment is custom designed by its own engineers. The Company fabricates most
of its own equipment and many parts are machined in-house and customized to
perform specific functions. The Company develops and uses automated material
handling, testing and packaging systems and has automated the manufacture of its
various lamps, fixtures and miniature lighting assemblies. By automating its
operations, the Company has been able to reduce its manufacturing costs, thereby
enabling it to be competitive with many products produced worldwide.

         For Fiscal 2001, the Company purchased approximately 30% of its
incandescent glass shells from a Belgium based joint venture between Philips and
Osram. The joint venture agreement automatically renews for a two-year term
unless notice of termination is provided by either party 12 months prior to the
automatic renewal date. The Company purchases approximately 60% of its
fluorescent glass tubing from Osram. The Osram agreement automatically renews
for a one-year term unless notice of termination is provided by either party 24
months prior to the automatic renewal date. As a result of the 2000 acquisition
of a glass manufacturer, the Company has reduced its purchases from Osram,
compared to prior years. Osram has taken the Company to arbitration to force the
Company to return to prior levels. The Company feels strongly that it will win
the arbitration hearing. As of the date hereof, the Company has not received
notice of termination for either agreement. There can be no assurance that such
agreements will be renewed in the future. The Company purchases certain of its
other raw materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all light emitting diodes
("LEDs") used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company recently acquired a European company
primarily engaged in the production of LEDs which now supplies the Company with
a small portion of its LED requirements. In addition, the Company has entered
into a joint venture to establish a North American manufacturing plant for the
production of surface mount LEDs. Any interruption in the supply of incandescent
glass shells, fluorescent glass tubing, LEDs or significant fluctuations in the
prices of other raw materials could have an adverse effect on the Company's
operations.

RESEARCH AND DEVELOPMENT

         The Company's research and development expenditures were $6.8 million
for Fiscal 2001. The Company's research and development, in recent years, has
been focused on product and process innovation, applying tested lighting
technologies, rather than in the exploration of new lighting techniques. Much of
the focus has been directed toward improvements in material science to improve
lamp photometric performance, energy-efficiency and miniaturization as well as
to lengthen the life of its products and reduce or eliminate the use of
environmentally hazardous materials. Certain of the Company's competitors are
significantly larger than the Company and devote a substantial amount of money
to research and development.


                                       7
<PAGE>

SALES AND MARKETING

         The Company sells its lighting products through a direct sales force,
sales representatives and distribution companies. The Company currently employs
approximately 1,600 people in sales and marketing, with 1,221 in Europe, 116 in
the U.S., 1 in Canada, 114 in Australia, 120 in Central and South America and 28
in Asia. In addition, the Company's sales force is augmented with 320
independent sales representative organizations, with designated geographic
territories in the United States, Canada, Europe and Latin America.

         The Company advertises in most major electronic and electrical trade
publications. To help ensure positive results of its advertising programs, the
Company has developed a lead fulfillment and tracking program that monitors
opportunities for the internal sales force, the sales representatives and
distributors. The Company also publishes a full-line of catalog/data books and
CD-ROMs for use by its customers.

INTERNATIONAL OPERATIONS

         Approximately 79% of the Company's net sales for Fiscal 2001 were
derived from outside the United States. The Company currently operates in more
than 30 countries located in North America, South America, Europe, and the
Pacific Rim. As a result of its foreign sales and facilities, the Company's
operations are subject to the risks of doing business internationally.

<TABLE>
<CAPTION>
                                                       YEAR ENDED
                                      1/02/00           12/31/00          12/30/01
                                     ----------        ----------        ----------
                                                     (IN THOUSANDS)
<S>                                  <C>               <C>               <C>
Net Sales:
United States ...............        $  163,934        $  230,880        $  175,341
Canada ......................            20,891            17,560            13,210
Europe ......................           477,949           473,838           550,323
Pacific Rim .................            47,626            44,269            40,382
Central and South America ...            73,009            86,941            71,930
                                     ----------        ----------        ----------
Total .......................        $  783,409        $  853,488        $  851,186
                                     ==========        ==========        ==========

Total Assets:
United States ...............        $  171,088        $  188,571        $  128,119
Canada ......................            11,177            22,112            16,477
Europe ......................           504,842           640,048           609,837
Pacific Rim .................            25,969            24,251            27,874
Central and South America ...            82,428            99,217            90,621
                                     ----------        ----------        ----------
Total .......................        $  795,504        $  974,199        $  872,928
                                     ==========        ==========        ==========
</TABLE>

COMPETITION

         The industry in which the Company operates is highly competitive. Most
of the Company's competitors offer products in some but not all of the markets
served by the Company. The Company competes primarily on the basis of brand
awareness, price, product quality, design and engineering, customer service and
distribution strength. The lamp manufacturing industry is dominated by Philips,
Osram and General Electric. The Company believes that it is the third largest
lighting company in Europe, behind Philips and Osram. The fixture and miniature
lighting assembly markets are highly fragmented with many suppliers. Some of the
Company's competitors have substantially greater resources than the Company.

ENVIRONMENTAL REGULATIONS

         The Company's operations are subject to federal, state, local and
foreign laws and regulations relating to the storage, handling, generation,
treatment, emission, release, discharge and disposal of certain substances and
wastes. While the Company believes that it is currently in material compliance
with these laws and regulations, there can be no assurance


                                       8
<PAGE>
that the Company will not incur significant costs to remediate violations
thereof or to comply with changes in existing laws and regulations (or the
enforcement thereof). Such costs could have a material adverse effect on the
Company's results of operations.

         The Company uses a radioactive gas in its manufacture of neon bulbs in
the United States, and maintains a U.S. Nuclear Regulatory Commission license
for the use of such gas. The Company must comply with federal, state and local
regulations pertaining to the storage and discharge of radioactive materials. In
view of the low dosage of radioactivity in the gas used, the requirements for
compliance with these regulations do not, and the Company anticipates will not,
have any material adverse effect upon its capital expenditures, results of
operations or financial condition.

PATENTS, LICENSES AND TRADEMARKS

         The Company owns and has obtained licenses to various domestic and
foreign patents, patent applications and trademarks related to its products,
processes and business. While these patents and patent applications in the
aggregate are important to the Company's competitive position, no single patent
or patent application is material to the Company. The trademark Sylvania is
owned by Osram-Sylvania, Inc. in the United States, Canada, Mexico and Puerto
Rico and by the Company in all other jurisdictions where the name is registered.
The Company's license agreements generally have a duration which coincides with
either the patents or the trademarks (which have an indefinite life) covered
thereby. Intellectual property rights associated with the Sylvania brand of
products are licensed from Osram, which is a competitor of the Company, and
there is no assurance that the Company's licenses may not be subject to
challenge by Osram arising out of any future sales by the Company in the United
States, Canada, Mexico and Puerto Rico.

EMPLOYEES

         As of December 30, 2001, the Company employed approximately 8,433
employees of whom 5,632 were employed in Europe, 561 in the U.S., 63 in Canada,
1,854 in Central and South America, 257 in Australia and 66 in Asia.
Manufacturing and engineering operations employed 6,231 people, sales and
marketing employed 1,600 people, and administration and finance employed 602
people. Union recognition and collective bargaining arrangements are in place in
16 countries (including the United States), covering a total of approximately
4,664 persons (202 in the United States). These agreements are with various
labor unions and consortiums and expire at various dates. Management believes
that it generally has a good relationship with its unionized and non-unionized
employees.


                                       9
<PAGE>

ITEM 2. PROPERTIES

         At December 30, 2001, the Company's manufacturing operations were being
carried on at the following locations:

<TABLE>
<CAPTION>
               LOCATION                       SQUARE FOOTAGE                 PRODUCT
               --------                       --------------                 -------
<S>                                           <C>                <C>

UNITED STATES:
Oklahoma(b) .............................         30,000*        miniature neon lamps and assemblies
Oklahoma(b) .............................         45,000*        lighting assemblies
New Jersey(a) ...........................         59,200*        miniature lighting assemblies, injection
                                                                 molding of housings and lenses
New Jersey(b) ...........................          7,000*        molds, tool and die
Pennsylvania(b) .........................        269,000*        table and floor lamps

CANADA:
Ontario(b) ..............................         75,000*        socket and socket lamp assemblies

EUROPE:
Tienen, Belgium(b) ......................        308,000*        HID lamps, halogen lamps for low and line
                                                                 voltage and general lighting service ("GLS") lamps
Hranice u Ase, Czech Republic(b) ........          7,500*        miniature lamp assembly
Besancon, France(b) .....................         44,000         miniature lighting, stamping and tooling
Besancon, France(b) .....................         37,000         lighting systems
Besancon, France(b) .....................         12,000         lampholder assemblies
Lyon, France(a) .........................        235,000         specialty incandescent lamps
Maxeville, France(b) ....................         77,469*        outdoor fixtures
St. Etienne, France(a) ..................        105,000         industrial/commercial fluorescent fixtures
St. Marcellin, France(b) ................         42,000         table lighting fixtures
Bad Durkeim, Germany(a) .................         37,000*        miniature lamp assemblies
Bamberg, Germany(b) .....................         54,400*        miniature lamp manufacturing and assembly
Berlin, Germany(a) ......................         12,000         LED manufacturing
Coburg, Germany(a) ......................         17,000*        manufacturer of automated lamp making equipment
Erlangen, Germany(c) ....................        255,000*        linear fluorescent lamps
Gnarrenburg, Germany(b) .................        297,372*        display fixtures
Neuenburg, Germany(a) ...................          4,000*        molds
Goes, Netherlands(a) ....................          7,700*        display fixtures
Haarlem, Netherlands(a) .................         45,000*        display fixtures
Bury St. Edmunds, United Kingdom(b) .....         59,000         miniature lamp manufacturing and assembly
Erskine, Scotland, United Kingdom(a) ....         16,000*        miniature lamp assemblies and light omitting diodes
Feltham, United Kingdom(a) ..............         76,100*        architectural fixtures
Harworth, United Kingdom(b) .............        788,000*        lighting glass
Newhaven, United Kingdom(a) .............        115,000*        architectural fixtures
Shipley, United Kingdom(b) ..............        110,000*        miniature linear fluorescent and compact lamps

AUSTRALIA:
Gosford, Australia(b) ...................         72,000         high bay industrial fixtures
Brookvale, Australia(a) .................         17,000         suspended linear fixtures

CENTRAL AND SOUTH AMERICA:
Santo Amaro, Brazil(b) ..................        390,000         incandescent and fluorescent low and line voltage
and                                                              GLS lamps
Vinhedo, Brazil(b) ......................         74,000*        incandescent glass shells and fluorescent glass tubes
Bogota, Colombia(b) .....................        155,000         incandescent and fluorescent glass and lamps
San Jose, Costa Rica(b) .................         75,000*        starters and glow bottles and fixtures
San Jose, Costa Rica(b) .................         19,000*        miniature lighting assemblies
</TABLE>


                                       10
<PAGE>

(a)      Leased or subleased. Such leases expire on various dates. Lease
         payments for Fiscal 2002 will be approximately $16.2 million. See Note
         12 to Notes to the Company's Consolidated Financial Statements.

(b)      Owned.

(c)      Manufacturing facility owned, warehouse space leased.

(*)      Includes warehouse space.

         The Company has sales offices and distribution facilities in over 30
countries.

         Certain Company-owned facilities located in the United States, Canada,
Germany, the United Kingdom and Belgium are subject to mortgages which were
entered into in connection with the Company's revolving credit facility.

ITEM 3. LEGAL PROCEEDINGS

         The Company and its subsidiaries are involved in legal proceedings from
time to time in the ordinary course of its business. As of the date of the
filing neither the Company nor any of its subsidiaries are a party to any law
suits or proceedings which individually or in the aggregate, in the opinion of
management, is likely to have a material adverse effect on the financial
condition, results of operations or cash flow of the Company.

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

         There were no meetings of shareholders during the fourth quarter of the
fiscal year covered by this report.

ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT

         The following table sets forth the names and ages of all executive
officers of the Registrant, including all positions and offices with the
Registrant held by him, and the period during which he has served as such.

<TABLE>
<CAPTION>
NAME                                          AGE       POSITION WITH THE COMPANY
----                                          ---       -------------------------
<S>                                           <C>       <C>

Frank M. Ward...........................       58       Chief Executive Officer
Stephen N. Cummings.....................       50       EVP-Finance & Tax, Secretary
Paul A. Flynn...........................       42       President, SLI Miniature NA and Europe (effective 3/1/02)
Jan Germis..............................       53       EVP Manufacturing, SLI Europe and Australasia
M. Barrington Hare (retired 3/1/02).....       63       President, SLI Miniature, Europe
Per Langholz............................       48       President, SLI Europe and Australasia
Robert J. Mancini.......................       46       Chief Financial Officer and Treasurer
Peter Mazalon...........................       42       EVP Sales and Marketing (Retail), SLI Europe and Australasia
Truong Nguyen...........................       50       Chief Financial Officer, SLI Europe and Australasia
Carlos Pietri...........................       55       President, Latin America Operations
</TABLE>

         Each of the executive officers listed above serves at the PLEASURE of
the Board of Directors for a term until his or her successor is duly elected and
qualified. The following is a summary of the business experience during the past
five years of each of the Company's executive officers.


                                       11
<PAGE>

         Frank M. Ward has served as President and Chief Executive Officer and
Director of the Company and its predecessor, Xenell Corporation, since 1985. Mr.
Ward received a Bachelor of Science degree in Electrical Engineering from
Northeastern University and has completed post graduate studies in physics and
metallurgy.

         Stephen N. Cummings joined the Company in August 1999 and was appointed
Executive Vice President of Finance and Tax in September 2001. From 1999 to
2001, he held the position of Corporate Tax Director. Prior to joining the
Company, Mr. Cummings was Treasurer and Director of Taxes at ENSR Corporation
(1990-1999) engineering and consulting firm. Mr. Cummings has also worked for
the IRS and Wiss & CO. CPA. Mr. Cummings has a Bachelor of Business
Administration degree in Accounting and Finance from Pace University.

         Paul A. Flynn is President of SLI Miniature Lighting - North America.
On March 1, 2002, Mr. Flynn was appointed to the position of President of SLI
Miniature Lighting - Europe. Previously, Mr. Flynn served as Vice President of
SLI Miniature Lighting - North America from 1994 to 1999. From 1992 to 1994, Mr.
Flynn was the Director of Sales and Marketing for Industrial Devices, Inc.
("IDI"), which was acquired by the Company in 1994. Prior to such time, he was
the National Sales Manager of IDI from 1987 to 1992. Mr. Flynn earned a Bachelor
of Arts degree in Marketing from Fairfield University.

         Jan Germis has held the position of Executive Vice President of
manufacturing - SLI, Europe and Australasia, since his promotion in 1998. Mr.
Germis joined the Company in 1977 and has held the various positions including
General Manager of the Tienen factory in Belgium and management positions in
which he was responsible for all of the Company's European lamp factories.

         M. Barrington Hare is President of SLI Miniature Lighting, Europe.
Prior to May 1998, Mr. Hare was a Director and Chief Executive Officer of VCH
International Limited, having headed the management buy-out of the USA and UK
lamp interests of General Instrument Corporation in 1987. Prior to that date he
served for 13 years as General Manager and Vice President of the General
Instrument Lamp Division responsible for the USA and UK businesses. Prior
thereto he was involved in various financial roles in diverse businesses both in
Germany and the UK. Mr. Hare was appointed to the Board in September 1998. Mr.
Hare is a Fellow of the UK Association of Certified Accountants and a past
member of the Institute of Taxation. Mr. Hare retired form the Company on March
1, 2002.

         Per Langholz has served as President of SLI Europe and Australasia,
since September 2001. Since joining the company in 1997, Mr. Langholz has held
the positions of Executive Vice President, Sales and Marketing (Wholesale & OEM)
and the Managing Director of the Central European Operations. From 1994 to 1997,
Mr. Langholz was the Managing Director of the GE's Power Controls Division in
Germany. Between 1976 and 1994, Mr. Langholz worked at AEG in a number of
positions.

         Robert J. Mancini joined the Company in February 1998 and was appointed
Executive Vice President of Finance and Chief Financial Officer in November
2001. In addition, Mr. Mancini has held the position of Treasurer since
September 1998. Prior to joining the Company he was Assistant Treasurer of
Hasbro, Inc. (1986 to 1998), a toy manufacturing company, where he was
responsible for foreign exchange, cash management and capital markets. Mr.
Mancini has a Bachelor of Science degree in Accounting from Boston College.

         Peter Mazalon joined the Company in 1995 and was appointed Managing
Director, SLI France. In 1997, Mr. Mazalon was promoted to his current position
of Executive Vice President of Sales and Marketing (Retail) - SLI Europe and
Australasia. Prior to joining the Company, Mr. Mazalon was the Major Projects
Manager for Thorn Lighting, Hong Kong for three years and previously held the
positions of Business Development manager of Thorn Lighting, UK and General
Manager of Thorn Lighting, Belgium. Mr. Mazalon holds a Masters degree in
Economics.

         Truong Nguyen joined Sylvania Lighting in 1981 and has held a number of
financial management positions within the Company in Europe, the U.S. and
Canada. In October 2001, Mr. Nguyen was appointed Chief Financial Officer of SLI
Europe and Australasia. He holds a degree in Business Administration.

         Carlos Pietri is President of Latin America Operations. Mr. Pietri
joined the Company in 1978 and has held various positions including Financial
Controller, General Manager of Sylvania Lighting Argentina and General Manager
of


                                       12
<PAGE>

the Andean region. Prior to joining the Company, Mr. Pietri worked for GTE
Corporation and Deloitte & Touche as a public accountant for 7 years. Mr. Pietri
holds a Bachelor's degree in Accounting from St. John's University in New York.

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Common Stock is traded on The New York Stock Exchange. The
following table sets forth the range of high and low sales prices for the
Company's Common Stock for each period indicated (adjusted for stock splits).

