<PAGE>





                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT











                                BACKYARD MOMENTS






<PAGE>

CONTENTS

Financial
Highlights
1

Letter to
Shareholders
2

Backyard
Moments
4

Satisfied Customers
See the Value
8
                                                [PHOTO]
An Alliance
with Homebuilders
8

Financial Year
in Review
9

Corporate
Information
Inside Back Cover


                  Backyard Moments

                  Doug, Lori and their three children are just one of many
                  thousands of families whose backyard dreams have been
                  fulfilled by Anthony & Sylvan. We feature their backyard in
                  this year's annual report. See how a well-planned backyard
                  environment can make all the difference and provide many years
                  of fun, relaxation, exercise and pure entertainment.




<PAGE>



                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                              FINANCIAL HIGHLIGHTS


<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)          2001          2000          1999
---------------------------------------------------------------------------------------
<S>                                                <C>           <C>           <C>
Net sales                                          $191,725      $201,723      $184,713
Income from operations                                2,270         6,377         3,453
Net income                                            1,380         3,546         1,017
Diluted earnings per share                             0.29          0.76          0.19
Total assets                                         65,998        59,203        56,578
Working capital                                       6,946         1,420           262
Total debt                                            7,555         1,312         4,764
Shareholders' equity                                 35,629        36,424        30,572
Market price of stock at 12/31                         7.35          6.92          4.74
</TABLE>


                                        NATIONAL RESOURCES,
                                        LOCAL SERVICE

                                        This map shows the geographic reach of
             [MAP]                      Anthony & Sylvan Pools' Sales Design
                                        Centers and Retail Stores. We also offer
                                        modernization services in several
                                        markets. Our pool service centers,
                                        available in limited markets, can help
                                        customers keep their pools and spas
                                        working properly. Our web site,
                                        www.anthonysylvan.com, contains a
                                        complete list of addresses and phone
                                        numbers.


[LOGO] ANTHONY & SYLVAN POOLS creates backyard dreams for thousands of families
       across the United States. We encourage homeowners to dream about what
could be - then we deliver it to their backyard. It all starts with one of our
custom designs and finishes with quality workmanship and customer service. With
more than 50 years of experience and a customer base of more than 350,000 pools
and spas already installed, Anthony & Sylvan is truly WHERE AMERICA SWIMS(TM).

                                       1

<PAGE>


                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


                               TO OUR SHAREHOLDERS

Backyard dreams. We are dedicated to fulfilling those dreams. In this annual
report, we feature one family from the many thousands of families over the years
whose backyard dreams have become a reality. Experience the fun, relaxation and
joys of an oasis at home. See why Anthony & Sylvan is the provider of choice for
in-ground swimming pools and spas for more than 50 years. Come along with us and
find out why Anthony & Sylvan makes backyard dreams come true and is "Where
America Swims."

Every year brings its ups and downs and successes and challenges. 2001 was no
exception. Our more than five decades of experience in designing and installing
in-ground swimming pools and our depth of resources helped us somewhat weather
the effects of the ailing economy, low consumer confidence and the tragic events
of September 11. As such, the year produced financial results that we were less
than happy with. As a result, in challenging years like 2001, financially strong
industry leaders such as Anthony & Sylvan dissect the causes and effects of
internal and external forces, develop strategies to minimize the future impact
that those forces may have on the business, resist the urge to sacrifice
long-term profits for short-term gains, and invest in the future.

         With approximately $36 million in equity and no debt except for
seasonal borrowings, our strong financial condition and leadership position in
the industry enable us to take advantage of short-term opportunities and to fund
our long-term growth plans. Rather than dwelling on the past, let me share with
you some of the things we have done to better prepare for the future and to
increase shareholder value.

IMPROVING CUSTOMER SATISFACTION

At Anthony & Sylvan, our mission is not just about installing swimming pools,
but about delighting our customers. That means both our products and processes
must fulfill our customers' backyard dreams. Every employee's goal is to satisfy
customers. Some of the things we did in 2001 to install additional quality
controls and to respond faster to customer inquiries include:

-    Establishing a national call center to improve the effectiveness of our
     selling processes;

-    Expanding the use of technology, including SalesLogix(R), our customer
     contact management software, and PoolDraw(TM), our designing and drafting
     tool;

-    Increasing the number of field project managers by 22 percent to better
     serve customers; and

-    Instituting a new incentive compensation program designed to reward our
     employees for meeting and exceeding customer expectations.

         We know that satisfied customers lead to increased referrals and new
business - in 2001, for example, the number of leads given to us by satisfied
customers increased by 30 percent.

                         SERVING THE HOMEBUILDER MARKET

Last year, we decided to invest heavily in expanding our relationships with
homebuilders. Historically, even within one market or a single subdivision,
homebuilders could be served by numerous pool installers. We have invested in
our "national" approach to this segment by:

-    Forming "homebuilder" organizations within each of our divisions in all of
     our markets;

-    Developing a separate national "homebuilder" co-branded identity to partner
     with homebuilders and their customers;

-    Participating in home and trade shows, including the largest homebuilder
     event, the February 2002 International Builders Show in Atlanta, Georgia,
     where we sponsored a booth and were selected to install the "backyard
     dream" pool and spa at the New American Home(R), a tri-level showcase home
     built specifically for the show; and

-    Creating numerous, tailored homebuilder programs such as co-op advertising
     and model pools.

         As a result, the number of homebuilders we serve today is nearly three
times the number served at the beginning of 2001, which we believe will pay
dividends in 2002 and beyond.



                                       2
<PAGE>

                                                        [PHOTO]

                              GROWING THE BUSINESS

Our primary objective has not changed - to be the leading, most innovative and
quality-focused in-ground concrete swimming pool company in the nation and in
each market we serve. With less than 5 percent of the overall market, we see
huge opportunities for profitable growth. To this end, we started or continued
our focus on a number of initiatives in 2001 that should serve us well in the
future. The following are some examples.

-    We opened four new pool sales offices and our first Florida-based retail
     store was activated in Tampa, bringing the number of retail stores to 22 in
     eight states.

-    Our average contract value for a new swimming pool increased by more than
     21 percent in the last two years, in part by expanding our product
     offerings in many markets to give customers convenient "one-stop shopping"
     to include fences, screen enclosures, solar heat, and a variety of
     complementary products and services that are intrinsic to the enjoyment of
     the backyard.

-    We consolidated seven divisions into two as a way of leveraging our
     overhead and management talent over wider geographic areas; and

-    A newly created position of vice president-marketing was filled by Jim
     Palmer, a veteran in the pool industry. He joined us from a leading
     supplier of consumer-oriented pool products with industry-leading retail
     marketing. In this position, Jim is leading a very focused effort in
     identifying and launching new products; developing new campaigns aimed at
     improving the effectiveness of our advertising; growing our retail
     business; and accelerating the strengthening of the Anthony & Sylvan brand
     nationally.

         We continue to open new sales offices, enter new markets, increase
retail sales and expand our renovation services. Our expansion into new markets
not currently served will be accomplished through internal start-up or
acquisition. Our criteria for acquisitions start with businesses with
outstanding reputations and committed management teams, and include strict
standards for growth, profit and being immediately accretive.

                              INVESTING IN PEOPLE

Without question, our most important asset is our people. Our goal of hiring and
deploying the best talent and increasing the quality of our organization remains
a key strategy. To that end, when it comes to opportunities for personal growth,
benefits and just having fun, we have set our sights on emulating the best
companies in America. In 2001, we made a significant investment in this
important area by establishing the Anthony & Sylvan Institute. Located in
Orlando, Florida, the Institute was created to further develop and train
employees and third-party installers. Designed with the help of our key
partners, the Institute is equipped with state-of-the-art computer technology
and a full-scale model pool, including cutaways of the concrete shell, plumbing
and electric, all intended to serve as additional training tools. It features a
spa, waterfall, lighting options and numerous other accessories that will allow
the best possible training on the sale, installation and usage of our products.
We also plan to offer training in "soft" skills essential for effective
management.

                                    OUTLOOK

Our homebuilder programs, expanding the use of state-of-the-art technologies,
investing in people through the Institute, and branding initiatives are ways we
are using our financial strength to position us for the future. With numerous
opportunities for growth and the strong foundations that we have built, combined
with a Board and senior management team that are significantly financially
invested, we believe we have an excellent formula for increasing shareholder
value. We are well positioned to deliver long-term revenue and profit growth
rates of 15 to 20 percent.

