<PAGE>

               UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                2000 FORM 10-K
(Mark One)
[ X ]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE
_____
                                  ACT OF 1934
                  For the fiscal year ended December 30, 2000

                                      or

 ______    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES

                             EXCHANGE ACT OF 1934
              For the transition period from ________to ________
                         COMMISSION FILE NO.: 0-18018

                             AEROVOX INCORPORATED
                             --------------------
            (Exact name of Registrant as specified in its charter)

           DELAWARE                                            76-0254329
-------------------------------                            -------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

             167 JOHN VERTENTE BOULEVARD, NEW BEDFORD, MA   02745
             ----------------------------------------------------
             (Address of principal executive offices)  (Zip Code)

                                (508) 994-9661
                                --------------
                        (Registrant's telephone number)

       SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:  NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

COMMON STOCK, PAR VALUE $1.00 PER SHARE           TRADED ON THE NASDAQ NATIONAL
    PREFERRED SHARE PURCHASE RIGHTS                        Market System

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months, and (2) has been subject to such filing
requirements for the past ninety days.  Yes  X    No___
                                            ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Shares Outstanding of the Registrant's Common Stock at March 12, 2001: 6,146,186
Aggregate market value of voting stock held by non-affiliates of the registrant
at March 12, 2001: $4,835,683.

Portions of the Registrant's definitive Proxy Statement for use at the 2001
Annual Meeting of Stockholders are incorporated by reference into Part III
hereof.

An index to exhibits filed with this Report on Form 10-K appears at pages 22
through 25 hereof.
<PAGE>

                             AEROVOX INCORPORATED
                         2000 FORM 10-K ANNUAL REPORT

                               Table of Contents
<TABLE>
<CAPTION>
  PART I.                                                                            PAGE
----------   ----------------------------------------------------------------------------
<S>          <C>                                                                      <C>
Item 1.      Business...............................................................   3
Item 2.      Properties.............................................................  10
Item 3.      Legal Proceedings......................................................  10
Item 4.      Submission of Matters to a Vote of Security Holders....................  11
Item 4A.     Executive Officers of the Registrant...................................  11

PART II.
----------
Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters..  13
Item 6.      Selected Financial Data................................................  13
Item 7.      Management's Discussion and Analysis of Financial Conditions and
             Results of Operations..................................................  14
Item 7A.     Quantitative and Qualitative Disclosure About Market Risk..............  20
Item 8.      Financial Statements and Supplementary Data............................  20
Item 9.      Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure...................................................  21

PART III.
----------
Item 10.     Directors and Executive Officers of the Registrant.....................  21
Item 11.     Executive Compensation.................................................  21
Item 12.     Security Ownership of Certain Beneficial Owners and Management.........  21
Item 13.     Certain Relationships and Related Transactions.........................  22

PART IV.
----------
Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K........  22
             Signatures.............................................................  50
             Exhibit Index..........................................................  22
</TABLE>
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

<S>                                                                                   <C>
Reports of Independent Auditors.....................................................  26

Consolidated Balance Sheets as of December 30, 2000 and January 1, 2000.............  27

Consolidated Statements of Operations for years ended December 30, 2000,
January 1, 2000 and January 2, 1999.................................................  28

Consolidated Statements of Stockholders' Equity for years ended December 30, 2000,
January 1, 2000 and January 2, 1999.................................................  29

Consolidated Statements of Cash Flows for years ended December 30, 2000,
January 1, 2000 and January 2, 1999.................................................  30

Notes to Consolidated Financial Statements..........................................  31

Reports of Independent Auditors on Financial Statement Schedule.....................  48

Schedule II - Valuation and Qualifying Accounts.....................................  49
</TABLE>

Statements concerning the Company's anticipated performance including future
revenues, costs and profits, or about the development of the Company's markets,
made through this Annual Report, may be deemed forward-looking statements.  Such
statements are based on the current assumptions of Aerovox management, which are
believed to be reasonable.  However, they are subject to significant risks and
uncertainties, including, but not limited to the important factors described
under "Certain Factors That May Affect Future Results" that could cause actual
results to differ materially from those described in the forward-looking
statements.

                                       2
<PAGE>

                                 PART I

ITEM 1.  BUSINESS

Aerovox's predecessor, Aerovox Corporation, began in 1922 producing crystal
wireless radios.  In 1973, the Aerovox AC capacitor operations, including a
plant in New Bedford, Massachusetts, together with the Aerovox name, were
purchased from Aerovox Corporation by a newly created corporation, Aerovox
Industries.  In 1978, RTE Corporation ("RTE"), a manufacturer of distribution
transformers and other utility electrical products, purchased all of the assets
of Aerovox Industries through its newly organized subsidiary, Aerovox
Incorporated, a Massachusetts corporation ("Aerovox Massachusetts").  In 1988,
RTE was acquired by Cooper Industries ("Cooper"), and Aerovox Massachusetts
became an indirect wholly owned subsidiary of Cooper, through Aerovox Holding
Company ("AHC"); a Delaware corporation incorporated on May 3, 1988. On May 26,
1989, Aerovox Massachusetts was merged into AHC and AHC's name was changed to
Aerovox Incorporated ("the Company").  The sole purpose of this merger was to
eliminate the passive holding company structure.  On February 26, 1990,
5,095,086 shares of Aerovox Common Stock were distributed to Cooper shareholders
of record on May 5, 1989.

On March 5, 1993, Aerovox purchased all the stock of Aero M, Inc., an aluminum
electrolytic capacitor manufacturer, from Cooper Industries and subsequently
relocated the business from Kentucky to create the Company's second plant in
Juarez, Mexico. On March 11, 1993, Aerovox purchased certain assets of British
aluminum electrolytic capacitor manufacturer, BH Components Ltd., and formed a
new company, BHC Aerovox Ltd. ("BHC Aerovox" or "BHC"), which is located in
Weymouth, England.

In August 1998, the Company sold its Power Factor Correction ("PFC") business
unit to a division of General Electric.

On April 5, 1999, the Company purchased all of the outstanding capital stock of
Capacitores Unidos, S.A. de C.V. ("CUSA") of Mexico City, a corporation
organized under the laws of Mexico, for the purpose of acquiring certain assets
of Compania General de Electronica, S.A. de C.V. ("CGE").  CUSA was merged into
Aerovox de Mexico, S.A. de C.V. ("Aerovox de Mexico"), a wholly owned
subsidiary, on March 1, 2000.

The Company's product lines are manufactured in its three North American
capacitor plants -- New Bedford, Massachusetts, Juarez, Mexico and Mexico City,
Mexico, and at its subsidiary, BHC Aerovox Ltd., in Weymouth, England.  A
principal component, aluminum foil for electrolytic capacitors, is produced in
the Aerovox plant in Huntsville, Alabama.

In August 1999, the Company disclosed its plans to merge its three Mexican
manufacturing plants into two by transferring the production of alternating
current ("AC") motor start capacitors and certain AC film capacitors for
lighting applications from Juarez to Mexico City and to consolidate its Juarez
operations into the larger of its two existing plants there.

Also in August 1999, the Company broke ground on its new corporate headquarters
and manufacturing facility in New Bedford, Massachusetts.  A phased transition
to the new facility from the Belleville Avenue, New Bedford plant began in the
summer of 2000 and was essentially complete at year end.

PRODUCT DESCRIPTION

Aerovox is a leading manufacturer of electrostatic (film and paper) and aluminum
electrolytic capacitors, sold worldwide, principally to original equipment
manufacturers ("OEMs") for use as components in electrical and electronic
products.

Capacitors are basic electrical components that store electrical energy and
regulate the frequency, timing and condition of electrical signals.  They are
used to release predetermined amounts of energy and assist in running an
electrical device, to send predetermined amounts of energy to start an
electrical device or to store energy for releases at unscheduled future times.
A principal functional element of every capacitor is its

                                       3
<PAGE>

dielectric (nonconductive) material, which functions as an insulator separating
two electrically charged plates (electrodes). Dielectric systems can be made
using a variety of materials, such as air, ceramic, tantalum oxide, aluminum
oxide, polypropylene film and paper. The capacitors manufactured by the Company
generally use film, paper and aluminum oxide as the dielectric material.

MARKETS AND APPLICATIONS

<TABLE>
<CAPTION>

MARKETS                APPLICATIONS                                  AEROVOX PRODUCTS
=====================================================================================================
<S>                    <C>                                           <C>
MOTORS                 Compressors, air conditioners, pumps,         AC Oil Capacitors
                       refrigeration, laundry equipment,             AC Dry Capacitors
                       garage door openers, hospital beds            Aluminum Electrolytic Capacitors
-------------------------------------------------------------------------------------------------------
LIGHTING               Electromagnetic and electronic                AC Oil Capacitors
                       ballasts for fluorescent and high             AC Dry Capacitors
                       intensity discharge (HID) fixtures            DC Film Capacitors
                       and strobe lights                             Aluminum Electrolytic Capacitors
-------------------------------------------------------------------------------------------------------
POWER ELECTRONICS      Variable speed drives, uninterruptible        DC Film Capacitors
                       power supplies (UPS), power supplies,         AC Oil Capacitors
                       transportation, welders, motor speed          AC Dry Capacitors
                       controllers, telecommunications equipment,    Aluminum Electrolytic Capacitors
                       audio/visual equipment, battery chargers
-------------------------------------------------------------------------------------------------------
SPECIALTY              Medical equipment (defibrillator,             Custom and Pulse Power Capacitors
                       X-ray equipment), industrial                  High Voltage Capacitors
                       equipment, government and university          Power Factor Correction Capacitors
                       research, power factor control systems
--------------------------------------------------------------------------------------------------
EMI/RFI FILTERS        Power supplies, industrial equipment,         Custom and General Purposes EMI/RFI
                       computer and telecommunications               Filters
                       equipment and appliances
--------------------------------------------------------------------------------------------------
</TABLE>

UNITED STATES AND MEXICAN MAQUILADORA OPERATIONS

Electrostatic Capacitors

Aerovox has manufactured electrostatic capacitors in New Bedford, Massachusetts
since 1938 and in Juarez, Mexico since 1992.

All Aerovox alternating current AC film capacitors are manufactured with
polypropylene film and/or kraft paper or polyester film (used in small units) as
the dielectric system. Aerovox's AC capacitors are utilized for continuous duty
in starting permanent split-phase motors and then provide power factor
correction during the running phase of the motor circuit. Applications include
air conditioners, pumps, refrigerators and other types of equipment. Aerovox AC
film capacitors are also utilized in ballasts for high intensity discharge
("HID") and fluorescent magnetic lighting fixtures, uninterruptible power
supplies ("UPS"), power supplies and in welding equipment.

Direct current ("DC") film capacitors utilize polyester films and polypropylene
(for high frequency applications) as the dielectric system.  Applications for
Aerovox DC film capacitors include lighting (for electronic ballasts in
fluorescent fixtures), UPS and power supplies, variable speed drives and
equipment for audio, communications and welding applications.

                                       4
<PAGE>

The Company offers a complete line of high-voltage, multi-purpose custom and
pulse power capacitors for medical, industrial and government applications. The
smaller models in this product line are used as components in photocopiers,
laser equipment, defibrillators and other medical equipment, power supply
systems and welding equipment.  Aerovox's larger DC capacitors are used in
government and university research products, government weaponry systems, in
equipment for high-energy x-rays and in high-speed trains.

Aluminum Electrolytic Capacitors

Aerovox has manufactured AC and DC aluminum electrolytic capacitors for North
and South America and Asian markets in Juarez, Mexico since 1994.  Aerovox's AC
motor start capacitors are designed for intermittent duty applications such as
starting electric motors and providing power for short duration gear motors.
Start capacitors of this type are used in compressor motors, pump motors, dental
chairs, garage door openers and other similar applications.

The Company's DC aluminum electrolytic capacitors are used in the electrical
equipment and electronic industry primarily for applications such as power
supplies, UPS, motor drives and energy discharge applications such as welding,
strobes and photo flash.

EMI/RFI Filters

Organized as an integrated business within the Company, the EMI Filters Business
Unit supplies EMI filters, which protect electronic equipment from electrical
interference ("noise") coming from the power source and suppress high-frequency
interference that would otherwise be transmitted out of the equipment along the
power cord.  EMI filters can also be used to suppress high-frequency and
unintentional noise generated in electronic and electromechanical equipment.
Applications for EMI filters include computer and computer peripheral equipment,
telecommunications and variable speed drives.  They are also used in sensitive
electronic testing and medical equipment.  The Company's EMI filter product
lines are assembled in Juarez, Mexico.

COMPETITION

Electrostatic Capacitors

AC capacitors are made by several domestic and foreign manufacturers and
competition is intense, especially for motor run capacitors. In the North
American AC capacitor market, Aerovox and General Electric are the primary
producers, each offering a full line of AC products.  Four other suppliers --
York, Commonwealth Sprague, American Radionics and Magnetek -- though smaller,
contribute to price competition.  Asian and European manufacturers are beginning
to make inroads into the U.S. markets as passage in Congress in early 1997 of
the Information Technology Agreement (ITA) eliminated tariffs on capacitors
coming into the United States.

The principal competitive factors in the industry include product quality and
reliability, competitive prices, on-time delivery, customer service, the ability
to meet rigid customer specifications and the ability to add value to the
customer's product.

The North American business of Aerovox is not a major supplier of general
purpose AC capacitors in either Europe or Asia and faces strong competition from
locally based manufacturers in those markets.  However, Aerovox has successfully
marketed energy discharge capacitors for specialized applications in Europe and
in the Korean market.

A significant number of DC film capacitor manufacturers, both domestic and
international, serve the North American market, including Vishay and Matsushita,
both of which are larger and have more resources than Aerovox.  Accordingly,
Aerovox faces stiff competition and enjoys only a minor share of this market.
The competitive factors are primarily quality, delivery and pricing.

                                       5
<PAGE>

Aluminum Electrolytic Capacitors

In the North American AC motor start capacitor market, Aerovox has two major
competitors -- BC Components and North American Capacitor Company (NACC). The
principal competitive factors in the industry are pricing, delivery, quality and
customer service.

The North American DC electrolytic capacitor market is dominated by Cornell
Dubilier Electronics, BC Components and United Chemi-Con. This marketplace has
minimal standardization and is considered application specific, normally
requiring design-in and qualification testing by its customers.

EMI/RFI Filters

A significant number of EMI custom filter manufacturers serve the North American
marketplace providing strong competition.  The principal competitive factors are
technical support, quality, delivery and price.

MANUFACTURING

Many of Aerovox's manufacturing processes are automated; mechanization is
essential to its ability to control costs in order to meet competitive prices
and still maintain acceptable profit margins.  The control of quality levels is
an equally important function throughout all operations and various tests are
conducted to assure continuity of high standards.

In 1997, the Company initiated an on-going program to significantly improve
operating efficiency. In all its plants, goals to improve on-time delivery
performance, to reduce cycle times, and to reduce inventory investment have been
established and information systems, materials acquisition and flows and
production have been redesigned to meet these goals.  Lean manufacturing
techniques, with emphasis on speed and waste elimination, have replaced
inflexible large-quantity batch production on the factory floor.

In December 1992, the Company formed Aerovox de Mexico, a maquiladora in Juarez,
Mexico for the assembly of high labor content products. As part of the Company's
restructuring plan, its two plants in Juarez were consolidated during 2000.

The key material element of an aluminum electrolytic capacitor is an essentially
pure aluminum foil that has been processed, chemically and electrically, to meet
the capacitance and voltage specifications of the finished capacitor.  This
processing, known as etching and forming of the aluminum foil, is done at the
Aerovox plant in Huntsville, Alabama. The foil is then forwarded to the
Company's plants in Juarez, Mexico City and Weymouth, England for assembly into
finished aluminum electrolytic capacitors.

BHC AEROVOX LTD.

BHC Aerovox Ltd., located in Weymouth, England, is one of Europe's leading
manufacturers of aluminum electrolytic capacitors with sales throughout Europe.

PRODUCTS AND MARKETS

BHC Aerovox is a major supplier of AC motor-start capacitors to the European
market, serving the fractional horsepower motor and the compressor markets.
Additionally, BHC Aerovox supplies DC capacitors to European manufacturers of
motor drives, uninterruptible power supplies, telecommunication power supplies,
traction units for trains, audio/visual equipment and welding equipment.

COMPETITION

There is competition from a number of European and Asian suppliers for all of
the aluminum electrolytic products made by BHC Aerovox.  Among the more
significant competitors are Epcos and Evox-Rifa.  In

                                       6
<PAGE>

each of the main countries, there is at least one local supplier. BHC Aerovox
has increased its market share by offering technical backup to support a range
of high-quality, technically advanced products at value prices.

BHC's margins are subject to influence by foreign currency exchange rates.  In
order to protect itself from adverse currency fluctuations, BHC now purchases
many of its raw materials in euros.  Approximately 70% of all sales are outside
the United Kingdom, primarily into Europe and are typically priced in euros.

MANUFACTURING

BHC Aerovox purchases etched and formed aluminum foil from multiple sources,
including the Aerovox foil operation in Huntsville. This processed foil is slit
to the required width, wound with specially selected tissues, impregnated with
an electrolyte fluid and then assembled into containers. A large part of the
production is for non-standard parts, custom designed to meet the specific
customer applications.  In 1999, BHC Aerovox completed a program of significant
investment to upgrade and automate its capacitor assembly operations.

AEROVOX DE MEXICO -- MEXICO CITY OPERATION

Acquired in April 1999, Aerovox de Mexico's plant located in Mexico City ("CGE
Aerovox") is a leading manufacturer of motor start, motor run and film
capacitors in Latin America.  Unlike Aerovox de Mexico's plant in Juarez, the
Mexico City plant does not operate as a maquiladora.

PRODUCTS AND MARKETS

CGE Aerovox's products are used in applications such as motors, lighting
equipment and electronics.  Other applications for its products include
telecommunication equipment, home appliances and HVAC equipment.

