TABLE OF CONTENTS




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|------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                                                                                             
|                                                                                                                    | Item 1. Business                                                                             
|                                                                                                                    | Item 2. Properties                                                                           
|                                                                                                                    | Item 3. Legal Proceedings                                                                    
|                                                                                                                    | Item 4. Submission of Matters to a Vote of Security-Holders                                  
|PART II                                                                                                            
|                                                                                                                    | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|                                                                                                                    | Item 6. Selected Financial Data                                                              
|                                                                                                                    | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                                                    | Item 7a. Quantitative and Qualitative Disclosures About Market Risk                          
|                                                                                                                    | Item 8. Financial Statements and Supplementary Data                                          
|                                                                                                                    | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|PART III                                                                                                           
|                                                                                                                    | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                                                                                    | Item 11. Executive Compensation                                                              
|                                                                                                                    | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                                                                                    | Item 13. Certain Relationships and Related Transactions                                      
|PART IV                                                                                                            
|                                                                                                                    | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES                                                                                                         
|                                                                                                                    | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES                                     
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS                                                                           
|COLE NATIONAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS                                              
|COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS                                   
|COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
|COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                         
|REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON THE FINANCIAL STATEMENT SCHEDULES                                      
|Schedule I                                                                                                         
|COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                           
|                                                                                                                    | EXHIBIT INDEX                                                                                
|EXHIBIT 24--POWER OF ATTORNEY                                                                                      



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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

|   |  |                                                                                                                                                
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|X  |  | Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended
February 3, 2001, 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 number 33-66342

COLE NATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)

|                                                                                        |  |                                                
|--------------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of incorporation or organization)                 |  | 34-1744334
(I.R.S. employer identification no.)
|                                                                                       
|5915 Landerbrook Drive, Mayfield Heights, Ohio
(Address of principal executive offices) |  | 44124
(Zip code)                               
|                                                                                       
|Registrants telephone number, including area code:                                     |  | (440) 449-4100                                 

Securities registered pursuant to Section 12 (b) of the Act: None

Securities registered pursuant to Section 12 (g) of the Act: None

The registrant meets the conditions set forth in General Instruction I(1)(a)
and (b) of Form 10-K and is therefore filing this form in the reduced
disclosure format.

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

All of the outstanding capital stock of the registrant is held by Cole
National Corporation.

As of March 28, 2001, 1,100 shares of the registrants common stock, $.01 par
value, were outstanding.

Documents incorporated by reference: None



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TABLE OF CONTENTS

|         |  |      |  |                                                                                       |  |  |    | 
|-------- |  | ---- |  | ------------------------------------------------------------------------------------- |  |  | -- | 
|Part I   |  | Page
|         |  |     
|        
|Item     |  | 1.   |  | Business                                                                              |  |  | 1  | 
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|        
|        
|        
|         |  | 2.   |  | Properties                                                                            |  |  | 3  | 
|        
|        
|        
|        
|         |  | 3.   |  | Legal Proceedings                                                                     |  |  | 4  | 
|        
|        
|        
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|         |  | 4.   |  | Submission of Matters to a Vote of Security Holders                                   |  |  | 4  | 
|        
|Part II 
|        
|        
|Item     |  | 5.   |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  |  | 4  | 
|        
|        
|        
|        
|         |  | 6.   |  | Selected Financial Data                                                               |  |  | 4  | 
|        
|        
|        
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|         |  | 7.   |  | Managements Discussion and Analysis
of Financial Condition and Results of Operations |  |  | 5  | 
|        
|        
|        
|        
|         |  | 7a.  |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |  | 10 | 
|        
|        
|        
|        
|         |  | 8.   |  | Financial Statements and Supplementary Data                                           |  |  | 10 | 
|        
|        
|        
|        
|         |  | 9.   |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure  |  |  | 10 | 
|        
|Part III
|        
|        
|Item     |  | 10.  |  | Directors and Executive Officers of the Registrant                                    |  |  | 10 | 
|        
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|        
|        
|         |  | 11.  |  | Executive Compensation                                                                |  |  | 10 | 
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|        
|        
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|         |  | 12.  |  | Security Ownership of Certain Beneficial Owners and Management                        |  |  | 10 | 
|        
|        
|        
|        
|         |  | 13.  |  | Certain Relationships and Related Transactions                                        |  |  | 10 | 
|        
|Part IV 
|        
|        
|Item     |  | 14.  |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  |  | 11 | 





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PART I

Item 1. Business

General

Cole National Group, Inc., a wholly owned subsidiary of Cole National
Corporation, was incorporated as a Delaware corporation in July 1993 as a
successor to companies that began approximately 60 years ago. Cole National
Group is a leading provider of vision care products and services, managed
vision care programs and personalized gifts with 2,813 retail locations in 50
states, Canada and the Caribbean. References herein to the Company include
Cole National Group, its direct and indirect subsidiaries, and its
predecessor companies. The Companys vision care products, services and
programs are offered through retail locations branded Pearle Vision, Sears
Optical, Target Optical and BJs Optical Department and through Cole
Managed Vision , collectively referred to herein as Cole Vision. Personalized
gifts are offered through retail locations, e-commerce and catalogs by Things
Remembered. The Company believes that, based on industry data, it is one of
the largest retail optical companies in the world and operates the only
nationwide chain of personalized gift stores. The Company differentiates
itself from other specialty retailers by providing value-added services at
the point of sale at all of its retail locations.

Cole Vision

Cole Vision contributed 74% of Cole National Groups net revenue in
fiscal 2000 with 2,029 company-owned and franchised retail locations
throughout the United States, Canada and the Caribbean as of February 3,
2001. The Cole Managed Vision programs provide vision care benefits to
participants through access to a network of company-owned, franchised and
third-party optical locations.

Cole Licensed Brands

Cole Licensed Brands operates principally under the Sears Optical,
Target Optical and BJs Optical Department names. As of February 3, 2001,
Cole Licensed Brands operated 1,164 retail locations in 47 states and Canada,
including 810 departments on the premises of Sears department stores, 104
departments in BJs Wholesale Club stores, 117 departments in Target stores,
and 133 freestanding stores operated under the name Sears Optical. Retail
locations are generally operated under a lease or license arrangement through
which the host store collects the sales receipts, retains an agreed upon
percentage of sales and remits the remainder on a weekly or monthly basis.

Locations are, in most cases, full-service retail eyecare stores
offering brand name and private label prescription eyeglasses, contact lenses
and accessories, with an on-premises doctor of optometry who performs
complete eye examinations and prescribes eyeglasses and contact lenses. Most
optical departments, which are typically 1,000 square feet in size, operate
with a doctor of optometry, a department manager, and a support staff of from
one to seven depending on store sales volume. The majority of the doctors of
optometry are independent, as is often required by state law, with the
remainder being employed. The independent doctors sublease space and
equipment from Cole Licensed Brands where permitted by law, or from the host,
and retain their examination fees.

Each of the United States retail locations is computer linked to six
centralized manufacturing laboratories, which grind, cut and fit lenses to
order and ship them to the stores. The Canadian retail locations have
manufacturing done at a centralized manufacturing laboratory located near
Toronto. Next day delivery is provided on most of the eyewear offered when
requested by customers. All of the frames and lenses used in its eyeglasses
are purchased from outside suppliers, both in the United States and several
foreign countries.

A variety of marketing and promotional efforts, primarily host
advertising, newspaper, direct mail, magazines and yellow pages are used to
build and maintain its customer base. Host advertising includes the placement
of promotional material within sales circulars or credit card billings sent
out by the host store to its customers.

Pearle

At February 3, 2001, Pearles operations consisted of 439 company-owned
and 426 franchised stores located in 44 states, Canada, and the Caribbean.
Most Pearle stores operate in either an Express or Mainline store format.
Express stores contain a full surfacing lab that can manufacture most glasses
in approximately one hour. Mainline stores can manufacture over 50% of
prescriptions on-site in approximately one hour. Other prescriptions are sent
to the central laboratory in Dallas. At February 3, 2001, 280 of the
company-owned stores and 121 of the franchised stores were Express, with the
balance being Mainline.

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The Express stores typically are located in high traffic freestanding,
strip centers and mall locations with most stores averaging 3,000 square
feet. The Express stores are usually staffed with two managers and a support
staff of four to eight associates. Mainline stores have an average size of
1,700 square feet and are also located in freestanding buildings, or in
smaller strip or regional centers. Mainline stores are usually staffed with
one manager and two to three associates. Most Pearle stores have a doctor of
optometry on site with approximately 80% leasing space from Pearle on an
independent basis and the remaining being direct employees of Pearle.

Pearles marketing strategy employs a wide range of media at both the
national and local levels. The franchised and company-owned stores each
contribute a percentage of revenues to Pearles marketing budget with a
significant amount of Pearles marketing expenditures devoted to television.
Pearles brand positioning of high quality eyecare products and services has
been reinforced by an advertising and promotions program, which includes
Pearles advertising slogans: Nobody Cares More for Eyes More Than Pearle,
The Doctor Is Inand IndividualEyes.

Pearle operates a central lab and distribution center in Dallas that
inventories and distributes a comprehensive product line, including frames,
eyeglass lenses, contact lenses, optical supplies and eyewear accessories to
company-owned and franchised locations.

Pearle has maintained a franchise program since 1980. Most of the
franchised stores are single franchise operations, with no franchisee
operating more than ten stores. Each franchisee is required to enter into a
franchise agreement requiring payment of an initial franchise fee. The term
of the typical franchise agreement is equal to the earlier of ten years or
the expiration or termination of the underlying base lease. Royalty and
advertising contributions typically are based on a percentage of the
franchisees gross revenues from the retail operation, excluding non-surgical
professional fees and third party revenues. The total monthly advertising
contribution is distributed between Pearles system-wide advertising fund and
the local co-op market advertising fund. Franchisees are generally eligible
to participate in Cole Visions managed vision care programs.

Cole Managed Vision

Cole Visions managed vision care programs provide comprehensive eyecare
benefits primarily marketed directly to large employers, HMOs and other
organizations. Its Vision One discount program gives plan sponsors the
opportunity to offer their members a group discount at locations within
Coles managed vision care network with minimal direct cost to the plan
sponsor. It also offers enhanced programs to plan sponsors to provide their
members with prepaid eye examinations, as well as pricing discounts or funded
materials benefits.

Cole Managed Visions panel of providers has 6,600 practitioners and includes
a network of company-owned retail locations, franchised locations, chains and
independents. Cole Managed Vision programs generated approximately 35% of
Cole Visions revenues in fiscal 2000.

Things Remembered

Things Remembered contributed 26% of the Companys net revenue in fiscal
2000. As of February 3, 2001, Things Remembered operated 784 stores and
kiosks generally located in large, enclosed shopping malls located in 46
states. Each location carries a wide assortment of engravable items and
provides while you shop personalization services for any occasion including
holiday, business and special occasion gift events. Engraving is offered for
items purchased at the store as well as for items purchased elsewhere.

Merchandise sold at Things Remembered stores consists of a broad
selection of moderately priced gift categories and items at prices generally
ranging from $15 to $150. The gift offering includes writing instruments,
clocks, music boxes, picture frames and albums, executive desk sets and
accessories, ID bracelets, glassware, lighters, keys and key rings, door
knockers and Christmas ornaments. Things Remembered features brand name
merchandise as well as higher margin private label merchandise. At some
locations computer-controlled embroidery equipment is utilized for the
personalization of merchandise, such as throws, sweaters, bathrobes, jackets,
baseball caps, towels and baby blankets. These softgoods are also available
in most of Things Remembereds other locations with personalization services
provided from a central fulfillment facility.

At February 3, 2001, Things Remembered locations consisted of 445 stores
and 339 kiosks. The typical store consists of about 1,300 square feet, while
kiosks, which are units generally located in the center of the common mall
area, are typically 200 square feet in size.

Things Remembered locations are usually operated by one or two employees
during non-peak periods and up to 15 employees during the peak Christmas
season. Locations typically employ a store manager on a full-time basis, an
assistant store manager on a full or part-time basis and the balance of
employees are part-time sales associates.

2



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Nearly all locations are equipped with computerized engravers and key
duplicating machines. Many stores also have equipment for etching glassware
items. All locations are equipped with point-of-sale terminals.

Most of Things Remembereds store merchandise is shipped through its
centralized warehouse and distribution facility located near Youngstown,
Ohio. The warehouse utilizes a computerized carousel system to automate the
process of locating merchandise needed to fill store orders. Systems and
support are also provided to handle e-commerce, catalog and direct mail
fulfillment.

Host Relationships

The Company believes it has developed excellent relationships with the
host stores in which Cole Licensed Brands operates. The Company has
maintained its relationships in the optical business with Sears for over 40
years. Although leases and licenses with major hosts are terminable upon
relatively short notice, Cole Licensed Brands has never had a lease
terminated other than in connection with a store closing, relocation or major
remodeling.

Purchasing

The merchandise, supplies and component parts required for the various
products sold by the Company are purchased from a large number of suppliers
and manufacturers and are generally readily available. In most cases, such
purchases are not made under long-term contracts. The Company believes that
the loss of any one supplier or manufacturer should not have a material
adverse effect on its operations.

Competition

The Company operates in highly competitive businesses. Cole Vision
competes with other optical companies, private ophthalmologists, optometrists
and opticians and HMOs and other managed vision care companies in a highly
fragmented marketplace on the basis of the patient service it provides, as
well as price and product quality. In addition, Pearle competes on the basis
of its highly recognized brand name and one-hour express service. The Company
believes that, based on industry data, Cole Vision is one of the largest
optical retail companies in the world. Although Things Remembered operates
the only nation-wide chain of gift stores offering while you shop gift
engraving, key duplicating, glass etching and monogramming, as well as
related merchandise, it competes with many other retailers that sell gift
items. Things Remembered competes with such other retailers primarily on the
basis of the value-added point of sale services, as well as price and product
quality. Some competitors have greater financial resources than the Company.

Employees

As of February 3, 2001, the Company and its subsidiaries had
approximately 9,500 full-time and 4,300 part-time employees. During October,
November and December, the Company employs additional full- and part-time
employees. In fiscal 2000, approximately 4,000 additional employees were
employed during such period, with the total number of employees peaking at
nearly 18,000. Approximately 140 employees at certain Pearle locations are
represented by labor unions. The Company considers its present labor
relations to be satisfactory.

Item 2. Properties

The Company leases its executive offices in Mayfield Heights, Ohio.

On January 19, 2001, the Company completed a third party sale and
leaseback of its office facility in Twinsburg, Ohio, which comprises
approximately 175,000 square feet of space. The lease expires in 2019 and
includes two options to renew for ten-year terms. Cole Visions home office
functions moved to this facility in 1998.

All Cole Licensed Brands retail locations are leased or operated under a
license with the host store, and none of the individual retail locations is
material to operations. Leases for departments operated in Sears stores and
freestanding stores operated under the name Sears Optical are generally for
terms of 90 days and five years, respectively.

Cole Licensed Brands leases six optical laboratories, located in
Columbus, Ohio; Knoxville, Tennessee (two labs); Memphis, Tennessee; Salt
Lake City, Utah; and Richmond, Virginia, pursuant to leases expiring
(including renewal options) in between 2001 and 2017. A three year extension
of the lease expiring in 2001 was recently negotiated.

Pearle leases most of their retail stores under noncancelable operating
leases with terms generally ranging from five to ten years and which
generally contain renewal options for additional periods. Pearle is the
principal lessee on a majority of stores operated by franchisees who sublease
the facilities from Pearle.

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Pearle owns its Dallas Support Center, which comprises approximately
129,000 square feet of laboratory and distribution facilities. An adjoining
office facility no longer used for operations was sold in April 2001. Pearle
also owns a small headquarters and laboratory in Puerto Rico.

Cole Vision also leases a home office, an optical laboratory and a
distribution facility, near Toronto, Ontario for its Canadian operations
pursuant to leases expiring in 2004.