         In closing, customers remain our passion and our base for the future.
We play a leading role in the swimming pool industry and in making backyard
dreams come true. I want to thank our customers, shareholders, employees and
suppliers for their continued support.


                              /s/ Stuart D. Neidus

                                STUART D. NEIDUS
                           Chairman of the Board and
                             Chief Executive Officer


                                       3
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT



                                BACKYARD MOMENTS

WHAT MAKES YOU DREAM? WHAT MAKES FAMILIES LIKE DOUG, LORI AND THEIR
CHILDREN WANT AN ANTHONY & SYLVAN SWIMMING POOL? THERE ARE A NUMBER OF
REASONS:


                                      FUN

Many of our customers did not dare dream of owning a swimming pool until their
neighbors and friends raved at how much fun they were having. Now, their Anthony
& Sylvan pool or spa is the center of fun for many parties and family
gatherings. Adding a water volleyball net or basketball hoop will provide hours
of fun for adults and children, alike. Watching people of all ages having fun in
a pool is enough to lighten the heart and give one a reason to smile.

                                 FAMILY VALUES

With the increased emphasis on family and the growing desire to stay closer to
home and enjoy more quality time together, families are looking to their
backyard as a special place to enjoy unique family experiences. Like a magnet,
the family pool or spa brings the family together. Some call it bonding; others
simply call it love - the kind that keeps families close. Our pools bring
families together.

                                   RELAXATION

Families are changing the way they look at relaxation and spending more time at
home, enjoying their backyard as a comfortable, convenient vacation oasis - a
place to unwind from the stresses of the day and be together as a family.
Imagine spending quiet afternoons or evenings, poolside, listening to a flowing
waterfall or soaking tired muscles in an invigorating spa. Ask anyone who owns a
pool how easy it is to read in a comfortable chair next to the sereneness of the
water. When the spirit moves you, take a dip for a quick refresher and then plow
back into your favorite pages.

                                    FITNESS

Swimming, water aerobics and water sports are great for the health and
well-being of people of all ages - young, upbeat professionals; families with
toddlers to teenagers; and mature families that include grown children and their
grandchildren. The benefits of a spa can be therapeutic as well as relaxing.
Many physicians and health trainers believe that swimming and aquatics are the
very best exercises for the body. Water exercises are beneficial because they
put less stress on limbs and joints.

                                 ENTERTAINMENT

Sharing your backyard paradise with others is a natural form of entertainment.
The alluring beauty of the pool draws family, close friends and guests to the
pool as a wonderful place to gather for informal get-togethers and parties. It
is the perfect setting for a family birthday celebration or a social outing for
colleagues and friends. Everything works better outdoors. Food, conversation and
impromptu gatherings all are special events when you have a pool.

                                SOUND INVESTMENT

While the swimming pool is often the center of attention, an overall
well-planned backyard environment can dramatically increase the value of a home.
Adding a spa, picnic area, barbecue or outdoor kitchen, pool house or cabana, as
well as landscape and lighting options will provide many years of enjoyment and
can bring value to the property.


         DOUG, LORI
         AND THEIR CHILDREN

         Doug and Lori wanted a pool that would serve multiple purposes - its
[PHOTO]  shape conducive to swimming, playing and relaxing, while having a deck
         area large enough to entertain friends and family. This 1,200-
         square-foot pool includes Roman steps, a 12-foot loveseat (swimout), a
         stone diving platform, and automated, color-changing evening and
         nighttime lighting.



                                       4
<PAGE>



                                     [PHOTO]




                                       5
<PAGE>




                                     [PHOTO]



                                       6
<PAGE>


                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


            OUR MISSION IS NOT JUST ABOUT INSTALLING SWIMMING POOLS,
                        BUT ABOUT DELIGHTING CUSTOMERS.



                             WHY ANTHONY & SYLVAN?

There are few pool companies in the world with the experience of Anthony &
Sylvan Pools. Fewer still have the financial strength to be there when the need
for service or renovation may arise. Anthony & Sylvan has been building swimming
pools for families like Doug, Lori and their children for more than a
half-century, having installed more than 350,000 pools across the country. We
serve our customers through a company-owned network of more than 50 sales design
offices serving 31 geographic markets in 16 states. Our reputation is synonymous
with quality and integrity, backed by a Solid Gold Warranty program that assures
homeowners we offer the longevity to meet their maintenance and modernization
needs.
         Our track record, our reputation and the credibility of our name
testify to our abilities. However, we know that there is always room for
improvement. We are constantly making investments in the latest products,
techniques and technologies that will benefit our customers. Examples include:

-    All of our sales designers are equipped with laptop computers and software
     aimed at better serving our customers.

-    Our web site (www.anthonysylvan.com) is increasingly being accessed by
     customers to gather information and helpful hints about our products and
     services. More than 30 percent of our 2001 leads came to us through the
     Internet, which we directly linked to our contact management software. In
     some cases, we are able to contact the prospective customer by phone while
     he or she is still on our web site.

-    We have received numerous awards for our ability to satisfy customers with
     swimming pools built to quality standards. For example, our Charlotte
     division was selected as the "Best Pool Company" in the Charlotte area by a
     panel of judges consisting of builders, architects, realtors and designers.
     This is the second year in a row that we have received this honor.

         Because customer satisfaction matters to us, we survey every customer
at the completion of the pool installation. This program provides us with
feedback and helps us identify areas where we can improve our processes,
communications and delivery times. It also is a valuable tool for asking our
customers to give us names of family, friends or neighbors who might be
interested in having a swimming pool or spa installed by us.

                                 LOOKING AHEAD

We are poised to take advantage of the many opportunities that lie ahead. We
have plans to expand our pool installation business by: n Opening new sales
offices;

-    Hiring additional qualified, professional sales designers;

-    Increasing marketing efforts and improving the effectiveness of our
     advertising; and

-    Developing the homebuilder market to partner with homebuilders for swimming
     pool installation during home construction.

         To serve the more than 3 million in-ground swimming pools in use today,
we also plan on expanding our renovation and modernization services into other
markets beyond those we currently serve. While it is only a small part of our
business, the opportunities are huge. Our retail business, which is comprised of
22 retail stores located primarily in the Northeast, is also a target for
increased growth plans, and is a logical extension of our customer service
philosophy to allow us to build strong customer relationships long after a pool
is installed.



         Doug and Lori

         Doug and Lori also wanted a spa large enough to comfortably accommodate
[PHOTO]  family and friends. This 80-square- foot spa includes 10 jets, color
         lighting synchronized with the swimming pool lights, and is equipped
         with an automatic, programmable system that adjusts the water
         temperature of the pool and spa. The system also controls the various
         pumps and valves used to clean and filter the pool.


                                       7
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                       SATISFIED CUSTOMERS SEE THE VALUE

We make backyard dreams come true. The following are excerpts from some of the
unsolicited thank-you letters that we received last year. Many we post on
bulletin boards and office walls as a reminder of why we do what we do.


Your sales person performed her responsibilities in a thoroughly efficient and
conscientious manner. She always responded to our phone calls and answered all
of our questions.

Pete and Mitzi C., New Jersey

Building a swimming pool is not a fun thing from the physical disruption
standpoint - dig a hole, dirt all over everything, etc., but your professionals
reduced the disruption factor in every way they could. The result - a beautiful
pool that has truly changed our lifestyle.

Thomas and Ann S., Florida

Having such a beautiful pool and spa to show potential buyers in our custom
homes is making such a difference. One couple was looking for an entertaining
yard, and the pool and spa made a difference for them and obviously for our
company.

Custom Homebuilder, Texas

It was a pleasure dealing with your team and the overall project was truly a
work of art. The coordination of the various installation phases was flawless.

Michael B., Pennsylvania

Thank you for establishing one of the finest, most professional and courteous
teams - people with caring hands
and thoughtful minds.

Paul and Debbie M., Ohio

We just wanted to thank your company for doing an outstanding job on the
building of our pool. This is the third Anthony & Sylvan Pool that we have built
in the past 30 years.

John & Judy M., California

Your people were superior, very professional; no screw-ups. I have recommended
two pools that are being dug [now].

Betty and Al B., Nevada

In this era of dot-com companies and business uncertainties, it is nice to know
that even after all these years, you honored your warranty. (The pool was built
in February 1973, and the letter was received in June 2001.)