COMPETITION

Brazilian and Asian suppliers present competitive factors for products made by
CGE Aerovox with Siemens and Lorenzetti representing the most noteworthy
competitors.  In addition, there is at least one local supplier of capacitors
within each country in Latin America.  In order to combat competitive pressures,
CGE Aerovox sells its products through a readily available, wide network of
independent distributors throughout Latin America.

Foreign currency exchange rates influence the business of CGE Aerovox.  Raw
material is purchased primarily in U.S. dollars and more than half of all sales
are outside Mexico and in U.S. dollars

MANUFACTURING

CGE Aerovox uses multiple sources for etched and formed aluminum foil, including
the Aerovox foil operation in Huntsville. It purchases polymer film and aluminum
foil and winds the material to customer-specified voltages and ratings.

GENERAL

SALES AND DISTRIBUTION

Aerovox sells its products worldwide to over 500 customers, primarily OEMs, who
purchase capacitors and filters manufactured by the Company for use as
components in the products they manufacture.  No one customer in 2000 accounted
for 10% or more of the net sales of the Company.  In 2000, approximately 47% of
the Company's net sales were to its ten largest customers and 90% were made to
its 100 largest customers.

                                       7
<PAGE>

The Company expects that sales to these customers will continue to represent a
significant portion of its total sales.

Sales to customers outside the U.S., primarily from BHC Aerovox and CGE Aerovox,
represented approximately 39% of total sales in 2000.

The Company markets its products directly to domestic OEMs and through a network
of independent manufacturers' sales representative organizations which
collectively employ over 180 sales people. A smaller portion of the Company's
sales are through distributors.  The Company continually reviews the performance
of its independent representatives, and from time to time, makes changes in its
relationships with them.

The Company's sales are slightly seasonal and are affected by the buying cycles
of the various industries it serves.  Approximately 75% of the net sales are
produced under agreements negotiated on an annual basis, usually during the
latter part of the year.  The Company sells approximately 95% of its products on
a manufactured-to-order basis. If an order is canceled, the Company bills the
customer for materials and labor expended on the order prior to cancellation.
Increasingly, customers require that the Company maintain stock of finished
capacitors for them, either at Aerovox plants or at the customer's designated
location.  This trend has resulted in an increase in the Company's investment in
finished goods inventory.

A critical element to the Company's strategy is its emphasis on customer
service.  The Company maintains continual, multi-level contacts with many
customers and places a high priority on meeting each customer's requirements in
a timely manner.

BACKLOG

Aerovox's total backlog represents approximately three months of production.
The Company's manufacturing lead times vary from one to eight weeks depending on
the product type, although some DC electrolytic capacitors with strong demand
and special larger pulse power products may require longer lead times. The
Company books orders, for purposes of calculating backlog, when a firm delivery
date that is no more than twelve months out is scheduled.  The trend of major
OEM customers to demand shipments from stock, as earlier noted, reduces the
order backlog and visibility of demand.  The total active backlog was $30.0
million at February 19, 2001 and $20.4 million at February 26, 2000.  The
Company expects to fill all backlog orders scheduled for 2001 delivery.

PRODUCT DEVELOPMENT AND QUALITY CONTROL

Product development and improvement are important elements of Aerovox's
strategy.  The Company's efforts to develop new products and to improve existing
products are continuous and benefit from long-term technical relationships with
a number of key suppliers and customers.  Formal and informal consultation and
discussion on technical matters of common interest with key suppliers have
resulted in a number of significant product improvements, including the
development of thinner dielectric materials resulting in a more cost efficient
capacitor and development of improved capacitor fluid impregnants that reduce
capacitance loss.

The Company places a high degree of emphasis on quality both in product design
(through improved design specifications) and in the production process by means
of continuous  process monitoring and control throughout the manufacturing
cycle.  Statistical Process Control, a program aimed at encouraging employee
involvement and participation through fact-based decision making, is typical of
the programs that have helped Aerovox achieve significant quality improvements.

The Company adheres to worldwide quality standards in all its operations. Its
North American manufacturing facilities in New Bedford, Massachusetts and
Juarez, Mexico have achieved International Standards Organization (ISO) 9002
certification. BHC Aerovox has been ISO 9001 certified for several years and
Aerovox de Mexico in Mexico City achieved ISO 9001 status in March 2000.

                                       8
<PAGE>

MANAGEMENT INFORMATION AND CONTROL SYSTEMS

In 1999, the Company completed a companywide project to convert all management
information and control systems to an integrated and uniform system that is
compliant with year 2000 computing requirements.

RAW MATERIALS

The Company purchases raw materials from a number of regional, national and
international suppliers.  All of these raw materials are available from a
variety of suppliers with which the Company has had long-term relationships.
The Company purchases its plain and metallized polypropylene and polyester films
from several sources in Europe and the United States.  A number of sources in
the United States, Europe and Asia are approved to provide aluminum foil for the
Company's electrolytic products.

PATENTS, LICENSES AND TRADEMARKS

The Company's most important intellectual property is its capacitor
manufacturing processes which have been developed over a period of many years.
Aerovox has approximately nine active patents and six pending patents.

The Company has granted licenses to two companies to make, use, import, sell
and/or offer for sale capacitors which rely on materials and/or designs patented
by Aerovox

The Aerovox trademark is registered or registration is pending in 23 countries
in Europe, North and South America, Asia, the Middle East and Australia.  This
trademark has been in force since 1976.  In addition, the Company holds or has
pending, twelve other United States registered trademarks, some of which are
registered in other countries.  The duration of Aerovox's product trademark
registrations range from one to 59 years.  The Company believes that its
trademark status helps to maintain the proprietary nature of its products.

EMPLOYEES

As of  January 27, 2001, Aerovox had 1,591 employees worldwide.  A total of 533
employees hold salaried management, supervisory, sales and clerical positions
and 1,058 hourly employees are engaged in production and related activities.
Unions represent 17% of the employees.  Approximately 427 employees have been
with their respective Aerovox company for ten years or more.

Aerovox considers its employee relations to be good.  There have been no labor
stoppages in recent years and union contracts have been renegotiated without
difficulty. The Company is currently in negotiations with the International
Brotherhood of Electrical Workers to renew a three-year contract which will
expire in April 2001.  In Mexico City, the agreement with the Sindicata
Progresita de Trabajadores will be up for its annual renewal in January 2002.

ENVIRONMENTAL COMPLIANCE

Per a consent order reached between the Company and the Environmental Protection
Agency ("EPA") in December 1999 (see background of this agreement in Item 3
Environmental Matters), the Company was required to abandon its factory and
corporate headquarters in New Bedford, Massachusetts, by April 2001. A new
manufacturing facility with corporate offices was constructed in the New Bedford
Business Park and relocation of the offices and production lines began in August
2000. In accordance with the consent order, all manufacturing equipment moved to
the new building had to be cleaned to meet the EPA's contamination limits for
polychlorinated biphenyls ("PCBs").

The Company hired an environmental engineering services firm to coordinate the
project and approximately 700 pieces of equipment and machinery were cleaned and
moved to the new facility. The process was as

                                       9
<PAGE>

follows: Each piece of equipment was cleaned by an EPA-qualified technical
service company crew and wipe sampled, with the samples certified by an
independent laboratory to contain PCBs at a level no more than the limit
prescribed by the EPA. For equipment manufactured prior to 1979 the process
involved disassembling the machines, removing all of the paint, repainting the
equipment with PCB-free paints, wipe sampling surfaces from several areas of the
machines, and shrink wrapping the cleaned machines in preparation for the move.
Upon receipt of the laboratory tests, the machines were moved out of the
building or, in case of a failed test, the process was repeated. The cost of
cleaning and moving was approximately $1.2 million, expensed to 2000 operations.

ITEM 2. PROPERTIES

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------
PROPERTY                            Sq. Feet         Owned/Leased          Year Lease
                                                                             Expires
<S>                                 <C>              <C>                   <C>
New Bedford, Massachusetts           435,000             Owned                  --
(closed February 2001)
---------------------------------------------------------------------------------------------
New Bedford, Massachusetts           137,000             Owned                  --
---------------------------------------------------------------------------------------------
Huntsville, Alabama                   85,000             Owned                  --
---------------------------------------------------------------------------------------------
Juarez, Mexico                       100,000             Leased                2003
---------------------------------------------------------------------------------------------
Mexico City, Mexico                  110,000             Leased                2004
---------------------------------------------------------------------------------------------
Weymouth, England                     35,000             Leased                2008
---------------------------------------------------------------------------------------------
Weymouth, England                     37,000             Owned                  --
---------------------------------------------------------------------------------------------
</TABLE>

As a result of the environmental matter related to the Company's New Bedford
plant, as described in Item 3 below, the Company constructed a new 137,000
square foot manufacturing plant and corporate offices, also in New Bedford.  The
phased relocation of manufacturing and office functions began in August 2000 and
was complete at year end.

The Company believes that its facilities are adequate for its foreseeable needs.

ITEM 3. ENVIRONMENTAL MATTERS

The Company, until September 2000, manufactured film capacitors and maintained
its corporate offices in a building located in New Bedford, Massachusetts, which
had been occupied by the Company and predecessor organizations also engaged in
the manufacture of capacitors since 1938. In June 1997, the EPA conducted tests
that revealed the presence of PCBs on surfaces within the Company's New Bedford
plant. While the Company and its expert advisors considered the PCBs to
represent no threat to the health of the employees of the Company or the
surrounding community, subsequent engineering studies indicated that the cost to
remove PCBs within the building to the levels prescribed by the EPA and the
Toxic Substances Control Act would be prohibitive.  Therefore, the Company
decided, and informed the EPA, that it would vacate the building, demolish it
and dispose of all contaminated building materials in a legally compliant
manner. Accordingly, a reserve was established and charged to income as of
December 27, 1997, in the amount of $7.2 million, which the Company believes is
adequate to dismantle and dispose of the building, clean equipment located
within it, and to pay for related engineering, legal and professional services.
Of this amount, $34,000, $133,000 and $387,000 were expended during 2000, 1999
and 1998, respectively for legal and professional services related to the
environmental issue. Additionally, the Company wrote-off, as of December 27,
1997 the depreciated value of that building, all improvements thereto and
certain machinery and equipment which would become surplus, abandoned or
otherwise unusable upon disposal of the building.

                                       10
<PAGE>

The amount of this write-off was $5.8 million. During 1998, the EPA approved the
Company's plan to dismantle and dispose of the building. In December 1999, the
Company reached a final agreement with the EPA regarding the timing of the
planned dismantling and disposal activity. Under the settlement, the Company
agreed to relocate its New Bedford operations within 16 months of the agreement
and to demolish the existing building and cap the site no later than November
2011.

On February 9, 1990, the Company entered into a settlement agreement (the
"Settlement Agreement") with the United States and The Commonwealth of
Massachusetts (the "governments") resolving litigation commenced by the
governments in the U.S. District Court for the District of Massachusetts, on
December 10, 1983 under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, commonly known as the "Superfund" legislation.  The
litigation concerned the alleged disposal by various defendants of PCBs in the
Acushnet River and New Bedford Harbor.  The Settlement Agreement resolved all of
the governments' claims against the Company and Aerovox Industries, Inc. (the
Company's predecessor, now known as Belleville Industries, Inc.) arising out of
the contamination of the Acushnet River and New Bedford Harbor with PCBs,
including cleanup costs, study costs and damages to natural resources, now or
hereafter incurred, except that the Settlement Agreement provides that the
governments may seek damages from the Company and Aerovox Industries, Inc. for
future liability in the event that such future liability arises out of unknown
conditions at the site. The Company, based on information presently available,
does not believe that this matter will have any further material adverse effect
on the Company's financial condition.

The Company is currently subject to a National Pollutant Discharge Elimination
System ("NPDES") permit to discharge water from the older New Bedford facility
into the Acushnet River/New Bedford Harbor.  The NPDES permit has a limitation
of up to ten parts per billion (ppb) of PCBs in its storm water and other
discharges.  For several years, the Company and the EPA have been discussing
possible changes to this permit.  In June 1994, the Company submitted the
following plans to the EPA and the Department of Environmental Protection
("DEP"): Stormwater Study Plan, Quality Assurance Project Plan and Stormwater
Best Management Practices Plan.  Aerovox will proceed with implementation of the
plans upon receipt of EPA and DEP approvals. The Company can not predict what
further actions the EPA or DEP may take with regard to the permit or what impact
any such actions may have on the Company.

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

Not applicable.  No matter was submitted to stockholders of the Company during
the fourth quarter of fiscal 2000.

ITEM 4A.  EXECUTIVE OFFICERS

Set forth below are the names, ages and positions of the executive officers of
Aerovox in 2000 and currently:
<TABLE>
<CAPTION>

NAME                         AGE                                  OFFICE(S)
----                         ---    ---------------------------------------------------------------------------
<S>                         <C>     <C>
Robert D. Elliott.........   50     President and Chief Executive Officer
Timothy J. Brown..........   51     Senior Vice President, Marketing and Sales
Martin Hudis..............   58     Senior Vice President, Technology Development
F. Randal Hunt............   43     Sr. Vice President, Chief Financial Officer, Secretary and Treasurer
Ted M. Miller.............   58     Senior Vice President, Engineering and Operations
Enrique Sanchez Aldunate..   56     Senior Vice President, Aerovox Inc. and President, Aerovox de Mexico
Graham Yates..............   54     Senior Vice President, Aerovox Inc. and Managing Director, BHC Aerovox Ltd.
</TABLE>

                                       11
<PAGE>

Mr. Elliott graduated in 1973 from Clarkson University with a Bachelor of
Science Degree in Industrial Distribution and received a Master of Business
Administration from the University of Wisconsin in 1981. From 1991 to 1993, Mr.
Elliott served as President of Hendrix Wire & Cable, a manufacturer of cable and
accessories for the electric utility market, and a business unit of the
Electrical Products Division of Eagle Industries, a diversified manufacturing
company.  From 1993 to 1996, he was Group Executive of Eagle's Electrical
Products Division.  Mr. Elliott joined Aerovox as President in March 1996 and
was named Chief Executive Officer of the Company in September 1996.

Mr. Brown graduated with a Bachelor of Arts degree in Physics from Hamilton
College in 1971 and received a Master of Arts from the University of
Massachusetts in 1973.  From 1987 to 1998, Mr. Brown was Vice President of
Marketing and Sales at Alberox Corporation, a manufacturer of technical
ceramics.  He joined Aerovox in April 1998 as Senior Vice President, Marketing
and Sales.  Mr. Brown was no longer employed by the Company effective January 3,
2001.

Dr. Hudis graduated with a Bachelor of Science degree from the University of
California in Los Angeles in 1965, a Ph.D. in Nuclear Engineering from the
Massachusetts Institute of Technology in 1970 and a Master of Business
Administration from the University of Chicago in 1981.  He was Vice President
for Engineering and Marketing of LH Research, a manufacturer of power supplies,
from 1989 to 1991.  Dr. Hudis joined Aerovox as Vice President, Technology in
January 1992 and became a Senior Vice President in 1995.  He is a senior member
of The Institute of Electrical and Electronics Engineers, an international
organization of electrical and electronic engineers.

Mr. Hunt graduated in 1981 with a Bachelor of Arts degree in Accounting from the
University of Texas at El Paso and is also a certified public accountant. From
1993 to 1994 he was Plant Controller at Hamilton Beach-Proctor Silex in Juarez,
Mexico. Mr. Hunt joined Aerovox in March 1994 as General Manager of the
Company's Juarez operations.  In 1996, he was appointed General Manager of the
Company's EMI filters business.  In September 1998, Mr. Hunt assumed the duties
of Corporate Controller, and in September 1999 he was elected Corporate
Secretary by the Board of Directors.  He became Vice President, Finance in
February 2000.  In May 2000, the Board of Directors appointed him Senior Vice
President and Chief Financial Officer.

Mr. Miller graduated from Syracuse University with a Bachelor of Science in
Electrical Engineering in 1964, and earned a Master of Business Administration
degree from the Rochester Institute of Technology in 1982. Mr. Miller was Vice
President of Operations and Engineering for Microtouch Systems Inc., a
manufacturer of computer touch screens, from 1991 to 1996.  He joined Aerovox as
Senior Vice President, Operations in 1997. Mr. Miller was no longer employed by
the Company effective January 3, 2001.

Mr. Sanchez graduated from Universidad Nacional Autonoma de Mexico ("UNAM") in
1965 with a Bachelor's degree in Mechanical Electrical Engineering.  He earned a
Master of Business Administration degree from Universite Sorbonne in Paris,
France in 1967.  From 1972 to 1999, he held the position of General Manager of
Compania General de Electronica S.A. de C.V. in Mexico City.  As part of the
Company's acquisition of the capacitor business of CGE in April 1999, Mr.
Sanchez was elected to the Board of Directors and named Senior Vice President,
Aerovox Inc. and President, Aerovox de Mexico in May 1999.

Mr. Yates received a Masters degree in Business Science from Salford University
in 1984.  From 1985 through 1996, he held the position of Managing Director of
Hawke Cable Glands Ltd., a manufacturer of specialized electrical equipment for
the petrochemical industry located in northern England.  Mr. Yates joined
Aerovox in 1996 and has since led the Company's British subsidiary, BHC Aerovox
Ltd., as Managing Director.  He became Senior Vice President, Aerovox Inc. in
May 1999.

                                       12
<PAGE>

                                    PART II

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

The Company's Common Stock trades on NASDAQ National Market System under the
symbol ARVX.  The Company's Common Stock was distributed to the beneficiaries of
the Aerovox Liquidating Trust on February 26, 1990.  The number of shareholders
of the Company's Common Stock on March 26, 2001 was 8,277.  Of that total, 5,705
were stockholders of record.  The Company has not declared dividends previously
and currently intends to continue to retain earnings for use in its business and
does not expect to pay dividends for the foreseeable future. The Company's
common stock dividend policy will be reviewed periodically by the Board of
Directors.