<TABLE>
<CAPTION>
                                                     HIGH          LOW
                                                    ------       ------
<S>                                                 <C>          <C>
Fiscal 1999:
   First Quarter ............................       $28.25       $18.12
   Second Quarter ...........................        35.00        22.00
   Third Quarter ............................        28.25        19.38
   Fourth Quarter ...........................        21.75         8.31

Fiscal 2000:
   First Quarter ............................       $17.00       $10.75
   Second Quarter ...........................        16.81        11.18
   Third Quarter ............................        12.43         7.12
   Fourth Quarter ...........................         9.18         5.87

Fiscal 2001:
   First Quarter ............................        $9.87        $6.19
   Second Quarter ...........................         8.35         6.50
   Third Quarter ............................         8.01         2.50
Fourth Quarter ..............................         3.82         1.75

Fiscal 2002:
   First Quarter (through March 13, 2002) ...        $3.06        $2.05
</TABLE>

         Such market quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.

         As of December 30, 2001, the approximate number of holders of record of
the Company's Common Stock was 125 and the number of beneficial holders,
including individual participants in security position listings with clearing
agencies, was estimated at approximately 5,980.

DIVIDENDS

In January 2000, the Company authorized an annualized cash dividend of $.40 per
share. During the year ended December 31, 2000, quarterly cash dividends of $.10
per share (for each of the first three quarters) were declared and paid in the
amount of $10.2 million. In December 2000, a quarterly dividend of $.10 per
share was declared in the amount of $3.5 million and paid in January of 2001.

In March 2001, the Company declared a cash dividend of $.10 per share for the
first quarter of 2001, paid in April 2001in the amount of $3.3 million, and
approved a reduction in annualized cash dividends from $.40 to $.20 per share.
In June 2001, the Company's declared a cash dividend of $.05 per share for the
second quarter, paid in July in the amount of $1.6 million.


                                       13
<PAGE>

In June the Company's Board of Directors approved the elimination of dividends.
Future dividends, if any, will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
at that time by the Company's Board of Directors

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table presents selected historical financial information of the
Company, as of the dates and for the periods indicated and was derived from the
audited consolidated financial statements of the Company. The selected financial
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
audited consolidated financial statements and notes thereto.

<TABLE>
<CAPTION>
                                                                      ONE
                                                     YEAR            MONTH          YEAR        YEAR          YEAR         YEAR
                                                     ENDED           ENDED          ENDED       ENDED         ENDED        ENDED
                                                  11/30/97(D)   1/4/98(A)(D)(E)   1/3/99(D)     1/2/00       12/31/00     12/30/01
                                                  -----------   ---------------   ---------    --------      --------     ---------
<S>                                               <C>           <C>               <C>          <C>           <C>          <C>
Income Statement Data(b):
Net sales ....................................     $255,389         $ 53,866      $690,585     $783,409      $853,488     $ 851,186
Cost of products sold ........................      172,407           40,199       471,640      581,278       640,275       664,060
                                                   --------         --------      --------     --------      --------     ---------
  Gross margin ...............................       82,982           13,667       218,945      202,131       213,213       187,126
Selling, general and
  administrative expenses ....................       54,813           14,004       161,131      139,801       164,604       184,211
Restructuring costs ..........................        5,115               --         2,022        2,300         8,106        58,947
                                                   --------         --------      --------     --------      --------     ---------
Operating income (loss) ......................       23,054             (337)       55,792       60,030        40,503       (56,032)
Interest expense, net ........................          951            1,206        16,756       14,320        16,915        27,255
Loss on sale of assets .......................           --               --            --           --            --         4,163
Other (income) expense, net ..................       (2,289)            (471)        1,229       (1,821)       (6,419)        1,148
                                                   --------         --------      --------     --------      --------     ---------
Income (loss) before income taxes ............       24,392           (1,072)       37,807       47,531        30,007       (88,598)
Income taxes .................................        7,446             (525)        7,930        6,718         5,890         4,615
                                                   --------         --------      --------     --------      --------     ---------
Income (loss) from continuing operations .....       16,946             (547)       29,877       40,813        24,117       (93,213)
                                                   --------         --------      --------     --------      --------     ---------

Discontinued operations:
   Income (loss) from operations .............        3,995               --         3,155       (2,504)       (3,053)       (5,932)
   (Loss) from disposal ......................           --               --            --           --            --       (62,982)
                                                   --------         --------      --------     --------      --------     ---------
Income (loss) from discontinued
  operations, (net of income taxes) ..........        3,995               --         3,155       (2,504)       (3,053)      (68,914)

Net income (loss) ............................     $ 20,941         $   (547)     $ 33,032     $ 38,309      $ 21,064     $(162,127)
                                                   ========         ========      ========     ========      ========     =========

Net income (loss)
per common share-basic(c):
   Income (loss) from
     continuing operations ...................     $   0.59         $  (0.02)     $   1.03     $   1.27      $   0.70     $   (2.71)
   Income (loss) from discontinued oper ......         0.14               --          0.11        (0.08)        (0.09)        (2.01)
                                                   --------         --------      --------     --------      --------     ---------
   Net income (loss) per common share ........     $   0.73         $  (0.02)     $   1.14     $   1.19      $   0.61     $   (4.72)
                                                   ========         ========      ========     ========      ========     =========

Weighted average shares
outstanding-basic(c) .........................       28,761           28,659        28,898       32,290        34,328        34,368
                                                   ========         ========      ========     ========      ========     =========

Net income (loss)
per common share-diluted(c) :
   Income (loss) from
     continuing operations ...................     $   0.58         $  (0.02)     $   1.00     $   1.21      $   0.70     $   (2.71)
   Income (loss) from discontinued operations.         0.13               --          0.10        (0.07)        (0.09)        (2.01)
                                                   --------         --------      --------     --------      --------     ---------
   Net income (loss) per common share ........     $   0.71         $  (0.02)     $   1.10     $   1.14      $   0.61     $   (4.72)
                                                   ========         ========      ========     ========      ========     =========

Weighted average shares
  outstanding-diluted(c) .....................       29,331           29,298        30,132       33,501        34,566        34,368
                                                   ========         ========      ========     ========      ========     =========
</TABLE>


                                       14
<PAGE>


<TABLE>
<CAPTION>
                                                               ONE
                                               YEAR           MONTH           YEAR        YEAR         YEAR          YEAR
                                              ENDED           ENDED          ENDED       ENDED         ENDED         ENDED
                                           11/30/97(D)   1/4/98(A)(D)(E)   1/3/99(D)     1/2/00       12/31/00      12/30/01
                                           -----------   ---------------   ---------    --------     ----------     --------
<S>                                        <C>           <C>               <C>          <C>          <C>            <C>

Balance Sheet Data at End of
  Period(b):
Working capital ........................     $107,229                      $ 72,499     $104,498     $  156,410    $(227,210)
Total assets ...........................      599,066                       717,062      795,504        974,199      872,928
Short-term debt ........................       14,821                        29,874       61,265         57,589      438,282
Long-term debt, less current portion ...      185,434                       238,530      164,160        316,051       26,084
Stockholders' equity ...................      166,051                       217,810      374,017        358,382      147,310
Dividends paid .........................           --                            --           --         10,173        8,391
</TABLE>

         (a) In January 1998, the Company changed its financial reporting
         year-end from the Sunday nearest December 1 to the Sunday nearest
         December 31. As a result of this change, the Company had a one-month
         transition period ending January 4, 1998. (b) Revenues, expenses,
         assets and liabilities have been significantly affected by the number
         and timing of acquisitions made by the Company. (c) In August 1996 and
         February 1998, the Company effected 3-for-2 stock splits in the form of
         50% stock dividends. (d) In January 2001, the Company changed its
         classification of shipping and handling costs from selling, general and
         administrative costs to cost of products sold. All financial data was
         restated for this change in accounting policy except for the year ended
         January 3, 1999, month ended January 4, 1998 and year ended November
         30, 1997, due to the information not being readily available. (e) In
         June 2001, the Company divested itself of its Power Lighting Products
         (PLP) segment. Results of this operation have been classified as
         discontinued operations and prior periods have bee restated, except for
         the one month ended January 4, 1998, due to the information not being
         readily available.

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

The Company is a leading, vertically integrated manufacturer and supplier of
lighting systems, which include lamps and fixtures . Through its acquisition
based growth strategy, the Company has grown from a specialized manufacturer of
miniature lighting products into a manufacturer, supplier and lighting service
provider of a wide variety of lighting products, including lamps (incandescent,
fluorescent, compact fluorescent, HID, halogen, miniature incandescent, neon,
LED's and special lamps) and fixtures. The Company's overall strategic view is
to focus on the growth prospects of core business activities and to divest
itself of non-core products, services and markets within the general lighting
business. In March 2001, the Company approved a plan to divest itself from the
lighting service and maintenance business and has entered into an agreement to
sell certain assets and service contracts. In addition, the Company ceased
manufacturing of its magnetic ballasts in January 2001.

The Company believes that it is one of the six largest global lighting companies
in the world offering lamps and fixtures. The Company serves a diverse,
international customer base and at December 31, 2001 had 37 manufacturing plants
in 12


                                       15
<PAGE>
countries. SLI, Inc. acquired one company in 2001, two companies in 2000 and
four companies in 1999, which has an impact on year-to-year comparisons of
revenues and earnings. See Note 1 of Notes of the Company's Consolidated
Financial Statements, "Acquisitions".

In January 2001, as financed primarily through the Company's credit facility
the Company acquired EBT (Germany) for approximately $10 million in cash, and
200,000 common shares. The acquired company assembles and distributes light
emitting diodes (LED) products in Europe

In July 2000, the Company acquired certain business lines of Emess Plc for
approximately $102 million in cash, as financed primarily through the Company's
credit facility. The acquired business lines include Brilliant (Germany) a
leading brand in decorative lighting and fixtures for the European retail
market, Marlin (UK) a UK market leader in architectural and display lighting
fixtures, Eclatec (France) an outdoor lighting manufacturer and Emess Lighting
Inc. (USA) a leading brand of table lamps. The acquisition has been accounted
for using the purchase method. The results of the Brilliant operations were
reported using the equity method until effective control was established in
November 2000.

Effective September 2000, the Company purchased the assets of an UK based
lamp-glass manufacturer for approximately $18 million in cash.

For the year ended December 30, 2001, December 31, 2000 and January 2, 2000,
79.4%, 72.9% and 79.1%, respectively, of the Company's worldwide net revenue was
generated from international operations. International operations are subject to
currency fluctuations and government actions, such as devaluations. The Company
monitors its currency exposure in each country and cannot predict future foreign
currency fluctuations, which have and can continue to affect the Company's
balance sheet and results of operations.

The following discussion and analysis of the results of operations for the year
ended December 30, 2001 should be read in conjunction with the Company's
Consolidated Financial Statements and accompanying notes. Except for historical
matters contained herein, the matters discussed herein are forward-looking
statements and are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
reflect assumptions and involve risks and uncertainties, which may affect the
Company's business and prospects and cause actual results to differ materially
from these forward-looking statements and should be read in conjunction with the
"Risk Factors" section of this Report on Form 10-K.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to product returns, bad debts, inventories,
investments, intangible assets, income taxes, financing operations, warranty
obligations, restructuring, pensions and other post-retirement benefits, and
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.

Warranties

The Company provides for the estimated cost of product warranties at the time
revenue is recognized. While the Company engages in extensive product quality
programs and processes, including actively monitoring and evaluating the
quality of its raw material suppliers, the Company's warranty obligation is
affected by product failure rates, material usage and service delivery costs
incurred in correcting a product failure. Should actual product failure rates,
material usage or service delivery costs differ from the Company's estimates,
revisions to the estimated warranty liability would be required.

Inventory

The Company writes down its inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.

Bad Debt

The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting
in an impairment of their ability to make payments, additional allowances may
be required.

Restructuring

During fiscal year 2001, we recorded significant reserves in connection with
our restructuring program. These reserves include estimates pertaining to
employee separation costs and the settlements of contractual obligations
resulting from our actions. Although we do not anticipate significant changes,
the actual costs may differ from these estimates.

Goodwill and Intangible Impairment

In assessing the recoverability of the Company's goodwill and other intangibles
the Company must make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. If these
estimates or their related assumptions change in the future, the Company may be
required to record impairment charges for these assets not previously recorded.
Effective for fiscal years beginning after December 15, 2001, under the new
rules, goodwill will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. The Company will apply the
new rules on accounting, Standard No. 142 "Goodwill and Other Intangible
Assets," beginning in the first quarter of 2002 and will be required to analyze
its goodwill for impairment issues during the first six months of fiscal 2002,
and then on a periodic basis thereafter. The Company recorded an $32.9 million
write-off of goodwill for the year ended December 30, 2001, as a result of an
agreement to sell certain assets and service contracts of its lighting and
service and maintenance business.

Financial Instruments

The Company may enter into interest rate swap agreements to limit the effect of
increases in the interest rates on any floating rate debt. The differential, as
specified in the swap contract, is accrued as interest rates change and is
recorded in interest expense. Upon termination of interest rate swap
agreements, any resulting gain or loss is recognized over the shorter of the
remaining original term of the hedging instrument or the remaining life of the
underlying debt obligation. To the extent that these do not achieve managements
intended objectives, they could produce different financial results.

Deferred Taxes

The Company records a valuation allowance to reduce its deferred tax assets to
the amount that is more likely than not to be realized. While the Company has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event the
Company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
deferred tax asset would increase income in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset would be charged to income in the period such
determination was made.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, certain items in the
Company's Consolidated Statements of Income expressed as a percentage of net
sales:

<TABLE>
<CAPTION>
                                                                            YEAR ENDED
                                                              1/2/00         12/31/00       12/30/01
                                                              ------        ----------      --------
<S>                                                           <C>           <C>             <C>
Net sales .............................................        100.0%         100.0%         100.0%
Cost of products sold .................................         74.2           75.0           78.0
                                                               -----          -----          -----
Gross margin ..........................................         25.8           25.0           22.0
Selling, general and administrative expenses ..........         17.8           19.3           21.7
Restructuring costs ...................................           .3            1.0            6.9
                                                               -----          -----          -----
Operating income (loss) ...............................          7.7            4.7           (6.6)
Interest (income) expense, net ........................          1.8            2.0            3.2
Loss on sale of assets ................................           --             --            0.5
Other (income) expense, net ...........................         (0.2)          (0.8)           0.1
                                                               -----          -----          -----
Income (loss) before taxes ............................          6.1            3.5          (10.4)
Income taxes ..........................................           .9             .7            0.5
                                                               -----          -----          -----
Income (loss) from continuing operations ..............          5.2            2.8          (10.9)
                                                               -----          -----          -----
Discontinued Operations:
  (loss) from operations ..............................         (0.3)          (0.3)          (0.7)
  (loss) from disposal ................................           --             --           (7.4)
                                                               -----          -----          -----
  (loss) from discontinued operations, net of taxes ...         (0.3)          (0.3)          (8.1)
                                                               -----          -----          -----
Net income (loss) .....................................          4.9%           2.5%         (19.0)%
                                                               =====          =====          =====
</TABLE>


                                       16
<PAGE>

Year ended December 30, 2001 compared to the year ended December 31, 2000.

Net sales. Net sales decreased by 0.3% from $853.5 million for the year ended
December 30, 2001 to $851.2 million for the year ended December 31, 2000. The
decrease was due to the loss in sales volume resulting from the sale of the
lighting services and maintenance business of $44.0 million and the exiting of
the ballast business of $45.0 million. The generally higher value of the US
dollar compared to other currencies worldwide decreased net sales by
approximately 2.2% or $18.7 million, for the year ended December 30, 2001 as
compared to the year ended December 31, 2000. The decrease in sales was offset
by the $109.2 million increase in sales volume due to the 2001 acquisition of
EBT and the full year impact of the 2000 acquisition of Emess Inc. Net sales for
the year ended December 30, 2001 are also affected by decreases in average
selling prices of general lighting products, primarily sold in Europe and North
America, as a result of market pricing pressures.

Gross Margin. Gross margin decreased by 12.2% from $213.2 million for the year
ended December 31, 2000 to $187.1 million for the year ended December 30, 2001.
Gross margin from the recent acquisitions of EBT and Emess Inc. totaled
approximately $30.7 million for the year ended December 30, 2001. The
translation effects of the weakening European currencies negatively impacted
gross margin by approximately 2.0% or $4.3 million for the year ended December
30, 2001 as compared to the year ended December 31, 2000. Gross margin for the
year ended December 30, 2001 was also negatively affected by decreases in
average selling prices of general lighting products, primarily sold in Europe
and North America, as a result of market pricing pressures.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $164.6 million for the year ended
December 31, 2000 to $184.2 million for the year ended December 30, 2001. As a
percentage of net sales, selling, general and administrative expenses increased
from 19.3% for year ended December 31, 2000 to 21.7% for the year ended December
30, 2001. This increase was largely due to the 2000 and 2001 acquisitions. The
Company intends to decrease selling, general and administrative expenses through
restructuring plans, which are being implemented at the newly acquired
businesses as well as existing subsidiaries.

Restructuring costs In March 2001, the Company entered into an agreement to sell
certain assets and service contracts of its lighting service and maintenance
business. As a result of this divestiture, charges totaling $56.9 million were
incurred, consisting of a goodwill write-off of $32.9 million, other asset
write-downs of $13.5 million and exit costs of $10.5 million. Approximately $5.6
million remain in accruals at December 30, 2001 related to this agreement, which
is expected to be completed within 12 months. The exit costs primarily relate to
unfavorable contractual agreements and severance and related costs.

In the year ended December 31, 2000, the Company approved restructuring plans in
Europe and North America, associated with severance and other disposal costs,
which resulted in a charge of $8.1 million. The restructuring in the European
general lighting businesses resulted in a charge of $6.9 million. This plan
included a reduction in headcount of 131 employees totaling $5.7 million and
other exit costs totaling $1.2 million. The European restructuring plan
generated annualized savings of approximately $8.5 million upon completion. In
the North America general lighting plan, restructuring costs of $1.2 million
were recorded in the year ended December 31, 2000. The North American plan
included a shut down of certain manufacturing operations and a headcount
reduction of approximately 168 employees with severance costs totaling $1.1
million and other exit costs totaling $100,000. The annualized savings of the
North American restructuring totaled approximately $3.6 million.

In connection with the purchase price accounting for the acquisition of certain
business lines of Emess Plc, effective July 2000, the Company approved a
restructuring plan, which resulted in reorganization accruals of $2.3 million as
follows:


                                       17
<PAGE>

         i.)      Severance costs of $2.1 million include the termination of 120
                  employees in Europe and 2 employees in the U.S. Approximately
                  $.3 million of severance cost was paid as of December 30,
                  2001. The remainder will be paid over the next 6 months.

         ii.)     Costs of $178,000 are associated with the disposal of fixed
                  assets and other exit costs. As of December 30, 2001, all of
                  the accrual had been utilized.