Mrs. Robert M., Texas

When we called on you to help us fulfill our dream [of pool ownership], we had
no idea of the complexity of the journey which we were about to embark upon. We
were at first overwhelmed by the prospect of designing, building and financing
our ideas. You stepped in and helped us manage the process. ... Without a
company such as Anthony & Sylvan, we would not have had our dream fulfilled.
Thank you ... for making this a banner year for fun and entertainment at our
house.
Robert, Evelyn, Robby, Spencer and Jensen S., North Carolina


--------------------------------------------------------------------------------

                         AN ALLIANCE WITH HOMEBUILDERS

[LOGO] The new home construction industry has experienced rapid growth over the
       past few years and is projected to continue to grow at a robust rate.
With our national network of offices that are 100 percent company-owned and
operated, we are well-positioned to develop and expand relationships with
national, regional and local homebuilders. Our goal is to become the pool
installer of choice in new housing developments, where the new homeowner's first
swim takes place on the day the family moves in and the cost of the pool
installation is included in the homeowner's first mortgage.

To this end, we have both hired and re-deployed sales people to identify and
develop new homebuilder relationships. The Anthony & Sylvan Home Builder
Alliance program was established during 2001 to focus on the specific needs of
the homebuilder. We understand the different issues in building on new
construction sites as compared with existing residences. Our phase work
scheduling is flexible to align with homebuilders' needs. We also offer a
powerful array of selling tools including a model pool program; targeted selling
brochures; co-op advertising; and dedicated sales personnel and field project
managers trained for homebuilder needs.


                                       8
<PAGE>

                    ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES
DECEMBER 31, 2001 AND 2000

(DOLLARS IN THOUSANDS)                                                                            2001           2000
------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>            <C>
Assets
Current Assets:
   Cash and cash equivalents                                                                    $    351       $    422
   Contract receivables, net of allowance for doubtful accounts
     of $680 and $720, respectively                                                               16,897         11,592
   Inventories                                                                                     5,799          5,219
   Prepayments and other                                                                           2,346          1,542
   Deferred income taxes                                                                           2,037          1,914
------------------------------------------------------------------------------------------------------------------------
       Total current assets                                                                       27,430         20,689
Property, Plant and Equipment, at cost:
   Land                                                                                            1,160          1,160
   Buildings and leasehold improvements                                                            3,720          2,963
   Machinery and equipment                                                                        11,879          9,526
------------------------------------------------------------------------------------------------------------------------
       Total                                                                                      16,759         13,649
   Less accumulated depreciation                                                                   7,452          4,975
------------------------------------------------------------------------------------------------------------------------
       Net property, plant and equipment                                                           9,307          8,674

Other Assets:
   Goodwill, net of accumulated amortization                                                      26,276         27,003
   Deferred income taxes                                                                             146             --
   Other                                                                                           2,839          2,837
------------------------------------------------------------------------------------------------------------------------
       Total other assets                                                                         29,261         29,840
------------------------------------------------------------------------------------------------------------------------
       TOTAL ASSETS                                                                             $ 65,998       $ 59,203
========================================================================================================================

Liabilities and Shareholders' Equity
Current Liabilities:
   Current maturities of long-term debt                                                         $      5       $     62
   Accounts payable                                                                                7,383          6,323
   Accrued expenses                                                                               13,029         12,379
   Accrued income taxes                                                                               67            505
------------------------------------------------------------------------------------------------------------------------
       Total current liabilities                                                                  20,484         19,269
------------------------------------------------------------------------------------------------------------------------
Long-Term Debt                                                                                     7,550          1,250
Deferred Income Tax Liabilities                                                                       --              6
Other Long-Term Liabilities                                                                        2,335          2,254
Commitments and Contingencies                                                                         --             --
Shareholders' Equity:
   Serial preferred shares, no par value; 1,000,000 shares authorized, none issued                    --             --
   Common shares, no par value; 29,000,000 shares authorized, 4,665,961 shares issued
     and 4,665,661 outstanding in 2001 and 4,926,047 shares issued and outstanding in 2000        40,305         36,261
   Treasury shares or equivalents, 975,664 in 2001 and 964,555 shares in 2000                     (5,592)        (5,546)
   Retained earnings                                                                                 916          5,709
         Total shareholders' equity                                                               35,629         36,424
------------------------------------------------------------------------------------------------------------------------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                             $ 65,998       $ 59,203
========================================================================================================================
</TABLE>



                See notes to consolidated financial statements.



                                       9
<PAGE>
                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                       CONSOLIDATED STATEMENTS OF INCOME

ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)              2001             2000           1999
-----------------------------------------------------------------------------------------

<S>                                              <C>             <C>            <C>
Net sales                                        $ 191,725       $ 201,723      $ 184,713
Cost of sales                                      139,627         145,883        136,970
-----------------------------------------------------------------------------------------
Gross profit                                        52,098          55,840         47,743
Operating expenses:
   Selling                                          30,958          30,754         28,382
   Administrative                                   19,360          17,236         15,908
   Non-cash deferred stock compensation               (490)          1,473             --
-----------------------------------------------------------------------------------------
       Total operating expenses                     49,828          49,463         44,290
-----------------------------------------------------------------------------------------
Income from operations                               2,270           6,377          3,453
Interest and other expense                             193             112          1,804
-----------------------------------------------------------------------------------------
Income before income taxes                           2,077           6,265          1,649
Provision for income taxes                             697           2,719            632
-----------------------------------------------------------------------------------------
Net income                                       $   1,380       $   3,546      $   1,017
=========================================================================================
Basic earnings per share                         $    0.30       $    0.86      $    0.21
=========================================================================================
Diluted earnings per share                       $    0.29       $    0.76      $    0.19
=========================================================================================
Weighted average basic shares outstanding            4,649           4,130          4,871
=========================================================================================
Weighted average diluted shares outstanding          4,779           4,678          5,487
=========================================================================================
</TABLE>


                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

Anthony & Sylvan Pools Corporation and Subsidiaries
For the Years Ended December 31, 2001, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                    Common       Treasury     Retained
(DOLLARS IN THOUSANDS)                                                              Shares        Shares      Earnings       Total
------------------------------------------------------------------------------------------------------------------------------------

<S>                                                                               <C>           <C>           <C>          <C>
Balance - December 31, 1998                                                         $     --     $     --     $  6,741     $ 6,741
   Net income                                                                             --           --        1,017       1,017
   Payable to Essef Corporation contributed to capital at split-off                   27,241           --           --      27,241
   Purchase of common shares for treasury (1,109,146 shares)                              --       (6,973)          --      (6,973)
   Issuance of shares under leveraged stock purchase plan (376,147 shares)               154        2,392           --       2,546
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 1999                                                           27,395       (4,581)       7,758      30,572
   Net income                                                                             --           --        3,546       3,546
   Issuance of shares under leveraged stock purchase plan (84,202 shares)                 44          526           --         570
   Stock dividends                                                                     5,595           --       (5,595)         --
   Exercise of stock options (717,456 shares)                                          1,510       (1,369)          --         141
   Issuance of shares under directors deferred compensation plan (14,608 shares)         244         (122)          --         122
Non-cash deferred stock compensation                                                   1,473           --           --       1,473
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2000                                                           36,261       (5,546)       5,709      36,424
   Net income                                                                             --           --        1,380       1,380
   Purchase of common shares for treasury (291,592 shares)                                --       (2,285)          --      (2,285)
   Issuance of shares under leveraged stock purchase plan (76,162 shares)                289          241           --         530
   Stock dividends                                                                     4,095        2,073       (6,173)         (5)
   Non-cash deferred stock compensation                                                 (490)          --           --        (490)
   Issuance of shares under directors deferred compensation plan (10,809 shares)         150          (75)          --          75
------------------------------------------------------------------------------------------------------------------------------------
Balance - December 31, 2001                                                         $ 40,305     $ (5,592)    $    916     $35,629
====================================================================================================================================
</TABLE>


                See notes to consolidated financial statements.