The following table provides the high and low sales prices of the Company's
Common Stock for each quarter during the Company's two most recent fiscal years.

<TABLE>
<CAPTION>

                                                  2000                                  1999
                                        HIGH               LOW                 HIGH              LOW
-----------------------------------------------------------------------------------------------------
<S>                                     <C>               <C>                  <C>              <C>
First Quarter                           $6.38             $3.00                $3.00            $2.06
Second Quarter                          $5.63             $2.38                $3.00            $2.06
Third Quarter                           $4.50             $2.63                $3.23            $2.28
Fourth Quarter                          $3.31             $1.88                $3.25            $2.25
</TABLE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                 DEC. 30        JAN. 1,        JAN. 2,        DEC. 27,        DEC. 28,
(Amounts in thousands, except per share data       2000          2000           1999            1997            1996
-----------------------------------------------------------------------------------------------------------------------
Income statement data:
<S>                                              <C>            <C>            <C>            <C>            <C>
    Net sales                                    $111,691       $110,438       $116,194       $119,658       $125,975
    Income (loss) from operations                  (3,405)        (2,273)         2,648        (12,574)           143
    Net income (loss)                              (7,200)        (3,471)         1,786        (11,499)        (1,347)
    Basic earnings (loss) per share                 (1.33)         (0.64)          0.33          (2.15)         (0.25)
    Diluted earnings (loss) per share               (1.33)         (0.64)          0.33          (2.15)         (0.25)
    Weighted average shares outstanding:
           Basic                                    5,429          5,398          5,390          5,348          5,388
           Diluted                                  5,429          5,398          5,390          5,348          5,388
Balance sheet data:
    Total assets                                 $ 85,482       $ 70,520       $ 70,571       $ 71,559       $ 84,976
    Working capital                               (13,598)        15,024         13,469         15,216         20,968
    Redeemable common stock                         1,750          2,546              -              -              -
    Long-term obligations                           9,520         21,344         17,888         23,808         23,806
    Total stockholders' equity                     15,354         22,206         25,289         23,766         35,073
</TABLE>

                                       13
<PAGE>

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

RESULTS OF OPERATIONS

The table below depicts significant components from the statements of operations
as percentages of net sales.
<TABLE>
<CAPTION>

                                                            FOR FISCAL YEARS
<S>                                                 <C>          <C>          <C>
                                                    2000         1999         1998
                                                   ------       ------       ------
Net sales                                          100.0%       100.0%       100.0%
Cost of sales                                       86.2%        82.1%        82.7%
Gross margin                                        13.8%        17.9%        17.3%
Research and development                             2.0%         2.0%         2.1%
Selling, general and administrative expenses        15.1%        13.2%        12.9%
Provision for restructuring costs                   (0.2)%        4.8%           -
Income (loss) from operations                       (3.1)%       (2.1)%        2.3%
</TABLE>

Fiscal years 2000 and 1999 included 52 weeks. Fiscal year 1998 included 53
weeks. The additional week in 1998 was required to comply with Company policy
that the fiscal year end on the Saturday nearest to December 31.  Because the
additional week included in 1998 was the week between the Christmas and New Year
holidays, during which shipping activity is historically slow and included only
three shipping days, the Company believes the effect on sales and income from
operations was immaterial.

2000 VERSUS 1999

SALES
Consolidated net sales for 2000 were $111.7 million versus $110.4 million in
1999, an increase of 1.1%.  Net sales at BHC Aerovox, a wholly owned subsidiary
in the United Kingdom, increased 12.2% to $24.1 million in 2000 from $21.5
million in 1999 due principally to strong demand in Europe for DC electrolytic
capacitors.  Sales of products manufactured in North America decreased by 1.5%
to $87.6 million in 2000 from $88.9 million in 1999.  The decrease in net sales
was the net impact of a full year's sales from the Company's operation in Mexico
City (nine months in 1999) combined with continued pricing pressures on
capacitors used in motor applications.

In general, the Company's sales are seasonal, with the first two quarters having
higher shipping rates due mainly to seasonal production schedules among OEM
manufacturers of air conditioning equipment.

GROSS PROFIT
Gross profit on sales decreased to $15.4 million (13.8% of net sales) in 2000
from $19.8 million (17.9% of net sales) in 1999 due primarily to labor
inefficiencies, cost of quality, and production line startup expenses incurred
during 2000 totaling approximately $3.7 million.  The largest contributor to the
high level of expenses was the Company's relocation of its New Bedford
operations into a new facility, also in New Bedford.  Additionally, the Company
consolidated its two plants in Juarez, Mexico, and moved a major electrolytic
capacitor line from Juarez to Mexico City, Mexico.  Although accomplished with
minimal disruption to customers, the relocations had significant negative
impacts on gross profits, operating income and cash flows in 2000.

RESEARCH AND DEVELOPMENT
Expenditures for research, product development and engineering totaled $2.2
million each year for 2000 and 1999.

SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased to $14.9 million in 2000
from $14.5 million in 1999.

                                       14
<PAGE>

EQUIPMENT CLEANING, RELOCATION AND OTHER MOVE-RELATED EXPENSES
The Company expensed $1.9 million in 2000 to clean equipment of PCB
contamination and to move its operations and certain production lines in New
Bedford, Massachusetts, and Juarez and Mexico City, Mexico. Of this amount, $1.2
million was expensed for engineering, professional and other outside services
required to accomplish the moves and $0.7 million represents the internal effort
directed to supporting the various move-related projects.

INTEREST EXPENSE
Interest expense for 2000 of $2.4 million was higher by $0.7 million compared to
$1.7 million in 1999 as a result of increased borrowings and interest rates.

OTHER INCOME
The $0.1 million decrease in other income to $0.2 million in 2000 from $0.3
million in 1999 principally reflects the reduction in gains from transactions
denominated in foreign currencies.

PROVISION FOR INCOME TAXES
The provision for income taxes included net deferred tax liabilities in foreign
jurisdictions of $1.3 million and current income taxes of $0.3 million. Due to
the uncertainty surrounding the realization of favorable tax attributes in
future tax returns related to the write-down of impaired assets and other
restructuring costs in the United States, the increase in deferred tax assets
has been fully offset by a valuation allowance.  In addition, net operating loss
carryforwards in Mexico have been reserved due to a restructuring of the Mexico
operations.

1999 VERSUS 1998

Sales
Consolidated net sales for 1999 were $110.4 million versus $116.2 million in
1998, a decline of 5.0%. Net sales at BHC Aerovox, a wholly owned subsidiary in
the United Kingdom, decreased 18.9% to $21.5 million in 1999 from $26.5 million
in 1998 due principally to weak demand in Europe.

Sales of products manufactured in North America decreased by 0.9%, to $88.9
million in 1999 from $89.7 million in 1998.  An increase in net sales
attributable to the newly acquired Mexico City business in April was essentially
offset by the Company's exit from several unprofitable product lines and
customers, as well as by declining prices in the electrical equipment and
appliance markets. Additionally, the sale of the PFC  business in the third
quarter of 1998 contributed to decreased sales in this year-to-year comparison.

GROSS PROFIT
Excluding inventory write-offs relating to restructuring activities of $0.3
million, gross profit on sales increased to $20.2 million (18.3% of net sales)
in 1999 from $20.1 million (17.3% of net sales) in 1998 as a result of a
significant cost reduction effort which began in the fourth quarter of 1997 and
continued throughout 1999.

RESEARCH AND DEVELOPMENT
Expenditures for research, product development and engineering totaled $2.2
million and $2.5 million for 1999 and 1998, respectively.  The decrease resulted
from the aforementioned cost reduction efforts.

SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses decreased to $14.5 million in 1999
from $15.0 million in 1998, primarily due to lower spending on Year 2000
projects and the impact of the cost reduction programs mentioned above.  This
was accomplished simultaneously with the integration of the newly acquired
business in Mexico City.

                                       15
<PAGE>

PROVISION FOR RESTRUCTURING COSTS
During the fourth quarter of 1999, the Company recorded pre-tax restructuring
charges totaling $5.7 million related to the consolidation of three plants in
Mexico to two, closure of foil processing operations in England, exit from a
capacitor product line in North America and write-down of manufacturing
equipment in New Bedford, which was abandoned and not moved to the new facility.

The components of the costs related to these restructuring activities are as
follows:

<TABLE>
<CAPTION>
                                                        CASH            NON-CASH           TOTAL
                                                     ------------------------------------------------
<S>                                                   <C>                <C>               <C>
Impairment of fixed assets                              $  -             $4,723            $4,723
Employee terminations                                    609                  -               609
Inventory write-down                                       -                344               344
   Pre-tax provision for restructuring costs            $609             $5,067            $5,676
                                                     ================================================
</TABLE>

INTEREST EXPENSE
Interest expense for 1999 of $1.7 million was higher by $0.2 million compared to
1998 as a result of borrowings related to the acquisition of the capacitor
business CGE in April 1999.

OTHER INCOME
The $1.2 million decrease in other income to $0.3 million in 1999 from $1.5
million in 1998 principally reflects the gain recorded in 1998 of $0.9 million
on the sale of the PFC business.

PROVISION FOR INCOME TAXES
The provision for income taxes included debits against deferred tax accounts of
$0.4 million and current income taxes of $0.1 million. Due to the uncertainty
surrounding the realization of favorable tax attributes in future tax returns
related to the write-down of impaired assets and other restructuring costs in
the United States, the increase in deferred tax assets has been fully offset by
a valuation allowance.

LIQUIDITY AND CAPITAL RESOURCES
The Company experienced a significant cash drain in 2000 as a result of closing
its factory and corporate headquarters in New Bedford, Massachusetts, a
requirement of the December 1999 consent order between the Company and the EPA.
Additional demands on the Company's cash flows were created by the consolidation
of its two plants in Juarez, Mexico and the relocation of a major product line
from Juarez to Mexico City, Mexico. In total, the Company expensed approximately
$5.6 million and capitalized $1.1 million of costs related to the various
relocation projects. Cash requirements were satisfied through increases in trade
accounts payable and borrowings from the Company's United States banks. At
December 30, 2000, the Company's working capital credit line availability was
$1.6 million, compared with $6.2 million at January 1, 2000. At times during the
fourth quarter of 2000 and subsequent to year-end 2000, availability on this
credit line has been below $0.5 million.  Currently, the Company has only
limited availability under its credit line.

During fiscal 2001, the Company expects to generate sufficient cash flows to
support its operating requirements; however, management believes that these cash
flows will not cover all of its debt service obligations. Furthermore, if
revenues fluctuate from the Company's plan for any reason, including changes in
economic conditions, sales volume declines, price erosion, increases in
expenses, and other unfavorable circumstances, some beyond the control of
management, the Company will need other financing to meet its cash requirements.
In view of its limited credit line availability, the Company has sought
additional funding sources; however, given the Company's current financial
condition, it has to date been unsuccessful in these efforts. The Company was in
default at December 30, 2000 and is currently in default of certain covenants in
its loan agreements and has not made certain principal, interest and fee
payments due in March 2001 in the amount of $0.4 million, and does not expect to
be able to make its scheduled principal and interest payments during the second
quarter of 2001. The amount of debt currently in default which has been
classified as a current liability totaled $26.6 million at December 30, 2000.
The Company has requested its U.S. lenders to waive existing covenant violations
and to allow it to suspend payments of principal and interest, in the amount of
approximately $1.2 million for the second quarter of 2001 and to pay interest
only for the remainder of the year. No such waivers or agreements to suspend
payments have been obtained. This request was made as part of a management
initiative to ensure sufficient short-term cash flows to run the operations
while developing strategic alternatives, which may include refinancing the


                                       16
<PAGE>

Company's debt, entering into a strategic alliance with another company or
seeking an acquirer for the Company. In this regard, the Company is in the
process of retaining an investment banker to assist management and the board of
directors in establishing and pursuing such strategic alternatives. In the event
any one or more of the Company's lenders declines to provide the Company with a
waiver, it would have the right to demand immediate repayment of the Company's
obligations. Any such acceleration of the Company's obligations would probably
cause other lenders to similarly accelerate the Company's obligations under
other financing arrangements. Should the U.S. lenders demand immediate
repayment, the Company expects that it would not be able to pay its indebtedness
and other obligations.

Working capital, calculated as total current assets less total current
liabilities at December 30, 2000 was a deficiency of $13.6 million compared with
working capital of $15.0 million at the end of fiscal 1999.  The decrease was
due to earlier noted relocation activities and the reclassification of certain
of the Company's debt from long term to current. Current ratio was 0.75 at year-
end 2000 and 1.74 at year-end 1999. Net accounts receivable and days sales
outstanding in accounts receivable were $17.5 million (53 days) compared with
$14.9 million (49 days) in fiscal 1999. Inventories increased by $5.4 million
during 2000 to support customer requirements during the plant and product line
moves, peaking at $22.9 million in the third quarter.  By year end, inventories
were $19.0 million, a reduction of $3.9 million and continued to decline during
the first quarter of 2001.  Net cash used in operating activities in 2000
totaled $0.2 million compared to net cash provided by operating activities of
$5.9 million in 1999 and $1.7 million in 1998.

The Company invested approximately $14.9 million in capital assets in 2000
compared with $4.3 million in 1999 and $2.8 million in 1998.  The increase in
overall investment in 2000 is attributable to construction of the new
manufacturing facility in New Bedford.  If revenues fluctuate from its plan for
any reason, including changes in economic conditions, sales volume declines,
price erosion, increases in expenses, and other unfavorable circumstances, some
beyond the control of management, the Company's long-lived capital assets may
become impaired, resulting in a charge to reduce them to fair value.

The Company's Revolving Credit Agreement, as amended on June 30, 1999 and
September 30, 2000, provides for a credit line of $14.5 million to the Company,
subject to borrowing base limitations. The agreement, which extends to May 31,
2002, also includes various interest rate options which, for fiscal 2000, have
varied from 7.8% to 10.0% on an annualized basis. The collateral for this line
of credit is accounts receivable and inventories. The outstanding balance of
loans at fiscal years ended December 30, 2000 and January 1, 2000 was $12.0
million and $3.6 million, respectively. The Company was in default of one
financial covenant at December 30, 2000 and is in default of certain other terms
of the agreement in 2001. As a result, this loan has been classified as a
current obligation.

BHC has an agreement with a bank which provides for (i) a ten-year mortgage on
real property in the amount of 0.5 million British pounds ($0.7 million at the
year-end exchange rate) with an outstanding balance at December 30, 2000 of $0.7
million, (ii) a five-year loan collateralized by machinery and equipment in the
amount of 0.5 million British pounds with an outstanding balance at December 30,
2000 of $0.5 million and (iii) an "Overdraft" credit line allowing borrowings in
British pounds, euros or U.S. dollars up to the equivalent of 2.5 million
British pounds ($3.7 million at the year-end exchange rate) with an outstanding
balance at December 30, 2000 of $3.3 million.  On February 28, 2001, BHC renewed
the credit line under the same terms except for the borrowing limit, which was
raised to 3.0 million British pounds ($4.4 million at the exchange rate of
February 28, 2001). With the exception of the five-year loan collateralized by
plant and machinery which has an interest rate of 5.73%, interest is charged at
variable rates based upon the bank base rate. The ten-year mortgage agreement
includes certain financial covenants. At December 30, 2000, BHC was in violation
of two covenants regarding interest coverage and net worth. On March 14, 2001,
the lender waived its right to accelerate payments on this loan with respect to
the violation as of December 30, 2000, and the Company expects to comply with
the terms of this agreement in 2001.


                                       17
<PAGE>

BHC has an agreement with another bank which provides for a five-year loan at
8.0% per annum collateralized by machinery and equipment equivalent to the
amount of 1.2 million British pounds ($1.8 million at year-end exchange rates)
with an outstanding balance at December 30, 2000 of $1.2 million which allows
for borrowings in British pounds or euros.

The Company has a term line of credit agreement with an equipment financing
company in the amount of $9,000,000, collateralized by certain equipment.
Principal payments due under that note in 2000 were $1,500,000. At December 30,
2000, borrowings outstanding under this agreement were $6,250,000 at an interest
rate of 8.50% and maturing in the year 2005; and at January 1, 2000, $7,750,000
at an interest rate of 7.80%. The Company was in default of two financial
covenants on December 30, 2000. Because of these violations and since the
Company is in payment default of certain terms of this agreement in 2001, this
loan has been classified as a current obligation.

Other long-term debt of the Company consists of an Industrial Revenue Bond
maturing on July 1, 2002, with an annual interest rate of 7.42% and monthly
payments of principal and interest. The outstanding balance at fiscal year-end
2000 was $0.8 million versus a balance at year-end 1999 of $1.3 million.
Although the Company was in compliance with the terms of this bond at December
30, 2000, the Company was in payment default on these bonds in 2001. As a result
of this default, the bondholders have the right to accelerate payment of the
outstanding balance due.

The Company also has two notes payable to each of the original shareholders of
CUSA in the amounts of $1.1 million and $0.3 million, accruing interest at rates
of 5.22% and 5.32% per annum, respectively, and due April 4, 2001 and April 5,
2002, respectively. The notes are secured by 59% of the common shares
outstanding of Aerovox de Mexico. The Company has not made its payment due April
4, 2001 but it has reached an agreement in principle with the noteholders to
delay repayment of the notes. As part of this agreement in principle, the
interest rates on the notes would be increased by three percentage points and
the notes would be secured by 100% of the common shares outstanding of Aerovox
de Mexico. While this agreement in principle has been reached, there can be no
assurance that a definitive agreement will be reached with the noteholders.

Aerovox de Mexico has a note payable to CGE in the amount of $0.2 million which
bears interest at 5.22% per annum, and matures at April 1, 2001. Aerovox de
Mexico also has a renewable bank loan with an outstanding balance at December
30, 2000 of $1.0 million bearing interest at 9.30%, due on May 18, 2001.

