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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------
                                  FORM 10-K/A
                             ---------------------

<TABLE>
<C>         <S>
(MARK ONE)
   [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
            SECURITIES EXCHANGE ACT OF 1934
            FOR THE FISCAL YEAR ENDED JANUARY 3, 1999
   [  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
            SECURITIES EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM ____________TO ____________
</TABLE>

                         COMMISSION FILE NUMBER 0-25848
                             ---------------------
                                   SLI, INC.
             (Exact Name of Registrant as specified in its charter)

<TABLE>
<S>                                                         <C>
                         OKLAHOMA                                        73-1412000
                 (State of incorporation)                   (I.R.S. Employer Identification No.)
        500 CHAPMAN STREET, CANTON, MASSACHUSETTS                          02021
        (Address of principal executive officers)                        (Zip Code)
</TABLE>

       Registrant's telephone number, including area code: (781)828-2948
                             ---------------------
         SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:
                     Common Stock, par value $.01 per share
                                (Title of Class)

         SECURITIES REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:
                                      NONE
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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, fixtures and ballasts. 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, LED's and special lamps), fixtures,
magnetic and electronic ballasts and fiber optic lighting systems. The Company
believes that it is one of the six largest global lighting companies and one of
only three major international producers to offer an integrated package of
lamps, fixtures and ballasts. The Company serves a diverse, international
customer base and at January 3, 1999 had 31 manufacturing plants in 13
countries.

     The Company was established in 1985, and completed its initial public
offering (the "IPO") in June 1995 and a subsequent offering of Common Stock in
October 1996. An important part of the Company's initial development has been
its geographic and product range expansion through acquisitions. Since its IPO
the Company has completed 16 acquisitions, the most significant being the
acquisition in September 1997 of SLI, B.V., a privately held company
headquartered in Geneva, Switzerland, for $161.5 million in cash. SLI, B.V. is
the third largest lighting company in Europe and a major global lighting
company, which sells a variety of products in its principal markets under
recognized brand names, including Sylvania. See "Business -- Acquisitions."

     The Company's acquisition strategy has had a significant impact on year to
year comparisons of revenues and earnings. SLI, Inc. acquired 6 companies in
1998, 4 companies in 1997 and 3 companies in 1996.

     In January 1998, the Company changed its financial reporting year-end from
the Sunday nearest to December 1 to the Sunday nearest to December 31. The
Company has included financial results for the one month ended January 4, 1998
herein.

     The following discussion and analysis of the results of operations for the
year ended January 3, 1999 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.

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
                                                              ---------------------------
                                                              12/1/96   11/30/97   1/3/99
                                                              -------   --------   ------
<S>                                                           <C>       <C>        <C>
Net sales...................................................   100.0%    100.0%    100.0%
Cost of products sold.......................................    64.9      70.3      69.0
                                                               -----     -----     -----
  Gross margin..............................................    35.1      29.7      31.0
Selling, general and administrative expenses................    15.4      19.8      23.0
Restructuring costs.........................................      --       1.6        .3
                                                               -----     -----     -----
  Operating income..........................................    19.7       8.3       7.7
Interest (income) expense, net..............................      .3        .4       2.2
Other (income) expense......................................    (1.3)      (.7)       .2
                                                               -----     -----     -----
Income before income taxes..................................    20.7       8.6       5.3
Income taxes................................................     6.4       2.3       1.0
                                                               -----     -----     -----
  Net income................................................    14.3       6.3       4.3
                                                               =====     =====     =====
</TABLE>
                                       2
<PAGE>   3
  Year ended January 3, 1999 compared to the year ended November 30, 1997.

     Net sales.  Net sales increased 134.3% from $330.0 million for the year
ended November 30, 1997 to $773.1 million for the year ended January 3, 1999.
The acquisition of SLI, B.V. accounted for 119.1% of the net sales increase.
Included in the year ended January 3, 1999 was a full year of sales contribution
from SLI, B.V., totaling $542.2 million, compared to three months in the year
ended November 30, 1997, totalling $149.2 million. The remaining increase in net
sales of 15.2% was primarily due to generic growth generated from the
integration of the 1998 acquisitions into ongoing operations.




                                       3
<PAGE>   4

     Gross Margin.  Gross margin increased 144.5% from $98.0 million for the
year ended November 30, 1997 to $239.6 million for the year ended January 3,
1999, due primarily to the increase in sales volume attributed to the SLI, B.V.
acquisition. Gross margin, as a percentage of net sales, increased from 29.7%
for the year ended November 30, 1997 to 31.0%, for the year ended January 3,
1999. The SLI, B.V. gross margin, as a percentage of SLI, B.V. sales, was 31.3%
for the year ended January 3, 1999. The gross margin of the Company is expected
to improve as further integration of the 1997 and 1998 acquisitions into the
Company evolves. The Company's gross margin percentage is subject to the impact
of seasonality and product mix.

     Selling, general and administrative expenses.  Selling, general and
administrative expenses increased from $65.5 million for the year ended November
30, 1997 to $178.2 million for the year ended January 3, 1999. This increase was
largely due to the impact of the SLI, B.V. acquisition. As a percentage of net
sales, selling, general and administrative expenses increased from 19.8% for the
year ended November 30, 1997 to 23.0% for the year ended January 3, 1999,
primarily as a result of the SLI, B.V. acquisition. Included in the year ended
January 3, 1999 are one time charges totaling $525,000 related to a proposed
public offering withdrawn in May 1998, severance costs totaling $543,000 and one
time charges related to the closure of one of the Company's Colombia
manufacturing operations and the United Kingdom machinery making operations
totaling $709,000. Selling, general and administrative expenses as a percentage
of net sales is expected to decrease as the full year effects of the 1997 and
1998 reorganization and restructuring plans take effect. Additionally, the
Company seeks to decrease the selling, general and administrative expenses as a
percentage of net sales by utilizing the infrastructure of its 1997 and 1998
acquisitions as a base for further sales growth.

     Restructuring costs  In Fiscal 1997, and in connection with the acquisition
of SLI, B.V., the Company developed and approved restructuring plans for
existing operations which resulted in charges of approximately $5.1 million
including $3.5 million of severance costs. The restructuring included the plant
closure, personnel termination, and asset liquidation of a lamp-making operation
in the United Kingdom which became redundant due to the SLI B.V. acquisition.
The facility's land and building was sold, and the equipment was sold or
scrapped. Employee severance cost at the Company's United Kingdom machinery
making operation resulted from the downsizing due to the duplication of
functions after the SLI B.V. acquisition. Additionally, the Company's leased
Illinois warehouse and distribution location was closed and personnel were
terminated. Also, the Company's Oklahoma manufacturing operation was considered
redundant in light of the SLI B.V. acquisition and the lamp making equipment was
disposed of. This restructuring plan was completed in 1998 with cash provided
from operations used to cover the costs incurred. The Company expects to realize
approximately $3.0 million in annualized cost savings over the next two year
period as a result of reduced employee expense of $2.9 million and reduced
depreciation expense of $60,000.

     In Fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operation and the Company's United Kingdom machinery making
operation. Included in these costs were the net effect of severance costs
totaling $600,000 and the write-off of lamp making equipment disposed of
totaling $1.1 million. This restructuring plan was completed in 1998 with cash
provided from operations used to cover the costs incurred. The Company expects
to realize approximately $1.5 million in annualized cost savings beginning in
1999 as a result of reduced employee expense of $1.4 million and reduced
depreciation expense of $55,000.

     In connection with the purchase price accounting for the acquisition of
SLI, B.V., the Company approved a restructuring plan which resulted in
reorganization accruals of $25 million. As part of the finalization of the
reorganization accruals, $8 million of the amount initially recorded was
reversed to property, plant and equipment in 1998 leaving recorded
reorganization accruals of $17 million. The reorganization plan affected
employee terminations in Europe, Latin America, Australia and Asia and includes
the closure of leased warehouses and administrative facilities. The warehouse
closures will occur in Scandinavia and the administrative office closures will
occur in Switzerland, France, Austria and Benelux. The purchase liabilities
include severance costs, remaining payments on non-cancellable operating leases,
costs to return the facilities to the condition at the outset of the lease, the
write-off of the remaining net book value of leasehold improvements and the cost
to relocate employees. Accrued lease costs are for costs to be incurred
subsequent to the Company vacating facilities. The costs in connection with
these reorganization plans will be incurred through
                                       4
<PAGE>   5

1999 and will be paid from cash provided by operations. The Company expects to
realize annualized savings of approximately $18 million by the end of 1999 as
result of reduced employee expense of approximately $13.4 million, reduced lease
cost of approximately $4.5 million and reduced depreciation expense of
approximately $100,000.

     As part of management's evaluation and finalization of the restructuring
plan for SLI B.V. and the related restructuring accrual recorded at the time of
the acquisition, it was determined that $8.0 million ($3.9 million in severance
cost and $4.1 million in other costs) of the amount initially recorded in
purchase accounting should be reversed in the third quarter of 1998. The amount
reversed relates to the plan to consolidate European warehouse facilities. At
the time of the formulation of the plan (September 1997), management intended to
quickly prepare and present the social plan required in three European countries
to employees and government employees and government authorities for approval.
Subsequently, in August 1998, it was determined that implementing this portion
of the plan in the short term would interrupt operations more significantly than
originally anticipated. As such, management determined that delaying and slowly
implementing the plan would be a more prudent business course of action and
decrease the negative impact on operations. The remaining $1 million of the
liability will be used in fiscal 1999.

     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 8 of Notes to the Company's Consolidated
Financial Statements.

     Interest (income) expense, net.  Interest expense, net, increased from $1.2
million for the year ended November 30, 1997 to interest expense, net, of $16.9
million for the year ended January 3, 1999, primarily as a result of the bank
debt incurred in connection with the SLI, B.V. acquisition. Interest income of
approximately $4.1 million was generated, for the year ended November 30, 1997,
primarily from the investment of unused proceeds from the Company's secondary
offering in October 1996. Interest income for the year ended January 3, 1999
totalled $917,000.

     Other (income) expense.  The other income for the year ended November 30,
1997 includes the effects of foreign exchange transactions and a $985,000 gain
for the sale of 49% interest in CML Fiberoptics to Schott Corporation in
connection with the formation of the Schott-CML Fiberoptic joint venture.
Included in other (income) expense for the year ended January 3, 1999 was a loss
on sale of assets totalling $408,000. Substantially all of the remainder of
other (income) expense resulted from recording the effects of foreign exchange
transactions. The Company, which has substantial foreign operations and
activity, enters into foreign currency contracts to protect the Company from the
risk that sales and purchases of products in foreign currencies will be
adversely affected by changes in exchange rates. The Company does not hold or
issue financial instruments for trading purposes. Reference Note 13 of the
Company's Consolidated Financial Statements.

     Income before income taxes.  As a result of the above factors, income
before income taxes increased 44.2%, from $28.5 million for year ended November
30, 1997 to $41.2 million for the year ended January 3, 1999. As a percentage of
net sales, income before provision for income taxes decreased from 8.6% for the
year ended November 30, 1997 to 5.3% for the year ended January 3, 1999.

     Income taxes.  For the year ended January 3, 1999, the Company recorded a
tax provision of $8.2 million on pretax income of $41.2 million, for an
effective rate of 19.9%, compared to an effective rate of 26.6% for the year
ended November 30, 1997. 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. An effective tax rate lower than the U.S. statutory effective tax rate
is expected to continue for several years due to the significant international
operations of the Company. Reference Note 5 of the Company's Consolidated
Financial Statements.

  Fiscal Year Transition Period

     As a result of the change in the Company's fiscal year end from the Sunday
nearest to December 1 to the Sunday nearest to December 31, the Company is
presenting financial results for the one month period ended

                                       5
<PAGE>   6

January 4, 1998. Revenues were effected in the month of December by a natural
slow down in the trade cycle in the countries where the Company operates due to
the holiday season. The net loss for this transition period was due primarily to
the seasonally low revenues and increases in selling, general and administrative
expenses resulting from the acquisition of SLI, B.V. See the Company's Condensed
Consolidated Financial Statements included elsewhere herein. For the period
ended January 4, 1998, the Company recorded a tax provision benefit of $525,000
on a pre-tax loss of $1.1 million, for an effective benefit rate of 49%. This
rate was affected by business results for the one month period and the resultant
effects of the Company's operating in many tax jurisdictions with varied rates
and special tax agreements.

  Year ended November 30, 1997 compared to year ended December 1, 1996.