Leases for Things Remembered stores and kiosks are generally for terms
of ten and five years, respectively. In 1999, Things Remembereds home office
functions moved into a leased facility in Highland Heights, Ohio. In December
1998, Things Remembered completed a third party sale and leaseback of its
210,000 square foot warehouse and distribution center located near
Youngstown, Ohio. The lease expires in 2013 and includes three options to
renew for five-year terms.

Item 3. Legal Proceedings

From time to time during the ordinary course of business, the Company is
threatened with, or may become a party to a variety of legal actions and
other proceedings incidental to its business.

Item 4. Submission of Matters to a Vote of Security-Holders

Information required by this item has been omitted pursuant to General
Instruction I of Form 10-K.

PART II

Item 5. Market for Registrants Common Equity and Related Stockholder Matters

The Registrant is a wholly owned subsidiary of Cole National Corporation
and has no equity securities that trade.

The covenants in certain debt instruments to which the Company and
certain of its subsidiaries are parties restrict the ability of the Company
and such subsidiaries to make distributions to Cole National Corporation
orthe Company, respectively. A credit facility to which the Company and its
subsidiaries are parties permits payment of dividends by the Companys
subsidiaries to the Company annually of up to $8.0 million plus 0.25% of the
net annual sales of the Companys subsidiaries to meet expenses of the
Company or Cole National Corporation, together with amounts necessary to pay
principal and interest on the Companys 8-5/8% Senior Subordinated Notes due
2007 and 9-7/8% Senior Subordinated Notes due 2006 and to meet tax
obligations. In addition, dividends of up to $20.0 million are permitted to
repurchase the 8-5/8% Notes and/or 9-7/8% Notes.

So long as no default or event of default has occurred under the
indentures relating to the 8-5/8% Notes and/or the 9-7/8% Notes and the
Company has met a specified fixed charge coverage ratio test, payments of
dividends to Cole National Corporation of amounts contributed by Cole
National Corporation to the equity of the Company subsequent to September 30,
1993, plus up to one-half of the consolidated net income of the Company since
October 31, 1993 are permitted. No dividends were paid during 2000, 1999 or
1998.

Item 6. Selected Financial Data

Information required by this item has been omitted pursuant to General
Instruction I of Form 10-K.

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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations

Certain information required by this item has been omitted pursuant to
General Instruction I of Form 10-K.

Fiscal years end on the Saturday closest to January 31 and are
identified according to the calendar year in which they begin. For example,
the fiscal year ended February 3, 2001 is referred to as fiscal 2000.
Fiscal 2000 consisted of a 53-week period, fiscal 1999 and fiscal 1998 each
consisted of 52-week periods.

The Company has two reportable segments: Cole Vision, which accounted
for 74% of total revenue in fiscal 2000, and Things Remembered, which
accounted for 26% of total revenue in fiscal 2000. Most of Cole Visions
revenue represents sales of prescription eyewear, accessories and services
through its Cole Licensed Brands and Pearle retail locations. Cole Visions
revenue also includes sales of merchandise to franchisees, royalties based on
sales, interest income on notes receivable and initial franchise fees from
franchisees and fees from managed vision care programs. Things Remembereds
revenue represents sales of engravable gift merchandise and personalization
and other services primarily through retail stores and kiosks. See Note 9 of
the Notes to Consolidated Financial Statements for further discussion of
reportable segments.

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Results of Operations

The following is a discussion of the results of continuing operations
for the three fiscal years ended February 3, 2001. This discussion should be
read in conjunction with the consolidated financial statements and notes
thereto included in Item 8 of this Form 10-K. The following table sets for
the certain operating information for each period (dollars in millions):

|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |       |         |   |      |          |      |          |        |      |       |   
|---------------------------------------------------- | --------------------------------- | ------------------- | ----- | ----------- | ------- | ------ | ----- | ----- | ------- | ---- | ----- | ----- | ------- | - | ---- | -------- | ---- | -------- | ------ | ---- | ----- | --
|                                                     |                                   |                     |       | Fiscal Year |         | Change
|                                                     |                                   |                     |       |             |         |       
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |       |         |   |      | 2000 vs. |      | 1999 vs.
|                                                     |                                   |                     |       | 2000        |         | 1999   |       | 1998  |         | 1999 |       | 1998 
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|Net revenue:                                        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cole Vision                       |                     | $     | 800.5       |         |        | $     | 779.0 |         |      | $     | 803.6 |         |   |      | 2.8      | %    |          |        | (3.1 | )%   
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Things Remembered                 |                     |       | 275.9       |         |        |       | 258.6 |         |      |       | 241.9 |         |   |      | 6.7      |      |          |        | 6.9  |      
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                   | Total net revenue   |       | $           | 1,076.4 |        |       | $     | 1,037.6 |      |       | $     | 1,045.5 |   |      |          | 3.7  | %        |        |      | (0.8  | )%
|                                                    
|                                                    
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|                                                    
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|                                                    
|                                                    
|Gross margin                                         |                                   | $                   | 720.8 |             |         | $      | 674.9 |       |         | $    | 678.0 |       |         |   | 6.8  | %        |      |          | (0.5   | )%  
|                                                    
|                                                    
|                                                    
|                                                    
|Operating expenses                                   |                                   |                     | 649.3 |             |         |        | 601.8 |       |         |      | 584.9 |       |         |   | 7.9  |          |      |          | 2.9    |     
|                                                    
|                                                    
|                                                    
|                                                    
|Depreciation and amortization                        |                                   |                     | 37.4  |             |         |        | 38.5  |       |         |      | 32.8  |       |         |   | (2.9 | )        |      |          | 17.3   |     
|                                                    
|                                                    
|                                                    
|                                                    
|Restructuring and other unusual charges              |                                   |                     |      |             |         |        |      |       |         |      | 7.9   |       |         |   |     |          |      |          | (100.0 | )   
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                   | Operating income    |       | $           | 34.1    |        |       | $     | 34.6    |      |       | $     | 52.4    |   |      |          | (1.3 | )%       |        |      | (34.0 | )%
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                    
|                                                    
|                                                    
|                                                    
|Percentage of net revenue:                          
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gross margin                      |                     |       | 67.0        | %       |        |       | 65.0  | %       |      |       | 64.8  | %       |   |      | 2.0      |      |          |        | 0.2  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Operating expenses                |                     |       | 60.3        |         |        |       | 58.0  |         |      |       | 55.9  |         |   |      | 2.3      |      |          |        | 2.1  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Depreciation & amortization       |                     |       | 3.5         |         |        |       | 3.7   |         |      |       | 3.1   |         |   |      | (0.2     | )    |          |        | 0.6  |      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Restructuring and unusual charges |                     |       |            |         |        |       |      |         |      |       | 0.8   |         |   |      |         |      |          |        | (0.8 | )    
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                     |                                   | Operating income    |       |             | 3.2     | %      |       |       | 3.3     | %    |       |       | 5.0     | % |      |          | (0.1 | )        |        |      | (1.7  | ) 
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|Number of retail locations at the end of the period:
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cole Licensed Brands              |                     |       | 1,164       |         |        |       | 1,056 |         |      |       | 1,186 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Pearle company-owned              |                     |       | 439         |         |        |       | 454   |         |      |       | 471   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Pearle franchised                 |                     |       | 426         |         |        |       | 416   |         |      |       | 409   |        
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                     |                                   | Total Cole Vision   |       |             | 2,029   |        |       |       | 1,926   |      |       |       | 2,066   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Things Remembered                 |                     |       | 784         |         |        |       | 796   |         |      |       | 818   |        
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|                                                     |                                   | Total Cole National |       |             | 2,813   |        |       |       | 2,722   |      |       |       | 2,884   |  
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|Comparable store sales growth:                      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cole Licensed Brands (U.S.)       |                     |       | 3.7         | %       |        |       | (2.7  | )%      |      |       | 2.9   | %      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Pearle company-owned (U.S.)       |                     |       | 2.0         |         |        |       | (5.5  | )       |      |       | (1.5  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                   | Total Cole Vision   |       |             | 3.1     |        |       |       | (3.5    | )    |       |       | 1.6     |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Things Remembered                 |                     |       | 5.4         |         |        |       | 7.2   |         |      |       | 7.4   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                   | Total Cole National |       |             | 3.7     | %      |       |       | (0.8    | )%   |       |       | 3.1     | %
|                                                     |                                   |                     |       |             |         |        |       |       |         |      |       |      
|Pearle U. S. Franchise stores                        |                                   |                     | 3.3   | %           |         |        | 0.4   | %     |         |      | 3.0   | %    
|                                                    
|                                                    
|                                                    
|                                                    
|Pearle U. S. chain-wide                              |                                   |                     | 2.7   | %           |         |        | (2.4  | )%    |         |      | 0.9   | %    

6



---



Fiscal 2000 Compared to Fiscal 1999

The increase in net revenue for fiscal 2000 was primarily attributable
to increases in consolidated comparable store sales, the 53rd week
(approximately $18.5 million), revenue associated with the MetLife vision
care business acquired in October 1999 and Target Optical expansion. These
increases were partially offset by the closing of poor performing stores at
Pearle and Things Remembered and the closing of 150 optical departments at
Montgomery Ward in December 1999. See Note 2 of the Notes to Consolidated
Financial Statements for further discussion of the closing of the Montgomery
Ward departments.

At Cole Licensed Brands and Pearle company-owned stores, the comparable
store sales increases primarily reflected increases in the average selling
price. The number of transactions at Cole Licensed Brands was even with last
year, notwithstanding the closing of the Montgomery Ward departments. At
Pearle company-owned stores, the average transaction increase was partially
offset by a decrease in the number of transactions during the first half of
the year. At Things Remembered, the comparable store sales increase reflected
an increase in sales of new merchandise at higher average unit retails.

The gross margin dollar increase was attributable to the revenue
increase at Pearle and Things Remembered, the additional revenue associated
with the MetLife vision care business and an improvement in gross margin as a
percentage of net revenue. The improvement in the gross margin rate was
primarily the result of higher average selling prices in the optical
businesses. Other factors in the improvement were additional MetLife vision
care revenues, the resolution of problems experienced during 1999s
integration of new manufacturing and merchandise/inventory management systems
at Pearle and 1999s inventory write-off due to the closing of the Ward
Optical departments. At Cole Vision, the gross margin rate improved 2.5
percentage points in fiscal 2000 compared to fiscal 1999. The gross margin
rate at Things Remembered decreased 0.3 percentage points to last year
reflecting the impact of an aggressive merchandise clearance promotion in the
first quarter of fiscal 2000.

The operating expense increase for fiscal 2000 was due primarily to
increases in staffing for improved service levels in the optical businesses,
increases in expenses associated with the 53rd week (which will not recur in
fiscal 2001) and the Target Optical expansion (which will continue in fiscal
2001), increases in managed vision care costs (primarily associated with the
MetLife vision care business) and increases in incentive bonus expense due to
improved performance at Cole Vision. As a percentage of net revenue,
operating expenses lost leverage this year because payroll costs increased
2.0 percentage points compared to a year ago for the reasons discussed above.
A decline in comparable store sales at Pearle company-owned stores during the
first six months of fiscal 2000 and a $1.8 million first quarter 2000 charge
for severance costs recorded in connection with a personnel reduction at Cole
Vision also impacted the comparison

The decrease in depreciation and amortization for fiscal 2000 compared
to fiscal 1999 was primarily attributable to the severance charge in 1999 and
lower charges in 2000 than a year ago to recognize asset impairments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121.
These reductions were partially offset by additional amortization of systems
development costs this year related to the Pearle manufacturing and
merchandise/inventory management system implemented in the third quarter of
fiscal 1999 and by additional compensation amortization for restricted stock
awarded in January 2000.

Operating income in fiscal 2000 was slightly below fiscal 1999
reflecting improved operating results at both Cole Vision and Things
Remembered offset by increased Corporate expenses and the first quarter
severance costs. The operating income at Cole Vision improved despite
absorbing increased losses associated with the Target Optical start up and
store opening program.

Interest and other (income) expense increased compared to fiscal 1999
because of increased interest expense from seasonal borrowing and less income
from temporary cash investments.

The effective income tax rate was 69.8% in fiscal 2000 compared to 47.4%
in fiscal 1999. The rates reflect the significant impact of non-deductible
amortization of goodwill and unearned compensation in both years. A more
complete discussion of income taxes is included in Note 7 of the Notes to
Consolidated Financial Statements.

7



---



Fiscal 1999 Compared to Fiscal 1998

The softness in consolidated net revenue for fiscal 1999 was primarily
attributable to the decrease in consolidated comparable store sales at Cole
Vision. Sales at Cole Licensed Brands have been negatively impacted by a
competitive promotional environment. Licensed Brands response, which began
at the end of the second quarter, produced an improvement in the second half
sales trend as comparable store sales were nearly flat to last year. Sales
this year at Pearle have also been impacted by the competitive promotional
environment and Pearles focus, earlier in the year, on long-term,
brand-building in its advertising campaign, as well as operating and systems
integration issues that the Company is addressing. Pearle refocused its
marketing efforts to become more promotional beginning in the second quarter
of fiscal 1999. Pearle achieved some improvement in comparable store sales
trends during the fourth quarter. Pearles comparable store sales for the
fourth quarter of fiscal 1999 were a negative 3.0%, as compared to a negative
5.5% full-year comparable store sales. The sales decrease at Cole Vision
reflected a lower average selling price for spectacles and contact lenses due
primarily to more promotional pricing. At Things Remembered, the comparable
store sales increase reflected increased sales of additional personalization
and new merchandise at higher average unit retails, along with the benefits
from marketing directly to its existing customer base. The total number of
transactions at Things Remembered was slightly behind a year ago. During the
fiscal year, the Company (including franchised locations) opened a total of
115 new locations and closed 277 locations, including 150 optical departments
located in Montgomery Ward stores.

The gross margin dollar improvement in fiscal 1999 compared to fiscal
1998 was primarily attributable to increased revenue at Things Remembered and
inventory markdowns at Pearle in 1998, partially offset by lower revenue at
Cole Vision. Excluding the 1998 inventory markdowns at Pearle, gross margin
at Cole Vision declined 0.8 percentage points to 62.9% in fiscal 1999 and
consolidated gross margins were 65.0% and 65.4% in fiscal 1999 and fiscal
1998, respectively. The lower gross margin at Cole Vision was primarily due
to the impact of more promotional pricing and lower margins on contact
lenses. In addition, the integration of new manufacturing and
merchandise/inventory management systems with Pearles existing warehouse
management system resulted in manufacturing and distribution inefficiencies
that led to increased costs and lost sales in the third and fourth quarters
of fiscal 1999. Gross margin at Things Remembered improved 0.4 percentage
points to 71.4% in fiscal 1999, benefiting from increased sales of additional
personalization and higher margins from new products.

The unfavorable leverage in operating expenses for the fiscal year was
primarily attributable to a 1.0 percentage point increase in payroll costs, a
0.9 percentage point increase in managed vision care costs and a 0.2
percentage point increase in net advertising expenditures. The unfavorable
payroll leverage was primarily due to the comparable store sales decrease at
Cole Vision and staffing increases in managed vision care, partly offset by
payroll leverage gains on the sales increase at Things Remembered. The
increase in managed vision care expenses was primarily attributable to growth
in call and claims volumes associated with increases in sponsor-funded
programs. The unfavorable advertising leverage was due to increased
advertising at Cole Licensed Brands in response to the competitive pricing
environment, partly offset by reduced spending at Pearle. Depreciation and
amortization expense increases were attributable to increases in amortization
of systems development and software costs, plus certain charges to recognize
asset impairments.

The decrease in income from operations was primarily the result of the
decrease in net revenue and the increases in operating expenses and
depreciation and amortization. Interest and other income includes the
recognition of $6.0 million of income in fiscal 1998 from a nontaxable cash
settlement with the former owner of Pearle. Excluding the Pearle settlement,
net interest and other expense in fiscal 1999 decreased slightly from fiscal
1998.

Net interest expense and other income for fiscal 1999 of $26.7 million
increased $5.6 million compared to fiscal 1998. The increase was primarily
attributable to the recognition of $6.0 million of other income in the third
quarter of fiscal 1998 from cash received in the non-taxable settlement of
certain contingencies related to several claims against and indemnifications
from the former owner of Pearle. Excluding this settlement, net interest
expense decreased by $0.4 million, primarily due to increased interest
income.