On March 21, 2000, the Company entered into a fifteen-year financing agreement
with a bank and an investment company affiliated with the bank. Under the terms
of the agreement, the Company received $10.2 million of adjustable rate
financing collateralized by the Company's new facility in New Bedford,
Massachusetts, which includes real property and manufacturing equipment. The
Company entered into a staged interest rate swap in order to fix the interest
rate at 7.66% over fifteen years. As of December 30, 2000, all $10.2 million was
covered by the interest rate swap. Including all amortizable fees, the effective
interest rate is 9.26%. The agreement contains a financial covenant requiring
the Company to maintain a minimum debt service coverage ratio. The Company was
in default of this covenant at December 30, 2000. On November 13, 2000, the
lenders waived their rights to accelerate payment of this loan with respect to
the default through December 30, 2000. Since the Company is in payment default
of this agreement in 2001, this loan has been classified as a current
obligation.

Cash at December 30, 2000 totaled $0.8 million compared to $0.7 million at
January 1, 2000.

ACQUISITION AND RELATED PARTY TRANSACTIONS

On April 5, 1999, the Company purchased all of the outstanding capital stock of
CUSA, a corporation organized under the laws of Mexico.  In a prior transaction,
CUSA had previously acquired the assets of the capacitor business of CGE, a
Mexican corporation. These assets consisted primarily of inventory and machinery
and equipment related to the capacitor business of CGE, along with an assignment
of employees, and all technical know-how, customer lists and other intangible
assets related to the business.  During 1998, the capacitor business accounted
for $11.5 million of the sales of CGE, and approximately $1.4 million of
earnings before interest and taxes. CGE purchased approximately $1.5 million of
high-purity aluminum capacitor foil from the Company during 1998 for use in AC-
rated motor start capacitors.

                                       18
<PAGE>

The aggregate consideration of $7.8 million paid for the capital stock of CUSA
consisted of (i) the assumption of obligations of CUSA arising from its purchase
of assets from CGE, principally three notes totaling $3.5 million, one of which,
in the amount of $1.8 million, was paid by the Company on April 6, 1999; the
remaining two notes were in the amounts of $1.5 million and $0.2 million,
bearing interest at 5.10% and 5.22% per annum respectively, and maturing at
April 1, 2000 and April 1, 2001 respectively, (ii) notes of the Company
aggregating $1.1 million, accruing interest at a rate of 5.22% per annum and
payable in full on April 4, 2001, (iii) notes of the Company aggregating $0.3
million, accruing interest at a rate of 5.32% per annum and payable in full on
April 5, 2002 and (iv) 700,000 shares of common stock of the Company (the
"Registrant Stock"). Each of the Sellers executed a stockholders agreement,
dated as of April 5, 1999, with the Company which provides for certain
restrictions on the transfer of the Registrant Stock and provides that, in
certain circumstances and at a date not earlier than April 5, 2003, nor later
than May 5, 2003, the holders of such Registrant Stock may require the Company
to purchase the Registrant Stock at the then current book value of the Company.
A total of $2.9 million was ascribed to the Registrant Stock which was composed
of the fair market value of the stock on the date of the transaction and the
amount ascribed to the right of the Sellers to require the Company to repurchase
the stock at a future date at the then current book value.  As of December 30,
2000, the fair value of the right of the Sellers to require the Company to
repurchase the stock was approximately $0.4 million.

The acquisition has been accounted for under the purchase method of accounting;
the operating results of CUSA have been included in the Company's consolidated
statement of operations from April 5, 1999. Excess of cost over the fair value
of net assets acquired, $4.3 million, is being amortized on a straight-line
basis over ten years.

The Company leases production space in Mexico City, Mexico from CGE. Payments
under this lease agreement totaled $0.1 million in 2000 and $0.1 million in
1999.  Certain services related to the security, maintenance and insurance of
the buildings are contracted through CGE, payments for which were $0.2 million
in 2000 and $0.2 million in 1999.

Certain of the Company's supervisory and managerial personnel, as well as
certain support departments, such as accounting and human resources, provide
services to CGE.  The Company charged CGE for all such services rendered which
totaled $0.4 million in 2000 and $0.3 million in 1999.

None of these related party transactions existed prior to the acquisition.

OTHER MATTERS

PATENT INFRINGEMENT SUIT
February 7, 2001, the Company announced that it had brought to a conclusion
patent infringement litigation against several Korean manufacturers and their
U.S. affiliates and representatives.

Aerovox's suit against Samwha Capacitor Company Ltd., Kuk Kwang Electric Company
Ltd. and Dae Yeong Company Ltd., and their American associates, Samwha U.S.A.
and Pacific Rim Components Corporation, alleged the named parties infringed its
patent for the impregnation and encapsulation of motor run capacitors.

During the fourth quarter 2000, Aerovox reached out-of-court settlements with
both Kuk Kwang Electric Company and Dae Yeong Company and their U.S. affiliates.
Because the Company could no longer afford the cost of litigation, it filed a
motion to dismiss the suit against Samwha in early 2001.

Costs related to these matters expensed in 2000 were approximately $0.5 million.


                                       19
<PAGE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivatives and hedging activities.  In June 2000, the
Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and Certain Hedging Activities," an amendment to
SFAS No. 133.  These statements require that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value.  Management is currently evaluating SFAS no. 133 and
SFAS No. 138.  It does not expect these new statements to have a material effect
on our consolidated financial position, results of operations or cash flow. The
Company adopted these standards on December 31, 2000.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

ENVIRONMENTAL STATUS
In June 1997, the United States Environmental Protection Agency ("EPA")
conducted tests that revealed the presence of polychlorinated biphenyls ("PCBs")
on surfaces within the Company's New Bedford plant. While the Company and its
expert advisors consider the PCBs to represent no threat to the health of the
employees of the Company or the surrounding community, subsequent engineering
studies indicated that the cost to remove PCBs within the building to the levels
proscribed by the EPA and the Toxic Substances Control Act would be prohibitive.
Therefore, the Company decided, and informed the EPA, that it intends to vacate
the building, to demolish it, and to dispose of all contaminated building
materials in a legally compliant manner. Accordingly, the Company wrote-off, as
of December 27, 1997, the undepreciated value of that building, all improvements
thereto, and certain machinery and equipment, and a reserve was established and
charged to income as of December 27, 1997, in the amount of $7.2 million, which
the Company believes is adequate to dismantle and dispose of the building, clean
equipment located within it, and  to pay for related engineering, legal and
professional services. Additionally, the Company wrote-off, as of December 27,
1997, the depreciated value of that building, all improvements thereto and
certain machinery and equipment which the Company believes will become surplus,
abandoned or otherwise unusable upon disposal of the building.  The amount of
this write-off was $5.8 million. Of this amount, $34,000, $133,000 and $387,000
were expended during 2000, 1999 and 1998, respectively, for such legal and
professional services. During 1998, the EPA approved the Company's plan to
dismantle and dispose of the building. In December 1999, the Company reached a
final agreement with the EPA regarding the timing of the planned dismantling and
disposal activity.  Under the settlement, the Company has agreed to relocate its
New Bedford operations within 16 months of the agreement and to demolish the
existing building and cap the site no later than November 2011.

The settlement also requires the Company to fund a trust account to be used for
demolishing the building and capping the site. The first deposit into this
account, labeled "Restricted cash" on the balance sheet, was made in January
2000 for $750,000. Payments into the fund are scheduled for each calendar year
end beginning December 31, 2000, with additional variable contributions
scheduled for each March 15th per a formula based on earnings of the prior year.
The Company is obligated to complete the site work within nine months of the
date the trust fund reaches $4.8 million or 60% of the planned cost of the
demolition and capping work, but no later than November 21, 2011. The Company's
scheduled payment of $200,000 for December 31, 2000 was deferred with the EPA's
consent to June 30, 2001.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company operates internationally with manufacturing facilities, customers,
and vendors in several countries. The Company may reduce its exposure to
fluctuations in foreign exchange rates by creating offsetting positions through
the use of foreign currency forward contracts, a type of derivative financial
instrument. The Company does not use derivative financial instruments for
trading or speculative purposes, nor is the Company a party to leveraged
derivatives.

The Company held no foreign currency forward contracts as of December 30, 2000
and January 1, 2000.

                                       20
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company's financial statements are set forth on pages 27 through 30, which
follow Item 14.

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

On August 30, 2000, Aerovox dismissed PricewaterhouseCoopers LLP ("PwC"), the
Company's independent accountants. The change of independent accountants was
recommended by the Audit Committee and the Board of Directors granted management
the authority to dismiss the Company's independent accountants and engage a new
independent accountant.

PwC's reports on the Company's financial statements for the two most recent
fiscal years in the period ending December 31, 1999 contained no adverse opinion
or disclaimer of opinion and was not modified or qualified as to uncertainty,
audit scope, or accounting principles.

During the Company's two most recent fiscal years and the subsequent interim
periods up to the date of termination, there were no disagreements with PwC on
any matters of accounting principles or practices, financial statement
disclosure, or auditing scope or procedures which, if not resolved to the
satisfaction of PwC, would have caused PwC to make reference to the matter in
their reports on the financial statements.

On August 30, 2000, the Company engaged KPMG  LLP ("KPMG") to act as its
independent accountants to audit the Company's consolidated financial
statements. The Company did not consult with KPMG regarding the application of
accounting principles to a specified transaction, either completed or proposed
or the type of audit opinion that might be rendered on the Company's financial
statements during the Company's two most recent fiscal years or during the
subsequent interim periods, prior to their engagement.


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     (a)  Directors -- Information with respect to all directors may be found in
the Company's definitive Proxy Statement for the 2001 Annual Meeting of
Stockholders on pages 1 through 4 under the caption "Election of Directors,"
which Statement is to be filed with the Securities and Exchange Commission.
Such information is incorporated herein by reference.

     (b)  Executive Officers -- Information with respect to executive officers
appears in Item 4A. of Part I.

     (c)  Information relating to a delinquent filing of a Form 3 or 4 by
Executive Officer or Director of the Company is contained in the Company's 2001
definitive Proxy Statement under the caption "Beneficial Ownership Reporting
Compliance."

ITEM 11.  EXECUTIVE COMPENSATION

This information is contained in the Company's definitive Proxy Statement for
the 2001 Annual Meeting of Stockholders on pages 7 and 11 under the caption
"Executive Compensation" and "Compensation Committee Report," which Statement is
to be filed with the Securities and Exchange Commission.  Such information is
incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

This information is contained in the Company's definitive Proxy Statement for
the 2001 Annual Meeting of Stockholders on pages 13 through 15 under the caption
"Security Ownership of Certain Beneficial Owners and Management," which
Statement is to be filed with the Securities and Exchange Commission.  Such
information is incorporated herein by reference.

                                       21
<PAGE>

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not applicable.


                                    PART IV

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

     (a)  The following documents are filed as part of this Report.

          1.  Financial Statements. The following financial statements of the
              --------------------
              Company and the Reports of PwC L.L.P. and KPMG L.L.P., Independent
              Auditors, are included in this Report on the pages indicated:
<TABLE>
          <S>                                                                                        <C>
          Consolidated Balance Sheets at December 30, 2000 and January 1, 2000.                      27

          Consolidated Statements of Operations for the years ended December 30, 2000,               28
          January 1, 2000 and January 2, 1999.

          Consolidated Statements of Stockholders' Equity for the years ended December 30,           29
          2000, January 1, 2000 and January 2, 1999.

          Consolidated Statements of Cash Flows for the years ended December 30, 2000,               30
          January 1, 2000 and January 2, 1999.

          Notes to Consolidated Financial Statements                                                 31

          Reports of Independent Auditors                                                            26
</TABLE>

          2.  Financial Statement Schedules. The following financial statement
              -----------------------------
              schedule of the Company for the years ended December 30, 2000,
              January 1, 2000 and January 2, 1999 is filed as part of this
              report on Form 10-K and should be read in conjunction with the
              financial statements.

<TABLE>
             <S>                                                                                    <C>
              Schedule II - Valuation and Qualifying Accounts for the years ended December           49
              30, 2000, January 1, 2000 and January 2, 1999.

              Report of Independent Auditors on Financial Statement Schedules.                       48
</TABLE>
              All other financial statement schedules are inapplicable or the
              required information is contained in the Company's consolidated
              financial statements or notes thereto, which have been
              incorporated by reference herein.

          3.  Exhibits. See Exhibit Index on Page 22 hereof for a list of
              --------
              exhibits filed or incorporated by reference as a part of this
              report.

     (b)  Reports on Form 8-K. No report on Form 8-K was filed by the Company in
          -------------------
          the quarter ended December 30, 2000.

                                       22
<PAGE>

     (c)  Exhibits Pursuant to Item 601 of Regulation S-K.
          ------------------------------------------------

<TABLE>
<CAPTION>
 Exhibit
  Number                                                Description
 --------       ------------------------------------------------------------------------------------------
<C>             <S>
   3.1          Restated Certificate of Incorporation. (1)
   3.1.1        Certificate of Designations, Preferences and Rights of Series A Junior Participating
                Preferred Stock. (4)
   3.2          Certificate of Ownership and Merger of Aerovox Incorporated (a Massachusetts
                corporation) into Aerovox Holding Company (a Delaware corporation). (1)
   3.3          By-Laws. (1)
   4.1          Instruments Defining Rights of Security Holders (See Exhibits 3.1, 3.1.1, 3.2, 3.3, 4.2
                and 4.3) (1)
   4.2          Form of Stock Certificate. (4)
   4.3          Form of Aerovox Incorporated Rights Agreement. (3)
   4.3.1        Amendment No. 1 to Aerovox Incorporated Rights Agreement. (18)
   4.3.2        Amendment No. 2 to Aerovox Incorporated Rights Agreement. (18)
   4.4          Amended and Restated Revolving Credit Agreement, dated July 8, 1993, between the Company
                and the First National Bank of Boston. (8)
   4.4.1        First Amendment to Amended and Restated Revolving Credit Agreement, dated August 30,
                1994, between the Company, BHC Aerovox Ltd. and the First National Bank of Boston. (9)
   4.4.2        Revolving Credit Facility, dated September 7, 1994 between BHC Aerovox Ltd. and the First
                National Bank of Boston. (10)
   4.4.3        Second Amendment to Amended and Restated Revolving Credit Agreement, dated December 29,
                1995. (11)
   4.4.4        Third Amendment to Amended and Restated Revolving Credit Agreement, dated May 15, 1996.
                (12)
   4.4.5        Fourth Amendment to Amended and Restated Revolving Credit Agreement, dated November 1,
                1996. (13)
   4.4.6        Fifth Amendment to Amended and Restated Revolving Credit Agreement, dated February 14,
                1997. (14)
   4.4.7        Sixth Amendment to Amended and Restated Revolving Credit Agreement, dated February 27,
                1998. (15)
   4.4.8        Seventh Amendment to Amended and Restated Revolving Credit Agreement, dated September 28,
                1998. (16)
   4.4.9        Eighth Amendment to Amended and Restated Revolving Credit Agreement, dated February 18,
                1999. (16)
   4.5          Loan and Security Agreement, dated March 30, 1992, between the Company and The CIT
                Group/Equipment Financing, Inc., as amended by Amendment No. 1 dated March 1, 1993. (6)
   4.5.1        Amendment No. 2 dated May 30, 1995. (11)
   4.6          Second Amended and Restated Revolving Credit Agreement, dated June 30, 1999, between the
                Company and BankBoston, N.A. (18)
   4.6.1        Amendment No. 1 to Second Amended and Restated Revolving Credit Agreement. (18)
   4.6.2        Amendment No. 2 to Second Amended and Restated Revolving Credit Agreement dated September
                29, 2000, between the Company and Fleet Capital Corporation as successor to BankBoston, N.A.
   4.6.3        Amendment And Restatement of the Revolving Credit Note, dated September 30, 2000,
                between the Company and Fleet Capital Corporation as successor to BankBoston, N.A.
   4.7          Loan Agreement dated April 14, 1999, between BHC Aerovox Ltd and Lloyd's Bowmaker Ltd. (18)
   4.7.1        Overdraft Facility dated March 21, 2000 between BHC Aerovox Ltd. and Lloyd's TSB Bank.
   4.7.2        Overdraft Facility dated February 8, 2001 between BHC Aerovox Ltd. and Lloyd's TSB Bank.
   4.8          Sale Agreement dated February 15, 1999, between BHC Aerovox Ltd. and Barclay's Mercantile
                Business Finance Ltd. (18)
   4.8.1        Sale Agreement dated March 7, 2000, between BHC Aerovox Ltd. and Barclay's Mercantile
                Business Finance Ltd.
</TABLE>
                                       23
<PAGE>
<TABLE>
<CAPTION>
 Exhibit
  Number                                           Description
 --------       -------------------------------------------------------------------------------------------
<S>           <C>
      4.9       Second Amended And Restated Security Agreement, dated June 30, 1999, between the Company
                and BankBoston, N.A.
      4.9.1     Amendment No. 1 To Second Amended And Restated Security Agreement, dated September 30,
                2000, between the Company and Fleet Capital Corporation as successor to BankBoston, N.A.
      4.10      Loan Agreement dated November 21, 2000 between Aerovox de Mexico S.A. de C.V. and Banco
                Bilbao Vizcaya.
     10.1       1989 Stock Incentive Plan. (1)
     10.1.1     Amended Stock Incentive Plan. (10)
     10.1.2     1999 Stock Incentive Plan. (18)
     10.1.3     1999 Stock Option Plan for Directors. (18)
     10.2       Profit-Sharing Savings Plan. (2)
     10.3       Deferred Supplemental No. 1 to Deferred Supplemental Savings Plan. (5)
     10.4       Deferred Compensation Plan for Directors. (1)
     10.5       1989 Stock Option Plan for Directors. (1)
     10.5.1     Amended Stock Option Plan for Directors. (10)
     10.7       Forms of Indemnification Agreements between Aerovox Incorporated and its directors and
                certain officers. (1)
     10.8       Change of Control Severance Agreement with Robert D. Elliott. (14)
     10.8       Form of Change of Control Severance Agreement with other executives. (2)
     10.9       Consulting Agreements with Clifford H. Tuttle and Ronald F. Murphy. (8)
     10.10      Form of Sales Representative Agreement. (2)
     10.11      Purchase Agreement dated March 5, 1993 between the Company and Cooper Industries. (7)
     10.12      Purchase Agreement dated April 5, 1999 between the Company and the former shareholders of
                Capacitores Unidos S.A. de C.V. (17)
     21.1       List of Subsidiaries of the Company.
     23.1       Consent of KPMG LLP
     23.2       Consent of PWC LLP
                --------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
<S>           <C>
      (1)       Filed as an Exhibit to Registration Statement on Form 10 with the Securities and Exchange
                Commission on October 4, 1989, and incorporated herein by reference.
      (2)       Filed as an Exhibit to Amendment No. 1 to the Registration Statement to Form 10 filed
                with the Securities and Exchange Commission on December 1, 1989, and incorporated herein
                by reference.
      (3)       Filed as an Exhibit to Amendment on Form 8 to the Registration Statement on Form 10,
                filed with the Securities and Exchange Commission on February 16, 1990, and incorporated
                herein by reference.
      (4)       Filed with the Company's Annual Report on Form 10-K for the year ended December 30, 1989
                and incorporated herein by reference.
      (5)       Filed with the Company's Annual Report on Form 10-K for the year ended December 29, 1990
                and incorporated herein by reference.
      (6)       Filed with the Company's Annual Report on Form 10-K for the year ended January 2, 1993
                and incorporated herein by reference.
      (7)       Filed as an exhibit to Form 8-K dated March 5, 1993.
      (8)       Filed with the Company's Annual Report on Form 10-K for the year ended January 1, 1994
                and incorporated herein by reference.
      (9)       Filed with the Company's Quarterly Report on Form 10-Q for the period ended October 1,
                1994 and incorporated herein by reference.
     (10)       Filed with the Company's Annual Report on Form 10-K for the year ended December 31, 1994
                and incorporated herein by reference.
     (11)       Filed with the Company's Annual Report on Form 10-K for the year ended December 30, 1995
                and incorporated herein by reference.
     (12)       Filed with the Company's Quarterly Report on Form 10-Q for the period ended June 29, 1996.
     (13)       Filed with the Company's Quarterly Report on Form 10-Q for the period ended September 28,
                1996.
</TABLE>
                                       24
<PAGE>
<TABLE>
<CAPTION>
<S>           <C>
     (14)       Filed with the Company's Annual Report on Form 10-K for the year ended December 28, 1996.
     (15)       Filed with the Company's Annual Report on Form 10-K for the year ended December 27, 1997.
     (16)       Filed with the Company's Annual Report on Form 10-K for the year ended January 2, 1999.
     (17)       Filed as an exhibit to Form 8-K dated April 14, 1999.
     (18)       Filed with the Company's Annual Report on Form 10-K for the year ended January 1, 2000.
</TABLE>

