<PAGE>   1
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
(Mark One)

For the fiscal year ended December 31, 1996 [X]

                                       OR

For the transition period from _____________ to _________________  [ ]
Commission file number 0-12489

                              SPECTRAN CORPORATION
           (Exact name of the registrant as specified in its charter)

                                                     04-2729372
                                         (I.R.S. Employer Identification No.)

 50 Hall Road, Sturbridge, Massachusetts               01566
(Address of Principal Executive Offices)            (Zip Code)

Registrant's telephone number, including area code   (508) 347-2261

Securities registered pursuant to Section 12(b) of the Act:

                                               Name of each exchange on
         Title of each class                      which registered
                                      None
         ---------------------------------------------------------------

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.10 par value
         ---------------------------------------------------------------
                                (Title of class)

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

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


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The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  computed  by  reference  to the  closing  price of such  stock,  on
February 26, 1997: $117.3 million.

The number of shares  outstanding of each of the Registrant's  classes of common
stock, as of the latest practicable date: 6,902,196 shares of common stock, $.10
par value, outstanding on February 26, 1997.

                       DOCUMENTS INCORPORATED BY REFERENCE

The  information  required for Part III hereof is incorporated by reference from
the Registrant's  Proxy Statement for its 1997 Annual Meeting of Shareholders to
be filed with the Securities and Exchange  Commission  within 120 days after the
end of the Registrant's fiscal year.

                                     PART I

Item 1. BUSINESS.

     SpecTran  Corporation  ("SpecTran,"  the  "Company"  or  the  "Registrant")
operates through two wholly-owned  subsidiaries,  SpecTran  Communication  Fiber
Technologies,  Inc.  ("SpecTran  Communication")  and SpecTran  Specialty Optics
Company ("SpecTran  Specialty"),  and through General  Photonics,  LLC ("General
Photonics"),  a recently  formed joint  venture with General  Cable  Corporation
("General  Cable").  The Company sold certain of the assets of its  wholly-owned
subsidiary,  Applied Photonic Devices,  Inc.  ("APD"),  and then contributed the
remaining  assets of APD to General  Photonics for a 50% equity  interest.  (See
Note  14  to  the  Consolidated   Financial  Statements  -   "Acquisitions/Joint
Venture").  SpecTran Communication develops,  manufactures and markets multimode
and single-mode  optical fiber for data  communications  and  telecommunications
applications.   SpecTran  Specialty,   acquired  in  February  1994,   develops,
manufactures  and  markets   specialty   multimode  and  single-mode  fiber  and
value-added   fiber   optic   products   for   industrial,   military/aerospace,
communication and medical applications. General Photonics develops, manufactures
and markets  communications-grade  fiber optic cable  primarily for the customer
premises market in the United States, Canada and Mexico.

Technology

     Fiber  optic  technology  utilizing  glass as a  communications  medium was
developed in the 1970s and offers numerous technical advantages over traditional
media such as copper. Optical fibers are hair-thin solid strands of high quality
glass usually  combined in cables for  transmitting  information  in the form of
light  pulses.  An optical  fiber  consists of a core of high purity glass which
transmits light with little signal loss. This core is typically encased within a
covering  layer of high  purity  glass  referred to as optical  cladding,  which
reduces signal loss through the side walls of the fiber.  The  information to be
transmitted is converted from electrical impulses into light

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waves by a laser or light emitting diode.  At the point of reception,  the light
waves are converted back into electrical impulses by a photo-detector.