The Company expects to realize annualized savings of approximately $4.0 million
by the end of 2002, primarily as a result of reduced employee expenses.

In the quarter ended July 4, 1999, the Company developed and approved a
restructuring plan for existing operations, which resulted in charges of $2.3
million. This restructuring plan was completed in 1999. The Company realized
approximately $1 million in annualized cost savings, largely as a result of
reduced employee expense.

The Company believes that these restructuring plans are a necessary action based
on the termination of certain activities and are required to maintain a
competitive position. See Note 7 of Notes to the Company's Consolidated
Financial Statements.

Interest (income) expense, net. Interest expense, net, increased from $16.9
million for the year ended December 31, 2000, to $27.3 million for the year
ended December 30, 2001, primarily as a result of an increase in average
outstanding borrowings.

Other (income) expense. Other expenses of $1.1 million for the year ended
December 30, 2001 includes income of $229,000 related to the recording of the
effects of foreign exchange transactions and equity income in investments
totaling $584,000, as offset by $2.0 million in other expenses.

Income before income taxes. As a result of the above factors, income before
income taxes decreased from $30.0 million for the year ended December 31, 2000
to a loss of $88.6 million for the year ended December 30, 2001.

Income taxes. For the year ended December 30, 2001, the Company recorded a tax
provision of $4.6 million on a pretax loss of $88.6 million.

Year ended December 31, 2000 compared to the year ended January 2, 2000.

Net sales. Net sales increased 8.9% from $783.4 million for the year ended
January 2, 2000 to $853.5 million for the year ended December 31, 2000 This
increase was primarily due to generic growth generated from the integration of
the 1999 acquisitions into ongoing operations. The generally higher value of the
US dollar compared to other currencies worldwide decreased net sales by
approximately 7.3% or $57 million for the year ended December 31, 2000 as
compared to the year ended January 2, 2000. In addition, net sales is effected
by decreases in average selling prices due to market pricing pressure, primarily
within the European lamp market.

Gross Margin. Gross margin increased 5.5% from $202.1 million for the year ended
January 2, 2000 to $213.2 million for the year ended December 31, 2000; due
primarily to the increase in sales volume, partially offset by decreases in
average selling prices. Gross margin from acquisitions totaled approximately
$24.4 million for the year ended December 31, 2000. The translation effects of
the weakening European currencies negatively impacted gross margin by
approximately 7.9% or $16 million for the year ended December 21, 2000 as
compared to the year ended January 2, 2000. Gross margin for the year ended
December 21, 2000 was also negatively affected by decreases in average selling
prices of general lighting products, primarily sold in Europe and North America,
as a result of market pricing pressures.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $139.8 million for the year ended January
2, 2000 to $164.6 million for the year ended December 31, 2000. As a percentage
of net sales, selling, general and administrative expenses increased from 17.8%
for the year ended January 2, 2000 to 19.3% for the year ended December 31,
2000. This increase is primarily as a result of the 1999 and 2000 acquisitions.


                                       18
<PAGE>

Restructuring costs. In the year ended December 31, 2000, the Company approved
restructuring plans in Europe and North America, associated with severance and
other disposal costs, which resulted in a charge of $8.1 million. The
restructuring in the European general lighting businesses resulted in a charge
of $6.9 million. This plan includes a reduction in headcount of 131 employees
totaling $5.7 million and other exit costs totaling $1.2 million. The European
restructuring plan generated annualized savings of approximately $8.5. In the
North America general lighting plan, restructuring costs of $1.2 million were
recorded in the year ended December 31, 2000. The North American plan includes a
shut down of certain manufacturing operations and a headcount reduction of
approximately 168 employees with severance costs totaling $1.1 million and other
exit costs totaling $100,000. The annualized savings of the North American
restructuring plan totaled approximately $3.6 million.

In connection with the purchase price accounting for the acquisition of certain
business lines of Emess Plc, effective July 2000, the Company approved a
restructuring plan, which resulted in reorganization accruals of $2.3 million as
follows:

         i.)      Severance costs of $2.1 million include the termination of 120
                  employees in Europe and 2 employees in the U.S. Approximately
                  $.3 million of severance cost was paid as of December 30,
                  2001. The remainder will be paid over the next 6 months.

         ii.)     Costs of $178,000 are associated with the disposal of fixed
                  assets and other exit costs. As of December 30, 2001, all of
                  the accrual had been utilized.

The Company expects to realize annualized savings of approximately $4.0 million
by the end of 2002, primarily as a result of reduced employee expenses.

In the quarter ended July 4, 1999, the Company developed and approved a
restructuring plan for existing operations, which resulted in charges of $2.3
million. This restructuring plan was completed in 1999. The Company realized
approximately $1 million in annualized cost savings, largely as a result of
reduced employee expense.

The Company believes that these restructuring plans are a necessary action based
on the termination of certain activities and are required to maintain a
competitive position. See Note 7 of Notes to the Company's Consolidated
Financial Statements.

Interest (income) expense, net. Interest expense, net, increased from $14.3
million for the year ended January 2, 2000 to $16.9 million for the year ended
December 31, 2000, primarily as a result of an increase in average outstanding
borrowings in connection with the recent acquisitions. In addition, the overall
weighted average interest rate increased approximately 50 basis points for the
year ended December 31, 2000 as compared to January 2, 2000.

Other (income) expense. Other income of $6.4 million for the year ended December
31, 2000 includes $4.0 million related to the recording of the effects of
foreign exchange transactions and equity income in investments totaling $3.1
million, as offset by $635,000 in other expenses. Substantially all of the other
income, totaling $1.8 million, for the year ended January 2, 2000, resulted from
recording the effects of foreign exchange transactions.

Income before income taxes. As a result of the above factors, income before
income taxes decreased from $47.5 million for the year ended January 2, 2000 to
$30.0 million for the year ended December 31, 2000.

Income taxes. For the year ended December 31, 2000, the Company recorded a tax
provision of $5.9 million on pretax income of $30.0 million, for an effective
rate of approximately 19.6%, compared to approximately 14.1% for the year ended
January 2, 2000. The lower than U.S. statutory tax rate is due to the impact of
income in countries with effective tax rates lower than those in the U.S. and
realization of tax attributes, including net operating loss carry forwards. As a
result of certain net operating losses becoming fully utilized as of December
31, 2000, the Company's effective tax rate is expected to rise in 2001 and
thereafter.

LIQUIDITY AND CAPITAL RESOURCES

The Company's major uses of cash have historically been for acquisitions,
working capital to support sales growth, ongoing capital expenditures and stock
repurchases. Sources of cash have typically included operating cash flow, bank
borrowings and proceeds from the sale of Common Stock.


                                       19
<PAGE>


As of December 30, 2001, the Company's cash on hand was $50.5 million.
For Fiscal 2001, net cash used in continuing operating activities was $29.6
million and cash used in discontinued operating activities was $8.9 million.
Cash used in investing activities totaled $38.6 million, net of proceeds from
the sale of assets amounting to $7.7 million. The investing activities primarily
include acquisitions, totaling approximately $8.8 million and capital
expenditures for production equipment, totaling $37.6 million. Net cash provided
by financing activities for Fiscal 2001 aggregated $61.3 million, which included
$86.5 million in net borrowings under the Company's worldwide credit facilities,
interest and a payment on a forward-share purchase agreement totaling $15.7
million, and dividend payments totaling $8.4 million.

On November 13, 2001, the Company entered into a Fourth Amendment to its Second
Amended and Restated Credit Agreement, which is effective September 30, 2001 and
provides for the conversion of the Company's 364-day Revolving Credit Facility,
under which $80 million was outstanding, into a Term Loan maturing in October
2004, amortizing in equal installments over that term. The Fourth Amendment also
permits the Company to maintain its $300 million Revolving Credit Facility.
Under the terms of the Fourth Amendment, the financial covenants which the
Company is required by its lenders to maintain, including a maximum leverage
ratio, an interest coverage ratio, and a fixed charge coverage ratio, have been
amended so that the Company is in compliance with such covenants as of December
30, 2001 and expect to remain in compliance with such covenants for the
remainder of the term of the agreement.

The Fourth Amendment also includes certain non-financial covenants.  Due to the
going concern modification to the opinion on the December 30, 2001 financial
statements, the Company is in technical default of the Revolving Credit
Facility. The Company is in the process of negotiating with its credit lenders
a waiver and long-term amendment. Since there are no assurances, that the
Company's lender group will agree to such actions, the Company has classified
the indebtedness under the Revolving Credit Facility and Term Loan as a
long-term debt in current liabilities.

The Credit Agreement calls for the quarterly amortization in the amount of $6.7
million, payable on January 1, April 1, July 1 and October 1 of each fiscal
year, maturing on October 31, 2004.

Under the Fourth Amendment, the applicable interest rates on such indebtedness
are Libor plus 3.75% or base rate plus 2.25%, so long as total outstanding
indebtedness under the Revolving Credit Facility and the Term Loan exceeds $300
million, reducing to Libor plus 2.5% or base rate plus 1% if such total
outstanding indebtedness is below $200 million.

As of December 30, 2001, the amount of borrowings under the Revolving Credit and
Term Loan Facility totaled approximately $377 million, and the face amount of
letters of credit issued and outstanding under the Revolving Credit Facility
totaled approximately $2.3 million.

The Company also has a number of other committed and uncommitted facilities
worldwide, which it utilizes for short-term working capital requirements.

As discussed in Note 1, the Company experienced significant operating and cash
flow losses during Fiscal 2001. This ultimately led to the Company amending its
Revolving Credit Agreement with its Senior lenders. The covenants, which
were amended as part of this process, are restrictive and closely tied to
management's forecasted financial results. The Company's ability to remain in
compliance with these covenants is therefore, dependent upon its ability to
meet forecasted operating and cash flow results.

Management believes these forecasted results will be sufficient to remain in
compliance with the amended covenants. Providing additional comfort however,
are certain actions that are within management's control that can be taken,
including the sale of Company non-core assets and business operations, which
would strengthen the Company's ability to remain in compliance with the
covenants throughout Fiscal 2002.

In February 2000, the Company entered into an equity forward purchase
transaction whereby the Company had the ability to purchase shares of the
Company's common stock in an aggregate principal amount of up to $15 million.
The Company has fully completed the purchase of 1,612,900 shares for a principal
purchase price of approximately $15 million.

In March 2000, the Company entered into a sale-leaseback transaction in
connection with a 370,000 square foot distribution facility located in France.
The sale-leaseback arrangement involved the sale of a warehouse distribution
center for approximately $17.5 million. Under the terms of the lease
arrangement, the Company has entered into a 12-year lease to begin in December
of this year. The resulting net gain of approximately $ 1.8 million is being
amortized over 12 years, and the resulting lease is a capital lease. The related
asset is included in land and buildings.

In December 2000, the Company entered into certain sale/leaseback arrangements
for manufacturing equipment with General Electric Capital. The sale/leaseback
arrangement involved the sale of the equipment for approximately $26.4 million.
The basic term of the lease is three years with two optional extensions, each
for the period of one year. Therefore, the maximum lease term is 5 years. The
resulting net gain of $11.6 million, of which $7.7 million remains unamortized,
is included in other long-term liabilities at December 30, 2001, and is being
amortized over three years. The lease is accounted for as an operating lease.

The Company conducts business in countries outside of the United
States, which exposes the Company to fluctuations in foreign currency exchange
rates. The Company may enter into short-term forward exchange contracts to hedge
this risk; nevertheless, fluctuations in foreign currency exchange rates could
have an adverse effect on the Company's business. The Company does not hold or
issue financial instruments for trading or speculative purposes. The Company has
significant operations in Europe and, to a lesser extent, in Latin America.
Certain member countries of the European Union


                                       20
<PAGE>

established fixed conversion rates between their existing currencies and the
European Economic Monetary Union common currency, or Euro. While the Euro was
introduced on January 1, 1999, member countries continued to use their existing
currencies through January 1, 2002, with the transition period for full
conversion to the Euro ending June 30, 2002. The introduction of a single
European currency is expected to reduce the currency risks associated with
inter-European transactions. However, risks will remain with respect to
transactions with customers or suppliers outside of the zone covered by the
single European currency. The Company's operations in Latin America are carried
out primarily in Brazil, Costa Rica and Colombia. Although currently not
classified as a hyper-inflationary country, Brazil has been classified as such
in the past.

The Company believes that the actions taken to restructure its
business, of which include selling or discontinuing non-profitable operations
and the restructuring of its credit facilities, will provide sufficient cash
from operations and available borrowings to meet the Company's working capital
and capital expenditures needs for the next twelve months and the foreseeable
future thereafter. Capital expenditures during the next twelve months are
expected to approximate $16 million.

<TABLE>
<CAPTION>
        CONTRACTUAL OBLIGATIONS                                   PAYMENTS DUE BY PERIOD, IN THOUSANDS

                                             TOTAL          LESS THAN 1      1-3 YEARS       4-5 YEARS      OVER 5 YEARS
                                                                YEAR
<S>                                          <C>               <C>           <C>              <C>               <C>
Long Term Debt                               $ 382,765         $377,010      $   2,329        $    674          $  2,752
Capital Lease Obligations                       32,182            2,584          5,211           4,942            19,445
Operating Leases                                62,315           16,242         32,854           8,562             4,657

Total Contractual Cash Obligations           $ 477,262         $395,836      $  40,394        $ 14,178          $ 26,854
</TABLE>

<TABLE>
<CAPTION>
       OTHER COMMERCIAL               TOTAL AMOUNTS                AMOUNT OF COMMITMENT EXPIRATION PER PERIOD,
         COMMITMENTS                    COMMITTED                                   IN THOUSANDS

                                                           LESS THAN 1       1-3 YEARS         4-5 YEARS        OVER 5 YEARS
                                                               YEAR
<S>                                      <C>                       <C>             <C>               <C>                 <C>
Standby Letters of Credit                $ 2,300                   $ 0             $ 0               $ 0                 $ 0

Total Commercial Commitments             $ 2,300                   $ 0             $ 0               $ 0                 $ 0


There are no outstanding commitments at December 30, 2001.
</TABLE>

SUBSEQUENT EVENTS

On March 1, 2002, the Company sold one of its subsidiaries for $1,250,001. The
transaction resulted in a loss of approximately $1,000,000 which will be
included in operations during the first quarter of 2002.

On April 12, 2002, the Company sold one of its subsidiaries for $3.8 million.
The transaction resulted in a loss of approximately $2.5 million, which will be
included in operations during the second quarter of 2002.

NET OPERATING LOSS CARRY FORWARDS

The Company had net operating loss carryforwards from continuing operations for
tax purposes of approximately $121.4 million at December 30, 2001, of which
approximately $68.7 million expire through 2021 and $52.7 million do not expire.
The Company also had net loss carryforwards from discontinued operations of
approximately $60.6 million at December 30, 2001, which expires through 2021.

ITEM 7A. MARKET RISK

The tables below summarize information on instruments and transactions that are
sensitive to foreign currency exchange rates foreign currency denominated debt
obligations. Reference is made to Note 4 of the Notes to the Company's
Consolidated Financial Statements.

Debt Denominated in Foreign Currencies is as follows:

<TABLE>
<CAPTION>
                                                                                                FAIR
                                                                            THERE-              VALUE
                               2001      2002     2003     2004     2005    AFTER     TOTAL    12/30/01
                             -------     ----     ----     ----     ----    ------    -----    --------
<S>                          <C>         <C>      <C>      <C>      <C>     <C>       <C>      <C>
                                                  (DOLLAR EQUIVALENTS IN MILLIONS)
Euro
   Variable Rate Loan ...    $  15.2       --       --       --       --       --     $15.2     $15.2
   Avg. Interest Rate ...     6.4318%      --       --       --       --       --        --        --
   Exchange Rate ........       .890       --       --       --       --       --        --        --

Sterling
   Variable Rate Loan ...    $   6.5       --       --       --       --       --     $ 6.5     $ 6.5
   Avg. Interest Rate ...     7.4625%      --       --       --       --       --        --        --
   Exchange Rate ........      1.448       --       --       --       --       --        --        --
</TABLE>


                                       21
<PAGE>

The Company has a Euro interest rate swap agreement whereby the Company agreed
with the counterparty to exchange, at quarterly intervals, the difference
between the Company's fixed pay rate and the counterparty's variable pay rate of
three-month EURIBOR. The agreement, as amended, expired on April 1, 2001. At
December 31, 2000, the notional principal amount of the swap agreement was Euro
45 million (approximately $42.2 million) having a fixed rate of 3.835%. The fair
value of the swap at December 31, 2000 was $418,000.

In connection with the capital lease of the warehouse distribution center in
France, the Company entered into a French Franc interest rate swap agreement,
whereby the Company agreed with the counterparty to exchange, at quarterly
intervals, the difference between the Company's fixed pay rate and the
counterparty's variable pay rate of three-month EURIBOR. The agreement expires
March 10, 2005. At December 30, 2001 the notional principal amount of the swap
agreement was Euros 18.9 million (approximately $16.7 million) having a fixed
rate of 5.46%. The fair value of the swap at December 30, 2001 was Euros 786,000
million (approximately $693,000).

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is found immediately following the
signature page of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

None.


                                       22
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

Reference is made to the Company's definitive proxy statement for the 2002
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report. The information required by this Item and contained in
such definitive proxy statement is incorporated herein by reference. Reference
is also made to Item 4A in Part I of this Report with respect to the executive
officers of Registrant.

ITEM 11. EXECUTIVE COMPENSATION

Reference is made to the Company's definitive proxy statement for the 2002
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Reference is made to the Company's definitive proxy statement for the 2002
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reference is made to the Company's definitive proxy statement for the 2002
annual shareholders meeting involving the election of directors, which will be
filed with the Commission within 120 days after the end of the fiscal year
covered by this Report.