     Net sales.  Net sales increased from $94.2 million for the year ended
December 1, 1996 to $330.0 million for Fiscal 1997. This increase was primarily
attributable to the impact of the Power Lighting Products, Inc. ("PLP") and SLI,
B.V. acquisitions and to a lesser extent, growth from existing operations. Net
sales of PLP totaled $70.5 million from January 31, 1997 (the effective date of
acquisition) to November 30, 1997 and net sales of SLI, B.V. totaled $149.2
million from September 1, 1997 (the effective date of acquisition) to November
30, 1997. The Company's strategy of integrating acquisitions can affect sales
comparisons as existing capacity is utilized for internal purposes.

     Gross margin.  Gross margin increased from $33.0 million for the year ended
December 1, 1996 to $98.0 million for Fiscal 1997, due primarily to the increase
in sales volume attributable to the PLP and SLI, B.V. acquisitions. PLP
contributed $15.0 million to the total gross margin from the date of acquisition
and the gross margin of SLI, B.V. was $47.7 million for the period from the date
of acquisition to November 30, 1997. Gross margin, as a percentage of net sales,
decreased from 35.1% for the year ended December 1, 1996 to 29.7% for Fiscal
1997, due primarily to the impact of the lower gross margin of the ballast
business of PLP, which business has traditionally had lower gross margins than
the Company's other products. This gross margin percentage is expected to
improve as restructuring plans developed at the time of acquisition are
implemented.

     Selling, general and administrative expenses.  Selling, general and
administrative expenses increased from $14.6 million for the year ended December
1, 1996 to $65.5 million for Fiscal 1997. This increase was largely due to the
impact of the PLP and SLI, B.V. acquisitions. As a percentage of net sales,
selling, general and administrative expenses increased from 15.4% for the year
ended December 1, 1996 to 19.8% for Fiscal 1997, primarily as a result of the
impact of the PLP and SLI, B.V. acquisitions. The Company's strategy is to
decrease selling, general and administrative expenses attributable to the
acquired companies through restructuring plans which are currently being
implemented.

     Restructuring costs.  In Fiscal 1997, and in connection with the
acquisition of SLI, B.V., the Company developed and approved restructuring plans
for existing operations which resulted in charges of approximately $5.1 million
including $3.5 million of severance costs. The restructuring included the plant
closure, personnel termination, and asset liquidation of a lamp-making operation
in the United Kingdom which became redundant due to the SLI B.V. acquisition.
The facility's land and building was sold, and the equipment was sold or
scrapped. Employee severance cost at the Company's United Kingdom machinery
making operation resulted from the downsizing due to the duplication of
functions after the SLI B.V. acquisition. Additionally, the Company's leased
Illinois warehouse and distribution location was closed and personnel were
terminated. Also, the Company's Oklahoma manufacturing operation was considered
redundant in light of the SLI B.V. acquisition and the lamp making equipment was
disposed of. This restructuring plan was completed in 1998 with cash provided
from operations used to cover the costs incurred. The Company expects to realize
approximately $3.0 million in annualized cost savings over the next two year
period as a result of reduced employee expense of $2.9 million and reduced
depreciation expense of $60,000.

     In connection with the purchase price accounting for the acquisition of
SLI, B.V., the Company approved a restructuring plan which resulted in
reorganization accruals of $25 million. As part of the finalization of the
reorganization accruals, $8 million of the amount initially recorded was
reversed to property, plant and equipment in 1998 leaving recorded
reorganization accruals of $17 million. The reorganization plan affected
employee terminations in Europe, Latin America, Australia and Asia and includes
the closure of leased

                                       6
<PAGE>   7

warehouses and administrative facilities. The warehouse closures will occur in
Scandinavia and the administrative office closures will occur in Switzerland,
France, Austria and Benelux. The purchase liabilities include severance costs,
remaining payments on non-cancellable operating leases, costs to return the
facilities to the condition at the outset of the lease, the write-off of the
remaining net book value of leasehold improvements and the cost to relocate
employees. Accrued lease costs are for costs to be incurred subsequent to the
Company vacating facilities. The costs in connection with these reorganization
plans will be incurred through 1999 and will be paid from cash provided by
operations. The Company expects to realize annualized savings of approximately
$18 million by the end of 1999 as result of reduced employee expense of
approximately $13.4 million, reduced lease cost of approximately $4.5 million
and reduced depreciation expense of approximately $100,000.

     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 8 of Notes to the Company's Consolidated
Financial Statements.

     Interest expense, net.  Interest expense, net, increased from $301,000 for
the year ended December 1, 1996 to $1,156,000 for Fiscal 1997, primarily as a
result of the bank financing in connection with the acquisition of SLI, B.V.
Interest income of approximately $4.1 million was generated in Fiscal 1997,
primarily from the investment of $98.3 million in proceeds from the Company's
public offering completed in October 1996. A portion of these proceeds was used
during the year for the PLP and SLI, B.V. acquisitions ($65.0 million), the
repurchase of Common Stock ($8.7 million) and for other capital expenditures.

     Other income.  Other income increased from $1.3 million in the year ended
December 1, 1996 to $2.3 million in Fiscal 1997. This increase included a
$985,000 gain from the sale by CML Fiberoptics to Schott Corporation ("Schott")
of a 49% interest in a newly-created entity, Schott-CML Fiberoptics, LLC. The
remainder of the increase and substantially all of the remaining balance of
other income for Fiscal 1997 was the result of recording the effects of foreign
exchange transactions.

     Income before income taxes.  As a result of the above factors, income
before provision for income taxes increased from $19.5 million for the year
ended December 1, 1996 to $28.5 million for Fiscal 1997. As a percentage of net
sales, income before provision for income taxes decreased from 20.7% for the
year ended December 1, 1996, to 8.6% for Fiscal 1997.

     Income taxes.  For Fiscal 1997, the Company recorded a tax provision of
$7.6 million on pre-tax income of $28.5 million, for an effective rate of 26.6%,
compared to a tax provision of $6.0 million on pre-tax income of $19.5 million,
for an effective rate of 31.0%, for the year ended December 1, 1996. The lower
effective tax rate in Fiscal 1997 was 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, attributable to the
acquisition of SLI, B.V. An effective tax rate lower than the U.S. statutory
effective tax rate is expected to continue for several years due to the
significant international operations of the Company. See Note 5 of Notes to the
Company's Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

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

     As of November 30, 1997, the Company's cash on hand was $73.4 million. For
Fiscal 1997, net cash provided by operating activities was $30.8 million
compared to net cash provided by operating activities of $393,000 for fiscal
1996. The increase was a result of increased net income ($8 million) and an
increase in accounts payable and long-term liabilities primarily for SLI, B.V.
since the date of acquisition ($24 million). The accounts payable increase
related to the timing of purchases and payments. For Fiscal 1997, cash used in
investing activities totaled $188.4 million. The investing activities included
primarily (i) the Bruckner and PLP acquisitions in connection with which the
Company paid an aggregate amount of approximately $25.0 million and (ii) the
SLI, B.V. acquisition in connection with which the Company paid approximately
$161.5

                                       7
<PAGE>   8

million. Net cash provided by financing activities in Fiscal 1997 aggregated
$121.9 million, which included $132.4 million in borrowings under the Company's
credit facilities net of, among other things, repurchases of Common Stock
totaling $8.7 million.

     As of January 3, 1999, the Company's cash on hand was $27.4 million. For
Fiscal 1998, net cash provided by operating activities was $17.6 million and
cash used in investing activities totaled $74.2 million. The investing
activities included (i) capital expenditures, primarily for production
equipment, totaling $49.0 million and (ii) the 1998 acquisitions in connection
with which the Company paid an aggregate amount of approximately $27.7 million,
net of cash acquired. Net cash provided by financing activities in Fiscal 1998
aggregated $30.9 million, which included $35 million in net borrowings under the
Company's credit facilities, repurchases of Common Stock totaling $7.2 million
and proceeds from the exercise of stock options totaling $3.1 million.

     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. 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 cash from operations and borrowings available
under the Company's credit facilities will be sufficient 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 $33 million.

NET OPERATING LOSS CARRYFORWARDS

     The Company had net operating loss carryforwards for tax purposes of
approximately $117.4 million at January 3, 1999, of which approximately $43.9
million expire through 2008 and $73.5 million do not expire.

     The net operating losses were generated in various jurisdictions around the
world. Accordingly, notwithstanding the fact that the Company has historically
been profitable, a valuation allowance has been provided for substantially all
of the deferred tax assets related to the net operating losses. Management is
unable to forecast or project future taxable income in specific jurisdictions
and has concluded that it is more likely than not that the deferred tax asset
relative to loss carryforwards would not be realized for specific jurisdictions.

                                       8
<PAGE>   9

SEASONALITY

     It is expected that the Company's operations will experience certain
seasonal patterns. Generally, sales have been highest in the fourth quarter of
each year due to abbreviated daylight hours and increased holiday light usage.

IMPACT OF YEAR 2000

     The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

     In addressing the year 2000 issue, the Company has identified the following
phases. In the Awareness phase, the Company defined the year 2000 issue and
obtained executive level support and funding. In the Inventory phase, the
Company collected a comprehensive list of items that may be affected by Year
2000 compliance issues. Such items include facilities and related
non-information technology systems (embedded technology) used in production and
manufacturing systems, computer systems, hardware, and services and products
provided by third parties. In the Assessment phase, the Company evaluated the
items and affected systems identified in the Inventory phase to determine which
will need to be remediated and prioritized remediation based on the potential
impact to the Company. Affected systems include automated assembly lines and
related robotic technologies used in various aspects of the manufacturing
process. However, based on a review of its product line, the Company has
determined that most of the products it has sold and will continue to sell do
not require remediation to be year 2000 compliant. Accordingly, the Company does
not believe that the Year 2000 presents a material exposure as it relates to its
products. The remediation phase includes an analysis of the items that are
affected by Year 2000, the identification of problem areas and the repair or
replacement of non-compliant items. In the ordinary course of replacing computer
equipment and software, the Company attempts to obtain replacements that it
believes are Year 2000 compliant and requests representations from
manufacturers. The Testing phase includes testing of all proposed repairs,
including present and forward date testing which simulates dates in the Year
2000. The Implementation phase consists of placing all items that have been
remediated and successfully tested into production.

     Utilizing both internal and external resources to reprogram, or replace,
test, and implement the software and operating equipment for year 2000
modifications, the Company currently anticipates that its Year 2000
identification, assessment, remediation and testing efforts will be completed by
December 31, 1999 and that such efforts will be completed prior to any currently
anticipated impact on computer equipment and software. The Company estimates
that as of April 4, 1999, it had completed approximately 50% of the initiatives
that it believes will be necessary to fully address potential Year 2000 issues
relating to computer equipment and software. The total cost of the Year 2000
project is estimated at $9.8 million and is being funded through operating cash
flows. To date the Company has incurred approximately $5.6 million ($5.1 million
capitalized for new systems and equipment and $.5 million expenses), related to
all phases of the Year 2000 projects. Of the total remaining project costs,
approximately $3.8 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $.4 million
relates to repair of hardware and software and will be expensed as incurred.

     Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the year 2000 program. In the event
that the Company does not complete any additional phases, the Company may be
unable to take orders, manufacture and ship products, invoice customers or
collect payments. In addition, disruptions in the economy generally resulting
from Year 2000 issues could also materially adversely affect the Company. The
Company could be subject to litigation for computer systems product failure, for
example, equipment shutdown or failure to properly date business records. The
amount of potential liability and lost revenue cannot be reasonably estimated at
this time.

     Although the Company has not developed a comprehensive contingency plan to
address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to

                                       9
<PAGE>   10

achieve Year 2000 readiness, the Company's Year 2000 compliance program is
on-going and its ultimate scope, as well as the consideration of contingency
plans, will continue to be evaluated as new information becomes available. These
contingency plans involve, among other actions, manual workarounds, increasing
inventories, and adjusting staffing strategies.

     The Company has contacted its vendors and other third parties that could
affect the Company's operations with respect to such vendors' year 2000
compliance status. The Company has been informed by such vendors and other third
parties that they have achieved or expect to achieve compliance by the end of
this year. There can be no guarantee, however, that such systems will be timely
converted, or that a failure to convert, or a conversion that is incompatible
with the Company's systems, would not have an adverse effect on the Company.

     The foregoing Year 2000 discussion contains "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
There are many uncertainties involved in the Year 2000 issue, including the
extent to which the Company will be able to successfully remediate systems and
adequately provide for contingencies that may arise, as well as the broader
scope of the year 2000 issues as it may affect third parties that are not
controlled by the Company. Accordingly, the costs and results of the Company's
Year 2000 program and the extent of any impact on the Company's operations could
vary materially from those stated herein.