     Optical  fiber's  advantages  include  its high  bandwidth,  which  permits
reliable transmission of complex signals such as multiple high-quality audio and
video  channels  and  high-speed  data formats  such as Fiber  Distributed  Data
Interface  (FDDI),  Asynchronous  Transfer  Mode (ATM) and other  communications
protocols. Compared to traditional copper cable used in telephony, optical fiber
has thousands of times the information  carrying  capacity,  occupies less space
and operates over greater distances with  significantly  less attenuation.  This
high  capacity  and  reliability  makes  optical  fiber  systems well suited for
interactive  applications,  allowing  digitally  encoded  voice,  data and video
signals to be transmitted in large volumes at high speed.  Furthermore,  optical
fiber is immune to  electrical  surges and  electromagnetic  interference  which
cause static in copper wire  transmission  and wireless  communication.  Optical
fiber has  technical  advantages  over  wireless  communications  media  such as
transmission  quality  and  signal  reliability.  Optical  fiber is also a safer
choice  in  flammable  environments  because  it  does  not  carry  electricity.
Additionally, communicating through optical fiber is more secure than copper and
wireless communications because tapping into fiber optic cable without detection
is very difficult.

     Optical  fiber quality is measured by several  performance  characteristics
and is reflected in the price of the fiber.  These  performance  characteristics
include bandwidth,  attenuation  (signal loss over distance),  tensile strength,
geometry and the dimensional and optical uniformity of the fiber.  Optical fiber
users and manufacturers  have established  specifications and standards for both
multimode and single-mode fiber.

Products

     The  following  table  describes  the  Company's  and  General   Photonics'
principal product areas and the markets they serve:

<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
               Products                             Applications                                       Target Customers
---------------------------------------------------------------------------------------------------------------------------------
SpecTran Communication
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                                               <C>
Data communication grade multimode           Data communications, including                    Integrated cablers (e.g., Lucent,
fiber: 50, 62.5 and 100 micrometer           FDDI and fast Ethernet; LANs; video;              Chromatic Technologies); independent
core diameters                               CCTV; computer peripherals channel                cablers (e.g., Optical Cable
                                             attachment                                        Corporation, CommScope, General
                                                                                               Photonics)
-----------------------------------------------------------------------------------------------------------------------------------
Telephone grade single-mode fiber            Telephony (principally  in  emerging              Independent data communications
                                             economies); high-speed domestic                   cablers; international
                                             short-distance data communication,                telecommunications cablers
                                             including Fibre Channel and FDDI                  (e.g., India, China, Mexico)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------
             Products                                 Applications                                      Target Customers
-----------------------------------------------------------------------------------------------------------------------------------
SpecTran Specialty
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                                               <C>
Step & graded index multimode fiber &        Factory LANs and PLC interconnects;               Factory, transportation and medical
cable: polymer clad/glass core, high         mobile video; avionics; high-speed                OEMs; systems designers and
numerical aperture, radiation                ground-based transportation;                      integrators; geophysical exploration
tolerant, power delivery and high            geophysical exploration and                       companies; US government and
temperature fiber; avionics cable;           monitoring; sensing; power                        military; utilities; telecom and
high dielectric strength cable;              transmission, including laser                     supercomputer OEMs; systems
tether cables                                surgery; blood gas monitoring;                    designers and integrators
                                             radiation resistant links; high-
                                             speed, short-distance telecom
                                             interconnects (e.g., telephone
                                             switching systems and PBXs);
                                             supercomputer links
-----------------------------------------------------------------------------------------------------------------------------------
Specialty single-mode fiber and              Metallized pigtails, couplers,                    Telecommunications; optoelectronic
cable: photo-sensitive, rare-earth,          amplifiers, geophysical exploration               manufacturers; well-logging
delay line, fatigue resistant fiber;         and monitoring; gyroscopes;                       companies and system integrators;
avionics cable; tether cables                wave-length division multiplexers                 defense contracts
-----------------------------------------------------------------------------------------------------------------------------------
Components and assemblies: crimp and         Industrial automation;                            OEMs; systems designers and
cleave connectors; pigtails; fiber           environmental monitoring;customer                 integrators; facilities managers;
optic arrays; specialty and hybrid           premises networking; military spec                utilities; optoelectronic device
interconnects; tool kits                     and high reliability assemblies;                  manufacturers; defense contractors
                                             high power laser delivery; sensing;
                                             illumination; spectroscopy
-----------------------------------------------------------------------------------------------------------------------------------
General Photonics
-----------------------------------------------------------------------------------------------------------------------------------
Indoor cable: tight buffered                 Building backbones; riser and                     Networking systems and LAN OEMs;
distribution and breakout designs            plenum installation                               systems designers and integrators;
                                                                                               installers; facilities managers
-----------------------------------------------------------------------------------------------------------------------------------
Outdoor cable: loose tube;                   Customer premises backbones,                      Networking systems and LAN OEMs;
gel-filled; direct burial; aerial;           including densely populated                       systems designers and integrators;
armored; figure eight                        buildings and campuses; Fibre                     installers; facilities managers
                                             Channel; FDDI; bypass telecom
-----------------------------------------------------------------------------------------------------------------------------------
Cable accessories: pulling devices;          Customer premises systems and LAN                 Installers; system integrators; LAN
breakout, splitter and restoration           installation & repair                             OEMs; utilities
kits; cable terminations
-----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