The effective income tax rate was 47.4% in fiscal 1999 and 38.2% in
fiscal 1998. The income tax provision for fiscal 1998 includes $7.4 million
of income tax benefits related to the charges for restructuring and other
unusual items. The effective rate on income excluding these charges and the
$6.0 million settlement included in other income was 41.0% in fiscal 1998.
The effective income tax rates reflect the significant impact of
non-deductible amortization of goodwill in both years.

8



---



Restructuring, Business Integration and Other Unusual Charges

In 1998, the Company began implementation of a restructuring plan and
recorded a net pretax charge of $13.1 million related to restructuring of its
Pearle business along with other unusual charges. The net pretax charge
consisted of charges associated with the restructuring of $13.9 million, a
reversal of previously established restructuring accruals of $12.3 million
and other unusual charges totaling $11.5 million.

The restructuring charge of $13.9 million relates to changes made to the
Pearle operating model and structure of the home office organization.
Consultants conducted market research and helped develop and implement
changes to Pearles marketing message, merchandise offerings and
presentation, store locations, organizational structure and other operational
opportunities. In addition, home office facilities and personnel, including
Cole Managed Vision Care administration and systems were relocated and
consolidated into one central facility. The results of these efforts resulted
in charges for inventory writedowns related to products that will no longer
be carried, severance and hiring costs primarily related to home office
organizational changes, consolidation of the home office facilities,
including the write-off of fixed assets at the old facilities, consultant
fees and changing the Pearle brand message through signing, production and
other costs. The charge related to the inventory writedown of $5.2 million
was reflected in cost of sales in accordance with EITF No. 96-9.

As part of a revised plan, which was approved by the Board of Directors
in March 1999, it was determined that certain stores originally identified
for closure would either remain open or be closed at a lower cost than
originally estimated. The revised plan was to close 26 stores, of which nine
were identified in the original store closing plan, over the next 12 months
and remove surfacing equipment from full service labs of 226 stores over the
next six to eighteen months. As a result of the revised plan, the expected
cost of closure was $1.0 million, requiring a reversal of $12.3 million of
the previous accrual, originally established in 1996. The primary reasons for
the significant reduction in the accrual were the passage of time of not
closing stores earlier, many of the stores now will be closed at the end of
their lease terms, and the shift in strategy in that only surfacing equipment
would be removed from full-service stores as opposed to the original plan of
completely removing labs.

In fiscal 1999, the Company determined that it no longer planned to
remove any labs from Pearle stores. Since there were no costs accrued at
January 30, 1999 related to closing of any in-store labs, this revision had
no effect on the restructuring reserves in fiscal 1999.

For the restructuring charge recorded in 1998 approximately $5.8 million
represented non-cash charges and $8.0 million represented cash outlays
through January 29, 2000. At January 29, 2000 and February 3, 2001, there
were no balances remaining in the restructure reserves.

The unusual charges in fiscal 1998 related to the writeoff of $8.8
million associated with the abandonment of previously capitalized system
development costs (including $1.9 million of incurred costs that will be paid
in the first half of fiscal 1999) and $2.7 million primarily related to
restricted stock issued to two senior executive officers.

Refer to Note 3 of the Notes to Consolidated Financial Statements for
additional information regarding the restructuring, business integration and
other unusual items.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities (as amended by SFAS No. 137).
SFAS No. 133 must first be applied in the first quarter of fiscal years that
begin after June 15, 2000 (the first quarter of fiscal 2001 for the Company)
and in general requires that entities recognize all derivative financial
instruments as assets or liabilities, measured at fair value, and include in
earnings the changes in the fair value of such assets and liabilities in either
operations or comprehensive income (loss). The Company does not presently
utilize derivative instruments, either for hedging or other purposes, and
therefore it is expected that the adoption of the requirements of SFAS No. 133
will not impact the Companys financial statements.

In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial Statements. SAB 101 provides guidance on applying generally
accepted accounting principles to revenue recognition. The Company adopted
the provisions of this bulletin in fiscal 2000. The adoption did not impact
the Companys recognition of revenue in fiscal 2000.

9



---



Forward-Looking Information

The Companys management has stated that it expects its strong emphasis
on becoming better retailers to have an ongoing positive impact on the
Companys results in fiscal 2001, enabling the Company to continue the
earnings turnaround that began with fiscal fourth quarter 2000. While we
expect first quarter 2001 operating earnings to improve compared to the first
quarter last year, we do not expect the first quarters comparable store
sales to be as strong as in the fourth quarter 2000. During first quarter
2000, sales were stimulated by highly promotional activities at Pearle and
Things Remembered which were not repeated this year. Nevertheless,
management expects net income will more than double in fiscal 2001 from
fiscal 2000, even after taking into account the significant losses associated
with the Target expansion program and the absence of a 53rd week. Achieving
these results assumes, among other things, that the current economic
environment does not worsen.

Certain sections of this Form 10-K Report, including this Managements
Discussion and Analysis, contain forward-looking statements within the
meaning of the Private Securities Litigation Act of 1995. Actual results may
differ materially from those forecast due to a variety of factors that can
adversely affect operating results, liquidity and financial condition, such
as risks associated with the timing and achievement of improvements in the
operations of the optical business, the success of new store openings and
the rate at which new stores achieve profitability, the Companys ability to
select, stock and price merchandise attractive to customers, success of
systems development and integration, competition in the optical industry,
integration of acquired businesses, economic and weather factors affecting
consumer spending, operating factors affecting customer satisfaction,
including manufacturing quality of optical and engraved goods, the Companys
relationships with host stores and franchisees, the mix of goods sold,
pricing and other competitive factors, and the seasonality of the business.
Forward-looking statements are made based upon managements expectations and
beliefs concerning future events impacting Cole National Group. All
forward-looking statements involve risk and uncertainty.

Item 7a. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to market risk from changes in foreign currency
exchange rates, which could impact its results of operations and financial
condition. Foreign exchange risk arises from the Companys exposure in
fluctuations in foreign currency exchange rates because The Companys
reporting currency is the United States dollar. Management seeks to minimize
the exposure to foreign currency fluctuations through natural internal
offsets to the fullest extent possible.

Item 8. Financial Statements and Supplementary Data

Information required by this Item appears on pages F-1 through F-24 of
this Form 10-K and is incorporated herein by reference. Other financial
statements and schedules are filed herewith as Financial Statement
Schedules pursuant to Item 14.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Information required by this Item has been omitted pursuant to General
Instruction I of Form 10-K.

Item 11. Executive Compensation

Information required by this Item has been omitted pursuant to General
Instruction I of Form 10-K.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Information required by this Item has been omitted pursuant to General
Instruction I of Form 10-K.

Item 13. Certain Relationships and Related Transactions

Information required by this Item has been omitted pursuant to General
Instruction I of Form 10-K.

10



---



PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

|               |  |                                                                                                                                                                                                        
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)(1) and (2) |  | Financial Statements and Financial Statement Schedules                                                                                                                                                 
|              
|               |  | The financial statements and financial statement schedules filed
as part of this Form 10-K for Cole National Group and its
consolidated subsidiaries are located as set forth in the index on
page F-1.
|              
|(a)(3)         |  | Exhibits                                                                                                                                                                                               
|              
|               |  | See Exhibit Index on pages X-1 through X-3.                                                                                                                                                            
|              
|(b)            |  | Reports on Form 8-K                                                                                                                                                                                    
|              
|               |  | No reports on Form 8-K have been filed by the Registrant during the
quarter ended February 3, 2001.                                                                                                    

Supplemental information to be furnished with reports filed pursuant to
Section 15(d) of the Act by Registrants which have not registered securities
pursuant to Section 12 of the Act.

No annual report or proxy statement covering Cole National Groups last
fiscal year has been or will be circulated to security holders.

11



---



SIGNATURES

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

|            |  |                           |  |     |  |                                     
|----------- |  | ------------------------- |  | --- |  | ------------------------------------
|            |  | COLE NATIONAL GROUP, INC.
|           
|May 3, 2001 |  | By:                       |  | /s/ |  | William P. Lahiff, Jr.              
|            |  |                           | 
|            |  |                           |  |     |  | William P. Lahiff, Jr.              
|            |  |                           |  |     |  | Senior Vice President and Controller

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

|                                                   |  |                                                                                    |  |            
|-------------------------------------------------- |  | ---------------------------------------------------------------------------------- |  | -----------
|*
Jeffrey A. Cole                                  |  | Chairman and Chief Executive Officer
and Director (Principal Executive Officer)    |  | May 3, 2001
|                                                  
|*
Larry Pollock                                    |  | President and Chief Operating Officer
and Director                                 |  | May 3, 2001
|                                                  
|*
Thomas T.S. Kaung                                |  | Executive Vice President and
Chief Financial Officer
(Principal Financial Officer) |  | May 3, 2001
|                                                  
|/s/  William P. Lahiff, Jr.
William P. Lahiff, Jr. |  | Senior Vice President and Controller
(Principal Accounting Officer)                |  | May 3, 2001
|                                                  
|*
Timothy F. Finley                                |  | Director                                                                           |  | May 3, 2001
|                                                  
|*
Irwin N. Gold                                    |  | Director                                                                           |  | May 3, 2001
|                                                  
|*
Peter V. Handal                                  |  | Director                                                                           |  | May 3, 2001
|                                                  
|*
Charles A. Ratner                                |  | Director                                                                           |  | May 3, 2001
|                                                  
|*
Walter J. Salmon                                 |  | Director                                                                           |  | May 3, 2001

* The undersigned, by signing his name hereto, does sign and execute this
report on Form 10-K pursuant to the Powers of Attorney executed by the
above-named officers and directors of Cole National Group, Inc. and which are
being filed herewith with the Securities and Exchange Commission on behalf of
such officers and directors.

|                                                                     
|---------------------------------------------------------------------
|/s/William P. Lahiff, Jr.
  William P. Lahiff , Jr., Attorney-in-Fact

12



---






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES

|                                                                                                                                                                            |  |      |      | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                                                                            |  | Page
|                                                                                                                                                                            |  |     
|Report of Independent Public Accountants                                                                                                                                    |  |      | F-2  | 
|                                                                                                                                                                           
|Consolidated Balance Sheets as of February 3, 2001 and January 29, 2000                                                                                                     |  |      | F-3  | 
|                                                                                                                                                                           
|Consolidated Statements of Operations for the 53 weeks ended February 3, 2001
and 52 weeks ended January 29, 2000, and January 30, 1999                                     |  |      | F-4  | 
|                                                                                                                                                                           
|Consolidated Statements of Cash Flows for the 53 weeks ended February 3, 2001,
and 52 weeks ended January 29, 2000, and January 30, 1999                                    |  |      | F-5  | 
|                                                                                                                                                                           
|Consolidated Statements of Stockholders Equity and Comprehensive Income for
the 53 weeks ended February 3, 2001, and 52 weeks ended January 29, 2000,
and January 30, 1999 |  |      | F-6  | 
|                                                                                                                                                                           
|Notes to Consolidated Financial Statements                                                                                                                                  |  |      | F-7  | 
|                                                                                                                                                                           
|Financial Statement Schedules:                                                                                                                                             
|                                                                                                                                                                           
|Report of Independent Public Accountants on the Financial Statement Schedules                                                                                               |  |      | F-20 | 
|                                                                                                                                                                           
|Schedule I  Condensed Financial Information of Registrant                                                                                                                  |  |      | F-21 | 
|                                                                                                                                                                           
|Schedule II  Valuation and Qualifying Accounts                                                                                                                             |  |      | F-24 | 

All financial statement schedules not included have been omitted because they are not
applicable or because the required information is otherwise furnished.

F-1



---



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF COLE NATIONAL GROUP, INC.:

We have audited the accompanying consolidated balance sheets of Cole National
Group, Inc. (a Delaware corporation) and Subsidiaries as of February 3, 2001
and January 29, 2000, and the related consolidated statements of operations,
cash flows and stockholders equity and comprehensive income for each of the
three years in the period ended February 3, 2001. 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 in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide 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 Cole National Group, Inc. and
Subsidiaries as of February 3, 2001 and January 29, 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended February 3, 2001 in conformity with accounting principles generally
accepted in the United States.

ARTHUR ANDERSEN LLP

Cleveland, Ohio,
  March 26, 2001.

F-2



---



COLE NATIONAL GROUP, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |             |          |         |         | 
|------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------ | --------------------------------- | ------------------------------------------ | -------- | ----------- | ------- | ----------- | -------- | ------- | ------- | 
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          | February 3, |         | January 29,
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          | 2001        |         | 2000       
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|Assets
Current assets:                                                                                                   
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Cash and cash equivalents                                                                      |                                      | $                                 | 36,725                                     |          |             | $       | 28,953      |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Accounts receivable, less allowance for doubtful accounts
of $7,348 in 2000 and $7,557 in 1999 |                                      |                                   | 40,429                                     |          |             |         | 41,650      |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Current portion of notes receivable                                                            |                                      |                                   | 4,272                                      |          |             |         | 4,917       |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Inventories                                                                                    |                                      |                                   | 122,238                                    |          |             |         | 116,514     |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Refundable income taxes                                                                        |                                      |                                   | 571                                        |          |             |         | 836         |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Prepaid expenses and other                                                                     |                                      |                                   | 15,188                                     |          |             |         | 6,942       |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Deferred income tax benefits                                                                   |                                      |                                   | 2,009                                      |          |             |         | 3,758       |         
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                          |                                                                                                |                                      | Total current assets              |                                            |          | 221,432     |         |             |          | 203,570 |        
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Property and equipment, at cost                                                                                           |                                                                                                |                                      | 268,742                           |                                            |          |             | 252,625 |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Less  accumulated depreciation and amortization                                               |                                      |                                   | (145,723                                   | )        |             |         | (140,791    | )       
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          |                                                                                                |                                      | Total property and equipment, net |                                            |          | 123,019     |         |             |          | 111,834 |        
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Notes receivable, excluding current portion, less reserves
for uncollectible amounts of $4,537 in 2000 and $4,196 in 1999 |                                                                                                |                                      | 6,573                             |                                            |          |             | 10,550  |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Deferred income tax benefits and other assets                                                                             |                                                                                                |                                      | 57,422                            |                                            |          |             | 60,175  |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Intangible assets, net                                                                                                    |                                                                                                |                                      | 151,588                           |                                            |          |             | 157,399 |            
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                          |                                                                                                |                                      | Total assets                      |                                            | $        | 560,034     |         |             | $        | 543,528 |        
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|Liabilities and
Stockholders Equity
Current liabilities:                                                                
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Current portion of long-term debt                                                              |                                      | $                                 | 49                                         |          |             | $       | 585         |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Accounts payable                                                                               |                                      |                                   | 55,644                                     |          |             |         | 58,514      |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Payable to affiliates, net                                                                     |                                      |                                   | 81,789                                     |          |             |         | 63,589      |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Accrued interest                                                                               |                                      |                                   | 6,337                                      |          |             |         | 6,090       |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Accrued liabilities                                                                            |                                      |                                   | 75,654                                     |          |             |         | 70,802      |         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          | Accrued income taxes                                                                           |                                      |                                   | 502                                        |          |             |         | 178         |         
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                          |                                                                                                |                                      | Total current liabilities         |                                            |          | 219,975     |         |             |          | 199,758 |        
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Long-term debt, net of discount and current portion                                                                       |                                                                                                |                                      | 274,262                           |                                            |          |             | 274,210 |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Other long-term liabilities                                                                                               |                                                                                                |                                      | 11,506                            |                                            |          |             | 16,611  |            
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|Stockholders equity:                                                                                                    
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          |                                                                                                | Common stock                         |                                   |                                            |         |             |         |             |         |        
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          |                                                                                                | Paid-in capital                      |                                   |                                            | 195,162  |             |         |             | 195,162  |        
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          |                                                                                                | Accumulated other comprehensive loss |                                   |                                            | (658     | )           |         |             | (117     | )      
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                         
|                                                                                                                          |                                                                                                | Accumulated deficit                  |                                   |                                            | (140,213 | )           |         |             | (142,096 | )      
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                          |                                                                                                |                                      |                                   | Total stockholders equity                 |          |             | 54,291  |             |          |         | 52,949  | 
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            
|                                                                                                                          |                                                                                                |                                      |                                   | Total liabilities and stockholders equity |          | $           | 560,034 |             |          | $       | 543,528 | 
|                                                                                                                          |                                                                                                |                                      |                                   |                                            |          |             |         |            

The accompanying notes to consolidated financial statements are an integal part
of these consolidated balance sheets.