MARKET RISK

     The tables below summarize information on instruments and transactions that
are sensitive to foreign currency exchange rates, including foreign currency
forward exchange agreements and foreign currency denominated debt obligations.

Debt Denominated in Foreign Currencies

<TABLE>
<CAPTION>
                                                                       THERE-           FAIR VALUE
                                                               1999    AFTER    TOTAL     1/3/99
                                                              ------   ------   -----   ----------
                                                               (DOLLARS EQUIVALENTS IN MILLIONS)
<S>                                                           <C>      <C>      <C>     <C>
Belgium Francs
  Variable Rate.............................................  $  5.4   $  --    $ 5.4     $ 5.4
  Avg. Interest Rate........................................     5.2%
  Avg. Forward Currency Exchange Rate.......................   0.029
Deutsche Marks
  Variable Rate.............................................  $  7.8   $  --    $ 7.8     $ 7.8
  Avg. Interest Rate........................................     5.2%
  Avg. Forward Currency Exchange Rate.......................   0.598
Japanese Yen
  Variable Rate.............................................  $  9.5   $  --    $ 9.5     $ 9.5
  Avg. Interest Rate........................................     2.1%
  Avg. Forward Currency Exchange Rate.......................   0.009
</TABLE>

                                       10
<PAGE>   11

Foreign Currency Forward Exchange Contracts

<TABLE>
<CAPTION>
                                                                THERE-              AVERAGE      FAIR VALUE
BUY CONTRACTS                    FUNCTIONAL CURRENCY    1999    AFTER    TOTAL   CONTRACT RATE     1/3/99
-------------                   ----------------------  -----   ------   -----   -------------   ----------
                                                                 (DOLLARS EQUIVALENTS IN MILLIONS)
<S>                             <C>                     <C>     <C>      <C>     <C>             <C>
Euro..........................  British Pound Sterling  $20.2   $  --    $20.2       1.436         $20.6
United States Dollar..........  British Pound Sterling  $ 3.3   $  --    $ 3.3       1.645         $ 3.3
United States Dollar..........  Deutsche Marks          $ 1.9   $  --    $ 1.9       0.600         $ 1.9
</TABLE>

     A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. As a result, the Company's financial
results could be significantly affected by factors such as foreign currency
exchange rates or weak economic conditions in the foreign markets in which the
Company distributes its products. The Company's operating results are exposed to
changes in exchange rates between the U.S. dollar and various other foreign
currencies.

     A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. As a result, the Company's financial
results could be significantly affected by factors such as foreign currency
exchange rates or weak economic conditions in the foreign markets in which the
Company distributes its products. The Company's operating results are exposed to
changes in exchange rates between the U.S. dollar and various other foreign
currencies.

     The Company has an existing credit facility with a syndicate of banks led
by BankBoston, N.A., as administrative agent, providing to the Company and its
domestic subsidiaries (the "Borrowers") a $300 million multi-currency revolving
credit facility including a $10.0 million swing-line loan facility and a $15.0
million letter of credit facility. Non-U.S.-dollar borrowings are capped at
$75.0 million. There are no scheduled amortization payments or repayment
penalties. The facility terminates and is repayable in full on August 30, 2002.

     At the Company's option, the interest rates per annum applicable to the
revolving credit facility are either adjusted LIBOR plus a margin ranging from
0.75% to 1.75%, or, with respect to US-dollar-denominated loans only, an
adjusted base rate plus a margin ranging from zero to 0.75%.

     The Company's revolving credit facility contains a number of covenants
typical in senior credit facilities that, among other things, restrict the
ability of the Company to dispose of assets (including the stock of
subsidiaries), incur additional indebtedness, create additional liens on assets,
enter into certain leases, investments or acquisitions, engage in mergers or
consolidations, make capital expenditures or engage in certain transactions with
subsidiaries and affiliates, and that otherwise restrict corporate activities.
In addition, the Company is also required to comply with certain financial
covenants including maximum leverage, minimum interest coverage and minimum net
worth. See "Description of Certain Indebtedness".

     The Company believes that it will continue to use its long-term credit
facility to fund its future acquisitions, capital expenditures, and other
short-term working capital requirements.

     The Company expects to generate sufficient cash flows from operations to
pay down remaining debt prior to the expiration of the credit facility (August
2002). All proceeds from the secondary offering will be used to pay down
existing debt.

     The Company continues to review and analyze financing alternatives based on
capital market conditions.
                                       11
<PAGE>   12

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
SLI, INC. AND SUBSIDIARIES
Report of Independent Auditors..............................
Consolidated Financial Statements
Consolidated Balance Sheets as of January 3, 1999 and
  November 30, 1997.........................................
Consolidated Statements of Operations for the years ended
  January 3, 1999, November 30, 1997 and December 1, 1996
  and for the one month ended January 4, 1998...............
Consolidated Statements of Stockholders' Equity for the
  years ended January 3, 1999, November 30, 1997 and
  December 1, 1996 and for the one month ended January 4,
  1998......................................................
Consolidated Statements of Cash Flows for the years ended
  January 3, 1999, November 30, 1997 and December 1, 1996
  and for the one month ended January 4, 1998...............
Notes to Consolidated Financial Statements..................
SLI, INC. AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial
  Statements................................................
CHICAGO MINIATURE LAMP (CANADA), INC.
Auditor's Report............................................
Financial Statements
Balance Sheet as at January 3, 1999, January 4, 1998,
  November 30, 1997 and December 1, 1996....................
Statement of Income for the years ended January 3, 1999,
  November 30, 1997 and December 1, 1996 and for the one
  month ended January 4, 1998...............................
Statement of Retained Earnings for the years ended January
  3, 1999, November 30, 1997 and December 1, 1996 and for
  the one month ended January 4, 1998.......................
Statement of Cash Flows for the years ended January 3, 1999,
  November 30, 1997 and December 1, 1996 and for the one
  month ended January 4, 1998...............................
Notes to the Financial Statements...........................
</TABLE>

                                       F-1
<PAGE>   13

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)

     We have audited the accompanying consolidated balance sheets of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) and subsidiaries as of January 3, 1999
and November 30, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended January 3, 1999,
November 30, 1997, and December 1, 1996, and for the month ended January 4,
1998. Our audits also included the financial statement schedule for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996 and for the month
ended January 4, 1998, listed in the index at Item 16(b). 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
$18,426,000 and $3,406,000, $14,605,000 and $2,671,000 and $13,031,000 and
$2,281,000 for the years ended January 3, 1999, November 30, 1997, and December
1, 1996, respectively, and $1,087,000 and $83,000 for the month ended January 4,
1998. 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 generally accepted auditing
standards. 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 provides 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. (formerly Chicago Miniature
Lamp, Inc.) and subsidiaries at January 3, 1999 and November 30, 1997, and the
consolidated results of their operations and their cash flows for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996, and for the
month ended January 4, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule for
the years ended January 3, 1999, November 30, 1997, and December 1, 1996 and for
the month ended January 4, 1998, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Ernst & Young LLP

Chicago, Illinois
February 12, 1999

                                       F-2
<PAGE>   14

                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
                                        ASSETS
Current assets:
  Cash and cash equivalents.................................   $ 27,390      $ 73,416
  Accounts receivable, less allowances for doubtful accounts
     of $9,369 in 1999 and $7,889 in 1997...................    160,582       140,380
  Inventories...............................................    149,453       124,086
  Prepaid expenses and other................................     15,735        12,120
                                                               --------      --------
          Total current assets..............................    353,160       350,002
Property, plant, and equipment, net.........................    341,210       269,650
Other assets:
  Goodwill, net of accumulated amortization.................     38,353         7,651
  Other intangible assets, net of accumulated
     amortization...........................................     29,091        12,039
  Other.....................................................     13,649        12,319
                                                               --------      --------
          Total assets......................................   $775,463      $651,661
                                                               ========      ========
                         LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Short-term notes payable..................................   $ 28,086      $  5,432
  Current portion of long-term debt.........................      1,788         9,389
  Accounts payable..........................................    121,484       102,104
  Accrued expenses..........................................    100,778       107,616
  Income taxes payable......................................      3,234         7,855
                                                               --------      --------
          Total current liabilities.........................    255,370       232,396
Long-term debt, less current portion........................    238,530       185,434
Other liabilities:
  Deferred income taxes.....................................     10,952         5,532
  Other long-term liabilities...............................     52,801        62,248
                                                               --------      --------
          Total other liabilities...........................     63,753        67,780
Commitments and contingencies
  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 -- 29,346,498 and 29,302,796 shares in
     1999 and 1997, respectively............................        293           293
  Common stock to be issued.................................      8,419            --
  Additional paid-in capital................................    131,399       126,835
  Retained earnings.........................................     77,703        45,218
  Cumulative translation adjustment.........................      4,080         2,377
  Less: Treasury stock at cost, 315,900 and 643,345 shares
     in 1999 and 1997.......................................     (4,084)       (8,672)
                                                               --------      --------
          Total stockholders' equity........................    217,810       166,051
                                                               --------      --------
          Total liabilities and stockholders' equity........   $775,463      $651,661
                                                               ========      ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.
                                       F-3
<PAGE>   15

                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                            YEAR ENDED
                                        ---------------------------------------------------    MONTH ENDED
                                          JANUARY 3,       NOVEMBER 30,       DECEMBER 1,       JANUARY 4,
                                             1999              1997              1996              1998
                                        --------------   ----------------   ---------------   --------------
                                                                                                 (NOTE 2)
                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                     <C>              <C>                <C>               <C>
Net sales.............................   $   773,068       $   329,959        $    94,171      $    53,866
Cost of products sold.................       533,484           231,933             61,147           40,199
                                         -----------       -----------        -----------      -----------
Gross margin..........................       239,584            98,026             33,024           13,667
Selling, general, and administrative
  expenses............................       178,235            65,549             14,552           14,004
Restructuring costs...................         2,022             5,115                 --               --
                                         -----------       -----------        -----------      -----------
Operating income (loss)...............        59,327            27,362             18,472             (337)
Other (income) expenses:
  Interest expense....................        17,809             5,238                936            1,312
  Interest income.....................          (917)           (4,082)              (635)            (106)
  Other, net..........................         1,247            (2,326)            (1,294)            (471)
                                         -----------       -----------        -----------      -----------
Income (loss) before income taxes.....        41,188            28,532             19,465           (1,072)
Income taxes..........................         8,156             7,591              6,029             (525)
                                         -----------       -----------        -----------      -----------
Net income (loss).....................   $    33,032       $    20,941        $    13,436             (547)
                                         ===========       ===========        ===========      ===========
Net income (loss) per common share --
  Basic...............................   $      1.14       $       .73        $       .55      $      (.02)
                                         ===========       ===========        ===========      ===========
Weighted-average shares outstanding --
  Basic...............................    28,898,124        28,760,505         24,357,099       28,658,634
                                         ===========       ===========        ===========      ===========
Net income (loss) per common share --
  Dilutive............................   $      1.10       $       .71        $       .55      $      (.02)
                                         ===========       ===========        ===========      ===========
Weighted-average shares outstanding --
  Dilutive............................    30,131,604        29,330,889         24,487,855       29,298,133
                                         ===========       ===========        ===========      ===========
</TABLE>