Customers and Marketing

     The Company sells its multimode and  single-mode  optical fibers to various
cable manufacturers,  domestically and internationally, which assemble them into
cables  for  resale in  configurations  of their  own  design.  Specialty  fiber
products  are sold  directly  to a large  number  of OEMs,  product  development
groups,   international   distributors   and   manufacturers'   representatives,
installers,  universities  and governmental  agencies,  primarily for use in the
industrial, medical, military, aerospace,  transportation and telecommunications
and data  communications  markets.  Optical  fiber cable and cable  accessories,
manufactured by General  Photonics,  are sold largely to  distributors,  systems
integrators and installers  primarily for use in the customer premises market in
the United States, Canada and Mexico.

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<PAGE>   5

     The Company markets its multimode and single-mode data  communications  and
telecommunications  optical fiber  products  principally  through a direct sales
force  in  the   United   States  and   through  a  network  of   manufacturer's
representatives   internationally.   Specialty   fiber   products  are  marketed
domestically  through a direct  technical field sales force and  internationally
through a network of technical distributors and sales  representatives.  Optical
fiber cable and cable  components  produced by General  Photonics  are  marketed
primarily through General Cable's direct sales force and sales  representatives.
Marketing,  technical  support and some direct  sales and  customer  support are
provided  by  General  Photonics  personnel.  The  Company  advertises  in trade
publications,  distributes  brochures and other  material to its mailing list of
potential  customers  worldwide  and  participates  at  trade  shows,  technical
symposia and standards committees.

     As a result of its  diversification  efforts and broader product  offering,
the Company has  significantly  increased  its customer base over the last three
years and plans to continue to expand this base aggressively within its targeted
markets. The Company's international sales have increased from approximately 11%
of  the  Company's  net  sales  in  1994  to  approximately   22%  in  1995  and
approximately  25% in 1996.  The Company has more than 500  customers in over 25
countries.  For the year ended December 31, 1995, sales of the Company's optical
fiber  products  to each of  Chromatic  Technologies,  Inc.  and  Optical  Cable
Corporation  were  equal to 10% or more of the  Company's  revenues.  These  two
companies  together accounted for 24% of the Company's revenues in 1995. For the
year ended December 31, 1996, only Optical Cable Corporation  accounted for more
than 10% of the Company's revenues.