                                       25
<PAGE>

                        REPORTS OF INDEPENDENT AUDITORS

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AEROVOX INCORPORATED:

We have audited the accompanying consolidated balance sheet of Aerovox
Incorporated, as of December 30, 2000, and the related consolidated statement of
operations, stockholders' equity and cash flows for the year 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 audits.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America.  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 audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Aerovox Incorporated as of
December 30, 2000 and the results of its operations and its cash flows for the
year then ended in conformity with accounting principles generally accepted in
the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from its
operations, is in default of specific terms of its debt agreements and has a
working capital deficiency which raise substantial doubt about its ability to
continue as a going concern.  Management's plans in regard to these matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

By /S/ KPMG LLP

February 23, 2001, except as to Notes 2 and 5, which are as of April 6, 2001
Boston, Massachusetts

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AEROVOX INCORPORATED:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, stockholders' equity and cash flows
present fairly, in all material respects, the financial position of Aerovox
Incorporated (the "Company") at January 1, 2000 and January 2, 1999 and the
results of their operations and their cash flows for each of the two years in
the period ended January 1, 2000 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

By/S/ PricewaterhouseCoopers LLP

February 14 2000
Boston, Massachusetts

                                       26
<PAGE>

Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Amounts in thousands)                                                      DEC. 30, 2000          JAN. 1, 2000
------------------------------------------------------------------------------------------------------------------
Assets
Current assets:
<S>                                                                      <C>                   <C>
  Cash                                                                              $    834              $    742
  Accounts receivable, net of allowance for doubtful
     accounts of $377 in 2000 and $511 in 1999                                        17,465                14,881
  Inventories                                                                         18,964                17,511
  Prepaid expenses and other current assets                                            1,957                 2,214
  Recoverable income taxes                                                               766                     -
                                                                       -------------------------------------------
     Total current assets                                                             39,986                35,348
Property, plant and equipment, at cost:
  Land                                                                                   341                   290
  Buildings and improvements                                                          11,307                 3,312
  Machinery and equipment                                                             52,552                46,367
                                                                       -------------------------------------------
                                                                                      64,200                49,969
     Less accumulated depreciation and amortization                                  (26,882)              (22,448)
                                                                       -------------------------------------------
                                                                                      37,318                27,521
Goodwill, net of accumulated amortization of  $755 in 2000 and $323 in
 1999                                                                                  3,557                 3,989

Deferred income taxes                                                                  3,504                 3,592
Restricted cash                                                                          787                     -
Other assets                                                                             330                    70
     Total assets                                                                   $ 85,482              $ 70,520
                                                                       ===========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                                  $ 13,842              $  8,285
  Accrued compensation and related expenses                                            1,768                 2,540
  Other accrued expenses                                                               2,826                 2,090
  Current maturities of long-term debt                                                35,148                 7,362
  Income taxes                                                                             -                    47
                                                                       -------------------------------------------
     Total current liabilities                                                        53,584                20,324
Deferred income taxes                                                                  5,274                 4,100
Long-term debt less current maturities                                                 2,453                14,371
Reserve for environmental costs and plant remediation                                  6,614                 6,470
Deferred compensation                                                                    453                   503
                                                                       -------------------------------------------
Total liabilities                                                                     68,378                45,768
Commitments and contingencies

Redeemable common stock                                                                1,750                 2,546

Stockholders' equity:
  Preferred stock, $.01 par value; 5,000,000 shares
     authorized; none issued                                                               -                     -
  Common stock; $1.00 par value; 20,000,000 shares authorized;
     5,441,924 and 5,404,866  shares issued and outstanding                            5,442                 5,404
  Additional paid-in capital                                                           1,162                 1,078
  Retained earnings                                                                    9,565                15,969
  Accumulated other comprehensive loss                                                  (815)                 (245)
                                                                       -------------------------------------------
     Total stockholders' equity                                                       15,354                22,206
     Total liabilities and stockholders' equity                                     $ 85,482              $ 70,520
                                                                       ===========================================
</TABLE>
   The accompanying notes are an integral part of the consolidated financial
                                  statements.

                                       27
<PAGE>

                     CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                          FOR THE YEARS ENDED
<S>                                                    <C>                       <C>                        <C>
(Amounts in thousands, except per share data)         DEC. 30, 2000              JAN. 1, 2000               JAN. 2, 1999
-------------------------------------------------------------------------------------------------------------------------
Net sales                                                   $111,691                   $110,438                  $116,194
Cost of sales                                                 96,263                     90,623                    96,062
                                           ------------------------------------------------------------------------------
Gross profit                                                  15,428                     19,815                    20,132
Research and development                                       2,247                      2,237                     2,492
Selling, general and administrative                           14,905                     14,519                    14,992
 expenses
Equipment cleaning, relocation and other
 move- related expenses                                        1,923                          -                         -

Provision for restructuring costs                               (242)                     5,332                         -

Income (loss) from operations                                 (3,405)                    (2,273)                    2,648
Other income (expense):
  Interest expense                                            (2,391)                    (1,735)                   (1,530)
  Other income                                                   182                        311                     1,520
                                           ------------------------------------------------------------------------------
Income (loss) before income taxes                             (5,614)                    (3,697)                    2,638
Provision for (benefit from) income taxes                      1,586                       (226)                      852

Net income (loss)                                           $(7,200)                   $(3,471)                  $  1,786
Earnings (loss) per share - basic and                        $(1.33)                    $(0.64)                     $0.33
 diluted
                                           ==============================================================================
Weighted average number of shares
 outstanding                                                   5,429                      5,398                     5,390

                                           ==============================================================================
</TABLE>

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

                                       28
<PAGE>

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                 Additional                Accumulated Other        Total
                                       Common      Paid-In     Retained       Comprehensive       Stockholders'   Comprehensive
(Amounts in thousands)                 Stock      Capital      Earnings       Income (Loss)          Equity        Income (Loss)
--------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>          <C>         <C>         <C>                    <C>              <C>
Balances at December 27, 1997         $5,384      $1,037       $17,282                  $  63          $23,766
  Net income                             -           -           1,786                    -              1,786          $ 1,786
     Proceeds from employee                9          22           -                      -                 31
  employee stock purchase plan
  and exercise of stock options
  (8,842 shares)
     Foreign currency translation        -           -             -                    (294)            (294)            (294)
                                                                                                                     -----------
        Comprehensive income                                                                                             $ 1,492
                                   ---------------------------------------------------------------------------------------------
Balances at January 2, 1999            5,393       1,059        19,068                  (231)          25,289
                                   ---------------------------------------------------------------------------------------------
     Net loss                            -           -          (3,471)                   -            (3,471)           $(3,471)
     Proceeds from employee               11          19            -                     -                30
  stock purchase plan and
  exercise of stock options
  (11,645 shares)
     Revaluation of redeemable            -          -             372                    -               372
     common stock
     Foreign currency translation         -          -              -                    (14)             (14)              (14)
                                                                                                                    ------------
        Comprehensive loss                                                                                              $(3,485)
                                  ----------------------------------------------------------------------------------------------
Balances at January 1, 2000           5,404       1,078         15,969                  (245)          22,206
                                  ----------------------------------------------------------------------------------------------
      Net loss                           -           -          (7,200)                    -          (7,200)          $(7,200)
      Proceeds from employee             38          84             -                      -             122
  stock purchase plan and
  exercise of stock options
  (37,058 shares)
     Revaluation of redeemable
     common stock                        -           -             796                    -              796
     Foreign currency translation        -           -              -                   (570)           (570)             (570)
                                                                                                                     ------------
          Comprehensive loss                                                                                           $(7,770)
                                  -----------------------------------------------------------------------------------------------
Balances at December 30, 2000        $5,442      $1,162         $ 9,565                $(815)        $15,354
                                  ===============================================================================================
</TABLE>

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

                                       29
<PAGE>

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                 For The Years Ended
(Amounts in thousands)                                     DEC. 30, 2000             JAN. 1, 2000            JAN. 2, 1999
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                     <C>                       <C>
Cash flows from operating activities:

Net income (loss)                                                   $ (7,200)                 $ (3,471)               $ 1,786
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
  Depreciation and amortization                                        4,833                     4,741                  4,366
  Write-down of impaired assets and other                                289                     5,676                      -
  restructuring costs
  Gain on sale of business unit                                            -                         -                   (949)
  Gain (loss) on disposal of assets                                        -                        (3)                     -
  Deferred income taxes                                                1,319                      (349)                   833
Changes in operating assets and liabilities, net of
effect of acquisition:
  Accounts receivable                                                 (2,997)                     (488)                  (371)
  Inventories                                                         (1,927)                    3,694                 (1,912)
  Prepaid expenses and other current assets                               (7)                   (1,120)                    82
  Recoverable income taxes                                              (716)                        -                      -
  Accounts payable                                                     5,693                      (939)                  (790)
  Accrued compensation and related expenses                             (744)                     (741)                    55
  Other accrued expenses                                               1,036                      (706)                (1,097)
  Income taxes payable                                                   188                      (356)                  (272)
                                                     ------------------------------------------------------------------------
Net cash provided by (used in) operating activities                     (233)                    5,938                  1,731
                                                     ------------------------------------------------------------------------

Cash flows from investing activities:
  Cash paid for acquisition, net of cash                                   -                    (1,721)                     -
  acquired
  Proceeds from sale of business unit                                      -                         -                  2,000
  Acquisition of property and equipment                              (14,935)                   (4,388)                (2,785)
  Other                                                                 (981)                      304                   (400)
                                                     ------------------------------------------------------------------------
Net cash used in investing activities                                (15,916)                   (5,805)                (1,185)
                                                     ------------------------------------------------------------------------
Cash flows from financing activities:
  Proceeds from employee stock purchase plan and
     exercise of stock options                                           122                        30                     30
  Proceeds from issuance of long-term debt                            10,781                    12,851                      -
  Cash paid for debt issuance cost                                      (195)                        -                      -
  Net borrowings (repayments) under line of credit                     9,665                    (3,332)                 1,855
  Repayments of long-term debt                                        (3,971)                  (10,018)                (1,861)
Net cash provided by (used in) financing activities                   16,402                      (469)                    24
                                                     ------------------------------------------------------------------------
Effects of exchange rates on cash                                       (161)                      (71)                  (114)

Increase (decrease) in cash                                               92                      (407)                   456
Cash at beginning of year                                                742                     1,149                    693
Cash at end of year                                                 $    834                  $    742                $ 1,149
                                                     ========================================================================
Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                            $  2,443                  $  1,465                $ 1,530
                                                     ========================================================================
  Cash paid during the year for income taxes                        $    296                  $    395                $   398
                                                     ========================================================================
</TABLE>

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

                                       30
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany transactions have
been eliminated. Certain reclassifications have been made to prior years'
financial statements to conform to the presentation.

FISCAL YEAR
The Company uses a fiscal calendar, which normally includes 52 weeks, and ends
on the Saturday nearest to December 31. Fiscal years 2000 and 1999 ended on
December 30, 2000 and January 1, 2000 respectively and included 52 weeks. Fiscal
year 1998 ended on January 2 and included 53 weeks.

TRANSLATION OF FOREIGN CURRENCIES
Assets and liabilities of all foreign subsidiaries are translated at period-end
rates of exchange and income statement accounts are translated at average rates
of exchange. Resulting translation adjustments are recorded as a separate
component of stockholders' equity, "Accumulated other comprehensive income or
loss."  Foreign currency transaction gains and losses are included in other
income and expense.

CASH
Cash consists of cash on hand.

RESTRICTED CASH
In December 1999, the Company reached a final agreement with the EPA regarding
the timing of the planned dismantling and disposal of its former New Bedford
plant. The agreement requires the Company to fund a trust account. The
restricted cash balance at December 30, 2000 of $787,000 represents a payment
made under this agreement in January 2000 plus accrued interest.

CONCENTRATIONS OF CREDIT RISKS
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables.  The Company's customer base
consists of a large number of geographically dispersed customers.  The Company
maintains reserves for potential credit losses on trade receivables and such
losses, in aggregate, have not exceeded management's expectations.

FINANCIAL INSTRUMENTS
Derivative financial instruments are used by the Company in the management of
foreign currency exposures to reduce commodity and financial market risk. Gains
and losses resulting from effective hedges of existing assets, liabilities or
firm commitments are deferred and recognized when the offsetting gains and
losses are recognized on the related hedged items (see Note 9). The Company does
not enter into derivative transactions for speculative purposes.

INVENTORIES
Inventories are stated at the lower of cost or market.  Cost is determined by
the first-in, first-out ("FIFO") method.

PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Provisions for depreciation of
plant and equipment are computed using the straight-line method over the
estimated useful lives of the assets (buildings and improvements, 5-25 years;
leasehold improvements, over the life of the lease or the useful life of the
asset, whichever is shorter; machinery and equipment, 3-15 years). Expenditures
for repairs and maintenance are charged to expense when incurred. Improvements
which materially extend the life of the related assets are capitalized and
depreciated. Upon retirement or other disposition of property and equipment, the
cost and related depreciation are removed from the accounts and the resulting
gain or loss is reflected in earnings.

                                       31
<PAGE>

Depreciation and amortization expense was approximately $4,833,000, $4,741,000
and $4,366,000 for 2000, 1999 and 1998, respectively. Capitalized interest costs
were approximately $294,000 for 2000.

REDEEMABLE COMMON STOCK
The redeemable common stock is reported on the balance sheet at its redemption
amount and is adjusted to market value quarterly.  This adjustment is charged or
credited to retained earnings.

IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of," the Company records impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount.

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 reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

REVENUE RECOGNITION
Revenues from product sales are recorded when the product is shipped, when
persuasive evidence of an arrangement exists, when the price to the buyer is
fixed or determinable, and collectibility of the sales price is reasonably
assured. Provisions for product returns and allowances are recorded in the same
period as the related revenue.

RESEARCH AND DEVELOPMENT
Expenditures for research and product development and engineering are expensed
as incurred.

ADVERTISING COSTS
The Company expenses the cost of advertising as incurred, or as appropriate, the
first time the advertising takes place.  Advertising expense was approximately
$89,000, $147,000 and $109,000 for 2000, 1999 and 1998, respectively.

SOFTWARE DEVELOPMENT COSTS
The Company has implemented Statement of Position ("SOP") No. 98-1, "Accounting
for the Cost of Computer Software Developed or Obtained for Internal Use."
Under SOP 98-1, costs associated with developing or obtaining internal use
software should be capitalized upon meeting certain criteria.  As of December
30, 2000, these capitalized costs and the related amortization have not been
material to the Company's consolidated financial statements, and all such costs
and amortization have been included in property, plant and equipment.