                                       23
<PAGE>

                                     PART IV

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

1.       FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:

(a) SLI, Inc. and subsidiaries

Report of Independent Auditors -- Ernst & Young LLP

Consolidated Balance Sheets of Registrant as of December 30, 2001 and December
31, 2000

Consolidated Statements of Operations of Registrant for the fiscal years ended
December 30, 2001, December 31, 2000 and January 2, 2000

Consolidated Statements of Stockholders' Equity for the fiscal years ended
December 30, 2001, December 31, 2000 and January 2, 2000

Consolidated Statements of Cash Flows of Registrant for the fiscal years ended
December 30, 2001, December 31, 2000 and January 2, 2000

Notes to Consolidated Financial Statements of Registrant

(b) Chicago Miniature Lamp (Canada), Inc.

Auditors' Report of Hards Pearson

2.       SCHEDULES.

All schedules other than Schedule II, Valuation and Qualifying Accounts, set
forth below, are omitted as the required information is inapplicable or is
presented in the financial statements or related notes which are incorporated
herein by reference.


                                       24

<PAGE>

3.       EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
-------                                           -----------
<S>             <C>

3.1(b)          Amended and Restated Certificate of Incorporation(1)
3.1(c)          Amendment to Company's Certificate of Incorporation changing the name of the Company to SLI, Inc.(1)
3.2             Bylaws(2)
4.1             Reference is made to Exhibits 3.1 and 3.2
4.2             Form of Common Stock Certificate(2)
10.1            Copy of Company's Incentive and Non-Statutory Stock Option Plan(2)
10.1(a)         Copy of Amendment to Company's Incentive and Non-Statutory Stock Option Plan(2)
10.1(b)         Copy of Amendment to Company's Incentive and Non-Statutory Stock Option Plan(1)
10.1(c)         Copy of Special 1997 Stock Option Plan(1)
10.2            Copy of Share Purchase Agreement by and between Xenell Corp. and VCH International Limited dated October 1, 1992(2)
10.3            Copy of Agreement for the Sale of Assets and Intellectual Property Rights by and between VCH International Limited,
                VCH Limited, Xenell Corp. and CML-Delaware dated October 20, 1992(2)
10.4            Copy of Asset Purchase Agreement by and between Glolite Sales, Ltd. and the Company dated March 1, 1993(2)
10.5            Copy of Contract for Purchase and Sale of Stock by and between the shareholders of Industrial Devices, Inc. and the
                Company dated March 31, 1994(2)
10.6            Copy of Agreement of Merger by and between Xenell Corp. and its shareholders and the Company and its shareholders
                dated December 15, 1993(2)
10.13           Copy of Contract for Purchase and Sale of Stock by between the shareholders of Plastomer, Inc. and the Company dated
                March 28, 1995(2)
10.17           Copy of Contract for Purchase and Sale of Stock by and between the shareholders of Fredon Development Industries,
                Inc. and the Company dated August 11, 1995(3)
10.18           Copy of Agreement for purchase of certain assets among STT Holdings Limited, STT Badalex Limited, STI Lighting
                Limited, PRT Shipping Limited, CML-Badalex Limited, PRT Industrial Holdings Limited and PRT Group Limited dated
                November 10, 1995(5)
10.19           Copy of Contract for Purchase and Sale of stock by and between the shareholders of Electro Fiberoptics, Inc. and the
                Company dated December 1, 1995(3)
10.20           Copy of Agreement for purchase of assets of Phoenix Lighting (UK) Limited by and among Phoenix Lighting (UK)
                Limited, Lynn Robert Bailey, Christopher John Barlow and the Company dated December 18, 1995(4)
10.23           Copy of Agreement on the Sale and Transfer of Shares and Interests in the Alba/Albrecht Group dated May 15, 1996(6)
10.24           Copy of Contract for Exchange of Stock by and between Werner A. Arnold and the Company dated May 15, 1996(6)
10.25           Copy of Contract for Purchase and Sale of Stock of Alba Lamps, Inc. by and between Werner A. Arnold and the Company
                dated May 15, 1996(6)
10.26           Copy of Contract for Purchase and Sale of Stock of Alba-Malaysia by and between Werner A. Arnold and the Company
                dated May 15, 1996(6)
10.28           Copy of Contract for Purchase and Sale of Stock of Valmont Electric, Inc. by and between Valmont Industries, Inc.
                and the Company dated January 3, 1997(8)
10.29           Copy of Joint Venture Agreement by and among Schott Corporation, CML Fiberoptics, Inc., Electro Fiberoptics Corp.,
                Schott CML Fiberoptics LLC, and the Company dated January 28, 1997(9)
10.30           Copy of Stock Purchase Agreement between the Sylvania Lighting International B.V. and the Company dated September 8,
                1997(10)
10.31           Asset Purchase and Security Agreement dated November 21, 1997 by and among the Company and Solium, Inc. and Pacific
                Scientific Company(1)
10.32           Acquisition Agreement dated January 7, 1997 between Gustav Bruckner GmbH and Alba Speziallampen Holding GmbH(1)
</TABLE>


                                       25
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
-------                                           -----------
<S>             <C>

10.33(a)        Amended and Restated Credit Agreement dated as of October 30, 1997 and amendments thereto(1)
10.33(b)        Second Amended and Restated Credit Agreement dated as of October 29, 1999(11)
10.34           Framework Agreement for Supply Contracts between Osram GmbH and EDIL International Lighting B.V.(1)
10.35           Amended and Restated Intellectual Property Allocation and License Agreement dated August 6, 1992 among EDIL
                International Lighting B.V. and Osram Acquisition Corporation and Osram GmbH(1)
10.36           Supply contract dated February 19, 1985 between Osram and Sylvania(1)
10.37           Purchase Agreement dated March 4, 1996 between Philips Lighting B.V. and Sylvania N.V.(1)
10.38           Settlement Agreement dated August 14, 1997 between Sylvania Lighting International B.V. and Osram GmbH(1)
10.39           Framework Agreement dated as of January 29, 1997 between Osram Sylvania Products, Inc. and Osram Sylvania and
                Sylvania Lighting International B.V.(1)
10.40           Agreement dated June 6, 1982 between Emgo and GTE Sylvania(1)
10.49           Purchase Agreement dated May 27, 2000 by and between the registrant and Emess Plc (12)
10.50           Fourth Amendment to the Second  Amended and Restated Credit Agreement dated as of November 13, 2001*
21.1            List of subsidiaries*
23.1(a)         Consent of Ernst & Young LLP*
23.1(b)         Consent of Hards Pearson*
</TABLE>

* Filed herewith

(1)      Incorporated by reference to the Exhibits included in the Company's
         Registration Statement on Form S-1, File No. 333-49287

(2)      Incorporated by reference to the Exhibits included in the Company's
         Registration Statement on Form S-1, File No. 33-90416.

(3)      Incorporated by reference to the Exhibits included in the Company's
         Form 10-K for the year ended December 3, 1995, File No. 0-25848.

(4)      Incorporated by reference to the Exhibits included in the Company's
         Form 10-Q for the quarter ended March 3, 1996, File No. 0-25848.

(5)      Incorporated by reference to the Exhibits included in the Company's
         Form 8-K dated November 10, 1995, File No. 0-25848.

(6)      Incorporated by reference to the Exhibits included in the Company's
         Form 8-K dated June 14, 1996, File No. 0-25848.

(7)      Incorporated by reference to the Exhibits included in the Company's
         Form 8-K dated November 10, 1995, File No. 0-25848.

(8)      Incorporated by reference to the Exhibits included in the Company's
         Form 8-K dated January 30, 1997, File No. 0-25848.

(9)      Incorporated by reference to the Exhibits included in the Company's
         Form 10-K dated December 1, 1996, File No. 0-25848.

(10)     Incorporated by reference to the Exhibits included in the Company's
         Form 8-K dated September 10, 1997, File No. 0-25848.

(11)     Incorporated by reference to the Exhibits included in the Company's
         Form 10-Q for the quarter ended April 2, 2000, File No. 0-25848.

(12)     Incorporated by reference to the Exhibits included in the Company's
         Form 10-Q for the quarter ended July 2, 2000, File No. 0-25848.


                                       26
<PAGE>

                                   SIGNATURES

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

Dated: March 29, 2002              SLI, INC.



                                   By: /s/ FRANK M.WARD
                                       -----------------------------------------
                                   Name: Frank M.Ward
                                   Title: President and Chief Executive Officer



                                   By: /s/ ROBERT J. MANCINI
                                       -----------------------------------------
                                   Name: Robert J. Mancini
                                   Title: Chief Financial Officer



                                   By: /s/ STEPHEN N. CUMMINGS
                                       -----------------------------------------
                                   Name: Stephen N. Cummings
                                   Title: Chief Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                 TITLE                   DATE
---------                                 -----                   ----
<S>                                      <C>                   <C>



/s/ FRANK M. WARD                        Director              March 29, 2002
----------------------------
Frank M. Ward



/s/ JOHN A. BOOKER                       Director              March 29, 2002
----------------------------
John A. Booker



                                         Director
----------------------------
Donald S. Dewsnap



/s/ MAURICE B. HARE                      Director              March 29, 2002
----------------------------
Maurice B. Hare



/s/ FREDERICK B. HOWARD                  Director              March 29, 2002
----------------------------
Frederick B. Howard



                                         Director
----------------------------
Fredric C. Kundahl
</TABLE>


                                       27

<PAGE>

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                           SLI, INC. AND SUBSIDIARIES
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                       BALANCE AT      CHARGED TO                                 BALANCE AT
                                                      BEGINNING OF     COSTS AND                                    END OF
                                                         PERIOD         EXPENSES     DEDUCTIONS      OTHER (1)      PERIOD
                                                      ------------     ----------    ----------      ---------    ----------
<S>                                                   <C>              <C>           <C>             <C>          <C>

Year ended December 30, 2001
  Reserves and allowances deducted
  From asset accounts:
    Allowance for uncollectible accounts .........       10,120           6,908        (6,492)          (262)       10,274
    Inventory reserves for excess and obsolete ...       24,593          12,085       (16,704)          (415)       19,559
Year ended December 31, 2000
  Reserves and allowances deducted
  From asset accounts:
    Allowance for uncollectible accounts .........        6,530           3,314        (2,331)         2,607        10,120
    Inventory reserves for excess and obsolete ...       10,275           3,977        (1,588)        11,929        24,593
Year ended January 2, 2000
  Reserves and allowances deducted
  From asset accounts:
    Allowance for uncollectible accounts .........        8,835             672        (1,653)        (1,324)        6,530
    Inventory reserves for excess and obsolete ...       14,073             949        (3,251)        (1,496)       10,275
</TABLE>

(1)      Represents allowance for doubtful accounts and inventory reserves for
         excess and obsolete acquired as a result of acquisitions, and the
         currency translation adjustments in these accounts during the period.


                                       28
<PAGE>

                                    SLI, INC.

                          INDEX TO FINANCIAL STATEMENTS

SLI, INC. AND SUBSIDIARIES

<TABLE>
<S>                                                                                                                <C>

Report of Independent Auditors - Ernst & Young LLP........................................................          F-2

Consolidated Balance Sheets as of December 30, 2001 and December 31, 2000.................................          F-3

Consolidated Statements of Operations for the years ended December 30, 2001,
  December 31, 2000 and January 2, 2000 ..................................................................          F-4

Consolidated Statements of Stockholders' Equity for the years ended
  December 30, 2001, December 31, 2000 and January 2, 2000 ...............................................          F-5

Consolidated Statements of Cash Flows for the years ended December 30, 2001,
  December 31, 2000 and January 2, 2000 ..................................................................          F-6

Notes to Consolidated Financial Statements................................................................          F-7

CHICAGO MINIATURE LAMP (CANADA), INC.

Auditors' Report - Hards Pearson..........................................................................         F-32
</TABLE>


                                      F-1

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
SLI, Inc.

We have audited the accompanying consolidated balance sheets of SLI, Inc. and
subsidiaries as of December 30, 2001 and December 31, 2000, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 30, 2001. Our audits also
included the financial statement schedule listed in the index at Item 14(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. We did not audit the financial
statements of Chicago Miniature Lamp (Canada), Inc., a wholly owned subsidiary,
which statements reflect net sales and income before income taxes of
approximately $19,005,000 and $2,218,000, and $20,891,000 and $3,422,000, for
the years ended December 31, 2000, and January 2, 2000, respectively. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to data included for Chicago Miniature
Lamp (Canada), Inc., is based solely on the report of the other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of other auditors
provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of SLI, Inc. and subsidiaries at December
30, 2001 and December 31, 2000, and the consolidated results of their operations
and their cash flows for each of the three years in the period ended December
30, 2001, in conformity with accounting principles generally accepted in the
United States.

As discussed in paragraph 6 of footnote 1 to the financial statements, the
Company has incurred significant losses in 2001 and is highly leveraged. The
Company's debt agreements also contain restrictive covenants that are closely
tied to the Company's forecasted results for Fiscal 2002. These conditions
raise substantial doubt about its ability to continue as a going concern.
Management's plan as to these matters are also described in paragraph 6 of
footnote 1. The 2001 financial statements do not include any adjustments that
might result from the outcome of this uncertainty.


                                             /s/ Ernst & Young LLP

Boston, Massachusetts
February 22, 2002,
except paragraph 6 of Footnote 1 and Footnote 23,
as to which the date is
March 28, 2002


                                      F-2
<PAGE>


                           SLI, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                DECEMBER 30, 2001     DECEMBER 31, 2000
                                                                                -----------------     -----------------
<S>                                                                             <C>                   <C>
ASSETS
Current assets:
   Cash and cash equivalents ...............................................        $  50,535            $    77,271
   Accounts receivable, less allowances for doubtful
      accounts of $10,274 and $10,120 at December 30, 2001,
      and December 31, 2000 ................................................          174,526                170,773
   Inventories .............................................................          178,850                192,915
   Prepaid expenses and other ..............................................           18,527                 17,899
                                                                                    ---------            -----------
Total current assets .......................................................          422,438                458,858
Property, plant, and equipment, net ........................................          365,693                391,211
Other assets:
   Goodwill, net of accumulated amortization ...............................           54,238                 86,828
   Other intangible assets, net of accumulated amortization ................           13,080                 15,432
   Other ...................................................................           17,479                 21,870
                                                                                    ---------            -----------
      Total other assets ...................................................           84,797                124,130
                                                                                    ---------            -----------
Net assets of discontinued operations ......................................               --                 63,485
                                                                                    ---------            -----------
Total assets ...............................................................        $ 872,928            $ 1,037,684
                                                                                    =========            ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Short-term notes payable ................................................        $  60,120            $    56,203
   Current portion of long-term debt .......................................           26,994                    318
   Long-term debt...........................................................          350,016                     --
   Accounts payable ........................................................          108,681                131,954
   Accrued expenses ........................................................           92,371                105,493
   Current portion of capital lease obligations ............................            1,152                  1,068
   Income taxes payable ....................................................           10,314                  7,412
                                                                                    ---------            -----------
Total current liabilities ..................................................          649,648                302,448
Long-term debt, less current portion .......................................            5,755                299,501
Other liabilities:
   Deferred income taxes ...................................................            7,956                  8,231
   Pension liability .......................................................           21,410                 22,402
   Long-term capital lease obligations, less current portion ...............           20,329                 16,550
   Minority interest .......................................................            5,769                  7,118
   Other long-term liabilities .............................................           14,274                 23,052
                                                                                    ---------            -----------
Total other liabilities ....................................................           69,738                 77,353
Commitments and contingencies ..............................................               --                     --
Net liabilities of discontinued operations .................................              477                     --
                                                                                    ---------            -----------
Stockholders' equity:
   Preferred stock, $.01 par value -- Authorized --
      5,000,000 shares, none issued and outstanding ........................               --                     --
   Common stock, $.01 par value -- Authorized -- 100,000,000 shares --
      Issued and outstanding -- 33,405,229 shares at December 30,
      2001, and issued -- 34,727,206 shares at December 31, 2000 ...........              334                    347
   Additional paid-in capital ..............................................          272,270                286,149
   Retained earnings (deficit) .............................................          (43,615)               123,410
   Accumulated other comprehensive loss ....................................          (81,679)               (51,524)
                                                                                    ---------            -----------
   Total stockholders' equity ..............................................          147,310                358,382
                                                                                    ---------            -----------
Total liabilities and stockholders' equity .................................        $ 872,928            $ 1,037,684
                                                                                    =========            ===========
</TABLE>

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


                                      F-3

<PAGE>

                           SLI, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             YEAR ENDED
                                                                        DECEMBER 30,         DECEMBER 31,          JANUARY 2,
                                                                            2001                 2000                 2000
                                                                        ------------         ------------         ------------
<S>                                                                     <C>                  <C>                  <C>

Net sales ......................................................        $    851,186         $    853,488         $    783,409
Cost of products sold ..........................................             664,060              640,275              581,278
                                                                        ------------         ------------         ------------
Gross margin ...................................................             187,126              213,213              202,131
Selling, general, and administrative expenses ..................             184,211              164,604              139,801
Restructuring costs ............................................              58,947                8,106                2,300
                                                                        ------------         ------------         ------------
Operating income (loss) ........................................             (56,032)              40,503               60,030
Other (income) expenses:
   Interest expense ............................................              28,621               18,528               15,233
   Interest income .............................................              (1,366)              (1,613)                (913)
   Loss on sale of assets ......................................               4,163                   --                   --
   Other, net ..................................................               1,148               (6,419)              (1,821)
                                                                        ------------         ------------         ------------
Income before income taxes .....................................             (88,598)              30,007               47,531
Income taxes ...................................................               4,615                5,890                6,718
                                                                        ------------         ------------         ------------
Income (loss) from continuing operations .......................             (93,213)              24,117               40,813
                                                                        ------------         ------------         ------------

Discontinued operations
   Loss from operations ........................................              (5,932)              (3,053)              (2,504)
   Loss from disposal ..........................................             (62,982)                  --                   --
                                                                        ------------         ------------         ------------
Loss from discontinued operations, (net of income taxes) .......             (68,914)              (3,053)              (2,504)

Net Income (loss) ..............................................        $   (162,127)        $     21,064         $     38,309
                                                                        ============         ============         ============

Net income (loss) per common share -- Basic
   Income (loss) from continuing operations ....................        $      (2.71)        $       0.70         $       1.27
   Loss from discontinued operations ...........................               (2.01)               (0.09)               (0.08)
                                                                        ------------         ------------         ------------
   Net income (loss) per common share ..........................        $      (4.72)        $       0.61         $       1.19
                                                                        ============         ============         ============