Manufacturing and Quality Control

     The basic raw  materials  required  for the  manufacture  of the  Company's
optical fiber products are high quality glass tubes and rods,  various chemicals
and gases and certain polymers.  The Company believes that its sources of supply
of these raw materials are adequate and that alternative  sources are available.
The Company  typically  manufactures  optical fibers by  introducing  vapors and
gases of varying  chemical  compositions  into a special  glass tube in a clean,
controlled  environment.  In the modified  chemical  vapor  deposition  ("MCVD")
process, an inside vapor deposition process used by the Company, the glass tube,
which forms all or a portion of the optical cladding,  and the introduced vapors
and gases are  simultaneously  heated,  and oxide  particles,  formed  through a
reaction of chemical  vapors with  oxygen,  are  deposited  on and adhere to the
inside of the tube. As the particles  attach to the tube wall, they are fused to
create a layer of high purity glass.  Succeeding  layers of glass of the same or
different  compositions are deposited in this fashion to permit the transmission
of light in accordance  with the desired  specifications.  The Company  believes
that the MCVD process is more flexible than other processes in the production of
optical fiber and uses it to produce both multimode and single-mode  fiber.  The
other main  process for making  optical  fiber is the outside  vapor  deposition
process which, the Company  believes,  is less flexible  overall,  but more cost
effective  for  producing  single-mode  fiber.  As  part of its  acquisition  of
SpecTran  Specialty,  the  Company  acquired  patent  rights  to  outside  vapor
deposition processes collectively known as hybrid vapor deposition ("HVD") which
it is continuing to develop for possible use in conjunction with its single-mode
fiber production process.

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     In the MCVD process,  once deposition is completed,  the glass tube is then
collapsed  into a rod, or primary  preform,  consisting of a deposited  core, in
certain  instances  some deposited  cladding and cladding  provided by the glass
tube  itself.  In most  cases,  additional  cladding  is added  to this  primary
preform.  The rod is then  placed at the top of a fiber  drawing  tower,  heated
until it softens and drawn into a fiber of predetermined diameter.

     The majority of the Company's  specialty products use a proprietary polymer
clad glass core fiber drawn from  manufactured  or  purchased  silica rod.  This
fiber  is  either  sold to  third  parties  or  cabled  and / or  combined  with
assemblies and sold. The Company owns certain hard polymer cladding, coating and
fiber  termination  technology  known as  "crimp /  cleave,"  which  facilitates
attachment of optical fibers to connectors and other  components and has certain
proprietary  technology  used for the cabling of optical fiber.  The Company has
developed proprietary  technology related to the processing of a wide variety of
polymeric  compounds  for  the  manufacture  of  optical  fiber  cable.  General
Photonics  purchases fiber from the Company and protectively  covers and bundles
the fibers  into cable.  Certain of General  Photonics'  technology  enables the
manufacture  of  nonflammable,  low  smoke,  low  toxicity  cables  for use both
outdoors and inside buildings, which the Company believes provides a significant
competitive advantage.

     The Company believes that its quality control programs are essential to its
success.  The Company's quality control programs are designed to maintain strict
tolerances during the manufacturing  process and to assure performance standards
of its products.  The Company  performs  quality  control  testing on all of its
products.  The  Company  designs and builds  much of the  equipment  its uses to
manufacture  and test its optical fiber  products.  In November  1995,  SpecTran
Communication's facility in Sturbridge, Massachusetts became certified under ISO
9001, an internationally  recognized  manufacturing  standard designed to ensure
process consistency.  SpecTran Specialty's Avon, Connecticut facility became ISO
9001 certified in March 1996. All of the Company's  operations  utilize internal
testing  procedures based on the  internationally  recognized  "Fiber Optic Test
Procedures"  and have in place and continue to develop  specialized  proprietary
testing systems and procedures to support the  requirements of their  respective
customers.

Environmental Matters

     The  Company  uses  certain   hazardous   materials  in  its  research  and
manufacturing  operations. As a result, the Company is subject to federal, state
and local  governmental  regulations.  The Company believes that it has complied
with all regulations and has all permits necessary to conduct its business.

Proprietary Rights

     The  Company  considers  its  proprietary  know-how  with  respect  to  the
development  and  manufacture of flexible glass fibers and  value-added  optical
fiber products to be a valuable asset. This know-how includes formulation of new
glass compositions, development of special fiber coatings, coating applications,
fiber designs, preform fabrication, fiber drawing, optical fiber

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<PAGE>   7

cabling  methods,  fiber  cleaving,  polishing  and  end  finishing  techniques,
proprietary   testing   capabilities,    development   and   implementation   of
manufacturing   processes  and  quality  control  techniques,   and  design  and
construction  of  manufacturing  and  quality  control  equipment.  Product  and
application knowledge are also considered to be valuable assets of the Company.