F-3



---



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)

|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |         |         | 
|------------------------------------ | --------------------------------------- | ---------------------------------------------- | --------- | ----------- | --------- | ----------- | --------- | ----------- | --------- | - | --------- | ------- | ------- | 
|                                     |                                         |                                                |           | Fifty-Three |           | Fifty-Two   |           | Fifty-Two  
|                                     |                                         |                                                |           | Weeks Ended |           | Weeks Ended |           | Weeks Ended
|                                     |                                         |                                                |           | February 3, |           | January 29, |           | January 30,
|                                     |                                         |                                                |           | 2001        |           | 2000        |           | 1999       
|                                     |                                         |                                                |           |             |           |             |           |            
|Net revenue                          |                                         | $                                              | 1,076,420 |             |           | $           | 1,037,581 |             |           | $ | 1,045,494 |        
|                                    
|                                    
|                                    
|                                    
|Costs and expenses:                 
|                                    
|                                    
|                                    
|                                    
|                                     | Cost of goods sold                      |                                                |           | 355,583     |           |             |           | 362,661     |           |   |           | 367,498 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Operating expenses                      |                                                |           | 649,392     |           |             |           | 601,875     |           |   |           | 584,954 |        
|                                    
|                                    
|                                    
|                                    
|                                     | Depreciation and amortization           |                                                |           | 37,351      |           |             |           | 38,485      |           |   |           | 32,803  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Restructuring and other unusual charges |                                                |           |            |           |             |           |            |           |   |           | 7,873   |        
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        
|                                     |                                         | Total costs and expenses                       |           |             | 1,042,326 |             |           |             | 1,003,021 |   |           |         | 993,128 | 
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        
|Operating income                     |                                         |                                                | 34,094    |             |           |             | 34,560    |             |           |   | 52,366    |        
|                                    
|                                    
|                                    
|                                    
|Interest and other (income) expense:
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense                        |                                                |           | 28,402      |           |             |           | 27,405      |           |   |           | 27,354  |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest and other income               |                                                |           | (541        | )         |             |           | (722        | )         |   |           | (6,283  | )      
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        
|                                     |                                         | Total interest and other (income) expense, net |           |             | 27,861    |             |           |             | 26,683    |   |           |         | 21,071  | 
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        
|Income before income taxes           |                                         |                                                | 6,233     |             |           |             | 7,877     |             |           |   | 31,295    |        
|                                    
|                                    
|                                    
|                                    
|Income tax provision                 |                                         |                                                | 4,350     |             |           |             | 3,737     |             |           |   | 11,960    |        
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        
|Net income                           |                                         | $                                              | 1,883     |             |           | $           | 4,140     |             |           | $ | 19,335    |        
|                                     |                                         |                                                |           |             |           |             |           |             |           |   |           |        

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

F-4



---



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |         |        |         |  
|------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------- | ----------- | ------- | ----------- | ------- | ----------- | ------- | - | ------- | ------ | ------- | -
|                                      |                                                                                   |                                                                                 |                                                                  |         | Fifty-Three |         | Fifty-Two   |         | Fifty-Two  
|                                      |                                                                                   |                                                                                 |                                                                  |         | Weeks Ended |         | Weeks Ended |         | Weeks Ended
|                                      |                                                                                   |                                                                                 |                                                                  |         | February 3, |         | January 29, |         | January 30,
|                                      |                                                                                   |                                                                                 |                                                                  |         | 2001        |         | 2000        |         | 1999       
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |            
|Cash flows from operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                                                                        |                                                                                 | $                                                                | 1,883   |             |         | $           | 4,140   |             |         | $ | 19,335  |       
|                                     
|                                     
|                                     
|                                     
|                                      | Adjustments to reconcile net income to net cash
provided by operating activities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   | Depreciation and amortization                                                   |                                                                  |         | 37,351      |         |             |         | 38,485      |         |   |         | 32,803 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   | Non-cash interest, net                                                          |                                                                  |         | 1,150       |         |             |         | 1,050       |         |   |         | 1,054  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   | Deferred income tax provision                                                   |                                                                  |         | 2,528       |         |             |         | 3,239       |         |   |         | 16,221 |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   | Restructuring and unusual charges                                               |                                                                  |         |            |         |             |         |            |         |   |         | 4,778  |        
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   | Increases (decreases) in cash resulting from changes in
assets and liabilities:
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                                                                 | Accounts and notes receivable, prepaid expenses
and other assets |         |             | (2,860  | )           |         |             | 4,871   |   |         |        | 11,809  |  
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                                                                 | Inventories                                                      |         |             | (5,724  | )           |         |             | 3,367   |   |         |        | (4,404  | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                                                                 | Accounts payable, accrued liabilities and other liabilities      |         |             | (1,335  | )           |         |             | (32,481 | ) |         |        | (21,656 | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                                                                 | Accrued interest                                                 |         |             | 247     |             |         |             | (126    | ) |         |        | (399    | )
|                                     
|                                     
|                                     
|                                     
|                                      |                                                                                   |                                                                                 | Accrued, refundable and deferred income taxes                    |         |             | 433     |             |         |             | 1,559   |   |         |        | 895     |  
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|                                      |                                                                                   |                                                                                 | Net cash provided by operating activities                        |         |             | 33,673  |             |         |             | 24,104  |   |         |        | 60,436  |  
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|Cash flows from investing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Purchases of property and equipment, net                                          |                                                                                 |                                                                  | (35,030 | )           |         |             | (25,877 | )           |         |   | (27,914 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Proceeds from sale/leaseback, net                                                 |                                                                                 |                                                                  |        |             |         |             |        |             |         |   | 8,835   |       
|                                     
|                                     
|                                     
|                                     
|                                      | Systems development costs                                                         |                                                                                 |                                                                  | (8,444  | )           |         |             | (13,639 | )           |         |   | (16,802 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Acquisitions of businesses, net of cash acquired                                  |                                                                                 |                                                                  |        |             |         |             |        |             |         |   | (7,231  | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                        |                                                                                 |                                                                  | 127     |             |         |             | (2,618  | )           |         |   | 312     |       
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|                                      |                                                                                   |                                                                                 | Net cash used for investing activities                           |         |             | (43,347 | )           |         |             | (42,134 | ) |         |        | (42,800 | )
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|Cash flows from financing activities:
|                                     
|                                     
|                                     
|                                     
|                                      | Repayment of long-term debt                                                       |                                                                                 |                                                                  | (576    | )           |         |             | (409    | )           |         |   | (15,095 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Advances from (to) affiliates, net                                                |                                                                                 |                                                                  | 18,971  |             |         |             | (3,848  | )           |         |   | (19,246 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Payment of deferred financing fees                                                |                                                                                 |                                                                  | (422    | )           |         |             | (281    | )           |         |   |        |       
|                                     
|                                     
|                                     
|                                     
|                                      | Other, net                                                                        |                                                                                 |                                                                  | (527    | )           |         |             | 464     |             |         |   | (227    | )     
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|                                      |                                                                                   |                                                                                 | Net cash provided by (used for) financing activities             |         |             | 17,446  |             |         |             | (4,074  | ) |         |        | (34,568 | )
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|Cash and temporary cash investments: 
|                                     
|                                     
|                                     
|                                     
|                                      | Net increase (decrease) during the period                                         |                                                                                 |                                                                  | 7,772   |             |         |             | (22,104 | )           |         |   | (16,932 | )     
|                                     
|                                     
|                                     
|                                     
|                                      | Balance, beginning of the period                                                  |                                                                                 |                                                                  | 28,953  |             |         |             | 51,057  |             |         |   | 67,989  |       
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        
|                                      | Balance, end of the period                                                        |                                                                                 | $                                                                | 36,725  |             |         | $           | 28,953  |             |         | $ | 51,057  |       
|                                      |                                                                                   |                                                                                 |                                                                  |         |             |         |             |         |             |         |   |        

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

F-5



---



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(Dollars in thousands )

|                                      |                                       |   |             |          |             |   |             |          |   |   |        |          |  
|------------------------------------- | ------------------------------------- | - | ----------- | -------- | ----------- | - | ----------- | -------- | - | - | ------ | -------- | -
|                                      |                                       |   | February 3, |          | January 29, |   | January 30,
|                                      |                                       |   | 2001        |          | 2000        |   | 1999       
|                                      |                                       |   |             |          |             |   |            
|Common Stock:                        
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at beginning of period        |   | $           |         |             |   | $           |         |   |   | $      |         |  
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at end of period              |   |             |         |             |   |             |         |   |   |        |         |  
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|Paid In Capital:                     
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at beginning of period        |   |             | 195,162  |             |   |             | 195,139  |   |   |        | 193,560  |  
|                                     
|                                     
|                                     
|                                     
|                                      | Tax benefit of stock option exercises |   |             |         |             |   |             | 23       |   |   |        | 1,579    |  
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at end of period              |   |             | 195,162  |             |   |             | 195,162  |   |   |        | 195,139  |  
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|Accumulated Deficit:                 
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at beginning of period        |   |             | (142,096 | )           |   |             | (146,236 | ) |   |        | (165,571 | )
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                            |   |             | 1,883    |             |   |             | 4,140    |   |   |        | 19,335   |  
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at end of period              |   |             | (140,213 | )           |   |             | (142,096 | ) |   |        | (146,236 | )
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|Accumulated Other Comprehensive Loss:
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at beginning of period        |   |             | (117     | )           |   |             | (657     | ) |   |        | (436     | )
|                                     
|                                     
|                                     
|                                     
|                                      | Other comprehensive income (loss)     |   |             | (541     | )           |   |             | 540      |   |   |        | (221     | )
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|                                      | Balance at end of period              |   |             | (658     | )           |   |             | (117     | ) |   |        | (657     | )
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                     
|                                     
|                                     
|                                     
|Total Stockholders Equity            |                                       | $ | 54,291      |          |             | $ | 52,949      |          |   | $ | 48,246 |         
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|Comprehensive Income:                
|                                     
|                                     
|                                     
|                                     
|                                      | Net income                            |   | $           | 1,883    |             |   | $           | 4,140    |   |   | $      | 19,335   |  
|                                     
|                                     
|                                     
|                                     
|                                      | Cumulative translation adjustment     |   |             | (541     | )           |   |             | 540      |   |   |        | (221     | )
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         
|                                      | Total comprehensive income            |   | $           | 1,342    |             |   | $           | 4,680    |   |   | $      | 19,114   |  
|                                      |                                       |   |             |          |             |   |             |          |   |   |        |         

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

F-6



---



COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|(1) |  | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Basis of Presentation -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | Cole National Group, Inc. is a wholly owned subsidiary of Cole
National Corporation. The consolidated financial statements include the
accounts of Cole National Group and its wholly owned subsidiaries
(collectively, the Company). All significant intercompany transactions
have been eliminated in consolidation.                                                                                                                                                                                                                                                            
|   
|    |  | Fiscal years end on the Saturday closest to January 31 and are
identified according to the calendar year in which they begin. For
example, the fiscal year ended February 3, 2001 is referred to as fiscal
2000. Fiscal 2000, consisted of a 53-week period, fiscal 1999 and
fiscal 1998 each consisted of 52-week periods.                                                                                                                                                                                                                                                     
|   
|    |  | Nature of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | The Company is a specialty service retailer operating in both host
and non-host environments, whose primary lines of business are eyewear
products and services and personalized gifts. The Company sells its
products through 2,387 company-owned retail locations and 426 franchised
locations in 50 states, Canada, and the Caribbean, and differentiates
itself from other specialty retailers by providing value-added services at
the point of sale at all of its retail locations. The Company has two
reportable segments: Cole Vision and Things Remembered (see Note 9).
|   
|    |  | Inventories -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Inventories are valued at the lower of first-in, first-out
(FIFO) cost or market.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Property and Depreciation -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | The policy is to provide depreciation using the straight-line method
over a period which is sufficient to amortize the cost of the asset over
its useful life or lease term.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | The estimated useful lives for depreciation purposes are:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                                                                                   |  |                                                        
|---------------------------------------------------------------------------------- |  | -------------------------------------------------------
|Buildings and improvements
Equipment
Furniture and fixtures
Leasehold improvements |  | 5 to 40 years
3 to 10 years
2 to 10 years
2 to 20 years



| |  | Property and equipment, at cost, consist of the following at February 3, 2001 and January 29, 2000 (000s omitted):
| |  | -------------------------------------------------------------------------------------------------------------------
|

|                                  |                              |   |         |         |      |   |         |         | 
|--------------------------------- | ---------------------------- | - | ------- | ------- | ---- | - | ------- | ------- | 
|                                  |                              |   | 2000    |         | 1999
|                                  |                              |   |         |         |     
|Land and buildings                |                              | $ | 12,987  |         |      | $ | 13,691  |        
|                                 
|                                 
|                                 
|                                 
|Furniture, fixtures and equipment |                              |   | 162,367 |         |      |   | 153,294 |        
|                                 
|                                 
|                                 
|                                 
|Leasehold improvements            |                              |   | 93,388  |         |      |   | 85,640  |        
|                                  |                              |   |         |         |      |   |         |        
|                                  | Total property and equipment |   | $       | 268,742 |      |   | $       | 252,625 | 
|                                  |                              |   |         |         |      |   |         |        

| |  | Store Opening Expenses -                                                                 
| |  | -----------------------------------------------------------------------------------------
|
| |  | Store opening expenses are charged to operations in the period the
expenses are incurred.

F-7



---



Notes Receivable -

The Companys notes receivable are primarily from Pearles
franchisees throughout the United States. The franchise notes are
collateralized by inventory, equipment, and leasehold improvements at each
location, generally bear interest at the prime rate plus 3%, and require
monthly payments of principal and interest over periods of up to ten
years.

Intangible Assets -

Intangible assets, net, consist of the following at February 3, 2001
and January 29, 2000 (000s omitted):

|           |  |      |         |      |  |   |         | 
|---------- |  | ---- | ------- | ---- |  | - | ------- | 
|           |  | 2000 |         | 1999
|           |  |      |         |     
|Goodwill   |  | $    | 107,360 |      |  | $ | 111,910 | 
|          
|          
|          
|          
|Tradenames |  |      | 44,228  |      |  |   | 45,489  | 
|           |  |      |         |      |  |   |         | 
|           |  | $    | 151,588 |      |  | $ | 157,399 | 
|           |  |      |         |      |  |   |         | 

Goodwill is being amortized on a straight-line basis over periods
from 5 to 40 years, based on managements assessment of the estimated
useful life, and is presented net of accumulated amortization of
$46,194,000 and $41,615,000 at February 3, 2001 and January 29, 2000,
respectively. Amortization of goodwill in fiscal 2000, 1999 and 1998 was
$4,580,000, $4,043,000 and $3,883,000, respectively. Management regularly
evaluates its accounting for goodwill considering primarily such factors
as historical profitability, current operating profits and cash flows. The
Company believes that, at February 3, 2001, the assets are realizable and
the amortization periods are still appropriate.

Tradenames acquired in connection with the Pearle acquisition in 1996
are being amortized on a straight-line basis over 40 years and are
presented net of accumulated amortization of $5,231,000 and $3,971,000 at
February 3, 2001 and January 29, 2000, respectively. Amortization of
tradenames in fiscal 2000, 1999 and 1998 was $1,260,000, $1,236,000 and
$1,236,000, respectively.

Other Long-Term Assets -

Financing costs incurred in connection with obtaining long-term debt
are capitalized in other assets and amortized over the life of the related
debt using the effective interest method. At February 3, 2001 and January
29, 2000, deferred financing costs net of accumulated amortization were
$6,082,000 and $6,714,000, respectively. Amortization of financing costs
in fiscal 2000, 1999 and 1998 was $1,054,000, $965,000 and $977,000,
respectively.