   Weighted-average shares outstanding .........................          34,367,770           34,328,483           32,289,924
                                                                        ============         ============         ============

Net income (loss) per common share -- Dilutive
   Income (loss) from continuing operations ....................        $      (2.71)        $       0.70         $       1.21
   Loss from discontinued operations ...........................               (2.01)               (0.09)               (0.07)
                                                                        ------------         ------------         ------------
   Net income (loss) per common share ..........................        $      (4.72)        $       0.61         $       1.14
                                                                        ============         ============         ============

   Weighted-average shares outstanding .........................          34,367,770           34,566,494           33,501,453
                                                                        ============         ============         ============
</TABLE>

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


                                      F-4

<PAGE>

                           SLI, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                       COMMON STOCK
                                                 -----------------------
                                                                               COMMON
                                                   NUMBER                       STOCK         ADDITIONAL
                                                     OF             PAR         TO BE          PAID-IN         TREASURY
                                                   SHARES          VALUE        ISSUED         CAPITAL          STOCK
                                                 ----------        -----       --------       ----------       --------

<S>                                              <C>               <C>         <C>            <C>              <C>
Balance at January 3, 1999 ...............       29,346,498        $293        $  8,419        $131,399        $ (4,084)
Comprehensive income:
  Net income .............................               --          --              --              --              --
  Translation adjustment .................               --          --              --              --              --

  Total comprehensive income .............               --          --              --              --              --
Issuance of common stock:
  Public offering, including over
    allotment, net of offering costs .....        6,000,000          60              --         153,403              --
  Acquisitions ...........................          480,189           5           6,868          12,572              --
  Exercise of stock options ..............          542,118           6              --           5,766              --
Purchase 1,936,517 shares for treasury ...               --          --              --              --         (24,961)
Retire treasury shares ...................       (1,802,417)        (18)             --         (24,193)         24,211
                                                 ----------        ----        --------        --------        --------
Balance at January 2, 2000 ...............       34,566,388         346          15,287         278,947          (4,834)
Comprehensive income:
  Net income .............................               --          --              --              --              --
  Translation adjustment .................               --          --              --              --              --

Total comprehensive income ...............               --          --              --              --              --
Issuance of common stock:
  Offering costs .........................               --          --              --             (21)             --
  Acquisitions ...........................          826,318           8         (15,287)         15,279              --
  Exercise of stock options ..............           88,000           1              --             742              --
Tax benefit of exercise of
  non-qualified stock options ............               --          --              --              42              --
Purchase 303,500 shares for treasury .....               --          --              --              --          (3,756)
Retire treasury shares ...................         (753,500)         (8)             --          (8,582)          8,590
Interest on forward share
  purchase agreement .....................               --          --              --            (258)             --
Cash dividends - $0.40 per share .........               --          --              --              --              --
                                                 ----------        ----        --------        --------        --------
Balance at December 31, 2000 .............       34,727,206         347              --         286,149              --
Comprehensive income:
  Net Income .............................               --          --              --              --              --
  Translation adjustment .................               --          --              --              --              --
  Loss on interest rate swap .............               --          --              --              --              --

Total comprehensive income ...............               --          --              --              --              --
Issuance of common stock:
  Acquisitions ...........................          200,000           2              --           1,798              --
  Other issuance .........................           90,923           1              --              15              --
Purchase and retire treasury shares ......       (1,612,900)        (16)             --              --              --
Interest and payment on forward share
  purchase agreement .....................               --          --              --         (15,692)             --
Cash dividends -  $0.15 per share ........               --          --              --              --              --
                                                 ----------        ----        --------        --------        --------
Balance at December 30, 2001 .............       33,405,229        $334        $     --        $272,270        $     --
                                                 ==========        ====        ========        ========        ========

<CAPTION>
                                                                 ACCUMULATED
                                                                    OTHER
                                                   RETAINED     COMPREHENSIVE
                                                   EARNINGS          LOSS            TOTAL
                                                   --------     -------------      ---------

<S>                                                <C>          <C>                <C>
Balance at January 3, 1999 ...............         $ 77,703        $  4,080        $ 217,810
Comprehensive income:
  Net income .............................           38,309              --           38,309
  Translation adjustment .................               --         (35,821)         (35,821)
                                                                                   ---------
  Total comprehensive income .............               --              --            2,488
Issuance of common stock:
  Public offering, including over
    allotment, net of offering costs .....               --              --          153,463
  Acquisitions ...........................               --              --           19,445
  Exercise of stock options ..............               --              --            5,772
Purchase 1,936,517 shares for treasury ...               --              --          (24,961)
Retire treasury shares ...................               --              --               --
                                                   --------        --------        ---------
Balance at January 2, 2000 ...............          116,012         (31,741)         374,017
Comprehensive income:
  Net income .............................           21,064              --           21,064
  Translation adjustment .................               --         (19,783)         (19,783)
                                                                                   ---------
Total comprehensive income ...............               --              --            1,281
Issuance of common stock:
  Offering costs .........................               --              --              (21)
  Acquisitions ...........................               --              --               --
  Exercise of stock options ..............               --              --              743
Tax benefit of exercise of
  non-qualified stock options ............               --              --               42
Purchase 303,500 shares for treasury .....               --              --           (3,756)
Purchase and retire treasury shares ......               --              --               --
Interest on forward share
  purchase agreement .....................               --              --             (258)
Cash dividends - $0.40 per share .........          (13,666)             --          (13,666)
                                                   --------        --------        ---------
Balance at December 31, 2000 .............          123,410         (51,524)         358,382
Comprehensive income:
  Net Income .............................         (162,127)             --         (162,127)
  Translation adjustment .................               --         (29,462)         (29,462)
  Loss on interest rate swap .............               --            (693)            (693)
                                                                                   ---------
Total comprehensive income ...............               --              --         (192,282)
Issuance of common stock:
  Acquisitions ...........................               --              --            1,800
  Other issuance .........................               --              --               16
Purchase and retire treasury shares ......               --              --              (16)
Interest and payment on forward share
  purchase agreement .....................               --              --          (15,692)
Cash dividends -  $0.15 per share ........           (4,898)             --           (4,898)
                                                   --------        --------        ---------
Balance at December 30, 2001 .............         $(43,615)       $(81,679)       $ 147,310
                                                   ========        ========        =========
</TABLE>

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


                                      F-5

<PAGE>

                           SLI, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           YEAR ENDED
                                                                         DECEMBER 30,     DECEMBER 31,       JANUARY 2,
                                                                             2001             2000              2000
                                                                         ------------     ------------       ----------
<S>                                                                      <C>              <C>                <C>
OPERATING ACTIVITIES
Net income (loss) .................................................        $(93,213)        $  24,117         $  40,813
Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
     Depreciation and amortization ................................          36,437            26,860            21,709
     Deferred income taxes ........................................            (108)           (3,724)              (69)
     Other ........................................................              --                42                --
     Loss from sale of property, plant, and equipment .............          70,512                --                --
     Changes in operating assets and liabilities:
         Accounts receivable ......................................          (8,557)            6,444           (29,889)
         Inventories ..............................................           2,440            (5,366)          (17,095)
         Prepaid expenses and other ...............................          (1,500)            7,232            (2,233)
         Accounts payable .........................................         (16,023)             (579)          (10,354)
         Accrued expenses .........................................         (17,167)           (7,987)           (7,796)
         Income taxes payable .....................................            (735)            3,278             3,811
         Other long-term liabilities ..............................          (1,723)           (5,101)             (646)
                                                                           --------         ---------         ---------
Net cash provided by (used in) operating activities ...............         (29,637)           45,216            (1,749)
                                                                           --------         ---------         ---------
Net cash used in discontinued operations ..........................          (8,898)           (8,940)          (16,672)

INVESTING ACTIVITIES
Purchases of property, plant, and equipment .......................         (37,606)          (34,703)          (51,018)
Proceeds from disposal of property, plant, and equipment ..........           7,712            26,759               481
Proceeds from sale of other investments ...........................              --                --               332
Acquisitions, net of cash acquired ................................          (8,752)         (111,907)           (8,285)
                                                                           --------         ---------         ---------
Net cash used in investing activities .............................         (38,646)         (119,851)          (58,490)

FINANCING ACTIVITIES
Net borrowings of short term debt .................................          26,676               441            27,997
Net borrowings (repayments) of revolving credit line ..............          59,837           127,482           (78,561)
Proceeds from long-term debt ......................................              --                --               412
Payments of long-term debt ........................................          (1,128)           (4,338)           (5,820)
Payment of deferred financing costs ...............................              --                --            (1,556)
Proceeds from sale of receivables .................................              --            25,965                --
Proceeds from issuance of common stock - net of offering costs ....              --               (21)          153,475
Repurchase of shares for treasury .................................              --            (3,756)          (24,962)
Interest paid on forward share agreement ..........................         (15,692)             (258)               --
Exercise of stock options .........................................              --               743             6,451
Payment of dividends ..............................................          (8,391)          (10,173)               --
                                                                           --------         ---------         ---------
Net cash provided by financing activities .........................          61,302           136,085            77,436
Effect of exchange rate changes on cash ...........................         (10,857)           (1,087)           (2,067)
                                                                           --------         ---------         ---------
Net increase (decrease) in cash and cash equivalents ..............         (26,736)           51,423            (1,542)
Cash and cash equivalents, beginning of year ......................          77,271            25,848            27,390
                                                                           --------         ---------         ---------
Cash and cash equivalents, end of year ............................        $ 50,535         $  77,271         $  25,848
                                                                           ========         =========         =========
Supplemental disclosure of cash flow information:
    Cash paid for:
     Interest.........................................................     $ 24,957         $  21,028         $  16,306
     Income taxes.....................................................     $  5,503         $   4,875         $   3,229
</TABLE>

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


                                      F-6
<PAGE>
                           SLI, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       ORGANIZATION AND ACQUISITIONS

SLI, Inc. (an Oklahoma corporation) and subsidiaries (collectively, the Company)
operates in multi-business segments as a vertically integrated manufacturer and
supplier of lighting systems, which include lamps, fixtures, and ballasts.
Through its 26 acquisitions completed since 1992, the Company has grown from a
specialized manufacturer of neon lamps and miniature lighting products into a
manufacturer and supplier of a wide variety of lighting products, including
lamps, (incandescent, fluorescent, compact fluorescent, HID, halogen, miniature
incandescent, neon, LEDs, and special lamps), fixtures, ballasts, and fiber
optic lighting systems. The Company serves a diverse, international customer
base and at December 30, 2001, had 37 manufacturing plants in 12 countries.

In January 2001, the Company acquired EBT (Germany) for approximately $10
million in cash as financed primarily through the Company's credit facility and
200,000 common shares. The acquired company assembles and distributes light
emitting diodes (LED) products in Europe.

In July 2000, the Company acquired certain business lines of Emess Plc for
approximately $102 million in cash, as financed primarily through the Company's
credit facility, and the assumption of $14.4 million of liabilities. The
acquired business lines include a 78% interest in Brilliant AG (Germany), a
leading brand in decorative lighting and fixtures for the European retail
market, Marlin (UK), a UK market leader in architectural and display lighting
fixtures, Eclatec (France), an outdoor lighting manufacturer, and Emess Lighting
Inc. (USA), a leading brand of table lamps. The acquisition has been accounted
for using the purchase method. The results of the Brilliant operations were
reported using the equity method until effective control was established in
November 2000. Effective September 2000, the Company purchased certain assets of
a UK based lamp-glass manufacturer for approximately $18 million in cash.

SLI, Inc. acquired four companies in 1999 for approximately $7.5 million in cash
and 428,182 common shares newly issued in 1999 and 713,818 shares newly issued
in 2000 (common shares valued at a total of approximately $21.1 million) and the
assumption of approximately $2.5 million of liabilities. Two of these purchase
agreements require contingent purchase price adjustments if certain conditions
are met, including management retention for a period of time, increased pretax
income, and new business revenue. These amounts will be recorded as additional
purchase price when the related contingency is resolved. No contingent purchase
price had been paid or recorded at January 2, 2000, or December 31, 2000.
Additionally, the Company acquired the remaining outstanding common stock of a
1998 acquisition for $3.0 million in cash.

These acquisitions were accounted for as purchases, and accordingly, the assets
and liabilities of the acquired entities have been recorded at their estimated
fair values at the dates of acquisition. The excess of purchase price over the
estimated values of the net assets acquired, in the amount of $8.3 million,
$40.3 million and $14.6 million in 2001, 2000 and 1999, respectively, has been
recorded in goodwill. The balances and results of the acquired companies are
included in the Company's consolidated amounts since the dates of acquisition,
except for the July 2000 Brilliant acquisition, which was not consolidated until
control was obtained in November 2000.

The Company experienced significant operating and cash flow losses during Fiscal
2001, which ultimately led to the amendment of the Company's Revolving Credit
Agreement with its Senior lenders. The covenants, which were amended as part of
this process, are restrictive, and very closely tied to management's ability to
meet forecasted operating and cash flow results, which raises substantial doubt
about its ability to continue as a going concern.  The Company has a number of
actions that can be taken including but not limited to the sale of Company
non-core assets and sale of business operations, that when considered in
combination with management's forecasted results is expected to provide the
Company sufficient ability to remain in compliance with its debt covenants
through Fiscal 2002.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated from the consolidated financial statements.


                                      F-7
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FISCAL YEAR

The Company's financial reporting year-end is the Sunday nearest to December 31
of each year. All references herein for the years 1999, 2000 and 2001 represent
the fiscal years ended January 2, 2000, December 31, 2000 and December 30, 2001.

RECLASSIFICATIONS

Certain amounts in the fiscal 2000 and 1999 financial statements have been
reclassified to conform with the fiscal 2001 presentation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

WARRANTY

Prior to June 2001 and the disposal of the Power Lighting Products (PLP)
segment, the Company estimated its ballast warranty liability at the time of
sale based upon historical warranty information. Management performs a review of
the amount accrued each quarter. In 2001 and 2000, as a result of this ongoing
analysis, management determined that this warranty liability was overstated and
reduced the liability by approximately $1.0 million and $4.7 million,
respectively. The change in estimate was recorded as a reduction in cost of
products sold.

REVENUE RECOGNITION

Revenues from product sales are recognized at the time of shipment when title
transfers. Revenue under long-term contracts is accounted for using the
percentage of completion method. Under this method, revenue is recognized as
work progresses in the ratio that costs incurred bear to estimated total costs.
Costs and estimated earnings in excess of amounts billed are classified as
current assets and amounts billed in excess of costs and estimated earnings
recognized to date are classified as current liabilities. Any anticipated losses
on contracts are charged to earnings when identified.

SHIPPING AND HANDLING COSTS

The Company records shipping and handling costs in Cost of Products Sold.
Shipping and handling costs were $33.5 million, $29.5 million and $26.1 million
for the years ended December 30, 2001, December 31, 2000 and January 2, 2000,
respectively.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.


                                      F-8
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost or market, with cost determined by
the first-in, first-out (FIFO) method. Inventories consist of the following
(dollars in thousands):

<TABLE>
<CAPTION>
                                           DECEMBER 30,     DECEMBER 31,
                                               2001             2000
                                           ------------     ------------
         <S>                               <C>              <C>
         Raw materials ............         $  41,751         $  49,113
         Work in process ..........            16,730            20,948
         Finished goods ...........           120,369           122,854
                                            ---------         ---------
                                            $ 178,850         $ 192,915
                                            =========         =========
</TABLE>

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. The company provides for
depreciation using the straight-line method over the following estimated useful
lives:

<TABLE>
<S>                                                  <C>
         Buildings and improvements .........        25-39 years
         Machinery and equipment ............        12-25 years
         Molds ..............................        10-20 years
         Furniture and fixtures .............         5-10 years
</TABLE>

Leasehold improvements are amortized on a straight-line basis over the shorter
of the estimated useful lives of the assets or the remaining lease term.

GOODWILL

Goodwill is amortized on a straight-line basis over the estimated useful life,
which ranges from 25 to 40 years. Accumulated amortization is approximately $5.1
million and $5.4 million at December 30, 2001 and December 31, 2000,
respectively. Amortization expense was approximately $3.3 million, $3.4 million
and $1.7 million for fiscal 2001, 2000 and 1999, respectively. The Company
continually reviews its goodwill for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable. In performing
the review for collectibility, the Company estimates the future cash flows
expected to result from the use of the goodwill. If the sum of the expected
future cash flow (undiscounted and without interest charges) is less than the
carrying amount of the goodwill, an impairment loss is recognized. Measurement
of such impairment loss for goodwill that the Company expects to hold and use is
based on the excess of the carrying value over its fair value. The Company
recorded a $32.9 million write-off of goodwill for the year ended December 30,
2001, as a result of an agreement to sell certain assets and service contracts
of its lighting and service and maintenance business.

OTHER INTANGIBLE ASSETS

Other intangible assets include the fair value of engineering technology and
patents. The intangibles are being amortized using the straight-line method over
their respective useful lives or contract periods, which range from 3 to 25
years. Amortization expense was approximately $2.6 million, $1.5 million and
$1.4 million for fiscal 2001, 2000 and 1999, respectively. Other intangible
assets, net of accumulated amortization consists of (dollars in thousands):


                                      F-9
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                                DECEMBER 30,          DECEMBER 31,
                                                                    2001                  2000
                                                                ------------          ------------
         <S>                                                    <C>                   <C>
         Engineering technology ......................          $      4,406          $      7,425
         Patents and noncompete agreements ...........                11,793                 9,885
                                                                ------------          ------------
                                                                      16,199                17,310
         Less: Accumulated amortization ..............                 3,119                 1,878
                                                                ------------          ------------
                                                                $     13,080          $     15,432
                                                                ============          ============
</TABLE>

MINORITY INTEREST IN SUBSIDIARIES

Minority interest is included in other (income) expense in the statement of
income of the Company and represents the minority shareholders' share of the
income of Brilliant AG (22% minority interest) and SLI Opto, Inc. (30% minority
interest). The minority interest in the consolidated balance sheets reflect the
original investment by these minority shareholders in these consolidated
subsidiaries, along with their proportional share of the earnings or losses of
these subsidiaries.

FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest and foreign exchange rates. The fair value for
financial instruments is based on information available and provided by
financial institutions to management. Financial instruments are not used for
trading purposes.