     Corning License. The Company has a limited, non-assignable,  non-exclusive,
royalty-bearing  license from Corning to make,  use and sell fiber under certain
of Corning's  United States patents with a filing date prior to January 1, 1996,
in the field of optical fiber.  The license  contains  certain  annual  quantity
limitations.  The Corning  license is not  applicable  to sales made directly or
indirectly to certain  customers  such as Corning,  Lucent and the United States
Government.  The quantities that can be manufactured  under the license increase
annually  through the year 2000. The license has a term equal to the life of the
last to expire of the Corning or Company  patents  licensed under the agreement.
Corning has the right to  terminate  the license in the event that more than 30%
of the Company's  voting stock is acquired,  directly or indirectly,  by another
manufacturing  company.  The  Company  granted  back to Corning a  non-exclusive
royalty-free  license for any of its patents with a filing date prior to January
1, 1996, in the field of optical fiber.

     Lucent License. The Company has a non-assignable, non-exclusive, unlimited,
royalty-bearing license from Lucent under all patents covering optical fiber and
optical fiber cable owned by Lucent or which Lucent and its  affiliates  had the
right to license on or before  August 15,  1986.  The  Company  granted  back to
Lucent a  non-exclusive,  royalty-free  license  under  patents  the Company may
obtain  relating to optical fiber  inventions made on or before August 15, 1986.
The license  extends for the life of the last to expire of the patents  licensed
under the agreement.

     Sales Subject to Corning and Lucent License  Agreements.  Approximately 36%
of the Company's net sales during 1996 were subject to the Corning  license and
approximately 62% were subject to the Lucent  license.  These  license
agreements required  aggregate royalty payments by the Company of approximately
3.7% of net sales of the Company's  products  manufactured under the agreements
during 1996. The Company believes that certain Corning patents,  which may have
been relevant to the Company's single-mode fiber, including patents covered by a
non-exclusive license from Corning to the Company,  have expired in many
countries (including the United States). Therefore, the Company believes that
manufacturing and sale of its  single-mode fiber is not subject to the Corning
license and has been marketing its  single-mode fiber  without payments of
royalties to Corning and without regard to the annual  quantity limitations of
the Corning license since 1993. The Company  presently does not expect to need
the Corning license for the manufacture of its multimode fiber after 1999
because the Company  believes that a Corning United States patent with relevancy
to its multimode fiber will expire in 1999.

     Patents  and  Trademarks.  The  Company  and its  subsidiaries  own 24 U.S.
patents  relating to products,  processes and equipment in the fields of optical
fibers,  optical  connectors,  coatings and cleaving tools. The Company believes
that its patents afford it certain  competitive  advantages.  Under the terms of
the  Corning  and Lucent  license  agreements,  the  optical  fiber  patents are
required  to be made  available  royalty-free  to Corning  and  certain of those
patents are also required to be made available royalty-free to Lucent.

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     The Company is using its trademark SPECTRAGUIDE(R) for its commercial grade
optical  fiber and for certain of its value added fiber  products.  It also uses
the  trademarks  HCS(R)  (Hard  Clad  Silica),  Avioptics(TM),  Flightguide(TM),
PYROCOAT(TM), V-System(TM) and V-Pin(TM).

Research and Development

     Research and development  activities,  and the Company's ability to develop
and improve products  employing both existing and new technology,  are important
to the Company.  During the fiscal years ended December 31, 1996, 1995 and 1994,
the Company spent $3.1 million, $2.8 million and $2.0 million,  respectively, or
5.1%, 7.3% and 7.3%, respectively, of its net sales on research and development.
The Company  expects to continue to  increase  the annual  dollar  amount of its
research and  development  expenditures.  The Company has continued to invest in
programs to reduce  manufacturing  cost and improve product  performance in both
the  single-mode  and  multimode  product  lines,  to develop new optical  fiber
products  and  to  develop  alternative  process  technologies.   The  Company's
personnel conduct substantially all of its research and development  activities.
See "Item 7.  Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations."