Direct costs to develop or obtain internal use software, including
internal costs, are capitalized in other assets and amortized over the
estimated useful life of the software using a straight-line method.
Amortization periods range from two to seven years, and begin when the
software is placed in service. At February 3, 2001 and January 29, 2000,
these costs, net of accumulated amortization, were $36,370,000 and
$38,127,000, respectively. Amortization of systems development costs in
fiscal 2000, 1999 and 1998 was $7,695,000, $6,703,000 and $2,980,000,
respectively.

Valuation of Long-Lived Assets-

Long-lived assets, such as property and equipment, goodwill and other
intangibles, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the total of the expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference
between the fair value and the carrying value of the asset.

Other Long-Term Liabilities -

Other long-term liabilities consist primarily of certain employee
benefit obligations, deferred lease credits and other lease-related
obligations, deferred revenue and other obligations not expected to be
paid within 12 months. Deferred lease credits are amortized on a
straight-line basis over the life of the applicable lease.

F-8



---



Capital Stock -

At February 3, 2001 and January 29, 2000, there were 1,100 shares of
common stock, par value $.01 per share, authorized, issued and
outstanding.

Foreign Currency Translation -

The assets and liabilities of the Companys foreign subsidiaries are
translated to United States dollars at the rates of exchange on the
balance sheet date. Income and expense items are translated at average
monthly rates of exchange. Translation adjustments are presented as a
component of accumulated other comprehensive loss within stockholders
equity.

Revenues -

Revenues include sales of goods and services to retail customers at
company-operated stores, sales of merchandise inventory to franchisees and
other outside customers, other revenues from franchisees such as royalties
based on sales, interest income on notes receivable and initial franchise
fees, and capitation and other fees associated with Cole Visions managed
vision care business.

Franchise revenues based on sales by franchisees are accrued as
earned. Initial franchise fees are recorded as income when all material
services or conditions relating to the sale of the franchises have been
substantially performed or satisfied by the Company and when the related
store begins operations.

Advertising -

Advertising production costs and other advertising costs are expensed
as incurred, a portion of which are reimbursed by franchisees based on a
percentage of their sales. Advertising expense is summarized as follows
(000s omitted):

|                              |  |      |         |      |  |      |         |   |  |   |         |  
|----------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                              |  | 2000 |         | 1999 |  | 1998
|                              |  |      |         |      |  |     
|Gross advertising expense     |  | $    | 89,329  |      |  | $    | 88,525  |   |  | $ | 82,492  |  
|                             
|                             
|                             
|                             
|Less: Franchisee contribution |  |      | (20,562 | )    |  |      | (19,930 | ) |  |   | (20,244 | )
|                              |  |      |         |      |  |      |         |   |  |   |         |  
|Net advertising expense       |  | $    | 68,767  |      |  | $    | 68,595  |   |  | $ | 62,248  |  
|                              |  |      |         |      |  |      |         |   |  |   |         |  

Earnings Per Share -

Earnings per share and weighted average number of common shares
outstanding data for 2000, 1999 and 1998 have been omitted as the
presentation of such information, considering the Company is a wholly
owned subsidiary of Cole National Corporation, is not meaningful.

Cash Flows -

For purposes of reporting cash flows, all temporary cash investments
which have original maturities of three months or less are considered to
be cash equivalents. The carrying amounts of cash and cash equivalents
approximate fair value due to the short maturity of those instruments.

Net cash flows from operating activities reflect cash payments for
income taxes and interest as follows (000s omitted):

|             |  |      |        |      |  |      |        |  |  |   |        | 
|------------ |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|             |  | 2000 |        | 1999 |  | 1998
|             |  |      |        |      |  |     
|Income taxes |  | $    | 844    |      |  | $    | 623    |  |  | $ | 1,644  | 
|            
|            
|            
|            
|Interest     |  |      | 27,007 |      |  |      | 26,229 |  |  |   | 25,900 | 

No dividends were declared during fiscal 2000, 1999 or 1998.

F-9



---





|    |  | Use of Estimates -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States, 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.                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | Reclassifications -                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | Certain prior year amounts have been reclassified to conform with
the current year presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(2) |  | Acquisitions and Dispositions of Businesses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The Company made the following acquisitions, each of which has been
accounted for under the purchase method of accounting, including any
contingent payments that may be made in the future. Pro forma financial
results have not been presented for these acquisitions, as they did not
have a material effect on results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | In October 1999, the Company acquired MetLifes managed vision care
benefits business. The business consists of vision care contracts with
approximately 250 institutional customers and generates approximately
$15.0 million of revenue annually. The purchase price paid to date totals
$2.6 million, with additional amounts contingently due upon certain
conditions being met over the four years following the date of purchase.                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | In fiscal 1998, the Company acquired ten Buckeye Optical stores in
Columbus, Ohio, and all of the issued and outstanding common stock of
Management Associates, Inc., whose operations consisted of four 20/20
Eyecare stores located in Las Vegas, Nevada. The total purchase price for
these acquisitions was $7.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | In fiscal 1999, the Company announced its plan to close the 150
optical departments in Montgomery Ward stores. The closings, which were
completed by the end of fiscal 1999, resulted in a pretax loss of $2.0
million, consisting primarily of inventory and fixed asset write-offs. The
after tax cash cost of the closings was not significant. Annual revenues
in fiscal 1999 for the Wards Optical Departments were $21.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(3) |  | Restructuring and Other Unusual Items                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | In fiscal 1998, the Company began implementation of a restructuring
plan and recorded a net pretax charge of $13.1 million, related to
restructuring its Pearle business along with other unusual charges. The
net pretax charge consisted of charges associated with the restructuring
of $13.9 million, a reversal of previously established restructuring
accruals of $12.3 million and other unusual charges totaling $11.5
million. The restructuring charge of $13.9 million related to changes made
to the Pearle operating model and structure of the home office
organization.                                                                                                                                                                                                                                                                      
|   
|    |  | The costs of the 1998 restructuring approximated the original
estimates. A remaining balance of approximately $0.1 million for the
facilities relocations was reversed into income in fiscal 1999. As of
February 3, 2001, and January 29, 2000, there were no balances remaining
for restructure reserves.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The unusual charges in fiscal 1998 related to the write off of $8.8
million associated with the abandonment of previously capitalized system
development costs (including $1.9 million of incurred costs that were paid
in the first half of fiscal 1999) and $2.7 million primarily related to
restricted stock issued to two senior executive officers. See Note 6 for
further discussion of the restricted stock grants.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | The 1998 results include the recognition of $6.0 million of income
from cash received in a nontaxable settlement of certain contingencies
related to several claims against and indemnifications from the former
owner of Pearle, which was acquired by the Company in fiscal 1996. In
connection with this settlement, the Company assumed secondary liability
for loans to certain franchisees held by a third party which totaled $3.6
million at February 3, 2001. The Company is contingently liable should any
of these franchisees default, and also for prepayment penalties of up to
$0.5 million at February 3, 2001. The Company has established reserves for
potential losses on the loans, which mature through 2001. The settlement
also included a release of the former owner of Pearle from certain future
non-tax claims related to Pearle.

F-10



---





|(4) |  | Long-Term Debt                                                                                   
|--- |  | -------------------------------------------------------------------------------------------------
|   
|    |  | Long-term debt at February 3, 2001 and January 29, 2000 is summarized
as follows (000s omitted):

|                                        |                      |                                        |         |         |         |      |         |         |         | 
|--------------------------------------- | -------------------- | -------------------------------------- | ------- | ------- | ------- | ---- | ------- | ------- | ------- | 
|                                        |                      |                                        |         | 2000    |         | 1999
|                                        |                      |                                        |         |         |         |     
|9-7/8% Senior subordinated Notes:      
|                                       
|                                       
|                                       
|                                       
|                                        | Face Value           |                                        | $       | 150,000 |         |      | $       | 150,000 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Unamortized discount |                                        |         | (785    | )       |      |         | (880    | )      
|                                        |                      |                                        |         |         |         |      |         |        
|                                        |                      | Total 9-7/8% Senior Subordinated Notes |         |         | 149,215 |      |         |         | 149,120 | 
|                                       
|                                       
|                                       
|                                       
|8-5/8% Senior Subordinated Notes        |                      |                                        | 125,000 |         |         |      | 125,000 |        
|                                       
|                                       
|                                       
|                                       
|Capital lease obligations (See Note 10) |                      |                                        | 96      |         |         |      | 675     |        
|                                        |                      |                                        |         |         |         |      |         |        
|                                        |                      |                                        | 274,311 |         |         |      | 274,795 |        
|                                       
|                                       
|                                       
|                                       
|Less current portion                    |                      |                                        | (49     | )       |         |      | (585    | )      
|                                        |                      |                                        |         |         |         |      |         |        
|Net long-term debt                      |                      | $                                      | 274,262 |         |         | $    | 274,210 |        
|                                        |                      |                                        |         |         |         |      |         |        



|    |  | On August 22, 1997, the Company issued $125.0 million of 8-5/8%
Senior Subordinated Notes that mature in 2007 with no earlier scheduled
redemption or sinking fund payments. Interest on the 8-5/8% Notes is
payable semi-annually on February 15 and August 15.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On November 15, 1996, the Company issued $150 million of 9-7/8%
Senior Subordinated Notes that mature in 2006 with no earlier scheduled
redemption or sinking fund payments. Interest on the 9-7/8% Notes is
payable semi-annually on June 30 and December 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The 8-5/8% Notes and the 9-7/8% Notes are general unsecured
obligations of the Company, subordinated in right of payment to senior
indebtedness of the Company and senior in right of payment to any current
or future subordinated indebtedness of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | The indentures pursuant to which the 8-5/8% Notes and the 9-7/8%
Notes were issued restrict dividend payments to Cole National Corporation
to 50% of the Companys net income after October 31, 1993, plus amounts
due to Cole National Corporation under a tax sharing agreement and for
administrative expenses of Cole National Corporation not to exceed 0.25%
of the Companys net revenue. The indentures also contain certain optional
and mandatory redemption features and other financial covenants. The
Company was in compliance with these covenants at February 3, 2001.                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | At February 3, 2001 the fair value of long-term debt was
approximately $212.3 million compared to a carrying value of $274.3
million. The fair value was estimated primarily by using quoted market
prices. There are significant principal payment obligations under its
outstanding indebtedness until the 9-7/8% notes mature in 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(5) |  | Credit Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The operating subsidiaries of the Company have a working capital
commitment ranging from $50.0 million to $75.0 million based on the
Companys current debt leverage ratio described in the credit facility.
This credit facility extends until January 31, 2003. Borrowings under the
credit facility presently bear interest based on leverage ratios at a rate
equal to, at the option of the principal operating subsidiaries of the
Company, either (a) the Eurodollar Rate plus 2.5% or (b) 1.5% plus the
highest of (i) the prime rate, (ii) the three-week moving average of the
secondary market rates for three-month certificates of deposit plus 1% and
(iii) the federal funds rate plus 0.5%. The Company pays a commitment fee
of between .375% and .75% per annum on the total unused portion of the
facility based on the percentage of revolving credit commitments used.
Cole National Corporation, the Companys parent, guarantees this credit
facility.
|   
|    |  | The credit facility requires the principal operating subsidiaries of
the Company to comply with various operating covenants that restrict
corporate activities, including covenants restricting the ability of the
subsidiaries to incur additional indebtedness, pay dividends, prepay
subordinated indebtedness, dispose of certain investments or make
acquisitions. The credit facility also requires the subsidiaries to comply
with certain financial covenants, including covenants regarding minimum
interest coverage, maximum leverage and consolidated net worth. The
principal operating subsidiaries of the Company were in compliance with
these covenants at February 3, 2001.                                                                                                                                                                                                                                                                                
|   
|    |  | The credit facility restricts dividend payments to the Company to
amounts needed to pay interest on the 9-7/8% Notes and the 8-5/8% Notes,
and certain amounts related to taxes, along with up to $8.0 million plus
0.25% of the Companys consolidated net revenue annually for other direct
expenses of Cole National Corporation or the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-11



---





|    |  | No borrowings under the credit facility were outstanding as of
February 3, 2001, and the maximum amount of borrowings outstanding during
fiscal 2000 was $20.2 million. No borrowings under the credit facility
were outstanding as of January 29, 2000, or at anytime during fiscal
1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(6) |  | Stock Compensation and Warrants                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | Cole National Corporation has various stock-based compensation plans
in which key employees of the Company are eligible to participate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The Company applies APB Opinion 25 and related Interpretations in
accounting for Cole National Corporations stock-based compensation plans.
Compensation cost of $2.3 million, has been charged against income for
Cole National Corporations stock-based plans in fiscal 1998. Had
compensation cost for Cole National Corporations stock-based compensation
plans been determined based on the fair value at the dates of awards
consistent with the method of SFAS No.123, the Companys net income would
have been $489,000, $2,583,000 and $18,647,000 in fiscal 2000, 1999 and
1998, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | For SFAS No. 123 purposes, the fair value of each option granted by
Cole National Corporation was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:
risk-free interest rates of 6.2%, 5.9 % and 4.7% for grants in fiscal
2000, 1999 and 1998, respectively, volatility of 45-47%, 39-45% and 35-39%
in fiscal 2000, 1999 and 1998, respectively, and expected lives of six
years for options granted in all fiscal years. The fair value of each
share granted under Cole National corporations Employee Stock Purchase
Plan was similarly estimated using the following assumptions: risk-free
interest rate of 6.0% and 5.2% in fiscal 2000 and 1999, respectively,
volatility of 46-47% and 42% in fiscal 2000 and 1999, respectively and
expected lives of 5 to 6 months. The effects of applying SFAS No. 123 in
the pro forma disclosure above are not indicative of future amounts. SFAS
No. 123 does not apply to options granted prior to January 29, 1995 and
additional awards in future years are anticipated.
|   
|(7) |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | The Company is included in the consolidated federal income tax
returns of Cole National Corporation and has been charged (credited) an
amount equal to the taxes that would have been payable by it if it were a
corporation filing a separate return.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | The income tax provision for continuing operations reflected in the
accompanying consolidated statements of operations for fiscal 2000, 1999
and 1998 are detailed below (000s omitted):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                              |                                                |  |       |       |      |  |       |        |   |  |        |        |  
|----------------------------- | ---------------------------------------------- |  | ----- | ----- | ---- |  | ----- | ------ | - |  | ------ | ------ | -
|                              |                                                |  | 2000  |       | 1999 |  | 1998 
|                              |                                                |  |       |       |      |  |      
|Current payable (refundable)-
|                             
|                             
|                             
|                             
|                              | Federal                                        |  | $     | 860   |      |  | $     |       |   |  | $      | (6,528 | )
|                             
|                             
|                             
|                             
|                              | State and local                                |  |       | 972   |      |  |       | 824    |   |  |        | 1,486  |  
|                             
|                             
|                             
|                             
|                              | Foreign                                        |  |       | 89    |      |  |       | 339    |   |  |        | 781    |  
|                              |                                                |  |       |       |      |  |       |        |   |  |        |       
|                              |                                                |  | 1,921 |       |      |  | 1,163 |        |   |  | (4,261 | )     
|                              |                                                |  |       |       |      |  |       |        |   |  |        |       
|Deferred -                   
|                             
|                             
|                             
|                             
|                              | Federal                                        |  |       | 2,002 |      |  |       | 8,199  |   |  |        | 16,765 |  
|                             
|                             
|                             
|                             
|                              | Foreign                                        |  |       | 427   |      |  |       | (179   | ) |  |        | (544   | )
|                             
|                             
|                             
|                             
|                              | Tax benefit of net operating
loss carryforward |  |       |      |      |  |       | (5,446 | ) |  |        |       |  
|                              |                                                |  |       |       |      |  |       |        |   |  |        |       
|                              |                                                |  | 2,429 |       |      |  | 2,574 |        |   |  | 16,221 |       
|                              |                                                |  |       |       |      |  |       |        |   |  |        |       
|                              | Income tax provision                           |  | $     | 4,350 |      |  | $     | 3,737  |   |  | $      | 11,960 |  
|                              |                                                |  |       |       |      |  |       |        |   |  |        |       