The Company and its subsidiaries utilize forward foreign currency exchange
contracts to minimize the impact of currency movements, principally on
anticipated intercompany inventory purchases and loans denominated in currencies
other than their functional currencies.

The Company may enter into interest rate swap agreements to limit the effect of
increases in the interest rates on any floating rate debt. The differential, as
specified in the swap contract, is accrued as interest rates change and is
recorded in interest expense. Upon termination of interest rate swap agreements,
any resulting gain or loss is recognized over the shorter of the remaining
original term of the hedging instrument or the remaining life of the underlying
debt obligation.

The Company recognizes all derivative financial instruments in the consolidated
financial statements at fair value, regardless of the purpose or intent for
holding the instrument, in accordance with Statement No. 133. Changes in the
fair value of derivative financial instruments are either recognized
periodically in earnings or in stockholders' equity as a component of
comprehensive income depending on whether the derivative financial instrument
qualifies for hedge accounting. Changes in fair values of derivatives not
qualifying for hedge accounting are reported in earnings.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the year incurred
and totaled $6.8 million, $6.6 million and $7.4 million for fiscal 2001, 2000
and 1999, respectively.

ADVERTISING COSTS

Advertising costs are charged to expense in the period incurred. Advertising
expense for 2001, 2000 and 1999 was approximately $9.8 million, $10.5 million
and $10.0 million, respectively.

INCOME TAXES

Deferred income taxes are recognized based on the expected future tax
consequences of differences between the financial statement and tax bases of
assets and liabilities, calculated using enacted tax rates in effect for the
year in which the differences are expected to be reflected in the tax return.
Tax benefits subsequently realized, which are related to deferred tax assets
with a valuation allowance recorded in connection with a business acquisition,
will first reduce goodwill and other intangible assets related to the
acquisition to zero and any remaining tax benefit will be accounted for in the
current statement of income.


                                      F-10
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FOREIGN CURRENCY TRANSLATION

Transactions arising in foreign currencies have been translated at rates of
exchange in effect at the dates of the transactions. Gains or losses during the
year have been included in net income. Assets and liabilities of foreign
affiliates that use the local currency as their functional currency are
translated at current exchange rates, and income statement accounts are
translated at the average rates during the period. Related translation
adjustments are reported as a component of comprehensive income directly in
equity.

TREASURY STOCK

The board of directors has authorized, subject to certain business and market
conditions, the repurchase of shares of the Company's stock. For the three years
ended December 30, 2001, a total of 4,168,817 shares have been repurchased under
these plans and retired. Also see Note 17 discussion of forward share purchase
agreement.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing income available to common
stockholders (the numerator) by the weighted-average number of common shares
outstanding (the denominator) for the period. The computation of the diluted
earnings per share is similar to the basic earnings per share, except that the
denominator is increased to include additional common shares that would have
been outstanding, assuming the exercise of dilutive stock options using the
treasury stock method.

The numerator in calculating both basic and diluted earnings per share for each
year is reported net income. The denominator is based on the following
weighted-average number of common shares:

<TABLE>
<CAPTION>
                              2001                2000                1999
                           ----------          ----------          ----------
<S>                        <C>                 <C>                 <C>
Basic ...........          34,367,770          34,328,483          32,289,924
Diluted .........          34,367,770          34,566,494          33,501,453
</TABLE>

The following stock options are not included in the diluted earnings per share
calculation since in each case the exercise price is greater than the average
market price:

<TABLE>
<CAPTION>
                               2001               2000                1999
                            ---------           ---------           --------
<S>                         <C>                 <C>                 <C>
Stock options ...           3,883,299           1,623,199           795,302
</TABLE>


                                      F-11
<PAGE>
                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ADOPTION OF ACCOUNTING PRINCIPLES

In October 2001, the Financial Accounting Standards Board (FASB) issued
Statement No. 144 "Accounting for the Impairment or Disposal of Long-Lived
Assets". This statement supercedes Statement No. 121. Although this statement
retains many of the fundamental provisions of Statement No. 121, it expands the
scope of discontinued operations to include more disposal transactions and
significantly changes the criteria for classifying an asset as held-for-sale.
The provisions of this Statement are effective for fiscal years beginning after
December 15, 2001. Management does not believe the adoption of this statement
will have a material impact on the Company's overall financial results of
operations.

In July 2001, the FASB issued Statement No. 143 "Accounting for Asset Retirement
Obligations". This Statement requires that the fair value of a liability for an
asset retirement obligation be recorded in the period in which it is incurred
and to capitalize costs as part of the carrying amount of the long-lived asset.
Adoption of this Statement is required for fiscal years beginning after June 15,
2002. Management does not believe that the adoption of this Statement will have
a material impact on the Company's overall financial position or results of
operations.

In June 2001, the FASB issued Statements of Financial Accounting Standards No.
141 "Business Combinations" and No. 142 "Goodwill and Other Intangible Assets"
(the "Statements"), effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill will no longer be amortized but will be
subject to annual impairment tests in accordance with the Statements. The
Company will apply the new rules on accounting for goodwill and other
intangibles beginning in the first quarter of 2002. Application of the
non-amortization provisions of the Statements is expected to result in an
increase in net income of approximately $3.3 million per year. Management does
not believe that the adoption of this statement will have a material impact on
the Company's overall financial position or results of operations.

The Company was required to adopt the Statement of Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (Statement 133),
as amended by SFAS Nos. 137 and 138 effective January 1, 2001. Statement 133
requires all derivatives to be recognized in the balance sheet as either assets
or liabilities at fair value. Derivatives not qualifying for special hedge
accounting must be adjusted to fair value through income. If the derivative is a
hedge, depending on the nature of the hedge, changes in the fair value of
derivatives will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings, or recognized in
other comprehensive income until the hedged item is recognized in income. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. Management believes the adoption of Statement 133 will
not have a material effect on the financial position or results of operations of
the Company.

In September 2000, the FASB issued Statement No. 140 "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities." This
statement replaces Statement 125 with the same name. Statement 140 revises the
standards for accounting and securitizations and other transfers of financial
assets and collateral and requires certain disclosures, but carries over most of
Statement 125's provisions. Statement 140 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
March 31, 2001. However, certain provisions regarding the recognition and
reclassification of collateral and certain disclosures relating to
securitization transactions and collateral are effective for the Company's
financial statements for the year ended December 31, 2000. The adoption of this
statement, with regard to the provisions for the recognition and
reclassification of collateral, did not affect the Company's accompanying
consolidated financial statements. Management is currently evaluating the effect
of adopting this statement, with regard to the revised accounting standards
effective for transactions occurring after March 31, 2001. See Note 10 for
disclosures relating to securitization transactions and collateral as required
by this statement.

3.       PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                DECEMBER 30,          DECEMBER 31,
                                                                    2001                  2000
                                                                ------------          ------------
                                                                     (DOLLARS IN THOUSANDS)
         <S>                                                    <C>                   <C>
         Land ........................................          $     17,166          $     17,920
         Buildings and improvements ..................                90,176                94,371
         Machinery and equipment .....................               283,467               291,281
         Molds .......................................                29,948                25,495
         Furniture and fixtures ......................                15,708                15,857
                                                                ------------          ------------
                                                                     436,465               444,924
         Less: Accumulated depreciation ..............                70,772                53,713
                                                                ------------          ------------
                                                                $    365,693          $    391,211
                                                                ============          ============
</TABLE>

Depreciation expense was approximately $30.5 million, $22.0 million and $18.6
million for fiscal 2001, 2000 and 1999, respectively.

In the most part, 100% of the United States, plant, property and equipment is
collateralized for the Revolving Credit Facility.

                                      F-12
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4.       DEBT

LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                DECEMBER 30,          DECEMBER 31,
                                                                    2001                  2000
                                                                ------------          ------------
                                                                       (DOLLARS IN THOUSANDS)
         <S>                                                    <C>                   <C>
         Revolving credit facility and term loan .....          $    377,010          $    293,418
         Other debt ..................................                 5,755                 6,401
                                                                ------------          ------------
                                                                     382,765               299,819
         Less: Current portion .......................               377,010                   318
                                                                ------------          ------------
         Total long term debt ........................          $      5,755          $    299,501
                                                                ============          ============
</TABLE>

On November 13, 2001 the Company entered into a Fourth Amendment to its Second
Amended and Restated Credit Agreement, which is effective September 30, 2001 and
provides for the conversion of the Company's 364-day Revolving Credit and Term
Loan Facility, under which $80 million was outstanding, into a Term Loan
maturing in October 2004, amortizing in equal installments over that term. The
Fourth Amendment also permits the Company to maintain its $300 million Revolving
Credit Facility. Under the terms of the Fourth Amendment, the financial
covenants which the Company is required by its lenders to maintain, include a
maximum leverage ratio, an interest coverage ratio and a fixed charge coverage
ratio, have been amended so that the Company is in compliance with such
covenants as of December 30, 2001 and expects to remain in compliance with such
covenants for the remainder of the term of the agreement.

The Fourth Amendment also includes certain non-financial covenants. Due to the
going concern modification to the opinion on the December 30, 2001 financial
statements, the Company is in default of the Revolving Credit Facility. The
Company is in the process of taking several actions, including negotiating with
its credit lenders to revise this covenant or to obtain an appropriate waiver.
There can be no assurance, however, that the Company's lender group will agree
to such actions. Accordingly, the Company has classified the indebtedness under
the Revolving Credit Facility and Term Loan as a current liability in the
accompanying balance sheet.

The Credit Agreement calls for the quarterly amortization in the amount of $6.7
million, payable on January 1, April 1, July 1 and October 1 of each fiscal
year, maturing on October 31, 2004.

Under the Fourth Amendment, the applicable interest rates on such indebtedness
are Libor plus 3.75% or base rate plus 2.25%, so long as total outstanding
indebtedness under the Revolving Credit Facility and the Term Loan exceeds $300
million, reducing to Libor plus 2.5% or base plus 1% if such total outstanding
indebtedness is below $200 million.

At December 30, 2001, long-term debt includes $15.2 million denominated in Euro
(bearing interest of 6.4318%) and $6.5 million in Sterling (bearing interest at
7.4625% per annum) under the Credit Agreement.

At December 30, 2001, the Company had outstanding letters of credit totaling
$2.3 million.

The Company uses interest rate swaps to reduce the impact on interest expense of
fluctuating interest rates on its variable rate debt (see Note 17).


                                      F-13
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company incurred interest expense costs of $28.6 million and capitalized
interest of $957,000 in the year ended December 30, 2001.

As of December 31, 2001, annual debt principal payments required were as follows
(dollars in thousands):

<TABLE>
         <S>                                <C>
         2002 ....................          $377,010
         2003 ....................             1,755
         2004 ....................               574
         2005 ....................               410
         2006 ....................               264
         Thereafter ..............             2,752
                                            --------
                                            $382,765
                                            ========
</TABLE>

SHORT-TERM DEBT

Short-term borrowings in the amounts of approximately $60.1 million and $56.2
million at December 30, 2001 and December 31, 2000, respectively, primarily
consisted of borrowings under the terms of uncommitted lines of credit or other
short-term borrowing arrangements. The weighted-average interest rate on
short-term borrowings outstanding at December 30, 2001 and December 31, 2000,
was 6.0% and 6.8%, respectively. No material compensating balances are required
or maintained.

5.       INCOME TAXES

The following is a summary of income (loss) before income taxes (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                              DECEMBER 30,       DECEMBER 31,        JANUARY 2,
                                                 2001                2000               2000
                                              ------------       ------------        ----------
         <S>                                  <C>                <C>                 <C>
         Domestic operations .........          $(93,993)          $ (9,631)          $ (4,955)
         Foreign operations ..........             5,395             39,638             52,486
                                                --------           --------           --------
                                                $(88,598)          $ 30,007           $ 47,531
                                                ========           ========           ========
</TABLE>

The following is a summary of the provision (benefit) for income taxes (dollars
in thousands):

<TABLE>
<CAPTION>
                                                                  YEAR ENDED
                                              DECEMBER 30,       DECEMBER 31,        JANUARY 2,
                                                 2001                2000               2000
                                              ------------       ------------        ----------
         <S>                                  <C>                <C>                 <C>
         U.S. Federal:
         Current .....................          $     --           $    810           $    441
         Deferred ....................                --             (1,358)               105
                                                --------           --------           --------
                                                      --               (548)               546
         U.S. States:
         Current .....................               435                184                 11
         Deferred ....................                --                (72)                 5
                                                --------           --------           --------
                                                     435                112                 16
         Foreign:
         Current .....................             4,455              8,620              6,335
         Deferred ....................              (275)            (2,294)              (179)
                                                --------           --------           --------
                                                   4,180              6,326              6,156
                                                --------           --------           --------
                                                $  4,615           $  5,890           $  6,718
                                                ========           ========           ========
</TABLE>


                                      F-14
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's manufacturing facility in Costa Rica is operated under a tax
holiday, which expires in 2005. The impact of this tax holiday was an increase
to net income of $1,118,000 or $.03 per share-basic for fiscal 2001, $1,823,000
or $.05 per share-basic for fiscal 2000, and $1,385,000 or $.04 per share-basic
for fiscal 1999.

A reconciliation between the provision (benefit) for income taxes computed at
statutory rates and the amount reflected in the accompanying consolidated
statements of operations is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                                      YEAR ENDED
                                                                                   DECEMBER 30,       DECEMBER 31,        JANUARY 2,
                                                                                       2001               2000               2000
                                                                                   ------------       ------------        ----------
<S>                                                                                <C>                <C>                 <C>
Computed federal tax provision (benefit) at
   U.S. statutory rates ...................................................          $(31,009)          $ 10,502           $ 16,636
Increase (decrease) in taxes resulting from:
   Amortization of goodwill that is not
       deductible for tax purposes ........................................             9,547                664                567
   State income taxes (benefit), net of federal benefit (taxes) ...........               435               (264)                --
   Effect of different income tax rates of foreign countries ..............            (1,091)            (3,055)            (6,238)
   Net operating losses not benefited .....................................            26,348              5,609              2,451
   Utilization of net operating loss carryforwards ........................                --             (7,714)            (5,136)
   U.S. Tax on Repatriated Foreign Earnings ...............................               274                494                 --
   Other ..................................................................               111               (346)            (1,562)
                                                                                     --------           --------           --------
                                                                                     $  4,615           $  5,890           $  6,718
                                                                                     ========           ========           ========
</TABLE>

The significant items comprising net deferred tax liabilities are as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                                DECEMBER 30,       DECEMBER 31,
                                                                                    2001               2000
                                                                                ------------       -----------
<S>                                                                             <C>                <C>
ASSETS
Net operating loss carryforwards .......................................          $ 42,496           $ 23,517
Reserves ...............................................................             4,698              1,126
Accruals ...............................................................               109                 22
Other ..................................................................             2,240              2,890
                                                                                  --------           --------
Total assets ...........................................................            49,543             27,555

LIABILITIES
Accelerated tax depreciation ...........................................            (3,449)            (3,232)
Other ..................................................................           (10,524)            (9,134)
                                                                                  --------           --------
Total liabilities ......................................................           (13,973)           (12,366)
                                                                                  --------           --------
                                                                                    35,570             15,189
Less: Valuation allowance for net operating loss carryforwards .........           (43,526)           (23,420)
                                                                                  --------           --------
Net deferred tax liabilities ...........................................          $ (7,956)          $ (8,231)
                                                                                  ========           ========
</TABLE>

At December 30, 2001, foreign earnings of $149.3 million have been retained
indefinitely by subsidiary companies for reinvestment. No provision is made for
income taxes that would be payable upon the distribution of such earnings, and
it is not practicable to determine the amount of related unrecognized deferred
income tax liability.

For tax purposes, the Company had available at December 30, 2001, net operating
loss carryforwards of approximately $121.4 million related to continuing
operations and $60.6 million related to discontinued operations.


                                      F-15
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The expiration dates of operating loss carryforwards from continuing operations
at December 30, 2001, are as follows (dollars in thousands):

<TABLE>
         <S>                                                                                              <C>
         2002....................................................................................         $    2,841
         2003....................................................................................                120
         2004....................................................................................              4,698
         2005....................................................................................              5,351
         2006....................................................................................              5,294
         Thereafter..............................................................................             50,435
         No expiration date......................................................................             52,677
                                                                                                          ----------
                                                                                                          $  121,416
                                                                                                          ==========
</TABLE>

6.       ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                DECEMBER 30,          DECEMBER 31,
                                                                    2001                  2000
                                                                ------------          ------------
                                                                      (DOLLARS IN THOUSANDS)
         <S>                                                    <C>                   <C>
         Payroll and related expenses ................          $     26,465          $     28,533
         Warranty and customer rebates ...............                24,051                23,429
         Restructuring expenses ......................                 9,952                 7,239
         Value-added taxes payable ...................                 4,895                 8,075
         Other .......................................                27,008                38,217
                                                                ------------          ------------
                                                                $     92,371          $    105,493
                                                                ============          ============
</TABLE>

7.       RESTRUCTURING

RESTRUCTURING OF EXISTING OPERATIONS

In fiscal 1999, the Company developed and approved a restructuring plan for
existing operations, which resulted in charges of $2.3 million. The
restructuring plan included severance of $1.8 million and $500,000 of other
costs. Severance costs related to the elimination of 26 employees at the
Company's France operations. The other costs associated with the restructuring
plan are related to the closure of sales and administrative facilities. These
costs represent the write-off of the remaining book value of leasehold
improvements, costs to return the facilities to the condition at the outset of
the lease, and employee related costs. The restructuring plan was completed in
1999, and the restructuring accruals were fully utilized.

In fiscal 2000, the Company approved restructuring plans in Europe and North
America, associated with severance and other disposal costs, which resulted in a
charge of $8.1 million. The restructuring in certain European businesses
resulted in a charge of $6.9 million. This plan includes a reduction in
headcount of 131 employees totaling $5.7 million and other exit costs totaling
$1.2 million. The other exit costs represent remaining payments on
non-cancelable operating leases and costs to return the facilities to the
condition at the outset of the leases. In the North American plan, restructuring
costs of $1.2 million were recorded in fiscal 2000. The North American plan
includes a shut down of manufacturing operations at the Company's South Carolina
location, resulting in a headcount reduction of approximately 168 employees with
severance costs totaling $1.1 million and other exit costs totaling $100,000.
The restructuring plan was completed in 2001, and the restructuring accruals
were fully used.