                                       10
<PAGE>



                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                                        2001         2000        1999
------------------------------------------------------------------------------------------------------------

<S>                                                                       <C>          <C>          <C>
Cash Flows from Operating Activities:

   Net income                                                             $  1,380     $  3,546     $  1,017
   Adjustments to reconcile net income to
     net cash provided by operating activities:
       Depreciation and amortization                                         3,441        2,856        2,627
       Non-cash deferred stock compensation                                   (490)       1,473           --
       Deferred income taxes                                                  (275)         676         (636)
       Other                                                                   104          179          154
   Changes in operating assets and liabilities net of assets acquired:
       Contract receivables                                                 (5,305)      (3,442)       2,206
       Inventories                                                            (580)          63         (946)
       Prepayments and other                                                  (804)        (906)         262
       Accounts payable                                                      1,060          511         (378)
       Accrued and other expenses                                              212          555        1,894
------------------------------------------------------------------------------------------------------------
         Cash provided by/(used in) operating activities                    (1,257)       5,511        6,200
------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities:
   Additions to property, plant and equipment                               (3,372)      (2,727)      (2,971)
   Other                                                                        --         (154)        (409)
------------------------------------------------------------------------------------------------------------
         Cash used in investing activities                                  (3,372)      (2,881)      (3,380)
------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities:
   Net transactions with Essef Corporation                                      --           --       (2,120)
   Proceeds from/(repayments of) long-term debt                              6,243       (3,452)       4,260
   Proceeds from exercise of stock options                                      --          141           --
   (Purchase)/sale of treasury shares                                       (1,685)         570       (4,427)
------------------------------------------------------------------------------------------------------------
         Cash provided by/(used in) financing activities                     4,558       (2,741)      (2,287)
------------------------------------------------------------------------------------------------------------
Increase/(Decrease) in Cash and Cash Equivalents                               (71)        (111)         533

Cash and Cash Equivalents:
   Beginning of period                                                         422          533           --
------------------------------------------------------------------------------------------------------------
   End of period                                                          $    351     $    422     $    533
============================================================================================================
Supplemental Cash Flow Information:
   Interest paid                                                          $    188     $    158     $  1,723
   Income taxes paid                                                      $  1,969     $  2,281     $    996
Non-Cash Financing and Investing Activities:
   Payable to Essef Corporation contributed to capital at split-off       $     --     $     --     $ 27,241
============================================================================================================
</TABLE>

                See notes to consolidated financial statements.




                                       11
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1
Summary of Significant Accounting Policies

Basis of Presentation Anthony & Sylvan Pools Corporation and Subsidiaries (the
"Company") is among the largest residential in-ground concrete pool sales and
installation businesses in the United States and operates in one business
segment.

     0n August 10, 1999, a third party (the "Acquiring Party") acquired Essef
Corporation ("Essef"), the Company's former parent, in a merger transaction that
included the Company being split-off to Essef's common shareholders through a
taxable distribution of 100% of the Company's shares as part of the merger
consideration. The split-off was accomplished through the distribution of 0.25
shares of common stock for every share of Essef common stock held at the time of
the distribution. Immediately prior to the split-off, the Company amended its
articles of incorporation to provide for the issuance of up to 1,000,000 serial
preferred shares and 29,000,000 shares of common stock.

     The Company, Essef and the Acquiring Party entered into various agreements
that provided for administrative services, tax sharing and indemnification (the
"Agreements"). Among other things, these Agreements provided for the Company to
pay a dividend of $17,000,000, subject to certain adjustments, to Essef with the
balance of the inter-company payable being contributed to capital retroactive to
the split-off date. The potential adjustments to the $17,000,000 primarily
related to the net tax benefit, as defined in the Agreements, realized by Essef
from the exercise of employee stock options net of the corporate tax payable
from the split-off. Pursuant to the Agreements, the calculation of adjustments
was made and the Company was not required to pay Essef any of the $17,000,000.
As such all of the Company's debt to Essef, which totaled $27,241,000 at the
date of the split-off, was contributed to the Company's capital increasing
shareholders' equity to approximately $34,700,000 at the date of the split-off.

     Company management believes that the results of operations for the Company
prior to August 10, 1999, the date of the split-off, reflect all material
expenses of the Company assuming it were organized as a stand-alone legal entity
including specifically identifiable costs incurred by Essef on behalf of, and
charged to, the Company.

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

CASH AND CASH EQUIVALENTS The Company considers all highly liquid short-term
investments with initial maturities of three months or less to be cash
equivalents.

FINANCIAL INSTRUMENTS The Company has financial instruments that consist
primarily of cash and cash equivalents, receivables, payables and debt
instruments. The Company has determined that the estimated fair value of its
financial instruments approximates carrying value.

     The Company's credit risk is limited due to the large number of customers
comprising the Company's customer base and their geographical dispersion.

INVENTORIES Inventories consist of materials and equipment purchased for
installation or use in pools and are stated at the lower of cost or market. Cost
is determined using the first-in, first-out method. At December 31, 2001 and
2000, the Company has a reserve on these inventories of $204,000 and $130,000,
respectively.

PROPERTY, PLANT AND EQUIPMENT Depreciation is computed using the straight-line
method for financial reporting purposes. Accelerated methods are used for tax
reporting purposes. Assets, valued at cost, are generally being depreciated over
their useful lives as follows: buildings, 30 years; leasehold improvement, 3 to
7 years; and machinery and equipment, 3 to 15 years.

GOODWILL Goodwill arising from the acquisition of the Company by Essef and from
subsequent business acquisitions has been amortized using the straight-line
method over 40 years. Accumulated amortization at December 31, 2001 and 2000 was
$3,212,000 and $2,475,000, respectively. See New Accounting Standards for a
discussion of the impact of new accounting standards that will affect 2002
results.

REVENUE RECOGNITION Revenue from pool installation contracts is recognized on
the percentage-of-completion accounting method based on the proportion of total
costs incurred during the various phases of installation as a percentage of
total estimated contract costs. Revisions in cost and revenue estimates are
reflected in the period in which the facts requiring such revisions become
known. Provision is made currently for estimated losses on uncompleted
installations. The majority of the Company's contracts call for progress
payments to be made while completing individual phases of the installation until
the final phases of installation, at which time the remaining portion is
recognized as a contract receivable. Progress payments in excess of revenue
recognized are classified as billings in excess of costs and estimated earnings
on uncomplet-



                                       12
<PAGE>
                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT



ed contracts, and are included in accrued expenses. Contract costs include
direct material, labor, subcontract costs and overheads. Selling and
administrative expenses are charged to income as incurred.

WARRANTY The Company accrues an estimate of warranty claims using regression
analysis formulas and estimates of the aggregate liability for claims based on
the Company's historical experience. The portion of claims the Company estimates
will not be paid within one year is included in other long-term liabilities.

INCOME TAXES The Company accounts for income taxes under the asset and liability
method. The provision for income taxes includes federal, state and local taxes
currently payable and those deferred because of temporary differences between
the financial statement and tax basis of assets. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Until August 10, 1999, the Company was included in the
consolidated federal income tax return of Essef. All tax amounts were recorded
prior to the split-off as if the Company filed separate federal and state tax
returns as a stand-alone entity for those periods.

USE OF ESTIMATES The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
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 period. Actual results could differ from those
estimates.

RECLASSIFICATIONS Certain reclassifications have been made to the 2000 and 1999
consolidated financial statements to make the presentation consistent with the
current period.

NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
The Company adopted the statement effective January 1, 2001. The adoption of
SFAS No. 133 did not have a significant impact on the financial position or
results of operations of the Company because the Company does not have
derivative activity.

     In July 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets," which will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement No.
142. The Company is required to adopt the provisions of Statement No. 142
effective January 1, 2002. Upon adoption, the Company will cease to amortize
approximately $26.3 million of goodwill. It had recorded approximately $737,000
of amortization of goodwill in 2001 and would have recorded a similar amount of
amortization in 2002.

     In lieu of amortization, the Company is required to perform an initial
impairment review of goodwill in 2002 and an annual impairment review
thereafter. The initial review should be completed during the first quarter of
2002. Management does not expect to record an impairment charge upon completion
of the initial impairment review. However, there can be no assurance that at the
time the review is completed, a material impairment charge will not be recorded.

     In October 2001, the FASB issued Statement No. 144, "Accounting for the
Impairment of Long-Lived Assets." This Statement, which supersedes Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of," provides a single accounting model for long-lived assets to
be disposed of. Although retaining many of the fundamental recognition and
measurement provisions of Statement No. 121, the Statement significantly changes
the criteria that would have to be met to classify an asset as held-for-sale.
This distinction is important because assets held-for-sale are stated at the
lower of their fair values or carrying amounts and depreciation is no longer
recognized. The provisions of this Statement are effective for financial
statements issued for fiscal years beginning after December 15, 2001. The
Company believes that the adoption of Statement No. 144 will not have any
material effect on its consolidated financial position, results of operations or
cash flows.