F-12



---



The income tax provision for continuing operations differs from the
federal statutory rate as follows (000s omitted):

|                                |                |                                                |                      |  |       |       |       |  |       |       |        |  |        |        | 
|------------------------------- | -------------- | ---------------------------------------------- | -------------------- |  | ----- | ----- | ----- |  | ----- | ----- | ------ |  | ------ | ------ | 
|                                |                |                                                |                      |  | 2000  |       | 1999  |  | 1998 
|                                |                |                                                |                      |  |       |       |       |  |      
|Tax provision at statutory rate |                | $                                              | 2,182                |  |       | $     | 2,757 |  |       | $     | 10,954 | 
|                               
|                               
|                               
|                               
|                                | Tax effect of-
|                               
|                               
|                               
|                               
|                                |                | Amortization of goodwill                       |                      |  | 1,252 |       |       |  | 1,230 |       |        |  | 1,234  |       
|                               
|                               
|                               
|                               
|                                |                | State income taxes, net of federal
tax benefit |                      |  | 632   |       |       |  | 536   |       |        |  | 966    |       
|                               
|                               
|                               
|                               
|                                |                | Nontaxable settlement                          |                      |  |      |       |       |  |      |       |        |  | (2,100 | )     
|                               
|                               
|                               
|                               
|                                |                | Nonrecurring charges                           |                      |  |      |       |       |  |      |       |        |  | 537    |       
|                               
|                               
|                               
|                               
|                                |                | Decrease in valuation allowance                |                      |  |      |       |       |  | (669  | )     |        |  |       |       
|                               
|                               
|                               
|                               
|                                |                | Other, net                                     |                      |  | 284   |       |       |  | (117  | )     |        |  | 369    |       
|                                |                |                                                |                      |  |       |       |       |  |       |       |        | 
|                                |                |                                                | Income tax provision |  | $     | 4,350 |       |  | $     | 3,737 |        |  | $      | 11,960 | 
|                                |                |                                                |                      |  |       |       |       |  |       |       |        | 

The income tax effects of temporary differences that give rise to
significant portions of the Companys deferred tax assets and deferred tax
liabilities at February 3, 2001 and January 29, 2000 are as follows (000s
omitted):

|                          |                                  |                                |   |        |        |      |   |        |        |  
|------------------------- | -------------------------------- | ------------------------------ | - | ------ | ------ | ---- | - | ------ | ------ | -
|                          |                                  |                                |   | 2000   |        | 1999
|                          |                                  |                                |   |        |        |     
|Deferred tax assets:     
|                         
|                         
|                         
|                         
|                          | Employee benefit accruals        |                                | $ | 1,738  |        |      | $ | 2,821  |       
|                         
|                         
|                         
|                         
|                          | Other non-deductible accruals    |                                |   | 7,541  |        |      |   | 9,040  |       
|                         
|                         
|                         
|                         
|                          | State and local taxes            |                                |   | 818    |        |      |   | 1,192  |       
|                         
|                         
|                         
|                         
|                          | Net operating loss carryforwards |                                |   | 3,025  |        |      |   | 3,576  |       
|                         
|                         
|                         
|                         
|                          | Intangibles                      |                                |   | 4,446  |        |      |   | 4,471  |       
|                         
|                         
|                         
|                         
|                          | Inventory reserves               |                                |   | 3,665  |        |      |   | 3,518  |       
|                         
|                         
|                         
|                         
|                          | Bad debt reserves                |                                |   | 316    |        |      |   | 185    |       
|                         
|                         
|                         
|                         
|                          | Other                            |                                |   | 2,297  |        |      |   | 2,427  |       
|                          |                                  |                                |   |        |        |      |   |       
|                          | Total deferred tax assets        |                                |   | 23,846 |        |      |   | 27,230 |       
|                         
|                         
|                         
|                         
|                          | Valuation allowance              |                                |   | (1,141 | )      |      |   | (1,141 | )     
|                          |                                  |                                |   |        |        |      |   |       
|                          |                                  | Net deferred tax assets        |   |        | 22,705 |      |   |        | 26,089 |  
|                         
|                         
|                         
|                         
|Deferred tax liabilities:
|                         
|                         
|                         
|                         
|                          | Depreciation and amortization    |                                |   | (4,750 | )      |      |   | (5,582 | )     
|                         
|                         
|                         
|                         
|                          | Other                            |                                |   | (2,856 | )      |      |   | (2,905 | )     
|                          |                                  |                                |   |        |        |      |   |       
|                          |                                  | Total deferred tax liabilities |   |        | (7,606 | )    |   |        | (8,487 | )
|                          |                                  |                                |   |        |        |      |   |       
|                          |                                  | Net deferred taxes             |   | $      | 15,099 |      |   | $      | 17,602 |  
|                          |                                  |                                |   |        |        |      |   |       

At February 3, 2001, Cole National Group, Inc. and subsidiaries have
approximately $18.9 million of tax net operating loss carryforwards in the
United States that expire in the years 2005 through 2019. Of that amount,
$8.3 million resulted from the Companys acquisition of American Vision
Centers (AVC). Due to the change in ownership requirements of the
Internal Revenue Code, utilization of AVCs net operating loss is limited
to $0.3 million per year. A valuation allowance of $1.1 million has been
established to reduce the deferred tax asset related to the net operating
loss to the amount that will likely be realized. The Companys balance
sheet reflects an amount from the Parent for the benefit the Parent will
receive on the U.S. consolidated federal income tax return as a result of
the net operating losses generated by the Company.

F-13



---





|    |  | No provision of United States federal and state income taxes has been
provided for the undistributed earnings of the Companys foreign
subsidiaries as those earnings are considered to be indefinitely
reinvested. Upon distribution of those earnings in the form of dividends
or otherwise, the Company would be subject to both United States income
taxes (subject to an adjustment for foreign tax credits) and withholding
taxes payable.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(8) |  | Retirement Plans                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | The Company maintains a noncontributory defined benefit pension plan
that covers employees who have met eligibility service requirements and
are not members of certain collective bargaining units. The pension plan
calls for benefits to be paid to eligible employees at retirement based
primarily upon years of service and their compensation levels near
retirement.                                                                    
|   
|    |  | The Companys policy is to fund amounts necessary to keep the pension
plan in full force and effect, in accordance with the Internal Revenue
Code and the Employee Retirement Income Security Act of 1974. Actuarial
present values of benefit obligations are determined using the projected
unit credit method.                                                                                                                               
|   
|    |  | Pension expense for fiscal 2000, 1999 and 1998 includes the
following components (000s omitted):                                                                                                                                                                                                                                                                                                                                               

|                                                  |                         |                     |        |      |        |      |        |      |        |   |        |   |        |  
|------------------------------------------------- | ----------------------- | ------------------- | ------ | ---- | ------ | ---- | ------ | ---- | ------ | - | ------ | - | ------ | -
|                                                  |                         |                     |        | 2000 |        | 1999 |        | 1998
|                                                  |                         |                     |        |      |        |      |        |     
|Service cost  benefits earned during the period  |                         | $                   | 1,398  |      |        | $    | 1,636  |      |        | $ | 1,446  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Interest cost on the projected benefit obligation |                         |                     | 1,882  |      |        |      | 1,733  |      |        |   | 1,582  |  
|                                                 
|                                                 
|                                                 
|                                                 
|Less:                                            
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Return on plan assets -
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                         | Actual              |        |      | (359   | )    |        |      | (2,205 | ) |        |   | (2,494 | )
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  |                         | Deferred            |        |      | (2,058 | )    |        |      | 19     |   |        |   | 690    |  
|                                                  |                         |                     |        |      |        |      |        |      |        |   |        |  
|                                                  |                         |                     | (2,417 | )    |        |      | (2,186 | )    |        |   | (1,804 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Amortization of transition asset over 17.9 years  |                         |                     | (179   | )    |        |      | (179   | )    |        |   | (179   | )
|                                                  |                         |                     |        |      |        |      |        |      |        |   |        |  
|                                                  |                         | Net pension expense |        | $    | 684    |      |        | $    | 1,004  |   |        | $ | 1,045  |  
|                                                  |                         |                     |        |      |        |      |        |      |        |   |        |  

F-14



---





| |  | The following sets forth changes in the benefit obligation and the
plan assets during the year and reconciles the funded status of the
pension plan with the amounts recognized in the consolidated balance
sheets (000s omitted):
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                 |                                                                           |                                                           |   |        |        |      |   |        |        |  
|-------------------------------- | ------------------------------------------------------------------------- | --------------------------------------------------------- | - | ------ | ------ | ---- | - | ------ | ------ | -
|                                 |                                                                           |                                                           |   | 2000   |        | 1999
|                                 |                                                                           |                                                           |   |        |        |     
|Change in benefit obligation:   
|                                
|                                
|                                
|                                
|                                 | Benefit obligation at beginning of period                                 |                                                           | $ | 22,660 |        |      | $ | 24,599 |       
|                                
|                                
|                                
|                                
|                                 | Service cost                                                              |                                                           |   | 1,398  |        |      |   | 1,636  |       
|                                
|                                
|                                
|                                
|                                 | Interest cost                                                             |                                                           |   | 1,882  |        |      |   | 1,733  |       
|                                
|                                
|                                
|                                
|                                 | Actuarial loss (gain)                                                     |                                                           |   | 633    |        |      |   | (4,017 | )     
|                                
|                                
|                                
|                                
|                                 | Benefits paid                                                             |                                                           |   | (1,011 | )      |      |   | (956   | )     
|                                
|                                
|                                
|                                
|                                 | Expenses paid                                                             |                                                           |   | (362   | )      |      |   | (335   | )     
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|                                 |                                                                           | Benefit obligation at end of period                       |   | $      | 25,200 |      |   | $      | 22,660 |  
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|Change in plan assets:          
|                                
|                                
|                                
|                                
|                                 | Fair value of plan assets at beginning of year                            |                                                           | $ | 25,410 |        |      | $ | 23,216 |       
|                                
|                                
|                                
|                                
|                                 | Actual return of plan assets                                              |                                                           |   | 359    |        |      |   | 2,205  |       
|                                
|                                
|                                
|                                
|                                 | Employer contributions                                                    |                                                           |   | 1,681  |        |      |   | 1,280  |       
|                                
|                                
|                                
|                                
|                                 | Benefits paid                                                             |                                                           |   | (1,011 | )      |      |   | (956   | )     
|                                
|                                
|                                
|                                
|                                 | Expenses paid                                                             |                                                           |   | (362   | )      |      |   | (335   | )     
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|                                 |                                                                           | Fair value of plan assets at end of year                  |   | $      | 26,077 |      |   | $      | 25,410 |  
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|Reconciliation of funded status:
|                                
|                                
|                                
|                                
|                                 | Benefit obligation at end of period                                       |                                                           | $ | 25,200 |        |      | $ | 22,660 |       
|                                
|                                
|                                
|                                
|                                 | Fair value of plan assets, primarily money market
and equity mutual funds |                                                           |   | 26,077 |        |      |   | 25,410 |       
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|                                
|                                
|                                
|                                
|                                 | Funded status                                                             |                                                           |   | 877    |        |      |   | 2,750  |       
|                                
|                                
|                                
|                                
|                                 | Unrecognized prior service cost                                           |                                                           |   | 25     |        |      |   | 54     |       
|                                
|                                
|                                
|                                
|                                 | Net unrecognized loss (gain)                                              |                                                           |   | 762    |        |      |   | (1,957 | )     
|                                
|                                
|                                
|                                
|                                 | Unamortized transition (asset) obligation                                 |                                                           |   | (698   | )      |      |   | (878   | )     
|                                 |                                                                           |                                                           |   |        |        |      |   |       
|                                 |                                                                           | Pension asset (liability) included in accrued liabilities |   | $      | 966    |      |   | $      | (31    | )
|                                 |                                                                           |                                                           |   |        |        |      |   |       



|
|
|
|
|
|
|
|

F-15



---





|    |  | The Company has several Supplemental Executive Retirement Plans that
provide for the payment of retirement benefits to participating executives
supplementing amounts payable under the Companys noncontributory defined
benefit pension plan. The first plan is an excess benefit plan designed to
replace benefits that would otherwise have been payable under the pension
plan but that were limited as a result of certain tax law changes. The
second plan is a defined contribution plan under which participants
receive an annual credit based on a percentage of base salary, subject to
vesting requirements. The third plan is a defined benefit plan
designed to provide additional retirement benefits for certain management and highly
compensated employees. Expenses for these plans for fiscal 2000, 1999 and
1998 were $619,000, $696,000 and $651,000, respectively.                                                                                    
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(9) |  | Segment Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The Company has two reportable segments: Cole Vision and Things
Remembered. Most of Cole Visions revenue is provided by sales of
prescription eyewear, accessories and services through its Cole Licensed
Brands and Pearle retail locations. Cole Visions revenue is also provided
by sales of merchandise to franchisees and other outside customers, by
royalties based on sales, interest income on notes receivable and initial
franchise fees from franchisees and by fees from managed vision care
programs. The Cole Licensed Brands and Pearle segments have been
aggregated in accordance with SFAS No. 131 based on the similarity of
their economic characteristics, nature of products, services and
production processes, types of customers, distribution methods and
regulatory environment. Things Remembereds revenue is provided by sales
of engravable gift merchandise, personalization and other services
primarily through retail stores and kiosks.
|   
|    |  | The accounting policies of the segments are the same as those
described in the Summary of Significant Accounting Policies (see Note 1).
Performance is evaluated based on operating income from operations before
interest, income taxes, and non-recurring or unusual charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The reportable segments are strategic business units that offer
different products and services. They are managed separately as each
business requires different technology and marketing strategies. Cole
Vision is subject to various state regulations related to the dispensing
of prescription eyewear, its relationship with the doctors of optometry
and other matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-16