ENVIRONMENTAL REMEDIATION COSTS
The Company accrues for costs associated with environmental remediation
obligations when such expenditures are probable and reasonably estimable.
Accruals for estimated costs of environmental remediation obligations generally
are recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances change.
Costs of future expenditures for environmental remediation obligations are not
discounted to their present value.

INCOME TAXES
Deferred tax liabilities and assets are determined based on the differences
between the financial statement basis and tax basis of assets and liabilities,
using enacted tax rates in effect for the year in which the differences are
expected to reverse.  FAS 109 requires a valuation allowance against net
deferred tax assets, if based upon the available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized.

                                       32
<PAGE>

NET INCOME PER SHARE (BASIC AND DILUTED)
Net income per share is computed based on the weighted average number of common
shares outstanding during the year.  Diluted income per share includes the
effect of common equivalent shares outstanding during the year, calculated under
the treasury stock method, unless their effect is anti-dilutive.

Options to purchase 696,050 shares of common stock at prices ranging from
$2.4375 to $9.625 per share were outstanding at December 30, 2000 but were not
included in the computation of diluted earnings per share because they were
anti-dilutive.

Options to purchase 530,875 shares of common stock at prices ranging from $3.375
to $9.625 per share were outstanding at January 1, 2000 but were not included in
the computation of diluted earnings per share because the exercise price of the
options was greater than the average market price of common shares.

Options to purchase 743,375 shares of common stock at prices ranging from $3.00
to $9.625 per share were outstanding at January 2, 1999 but were not included in
the computation of diluted earnings per share because the exercise price of the
options was greater than the average market price of common shares.

NEW PRONOUNCEMENTS
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities" establishes accounting and
reporting standards for derivatives and hedging activities.  In June 2000, the
Financial Accounting Standards Board issued SFAS No. 138, "Accounting for
Certain Derivative Instruments and certain Hedging Activites," an amendment to
SFAS No. 133.  These statements require that an entity recognize all derivatives
as either assets or liabilities in the balance sheet and measure those
instruments at fair value.  Management is currently evaluating SFAS no. 133 and
SFAS No. 138.  It does not expect these new statements to have a material effect
on our consolidated financial position, results of operations or cash flow. The
Company adopted these standards on December 31, 2000.

Note 2 - Liquidity
The Company experienced a significant cash drain in 2000 as a result of closing
its factory and corporate headquarters in New Bedford, Massachusetts, a
requirement of the December 1999 consent order between the Company and the EPA.
Additional demands on the Company's cash flows were created by the consolidation
of its two plants in Juarez, Mexico and the relocation of a major product line
from Juarez to Mexico City, Mexico. In total, the Company expensed approximately
$5.6 million and capitalized $1.1 million of costs related to the various
relocation projects. Cash requirements were satisfied through increases in trade
accounts payable and borrowings from the Company's United States banks.

This has resulted in limited availability under the Company's existing credit
facilities. The Company's recurring losses from operations have resulted in
default of certain covenants in its loan agreements and the Company has not made
certain principal, interest and fee payments due in March 2001, and does not
expect to be able to make its scheduled principal and interest payments during
the second quarter of 2001. As a consequence, the loan obligations in default
have been classified as current obligations (see Note 5), resulting in a working
capital deficiency of $13,598,000. These matters raise substantial doubt about
the Company's ability to continue as a going concern. The Company's continued
existence is dependent upon several factors including its ability to generate
positive cash flows from operations and to negotiate more favorable lending
terms.

The Company has taken steps to improve its operating results including the
consolidation of its three Mexican plants into two and its move into its new
factory and corporate headquarters in New Bedford, Massachusetts, both of which
were completed in 2000; and the closure of foil processing operations in the
United Kingdom in 1999.  The Company has requested its U.S. lenders to waive
existing covenant violations and to allow it to suspend payments of principal
and interest for the second quarter of 2001 and to pay interest only for the
remainder of the year.  This request was made as part of a management initiative
to ensure sufficient short-term cash flows to run the operation while developing
strategic alternatives which may include refinancing the Company's debt,
entering into a strategic alliance with another company or seeking an acquirer
for the Company.  In this regard, the Company is in the process of retaining an
investment banker to assist management and the board of directors in
establishing and pursuing such strategic alternatives.  In the event any one or
more of the Company's lenders declines to provide the Company with a waiver, it
would have the right to demand immediate repayment of the Company's obligations.
Any such acceleration of the Company's obligations would probably cause other
lenders to similarly accelerate the Company's obligations under other financing
arrangements.  Should the U.S. lenders demand immediate repayment, the Company
expects that it would not be able to pay its indebtedness and other obligations.

                                       33
<PAGE>

Note 3 - Acquisition and Related Party Transactions:
On April 5, 1999, the Company purchased all of the outstanding capital stock of
CUSA, a corporation organized under the laws of Mexico.  In a prior transaction,
CUSA had previously acquired the assets of the capacitor business of CGE, a
Mexican corporation. These assets consisted primarily of inventory and machinery
and equipment related to the capacitor business of CGE, along with an assignment
of employees, and all technical know-how, customer lists and other intangible
assets related to the business.  During 1998, the capacitor business accounted
for $11,500,000 of the sales of CGE and approximately $1,400,000 of earnings
before interest and taxes. CGE purchased approximately $1,500,000 of high-purity
aluminum capacitor foil from the Company during 1998 for use in AC-rated motor
start capacitors.

The aggregate consideration of $7,826,643 paid for the capital stock of CUSA
consisted of (i) the assumption of obligations of CUSA arising from its purchase
of assets from CGE, principally three notes totaling $3,470,000, one of which,
in the amount of $1,750,000, was paid by the Company on April 6, 1999; the
remaining two notes were in the amounts of $1,509,000 and $211,000, bearing
interest at 5.10% and 5.22% per annum respectively, and maturing at April 1,
2000 and April 1, 2001 respectively, (ii) notes of the Company aggregating
$1,089,000, accruing interest at a rate of 5.22% per annum and payable in full
on April 4, 2001, (iii) notes of the Company aggregating $350,000, accruing
interest at a rate of 5.32% per annum and payable in full on April 5, 2002 and
(iv) 700,000 shares of the Registrant Stock. Each of the Sellers executed a
stockholders agreement, dated as of April 5, 1999, with the Company which
provides for certain restrictions on the transfer of the Registrant Stock and
provides that, in certain circumstances and at a date not earlier than April 5,
2003, nor later than May 5, 2003, the holders of such Registrant Stock may
require the Company to purchase the Registrant Stock at the then current book
value of the Company. A total of $2,917,643 was ascribed to the Registrant Stock
which was composed of the fair market value of the stock on the date of the
transaction and the amount ascribed to the right of the Sellers to require the
Company to repurchase the stock at a future date at the then current book value.
As of December 30, 2000 and January 1, 2000 the fair value of the right of the
Sellers to require the Company to repurchase the stock was approximately
$349,000 and $468,000, respectively.

The acquisition has been accounted for under the purchase method of accounting;
the operating results of CUSA have been included in the Company's consolidated
statement of operations from April 5, 1999. Excess of cost over the fair value
of net assets acquired, $4,312,000, is being amortized on a straight-line basis
over ten years.

The Company leases production space in Mexico City, Mexico from CGE. Payments
under this lease agreement totaled $109,000 in 2000 and $74,000 in 1999.
Certain services related to the security, maintenance and insurance of the
buildings are contracted through CGE, payments for which were $243,000 in 2000
and $191,000 in 1999.

Certain of the Company's supervisory and managerial personnel, as well as
certain support departments, such as accounting and human resources, provide
services to CGE.  The Company charged CGE for all such services rendered, which
totaled $362,000 in 2000 and $332,000 in 1999.

None of these related party transactions existed prior to the acquisition.

Note 4 - Inventories:
Inventories consist of the following (in thousands):

                                       34
<PAGE>

<TABLE>
<CAPTION>
                                          DECEMBER 30, 2000                              JANUARY 1, 2000
                              DOMESTIC          FOREIGN          TOTAL        DOMESTIC       FOREIGN         TOTAL
                         ---------------------------------------------------------------------------------------------
<S>                            <C>              <C>              <C>            <C>            <C>           <C>
Raw materials                      $ 5,493           $3,930        $ 9,423        $ 5,948        $3,429        $ 9,377
Work in process                      2,062              779          2,841          1,949           359          2,308
Finished goods                       5,493            1,207          6,700          4,838           988          5,826
                                   $13,048           $5,916        $18,964        $12,735        $4,776        $17,511
                         ---------------------------------------------------------------------------------------------
</TABLE>

Note 5 - Debt:
The Company maintains a Revolving Credit Agreement with a bank, which, as
amended, provides a credit line of $14,500,000 to the Company, subject to
borrowing base restrictions. This debt is collateralized by inventory and
accounts receivable. Interest on the credit line is at the bank's prime rate
payable in arrears on the outstanding loan balance. The Company has the option
to convert from a bank base rate loan into a eurodollar loan at the then
eurodollar (LIBOR) rate plus 2.5%. The Company also has the option to convert up
to $4,000,000 of loans to a bankers' acceptance facility at interest rates equal
to the per annum average discount rate quoted to the bank on the date of request
for such facility plus 2.5% per annum. The weighted average interest rate was
9.16% at December 30, 2000 and 8.48% at January 1, 2000. The agreement matures
on May 31, 2002. A commitment fee, equal to one-quarter percent per annum is
charged on the unused portion of the total commitment. At December 30, 2000,
borrowings outstanding under this agreement were $12,059,000 and at January 1,
2000, the amount was $3,630,000. The Company was in default of one financial
covenant at December 30, 2000 and is in default of certain other terms of the
agreement in 2001. As a result, this loan has been classified as a current
obligation.

BHC has an agreement with a bank which provides for (i) a ten-year mortgage on
real property in the amount of 500,000 British pounds ($745,000 at the year-end
exchange rate) with an outstanding balance at December 30, 2000 of $661,000,
(ii) a five-year loan collateralized by machinery and equipment in the amount of
500,000 British pounds with an outstanding balance at December 30, 2000 of
$531,000, and (iii) an "Overdraft" credit line allowing borrowings in British
pounds, euros or U.S. dollars up to the equivalent of 2,500,000 British pounds
($3,725,000 at the year-end exchange rate) with an outstanding balance at
December 30, 2000 of $3,305,000. On February 28, 2001, BHC renewed the credit
line under the same terms except for the borrowing limit, which was raised to
3,000,000 British pounds ($4,361,000 at the exchange rate of February 28, 2001).

With the exception of the five-year loan collateralized by plant and machinery
which has an interest rate of 5.73%,  interest is charged at variable rates
based upon the bank base rate. The ten-year mortgage agreement includes certain
financial covenants.  At December 30, 2000, BHC was in violation of two
covenants regarding interest coverage and net worth. On March 14, 2001, the
lender waived its right to accelerate payments on this loan with respect to the
violation as of December 30, 2000 and the Company expects to comply with the
terms of this agreement in 2001.

BHC has an agreement with another bank which provides for a five-year loan at an
interest rate of 8.0% collateralized by machinery and equipment equivalent to
the amount of 1,200,000 British pounds ($1,788,000 at the year-end exchange
rate) with an outstanding balance at December 30, 2000 of $1,175,000.

Other long-term debt of the Company consists of an Industrial Revenue Bond
maturing on July 1, 2002, with an annual interest rate of 7.42% and monthly
payments of principal and interest. The outstanding balance at fiscal year-end
2000 was $0.8 million versus a balance at year-end 1999 of $1.3 million.
Although the Company was in compliance with the terms of this bond at December
30, 2000, the Company was in payment default on these bonds in 2001. As a result
of this default, the bondholders have the right to accelerate payment of the
outstanding balance due.

The Company has a term line of credit agreement with an equipment financing
company in the amount of $9,000,000, collateralized by certain equipment.
Principal payments due under that note in 2000 were $1,500,000. At December 30,
2000, borrowings outstanding under this agreement were $6,250,000 at an interest
rate of 8.50% and maturing in the year 2005; and at January 1, 2000, $7,750,000

                                       35
<PAGE>

at an interest rate of 7.80%. The Company was in payment default of two
financial covenants on December 30, 2000. Because of these violations and since
the Company is in payment default of certain terms of this agreement in 2001,
this loan has been classified as a current obligation.

The Company also has two notes payable to each of the original shareholders of
CUSA in the amounts of $1.1 million and $0.3 million, accruing interest at rates
of 5.22% and 5.32% per annum, respectively, and due April 4, 2001 and April 5,
2002, respectively. The notes are secured by 59% of the common shares
outstanding of Aerovox de Mexico The Company has not made its payment due April
4, 2001. The Company has reached an agreement in principle with the noteholders
to delay repayment of the notes. As part of this agreement in principle, the
interest rates on the notes would be increased by three percentage points and
the notes would be secured by 100% of the common shares outstanding of Aerovox
de Mexico. While this agreement in principle has been reached, there can be no
assurance that a definitive agreement will be reached with the noteholders.

Aerovox de Mexico has a note payable to CGE in the amount of $211,000, which
bears interest at 5.22% per annum, and matures on April 1, 2001. Aerovox de
Mexico also has a renewable bank loan with an outstanding balance at December
30, 2000 of $1,000,000 bearing interest at 9.30%, due on May 18, 2001.

On March 21, 2000, the Company entered into a fifteen-year financing agreement
with a bank and an investment company affiliated with the bank. Under the terms
of the agreement, the Company received $10.2 million of adjustable rate
financing collateralized by the Company's new facility in New Bedford,
Massachusetts, which includes real property and manufacturing equipment. The
Company entered into a staged interest rate swap in order to fix the interest
rate at 7.66% over fifteen years. As of December 30, 2000, all $10.2 million was
covered by the interest rate swap. Including all amortizable fees, the effective
interest rate is 9.26%. The agreement contains a financial covenant requiring
the Company to maintain a minimum debt service coverage ratio. The Company was
in default of this covenant at December 30, 2000. On November 13, 2000, the
lenders waived their rights to accelerate payment of this loan with respect to
the default through December 30, 2000. Since the Company is in default of
certain terms of this agreement in 2001, this loan has been classified as a
current obligation.

Total maturities of long-term debt over the next five years are:
<TABLE>
<CAPTION>
YEAR                                                       (in thousands)
-------------------------------------------------------------------------
<S>                                                          <C>
2001                                                            $35, 148
2002                                                               1,195
2003                                                                 588
2004                                                                 248
2005                                                                  60
Thereafter                                                           362
                                                                $ 37,601
========================================================================
</TABLE>

Note 6 - Sale of Business Unit:
On July 29, 1998, the Company sold its PFC business. The PFC unit manufactured
and sold equipment used to enhance the efficient use of power by large
industrial plants.  Proceeds from the sale were $2,000,000 resulting in a gain
of $949,000.

Note 7 - Other Accrued Expenses:
Other accrued expenses consist of the following at December 30, 2000 and January
1, 2000 (in thousands):

<TABLE>
<S>                                             <C>                         <C>
                                               2000                        1999
           --------------------------------------------------------------------
Warranty                                     $  790                      $  498
Duty                                            593                         579
Environmental cost and plant remediation         24                         150
Other                                         1,419                         863
                                             $2,826                      $2,090
          ---------------------------------------------------------------------
</TABLE>

                                       36
<PAGE>

Note 8 - Commitments and Contingencies:
The Company leases manufacturing space, equipment and software under various
non-cancelable operating leases. Rental expense amounted to $1,875,000 in 2000,
$1,480,000 in 1999 and $1,717,000 in 1998.  On December 30, 2000 future minimum
annual rental payments under all leases were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR
---------------------------------------------------------
<S>                                                 <C>
2001                                                 $882
2002                                                  821
2003                                                  644
2004                                                  587
2005                                                  104
Thereafter                                            248
</TABLE>

The Company leases, and in turn sublets, office space in North Dartmouth,
Massachusetts.  Since rental income from the sublease substantially offsets
rental expense under the lease, the future minimum annual rental payments above
exclude payments related to those offices.

The Company is self insured for workers' compensation benefits for some of its
employees. The amounts charged to expense for workers' compensation were
$469,000 in 2000,  $373,000 in 1999, and $359,000 in 1998, based upon reported
claims and estimates of claims incurred but not reported.

The Company is also self insured for a portion of health care costs not covered
by insurance for some of its U.S. employees. The Company is liable for claims up
to $150,000 per employee and aggregate claims up to a maximum of $5,000,000 for
2000. Costs accrued are based upon reported claims and estimates of claims
incurred but not reported. The amount charged to expense for health care costs,
which includes paid claims, individual and aggregate stop/loss coverage and
administrative fees, less employee contributions, was $1,847,000 in 2000,
$1,603,000 in 1999 and $1,816,000 in 1998.

Note 9 - Financial Instruments:
The Company operates internationally with manufacturing facilities, customers,
and vendors in several countries outside of the United States. The Company may
reduce its exposure to fluctuations in foreign exchange rates by creating
offsetting positions through the use of foreign currency forward contracts, a
type of derivative financial instrument. The Company does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives.

The Company held no foreign currency forward contracts as of December 30, 2000
and  January 1, 2000.

The fair value of the Company's other financial instruments, including cash,
accounts receivable and long-term debt approximates the carrying value due to
the nature and terms of the instruments.

Note 10 - Incentive and Other Plans:
1989 and 1999 Stock Incentive Plan
The 1989 and 1999 Stock Incentive Plans ("Plans") permit the granting of a
variety of stock and stock-based awards, including stock options, rights to
receive cash or shares for increases in the value of the Company's common stock,
the award of restricted and unrestricted shares, rights to receive cash or
shares on a deferred basis or based on performance, cash payments sufficient to
offset the Federal ordinary income taxes under the Plans, loans to participants
in connection with awards and other common stock-based awards, including the
sale or award of convertible securities that meet the requirements of the Plans.
The Plans also provide that option holders may surrender outstanding options in
exchange for a cash payment during the sixty-day period following a change in
control as defined in the Plans.