2
EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share is based
on the combined weighted average number of shares outstanding including the
assumed exercise or conversion of options. The treasury stock method is used in
computing diluted earnings per share. For the periods prior to the split-off,
earnings per share is calculated based on the number of shares that would have
been outstanding assuming the split-off had occurred at the beginning of the
period shown. The calculations are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)     2001        2000        1999
-----------------------------------------------------------------------

<S>                                      <C>         <C>         <C>
Numerator:
   Net income available
     to common shareholders              $1,380      $3,546      $1,017
=======================================================================
Denominator:
   Weighted average common
     shares outstanding                   4,649       4,130       4,871
   Dilutive effect of stock options         130         548         616
-----------------------------------------------------------------------
Denominator for net income
   per diluted share                      4,779       4,678       5,487
=======================================================================
Earnings per share:
   Basic                                 $ 0.30      $ 0.86      $ 0.21
=======================================================================
   Diluted                               $ 0.29      $ 0.76      $ 0.19
=======================================================================
</TABLE>


3
RELATED PARTY TRANSACTIONS

With the exception of certain capitalized lease obligations, from January 1,
1999 to June 30, 1999 the Company did not have external sources of borrowings,
and as such, relied upon Essef as its primary source of funding. There was no
interest charged on the inter-company account between June 30, 1999 and the date
of the split-off, August 10, 1999. Total interest charges on the inter-company
account for the six months ended June 30, 1999 were $1,683,000. At the date of
the split-off, the balance of the inter-company account was contributed to
capital (see Note 1).



                                       13
<PAGE>


                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


     From January 1, 1999 through August 10, 1999, the Company purchased
swimming pool and spa equipment used in its swimming pool installations from
companies who were also wholly owned subsidiaries of Essef. These purchases were
made on an arm's length basis, on terms similar to those to which those
companies sell to their other customers and were not subject to any long- term
supply agreements. Total purchases from these related companies for the period
from January 1, 1999 through August 10, 1999 were approximately $9,816,000.

4
ACCRUED EXPENSES

Accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                             2001             2000
------------------------------------------------------------------------

<S>                                              <C>             <C>
Billings in excess of costs and estimated
   earnings on uncompleted contracts             $ 6,108         $ 4,851
Warranty                                           2,349           2,060
Accrued compensation                               3,003           4,229
Other                                              1,569           1,239
------------------------------------------------------------------------
   Total                                         $13,029         $12,379
========================================================================
</TABLE>

5
Long-Term Debt

Long-term debt consists of the following at December 31:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                             2001          2000
------------------------------------------------------------------------

<S>                                               <C>           <C>
Revolving credit facility                         $7,550        $1,250
Other obligations                                      5            62
Less current maturities                               (5)          (62)
------------------------------------------------------------------------
   Total                                          $7,550        $1,250
========================================================================
</TABLE>


     The Company has a $35 million revolving credit facility ("Credit Facility")
with a group of banks secured by the assets of the Company. On December 31, 2001
the Credit Facility was amended to extend the maturity date of the agreement to
August 10, 2004. It may be extended in one-year increments after that with the
approval of the bank group. The Company's borrowing capacity and interest rates
under the Credit Facility are based on its profitability and leverage. Interest
is charged at increments over either Prime or LIBOR rates. In addition a 37.5
basis points commitment fee is payable on the total amount of the unused
commitment. As of December 31, 2001, the effective interest rates on the
outstanding borrowings ranged from 3.65% to 5.13%. The amended Agreement
provides for a seasonal increase in available borrowings during the first
quarter of each year. Total available borrowing capacity under the Credit
Facility as of January 1, 2002 is $11.8 million. The Company is in compliance
with all of its debt covenants under the Credit Facility.

     Aggregate maturities of long-term debt are the following: 2002, $5,000; and
2004, $7,550,000.

6
OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following at December 31:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                         2001            2000
---------------------------------------------------------------------

<S>                                           <C>             <C>
Warranty                                      $1,200          $1,200
Deferred compensation                          1,135           1,054
---------------------------------------------------------------------
   Total                                      $2,335          $2,254
=====================================================================
</TABLE>

     Long-term warranty expense represents the portion of warranty claims the
Company estimates will not occur within one year. The deferred compensation
liability relates to amounts deferred by officers and directors of the Company
as part of a deferred compensation plan maintained for those participants. The
plan provides participants the opportunity to defer a portion or all of their
compensation until such time as the officers are no longer employed by the
Company or the directors no longer serve on the Company's Board. The Company has
funded virtually all of its obligations under the plan through a deferred
compensation plan trust.

7
INCOME TAXES

The significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)             2001           2000           1999
-----------------------------------------------------------------------
<S>                              <C>             <C>            <C>
Current:
   Federal                       $  816          $1,819         $  598
   State                            156             224            136
-----------------------------------------------------------------------
     Total current                  972           2,043            734
=======================================================================
Deferred:
   Federal                         (264)            669            (97)
   State                            (11)              7             (5)
-----------------------------------------------------------------------
     Total deferred                (275)            676           (102)
-----------------------------------------------------------------------
     Total                       $  697          $2,719         $  632
=======================================================================
</TABLE>

     The Company's deferred tax assets and deferred tax liabilities at December
31, 2001 and 2000 are comprised of the following items:

<TABLE>
<CAPTION>
                                               2001      2000
-----------------------------------------------------------------

<S>                                           <C>        <C>
Deferred tax assets:
   Warranty reserve                           $1,277     $1,173
   Compensation and benefits                     931        970
   Depreciation                                  359         --
   Other                                         806        709
-----------------------------------------------------------------
     Total deferred tax assets                 3,373      2,852
=================================================================
Deferred tax liabilities:
   Goodwill                                   (1,190)      (927)
   Depreciation                                   --        (17)
-----------------------------------------------------------------
     Total deferred tax liabilities           (1,190)      (944)
=================================================================
       Net deferred tax asset                 $2,183     $1,908
=================================================================
</TABLE>



                                       14
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


     The consolidated tax provision differs from the tax provision computed at
the statutory United States tax rate of 34 percent as follows:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                            2001         2000        1999
--------------------------------------------------------------------------------

<S>                                              <C>          <C>         <C>
Tax provision at statutory Federal rate          $  706       $2,130      $  561
State income taxes                                   96          134          66
Non-deductible stock compensation
   and goodwill                                    (109)         453          --
Other items, net                                      4            2           5
--------------------------------------------------------------------------------
Provision for income taxes                       $  697       $2,719      $  632
================================================================================
</TABLE>


8
CAPITAL STOCK AND STOCK OPTION PLANS

On May 4, 2001, the Board of Directors authorized a 10% stock dividend to be
distributed on May 30, 2001 to shareholders of record on May 16, 2001. On
October 25, 2001, the Board of Directors authorized a second 10% stock dividend
to be distributed on November 30, 2001 to shareholders of record on November 16,
2001. The consolidated financial statements have been retroactively restated to
reflect the number of shares outstanding following both 10% dividends.

     On January 4, 2001, based on the authorization of its Board of Directors,
the Company purchased a block of 250,000 shares of its common stock, in a
private transaction at $8.00 per share. Additionally on April 3, 2001, the Board
of Directors authorized the purchase of up to one million shares of the common
stock outstanding. Based on this authorization, the Company purchased a block of
41,292 shares of its common stock, in a private transaction with a former
officer of the Company at $7.61 per share and purchased 300 shares of its common
stock on the open market at an average price of $6.72 per share.

     Based on authorizations of the Board of Directors between October 27 and
December 31, 1999, the Company purchased 72,100 shares of its common stock on
the open market at an average price of $6.82 per share and on December 28, 1999
the Company purchased a block of 1,037,046 common shares or approximately 32% of
the outstanding common shares in a private transaction at $6.25 per share.

     At the time of the split-off from Essef (see Note 1), stock options held by
persons who became officers or directors of the Company were also split-off so
that the potential ownership these employees had in Essef would remain
consistent with that in the Company. This resulted in the allocation to the
Company of 847,429 fully vested options. 717,456 of these options were exercised
in 2000 with 711,406 of the shares being transferred to a deferred compensation
plan trust. Of the remaining options, 8,179 expire in January 2004 and 121,794
expire in September 2006. The exercise prices for these options of $1.11 and
$1.17, respectively, were determined based on a formula that included the
Company's first day's trading price following the split-off and the original
exercise price.

     Also at the time of the split-off, the Company established a long-term
incentive plan (the "Long-Term Incentive Plan") for employees and directors
providing for 10 year options for the purchase of up to 732,050 shares of the
Company's common stock. Under this plan there are 432,667 options outstanding
with exercise prices ranging from $4.94 to $10.93 per share that have been
granted to certain officers and directors of the Company. These options vest
over periods ranging from one to five years from the date of the grant.