---





| |  | Reported segment revenue, depreciation and amortization, income or
loss, with reconciliations to consolidated amounts are as follows (000s
omitted):
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |         |           |  
|------------------------------ | ------------------------------------ | ------------------------------------------- | - | ------- | --------- | ---- | - | ------- | --------- | - | - | ------- | --------- | -
|                               |                                      |                                             |   | 2000    |           | 1999 |   | 1998   
|                               |                                      |                                             |   |         |           |      |   |        
|Net revenue:                  
|                              
|                              
|                              
|                              
|                               | Cole Vision                          |                                             | $ | 800,561 |           |      | $ | 778,995 |           |   | $ | 803,547 |          
|                              
|                              
|                              
|                              
|                               | Things Remembered                    |                                             |   | 275,859 |           |      |   | 258,586 |           |   |   | 241,947 |          
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                               |                                      | Consolidated net revenue                    |   | $       | 1,076,420 |      |   | $       | 1,037,581 |   |   | $       | 1,045,494 |  
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|Depreciation and amortization:
|                              
|                              
|                              
|                              
|                               | Cole Vision                          |                                             | $ | 24,820  |           |      | $ | 26,266  |           |   | $ | 21,712  |          
|                              
|                              
|                              
|                              
|                               | Things Remembered                    |                                             |   | 10,260  |           |      |   | 10,916  |           |   |   | 10,485  |          
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                               |                                      | Total segment depreciation and amortization |   |         | 35,080    |      |   |         | 37,182    |   |   |         | 32,197    |  
|                              
|                              
|                              
|                              
|                               | Corporate                            |                                             |   | 2,271   |           |      |   | 1,303   |           |   |   | 606     |          
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                              
|                              
|                              
|                              
|                               |                                      | Consolidated depreciation and amortization  |   | $       | 37,351    |      |   | $       | 38,485    |   |   | $       | 32,803    |  
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|Income or loss:               
|                              
|                              
|                              
|                              
|                               | Cole Vision                          |                                             | $ | 20,755  |           |      | $ | 17,915  |           |   | $ | 54,287  |          
|                              
|                              
|                              
|                              
|                               | Things Remembered                    |                                             |   | 25,811  |           |      |   | 22,706  |           |   |   | 17,647  |          
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                               |                                      | Total segment profit                        |   |         | 46,566    |      |   |         | 40,621    |   |   |         | 71,934    |  
|                              
|                              
|                              
|                              
|                               | Unallocated amounts:                
|                              
|                              
|                              
|                              
|                               |                                      | Restructuring and other unusual items       |   |         |          |      |   |         |          |   |   |         | (13,120   | )
|                              
|                              
|                              
|                              
|                               |                                      | Corporate expenses                          |   |         | (12,472   | )    |   |         | (6,061    | ) |   |         | (6,448    | )
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                               | Consolidated operating income (loss) |                                             |   | 34,094  |           |      |   | 34,560  |           |   |   | 52,366  |          
|                              
|                              
|                              
|                              
|                               | Interest and other expense, net      |                                             |   | (27,861 | )         |      |   | (26,683 | )         |   |   | (21,071 | )        
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        
|                               | Income before income taxes           |                                             | $ | 6,233   |           |      | $ | 7,877   |           |   | $ | 31,295  |          
|                               |                                      |                                             |   |         |           |      |   |         |           |   |   |        



|
|
|

|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |         |         | 
|----------------------------------------------------------------------------- | --------------------------------------------- | -------------------------- | - | ------- | ------- | ---- | ----- | ------- | ------- | - | ----- | ------- | ------- | 
|                                                                              |                                               |                            |   | 2000    |         | 1999 |       | 1998   
|                                                                              |                                               |                            |   |         |         |      |       |        
|Segment assets:                                                              
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Cole Vision                                   |                            | $ | 423,709 |         |      | $     | 418,687 |         |   | $     | 438,509 |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Things Remembered                             |                            |   | 141,484 |         |      |       | 141,511 |         |   |       | 132,232 |        
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|                                                                              |                                               | Total segment assets       |   |         | 565,193 |      |       |         | 560,198 |   |       |         | 570,741 | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Elimination of intercompany receivables       |                            |   | (43,949 | )       |      |       | (52,917 | )       |   |       | (36,440 | )      
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Corporate cash and temporary cash investments |                            |   | 26,416  |         |      |       | 21,024  |         |   |       | 34,506  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Other corporate assets                        |                            |   | 12,375  |         |      |       | 59,966  |         |   |       | 54,037  |        
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|                                                                              |                                               | Consolidated assets        |   | $       | 560,035 |      |       | $       | 588,271 |   |       | $       | 622,844 | 
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|Expenditures for capital additions and systems development costs:            
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Cole Vision                                   |                            | $ | 31,857  |         |      | $     | 33,728  |         |   | $     | 35,796  |        
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Things Remembered                             |                            |   | 11,457  |         |      |       | 5,709   |         |   |       | 8,228   |        
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|                                                                              |                                               | Total segment expenditures |   |         | 43,314  |      |       |         | 39,437  |   |       |         | 44,024  | 
|                                                                             
|                                                                             
|                                                                             
|                                                                             
|                                                                              | Corporate                                     |                            |   | (28     | )       |      |       | 79      |         |   |       | 692     |        
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|                                                                              |                                               | Consolidated expenditures  |   | $       | 43,286  |      |       | $       | 39,516  |   |       | $       | 44,716  | 
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        
|Expenditures for acquisitions of businesses,
net of cash acquired
Cole Vision |                                               | $                          |  |         |         | $    | 2,956 |         |         | $ | 7,231 |        
|                                                                              |                                               |                            |   |         |         |      |       |         |         |   |       |        

F-17



---





| |  | Revenue from external customers of each group of similar products and
services is as follows (000s omitted):
| |  | -------------------------------------------------------------------------------------------------------------

|                                                            |                               |   |         |           |      |   |         |           |  |   |         |           | 
|----------------------------------------------------------- | ----------------------------- | - | ------- | --------- | ---- | - | ------- | --------- |  | - | ------- | --------- | 
|                                                            |                               |   | 2000    |           | 1999 |   | 1998   
|                                                            |                               |   |         |           |      |   |        
|Sales of optical products and services                      |                               | $ | 733,410 |           |      | $ | 724,546 |           |  | $ | 754,852 |          
|                                                           
|                                                           
|                                                           
|                                                           
|Royalties, interest income and initial fees
from franchises |                               |   | 21,653  |           |      |   | 22,361  |           |  |   | 21,518  |          
|                                                           
|                                                           
|                                                           
|                                                           
|Fees from managed vision care programs                      |                               |   | 45,498  |           |      |   | 32,088  |           |  |   | 27,177  |          
|                                                            |                               |   |         |           |      |   |         |           |  |   |         |          
|                                                            | Total Cole Vision net revenue |   |         | 800,561   |      |   |         | 778,995   |  |   |         | 803,547   | 
|                                                           
|                                                           
|                                                           
|                                                           
|Retail sales of gift merchandise and services               |                               |   | 275,859 |           |      |   | 258,586 |           |  |   | 241,947 |          
|                                                            |                               |   |         |           |      |   |         |           |  |   |         |          
|                                                            | Consolidated net revenue      |   | $       | 1,076,420 |      |   | $       | 1,037,581 |  |   | $       | 1,045,494 | 
|                                                            |                               |   |         |           |      |   |         |           |  |   |         |          

|    
|----
|    
|    
|(10)
|    
|    

|                               |  |      |         |      |  |      |         |   |  |   |         |  
|------------------------------ |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                               |  | 2000 |         | 1999 |  | 1998
|                               |  |      |         |      |  |     
|Occupancy costs based on sales |  | $    | 54,854  |      |  | $    | 52,623  |   |  | $ | 54,563  |  
|                              
|                              
|                              
|                              
|All other rental expense       |  |      | 96,924  |      |  |      | 96,084  |   |  |   | 92,043  |  
|                              
|                              
|                              
|                              
|Sublease rental income         |  |      | (21,354 | )    |  |      | (21,672 | ) |  |   | (22,606 | )
|                              
|                              
|                              
|                              
|                               |  |      |         |      |  |      |         |   |  |   |         |  
|                              
|                              
|                              
|                              
|                               |  | $    | 130,424 |      |  | $    | 127,035 |   |  | $ | 124,000 |  
|                               |  |      |         |      |  |      |         |   |  |   |         |  

|
|
|
|
|

|                                               |  |         |     |          |  |                  |         |  |  |   |         |  
|---------------------------------------------- |  | ------- | --- | -------- |  | ---------------- | ------- |  |  | - | ------- | -
|                                               |  |         |     |          |  | Operating Leases
|                                               |  | Capital |     |         
|                                               |  | Leases  |     | Payments |  | Receipts        
|                                               |  |         |     |          |  |                 
|2001                                           |  | $       | 49  |          |  | $                | 73,938  |  |  | $ | (11,943 | )
|                                              
|                                              
|                                              
|                                              
|2002                                           |  |         | 55  |          |  |                  | 63,203  |  |  |   | (9,171  | )
|                                              
|                                              
|                                              
|                                              
|2003                                           |  |         |    |          |  |                  | 54,815  |  |  |   | (7,164  | )
|                                              
|                                              
|                                              
|                                              
|2004                                           |  |         |    |          |  |                  | 47,526  |  |  |   | (5,449  | )
|                                              
|                                              
|                                              
|                                              
|2005                                           |  |         |    |          |  |                  | 37,066  |  |  |   | (3,681  | )
|                                              
|                                              
|                                              
|                                              
|2006 and thereafter                            |  |         |    |          |  |                  | 88,213  |  |  |   | (5,998  | )
|                                               |  |         |     |          |  |                  |         |  |  |   |         |  
|Total future minimum lease payments            |  | $       | 104 |          |  | $                | 364,761 |  |  | $ | (43,406 | )
|                                               |  |         |     |          |  |                  |         |  |  |   |         |  
|Amount representing interest                   |  |         | 8   |         
|                                               |  |         |     |         
|Present value of future minimum lease payments |  | $       | 96  |         
|                                               |  |         |     |         

F-18



---



In the ordinary course of business, the Company is involved in various
legal proceedings. The Company is of the opinion that the ultimate resolution
of these matters will not have a material adverse effect on the results of
operations or the financial position of the Company.

F-19



---



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON THE FINANCIAL STATEMENT SCHEDULES

TO THE BOARD OF DIRECTORS OF COLE NATIONAL GROUP, INC.:

We have audited in accordance with auditing standards generally accepted in the
United States the consolidated financial statements of Cole National Group,
Inc. and Subsidiaries included in Form 10-K, and have issued our report thereon
dated March 26, 2001. Our audits were made for the purpose of forming an
opinion on those statements taken as a whole. The financial statement schedules
are the responsibility of the Companys management and are presented for
purposes of complying with the Securities and Exchange Commissions rules and
are not part of the consolidated financial statements. These schedules have
been subjected to the auditing procedures applied in the audits of the
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the consolidated financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Cleveland, Ohio,
  March 26, 2001.

F-20



---



Schedule I

COLE NATIONAL GROUP, INC. AND SUBSIDIARIES
CONDENSED FINANCIAL INFORMATION OF REGISTRANT



---




Cole National Group, Inc.
Condensed Balance Sheets
February 3, 2001 and January 29, 2000
(Dollars in millions)

|                                      |                                            |   |       |       |      |   |       |       | 
|------------------------------------- | ------------------------------------------ | - | ----- | ----- | ---- | - | ----- | ----- | 
|                                      |                                            |   | 2000  |       | 1999
|                                      |                                            |   |       |       |     
|Assets:                              
|                                     
|                                     
|                                     
|                                     
|Cash                                  |                                            | $ | 26.4  |       |      | $ | 21.0  |      
|                                     
|                                     
|                                     
|                                     
|Deferred income tax benefits          |                                            |   | 2.5   |       |      |   | 4.3   |      
|                                     
|                                     
|                                     
|                                     
|Investment in subsidiaries            |                                            |   | 391.8 |       |      |   | 401.2 |      
|                                     
|                                     
|                                     
|                                     
|Property and equipment, net           |                                            |   | 3.6   |       |      |   | 3.9   |      
|                                     
|                                     
|                                     
|                                     
|Other                                 |                                            |   | 8.0   |       |      |   | 8.3   |      
|                                      |                                            |   |       |       |      |   |       |      
|                                      | Total assets                               |   | $     | 432.3 |      |   | $     | 438.7 | 
|                                      |                                            |   |       |       |      |   |       |      
|Liabilities and stockholders equity:
|                                     
|                                     
|                                     
|                                     
|Accounts payable and accrued expenses |                                            | $ | 12.5  |       |      | $ | 19.9  |      
|                                     
|                                     
|                                     
|                                     
|Payable to affiliates                 |                                            |   | 85.9  |       |      |   | 86.7  |      
|                                     
|                                     
|                                     
|                                     
|Long-term debt                        |                                            |   | 274.4 |       |      |   | 274.7 |      
|                                     
|                                     
|                                     
|                                     
|Other long-term liabilities           |                                            |   | 5.2   |       |      |   | 4.1   |      
|                                     
|                                     
|                                     
|                                     
|Stockholders equity                  |                                            |   | 54.3  |       |      |   | 53.3  |      
|                                      |                                            |   |       |       |      |   |       |      
|                                      | Total liabilities and stockholders equity |   | $     | 432.3 |      |   | $     | 438.7 | 
|                                      |                                            |   |       |       |      |   |       |      

F-21



---



Schedule I

|                          |  |            
|------------------------- |  | -----------
|Cole National Group, Inc. |  | (continued)

Condensed Statements of Operations and Cash Flows
53 Weeks Ended February 3, 2001,
52 Weeks Ended January 29, 2000 and
52 Weeks Ended January 30, 1999
(Dollars in millions)

|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |      |       |       |  
|--------------------------------------------------------------------------------------------- | ----- | --------------------------- | ---------------------------------------------------- | ---- | ----------- | ---- | ----------- | ---- | ----------- | ---- | ----- | ---- | ----- | ----- | -
|                                                                                              |       |                             |                                                      |      | February 3, |      | January 29, |      | January 30,
|                                                                                              |       |                             |                                                      |      | 2001        |      | 2000        |      | 1999       
|                                                                                              |       |                             |                                                      |      |             |      |             |      |            
|Revenue  services to affiliates                                                              |       | $                           | 16.4                                                 |      |             | $    | 10.4        |      |             | $    | 8.6   |     
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Operating expenses                                                                            |       |                             | 14.3                                                 |      |             |      | 10.4        |      |             |      | 11.8  |     
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Interest expense                                                                              |       |                             | 0.3                                                  |      |             |      | 0.1         |      |             |      | 2.4   |     
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Pre-tax income (loss)                                                                         |       |                             | 1.8                                                  |      |             |      | (0.1        | )    |             |      | (5.6  | )   
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Income tax benefit                                                                            |       |                             | (0.4                                                 | )    |             |      | (0.9        | )    |             |      | (1.4  | )   
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Income (loss) before equity in undistributed earnings
of subsidiaries and extraordinary items |       |                             | 2.2                                                  |      |             |      | 0.8         |      |             |      | (4.2  | )   
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Equity in undistributed earnings (loss) of subsidiaries                                       |       |                             | (0.4                                                 | )    |             |      | 3.7         |      |             |      | 23.5  |     
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Net income                                                                                    |       |                             | 1.8                                                  |      |             |      | 4.5         |      |             |      | 19.3  |     
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Adjustments to reconcile net income to cash provided by
(used for) operating activities       |       |                             | 6.8                                                  |      |             |      | (7.1        | )    |             |      | (22.3 | )   
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|                                                                                              |       |                             | Net cash provided by (used for) operating activities |      |             | 8.6  |             |      |             | (2.6 | )     |      |       | (3.0  | )
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Investing activities:                                                                        
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              | Other |                             |                                                      | (1.6 | )           |      |             | (2.1 | )           |      |       | (0.3 | )    
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|                                                                                              |       |                             | Net cash used for investing activities               |      |             | (1.6 | )           |      |             | (2.1 | )     |      |       | (0.3  | )
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Financing activities:                                                                        
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |       | Repayment of long-term debt |                                                      |      | (0.4        | )    |             |      | (0.3        | )    |       |      | (14.8 | )    
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |       | Advances to affiliates      |                                                      |      | (0.8        | )    |             |      | (9.0        | )    |       |      | (2.1  | )    
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |       | Payment of financing fees   |                                                      |      | (.4         | )    |             |      | (0.3        | )    |       |      |      |      
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                              |       | Other                       |                                                      |      |            |      |             |      | 0.6         |      |       |      |      |      
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|                                                                                              |       |                             | Net cash used for financing activities               |      |             | (1.6 | )           |      |             | (9.0 | )     |      |       | (16.9 | )
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Net change in cash                                                                            |       |                             | 5.4                                                  |      |             |      | (13.7       | )    |             |      | (20.2 | )   
|                                                                                             
|                                                                                             
|                                                                                             
|                                                                                             
|Cash, beginning of period                                                                     |       |                             | 21.0                                                 |      |             |      | 34.7        |      |             |      | 54.9  |     
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     
|Cash, end of period                                                                           |       | $                           | 26.4                                                 |      |             | $    | 21.0        |      |             | $    | 34.7  |     
|                                                                                              |       |                             |                                                      |      |             |      |             |      |             |      |       |     

F-22



---



Schedule I

(continued)

Note to Condensed Financial Information of Registrant

---

---

The accompanying financial information of Cole National Group, Inc., a
wholly-owned subsidiary of Cole National Corporation, is as of February 3, 2001
and January 29, 2000 and for the 53 weeks ended February 3, and 52 weeks ended
January 29, 2000 and January 30, 1999. Cole National Group is a holding company
for its wholly-owned subsidiaries, Things Remembered, Inc., Cole Vision
Corporation and Pearle, Inc., except for expenses associated with Cole National
Groups corporate offices, consisted of no other operations.

This financial information should be in connection with the Notes to
Consolidated Financial Statements of Cole National Group, Inc. and
Subsidiaries contained elsewhere in this Form 10-K.