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

                                       F-4
<PAGE>   16

                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                 COMMON STOCK
                              ------------------   COMMON
                                NUMBER             STOCK    ADDITIONAL                         CUMULATIVE
                                  OF        PAR    TO BE     PAID-IN     TREASURY   RETAINED   TRANSLATION
                                SHARES     VALUE   ISSUED    CAPITAL      STOCK     EARNINGS   ADJUSTMENT     TOTAL
                              ----------   -----   ------   ----------   --------   --------   -----------   --------
                                                              (DOLLARS IN THOUSANDS)
<S>                           <C>          <C>     <C>      <C>          <C>        <C>        <C>           <C>
Balance at December 3,
  1995......................  23,558,171   $236    $  --     $ 23,805         --    $10,841      $    39     $ 34,921
Comprehensive income:
  Net income................          --     --       --           --         --     13,436           --       13,436
  Translation adjustment
    (net of taxes of
    $180)...................          --     --       --           --         --         --          551          551
                                                                                                             --------
Comprehensive income........                                                                                   13,987
Issuance of common stock:
  Public offering, including
    over allotment, net of
    offering costs..........   5,287,125     53       --       98,291         --         --           --       98,344
  Acquisition...............     225,000      2       --        3,248         --         --           --        3,250
  Exercise of stock
    options.................     116,394      1       --          661         --         --           --          662
                              ----------   ----    ------    --------    -------    -------      -------     --------
Balance at December 1,
  1996......................  29,186,690    292       --      126,005         --     24,277          590      151,164
Comprehensive income:
  Net income................          --     --       --           --         --     20,941           --       20,941
  Translation adjustment
    (net of taxes of
    $771)...................          --     --       --           --         --         --        1,787        1,787
                                                                                                             --------
  Comprehensive income......                                                                                   22,728
Issuance of common stock:
  Additional offering
    costs...................          --     --       --         (212)        --         --           --         (212)
  Acquisition...............       4,500     --       --          100         --         --           --          100
  Exercise of stock
    options.................     111,606      1       --          942         --         --           --          943
Purchase of 643,345 shares
  for treasury..............                 --       --           --     (8,672)        --           --       (8,672)
                              ----------   ----    ------    --------    -------    -------      -------     --------
Balance at November 30,
  1997......................  29,302,796    293       --      126,835     (8,672)    45,218        2,377      166,051
Comprehensive income:
  Net income................          --     --       --           --         --       (547)          --         (547)
  Translation adjustment
    (net of taxes of
    $738)...................          --     --       --           --         --         --       (3,210)      (3,210)
                                                                                                             --------
Comprehensive income
  (loss)....................          --     --       --           --         --         --           --       (3,757)
                              ----------   ----    ------    --------    -------    -------      -------     --------
Balance at January 4,
  1998......................  29,302,796    293       --      126,835     (8,672)    44,671         (833)     162,294
Comprehensive income:
  Net income................          --     --       --           --         --     33,032           --       33,032
Translation adjustment (net
  of taxes of $2,101).......          --     --       --           --         --         --        4,913        4,913
                                                                                                             --------
Comprehensive income........                                                                                   37,945
Issuance of common stock:
  Acquisitions..............     680,000      7    8,419       12,591         --         --           --       21,017
  Exercise of stock
    options.................     295,947      2                 3,770                                           3,772
  Purchase 604,800 shares
    for treasury............          --     --       --           --     (7,218)        --           --       (7,218)
  Retire treasury shares....    (932,245)    (9)      --      (11,797)    11,806         --           --           --
                              ----------   ----    ------    --------    -------    -------      -------     --------
Balance at January 3,
  1999......................  29,346,498   $293    $8,419    $131,399    $(4,084)   $77,703      $ 4,080     $217,810
                              ==========   ====    ======    ========    =======    =======      =======     ========
</TABLE>

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

                                       F-5
<PAGE>   17

                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                    ONE
                                                                   YEAR ENDED                      MONTH
                                                   -------------------------------------------     ENDED
                                                     JANUARY 3,     NOVEMBER 30,   DECEMBER 1,   JANUARY 4,
                                                        1999            1997          1996          1998
                                                   --------------   ------------   -----------   ----------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                <C>              <C>            <C>           <C>
OPERATING ACTIVITIES
Net income (loss)................................     $ 33,032       $  20,941      $ 13,436      $   (547)
Adjustments to reconcile net income (loss) to net
  cash provided by (used in) operating
  activities:
  Depreciation and amortization..................       17,280           7,252         3,165         1,462
  Deferred income taxes..........................          470          (3,094)          907          (566)
  Changes in operating assets and liabilities:
     Accounts receivable.........................        2,361         (15,597)       (5,110)        7,141
     Inventories.................................      (14,009)            695        (4,873)       (2,709)
     Prepaid expenses and other..................        1,715            (182)         (440)      (12,628)
     Accounts payable............................        2,084          21,051        (3,478)       (8,292)
     Accrued expenses............................      (14,555)         (4,669)        1,452          (988)
     Income taxes payable........................        1,268          (1,825)         (652)          (45)
     Stockholder payable/receivable..............          (53)            594          (594)          303
     Other long-term liabilities.................      (12,012)          5,617        (3,420)       (1,778)
                                                      --------       ---------      --------      --------
Net cash provided by (used in) operating
  activities.....................................       17,581          30,783           393       (18,647)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment......      (48,970)        (23,116)       (8,921)       (1,966)
Proceeds from disposal of property, plant and
  equipment......................................        2,529              --            --            --
Acquisitions, net of cash acquired...............      (27,721)       (165,325)      (10,293)           --
Maturities of held-to-maturity investments.......                           --         2,102            --
                                                      --------       ---------      --------      --------
Net cash used for investing activities...........      (74,162)       (188,441)      (17,112)       (1,966)
FINANCING ACTIVITIES
Net borrowings (repayments) of short term debt...          313          (4,541)        1,804           858
Net borrowings of revolving credit line..........       50,494         183,375            --            --
Proceeds from long-term debt.....................        7,214           5,730        24,442        (1,089)
Payments of long-term debt.......................      (22,967)        (52,128)       (3,214)           --
Payment of deferred financing costs..............           --          (2,616)         (297)           --
Proceeds from issuance of common stock -- net of
  offering costs.................................           --            (212)       98,344            --
Repurchase of shares for treasury................       (7,218)         (8,672)           --            --
Exercise of stock options........................        3,079             943           662            --
                                                      --------       ---------      --------      --------
Net cash provided by (used in) financing
  activities.....................................       30,915         121,879       121,741          (231)
Effect of exchange rate changes on cash..........          484             168            --            --
                                                      --------       ---------      --------      --------
Net increase (decrease) in cash and cash
  equivalents....................................      (25,182)        (35,611)      105,022       (20,844)
Cash and cash equivalents, beginning of year.....       52,572         109,027         4,005        73,416
                                                      --------       ---------      --------      --------
Cash and cash equivalents, end of year...........     $ 27,390       $  73,416      $109,027      $ 52,572
                                                      ========       =========      ========      ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
  Interest.......................................     $ 18,120       $   2,097      $    936      $     --
  Income taxes...................................     $  4,138       $   7,447      $  3,802      $  1,510
</TABLE>

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

                                       F-6
<PAGE>   18

                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND ACQUISITIONS

     SLI, Inc. (formerly Chicago Miniature Lamp, Inc. (an Oklahoma corporation))
and subsidiaries (collectively, the Company) operates in a single business
segment and is a vertically integrated manufacturer and supplier of lighting
systems, which include lamps, fixtures and ballasts. Through its 20 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, LED's and
special lamps), fixtures, magnetic and electronic ballasts and fiber optic
lighting systems. The Company serves a diverse, international customer base and
at January 3, 1999 had 31 manufacturing plants in 13 countries.

     SLI Inc. acquired 6 companies in 1998 for approximately $31.9 million in
cash and 680,000 of newly issued common shares and 225,000 of common shares to
be issued, valued at approximately $21.0 million and the assumption of
approximately $27 million in debt. Pursuant to the terms of the acquisition
agreement, 225,000 shares are to be issued on the earlier of January 1, 2000 or
the commencement of production of the European linear fluorescent ballast and
attainment of certain minimum direct material costs. In 1997, the Company
acquired 4 companies for approximately $187.1 million in cash and the assumption
of approximately $1.4 million of debt. The Company acquired 3 companies in 1996
for approximately $12.5 million in cash and 225,000 of newly issued common
shares valued at approximately $3.3 million and the assumption of approximately
$4.9 million of debt. 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 $33.7 million in 1998 and $800,000 in 1997 has been recorded in
goodwill and amortized over estimated useful lives. The purchase price
allocation for one of the 1998 acquisitions is subject to adjustment upon the
completion of an asset appraisal. Any adjustment is not expected to be material.

     The largest acquisition occurred in 1997, when the Company acquired all the
outstanding capital stock of Sylvania Lighting International, B.V. and its
subsidiaries (SLI B.V.) for $161.5 million in cash financed with the Company's
cash and the Company's credit facility (Note 4). SLI, B.V. is an integrated
designer, manufacturer and seller of lighting systems. SLI, B.V. has a total of
15 manufacturing facilities in Europe, Latin America and Australia and sells to
customers throughout the world. There was no excess of purchase price over the
fair value of assets acquired.

     Based on unaudited data, the following table presents selected financial
information for the Company and its subsidiaries on a pro forma basis, assuming
the companies acquired in 1997 had been consolidated since December 4, 1995:

<TABLE>
<CAPTION>
                                                               YEAR ENDED
                                                              NOVEMBER 30,   DECEMBER 1,
                                                                  1997          1996
                                                              ------------   -----------
<S>                                                           <C>            <C>
Net sales...................................................    $755,364      $808,372
Net income..................................................      22,264        17,071
Net income per share........................................         .77           .70
</TABLE>

     The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions been made as
of December 4, 1995. Pro forma data has not been presented for 1998 because the
effect of the 1998 acquisitions on operations was not significant.

                                       F-7
<PAGE>   19
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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.

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.

FISCAL YEAR

     In January 1998, the Company changed its financial reporting year-end to
the Sunday nearest to December 31 of each year. Previously, the fiscal year
ended the Sunday nearest December 1. Accordingly, the accompanying statements of
operations, stockholders' equity and cash flows include results for the one
month transition period ending January 4, 1998. All references herein for the
years 1996, 1997 and 1998 represent the fiscal years ended December 1, 1996,
November 30, 1997 and January 3, 1999.

CASH EQUIVALENTS

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

INVENTORIES

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

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
<S>                                                           <C>          <C>
Raw materials...............................................   $ 35,638      $ 28,262
Work in process.............................................     17,389        14,693
Finished goods..............................................     96,426        81,131
                                                               --------      --------
                                                               $149,453      $124,086
                                                               ========      ========
</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.

                                       F-8
<PAGE>   20
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GOODWILL

     Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired related to the business acquisitions described
in Note 1. Goodwill is amortized on a straight-line basis over the respective
useful lives which range from 25 to 40 years. Accumulated amortization is
approximately $855,000 and $593,000 at January 3, 1999 and November 30, 1997,
respectively. Amortization expense was approximately $253,000, $216,000,
$200,000, and $53,000, for fiscal 1998, 1997, and 1996, respectively and $9,000
for the one month ended January 4, 1998. 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
recoverability, 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 an 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. To date, there have been no
adjustments to the carrying amounts of the goodwill resulting from these
evaluations.

OTHER INTANGIBLE ASSETS

     Other intangible assets include the fair value of engineering technology,
patents and, noncompete agreements associated with the acquisitions described in
Note 1. 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. Accumulated amortization is approximately $3,105,000 and $2,290,000 at
January 3, 1999 and November 30, 1997, respectively. Amortization expense was
approximately $684,000, $480,000, and $392,000 for fiscal 1998, 1997, and 1996,
respectively and $57,000 for the one month ended January 4, 1998. Other
intangible assets, net of accumulated amortization consists of (dollars in
millions):

<TABLE>
<CAPTION>
                                                             JANUARY 3,       NOVEMBER 30,
                                                                1999              1997
                                                           --------------   ----------------
<S>                                                        <C>              <C>
Engineering technology...................................      $24.4             $ 7.2
Patents and non-compete agreements.......................        7.8               7.1
                                                               -----             -----
                                                                32.2              14.3
Accumulated amortization.................................        3.1               2.3
                                                               -----             -----
Other intangibles, net of accumulated amortization.......      $29.1              12.0
</TABLE>

TREASURY STOCK

     The board of directors has authorized, subject to certain business and
market conditions, the repurchase of shares of the Company's stock. At January
3, 1999, a total of 1,248,145 shares have been repurchased under these plans.
Retirements of treasury stock totaled 932,245 shares as of January 3, 1999.

FINANCIAL INSTRUMENTS

     The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest and foreign exchange rates. 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.

                                       F-9
<PAGE>   21
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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 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 remaining term of the underlying debt obligation.

REVENUE RECOGNITION

     Revenues from product sales are recognized at the time of shipment.

RESEARCH AND DEVELOPMENT

     Research and development costs are charged to operations in the year
incurred and totaled $7,533,000 and $1,926,000 for fiscal 1998 and 1997,
respectively and $628,000 for the one month ended January 4, 1998. The costs
incurred in fiscal 1996 were not material.

ADVERTISING COSTS

     Advertising costs are charged to expense in the period incurred.
Advertising expense for 1998, 1997, and 1996 was approximately $10,500,000,
$4,535,000 and $250,000, 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 non-current assets related to the acquisition to
zero and any remaining tax benefit will be accounted for in the current
statement of operations.

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 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.

STOCK SPLITS AND RECAPITALIZATION

     On August 5, 1996, the Company approved a three-for-two stock split of its
outstanding common stock to be effected in the form of a 50% stock dividend. The
dividend was paid on August 27, 1996, to shareholders of record August 16, 1996.

     On February 11, 1998, the Company approved a three-for-two stock split of
its outstanding common stock to be effected in the form of a 50% stock dividend.
The dividend was paid on March 6, 1998 to shareholders of record February 23,
1998.