     As part of the Company's compensation plans, certain officers and directors
of the Company have been given the opportunity to purchase shares of the
Company's common stock under a Leveraged Stock Purchase Plan for an amount
generally up to two times their base compensation at fair market value. Under
this plan the current officers and directors have purchased 637,859 shares of
the Company's common stock at an average price of $4.90 per share. For every
share of common stock purchased under the Plan, participants received .40 of a
stock option representing in total 284,018 stock options with exercise prices
ranging from $4.65 to $7.05 per share. These options vest over periods ranging
from two to five years from the date of the grant. At the election of each
officer or director, the stock purchases could be financed through full recourse
external borrowings guaranteed by the Company and secured by the stock. The
Company has agreed to advance to the participants the interest on the
obligation. At December 31, 2001 the Company has guaranteed total borrowings of
$3,127,000 under the Plan.

     The Company amended the Long-Term Incentive Plan effective April 1, 2001 to
eliminate features that required variable accounting treatment. As a result of
the amendment, the Company no longer accounts for any portion of the Long-Term
Incentive Plan as a variable plan.

     The following table summarizes the activity in the Long-Term Incentive Plan
from the date of the split-off.

<TABLE>
<CAPTION>
                                                     NUMBER   WEIGHTED AVERAGE
                                                   OF OPTIONS  EXERCISE PRICE
----------------------------------------------------------------------------

<S>                                                 <C>            <C>
Outstanding at August 10, 1999                            --             --
   Initial Grants                                    407,752       $  10.93
   Subsequent Grants tied to participation
     in leveraged stock purchase plan.               256,218       $   4.65
----------------------------------------------------------------------------
Outstanding at December 31, 1999                     663,970       $   8.50
   Grants                                            119,660       $   8.12
   Cancelled                                        (158,185)      $   8.87
----------------------------------------------------------------------------
Outstanding at December 31, 2000                     625,445       $   8.41
   Grants                                             91,240       $   9.14
----------------------------------------------------------------------------
Outstanding at December 31, 2001                     716,685       $   8.49
----------------------------------------------------------------------------
Exercisable at December 31, 2001                     206,451       $   7.69
============================================================================
</TABLE>


     The following table summarizes information about the Company's options:

<TABLE>
<CAPTION>
    Exercise      Number      Weighted Average    Weighted Average
     Price      of Options     Remaining Life      Exercise Price
------------------------------------------------------------------

<S>               <C>                <C>                <C>
   $ 4.65-7.05    292,040            8.0                $ 4.95
   $10.93         424,645            7.7                $10.93
===================================================================
</TABLE>

     The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock based compensation arrangements. Prior to its amendment on
April 1, 2001, a portion of the Long-Term Incentive Plan was accounted for as a
variable plan. The Company recorded a non-cash deferred compensation credit of
$0.5 million in 2001 and a non-cash deferred compensation expense of $1.5
million in 2000 related to that plan. Had compensation cost for the Company's
other stock options been determined based on the fair value at the grant date of
those options consistent with the methods of SFAS No. 123, there would not have
been a material impact on the Company's reported amount of net income or diluted
earnings per share.


                                       15
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

9
OPERATING LEASES

The Company leases certain of its facilities and equipment. Total rental
expenses under operating leases for the years ended December 31, 2001, 2000 and
1999 were $2,993,000, $2,565,000 and $2,391,000, respectively. Minimum annual
rental commitments for the next five years under non-cancelable operating leases
are the following: 2002, $2,467,000; 2003, $1,903,000; 2004, $1,558,000; 2005,
$1,138,000; 2006, $544,000; and thereafter, $527,000.

10
RETIREMENT PLANS

The Company maintains a 401(K) retirement plan covering substantially all of its
employees. Participants are permitted to make pretax contributions to the plan
as a percentage of compensation. The Company matches participant contributions,
up to specified limits. Total Company contributions for the years ended December
31, 2001, 2000 and 1999 were $812,000, $1,000,000 and $925,000, respectively.

11
LITIGATION

Certain claims, suits and complaints arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, the results of all such matters will not have a material adverse
effect on the Company's financial position, results of operations or
liquidity.




                              REPORT OF MANAGEMENT


Management is responsible for the preparation and accuracy of the financial
statements and other information included in this report. The consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America using, where appropriate,
management's best estimates and judgment.

     In meeting its responsibility for the reliability of the financial
statements, the Company depends upon its system of internal controls. The system
is supported by policies and guidelines, and by careful selection and training
of financial management personnel. Management believes that the Company's
internal control systems provide reasonable assurance that assets are
safeguarded against losses from unauthorized use or disposition, that
transactions are executed in accordance with management's authorization, and
accounting records are reliable as a basis for preparing financial statements.

     The Board of Directors through its Audit Committee, which is composed
entirely of Directors who are neither officers nor employees of the Company, has
oversight responsibilities with respect to the Company's financial audit and
reporting process and system of internal controls. The Audit Committee meets
periodically with management and with the independent public accountants to
review and assess the activities of each in meeting their respective
responsibilities.

     The annual audit by the independent accountants provides an objective,
independent review of management's discharge of its responsibilities as they
relate to the fairness of reported operating results and financial condition.
The auditors obtain and maintain an understanding of the Company's accounting
and financial controls and conduct such tests and related procedures as they
deem necessary to arrive at an opinion on the fairness of the Company's
consolidated financial statements. The independent accountants have full access
to the Audit Committee at all times to discuss with and without management
present, the results of their audit work, the adequacy of internal accounting
controls, and the quality of financial reporting.



/s/ Stuart D. Neidus                            /s/ William J. Evanson

Stuart D. Neidus                                William J. Evanson
Chairman and                                    Executive Vice President and
Chief Executive Officer                         Chief Financial Officer




                                       16
<PAGE>



                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders,
Anthony & Sylvan Pools Corporation

We have audited the accompanying consolidated balance sheet of Anthony & Sylvan
Pools Corporation and Subsidiaries (the Company) as of December 31, 2001, and
the related consolidated statements of income, shareholders' equity, and cash
flows for the year ended December 31, 2001. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anthony &
Sylvan Pools Corporation and Subsidiaries as of December 31, 2001, and the
results of their operations and their cash flows for the year ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America.


KPMG LLP
Cleveland, Ohio
February 15, 2002



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders,
Anthony & Sylvan Pools Corporation

We have audited the accompanying consolidated balance sheet of Anthony & Sylvan
Pools Corporation and Subsidiaries (the "Company") as of December 31, 2000 and
the related consolidated statements of income, shareholders' equity and cash
flows for the years ended December 31, 2000 and 1999. 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 of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, such consolidated financial statements, present fairly, in
all material respects, the financial position of the Company as of December 31,
2000, the results of the Company's operations and cash flows for the years ended
December 31, 2000 and 1999 in conformity with accounting principles generally
accepted in the United States of America.


/s/ Deloitte & Touche  LLP

Deloitte & Touche  LLP
Cleveland, Ohio
March 28, 2001



                                       17
<PAGE>


                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


                      MANAGEMENT'S DISCUSSION AND ANALYSIS

CRITICAL ACCOUNTING POLICIES

The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The Company believes the following critical accounting
policies affect its more significant estimates and assumptions used in the
preparation of its consolidated financial statements.

REVENUE RECOGNITION Revenue from pool installation contracts is recognized on
the percentage-of-completion accounting method based on the proportion of total
costs incurred during the various phases of installation as a percentage of
total estimated contract costs. Revisions in cost and revenue estimates are
reflected in the period in which the facts requiring such revisions become
known. Provision is made currently for estimated losses on uncompleted
installations. The majority of the Company's contracts call for progress
payments to be made while completing individual phases of the installation until
the final phases of installation, at which time the remaining portion is
recognized as a contract receivable. Progress payments in excess of revenue
recognized are classified as billings in excess of costs and estimated earnings
on uncompleted contracts, and are included in accrued expenses. Contract costs
include direct material, labor, subcontract costs and overheads. Selling and
administrative expenses are charged to income as incurred.

WARRANTY The Company accrues an estimate of warranty claims using regression
analysis formulas and estimates of the aggregate liability for claims based on
the Company's historical experience. The portion of claims the Company estimates
will not be paid within one year is included in other long-term liabilities.