                                      F-16
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In connection with the purchase price accounting for the acquisition of certain
business lines of Emess Plc, effective July 2000, the Company approved a
restructuring plan, which resulted in reorganization accruals of $2.3 million as
follows:

         i.)      Severance costs of $2.1 million include the termination of 120
                  employees in Europe and 2 employees in the U.S. Approximately
                  $.3 million of severance cost was paid as of December 30,
                  2001. The remainder will be paid over the next 6 months.

         ii.)     Costs of $178,000 are associated with the disposal of fixed
                  assets and other exit costs. As of December 30, 2001, all of
                  the accrual had been utilized.

In March 2001, the Company entered into an agreement to sell certain assets and
service contracts of its lighting service and maintenance business. As a result
of this divestiture, charges totaling $56.9 million were incurred, consisting of
a goodwill write-off of $32.9 million, other asset write-downs of $13.5 million
and exit costs of $10.5 million. Approximately $5.6 million remain in accruals
at December 30, 2001 related to this agreement, which is expected to be
completed within 12 months. The exit costs primarily relate to unfavorable
contractual agreements and severance and related costs.

In April 2001, the Company approved restructuring plans in Europe to relocate
some manufacturing activities into more cost-effective areas. As a result,
severance costs of $2.0 million related to 73 employees were accrued. As of
December 30, 2001, $1.2 million of the accruals had been utilized and the
remainder will be paid over the next 12 months. These restructuring plans are
expected to be completed within 12 months.

8.       DISCONTINUED OPERATIONS

In June 2001, the Company announced its intention to divest itself of its Power
Lighting Products (PLP) segment. The Company adopted a plan that expects to
divest the segment through sale and liquidation over the next 12 months. The
assets to be sold consist primarily of accounts receivable, inventories and
property, plant and equipment. Results of this operation have been classified as
discontinued and prior periods have been reclassified. Revenues and operating
results, including income tax impact, are reported in discontinued operations,
as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                       Year ended
                                                                December 30,          December 31,        January 2,
                                                                    2001                  2000               2000
                                                                ------------          ------------        ----------
<S>                                                             <C>                   <C>                  <C>
         Revenues                                               $     14,948          $     57,827        $ 91,414

         Loss from operations:
                         Loss before taxes                            (5,758)               (4,847)         (2,334)
                         Income tax (expense) benefit                   (174)                1,794            (170)

                         Net loss after tax                     $     (5,932)         $     (3,053)       $ (2,504)

         Loss from disposal (no tax effect)                     $    (62,982)         $         --        $     --
</TABLE>


                                      F-17
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Loss from operations for the twelve months ended December 30, 2001 and December
31, 2000 includes interest expenses of $1.7 million and $3.8, respectively. The
allocation of interest expenses to the discontinued operations was based on
identified debt that can be specifically attributed to the discontinued
operations.

Loss from disposal for the twelve months ended December 30, 2001 includes asset
write-downs to net realizable value totaling $45.4 million, warranty, supplier
and lease obligations of $7.3 million and other liquidation and exit costs of
$10.3 million. At December 30, 2001 approximately $5.5 million remain in
accruals for warranty, supplier and lease obligations. Included in other exit
costs is an allocation of interest expense totaling $3.9 million based on debt
that can be identified as specifically attributed to the discontinued operations

In addition, the Company has presented the assets and liabilities relating to
its discontinued operations separately in the accompanying condensed balance
sheets as of December 30, 2001 and December 31, 2000. Net current assets
(liabilities) of discontinued operations are comprised of the following (dollars
in thousands):

<TABLE>
<CAPTION>
                                                       DECEMBER 30,          DECEMBER 31,
                                                           2001                  2000
                                                       ------------          ------------
<S>                                                    <C>                   <C>
Accounts Receivable .........................          $        862          $     17,010
Inventories .................................                 2,063                17,768
Property, Plant, & Equipment ................                 3,330                19,874
Intangible Assets ...........................                    --                14,346
Accounts Payable & Accruals .................                (5,549)               (7,815)
Other .......................................                (1,183)                2,302

                                                       ------------          ------------
Net Assets (Liabilities) ....................          $       (477)         $     63,485
                                                       ============          ============
</TABLE>

9.       SEGMENTATION

The Company, as a result of redefining its core business, elected to change the
reporting of its business segments as of January 1, 2001. Four of the Company's
businesses (Miniature Lighting, General Lighting, Power Lighting Products and
Disposed Business) had been designated as separate business segments; of which
three segments remain as reportable segments.

Power Lighting Products, previously a segment, is reflected separately as
discontinued operations in our consolidated financial statements. Corporate
expenses are not allocated.

The Miniature Lighting segment consists primarily of vertically integrated
manufacturing and sales operations throughout North America and Europe. A wide
variety of products comprised primarily of value added miniature lighting
assemblies and lighting systems are sold primarily to original equipment
manufacturers ("OEMs") in the automotive, electronics and communication,
appliance and aviation industries.

The General Lighting segment consists primarily of vertically integrated
manufacturing and sales operations throughout Europe, Central and South America,
Pacific Rim and the United States. A wide range of lamp and fixture products is
supplied to wholesalers, OEMs, retailers, architects, designers and contractors.


                                      F-18
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Disposed Business segment consists of divestitures, which includes the
lighting service and maintenance business. The Company entered into an agreement
in March 2001 to sell certain assets and service contracts of the lighting
service and maintenance business.

Miniature Lighting:

The Miniature Lighting segment, which represents 18.5% of the Company's
consolidated revenues, reported revenues of $157.3 million for the year ended
December 30, 2001, an increase of 0.3% from the year ended December 31, 2000.
The generally higher value of the US dollar compared to other currencies
worldwide decreased net sales by approximately 1.4% or $2.3 million, for the
year ended December 30, 2001 as compared to the year ended December 31, 2000.
Revenues from the 2001 acquisition contributed $27.2 million of the 2001
increase, as the remaining business decreased approximately $24.4 million.
Miniature lighting operating profits decreased $13.5 million for the year ended
December 30, 2001 to $11.7 million, as compared to the year ended December 31,
2000.

The decrease in the miniature lighting operating results for the year ended
December 30, 2001 as compared to the prior year is primarily due to inventory
adjustments in the electronic and automotive industries and a general decrease
in demand due to a slowing in the economy.

General Lighting:

The General Lighting segment, which represents 80.3% of the Company's
consolidated revenues, reported revenues of $683.5 million for the year ended
December 30, 2001, an increase of 6.4% from the year ended December 31, 2000.
The generally higher value of the US dollar compared to other currencies
worldwide decreased net sales by approximately 2.6% or $16.4 million, for the
year ended December 30, 2001 as compared to the year ended December 31, 2000.
Revenues from the 2001 acquisition contributed $96.1 million of the 2001
increase, as the remaining business decreased approximately $38.4 million.
General lighting operating profits for the year ended December 30, 2001 of $3.5
million decreased $19.8 million as compared to the year ended December 31, 2000.

The decrease in the general lighting operating results for the year ended
December 30, 2001 as compared to the prior year is primarily due to the adverse
impact of the foreign currency translation and a sharp decrease in demand due to
a slowing in the economy.

Disposed Business:

The Disposed Business segment includes the service and maintenance business,
which was exited in March 2001.

Revenues for this segment total $10.5 million for the year ended December 30,
2001 as compared to $54.5 million for the year ended December 31, 2000. The
Disposed business operating loss for the year ended December 30, 2001 totaled
$64.2 million as compared to a loss of $4.0 million in the year ended December
31, 2000. Included in the year ended December 30, 2001 operating loss are
charges, as a result of divestiture, totaling $56.9 million.


                                      F-19
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Segment information for the years ended December 30, 2001, December 31, 2000 and
January 2, 2000 was as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                     Miniature          General          Disposed
                                                     Lighting           Lighting         Business            Other          Total
                                                     ---------          --------         --------           -------        --------
<S>                                                  <C>                <C>              <C>                <C>            <C>
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2001 (A)

Net Sales                                             $157,307         $683,519         $ 10,494           $  (134)        $851,186
Operating profit (loss)                                 11,733            3,492          (64,210)           (7,047)         (56,032)
Identifiable assets                                    178,789          676,193            8,847             9,099          872,928
Depreciation & Amortization                              7,882           27,019              526             1,010           36,437
Capital Expenditures                                    10,529           26,873               20               191           37,613

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000 (A)

Net Sales                                             $156,805         $642,162         $ 54,521           $    --         $853,488
Operating profit (loss)                                 25,185           23,269           (3,984)           (3,967)          40,503
Identifiable assets                                    167,904          724,687           74,110             7,498          974,199
Depreciation & Amortization                              5,892           18,550            1,944               474           26,860
Capital Expenditures                                     9,348           30,434              639            (5,827)          34,594

FOR THE FISCAL YEAR ENDED JANUARY 2, 2000 (A)

Net Sales                                             $152,364         $574,722         $ 56,323           $    --         $783,409
Operating profit (loss)                                 19,589           36,727            3,404               310           60,030
Identifiable assets                                    158,131          552,099           63,322            21,952          795,504
Depreciation & Amortization                              5,785           13,668            1,668               588           21,709
Capital Expenditures                                    11,140           38,178            1,133              (439)          50,012
</TABLE>

(a)      Segment information is shown net of the Power Lighting Products
         segment, which is now reflected separately as discontinued operations.


                                      F-20
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10.      SECURITIZATION

In July 2000, the Company established a five-year 78.0 million Euro
(approximately $73 million) Receivable Purchase Agreement ("Receivables
Facility") with a financial institution ("Transferee") to sell an undivided
ownership interest in a designated pool of trade accounts receivable. The
Receivables Facility was amended in September 2000. The amount of proceeds under
the amended Receivables Facility at any time is a function of the amount of the
outstanding eligible trade accounts receivable up to 55.0 million Euro
(approximately $52 million). The transfer of receivables to the Transferee is
accounted for as a sale. Under the agreement, which matures in July 2005, the
Company retains the residual interest in the designated pool of receivables.
This retained interest, which is included in the accounts receivable balance
reflected in the accompanying Consolidated Balance Sheet, is recorded at fair
value. Due to the Company's collection experience history and the composition of
the designated pool of trade accounts receivable that are part of this program,
the fair value of the Company's retained interest approximates the total amount
of the designated pool of receivables reduced by the outstanding balance of
receivables sold to the Transferee under the program.

Under this receivable securitization agreement, the Transferee has no recourse
to any other assets of the Company, who remains responsible for servicing the
transferred receivables and pays certain fees to the Transferee related to its
sale of receivables under this program. During 2000, the costs incurred by the
Company related to this program, which are included in "Other Income (Expense),
Net" in the accompanying Consolidated Statement of Operations for the year ended
December 31, 2000, were $585,000. During 2000, proceeds from collections under
this revolving agreement of $130.9 million were reinvested in the program by the
Transferee. However, the Transferee's interest in the Company's receivables was
never in excess of 55 million Euro at any point in time under this program.

As of December 31, 2000, 65 million Euro (approximately $61 million) of accounts
receivable comprised the designated pool of trade receivables included in this
program. Of this amount, 27 million Euro (approximately $26 million) had been
sold to the Transferee and 38 million Euro (approximately $36 million) was
retained by the Company.

At December 30, 2001 there were no proceeds outstanding under this facility.

11.      SALE/LEASEBACK TRANSACTIONS

In December 2000, the Company entered into certain sale/leaseback arrangements
for manufacturing equipment with General Electric Capital. The sale/leaseback
arrangement involved the sale of the equipment for approximately $26.4 million.
The basic term of the lease is three years with two optional extensions, each
for the period of one year. Therefore, the maximum lease term is 5 years. The
resulting net gain is $11.6 million, of which $7.7 million remains unamortized,
is included in other long-term liabilities at December 30, 2001. The remaining
balance is being amortized over the remaining two years of the lease. The lease
is accounted for as an operating lease. Included in the future minimum rental
payments in Note 12 are $5.1 million for 2002, and $17.9 million for 2003 for
this transaction.

In March 2000, the Company entered into a sale/leaseback arrangement in
connection with a 370,000 square foot distribution facility located in France.
The sale/leaseback arrangement involved the sale of a warehouse distribution
center for approximately $17.5 million. Under the terms of the lease
arrangement, the Company has entered into a 12-year lease. The resulting net
gain of approximately $1.8 million is being amortized over 12 years. The lease
is accounted for as a capital lease with the related asset, $15.7 million,
included in land and buildings. The accumulated amortization at December 30,
2001, is $899,000. Amortization expense is included with depreciation.


                                      F-21
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Future minimum lease payments at December 30, 2001, are as follows:

<TABLE>
         <S>                                                                           <C>
         2002...................................................................       $   2,584
         2003...................................................................           2,609
         2004...................................................................           2,602
         2005...................................................................           2,554
         2006...................................................................           2,388
         Thereafter.............................................................          19,445
                                                                                       ---------
                                                                                          32,182
         Less: Amounts representing interest....................................          10,701
                                                                                       ---------
         Present Value of future minimum lease payments.........................       $  21,481
                                                                                       =========
</TABLE>

12.      COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company leases certain facilities and equipment under operating lease and
sublease agreements that expire at various dates from the current year to 2010.
As of December 30, 2001, the aggregate minimum future commitments under
operating leases are as follows (dollars in thousands), including the operating
sale/leaseback payments noted in Note 11:

<TABLE>
         <S>                                                                      <C>
         2002...................................................................  $  16,242
         2003...................................................................     26,492
         2004...................................................................      6,362
         2005...................................................................      4,939
         2006...................................................................      3,623
         Thereafter.............................................................      4,657
                                                                                  ---------
                                                                                  $  62,315
                                                                                  =========
</TABLE>

Rent expense for fiscal 2001, 2000, and 1999 was approximately $15.1 million,
$13.1 million, and $10.6 million, respectively.


                                      F-22
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13.      STOCK OPTION PLANS

The Company's Board of Directors has approved amended stock option plans for up
to 6,000,000 shares of common stock. The first plan provides for the granting of
both incentive stock options (as defined in section 422 of the Internal Revenue
Code) and nonqualified stock options. The second plan provides for the granting
of incentive stock options to employees outside the U.S. and Canada, and certain
other persons. Options may be granted under the plans on such terms and at such
prices as determined by the Board of Directors, except that the per share
exercise price of incentive stock options cannot be less than the fair market
value of the common stock on the date of grant. Each option will be exercisable
after the period or periods specified in the option agreement, but no option may
be exercisable after the expiration of 10 years from the date of grant.

The Company has elected to follow APB Opinion No. 25 and related interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB No. 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Pro forma information regarding net income is required by FASB
No. 123, which requires that the information be determined as if the Company had
accounted for the employee stock options granted subsequent to December 3, 1995,
under the fair value method of that Statement. The fair value for these options
was estimated at the date of grant using a Black-Scholes option pricing model.
The weighted-average risk-free interest rate assumptions used for fiscal 2001,
2000, and 1999, respectively, were 5.4%, 6.0%, and 5.9%. The weighted-average
expected life assumption used was seven years for all years. There was no
dividend yield used for fiscal year 2001. A dividend yield rate of 3.7% was used
for fiscal year 2000 and no dividend yield rate was applied in 1999. The
volatility factor was assumed to be .7 for fiscal 2001and fiscal 2000, and .8
for fiscal 1999.

The Black-Scholes option valuation model was developed for the use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the respective
option. Because FASB No. 123 is applicable only to options granted subsequent to
December 3, 1995, its pro forma impact will not be fully reflected until 2001.
The Company's pro forma net income (loss) and pro forma net income (loss) per
share - basic and pro forma net income (loss) per share - dilutive would be
($168) million, ($4.89), and ($4.89); $11.9 million, $.35, and $.34; and $30.4
million, $.94, and $.91 for the years ended December 30, 2001, December 31,
2000, and January 2, 2000, respectively.

Under the APB Opinion No. 25 accounting applied by the Company, there was no
compensation expense recognized for 2001, 2000, or 1999.


                                      F-23
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The table below summarizes option activity for each of the three years ended
December 30, 2001:

<TABLE>
<CAPTION>
                                                                                RANGE OF           WEIGHTED-AVERAGE
                                                        NUMBER OF               EXERCISE               EXERCISE
                                                         OPTIONS                 PRICES                 PRICE
                                                       ----------           --------------         ---------------
<S>                                                    <C>                  <C>                    <C>
Outstanding at January 3, 1999 ..............           3,694,795           $ 5.555-32.417         $        13.206
Options granted during 1999 .................             871,923             9.938-32.380                  20.338
Options exercised during 1999 ...............            (542,118)            5.555-29.625                  10.616
Options canceled during 1999 ................            (237,600)            9.938-29.625                  15.504
                                                       ----------
Outstanding at January 3, 2000 ..............           3,787,000             5.555-32.417                  15.064
Options granted during 2000 .................           1,352,460             6.875-16.313                   9.179
Options exercised during 2000 ...............             (85,500)            5.555- 9.938                   8.920
Options canceled during 2000 ................            (752,700)            6.875-32.380                  16.719
                                                       ----------
Outstanding at December 31, 2000 ............           4,301,260             5.555-32.417                  13.031
Options granted during 2001 .................           1,560,000              1.96-  8.25                   3.018
Options exercised during 2001 ...............                  --                       --                      --
Options canceled during 2001 ................          (1,162,210)            6.875-29.625                  11.534
                                                       ----------
Outstanding at December 30, 2001 ............           4,699,050              1.96-32.417                  10.077
                                                       ==========
</TABLE>

Information with respect to stock options outstanding and stock options
exercisable at December 30, 2001, follows:

<TABLE>
<CAPTION>
                                                                                    OPTIONS OUTSTANDING
                                                                   NUMBER            WEIGHTED-AVERAGE
                                                               OUTSTANDING AT            REMAINING        WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES                                      DECEMBER 30, 2001      CONTRACTUAL LIFE      EXERCISE PRICE
------------------------                                      -----------------     -------------------   ----------------
<S>          <C>                                              <C>                   <C>                   <C>
$             1.960-2.000                                             1,222,500             9.79 years     $       1.974
              2.570-9.938                                             2,043,760             7.92 years             8.834
             10.000-29.375                                            1,174,790             6.64 years            16.922
             29.625-32.417                                              258,000             6.91 years            31.111
                                                              ----------------
                                                                      4,699,050             8.03 years            10.077
                                                              ================
<CAPTION>
                                                            NUMBER EXERCISABLE AT    WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES                                      DECEMBER 30, 2001       EXERCISE PRICE
------------------------                                    ---------------------    ----------------
<S>          <C>                                            <C>                      <C>
$             1.960-2.000                                              626,999       $          1.967
              2.570-9.938                                            1,276,560                  8.328
             10.000-29.375                                             630,854                 17.655
             29.625-32.417                                             122,800                 30.914
                                                              ----------------
                                                                     2,657,213                 10.085
                                                              ================
</TABLE>

At December 31, 2000 and January 2, 2000, there were 2,032,867 and 967,660
options exercisable at a weighted-average exercise price of $11.922 and $12.726,
respectively. The weighted-average grant date fair value of the options granted
during fiscal 2001 and 2000 was $1.6993 and $4.711, respectively.