     All share and per share data have been adjusted to reflect these stock
splits as of the earliest period presented.

                                      F-10
<PAGE>   22
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER SHARE

     Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
became effective in the fourth quarter of 1997 and requires presentations of
earnings per share -- "basic" and "diluted." Basic earnings per share is
computed by dividing income available to common stockholders (the numerator) by
the weighted-average number of common shares (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 the
number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued.

     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>
                                                        1998         1997         1996
                                                     ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>
Basic..............................................  28,898,124   28,760,505   24,357,099
                                                     ==========   ==========   ==========
Diluted............................................  30,131,604   29,330,889   24,487,855
                                                     ==========   ==========   ==========
</TABLE>

     The difference between basic and diluted weighted-average common shares
results from the assumption that dilutive stock options outstanding were
exercised.

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

<TABLE>
<CAPTION>
                                                             1998      1997      1996
                                                            -------   -------   -------
<S>                                                         <C>       <C>       <C>
Stock options.............................................  181,606        --        --
                                                            =======   =======   =======
</TABLE>

ADOPTION OF ACCOUNTING PRINCIPLES

     The Company has adopted Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires the Company's foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.

     The Company has adopted the SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131), Statement 131 superseded
FASB Statement No. 14, Financial Reporting For Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of Statement 131 is solely a reporting requirement and
therefore did not have an effect on the Company's financial position or results
of operations.

     The Company has adopted the SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits (Statement 132). Statement 132
standardizes the disclosure requirements for pensions and other postretirement
benefits, requires additional information on changes in the benefit obligation
and fair values of plan assets and eliminates certain disclosures. The adoption
of Statement 132 is solely a reporting requirement and therefore did not have an
effect on the Company's financial position or results of operations.

                                      F-11
<PAGE>   23
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In June 1998, the SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities (Statement 133), which is required to be adopted in fiscal
years beginning after June 15, 1999. Statement 133 requires all derivatives to
be recognized in the balance sheet as either assets or liabilities at fair
value. Derivatives that are not hedges 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. The Company has not
yet determined what the effect of Statement 133 will be on the earnings and
financial position of the Company.

RECLASSIFICATIONS

     Certain amounts in the fiscal 1997 and 1996 financial statements have been
reclassified to conform with the fiscal 1998 presentation.

3. PROPERTY, PLANT, AND EQUIPMENT

     Property, plant, and equipment consists of the following:

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Land........................................................   $ 11,810      $  8,051
Buildings and improvements..................................     70,545        66,726
Machinery and equipment.....................................    268,442       189,748
Molds.......................................................     14,460        10,662
Furniture and fixtures......................................      6,058         6,493
                                                               --------      --------
                                                                371,315       281,680
Less: Accumulated depreciation..............................     30,105        12,030
                                                               --------      --------
                                                               $341,210      $269,650
                                                               ========      ========
</TABLE>

     Depreciation expense was approximately $16,175,000, $6,500,000, $2,700,000
and $1,167,000 for fiscal 1998, 1997 and 1996 and the one month ended January 4,
1998, respectively.

4. DEBT

LONG TERM DEBT

     Long-term Debt consists of the following:

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Revolving credit facility...................................   $229,749       183,375
Other debt..................................................     10,569        11,448
                                                               --------      --------
                                                                240,318       194,823
Less: Current portion.......................................      1,788         9,389
                                                               --------      --------
          Total long term debt..............................   $238,530      $185,434
                                                               ========      ========
</TABLE>

                                      F-12
<PAGE>   24
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company has an existing credit facility which provides for a $300
million multi-currency revolving credit facility including a $10 million
swing-line loan facility and a $15 million letter of credit facility. Non US
dollar borrowings are limited to $75 million. Borrowings under this agreement
totaled $229,749,000 at January 3, 1999. This agreement expires August 30, 2002.
At the Company's option, the U.S. dollar loans bear interest at LIBOR (5.1% at
January 3, 1999) plus a margin, or an adjusted base rate (7.8% at January 3,
1999) plus a margin, payable quarterly. Foreign-denominated loans bear interest
at local spot rates. The interest margin of 1.5% for LIBOR loans and .5% for
prime loans at January 3, 1999 fluctuates on the Company's leverage ratio. The
agreement provides for a quarterly commitment fee, based on the Company's
leverage ratio as it relates to the available portion of the commitment (37.5
basis points at January 3, 1999). Mandatory prepayments are required upon the
occurrence of additional debt, or offering of equity, as defined in the
agreement.

     The Company is required to comply with a number of affirmative and negative
covenants under its credit agreements. Among other things, the credit agreements
require the Company to satisfy certain financial tests and ratios (including
minimum interest coverage ratios, maximum leverage ratios, and minimum net worth
requirements).

     At January 3, 1999, long-term debt includes $7,848,000 denominated in
Deutsche Marks (bearing interest at 5.24% per annum), $5,422,000 denominated in
Belgian Francs (bearing interest at 5.15% per annum) and $9,479,000 in Japanese
Yen (bearing interest at 2.05% per annum) under the credit agreement.

     The Company uses interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt (Note 13).

     Interest expense was $17,809,000 , $5,238,000, and $936,000, for fiscal
1998, 1997, and 1996, respectively and $1,312,000 for the one month period ended
January 4, 1998.

     As of January 3, 1999, annual debt principal payments required were as
follows (dollars in thousands):

<TABLE>
<S>                                                           <C>
1999........................................................  $  1,788
2000........................................................     2,415
2001........................................................     1,369
2002........................................................   230,590
2003........................................................       771
Thereafter..................................................     3,385
                                                              --------
                                                              $240,318
                                                              ========
</TABLE>

SHORT-TERM DEBT

     Short-term borrowings in the amounts of approximately $28.1 million and
$5.4 million at January 3, 1999 and November 30, 1997, respectively, primarily
consisted of borrowings by subsidiaries located outside of the United States
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 January 3, 1999 was 8.4%. No material compensating balances are
required or maintained.

                                      F-13
<PAGE>   25
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                                           ONE
                                                            YEAR ENDED                    MONTH
                                              ---------------------------------------     ENDED
                                              JANUARY 3,   NOVEMBER 30,   DECEMBER 1,   JANUARY 4,
                                                 1999          1997          1996          1998
                                              ----------   ------------   -----------   ----------
<S>                                           <C>          <C>            <C>           <C>
Domestic operations.........................   $(5,249)      $14,005        $ 9,280      $(1,170)
Foreign operations..........................    46,437        14,527         10,185           98
                                               -------       -------        -------      -------
                                               $41,188       $28,532        $19,465      $(1,072)
                                               =======       =======        =======      =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                            YEAR ENDED                  ONE MONTH
                                              ---------------------------------------     ENDED
                                              JANUARY 3,   NOVEMBER 30,   DECEMBER 1,   JANUARY 4,
                                                 1999          1997          1996          1998
                                              ----------   ------------   -----------   ----------
<S>                                           <C>          <C>            <C>           <C>
Federal:
  Current...................................   $(1,050)      $ 7,729        $3,082        $(307)
  Deferred..................................       390        (3,002)          632          (28)
                                               -------       -------        ------        -----
                                                  (660)        4,727         3,714         (335)
State:
  Current...................................      (295)        1,005           425          (27)
  Deferred..................................        16          (413)          (49)          (3)
                                               -------       -------        ------        -----
                                                  (279)          592           376          (30)
Foreign:
  Current...................................     7,800         1,951         1,615         (249)
  Deferred..................................     1,295           321           324           89
                                               -------       -------        ------        -----
                                                 9,095         2,272         1,939         (160)
                                               -------       -------        ------        -----
                                               $ 8,156       $ 7,591        $6,029        $(525)
                                               =======       =======        ======        =====
</TABLE>

     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 $905,000 or $.03 per share for fiscal 1998, $1,393,000 or $.05
per share for fiscal 1997 and $1,309,000 or $.05 per share for fiscal 1996.

                                      F-14
<PAGE>   26
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     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                  ONE MONTH
                                              ---------------------------------------     ENDED
                                              JANUARY 3,   NOVEMBER 30,   DECEMBER 1,   JANUARY 4,
                                                 1999          1997          1996          1998
                                              ----------   ------------   -----------   ----------
<S>                                           <C>          <C>            <C>           <C>
Computed federal tax provision (benefit) at
  U.S. statutory rates......................   $14,416        $9,986        $ 6,618       $(375)
Increase (decrease) in taxes resulting from:
  Amortization of goodwill..................        70           118             35          30
  Nonstatutory stock options................      (880)         (185)            --          --
  State income taxes (benefit), net of
     federal benefit (taxes)................      (130)          396            205         (70)
  Effect of different income taxes of other
     countries..............................    (2,400)         (573)        (1,484)       (381)
  Net operating losses not benefited........     1,276            --             --         271
  Utilization of net operating loss
     carryforwards..........................    (4,196)       (2,211)            --          --
  Other.....................................        --            60            655          --
                                               -------        ------        -------       -----
                                               $ 8,156        $7,591        $ 6,029       $(525)
                                               =======        ======        =======       =====
</TABLE>

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

<TABLE>
<CAPTION>
                                                          JANUARY 3, 1999   NOVEMBER 30, 1997
                                                          ---------------   -----------------
<S>                                                       <C>               <C>
Assets:
  Net operating loss carryforwards......................     $ 45,565           $ 46,065
  Reserves..............................................        1,063              4,608
  Accruals..............................................        1,019                573
  Other.................................................        1,717                416
                                                             --------           --------
          Total assets..................................       49,364             51,662
Liabilities:
  Accelerated tax depreciation..........................      (11,521)            (9,984)
  Other.................................................       (4,391)            (2,383)
                                                             --------           --------
          Total liabilities.............................      (15,912)           (12,367)
                                                             --------           --------
                                                               33,452             39,295
Less: Valuation allowance for net operating loss
  carryforwards.........................................      (44,404)           (44,827)
                                                             --------           --------
Net deferred tax liabilities............................     $(10,952)          $ (5,532)
                                                             ========           ========
</TABLE>

     For tax purposes, the Company had available at January 3, 1999, net
operating loss carryforwards for foreign tax purposes of approximately
$117,351,000.

                                      F-15
<PAGE>   27
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The expiration dates of operating loss carryforwards at January 3, 1999 are
as follows (dollars in thousands):

<TABLE>
<S>                                                           <C>
1999........................................................  $ 11,438
2000........................................................     5,823
2001........................................................     4,212
2002........................................................    14,924
2003........................................................     4,809
Thereafter..................................................     2,676
No expiration date..........................................    73,469
                                                              --------
                                                              $117,351
                                                              ========
</TABLE>

6. ACCRUED EXPENSES

     Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Payroll and related expenses................................   $ 29,013      $ 27,596
Warranty and customer rebates...............................     22,159        27,036
Restructuring expenses......................................      6,552        17,147
Value-added taxes payable...................................      5,327         7,249
Other.......................................................     37,727        28,588
                                                               --------      --------
                                                               $100,778      $107,616
                                                               ========      ========
</TABLE>

7. OTHER LONG-TERM LIABILITIES

     Other long-term liabilities consist of the following:

<TABLE>
<CAPTION>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                           <C>          <C>
Pension.....................................................   $25,558       $18,240
Restructuring expenses......................................        --        18,831
Other.......................................................    27,243        25,177
                                                               -------       -------
                                                               $52,801       $62,248
                                                               =======       =======
</TABLE>

8. RESTRUCTURING

RESTRUCTURING OF EXISTING OPERATIONS

     In fiscal 1997, the Company approved restructuring plans which resulted in
charges of approximately $5.1 million, including $3.5 million of severance
costs. This restructuring included the plant closure, personnel termination, and
asset liquidation of a lamp-making operation in the United Kingdom (U.K.), which
became redundant due to the SLI B.V. acquisition. The facility's land and
building were sold, and the equipment was sold or scrapped. Employee severance
cost at the Company's U.K. machinery making operation resulted from the
downsizing due to the duplication of functions after the SLI B.V. acquisition.
Additionally, the Company's leased Chicago, Illinois warehouse and distribution
location was closed and personnel were terminated. Also, the Company's Pauls
Valley, Oklahoma manufacturing operation was considered redundant in light of
the SLI

                                      F-16
<PAGE>   28
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

B.V. acquisition and the lamp making equipment was disposed of and the building
held pending rehabilitation for an undesignated future use. Severance costs of
$3.5 million included the elimination of redundancies of 92 employees at the
U.K. lamp making location, 67 employees at the U.K. machinery making location
and 23 employees at the Chicago, Illinois location. The restructuring plan was
completed in 1998 and restructuring accruals were fully used.