RESULTS OF OPERATIONS

2001 COMPARED WITH 2000 Net sales in 2001 of $191.7 million decreased 5.0% from
2000 net sales of $201.7 million. The decrease was primarily attributable to a
14.1% decrease in new pool units produced, partially offset by a 10.2% increase
in average selling prices of new pools and increases in retail stores activity.

     Gross profit decreased to $52.1 million in 2001 from $55.8 million in 2000
as a result of the decrease in net sales. As a percentage of sales, gross profit
decreased slightly from 27.7% in 2000 to 27.2% in 2001 as a result of spreading
higher fixed construction expenses over a lower revenue base.

     Operating expenses include selling and administrative expenses, which
increased by $0.3 million to $49.8 million in 2001 from $49.5 million in 2000.
Higher administrative costs associated with improvements that have been made in
the Company's infrastructure and operating methods were partially offset by
reductions in both short-term and long-term incentive compensation expense. The
combination of lower revenues and higher administrative costs resulted in
operating expenses as a percentage of sales increasing from 24.5% in 2000 to
26.0% in 2001. Operating expenses in 2000 include $1.5 million of non-cash
deferred compensation expense related to the Company's long-term incentive plan
compared with a credit of $0.5 million in 2001.

     The Company's effective tax rate decreased from 43.4% in 2000 to 33.6% in
2001, primarily as a result of the decrease in non-cash deferred compensation
related to the Company's long-term incentive plan. As a result of the above
items, net income decreased $2.1 million to $1.4 million in 2001. Net income per
diluted share decreased $0.47 to $0.29 per share in 2001. On a pro-forma basis,
excluding the impact of non-cash deferred compensation, pro-forma net income of
$0.9 million, or $0.19 per share, in 2001 compared with pro-forma net income of
$5.0 million, or $1.06 per share, in 2000.

2000 COMPARED WITH 1999 Net sales in 2000 of $201.7 million increased 9.2% from
1999 net sales of $184.7 million. The increase was primarily attributable to
increases in average selling prices.

     Gross profit increased to $55.8 million in 2000 from $47.7 million in 1999.
As a percentage of sales, gross profit increased from 25.8% in 1999 to 27.7% in
2000. The increase was attributable to increases in overall average selling
prices and net material cost reductions arising from new purchasing programs
offset by other material and labor cost increases.

     Operating expenses include selling and administrative expenses, which
increased by $3.7 million to $48.0 million in 2000 from $44.3 million in 1999.
Operating expenses also include $1.5 million in 2000 for non-cash deferred stock
compensation expense related to the Company's Long-Term Incentive Plan. As a
percentage of sales, overall operating expenses increased slightly from 24.0% in
1999 to 24.5% in 2000. The dollar increase was primarily attributable to
increased spending for sales and lead generating activities and increases in
incentive compensation, both cash and non-cash, as a result of increased sales
and profits and changes in the Company's stock price as it related to the
non-cash deferred stock compensation expense.

     Interest and other expense decreased $1.7 million from $1.8 million in 1999
to $0.1 million in 2000. The reduction in interest expense was attributable to
the change in the capital and debt structure as a result of the split-off from
the Company's former Parent, Essef Corporation ("Essef Corporation"), into a
stand-alone public company in August 1999. Interest was paid on external
borrowings in 2000, while the interest paid in 1999 was paid to Essef through an
inter-company borrowing arrangement.

     The Company's effective tax rate was 43.4% in 2000 compared with 38.3% in
1999. The higher effective tax rate was the result of the non-cash deferred
stock compensation expense of $1.5 million only receiving a $67,000 deferred tax
benefit and an aggregate reduction in state income taxes in the states where
Anthony & Sylvan operates.

     As a result of the above items, net income increased $2.5 million to $3.5
million and earnings per diluted share, benefiting from a lower number of shares
outstanding, increased $0.57 per share from $0.19 per share in 1999 to $0.76 per
share in 2000.

LIQUIDITY AND CAPITAL RESOURCES For the year ended December 31, 2001, cash flow
used in operating activities was $1.3 million compared with cash flow from
operating activities of $5.5 million in 2000. The decrease in comparative annual
cash flow amounts was attributable to decreases in net income of $2.1 million,
decreases in non-cash charges of $2.4 million (including $2.0 million of
non-cash deferred stock compensation expense) combined with increases in


                                       18
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT


working capital of $5.5 million. The increase in working capital in 2001 is
primarily attributable to increases in receivables of $5.3 million in 2001
compared with increases of $3.4 million in 2000 as a result of revenue generated
under deferred payment sales programs run in the Company's Northeast markets
during the fourth quarters of each of the two years.

     Capital expenditures in 2001 were $3.4 million compared with $2.7 million
in 2000. The increase is primarily attributable to the Company's investment in
computers and related software and its new employee training center in Orlando,
Florida. Funding for cash flow used in operating activities, increased working
capital, capital expenditures and the acquisition of $1.7 million of treasury
shares was accomplished through external bank borrowings, which totaled $7.5
million at December 31, 2001. The Company does not have any off-balance sheet
financing activities.

     On August 10, 1999 a third party acquired the Company's former Parent,
Essef Corporation, in a merger transaction that included the Company being split
off to Essef's common shareholders as part of the merger consideration. In
accordance with the terms of the merger agreement, subsequent to June 30, 1999
the Company separated its cash management activities from Essef. Therefore, the
Company could no longer be advanced funds from Essef while retaining its
after-tax cash flow after such date. Additionally, the Company was not required
to pay to Essef any of the $17,000,000 that might have been due under certain
adjustment mechanisms related to the Company's split-off from Essef. As such,
all of the Company's debt to Essef, which totaled $27.2 million at the date of
the split-off, was contributed to the Company's capital at the date of the
split-off.

     The Company has a $35 million revolving credit facility ("Credit Facility")
with a group of banks secured by the assets of the Company. On December 31, 2001
the Credit Facility was amended to extend the maturity date of the agreement to
August 10, 2004. It may be extended in one-year increments with the approval of
the bank group. The Company's borrowing capacity and interest rate under the
Credit Facility are based on its profitability and leverage. Interest is charged
at increments over either Prime or LIBOR rates. In addition, a 37.5 basis points
commitment fee is payable on the total amount of the unused commitment. As of
December 31, 2001 the effective interest rate on the outstanding borrowings
under the Credit Facility ranged from 3.65% to 5.13%. The amended agreement
provides for a seasonal increase in available borrowings during the first
quarter of each year. Total available borrowing capacity under the Facility as
of January 1, 2002 is $11.8 million. The Company is in compliance with all of
its debt covenants under the Credit Facility.

     The Company believes that existing cash and cash equivalents, internally
generated funds, and funds available under its line of credit will be sufficient
to meet its needs.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company is exposed to various market risks, including changes in pricing of
equipment, materials and contract labor, and interest rates. Market risk is the
potential loss arising from adverse changes in market rates and prices, such as
commodity prices and interest rates. The Company does not enter into financial
instruments to manage and reduce the impact of these risks. Further, the Company
does not enter into derivatives or other financial instruments for trading or
speculative purposes.

     The Company is exposed to cash flow and fair value risk arising out of
changes in interest rates with respect to its long-term debt. Information with
respect to the Company's principal cash flows and interest rates on long-term
debt at December 31, 2001 is included in the Consolidated Financial Statements.

     Prior to an amendment of the Company's Long-Term Incentive Plan on April 1,
2001, the Company's financial results were impacted by fluctuations in its stock
price, as a portion of the Company's Long-Term Incentive Plan was being treated
as a variable versus a fixed stock, option or award plan. As a result of the
amendment, the Company no longer accounts for any portion of the Plan as a
variable plan.

CYCLICALITY AND SEASONALITY

The Company believes that the in-ground swimming pool industry is strongly
influenced by general economic conditions and tends to experience periods of
decline during economic downturns. Since the majority of the Company's swimming
pool installation purchases are financed, pool sales are particularly sensitive
to interest rate fluctuations and the availability of credit. A sustained period
of high interest rates could result in declining sales, which could have a
material adverse effect on the Company's financial condition and results of
operations.

     Historically, approximately two-thirds of the Company's revenues have been
generated in the second and third quarters of the year, the peak season for
swimming pool installation and use. Conversely, the Company typically incurs net
cumulative losses during the first and fourth quarters of the year. Unseasonably
cold weather or extraordinary amounts of rainfall during the peak sales season
can significantly reduce pool purchases. In addition, unseasonably early or late
warming trends can increase or decrease the length of the swimming pool season,
significantly affecting sales and operating profit.

PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this report and
other materials filed with the Securities and Exchange Commission (as well as
information included in oral or other written statements made or to be made by
the Company) contains statements that are forward-looking. All forward-looking
statements are based on current expectations regarding important risk factors,
including but not limited to: the costs of integrating acquired businesses;
dependence on existing management; consumer spending and market conditions and
weather. Accordingly, actual results may differ from those expressed in any
forward-looking statements, and the making of such statements should not be
regarded as a representation by the Company or any other person that the results
expressed herein will be achieved.



                                       19
<PAGE>

                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                            SELECTED FINANCIAL DATA


ANTHONY & SYLVAN POOLS CORPORATION AND SUBSIDIARIES

<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)                       ANTHONY & SYLVAN                                          PREDECESSOR
---------------------------------------------------------------------------------------------------------------------------------
                                                                YEARS ENDED                          EIGHT MONTHS     FOUR MONTHS
                                                                DECEMBER 31,                         DECEMBER 31,      APRIL 30,
---------------------------------------------------------------------------------------------------------------------------------
                                            2001            2000          1999            1998           1997          1997(1)
---------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>             <C>            <C>            <C>            <C>             <C>
OPERATING DATA
Net Sales                                $ 191,725       $ 201,723      $ 184,713      $ 155,765      $  98,829       $28,883
Cost of Sales                              139,627         145,883        136,970        113,873         70,814        22,291
Gross Profit                                52,098          55,840         47,743         41,892         28,015         6,592
Gross Profit %                                27.2%           27.7%          25.8%          26.9%          28.3%         22.8%
Income from Operations                       2,270           6,377          3,453          5,538          8,839        (3,461)
% of Sales                                     1.2%            3.2%           1.9%           3.6%           8.9%       -12.0%
Net Income                                   1,380           3,546          1,017          2,188          4,553        (2,414)
Diluted Earnings per Share               $    0.29       $    0.76      $    0.19      $    0.40      $    0.82           N/A

BALANCE SHEET DATA

Total Assets                             $  65,998       $  59,203      $  56,578      $  54,273      $  42,620           N/A
Working Capital                              6,946           1,420            262          2,176            966           N/A
Total Debt                                   7,555           1,312          4,764         29,865         24,638           N/A
Shareholders' Equity                        35,629          36,424         30,572          6,741          4,553           N/A
Debt to Total Capital                           17%              3%            13%            82%            84%          N/A

OTHER DATA
Cash Flow from Operations                $  (1,257)      $   5,511      $   6,200      $   1,019      $    (687)      $ 2,021
Capital Expenditures                         3,372           2,727          2,971          2,407          1,019           259
Depreciation and Amortization                3,441           2,856          2,627          2,254          1,070           470
Non-cash deferred compensation                (490)          1,473
EBITDA                                       5,711           9,233          6,080          7,792          9,909        (2,991)
Average Shares Outstanding
   Basic                                     4,649           4,130          4,871          4,915          4,952           N/A
   Diluted                                   4,779           4,678          5,487          5,523          5,559           N/A
Market Price of Stock
   High                                  $    9.09       $    8.68      $    5.51            N/A            N/A           N/A
   Low                                   $    5.91       $    4.61      $    2.73            N/A            N/A           N/A
   Period End                            $    7.35       $    6.92      $    4.74            N/A            N/A           N/A
Market Capitalization At December 31     $  34,295       $  34,095      $  18,371            N/A            N/A           N/A
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) May 1, 1997 represents the date that certain assets and assumed liabilities
were purchased from the Predecessor company.



                   UNAUDITED QUARTERLY FINANCIAL INFORMATION

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)                 1ST QUARTER                2ND QUARTER             3RD QUARTER            4TH QUARTER
-----------------------------------------------------------------------------------------------------------------------------------
                                    2001          2000         2001        2000        2001        2000        2001          2000
-----------------------------------------------------------------------------------------------------------------------------------

<S>                             <C>             <C>          <C>         <C>         <C>         <C>         <C>          <C>
Net sales                       $    26,089     $ 30,391     $ 68,685    $ 67,199    $ 57,118    $ 63,188    $ 39,833     $ 40,945
Gross profit                          4.990        6,453       21,613      20,480      15,867      18,203       9,628       10,704
Income from operations               (5,131)      (3,310)       6,522       5,700       2,681       4,809      (1,802)        (822)
Net income/(loss)                    (3,176)      (2,212)       4,184       3,306       1,681       3,216      (1,309)        (764)
Net income per basic share      $     (0.68)    $  (0.58)    $   0.90    $   0.84    $   0.36    $   0.81    $  (0.28)    $  (0.16)
Net income per diluted share    $     (0.68)    $  (0.58)    $   0.87    $   0.72    $   0.35    $   0.69    $  (0.28)    $  (0.16)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


The sum of the quarterly net income per share does not equal the annual amount
reported. Net income per share is calculated independently for each quarter and
the full year is based on respective weighted average common shares.
Additionally, due to the net loss reported in the first and fourth quarter of
both years the share base used in calculating net income per diluted share does
not include the effect of common share equivalents as its effect would be
anti-dilutive.



                                       20
<PAGE>



                   ANTHONY & SYLVAN POOLS 2001 ANNUAL REPORT

                              CORPORATE INFORMATION

<TABLE>
<S>                                             <C>                                        <C>
DIRECTORS:                                      William J. Evanson                         GENERAL INFORMATION:
                                                Executive Vice President and
Stuart D. Neidus (1)                            Chief Financial Officer                    ANNUAL MEETING
Chairman of the Board and                                                                  The Annual Meeting of Shareholders
Chief Executive Officer,                        Thomas J. Casey                            of Anthony & Sylvan Pools Corporation
Anthony & Sylvan Pools Corporation              Vice President, Sales                      will be held at the Company's
                                                                                           headquarters:
Roger D. Blackwell, Ph.D. (2,3)                 Martin J. Degnan                           Mt. Vernon Square - Suite 300
Professor of Marketing,                         Vice President, General Counsel            6690 Beta Drive
The Ohio State University;                      and Secretary                              Mayfield Village, Ohio
President,                                                                                 on May 1, 2002, at 10 a.m.
Roger Blackwell Associates, Inc.                Martin A. Iles
                                                Vice President, Treasurer                  TRANSFER AGENT AND REGISTRAR
Mary Ann Jorgenson, Esq. (1, 2,3)               and Controller                             National City Bank
Partner,                                                                                   Corporate Trust Operations
Squire, Sanders & Dempsey LLP                   Lawrence M. Mazzenga                       P.O. Box 92301
                                                Vice President, Operations                 Cleveland, Ohio 44193-0900
Thomas B. Waldin (1,2,3)                                                                   (800) 622-6757
Former Chief Executive Officer,                 Richard E. Mills
Essef Corporation;                              Vice President, Builder Division           INVESTOR INQUIRIES
Private Investor                                                                           Copies of the Company's Annual
                                                James E. Palmer                            Report on Form 10-K as filed
Committees of the Board:                        Vice President, Marketing and Retail       with the Securities and Exchange
1.  Executive Committee                                                                    Commission will be provided upon
2.  Audit Committee                             Anthony F. Pizzelanti                      written request to:
3.  Compensation Committee                      Vice President, Management
                                                Information Systems                        Chief Financial Officer
                                                                                           Anthony & Sylvan Pools Corporation
CORPORATE OFFICERS:                             Ken F. Sloan                               Mt. Vernon Square - Suite 300
                                                Vice President, Human Resources            6690 Beta Drive
Stuart D. Neidus                                                                           Mayfield Village, Ohio 44143
Chief Executive Officer
                                                CORPORATE HEADQUARTERS:                    STOCK EXCHANGE LISTING
Howard P. Wertman                                                                          Anthony & Sylvan Pools Corporation
President                                       Mt. Vernon Square - Suite 300              Common Shares are listed on
                                                6690 Beta Drive                            the Nasdaq SmallCap Stock Market
Richard M. Kelso                                Mayfield Village, Ohio  44143              under the symbol SWIM.
Executive Vice President and                    (440) 720-3301
Chief Operating Officer                         (877) 307-SWIM (7946)                      WEB SITE
                                                (440) 720-3303 FAX                         Company information is
                                                                                           available on our web site at
                                                                                           www.anthonysylvan.com
</TABLE>


<PAGE>



                                    [PHOTO]

Anthony & Sylvan Pools Corporation
Mt. Vernon Square - Suite 300
6690 Beta Drive
Mayfield Village, Ohio 44143
440.720.3301
www.anthonysylvan.com