                                      F-24
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK PURCHASE PLAN

In April 2000, the Company's Board of Directors adopted a non-compensatory
Employee Stock Purchase Plan ("the Plan") effective July 1, 2000, under Section
423 of the Internal Revenue Code. All domestic employees are eligible to
participate in the Plan after completing ninety days of employment. Under the
terms of the Plan, the Company is authorized to sell up to 1,000,000 shares of
common stock and employees may elect a fixed dollar amount per pay period to be
withheld to purchase the Company's common stock. The Plan terms require a
minimum of $10 per period and a maximum of $25,000 per plan year. The purchase
price of the stock is 85% of the lower of the entry date (July 1) or exercise
date (June 1) market price of the Company's common stock. Currently, the Board
of Directors is the Plan administrator, but under the terms of the Plan a
Committee may be appointed. As of December 30, 2001 and December 31, 2000,
40,923 shares and no shares, respectively have been issued under the Plan. No
compensation expense will be recorded for shares sold under this plan.

14.      EMPLOYEE BENEFIT PLANS

The Company sponsors noncontributory, defined-benefit pension plans (the Plans)
covering eligible employees, including employees in foreign countries. The
domestic plans cover union employees of SLI, Inc. The Company also has separate
plans covering employees in various foreign locations. The principal locations
are Germany, the United Kingdom, and Switzerland. Benefits are based on years of
service and compensation. The Company's funding policy is consistent with the
funding requirements of federal law and regulations in the United States and
regulations of foreign jurisdictions.

The Plans' fiscal 2001 and 2000 combined funded status (based on the most recent
valuations) and the amounts recognized in the accompanying consolidated balance
sheets are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                 DECEMBER 30,           DECEMBER 31,
                                                                     2001                   2000
                                                                 ------------           ------------
<S>                                                              <C>                    <C>
Change in benefit obligation:
   Benefit obligation at beginning of year ............          $     58,678           $     59,301
   Service cost .......................................                 2,090                  2,129
   Interest cost ......................................                 3,276                  3,400
   Actuarial loss (gain) ..............................                 2,713                    (11)
   Employee contribution ..............................                   459                     --
   Translation difference .............................                (1,880)                (3,923)
   Benefits paid ......................................                (4,598)                (2,218)
                                                                 ------------           ------------
   Benefit obligation at end of year ..................          $     60,738           $     58,678
                                                                 ============           ============


Change in plan assets:
   Fair value of plan assets at beginning of year .....          $     47,133           $     50,190
   Actual return on plan assets .......................                (4,334)                   129
   Translation difference .............................                (1,279)                (3,259)
   Employer contribution ..............................                 1,668                  2,291
   Employee contribution ..............................                   459                     --
   Benefits paid ......................................                (4,598)                (2,218)
                                                                 ------------           ------------
   Fair value of plan assets at end of year ...........          $     39,049           $     47,133
                                                                 ============           ============
</TABLE>


                                      F-25
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                           DECEMBER 30,       DECEMBER 31,
                                                               2001               2000
                                                           -----------        ----------
<S>                                                        <C>                 <C>
Funded status of the plan (underfunded) ...........          $(21,689)          $(11,545)
Unrecognized net actuarial gain (loss) ............            10,498                185
Unrecognized prior service cost ...................               220                257
Adjustment to recognize minimum liability .........              (104)                --
                                                             --------           --------
Accrued benefit cost ..............................          $(11,075)          $(11,103)
                                                             ========           ========
</TABLE>

The components of net periodic pension cost are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                                   2001              2000              1999
                                                  -------           -------           -------
<S>                                               <C>               <C>               <C>
Service cost ...........................          $ 2,269           $ 2,129           $ 2,163
Interest cost ..........................            3,473             3,400             3,553
Expected return on plan assets .........           (2,724)           (3,296)           (3,551)
Net amortization and deferral ..........              416                (7)               (8)
                                                  -------           -------           -------
Net pension cost .......................          $ 3,434           $ 2,226           $ 2,157
                                                  =======           =======           =======
</TABLE>

ASSUMPTIONS

<TABLE>
<CAPTION>
                                                                 2001                  2000                    1999
                                                            ------------           ------------           -------------
<S>                                                         <C>                    <C>                    <C>
Weighted-average discount rate ...................              6.0%                   6.0%                   6.0%
Expected return on plan assets ...................          5.0% to 7.5%           5.0% to 7.5%           5.0% to 7.5%
Assumed rate of compensation increase ............          3.0% to 11.5%          3.0% to 11.5%          2.5% to 10.5%
</TABLE>

The aggregate benefits obligation for those plans where the accumulated benefits
obligation exceeded the fair value of plan assets was $14.4 million and $12.9
million at December 30, 2001, and December 31, 2000, respectively. The fair
value of plan assets for these plans was $2.6 million and $2.9 million at
December 30, 2001, and December 31, 2000, respectively.

The projected benefit obligations for those plans where the projected benefit
obligations exceeded the fair value of plan assets was $15.5 million and $15.0
million at December 30, 2001, and December 31 2000, respectively. The fair value
of plan assets for these plans was $2.6 million and $2.9 million at December 30,
2001, and December 31, 2000, respectively.

The Company also maintained a separate defined-benefit plan for which actuarial
valuation was not obtained. This plan was terminated and the net assets of the
plan were distributed to the participants in 1999.


                                      F-26
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

DEFINED-CONTRIBUTION PLANS

The Company sponsors a number of defined-contribution plans. Participation in
these plans is available to all U.S. nonunion employees and employees in various
other countries. Company contributions to these plans are based on either a
percentage of employee contributions or on a specified amount per hour based on
the provisions of each plan. The Company's expense under these plans was
approximately $2.6 million, $3.7 million and $1.8 million for fiscal 2001, 2000
and 1999, respectively.

15.      CAPITAL STOCK

In July 1999, the Company completed a sale of 6,000,000 shares of common stock
and received net proceeds of $153.5 million, which were used to reduced
long-term debt.

At December 31, 2000, 4,846,000 shares of common stock have been reserved for
future issuance upon the exercise of stock options and 1,000,000 shares of
common stock have been reserved for future issuance under the stock purchase
plan.

In July 2001, 40,923 shares of common stock was issued under the stock purchase
plan against the 1,000,000 shares reserved.

During the year ended December 30, 2001, 50,000 shares of common stock were
granted to a former employee as part of a severance agreement.

16.      DIVIDEND

During the year ended December 31, 2000, quarterly cash dividends of $.10 per
share (for each of the first three quarters) were declared and paid in the
amount of $10.2 million. In December 2000, a quarterly dividend of $.10 per
share was declared in the amount of $3.5 million and paid in January of 2001.

In March 2001, the Company declared a cash dividend of $.10 per share for the
first quarter of 2001, paid in April 2001in the amount of $3.3 million, and
approved a reduction in annualized cash dividends from $.40 to $.20 per share.
In June 2001, the Company's declared a cash dividend of $.05 per share for the
second quarter, paid in July in the amount of $1.6 million.

In June the Company's Board of Directors approved the elimination of dividends.
Future dividends, if any, will be at the discretion of the Company's Board of
Directors and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions and other factors deemed relevant
at that time by the Company's Board of Directors


                                      F-27
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

17.      FAIR VALUE OF FINANCIAL INSTRUMENTS

INTEREST RATE RISK MANAGEMENT

The Company uses interest rate swaps to reduce the impact on interest expense of
fluctuating interest rates resulting from its variable rate debt. The Company
had a Euro interest rate swap agreement whereby the Company agreed with the
counterparty to exchange, at quarterly intervals, the difference between the
Company's fixed pay rate and the counterparty's variable pay rate of three-month
EURIBOR. The agreement expired April 1, 2001. At December 31, 2000, the notional
principal amount of the swap agreement was Euro 45 million (approximately $42.2
million) having a fixed rate of 3.835%. The fair value of the swap at December
31, 2000, and January 2, 2000, was $418,000 and 282,000, respectively.

In connection with the capital lease of the warehouse distribution center in
France, the Company entered into an interest rate swap agreement, whereby the
Company agreed with the counterparty to exchange, at quarterly intervals, the
difference between the Company's fixed pay rate and the counterparty's variable
pay rate of three-month EURIBOR. The agreement expires March 10, 2005. At
December 30, 2001, the notional principal amount of the swap agreement was Euros
18.9 million, (approximately $16.7 million) having a fixed rate of 5.46%. The
fair value of the swap at December 30, 2001, was Euros 786,000 (approximately
$693,000) in favor of the counterparty.

FOREIGN EXCHANGE RISK MANAGEMENT

The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts (forward
contracts). Gains and losses associated with currency rate changes on forward
contracts which do not meet hedge criteria, are recorded currently in income.
Gains and losses on forward contracts, which do qualify for hedge criteria are
deferred off-balance-sheet and included as a component of the related
transaction when recorded; however, a loss is not deferred if deferral would
lead to the recognition of a loss in future periods. The aggregate foreign
exchange gains/(losses) on forward exchange contracts recorded in fiscal 2001,
2000, and 1999 were approximately $.2 million $3.9 million and $1.5 million,
respectively.

The forward contracts have maturities of one to 12 months. The counterparties to
the Company's forward contracts consist of a number of major international
financial institutions. The credit ratings and concentration of risk of these
financial institutions are monitored on a continuing basis, and management
believes they present no significant credit risk to the Company. At January 2,
2000, the carrying value of forward exchange contracts was ($822,000) and fair
value was approximately equal to the carrying amount. At December 31, 2000, the
Company had a forward exchange contract to buy 22,500,000 Belgian Francs. The
fair value of the contract at December 31, 2000, was approximately $34,000. At
December 30, 2001, the Company had a forward exchange contract to buy 3,770,000
Sterling. The fair value of the contract at December 30, 2001 was approximately
($147,000)

FORWARD SHARE PURCHASE AGREEMENT

In February 2000, the Company entered into an equity forward purchase
transaction whereby the Company had the ability to purchase shares of the
Company's common stock in an aggregate principal amount of up to $15 million.
The Company was not required to pay for shares purchased under the transaction
until the end of a two-year period. The Company was obligated to make quarterly
payments of interest on the principal amount of shares which the Company
committed to purchase, with interest to be calculated based on LIBOR plus a
spread determined upon the Company's leverage ratio. On the termination date,
the Company had the option to settle the transaction by payment of cash, sales
of shares of common stock, or a combination thereof. As such the contract was
considered an equity instrument and is recorded as a reduction or addition to
paid in capital depending on the market price of the shares at the settlement
date. The Company has fully completed the purchase of 1,612,900 shares for a
principal price of approximately $15 million in the third quarter, 2001. The
Company has no future obligation related to this contract.


                                      F-28
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

OTHER

All financial instruments are held for purposes other than trading. The carrying
values of cash equivalents, accounts receivable, accounts payable, and debt
approximate their fair values at December 30, 2001 and December 31, 2000.

18.      SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of unaudited quarterly financial data for fiscal 2001
and 2000.

<TABLE>
<CAPTION>
                                                        FIRST                SECOND                 THIRD                FOURTH
                                                       QUARTER               QUARTER               QUARTER               QUARTER
                                                     -----------           -----------           -----------           -----------
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>                   <C>                   <C>                   <C>
2001
Net sales ....................................       $   235,240           $   199,386           $   200,558           $   216,002
Gross margin .................................            55,170                42,338                42,796                46,822
Loss from continuing operations ..............           (52,559)              (17,446)              (14,886)               (8,322)
Income (loss) from discontinued operations ...            (5,450)              (60,136)               (4,000)                  672
Net loss .....................................           (58,009)              (77,582)              (18,886)               (7,650)
Net loss from continuing operations
   per common share - Basic ..................             (1.50)                (0.50)                (0.43)                (0.25)
Net income (loss) from discontinued operations
   per common share - Basic ..................             (0.16)                (1.72)                (0.12)                 0.02
Net loss per common share - Basic ............             (1.66)                (2.22)                (0.55)                (0.23)
Net loss from continuing operations
   per common share - Diluted ................             (1.50)                (0.50)                (0.43)                (0.25)
Net income (loss) from discontinued operations
   per common share - Diluted ................             (0.16)                (1.72)                (0.12)                 0.02
Net loss per common share - Diluted ..........             (1.66)                (2.22)                (0.55)                (0.23)
Equity .......................................           276,004               178,696               170,105               147,310
</TABLE>


                                      F-29
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                        FIRST                SECOND                 THIRD                FOURTH
                                                       QUARTER               QUARTER               QUARTER               QUARTER
                                                     -----------           -----------           -----------           -----------
                                                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>                   <C>                   <C>                   <C>
2000
Net sales ....................................       $   207,620           $   195,531           $   218,706           $   231,631
Gross margin .................................            54,074                48,366                55,669                55,104
Income from continuing operations ............            11,303                 6,732                 1,512                 4,570
Income (loss) from discontinued operations ...            (1,062)               (1,295)               (1,403)                  707
Net income ...................................            10,241                 5,437                   109                 5,277
Net income from continuing operations
   per common share - Basic ..................              0.33                  0.20                  0.04                  0.13
Net income (loss) from discontinued operations
   per common share - Basic ..................             (0.03)                (0.04)                (0.04)                 0.02
Net income per common share - Basic ..........              0.30                  0.16                    --                  0.15
Net income from continuing operations
   per common share - Diluted ................              0.33                  0.20                  0.04                  0.13
Net income (loss) from discontinued operations
   per common share - Diluted ................             (0.03)                (0.04)                (0.04)                 0.02
Net income per common share - Diluted ........              0.30                  0.16                    --                  0.15
Equity .......................................           376,296               361,081               341,567               358,382
</TABLE>

19.      GEOGRAPHIC SEGMENT INFORMATION

Financial information for the fiscal years 2001, 2000, and 1999 summarized by
geographic area is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                 2001                        2000                        1999
                                       -------------------------   -------------------------    ------------------------
                                        REVENUES       ASSETS        REVENUES       ASSETS       REVENUES       ASSETS
                                       ----------   ------------   -----------    ----------    ----------    ----------
<S>                                    <C>          <C>            <C>            <C>           <C>           <C>
United States......................    $  175,341   $    128,119   $   230,880    $  188,571    $  163,934    $  171,088
Canada.............................        13,210         16,477        17,560        22,112        20,891        11,177
Europe.............................       550,323        609,837       473,838       640,048       477,949       504,842
Latin America......................        71,930         90,621        86,941        99,217        73,009        82,428
Pacific Rim........................        40,382         27,874        44,269        24,251        47,626        25,969
                                       ----------   ------------   -----------    ----------    ----------    ----------
                                       $  851,186   $    872,928   $   853,488    $  974,199    $  783,409    $  795,504
                                       ==========   ============   ===========    ==========    ==========    ==========
</TABLE>

20.      NONCASH ACTIVITIES

The following discloses noncash investing activities during fiscal 2001, 2000,
and 1999 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                  2001            2000          1999
                                                                               ----------     -----------     ----------
<S>                                                                            <C>            <C>             <C>
Value of common shares issued in connection with acquisitions.............     $    1,800     $    15,279     $   12,577
Liabilities assumed in connection with acquisitions.......................          1,735          14,445          2,553
Capital lease obligation..................................................            620          17,779             --
</TABLE>

21.      RELATED PARTY TRANSACTIONS

In September and December 2000, the principal shareholder and chief executive
officer expressed an interest in purchasing certain assets from the Company.
Funds in the amount of approximately $10 million were deposited with the Company
in each of


                                      F-30
<PAGE>

                           SLI, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the months of September and December; however, the contemplated transactions
were not completed and the funds were returned without interest. The financial
statements at December 31, 2000, were not impacted by these transactions. There
were no transactions in the year ended December 30, 2001.

22.      OTHER (INCOME) EXPENSES

Other, net consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                       2001         2000          1999
                                                                                   ----------    ----------    -----------
<S>                                                                                <C>           <C>           <C>
Equity income in investments...................................................    $     (584)   $   (3,100)   $      (424)
Foreign exchange (gain) loss...................................................          (229)       (3,887)        (1,549)
Other, including minority interest.............................................         1,961           568            152
                                                                                   ----------    ----------    -----------
                                                                                   $    1,148    $   (6,419)   $   (1,821)
                                                                                   ==========    ==========    ===========
</TABLE>

23.      SUBSEQUENT EVENT

On March 1, 2002 the Company sold one of its subsidiaries for $1,250,001. The
transaction resulted in a loss of approximately $1,000,000 which will be
included in operations during the first quarter of 2002.

On April 12, 2002, the Company sold one of its subsidiaries for $3.8 million.
The transaction resulted in a loss of approximately $2.5 million, which will be
included in operations during the second quarter of 2002.



                                      F-31
<PAGE>

AUDITORS' REPORT


To the Shareholder of
Chicago Miniature Lamp (Canada) Inc.

We have audited the balance sheets of Chicago Miniature Lamp (Canada) Inc. as at
Sunday, December 31, 2000, January 2, 2000, January 3, 1999 and January 4, 1998
and the statements of income, retained earnings and cash flows for the periods
then ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at Sunday, December 31, 2000,
January 2, 2000, January 3, 1999 and January 4, 1998 and the results of its
operations and the changes in its financial position for the periods then ended
in accordance with generally accepted accounting principles in the United
States.

Barrie, Canada,                                           /s/ Hards Pearson
January 31, 2001.                                         Chartered Accountants
Chicago Miniature Lamp (Canada) Inc.


                                      F-32