     In fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operations and the Company's U.K. machinery making operation.
Included in these costs were the net effect of severance costs totaling $600,000
and the write-off of lamp making equipment disposed of totaling $1.1 million.
Severance costs relate to the elimination of 171 employees at the Company's
Colombia operation. This restructuring plan was completed in 1998 and
restructuring accruals were fully used. The results of operations of the
activities which will not be continued were not significant to the consolidated
financial statements.

RESTRUCTURING OF ACQUIRED OPERATIONS

     In connection with the purchase price accounting for the acquisition of SLI
B.V., effective September 1, 1997, the Company approved a restructuring plan,
which resulted in reorganization accruals of $25.0 million ($16.8 million of
severance costs and $8.2 million of other costs). $8 million ($3.9 million of
severance costs and $4.1 million of other costs) of the amount initially
recorded was reversed in fiscal 1998 through an adjustment to property, plant
and equipment. The remaining purchase liabilities recorded include the
following:

          (i) Severance costs of $12.9 million include the termination of 180
     employees in Europe, 268 employees in Latin America, 19 employees in
     Australia and 28 employees in Asia. Approximately $9.2 million of severance
     cost was paid as of January 3, 1999. The remainder will be paid in fiscal
     1999.

          (ii) Costs of $4.1 million are associated with the closure of leased
     warehouse and administrative facilities. These costs represent remaining
     payments on non-cancelable operating leases (which expire through 2000),
     costs to return the facilities to the condition at the outset of the lease,
     the write-off of the remaining net book value of leasehold improvements and
     the cost to relocate employees. Accrued lease costs are for costs to be
     incurred subsequent to the Company vacating the facilities. The warehouse
     closures will occur in France, Belgium and Scandinavia and the
     administrative office closures will occur in Switzerland, France, Austria
     and Benelux. As of January 3, 1999, $2.6 million of the accrual had been
     utilized. The remainder will be paid in fiscal 1999.

                                      F-17
<PAGE>   29
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

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 January 3, 1999, the aggregate minimum future commitments under
operating leases are as follows (dollars in thousands):

<TABLE>
<S>                                                           <C>
2000........................................................  $ 9,958
2001........................................................    8,493
2002........................................................    5,035
2003........................................................    3,837
2004........................................................    3,088
Thereafter..................................................    4,831
                                                              -------
                                                              $35,242
                                                              =======
</TABLE>

     Rent expense for fiscal 1998, 1997, and 1996, was approximately
$10,622,000, $2,846,000 and $948,000, respectively and $238,000 for the one
month ended January 4, 1998.

10. STOCK OPTION PLAN

     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 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 the use in valuing
employee stock options. Pro forma information regarding net income is required
by FASB No. 123, which also 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 with the following weighted-average assumptions for fiscal
1998, 1997 and 1996, respectively: weighted average risk-free interest rates of
5.3%, 6.1%, and 6.5%; no dividend yield; and a weighted-average expected life of
the option of 7 years. The volatility factor was assumed to be 0.3.

     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 option, 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

                                      F-18
<PAGE>   30
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subsequent to December 3, 1995, its pro forma impact will not be fully reflected
until 2001. The Company's pro forma net income and pro forma net income per
share -- basic and net income per share -- dilutive would be $21,912,000, $.76
and $.73; $18,248, $.63 and $.62; and $13,039, $.54 and $.53 for the years ended
January 3, 1999, November 30, 1997 and December 1, 1996 respectively.

     The table below summarized option activity through January 3, 1999:

<TABLE>
<CAPTION>
                                                                                   WEIGHTED-
                                                                     RANGE OF       AVERAGE
                                                  NUMBER OF          EXERCISE      EXERCISE
                                                   OPTIONS            PRICES         PRICE
                                              -----------------   --------------   ---------
<S>                                           <C>                 <C>              <C>
Outstanding at December 3, 1995.............        517,500       $ 5.555- 7.889    $ 6.471
Options granted during 1996.................        339,750         9.111-15.554     13.257
Options exercised during 1996...............       (116,394)        5.555- 7.167      6.440
Options canceled during 1996................       (187,505)        5.555- 9.111      7.568
                                                 ----------
Outstanding at December 1, 1996.............        553,351         5.555-15.554     10.474
Options granted during 1997.................      3,297,700        12.917-19.917     17.822
Options exercised during 1997...............       (111,606)        5.555-12.667      8.449
Options canceled during 1997................        (46,802)       12.667-15.167     14.125
                                                 ----------
Outstanding at November 30, 1997............      3,692,643         5.555-19.917     17.051
Options canceled during the month ended
  January 4, 1998...........................        (15,000)              13.000     13.000
                                                 ----------
Outstanding at January 4, 1998..............      3,677,643         5.555-19.917     17.067
Options granted during 1998.................      2,912,100         9.938-33.688     12.520
Options exercised during 1998...............       (295,947)        5.555-18.667     11.877
Options canceled during 1998................     (2,599,001)        9.938-33.688     18.054
                                                 ----------
Outstanding at January 3, 1999..............      3,694,795                          13.206
                                                 ==========
</TABLE>

     Information with respect to stock options outstanding and stock options
exercisable at January 3, 1999:

<TABLE>
<CAPTION>
                                                                OPTIONS OUTSTANDING
                                                ---------------------------------------------------
                                                                      WEIGHTED
                                                    NUMBER            AVERAGE           WEIGHTED
                                                OUTSTANDING AT       REMAINING          AVERAGE
RANGE OF EXERCISE PRICES                        JANUARY 3, 1999   CONTRACTUAL LIFE   EXERCISE PRICE
------------------------                        ---------------   ----------------   --------------
<S>                                             <C>               <C>                <C>
  $5.555 -  9.938.............................     2,245,650         9.48 years         $ 9.731
  10.250 - 15.167.............................       338,000         9.40 years          11.208
  16.000 - 20.563.............................       873,645         8.77 years          18.614
  23.938 - 32.417.............................       237,500         9.41 years          29.012
                                                   ---------
                                                   3,694,795
                                                   =========
</TABLE>

<TABLE>
<CAPTION>
                                                                   OPTIONS EXERCISABLE
                                                             --------------------------------
                                                                 NUMBER           WEIGHTED
                                                             EXERCISABLE AT       AVERAGE
RANGE OF EXERCISE PRICES                                     JANUARY 3, 1999   EXERCISE PRICE
------------------------                                     ---------------   --------------
<S>                                                          <C>               <C>
$ 5.555 - 9.938............................................      587,250          $ 9.147
 10.250 - 15.167...........................................       27,000           14.296
 16.000 - 20.563...........................................      163,145           18.569
                                                                 -------
                                                                 777,395
                                                                 =======
</TABLE>

                                      F-19
<PAGE>   31
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. EMPLOYEE BENEFIT PLANS

     The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The domestic plans cover union employees of SLI, Inc. As a result of
the SLI B.V. acquisition in 1997, the Company also has 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' 1998 and 1997 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>
                                                              JANUARY 3,   NOVEMBER 30,
                                                                 1999          1997
                                                              ----------   ------------
<S>                                                           <C>          <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year.....................   $ 55,586      $  1,268
Service cost................................................      2,011           427
Interest cost...............................................      3,820           859
Actuarial loss (gain).......................................      4,207         1,034
Acquisitions................................................         --        50,530
Translation difference......................................      1,142         1,997
Benefits paid...............................................     (3,543)         (529)
                                                               --------      --------
Benefit obligation at end of year...........................   $ 63,223      $ 55,586
                                                               ========      ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year..............   $ 41,880      $  1,063
Actual return on plan assets................................      6,951           783
Acquisitions................................................         --        38,483
Translation difference......................................        332         1,688
Employer contribution.......................................      3,081           392
Benefits paid...............................................     (3,543)         (529)
                                                               --------      --------
Fair value of plan assets at end of year....................   $ 48,701      $ 41,880
                                                               ========      ========
Funded status of the plan (underfunded).....................   $(14,522)     $(13,706)
Unrecognized transition amount..............................         80            75
Unrecognized net actuarial loss.............................        822         1,196
Unrecognized prior service cost.............................         16            14
                                                               --------      --------
Accrued benefit cost........................................   $(13,604)     $(12,421)
                                                               ========      ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                               1998      1997    1996
                                                              -------   ------   ----
<S>                                                           <C>       <C>      <C>
Service cost................................................  $ 2,011   $  608   $ 44
Interest cost...............................................    3,820    1,149     81
Expected return on plan assets..............................   (3,266)    (814)   (63)
Net amortization and deferral...............................       --       --     (7)
                                                              -------   ------   ----
Net pension cost............................................  $ 2,565   $  943   $ 55
                                                              =======   ======   ====
</TABLE>

                                      F-20
<PAGE>   32
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ASSUMPTIONS

<TABLE>
<CAPTION>
                                                  1998          1997           1996
                                              ------------  -------------  ------------
                                                                           (U.S. ONLY)
<S>                                           <C>           <C>            <C>
Discount rate...............................  4.3% to 17%    4.5% to 24%   6.5% to 7.5%
Weighted average discount rate..............      6.0%          6.5%           7.1%
Expected return on plan assets..............  5.0% to 7.5%  5.0% to 8.5%    6.5% to 9%
Assumed rate of compensation increase.......  2.5% to 15%    2.5% to 19%        5%
</TABLE>

     The Company also maintains separate defined benefit plans for which
actuarial valuations were not obtained. These plans have benefit obligations of
approximately $4.6 million and $4.4 million at January 3, 1999 and November 30,
1997, respectively. The pension expense for these plans, consisting primarily of
interest cost, for fiscal 1998, 1997, and 1996 was approximately $300,000,
$344,000, and $124,000.

DEFINED CONTRIBUTION PLANS

     The Company sponsors a number of defined contribution plans. Participation
in these plans is available to all U.S. non-union 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 $2,674,000, $650,000, and $38,000, for fiscal 1998, 1997, and
1996, respectively.

12. CAPITAL STOCK

     In December 1996, the Company amended its Articles of Incorporation to
increase the authorized shares of common stock to 100,000,000 shares.

     At January 3, 1999, 3,694,795 shares of common stock have been reserved for
future issuance upon the exercise of stock options.

13. 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 on its variable rate debt. Under the
Company's interest rate swap agreement, which expires February 2, 2001, 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 LIBOR. At January 3, 1999, the notional principal
amounts of fixed interest rate swap agreements was $40 million having a fixed
rate of 5.82%.

     In connection with the interest swap agreement, the Company sold an option
to the counterparty effective through February 2, 2001, whereby the counterparty
may terminate the swap agreement on January 29, 1999. The fair value of the
option at January 3, 1999, was estimated to be approximately $672,288.

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 hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging from foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction, when recorded; however, a loss is not deferred if

                                      F-21
<PAGE>   33
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deferral would lead to the recognition of a loss in future periods. The
aggregate foreign exchange (losses) gains recorded in fiscal 1998, 1997, and
1996 were approximately ($329,554), $1,664,000 and $1,283,000, 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.

     The following table summarizes by major currency the contractual amounts of
the Company's forward contracts in U.S. dollars. Foreign currency amounts are
translated at year-end rates at the respective reporting date. The "buy" amounts
represent the U.S. equivalent of commitments to purchase foreign currencies and
"sell" amounts represent the U.S. equivalent of commitments to sell foreign
currencies according to local needs in foreign subsidiaries. Some of the forward
contracts involve the exchange of two foreign currencies according to local
needs in foreign subsidiaries.

     At January 3, 1999 and November 30, 1997, the contractual amounts were:

<TABLE>
<CAPTION>
                                                      JANUARY 3, 1999    NOVEMBER 30, 1997
                                                      ----------------   ------------------
                                                        BUY      SELL      BUY       SELL
                                                      -------   ------   --------   -------
<S>                                                   <C>       <C>      <C>        <C>
Belgium francs......................................  $    --   $   --   $ 6,170    $   --
Deutsche marks......................................       --       --     8,759        --
French francs.......................................       --       --     2,516        --
Swiss francs........................................       --       --     2,179     1,236
U.S. dollars........................................    5,096       --     4,695        --
Euro................................................   20,174       --                  --
Other...............................................       --       --     3,290        --
                                                      -------   ------   -------    ------
          Total.....................................  $25,270   $   --   $27,609    $1,236
                                                      =======   ======   =======    ======
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

     All financial instruments are held for purposes other than trading. The
carrying amount of cash and cash equivalents, accounts receivable, short-term
borrowings, accounts payable, and accruals are a reasonable estimate of their
fair value due to the short-term nature of these instruments. The estimated fair
value for long-term debt at January 3, 1999 and November 30, 1997 was
approximately equal to the carrying amounts at those dates. At January 3, 1999
and November 30, 1997 the carrying value of forward exchange contracts were
$359,000 and ($657,000), respectively and fair value was approximately equal to
the carrying amounts.