                                       37
<PAGE>

The 1989 Stock Incentive Plan expired in April 1999. The 1999 Stock Incentive
Plan ("1999 Plan") was approved by the Company's shareholders in May 1999.  A
total of 500,000 shares of common stock have been reserved and may be issued
under the 1999 Plan to full or part-time officers and other key employees of the
Company and its subsidiaries. The Plans limit the terms of awards to ten years
and prohibit the granting of awards more than ten years after the effective date
of the Plans. The Plans permit the granting of non-transferable stock options
that qualify as incentive stock options ("ISOs") for United States Federal
income tax purposes and options that do not so qualify. The exercise price of
each option may not be less than 100% of the fair market value, or 110% in the
case of a person holding 10% or more of the outstanding voting power of all
classes of stock of the Company, on the date of grant in the case of ISOs and
not less than 50% of the fair market value in the case of non-qualified options.
The term of each option is fixed by the board of directors but may not exceed
ten years from the date of grant (five years in the case of a 10% shareholder)
with respect to ISOs and ten years and a day with respect to non-qualified
options.

In the event of termination of employment by reason of retirement, disability or
death, an option may be exercised (to the extent it was then exercisable) for a
period of three years. In the event of termination for other reasons, an option
may be exercised (to the extent it was then exercisable) for three months.

Each option becomes exercisable at the rate of 20% per year beginning on the
first anniversary of the date of grant and expires ten years from the date of
grant. Information for fiscal years 2000, 1999, and 1998, with respect to the
Plans, is as follows:

<TABLE>
<S>                       <C>                   <C>             <C>             <C>           <C>            <C>
                                    2000                            1999                           1998
STOCK INCENTIVE PLANS                                                        WEIGHTED                       WEIGHTED
                                           WEIGHTED                          AVERAGE         SHARES         AVERAGE
                                            AVERAGE                          EXERCISE                       EXERCISE
                          SHARES        EXERCISE PRICE       SHARES           PRICE                          PRICE

Outstanding at beginning      540,500             $4.59          643,500          $4.92         471,000          $5.59
    of year
Granted                       141,000             $3.85          113,500          $2.79         239,000          $3.48
Exercised                     (16,200)            $3.58                -              -               -              -
Canceled                      (66,500)            $4.23         (216,500)         $4.62         (66,500)         $4.55
                        ----------------------------------------------------------------------------------------------
Outstanding at end            598,800             $4.48          540,500          $4.59         643,500          $4.91
 of year
                        ==============================================================================================
Options exercisable           268,900             $5.42          243,000          $5.65         265,300          $5.50
  at end of year
Options available of          365,000                            495,000                        117,000
  future grant
                        ==============================================================================================
</TABLE>

The following table summarizes information about stock options outstanding at
December 30, 2000:

<TABLE>
<CAPTION>
STOCK INCENTIVE PLANS          OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE

                            NUMBER             WEIGHTED         WEIGHTED           NUMBER            WEIGHTED
EXERCISE PRICE         OUTSTANDING AT     AVERAGE REMAINING     AVERAGE        EXERCISABLE AT        AVERAGE
    RANGE             DECEMBER 30, 2000   CONTRACTUAL LIFE    EXERCISE PRICE   DECEMBER 30, 2000   EXERCISE PRICE

<S>                    <C>                <C>                  <C>              <C>                <C>
$2.00 - $2.50               5,000                  8.9            $2.44                1,000            $2.44
$2.51 - $3.00              88,200                  8.4            $2.80               15,000            $2.81
$3.01 - $4.50             358,600                  7.3            $3.79              121,400            $3.72
$4.51 - $6.75              77,500                  4.2            $6.19               66,000            $6.18
$6.76 - $9.00              69,500                  3.9            $8.42               65,500            $8.46

--------------------------------------------------------------------------------------------------------------
$2.00 - $9.00             598,800                  6.7            $4.48              268,900            $5.42
                   ============================================================================================
</TABLE>

                                       38
<PAGE>

NON-STATUTORY STOCK OPTION AWARD AGREEMENT
On September 1, 1996, an officer of the Company was awarded options to purchase
50,000 shares of Aerovox common stock, bearing an exercise price of $6.00 per
share.  The options are exercisable at the rate of 20% per year and expire ten
years from the date of grant.  On December 30, 2000 options for 40,000 shares
were exercisable under this agreement.

1989 AND 1999 STOCK OPTIONS PLAN FOR DIRECTORS
The 1989 Stock Option Plan for Directors expired in April 1999. The 1999 Stock
Option Plan for Directors (the "1999 Directors Plan")  was approved by the
Company's shareholders in May 1999. The 1999 Directors Plan reserved 25,000
shares of common stock for the granting of options to purchase stock at 100% of
the fair market value on the date of grant. Directors who are not employees of
the Company are eligible under the Directors Plan. Each newly elected director
will be awarded options to purchase 2,500 shares of common stock on the date of
election. Following the initial grant, each person who is an eligible director
on the day of each annual meeting of shareholders of the Company will receive
options to purchase 1,000 shares or 250 for each quarter of service if less than
one year elapses between the initial grant and an annual grant.

Options expire ten years from the grant date and become exercisable on the first
anniversary of the grant date. No options may be awarded under the 1999
Directors Plan after April 2009. In the event of termination by retirement, an
option may be exercised for a period of three years, or until expiration, if
earlier; or for one year after death in the event an optionee dies during the
final year of such exercise period or until the expiration of the stated term of
the option.  In the event of termination by reason of death, an option may be
exercised (to the extent it was then exercisable) for a period of three years.
In the event of termination for other reasons, an option may be exercised (to
the extent it was then exercisable) for three months.

Information for fiscal years 2000, 1999, and 1998, with respect to the Directors
Plans, is as follows:

<TABLE>
<S>                  <C>               <C>             <C>              <C>             <C>            <C>
                                                 2000                             1999                         1998
STOCK OPTION PLANS
  FOR DIRECTORS                                    WEIGHTED                         WEIGHTED                      WEIGHTED
                                                    AVERAGE                          AVERAGE                       AVERAGE
                                                   EXERCISE                         EXERCISE                      EXERCISE
                                  SHARES             PRICE          SHARES            PRICE         SHARES          PRICE

Outstanding at beginning            48,375            $5.72          49,875            $5.70         43,875         $6.00
  of year
Granted                              5,000            $3.95           6,000            $2.50          6,000         $3.50
Exercised                                -                -               -                -              -             -
Canceled                            (6,125)           $7.14          (7,500)           $3.00              -             -
                        --------------------------------------------------------------------------------------------------
Outstanding at end                  47,250            $5.35          48,375            $5.72         49,875         $5.70
 of year
                        =================================================================================================
Options exercisable at              42,250            $5.52          42,375            $6.18         43,875         $6.00
  year-end
Options available                   14,000                           19,000                          18,292
 for future grant
                        ==================================================================================================
</TABLE>

The following table summarizes information about stock options outstanding at
December 30, 2000:
<TABLE>
<CAPTION>
STOCK OPTION                        OPTIONS OUTSTANDING                               OPTIONS EXERCISABLE
 PLANS FOR
 DIRECTORS
  Exercise           NUMBER          WEIGHTED AVERAGE     WEIGHTED AVERAGE         NUMBER        WEIGHTED AVERAGE
 Price Range     OUTSTANDING AT         REMAINING             EXERCISE         EXERCISABLE AT        EXERCISE
               DECEMBER 30, 2000     CONTRACTUAL LIFE           PRICE         DECEMBER 30, 2000        PRICE

<S>            <C>                 <C>                   <C>                  <C>                <C>
$2.50 - $3.00               6,000                   8.3                $2.50              6,000              $2.50
$3.01 - $4.50              20,500                   7.4                $4.07             15,500              $4.11
$4.51 - $6.75               9,500                   4.0                $6.55              9,500              $6.55
$6.76 - $9.63              11,250                   3.8                $8.19             11,250              $8.19
$2.50 - $9.63              47,250                   6.0                $5.35             42,250              $5.52
             =====================================================================================================
</TABLE>

                                       39
<PAGE>

ACCOUNTING FOR STOCK OPTIONS
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123") describes a "fair value" method for calculating the
effect of options granted on the reported earnings of the Company. This method
uses certain historical data regarding outstanding options and the price history
of a company's shares in a mathematical model to determine the hypothetical
value of the option had it been sold in the open securities market rather than
granted to the plan participant. This is in contrast to the valuation method
prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), which
calculates the value at the date of grant as the difference, if any, between the
exercise price and the market price of the shares on that date.

Calculated in accordance with SFAS 123, the weighted average fair value at date
of grant for options granted in 2000, 1999 and 1998 was $2.69, $1.72 and $2.09
per option, respectively. The fair value of these options at the date of grant
was estimated using the Black-Scholes model with the following weighted average
assumptions for 2000, 1999 and 1998: risk-free interest rates as of the grant
dates from 5.00% to 5.59%; no dividend yields; a volatility factor of the
expected market price of the Company's common stock of  63.05%, 42.38% and
38.28%, respectively; and a weighted average expected life of the options of
7.60, 9.34 and 9.79 years, respectively.

As allowed by SFAS 123, the Company has elected the disclosure-only alternative,
and continues to calculate and report net income and net income per share
according to APB 25 for employee and director stock-based compensation. Had
compensation cost for the Company's 2000, 1999, and 1998 grants for stock-based
employee and director compensation plans been determined using the fair value
method as prescribed by SFAS 123, the Company's net income, and net income per
share for those years would approximate the pro forma amounts below (in
thousands except for per share data).

<TABLE>
<CAPTION>
                                DECEMBER 30, 2000              JANUARY 1, 2000              JANUARY 2, 1999
                            AS REPORTED     PRO FORMA     AS REPORTED     PRO FORMA     AS REPORTED    PRO FORMA
<S>                        <C>             <C>           <C>             <C>           <C>            <C>
Net income (loss)                $(7,200)      $(7,287)        $(3,471)      $(3,547)         $1,786       $1,673
Basic and diluted
 earnings (loss)
 per share                       $ (1.33)      $ (1.34)        $ (0.64)      $ (0.66)         $ 0.33       $ 0.31

</TABLE>

EMPLOYEE STOCK PURCHASE PLAN
In 1989, the Company established the Employee Stock Purchase Plan (the "ESPP")
under which 100,000 shares of common stock were reserved for  purchase by
employees.  The ESPP was amended in August 1999 to expand the common stock
reserved to 200,000 shares. The ESPP provides for the sale of common stock at
the average of the reported high and low sales prices of the stock on the last
business day of the accounting period each month. Common stock purchases are
paid through regular payroll deductions of up to 15% of eligible compensation
plus Company payments equal to 10% of the participant's payment plus an
additional 0.75% for each full year of continuous employment with the Company
since January 1, 1973, up to a maximum of 25% of the participant's payment. In
2000, 1999 and 1998, 20,858, 11,645 and 8,842 shares, respectively, were sold
under the ESPP.  There were 72,589 shares qualified for future sale on December
30, 2000.

CHANGE OF CONTROL SEVERANCE BENEFITS
The Company has severance agreements with certain key employees which provide
that if, within 24 months following a change in control (as defined in the
severance agreements), the Company were to terminate the employee's employment
other than for cause or the employee were to terminate his employment for
reasons specified in the agreements, the employee would receive amounts of up to
three times that person's annual base salary plus target bonus for such year
without deduction for any amounts previously paid under the bonus plan. The
agreements also provide for the immediate vesting of bonus awards, stock options
and similar awards, the immediate payment of deferred compensation amounts and

                                       40
<PAGE>

the continuation of certain benefits. The maximum contingent liability under
these agreements on December 30, 2000 was approximately $2,440,000.

PROFIT-SHARING SAVINGS PLAN
The Company maintains a Profit-Sharing Savings Plan  ("PSSP") which covers
substantially all domestic employees with at least six months of service. Under
the PSSP, each employee can elect to make a pre-tax contribution to the PSSP of
not less than 3% and not more than 15% of qualified compensation, of which up to
the first 8% is eligible for a Company match. The Company makes regular
contributions to the PSSP on behalf of each participating employee in an amount
which, together with any forfeitures during the PSSP year, is equal to each
employee's voluntary contribution up to a maximum aggregate contribution of 6%
of the pre-tax income of the Company, as defined, or 50% of the aggregate pre-
tax contributions of the participating employees or 50% of the first 8% of the
aggregate pre-tax contribution of the participating employees. The Company's
subsidiary in the United Kingdom maintains a plan covering its eligible
employees wherein Company contributions are made on the basis of the
individual's age and amount of contribution. Expense under these plans amounted
to $585,000 in 2000, $648,000 in 1999 and $639,000 in 1998.

DEFERRED SUPPLEMENTAL SAVINGS PLAN
The Company has a Deferred Supplemental Savings Plan under which certain key
employees may defer a percentage of their compensation equal to the difference
between pre-tax amounts of compensation eligible to be contributed to the PSSP
and amounts actually eligible for contributing to the PSSP under Section 401k of
the Revenue Code of the United States.  Under the Deferred Supplemental Savings
Plan, the Company will make a matching contribution in an amount equal to the
matching contribution which would have been made if such contribution had been
made under the PSSP. Expense related to the Deferred Supplemental Savings Plan
amounted to $52,000 in 2000, $52,000 in 1999 and $85,000 in 1998.

CONSULTING AGREEMENTS
The Company has Consulting, Non-Competition and Confidentiality Agreements with
two former executives. Under the Agreements, which expire on December 28, 2006,
the executives are paid an aggregate of $160,000 per year.

Note 11 - Preferred Stock:
The Company is authorized to issue up to 5,000,000 shares of preferred stock
without further stockholder approval in such series and with such preferences,
terms and other provisions as may be designated by the board of directors.

On August 16, 1989, the board of directors voted to create a series of 55,000
shares of preferred stock, par value $0.01 per share, designated as Series A
Junior Participating Preferred Stock ("Series A Preferred"). Each Series A
Preferred share is entitled to receive a minimum preferential quarterly dividend
of $1.00 per share and an aggregate dividend of 100 times any dividend declared
per share of common stock. Each share of Series A Preferred is entitled to one
hundred votes and votes together as one class with the common stock. Upon
liquidation or dissolution of the Company, the holder of each share of Series A
Preferred is entitled to a liquidation payment of $100 per share plus an
aggregate payment of 100 times the payment made per share on the common stock.
The Series A Preferred shares are not redeemable and rank junior to all other
series of preferred stock of the Company.

In the event of any merger, consolidation or other transaction in which shares
of the Company's common stock are exchanged, each Series A Preferred share will
be entitled to receive 100 times the amount received per share of common stock.

On December 30, 2000, 55,000 shares of Series A Preferred were reserved for
issuance for stock purchase rights (see Note 12). No such rights have become
exercisable and no shares of Series A Preferred have been issued.

                                       41
<PAGE>

Note 12 - Preferred Share Purchase Rights:
On August 16, 1989, the board of directors approved a preferred share rights
plan (the "Rights Plan") pursuant to which one preferred share purchase right (a
"Right") was distributed for each share of outstanding common stock.  Each Right
entitles the holder to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock, $0.01 par value per share, at a
price of $16.00 per one one-hundredth of a Series A Preferred Share, subject to
adjustment.  On September 22, 1999, the board of directors approved a ten-year
extension of the Rights Plan.  The Rights, which do not have voting rights,
expire on December 1, 2009, unless redeemed earlier by the Company.

As amended by the board of directors on September 22, 1999, the Rights Plan will
become effective and Rights will become exercisable on the date (the "Shares
Acquisition Date") that a person or group of affiliated or associated persons
(an "Acquiring Person") acquires beneficial ownership of 20% or more of the
outstanding shares of the Company's common stock or following the commencement
of, or announcement of, an intention to make a tender offer or exchange offer
which would result in the beneficial ownership by a person or group of 20% or
more of the outstanding shares of the Company's common stock.

At any time on or prior to the Shares Acquisition Date, the Company may redeem
the Rights in whole, but not in part, at a price of $0.01 per Right.

In the event that the Company is acquired in a merger or other business
combination transaction or 30% or more of its consolidated assets or earnings
power are sold, the Rights Plan requires that proper provision be made so that
each holder of a Right will thereafter have the right to receive, upon the
exercise thereof at the then current exercise price of the Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value of two times the exercise price of the
Right. In the event that any person becomes an Acquiring Person, the holder of a
Right, other than Rights beneficially owned by the Acquiring Person (which would
thereafter be void), will have the right to receive upon exercise that number of
shares of common stock having a net value of two times the exercise price of the
Right.

At any time after the Shares Acquisition Date and prior to the acquisition by an
Acquiring Person of 50% or more of the outstanding shares of the Company's
common stock, the Company may exchange the Rights (other than Rights owned by
Acquiring Persons which have become void), in whole or in part, at an exchange
ratio of one share of common stock, or one one-hundredth of a Series A Preferred
Share (or of a share of a class or series of the Preferred Stock of the Company
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).


Note 13 - Segment Information:
The Company is engaged in the manufacture of capacitors and EMI filters.  The
Company is managed as a single business.  The Company adopted SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information" during the
fourth quarter of 1998.  SFAS 131 establishes standards for reporting
information about operating segments in annual financial statements and requires
selected information about operating segments in interim financial reports
issued to stockholders.  It also established standards for related disclosures
about products, services and geographic areas.