F-23



---



Schedule II

Cole National Group, Inc. and Subsidiaries
Valuation and Qualifying Accounts
53 Weeks Ended February 3, 2001
52 Weeks Ended January 29, 2000 and
52 Weeks Ended January 30,1999


|                                |             |           |            |          |             |            |     |        |   |   |         |       |   |   |     |     | 
|------------------------------- | ----------- | --------- | ---------- | -------- | ----------- | ---------- | --- | ------ | - | - | ------- | ----- | - | - | --- | --- | 
|                                |             |           | Charged   
|                                |             |           | Balance at |          | (Reversals) |            |     |        |   |   | Balance
|                                |             |           | Beginning  |          | to Cost and |            |     |        |   |   | End of 
|Description                     |             | of Period |            | Expenses |             | Deductions |     | Period
|                                |             |           |            |          |             |            |     |       
|February 3, 2001               
|                               
|                               
|                               
|                               
|Allowance for doubtful accounts |             | $         | 7.6        |          |             | $          | 4.6 |        |   | $ | (4.9    | )(A)  |   | $ | 7.3 |    
|                               
|                               
|                               
|                               
|Franchise repurchase reserve    |             |           | 4.2        |          |             |            | 0.8 |        |   |   | (0.5    | )(A)  |   |   | 4.5 |    
|                               
|                               
|                               
|                               
|January 29, 2000               
|                               
|                               
|                               
|                               
|Allowance for doubtful accounts |             | $         | 7.2        |          |             | $          | 4.3 |        |   | $ | (3.9    | )(A)  |   | $ | 7.6 |    
|                               
|                               
|                               
|                               
|Franchise repurchase reserve    |             |           | 5.2        |          |             |            | 0.3 |        |   |   | (1.3    | )(A)  |   |   | 4.2 |    
|                               
|                               
|                               
|                               
|Restructuring-                 
|                               
|                               
|                               
|                               
|                                | 1998 Charge |           | $          | 6.1      |             |            | $   | (0.1   | ) |   | $       | (6.0  | ) |   |     |    | 
|                               
|                               
|                               
|                               
|                                | 1996 Charge |           |            | 1.0      |             |            |     |       |   |   |         | (1.0  | ) |   |     |    | 
|                               
|                               
|                               
|                               
|January 30, 1999               
|                               
|                               
|                               
|                               
|Allowance for doubtful accounts |             | $         | 7.1        |          |             |            | 0.9 |        |   | $ | (0.8    | )(A)  |   | $ | 7.2 |    
|                               
|                               
|                               
|                               
|Franchise repurchase reserve    |             |           | 6.7        |          |             |            |    |        |   |   | (1.5    | )(A)  |   |   | 5.2 |    
|                               
|                               
|                               
|                               
|Discontinued operation reserve  |             |           | 1.3        |          |             |            |    |        |   |   | (1.3    | )(B)  |   |   |    |    
|                               
|                               
|                               
|                               
|Restructuring-                 
|                               
|                               
|                               
|                               
|                                | 1998 Charge |           | $          |         |             |            | $   | 13.9   |   |   | $       | (7.8  | ) |   | $   | 6.1 | 
|                               
|                               
|                               
|                               
|                                | 1997 Charge |           |            | 4.8      |             |            |     | (2.3   | ) |   |         | (2.5  | ) |   |     |    | 
|                               
|                               
|                               
|                               
|                                | 1996 Charge |           |            | 21.8     |             |            |     | (10.0  | ) |   |         | (10.8 | ) |   |     | 1.0 | 

(A) Receivable balances written off, net of recoveries
(B) Discontinued operation charges taken against the reserve

Reserve balances presented in the Notes to Consolidated Financial Statements are not presented in this schedule.



F-24



---



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                      
|3.1(i)  |  | Certificate of Incorporation of Cole National Group, incorporated by
reference to Exhibit 3.1(i) to Cole National Groups Registration
Statement on Form S-1 (Registration No. 33-66342).                                                                                                                                                                                                                                            
|       
|       
|       
|       
|3.2(ii) |  | By-Laws of Cole National Group, incorporated by reference to
Exhibit 3.2(ii) to Cole National Groups Registration Statement on Form
S-1 (Registration No. 33-66342).                                                                                                                                                                                                                                                                
|       
|       
|       
|       
|4.1     |  | Indenture dated November 15, 1996, by and among Cole National Group and
Norwest Bank Minnesota, National Association, as trustee, relating to the
9 7/8% Senior Subordinated Notes due 2006 (the form of which Senior
Subordinated Note is included in such Indenture), incorporated by
reference to Exhibit 4.1 of Cole National Corporations Report on Form
8-K, filed with the Commission on December 2, 1996 (File No. 1-12814).
|       
|       
|       
|       
|4.2     |  | Indenture dated August 22, 1997, between Cole National Group, Inc. and
Norwest Bank Minnesota, National Association, as Trustee, relating to the
8-5/8% Senior Subordinated Notes Due 2007, incorporated by reference to
Exhibit 4.4 of Cole National Group, Inc.s Registration Statement on Form
S-1 (Registration No. 333-34963).                                                                                                 
|       
|       
|       
|       
|4.3     |  | Cole National Group by this filing agrees, upon request, to file with
the Commission the instruments defining the rights of holders of
long-term debt of Cole National Group and its subsidiaries where the
total amount of securities authorized thereunder does not exceed 10% of
the total assets of Cole National Group and its subsidiaries on a
consolidated basis.                                                            
|       
|       
|       
|       
|10.1    |  | Lease Agreement (Knoxville) dated as of November 28, 1979 by and between
Tommy Hensley, as agent for the real property of Mrs. Don Siegel and Cole
Vision Corporation, as amended and supplemented, incorporated by reference
to Exhibit 10.15 to Cole National Groups Registration Statement on
Form S-1 (Registration No. 33-66342).                                                                                              
|       
|       
|       
|       
|10.2    |  | Lease Agreement (Memphis) dated as of October 2, 1991 by and between
Shelby Distribution Park and Cole Vision Corporation, incorporated by
reference to Exhibit 10.16 to Cole National Groups Registration Statement
on Form S-1 (Registration No. 33-66342).                                                                                                                                                                       
|       
|       
|       
|       
|10.3    |  | Lease Agreement (Richmond) dated as of April 23, 1982 by and between
Daniel, Daniel & Daniel and Cole Vision Corporation, as amended and
supplemented, incorporated by reference to Exhibit 10.17 to Cole National
Groups Registration Statement on Form S-1 (Registration No. 33-66342).                                                                                                                                           
|       
|       
|       
|       
|10.4    |  | Lease for Multi-Tenancy Space (Salt Lake) dated as of October 30, 1981 by
and between East Centennial Joint Venture and Cole Vision Corporation, as
amended and supplemented, incorporated by reference to Exhibit 10.18 to
Cole National Groups Registration Statement on Form S-1 (Registration No.
33-66342).                                                                                                                    
|       
|       
|       
|       
|10.5    |  | Form of Lease Agreement Finite 19518 dated as of December 29, 1988
between Sears, Roebuck and Co. and Cole Vision Corporation, incorporated
by reference to Exhibit 10.23 to Cole National Groups Registration
Statement on Form S-1 (Registration No. 33-66342).                                                                                                                                                                   
|       
|       
|       
|       
|10.6    |  | Lease Agreement (Knoxville) dated as of April 11, 1995 by and between
Richard T. Fox and Cole Vision Corporation, incorporated by reference to
Exhibit 10.29 to Cole National Corporations Annual Report on Form 10-K
for the period ended February 3, 1996 (File No. 1-12814).                                                                                                                                                     
|       
|       
|       
|       
|10.7    |  | Form of Indemnification Agreement for Directors of Cole National
Corporation, incorporated by Reference to Exhibit 10.19 to Cole National
Groups Registration Statement on Form S-1 (Registration No. 33-66342).                                                                                                                                                                                                                    
|       
|       
|       
|       
|10.8    |  | Form of Indemnification Agreement for Officers of Cole National
Corporation, incorporated by reference to Exhibit 10.20 to Cole National
Groups Registration Statement on Form S-1 (Registration No. 33-66342).                                                                                                                                                                                                                     
|       
|       
|       
|       
|10.9    |  | Form of License Agreement (Optical), incorporated by reference to Exhibit
10.24 to Cole National Groups Registration Statement on Form S-1
(Registration No. 33-66342).                                                                                                                                                                                                                                                             

X-1



---



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                    
|10.10   |  | Form of License/Lease Agreement (Optical), incorporated by reference to
Exhibit 10.25 to Cole National Groups Registration Statement on Form S-1
(Registration No. 33-66342).                                                                                                                                                                                                                     
|       
|       
|       
|       
|10.11   |  | Agreement for the Allocation of Federal Income Tax Liability and
Benefits among Members of the Parent Group dated August 23, 1985, as
amended, incorporated by reference to Exhibit 10.26 to Cole National
Groups Registration Statement on Form S-1 (Registration No. 33-66342).                                                                                                                 
|       
|       
|       
|       
|10.12   |  | Assignment and Assumption Agreement dated as of September 30, 1993
between Cole National Corporation and Cole National Group, incorporated by
reference to Exhibit 10.24 to Cole National Corporations Annual Report on
Form 10-K for the period ended February 3, 1996 (File No. 1-12814).                                                                                                       
|       
|       
|       
|       
|10.13   |  | Lease agreement (Salt Lake) dated as of November 1, 1996 by and between
Gibbons Realty Company and Cole Vision Corporation, incorporated by
reference to Exhibit 10.01 of Cole National Corporations quarterly report
of Form 10-Q for the period ended November 2, 1996 (File No. 1-12814).                                                                                                      
|       
|       
|       
|       
|10.14   |  | Credit Agreement, dated as of November 15, 1996, among Cole Vision
Corporation, Things Remembered, Inc., Cole Gift Centers, Inc., Pearle,
Inc. and Pearle Service Corporation and Canadian Imperial Bank of
Commerce, incorporated by reference to Exhibit 99.1 of Cole National
Corporations Report on Form 8-K, filed with the Commission on December 2,
1996 (File No. 1-12814).               
|       
|       
|       
|       
|10.15   |  | Cole National Group Guarantee and Cash Collateral Agreement, dated as of
November 15, 1996, by Cole National Group and Cole National Corporation,
incorporated by reference to Exhibit 99.3 of Cole National Corporations
Report on Form 8-K, filed with the Commission on December 2, 1996 (File
No. 1-12814).                                                                                   
|       
|       
|       
|       
|10.16   |  | Guarantee and Collateral Agreement, dated as of November 15, 1996, by
Cole Vision Corporation, Things Remembered, Inc., Cole Gift Centers, Inc.,
Pearle, Inc. and Pearle Service Corporation and Canadian Imperial Bank of
Commerce, incorporated by reference to Exhibit 99.4 of Cole National
Corporations Report on Form 8-K, field with the Commission on December 2,
1996 (File No. 1-12814).
|       
|       
|       
|       
|10.17   |  | First Amendment to the Credit Agreement, dated as of January 13, 1997,
among Cole Vision Corporation, Things Remembered, Inc., Cole Gift Centers,
Inc., Pearle, Inc., and Pearle Service Corporation and Canadian Imperial
Bank of Commerce, incorporated by reference to Exhibit 10.33 of Cole
National Group, Inc.s Registration Statement on Form S-1 (Registration
No. 333-34963).            
|       
|       
|       
|       
|10.18   |  | Second Amendment to Credit Agreement, dated as of August 8, 1997, among
Cole Vision Corporation, Things Remembered, Inc., Cole Gift Centers, Inc.,
Pearle, Inc. and Pearle Service Corporation and Canadian Imperial Bank of
Commerce, incorporated by reference to Exhibit 10.34 of the Cole National
Group, Inc.s Registration Statement on Form S-1 (Registration No.
333-34963).              
|       
|       
|       
|       
|10.19   |  | Third Amendment to the Credit Agreement, dated as of May 15, 1998, among
Cole Vision Corporation and Canadian Imperial Bank of Commerce,
incorporated by reference to Exhibit 10.1 of Cole National Corporations
Quarterly Report on Form 10-Q for the period ended May 2, 1998 (File No.
1-12814).                                                                                               
|       
|       
|       
|       
|10.20   |  | Fourth Amendment to the Credit Agreement, dated as of March 5, 1999,
among Cole Vision Corporation, Things Remembered, Inc. and Pearle, Inc.,
and Canadian Imperial Bank of Commerce, incorporated by reference to
Exhibit 10.45 to Cole National Corporations Annual Report on Form 10-K
for the period ended January 30, 1999
(File No. 1-12814).                                               
|       
|       
|       
|       
|10.21*  |  | Cole National Group, Inc. 1999 Supplemental Retirement Benefit Plan
dated as of December 17, 1998, incorporated by reference to Exhibit 10.51
to Cole National Corporations Annual Report on Form 10-K for the period
ended January 30, 1999 (File No. 1-12814).                                                                                                                                  
|       
|       
|       
|       
|10.22*  |  | Instrument Designating Participants of the Cole National Group, Inc.
1999 Supplemental Retirement Benefit Plan dated December 17, 1998,
incorporated by reference to Exhibit 10.52 to Cole National Corporations
Annual Report on Form 10-K for the period ended January 30, 1999 (File No.
1-12814).                                                                                             

X-2



---



EXHIBIT INDEX

|        |  |                                                                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                               
|10.23*  |  | Cole National Group, Inc. Deferred Compensation Plan effective as of
February 1, 1999, incorporated by reference to Exhibit 10.53 to Cole
National Corporations Annual Report on Form 10-K for the period ended
January 30, 1999 (File No. 1-12814).                                                                                                         
|       
|       
|       
|       
|10.24*  |  | Amendment No. 1, dated as of December 17, 1998, to the Cole National
Group, Inc. Supplemental Pension Plan, incorporated by reference to
Exhibit 10.54 to Cole National Corporations Annual Report on Form 10-K
for the period ended January 30, 1999 (File No. 1-12814).                                                                                    
|       
|       
|       
|       
|10.25*  |  | Employment Agreement entered into as of December 17, 1998 by and among
Cole National Corporation, Cole National Group, Inc., Cole Vision
Corporation, Pearle Inc., Things Remembered, Inc. and Jeffrey A. Cole,
incorporated by reference to Cole National Corporations Annual Report on
Form 10-K in the period ended January 30, 1999 (File No. 1-12814)   
|       
|       
|       
|       
|10.26   |  | Fifth Amendment to the Credit Agreement, dated as of August 20, 1999,
among Cole Vision Corporation, Things Remembered, Inc. and Pearle, Inc.,
and Canadian Imperial Bank of Commerce, incorporated by reference to
Exhibit 10.1 to Cole National Corporations Quarterly Report on Form 10-Q
for the period ended July 31, 1999 (File No. 1-12814).          
|       
|       
|       
|       
|10.27   |  | Sixth Amendment and Waiver to the Credit Agreement, dated as of March 7,
2000, among Cole Vision Corporation, Things Remembered, Inc. and Pearle,
Inc., and Canadian Imperial Bank of Commerce, incorporated by reference to
Exhibit 10.50 to Cole National Corporations Annual Report on Form 10-K
for the period ended February 3, 2001 (File No. 1-12814).
|       
|       
|       
|       
|10.28*  |  | Instrument Designating Participant of the Cole National Group, Inc. 1999
Supplemental Retirement Benefit Plan dated January 1, 2000, incorporated
by reference to Exhibit 10.66 to Cole National Corporations Annual Report
on Form 10-K for the period ended February 3, 2001 (File No. 1-12814).                                                           
|       
|       
|       
|       
|10.29*  |  | Addendum to Employment Agreement dated June 4, 1999 among Jeffrey A.
Cole, Cole National Corporation and certain of its subsidiaries,
incorporated by reference to Exhibit 10.67 to Cole National Corporations
Annual Report on Form 10-K for the period ended February 3, 2001 (File No.
1-12814).                                                          
|       
|       
|       
|       
|10.30   |  | Seventh Amendment to the Credit Agreement, dated as of April 21, 2000
among Cole Vision Corporation, Things Remembered, Inc., and Canadian
Imperial Bank of Commerce, incorporated by reference to Exhibit 10.69 to
Cole National Corporations Annual Report on Form 10-K for the period
ended February 3, 2001 (File No. 1-12814).                          
|       
|       
|       
|       
|24      |  | Power(s) of Attorney                                                                                                                                                                                                                                                                                                                                          

X-3