                                      F-22
<PAGE>   34
                                   SLI, INC.
                    (FORMERLY CHICAGO MINIATURE LAMP, INC.)
                                AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

 14. SELECTED QUARTERLY FINANCIAL DATA

     The following is a summary of unaudited quarterly financial data for fiscal
1998 and 1997. Fiscal 1997 information has been restated to reflect the new
reporting period.

<TABLE>
<CAPTION>
                                                 FIRST      SECOND     THIRD      FOURTH
                                                QUARTER    QUARTER    QUARTER    QUARTER
                                                --------   --------   --------   --------
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                             <C>        <C>        <C>        <C>
1998
Net sales.....................................  $192,420   $185,669   $181,957   $213,022
Gross margin..................................    58,827     56,572     55,996     68,189
Net income....................................     9,117      7,518      6,661      9,736
Net income per common share-Basic.............       .32        .26        .23        .34
Net income per common share-Diluted...........       .30        .25        .23        .32
1997
Net sales.....................................  $ 46,188   $ 49,289   $ 94,622   $186,027
Gross margin..................................    13,993     14,278     28,479     53,314
Net income....................................     6,108      4,650      3,591      5,372
Net income per common share -- Basic..........       .21        .16        .13        .19
Net income per common share -- Diluted........       .21        .16        .12        .18
</TABLE>

15. GEOGRAPHIC SEGMENT INFORMATION

     Financial Information for the fiscal years 1998, 1997 and 1996 and for the
month ended January 4, 1998 summarized by geographic area is as follows:

<TABLE>
<CAPTION>
                                                                                       MONTH
                                      1998                  1997             1996      ENDED
                               -------------------   -------------------   --------    1/4/98
                               REVENUES    ASSETS    REVENUES    ASSETS    REVENUES   REVENUES
                               --------   --------   --------   --------   --------   --------
<S>                            <C>        <C>        <C>        <C>        <C>        <C>
United States................  $159,565   $160,172   $129,120   $127,777   $49,843    $ 9,986
Canada.......................    18,426     10,937     14,605     10,459    13,084      1,687
Europe.......................   463,491    491,042    135,719    429,418    22,801     31,383
Latin America................    84,051     87,529     34,894     51,405     8,443      6,580
Other........................    47,535     25,783     15,621     32,602        --      4,230
                               --------   --------   --------   --------   -------    -------
          Total..............  $773,068   $775,463   $329,959   $651,661   $94,171    $53,866
                               ========   ========   ========   ========   =======    =======
</TABLE>

16. NONCASH ACTIVITIES

     The following discloses noncash investing activities during fiscal 1998,
1997 and 1996 (dollars in millions):

<TABLE>
<S>                                                           <C>     <C>    <C>
Common shares issued in connection with acquisitions........  $21.0   $ --   $3.3
Liabilities assumed in connection with acquisitions.........  $27.0   $1.4   $4.9
</TABLE>

                                      F-23
<PAGE>   35

                                AUDITOR'S REPORT

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

     We have audited the balance sheets of Chicago Miniature Lamp (Canada) Inc.
as at January 3, 1999, January 4, 1998, November 30, 1997 and December 1, 1996
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 January 3, 1999, January
4, 1998, November 30, 1997, and December 1, 1996 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.

                                          Hards Pearson
                                          Chartered Accountants

Barrie, Canada,
January 29, 1999.

                                      F-29
<PAGE>   36

                      CHICAGO MINIATURE LAMP (CANADA) INC.

                                 BALANCE SHEET
                             AS AT JANUARY 3, 1999
                                   CANADIAN $

<TABLE>
<CAPTION>
                                              JANUARY 3,    JANUARY 4,    NOVEMBER 30,   DECEMBER 1,
                                                 1999          1998           1997          1996
                                              -----------   -----------   ------------   -----------
<S>                                           <C>           <C>           <C>            <C>
                                               ASSETS
CURRENT
Cash........................................  $   154,335   $ 1,156,194   $ 1,476,387    $   985,424
Accounts receivable.........................    4,121,696     3,310,152     2,996,235      2,630,575
Inventory (note 3)..........................    2,943,649     1,557,128     1,360,003      1,661,931
Prepaid expenses............................       38,060        49,278        45,695         31,019
Due from related parties (note 4)...........    4,145,066       291,029       254,974             --
                                              -----------   -----------   -----------    -----------
          Total current assets..............   11,402,806     6,363,781     6,133,294      5,308,949
Fixed assets (note 5).......................    8,559,505     8,066,973     8,007,320      6,779,361
Goodwill (note 6)...........................    1,110,101     1,140,724     1,143,277      1,261,167
                                              -----------   -----------   -----------    -----------
                                              $21,072,412   $15,571,478   $15,283,891    $13,349,477
                                              ===========   ===========   ===========    ===========

                                LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT
Bank indebtedness...........................  $        --   $        --   $        --    $        --
Accounts payable and accrued charges........    2,222,969     1,586,085     1,503,962      1,350,297
Income taxes payable........................      906,916       119,129        73,301        614,565
Due to related parties (note 4).............           --            --            --        471,450
                                              -----------   -----------   -----------    -----------
          TOTAL CURRENT LIABILITIES.........    3,129,885     1,705,214     1,577,263      2,436,312
Due to SLI, Inc. (note 7)...................    2,932,821     2,011,075     1,939,000      1,353,400
Accrued start-up costs......................           --            --            --        333,058
Deferred income taxes.......................    2,127,172     1,927,172     1,919,672      1,683,081
                                              -----------   -----------   -----------    -----------
          Total liabilities.................    8,189,878     5,643,461     5,435,935      5,805,851
                                              -----------   -----------   -----------    -----------
SHAREHOLDER'S EQUITY
Capital stock (note 8)......................    5,000,000     5,000,000     5,000,000      5,000,000
Deferred translation loss (note 9)..........     (156,496)           --            --             --
Retained earnings...........................    8,039,030     4,928,017     4,847,956      2,543,626
                                              -----------   -----------   -----------    -----------
          Total shareholder's equity........   12,882,534     9,928,017     9,847,956      7,543,626
                                              -----------   -----------   -----------    -----------
                                              $21,072,412   $15,571,478   $15,283,891    $13,349,477
                                              ===========   ===========   ===========    ===========
</TABLE>

                            See accompanying notes.

                                      F-30
<PAGE>   37

                      CHICAGO MINIATURE LAMP (CANADA) INC.

                              STATEMENT OF INCOME
                                   CANADIAN $

                          PERIOD ENDED JANUARY 3, 1999
       (WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
          AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
                                                  1999          1998         1997          1996
                                               -----------   ----------   -----------   -----------
<S>                                            <C>           <C>          <C>           <C>
NET SALES....................................  $26,915,467   $1,494,358   $19,465,058   $16,872,470
Cost of product sold.........................   20,495,620    1,235,145    14,604,964    12,458,853
                                               -----------   ----------   -----------   -----------
GROSS MARGIN.................................    6,419,847      259,213     4,860,094     4,413,617
Selling, general and administration
  expenses...................................      618,373       81,449       680,764       759,321
                                               -----------   ----------   -----------   -----------
INCOME BEFORE INTEREST AND MANAGEMENT FEE....    5,801,474      177,764     4,179,330     3,654,296
Interest on long-term debt...................           --           --            --        55,662
Management fee...............................      790,461       44,375       525,000       510,000
                                               -----------   ----------   -----------   -----------
INCOME BEFORE PROVISION FOR INCOME TAXES.....    5,011,013      133,389     3,654,330     3,088,634
                                               -----------   ----------   -----------   -----------
Provision for income taxes
  Current....................................    1,700,000       45,828     1,180,000       946,100
  Deferred...................................      200,000        7,500       170,000       152,907
                                               -----------   ----------   -----------   -----------
                                                 1,900,000       53,328     1,350,000     1,099,007
                                               -----------   ----------   -----------   -----------
          NET INCOME FOR THE PERIOD..........  $ 3,111,013   $   80,061   $ 2,304,330   $ 1,989,627
                                               ===========   ==========   ===========   ===========
</TABLE>

                            See accompanying notes.

                                      F-31
<PAGE>   38

                      CHICAGO MINIATURE LAMP (CANADA) INC.

                         STATEMENT OF RETAINED EARNINGS
                                   CANADIAN $

                          PERIOD ENDED JANUARY 3, 1999
       (WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
          AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
                                                     1999         1998         1997         1996
                                                  ----------   ----------   ----------   ----------
<S>                                               <C>          <C>          <C>          <C>
RETAINED EARNINGS, BEGINNING OF PERIOD..........  $4,928,017   $4,847,956   $2,543,626   $  553,999
Net income for the period.......................   3,111,013       80,061    2,304,330    1,989,627
                                                  ----------   ----------   ----------   ----------
RETAINED EARNINGS, END OF PERIOD................   8,039,030    4,928,017    4,847,956    2,543,626
                                                  ==========   ==========   ==========   ==========
</TABLE>

                            See accompanying notes.

                                      F-32
<PAGE>   39

                      CHICAGO MINIATURE LAMP (CANADA) INC.

                            STATEMENT OF CASH FLOWS
                                   CANADIAN $

                          PERIOD ENDED JANUARY 3, 1999
       (WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
          AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
                                                  1999          1998         1997          1996
                                               -----------   ----------   -----------   -----------
<S>                                            <C>           <C>          <C>           <C>
OPERATING ACTIVITIES
Net income for the period....................  $ 3,111,013   $   80,061   $ 2,304,330   $ 1,989,627
Add charges to income not resulting in a
  current outlay of cash
  Depreciation and amortization..............      685,963       56,973       587,045       494,518
  Deferred income taxes......................      200,000        7,500       170,000       152,907
  Loss on sale of fixed assets...............           --           --         4,975        83,643
Net decrease in accrued start-up costs.......           --           --      (333,058)     (322,871)
Adjustment to deferred taxes and goodwill
  recorded upon amalgamation.................           --           --       165,254            --
Net change in non-cash working capital
  balances (note 10).........................     (762,176)    (386,674)     (466,007)     (212,175)
                                               -----------   ----------   -----------   -----------
CASH PROVIDED BY (USED IN) OPERATING
  ACTIVITIES.................................    3,234,800     (242,140)    2,432,539     2,185,649
                                               -----------   ----------   -----------   -----------
FINANCING ACTIVITIES
Advances from (to) related parties...........   (3,088,787)      36,020      (140,824)       89,513
Reduction in long-term debt..................           --           --            --      (793,400)
                                               -----------   ----------   -----------   -----------
CASH PROVIDED BY (USED IN) FINANCING
  ACTIVITIES.................................   (3,088,787)      36,020      (140,824)     (703,887)
                                               -----------   ----------   -----------   -----------
INVESTING ACTIVITIES
Purchase of fixed assets.....................   (1,147,872)    (114,073)   (1,836,156)   (1,645,604)
Proceeds on disposal of fixed assets.........           --           --        35,404       234,954
                                               -----------   ----------   -----------   -----------
CASH USED IN INVESTING ACTIVITIES............   (1,147,872)    (114,073)   (1,800,752)   (1,410,650)
                                               -----------   ----------   -----------   -----------
NET INCREASE (DECREASE) IN CASH DURING THE
  PERIOD.....................................   (1,001,859)    (320,193)      490,963        71,112
Cash, beginning of period....................    1,156,194    1,476,387       985,424       914,312
                                               -----------   ----------   -----------   -----------
CASH, END OF PERIOD..........................      154,335    1,156,194     1,476,387       985,424
                                               ===========   ==========   ===========   ===========
</TABLE>

                            See accompanying notes.

                                      F-33
<PAGE>   40

                      CHICAGO MINIATURE LAMP (CANADA) INC.

                       NOTES TO THE FINANCIAL STATEMENTS
                                JANUARY 3, 1999

1. OPERATIONS

     The company is a manufacturer and supplier of miniature light socket
assemblies to the automotive industry. The assemblies are used primarily for
instrument clusters, warning lights, climate control modules and courtesy
lights.

ARTICLES OF AMENDMENT

     On May 9, 1997, the company filed articles of amendment to change its name
to Chicago Miniature Lamp (Canada) Inc. The company was formerly known as
Plastomer Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The financial statements of the company have been prepared in accordance
with generally accepted accounting principles, on a basis consistent with that
of the preceding period. The following is a summary of the more significant
accounting policies:

INVENTORY

     Inventory is valued at the lower of cost or net realizable value. Cost has
been determined on the first-in, first-out basis. Net realizable value for
finished goods has been defined as standard selling price less normal profit
margin. Net realizable value for raw materials has been defined as net
replacement cost.