Information about the Company's operations by geographic area is as follows (in
thousands):

                                       42
<PAGE>

OPERATIONS BY GEOGRAPHIC AREA:
<TABLE>
<CAPTION>
                                      United              UNITED
                                      STATES             KINGDOM             MEXICO            ELIMINATIONS          CONSOLIDATED
----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 30, 2000
<S>                                   <C>                 <C>                 <C>                <C>                    <C>
Sales to unaffiliated customers       $68,111             $23,010             $20,570  $                -               $111,691
Transfer between geographic areas       6,536               1,114               4,773               (12,423)                   -
Total sales                           $74,647             $24,124             $25,343              $(12,423)            $111,691
                             ======================================================================================================
Operating profit (loss)               $(5,581)            $   739             $ 1,223              $    214             $ (3,405)
Interest expense                                                                                                          (2,391)
Other income                                                                                                                 182
                             ------------------------------------------------------------------------------------------------------
Loss before income taxes                                                                                                  (5,614)
Identifiable assets                   $58,954             $14,624             $11,904  $                  -             $ 85,482
                             ======================================================================================================
YEAR ENDED JANUARY 1, 2000
Sales to unaffiliated customers       $76,238             $21,493             $12,707  $                  -             $110,438
Transfer between geographic areas       3,270                   -               2,610                (5,880)                   -
Total sales                           $79,508             $21,493             $15,317                (5,880)            $110,438
                             ======================================================================================================
Operating profit (loss)               $(1,101)            $(1,366)            $   300              $   (106)            $ (2,273)
Interest expense                                                                                                          (1,735)
Other income                                                                                                                 311
                             ------------------------------------------------------------------------------------------------------
Loss before income taxes                                                                                                  (3,697)
                             ======================================================================================================
Identifiable assets                   $45,321             $13,133             $12,071              $     (5)            $ 70,520
                             ======================================================================================================
YEAR ENDED JANUARY 2, 1999
Sales to unaffiliated customers       $89,348             $26,465             $   381   $               -               $116,194
Transfer between geographic areas       3,981                   -               7,073               (11,054)                   -
Total sales                           $93,329             $26,465             $ 7,454              $(11,054)            $116,194
                             ======================================================================================================
Operating profit                      $   872             $ 1,474             $   302  $                 -              $  2,648
Interest expense                                                                                                          (1,530)
Other income                                                                                                               1,520
                             ------------------------------------------------------------------------------------------------------
Income before income taxes                                                                                              $  2,638
Identifiable assets                   $60,166             $16,569             $ 1,806              $ (7,970)            $ 70,571
                             ======================================================================================================
</TABLE>

Transfers between geographic areas are accounted for at cost plus 15% in 2000,
1999, and 1998, except for transfers of etched and formed foil in all years
which were accounted for at prices intended to approximate sales to unrelated
third parties.  Operating profit (loss) is total sales less operating expenses
which in 2000 included a special provision for relocation costs, in 1999
included a special provision for restructuring costs and in 1998 included a
special gain on the sale of certain assets related to a product line.
Identifiable assets are those assets of the Company that are identified with the
operations in each geographic area.


                                       43
<PAGE>

NOTE 14 - PROVISION FOR INCOME TAXES:
The provision for income taxes consists of (in thousands):

<TABLE>
<CAPTION>
                                                               DEC. 30, 2000             JAN. 1, 2000            JAN. 2, 1999
---------------------------------------------------------------------------------------------------------------------------------
Current:
<S>                                                       <C>                       <C>                     <C>
Federal                                                                   $     -                 $   259                   $(315)
State                                                                           -                      25                       -
Foreign                                                                       323                    (141)                    352
                                                        -------------------------------------------------------------------------
Total Current                                                                 323                     143                      37
DEFERRED:
Federal                                                                         -                       -                     691
State                                                                           -                       -                     124
Foreign                                                                     1,263                    (369)                      -
Total deferred taxes                                                        1,263                    (369)                    815
                                                        -------------------------------------------------------------------------
Provision for (benefit from) income taxes                                 $ 1,586                 $ (226)                   $ 852
                                                        =========================================================================
Deferred income taxes arise from:
       Environmental reserve                                              $     2                 $ (114)                   $ 350
  Accelerated depreciation                                                   (220)                 (1,028)                   (355)
  Net operating losses                                                     (3,967)                    951                      42
  Inventory valuation                                                          23                    (459)                    (25)
  Allowance for doubtful accounts                                              27                       1                       4
  Compensation related costs                                                   13                      82                     162
  Warranty reserve                                                              -                      47                      74
  Restructuring reserve                                                     1,774                  (1,774)                      -
  Other                                                                      (222)                     60                     509
  Tax credits                                                                  63                     615                     133
  Foreign operations, primarily due to basis
   differences in inventory and fixed assets                                1,263                    (369)                      -

  Valuation allowance                                                       2,507                   1,619                     (79)
                                                                          $ 1,263                 $  (369)                  $ 815
                                                        =========================================================================


INCOME TAXES ARE RECONCILED TO THE UNITED STATES
 STATUTORY CORPORATE TAX RATE AS FOLLOWS:
  United States corporate tax at statutory rate                           $(1,833)                $(1,256)                  $ 897
  Increase (decrease) arising from:
  State taxes                                                                (382)                   (220)                    124
  Foreign taxes                                                             1,355                    (509)                   (193)
  Other                                                                      (532)                    140                     103
  Change in valuation allowance                                             2,978                   1,619                     (79)
                                                        -------------------------------------------------------------------------
                                                                          $ 1,586                 $ (226)                   $ 852
                                                        =========================================================================
</TABLE>

Deferred U.S. income taxes have not been provided on basis differences related
to investments in certain foreign subsidiaries and affiliates. These basis
differences consist primarily of undistributed earnings considered permanently
invested in the business.  Determination of the deferred income tax liability on
these unremitted earnings is not practicable since such liability, if any, is
dependent on circumstances existing if and when remittance occurs.

The components of the Company's deferred tax assets and liabilities as of
December 30, 2000 and
January 1, 2000 are as follows (in thousands):

                                       44
<PAGE>

<TABLE>
<CAPTION>
                                                         DECEMBER 30, 2000                    JANUARY 1, 2000
-------------------------------------------------------------------------------------------------------------------
                                                     Assets          LIABILITIES         ASSETS         LIABILITIES
<S>                                                  <C>             <C>                 <C>            <C>
Deferred Taxes:
Net operating loss carryforwards                       $ 6,459                 -          $ 2,020                 -
Compensation related cost                                  361                 -              472                 -
Allowance for doubtful accounts                            145                 -              172                 -
Depreciation                                                 -             3,838                -             4,099
Environmental reserve                                    2,663                 -            2,665                 -
Restructuring reserve                                        -                 -            1,775                 -
Inventory reserves                                         592                 -              739                 -
Warranty reserves                                          160                 -              160                 -
Tax credit carryforwards                                   420                 -              483                 -
Valuation allowance                                     (7,402)                -           (4,894)                -
Basis differences in foreign inventory                       -             1,436                -                 -
Other                                                      106                 -                -                 -
Total                                                  $ 3,504            $5,274          $ 3,592            $4,099
                                            =======================================================================
</TABLE>

Due to the uncertainty surrounding the realization of favorable tax attributes
in future tax returns related to the write-down of impaired assets and other
restructuring costs in the United States, the increase in deferred tax assets
has been fully offset by a valuation allowance.  The change in valuation
allowance is due to the increase in net operating loss carryforwards.  At
December 30, 2000, the Company had a net operating loss carryforward of
approximately $14,930,000 for U.S. federal purposes, which begins to expire in
2007. At December 30, 2000, the Company also had $420,000 of foreign and other
tax credits which expire from 2001 to 2019.

Note 15 - Environmental Matters:
The Company, until September 2000, manufactured film capacitors and maintained
its corporate offices in a building located in New Bedford, Massachusetts which
had been occupied by the Company and predecessor organizations also engaged in
the manufacture of capacitors since 1938.  In June 1997, the EPA conducted
preliminary tests within the building that revealed the presence of PCBs on
surfaces within the plant.  Subsequent engineering tests by independent
consultants retained by the Company confirmed the presence of residual PCBs
throughout the plant, which resulted from their use prior to 1978.  While the
Company and its expert advisors consider the PCBs to represent no threat to the
health of the employees of the Company or the surrounding community, subsequent
engineering studies indicated that the cost to remove PCBs within the building
to the levels prescribed by the EPA and the Toxic Substances Control Act would
be prohibitive. Therefore, the Company decided, and informed the EPA, that it
would vacate the building, demolish it and dispose of all contaminated building
materials in a legally compliant manner.  Accordingly, a reserve was established
and charged to income as of December 27, 1997 in the amount of $7,233,000, which
the Company believes is adequate to dismantle and dispose of the building, clean
equipment located within it, and to pay for related engineering, legal and
professional services.  Of this amount, $6,614,000 remains accrued and has been
classified as a long-term liability at December 30, 2000. During 1998, the EPA
approved the Company's plan to dismantle and dispose of the building. In
December 1999, the Company reached a final agreement with the EPA regarding the
timing of the planned dismantling and disposal activity.  Under the settlement,
the Company agreed to relocate its New Bedford operations within 16 months of
the agreement, and to demolish the existing building and cap the site no later
than November 2011.

The settlement also requires the Company to fund a trust account to be used for
demolishing the building and capping the site. The first deposit into this
account, labeled "Restricted cash" on the balance sheet, was made in January
2000 for $750,000. Payments into the fund are scheduled for each calendar year
end beginning December 31, 2000, with additional variable contributions
scheduled for each March 15th per a formula based on earnings of the prior year.
The Company is obligated to complete the site work within nine months of the
date the trust fund reaches $4.8 million or 60% of the planned cost of the
demolition and capping work, but no later than January 21, 2011. The Company's
scheduled payment of $200,000 for December 31, 2000 was deferred with the EPA's
consent to June 30, 2001.

                                       45
<PAGE>

On February 9, 1990, the Company entered into the Settlement Agreement with the
United States and The Commonwealth of Massachusetts resolving litigation
commenced by the governments in the U.S. District Court for the District of
Massachusetts, on December 10, 1983 under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, commonly known as the
"Superfund" legislation. The litigation concerned the alleged disposal by
various defendants of PCBs in the Acushnet River and New Bedford Harbor. The
Settlement Agreement resolved all of the governments' claims against the Company
and Aerovox Industries, Inc. (a predecessor of the Company) arising out of the
contamination of the Acushnet River and New Bedford Harbor with PCBs, including
cleanup costs, study costs and damages to natural resources, now or hereafter
incurred, except that the Settlement Agreement provides that the governments may
seek damages from the Company and Aerovox Industries, Inc. for future liability
in the event that such future liability arises out of unknown conditions at the
site. The Company, based on information presently available, does not believe
that this matter will have any further material adverse effect on the Company's
financial condition.

Note 16 - 1999 Restructuring Costs:
In December 1999, the Company recorded charges of $5,676,000 related to the exit
costs from certain activities and asset impairments arising from the
consolidation and relocation of certain facilities.  The components of these
charges were as follows (in thousands):

<TABLE>
<CAPTION>
<S>                                                  <C>
      Impairment of property, plant and equipment    $4,723
      Write-off of certain inventory                    344
      Involuntary employee terminations                 609
                                                     ------
                                                     $5,676
</TABLE>

The impairments of property, plant and equipment were a result of the closure
and consolidation of plants in Mexico, the closure of foil processing operations
in the United Kingdom, the cessation of a North American product line and the
abandonment of manufacturing equipment resulting from the relocation of the
Company's corporate headquarters and manufacturing plant in New Bedford,
Massachusetts to a new facility.  These costs have been recorded as provisions
for restructuring costs in the Company's Consolidated Statements of Operations.

The write-off of certain inventory was a result of the Company's decision to
exit a capacitor product line in North America and the closure of foil
processing operations in the United Kingdom.  These costs have been recorded as
charges to cost of sales.

The involuntary employee terminations were a result of the closure and
consolidation of plants in Mexico and the closure of foil processing operations
in the United Kingdom.  As a result of these actions, 69 employees were
terminated, primarily from production, supervisory and manufacturing support
functions. The termination benefits related to these employees have been accrued
and charged to the provision for restructuring costs.  During fiscal 2000,
$344,000 was paid to terminated employees and $242,000 was reversed into income.

                                       46
<PAGE>

Note 17 - Foreign Operations:
Summarized financial information for the Company's foreign operations is as
follows (in thousands):

<TABLE>
<S>                                                       <C>                      <C>                      <C>
                                                         DECEMBER 30,            JANUARY 1,               JANUARY 2,
                                                            2000                     2000                    1999
--------------------------------------------------------------------------------------------------------------------
Current assets                                              $15,549                 $ 13,639                 $10,122
Non-current assets                                           12,676                   13,353                   7,826
                                          --------------------------------------------------------------------------
                                                            $28,225                 $ 26,992                 $17,948
                                          ==========================================================================
Current liabilities                                         $ 9,895                 $  8,488                 $ 5,808
Due to parent                                                 1,698                    1,788                     428
Deferred income taxes                                         1,718                      456                     824
Long-term debt                                                1,830                    2,253                   2,465
Stockholders' equity                                         13,084                   14,007                   8,423
                                          --------------------------------------------------------------------------
                                                            $28,225                 $ 26,992                 $17,948
                                          ==========================================================================
Net sales                                                   $43,580                 $ 34,200                 $26,846
                                          ==========================================================================
Net income (loss)                                           $ (388)                 $(1,188)                 $ 1,005
                                          ==========================================================================
</TABLE>

Note 18 - Summary of Quarterly Results of Operations
<TABLE>
<CAPTION>
(Unaudited)                                                                     QUARTER
(Amounts in thousands, except per share data)             First             SECOND           THIRD           FOURTH
---------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>             <C>              <C>
Year Ended December 30, 2000
  Net sales                                                  $30,225        $30,075          $25,770          $25,621
  Gross profit                                                 5,199          5,286            2,883            2,060
  Net income (loss)                                              448           (133)          (1,853)          (5,662)
  Earnings (loss) per share - basic                          $  0.08        $ (0.02)         $ (0.34)         $ (1.05)
  Earnings (loss) per share - diluted                        $  0.07        $ (0.02)         $ (0.34)         $ (1.05)
YEAR ENDED JANUARY 1, 2000
  Net sales                                                  $28,375        $30,637          $26,718          $24,708
  Gross profit                                                 4,973          6,111            4,777            3,954
  Net income (loss)                                              330            801              104           (4,706)
  Earnings (loss)  per share - basic and diluted             $  0.06        $  0.15          $  0.02          $ (0.87)
</TABLE>

                                       47
<PAGE>

REPORTS OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
and Stockholders of Aerovox Incorporated


Under date of February 23, 2001, except as to Notes 2 and 5, which are as of
April 6, 2001 we reported on the consolidated balance sheet of Aerovox
Incorporated as of December 30, 2000, and the related consolidated statement of
operations, stockholders' equity and cash flows of the year then ended, which is
included in the annual report on Form 10-K for the year ended December 31, 2000.
In connection with our audit of the aforementioned consolidated financial
statements, we also audited the related consolidated financial statement
schedule in the annual report on Form 10-K. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audit.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

The audit report on the consolidated financial statements of Aerovox
Incorporated referred to above contains an explanatory paragraph that states
that the Company's recurring losses and resultant defaults under the Company's
debt agreement raise substantial doubt about the entity's ability to continue as
a going concern.  The financial statement schedule included in the annual report
on Form 10-K does not include adjustments that might result from the outcome of
this uncertainty.


BY /S/  KPMG LLP
----------------

Boston, Massachusetts
February 23, 2001, except as to Notes 2 and 5, which are as of April 6, 2001



To the Board of Directors
and Stockholders of Aerovox Incorporated


Our report on the consolidated financial statements of Aerovox Incorporated has
been incorporated by reference in this Form 10-K from page 28 of the 1999 Annual
Report to Stockholders of Aerovox Incorporated.  In connection with our audit of
such financial statements, we have also audited the related financial statement
schedule listed in Item 14(b) of this Form 10-K. In addition, in our opinion,
the financial statement schedule referred to above, when considered in relation
to the basic financial statements as a whole, presents fairly, in all material
respects, the information required to be included therein.


BY /S/  PricewaterhouseCoopers LLP
----------------------------------

Boston, Massachusetts
February 14, 2000

                                       48
<PAGE>

                             AEROVOX INCORPORATED
                       VALUATION AND QUALIFYING ACCOUNTS
                            (AMOUNTS IN THOUSANDS)

SCHEDULE II
<TABLE>
<CAPTION>
                          Balance at                                                                                 Balance
                           Beginning        Charged to     Charged to       Deductions         Deductions            End of
    Description            of Period          Expense    Other Accounts     Describe(1)        Describe(2)           Period
<S>                      <C>                <C>          <C>                <C>                <C>                   <C>
                                  $511                -               -            $ 72                $62                $377
Year ended
December 30, 2000:
Allowance for doubtful
accounts receivable

Year ended
January 1, 2000:                  $606                -               -            $ 95                  -                $511
Allowance for doubtful
accounts receivable

Year ended
January 2, 1999:                  $617             $115               -            $126                  -                $606
Allowance for doubtful
accounts receivable
</TABLE>


(1)  Write-off of accounts receivable.
(2)  Adjustment to allowance for doubtful accounts.

                                       49
<PAGE>

Signatures

     Pursuant to the requirements of Section 13 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.

Aerovox Incorporated
(Registrant)


BY /S/ ROBERT D. ELLIOTT            BY /S/ F. RANDAL HUNT
------------------------            ----------------------
President and Chief Executive       Senior Vice President, Finance, and
Officer                             Chief Financial Officer
April 16, 2001                      April 16, 2001

     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.

Signatures

/S/ SHEREL D. HORSLEY           Chairman of the Board of      April 16, 2001
----------------------------    Directors
Sherel D. Horsley

/S/ JOHN F. BRENNAN             Director                      April 16, 2001
----------------------------
John F. Brennan

/S/ DENNIS HOROWITZ             Director                      April 16, 2001
----------------------------
Dennis Horowitz

/S/ WILLIAM G. LITTLE           Director                      April 16, 2001
----------------------------
William G. Little

/S/BENEDICT P. ROSEN            Director                      April 16, 2001
----------------------------
Benedict P. Rosen

/S/ ENRIQUE SANCHEZ ALDUNATE    Director                      April 16, 2001
----------------------------
Enrique Sanchez Aldunate

                                       50