FIXED ASSETS

     Based on purchase accounting, the fixed assets are stated at the lower of
appraised value, as determined by appraisals dated April 5, 1995 and May 3,
1995, less accumulated depreciation and net recoverable amount. Additions after
these dates are stated at the lower of cost less accumulated depreciation and
net recoverable amount. Depreciation is provided when the asset is placed into
service on the straight-line basis, with half rates applied in the year of
acquisition, over the following periods:

<TABLE>
<S>                                                           <C>
Buildings...................................................      35 years
Machinery and equipment.....................................  5 - 20 years
Moulds and dies.............................................      10 years
Software....................................................       5 years
</TABLE>

GOODWILL

     Goodwill is recorded at cost less accumulated amortization. Amortization is
provided on the straight-line basis over a period of 40 years.

TRANSLATION OF FOREIGN CURRENCY

     Transactions arising in foreign currencies [principally United States
dollars and British pounds] have been translated at rates of exchange in effect
at the dates of the transactions. Monetary items denominated in foreign
currencies have been translated at rates of exchange in effect at the balance
sheet date. Gains or losses during the period have been included in net income.

                                      F-34
<PAGE>   41
                      CHICAGO MINIATURE LAMP (CANADA) INC.

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORY

<TABLE>
<CAPTION>
                                                JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                   1999         1998          1997          1996
                                                ----------   ----------   ------------   -----------
<S>                                             <C>          <C>          <C>            <C>
Raw materials.................................  $1,543,765   $  824,676    $  820,977    $1,029,503
Work-in-progress and finished goods...........   1,239,563      681,763       488,337       625,370
Capitalized variances.........................      53,810      (49,310)      (49,310)      (27,175)
Tooling.......................................     106,511       99,999        99,999        34,233
                                                ----------   ----------    ----------    ----------
                                                $2,943,649   $1,557,128    $1,360,003    $1,661,931
                                                ==========   ==========    ==========    ==========
</TABLE>

4. DUE FROM (TO) RELATED PARTIES

<TABLE>
<CAPTION>
                                                   JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                      1999         1998          1997          1996
                                                   ----------   ----------   ------------   -----------
<S>                                                <C>          <C>          <C>            <C>
Canadian Dollars
Power Lighting Products, Inc. ...................  $   24,567    $ 24,712      $ 12,625      $      --
British Pounds
Badalex Ltd. ....................................          --     (54,320)      (54,320)       (88,962)
  Exchange.......................................          --     (70,888)      (76,048)      (106,754)
United States Dollars
SLI, Inc. .......................................   3,161,951     275,698       264,438       (205,797)
Socop Industries.................................       9,899          --            --             --
SLI Miniature Lighting Ltd. .....................    (481,300)         --            --             --
  Exchange.......................................   1,429,949     115,827       108,279        (69,937)
                                                   ----------    --------      --------      ---------
                                                   $4,145,066    $291,029      $254,974      $(471,450)
                                                   ==========    ========      ========      =========
</TABLE>

     The following is a summary of the related party transactions for the
period:

<TABLE>
<S>                                                           <C>
INTERCOMPANY SALES (IN CANADIAN DOLLARS)
Socop Industries............................................  $   41,649
SLI Miniature Lighting Ltd. ................................       8,994
SLI, Inc. ..................................................     386,728
                                                              ----------
                                                              $  437,371
                                                              ==========
OTHER RELATED PARTY TRANSACTIONS
Lamps purchased from SLI Miniature Lighting Ltd. ...........  $1,781,166
Capital equipment purchased from Bruckner...................     435,082
Insurance premiums paid to SLI, B.V. .......................      22,524
Rework performed for IDI Internacional, S.A. (Costa Rica)...      30,816
Management fees paid to SLI, Inc. ..........................     790,461
                                                              ==========
</TABLE>

     The above corporations deal on terms that are substantially the same as
independent customers. SLI, Inc. pays certain expenditures on behalf of the
company and purchases finished goods. They also provide executive, information
system and marketing services for which they receive a yearly management fee.

                                      F-35
<PAGE>   42
                      CHICAGO MINIATURE LAMP (CANADA) INC.

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

5. FIXED ASSETS

<TABLE>
<CAPTION>
                                                 JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                    1999         1998          1997          1996
                                                 ----------   ----------   ------------   -----------
<S>                                              <C>          <C>          <C>            <C>
Land...........................................  $   75,000   $   75,000    $   75,000    $   75,000
Buildings......................................   1,353,926    1,387,000     1,391,090     1,434,107
Machinery and equipment........................   4,775,234    4,829,048     4,641,387     3,475,312
Moulds and dies................................   1,300,184    1,391,400     1,260,623       884,760
Software.......................................      48,648       30,255        31,355        42,700
Construction-in-progress.......................   1,006,513      354,270       607,865       867,482
                                                 ----------   ----------    ----------    ----------
                                                 $8,559,505   $8,066,973    $8,007,320    $6,779,361
                                                 ==========   ==========    ==========    ==========
</TABLE>

     The fixed assets are shown at cost less accumulated depreciation.

6. GOODWILL

<TABLE>
<CAPTION>
                                                 JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                    1999         1998          1997          1996
                                                 ----------   ----------   ------------   -----------
<S>                                              <C>          <C>          <C>            <C>
Cost...........................................  $1,224,939   $1,224,939    $1,224,939    $1,323,602
Less accumulated amortization..................    (114,838)     (84,215)      (81,662)      (62,435)
                                                 ----------   ----------    ----------    ----------
                                                 $1,110,101   $1,140,724    $1,143,277    $1,261,167
                                                 ==========   ==========    ==========    ==========
</TABLE>

7. DUE TO SLI, INC.

<TABLE>
<CAPTION>
                                                 JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                    1999         1998          1997          1996
                                                 ----------   ----------   ------------   -----------
<S>                                              <C>          <C>          <C>            <C>
United States Dollars
Note payable...................................  $1,916,250   $1,416,250    $1,385,000    $1,010,000
  Exchange.....................................   1,016,571      594,825       554,000       343,400
                                                 ----------   ----------    ----------    ----------
                                                 $2,932,821   $2,011,075    $1,939,000    $1,353,400
                                                 ==========   ==========    ==========    ==========
</TABLE>

     No interest and no specific terms of repayment have been negotiated.

8. CAPITAL STOCK

<TABLE>
<CAPTION>
                                                 JANUARY 3,   JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                    1999         1998          1997          1996
                                                 ----------   ----------   ------------   -----------
<S>                                              <C>          <C>          <C>            <C>
AUTHORIZED
Unlimited voting, 6% non-cumulative,
  redeemable, retractable Class AA special
  shares.......................................
Unlimited common shares........................
ISSUED AND FULLY PAID
5,000,000 common shares........................  $5,000,000   $5,000,000    $5,000,000    $5,000,000
                                                 ==========   ==========    ==========    ==========
</TABLE>

9. DEFERRED TRANSLATION LOSS

     The unrealized loss on translation of foreign exchange on the balance due
to SLI, Inc. has been deferred to reflect the long-term nature of this advance.

                                      F-36
<PAGE>   43
                      CHICAGO MINIATURE LAMP (CANADA) INC.

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

10. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES

<TABLE>
<CAPTION>
                                                 JANUARY 3,    JANUARY 4,   NOVEMBER 30,   DECEMBER 1,
                                                    1999          1998          1997          1996
                                                 -----------   ----------   ------------   -----------
<S>                                              <C>           <C>          <C>            <C>
Accounts receivable............................     (811,544)  $(313,917)     (365,660)     $  10,922
Income taxes receivable........................           --          --            --        133,139
Inventory......................................   (1,386,521)   (197,125)      301,928       (205,552)
Prepaid expenses...............................       11,218      (3,583)      (14,676)         3,637
Accounts payable and accrued charges...........      636,884      82,123       153,665       (768,886)
Income taxes payable...........................      787,787      45,828      (541,264)       614,565
                                                 -----------   ---------     ---------      ---------
                                                 $  (762,176)  $(386,674)    $(466,007)     $(212,175)
                                                 ===========   =========     =========      =========
</TABLE>

     Decreases in assets and increases in liabilities result in a source of
funds. Increases in assets and decreases in liabilities result in a use of funds
and are indicated by brackets.

11. PENSION PLAN

     Prior to July 31, 1997 the company maintained a defined benefit pension
plan of which substantially all employees were members. Current and past service
costs were charged to income as incurred and funded as required by actuarial
valuations.

     The pension expense, all for current service costs, was $62,579 in 1997.
Effective July 1, 1997 the company introduced a Group Registered Retirement
Savings Plan and began the process of winding-up the defined benefit plan. The
accumulated net assets of the defined benefit plan were distributed to the
members for transfer to a "locked-in" Registered Retirement Savings Plan.

12. OPERATING LEASES

     Minimum lease payments over the next three years with respect to vehicle
and office equipment operating leases are as follows:

<TABLE>
<S>                                                           <C>
2000........................................................  $27,963
2001........................................................   13,348
2002........................................................    5,510
                                                              -------
                                                              $46,821
                                                              =======
</TABLE>

13. FINANCIAL INSTRUMENTS

     It is management's opinion that the company is not exposed to significant
interest, currency, or credit risks arising from financial instruments. The fair
values of short-term investments, accounts receivable, accounts payable and
accrued liabilities and long-term debt are represented by their carrying values.

14. CONTINGENT LIABILITIES

(A) GUARANTEES

     The company has pledged an unlimited guarantee in favour of BANKBOSTON,
N.A. over the indebtedness of its parent company, SLI, Inc.

(B) INCOME TAXES

     In April 1998 Revenue Canada issued a Notice of Assessment with respect to
the year ended December 30, 1994 and Notices of Reassessment for the periods
ended March 29th and December 3rd, 1995.

                                      F-37
<PAGE>   44
                      CHICAGO MINIATURE LAMP (CANADA) INC.

                NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

     The effect of these Notices is to disallow certain deductions and
Investment Tax Credits pursuant to Section 37 of the Income Tax Act. The Company
has not paid any amount in respect of the Notices and has responded by filing
Notices of Objection for each of the tax periods in question.

     Based on the information currently available, if these assessments were to
be upheld, the Company's exposure would be approximately $190,000 less any
amount recovered under certain warranties.

     If any payment is ultimately required, it will be recorded in the period
paid.

15. COMMITMENTS

     The company has committed to $225,000 of capital asset purchases for the
coming year. Progress payments totaling $105,000 have been made to suppliers as
a result of these commitments. These payments are included under
"Construction-in-progress" [Note 5] in the financial statements.

     The company is also committed to the transfer of certain equipment to Socop
Industries (a fully-owned subsidiary of SLI Miniature Lighting Ltd. and a
related party) in the coming year. The items to be transferred are as follows:

<TABLE>
<S>                                                           <C>
Production equipment........................................  $500,157
Tooling inventory...........................................   101,312
Dies........................................................   145,570
Raw materials...............................................    11,257
                                                              --------
                                                              $758,296
                                                              ========
</TABLE>

     The items will be transferred at cost with no specific terms of repayment.

16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

     The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect and entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.

17. COMPARATIVE AMOUNTS

     Certain comparative amounts have been reclassified from those previously
presented to confirm to the presentation of the current period's financial
statements.

                                      F-38
<PAGE>   45

                                   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: June 29, 1999                      SLI, INC.

                                          By:       /s/ FRANK M. WARD
                                            ------------------------------------
                                                       Frank M. Ward
                                               Chief Executive and Financial
                                                           Officer

                                          By:    /s/ RICHARD F. PARENTI
                                            ------------------------------------
                                                     Richard F. Parenti
                                                  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
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>

                  /s/ FRANK M. WARD                               Director             June 28, 1999
-----------------------------------------------------
                    Frank M. Ward

                                                                  Director             June 28, 1999
-----------------------------------------------------
                    Werner Arnold

                  /s/ Donald S. Dewsnap                           Director             June 28, 1999
-----------------------------------------------------
                  Donald S. Dewsnap

                 /s/ RICHARD INGRAM                               Director             June 28, 1999
-----------------------------------------------------
                   Richard Ingram

                                                                  Director             June 28, 1999
-----------------------------------------------------
                     Fred Howard

                 /s/ MAURICE B. HARE                              Director             June 28, 1999
-----------------------------------------------------
                   Maurice B. Hare
</TABLE>