Backlog

     As of January 31, 1997, the Company's  backlog of orders was  approximately
$69.4 million, as compared to a backlog of $17.4 million as of January 31, 1996.
Approximately  $30.9  million of the January 31, 1997  backlog is expected to be
delivered during 1997.

Competition

     The Company produces and sells optical fibers and value added optical fiber
components  and  assemblies  for  data  communications,  telecommunications  and
specialized applications. Optical fiber cable and cable components are also sold
through  General  Photonics.   While  there  may  be  less  competition  in  the
specialized  markets,  all of the  markets  served by the  Company  and  General
Photonics are very  competitive.  The Company's main  competitors for its fibers
for data communications and  telecommunications  are its licensors,  Corning and
Lucent,  to whom the Company pays royalties and who have  substantially  greater
resources  and  operating  experience  than  the  Company.  The  Company's  main
competitors for its specialty fibers generally have been smaller operations, but
some of those  competitors  are part of  companies  with  substantially  greater
resources than the Company.  General Photonics' main competitors for its optical
fiber cable products are large companies with  substantially  greater  resources
and operating  experience than the Company and General Photonics,  some of which
may also be customers of SpecTran Communications. The Company competes for sales
based upon its ability to fill orders  promptly at competitive  prices,  product
performance, product features, unique proprietary products, flexibility, quality
and service.

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     The Company  believes that optical fibers offer a number of advantages over
and compete  favorably  with other means of  transmitting  information,  such as
copper wire, satellite and other line of sight transmissions (e.g.,  microwaves)
despite  increased  interest in wireless  communications  in the marketplace and
enhancements  to  the  existing  copper  wire  telephony  infrastructure.   Many
companies   offering  such  other  means  of   transmitting   information   have
substantially  greater resources and operating  experience than the Company. The
Company often competes with both mature existing  technology and new technology,
some of which have cost advantages over optical fiber for certain applications.

     The number of  participants in the optical fiber industry is to some extent
limited by patents covering the fundamental  optical fiber technology,  the need
for substantial  capital  investment and the availability of highly  specialized
equipment and  personnel  with the requisite  technical  expertise.  The Company
believes  that  certain  Corning  patents,  which may have been  relevant to the
Company's  single-mode  fiber,  including  patents  covered  by a  non-exclusive
license from Corning to the Company,  have expired in many countries  (including
the United States).  The Company further  believes that a certain Corning United
States  patent,  covered by this  non-exclusive  license,  with relevance to the
Company's  multimode fiber,  expires in 1999. In addition,  the Company believes
that a certain Lucent patent  licensed to the Company  relating to its multimode
and  single-mode  fiber expires in 1997.  The expiration of these patents may or
may not reduce the patent  barrier to entry by other  participants.  The Company
estimates  that the initial  investment  required  for a turn-key  manufacturing
facility  capable of  producing  200,000  kilometers  of  world-class  multimode
optical fiber annually is between $50 million and $100 million.

Employees

     As of December 31, 1996, the Company employed 381 persons, of whom 101 were
employed in technology,  171 were employed in  manufacturing  operations and 109
provided marketing, administrative, management and other support services. These
numbers do not include 58 employees of General Photonics  previously employed by
APD. The Company's  employees are not represented by a labor union.  The Company
believes its employee relations are good.

Item 2. PROPERTIES.

     The  Company's  administrative  offices  and  the  offices  and  production
facilities  of SpecTran  Communication  are located in an  approximately  50,000
square  foot  building  which the  Company  is in the  process of  expanding  to
approximately  100,000 square feet. The building is situated on approximately 43
acres of land owned by  SpecTran  Communication  in  Sturbridge,  Massachusetts.
SpecTran  Communication  also owns an  approximately  5,000  square  foot office
building used for offices that is next to this manufacturing facility.

     SpecTran  Specialty  leases  approximately  33,000  square feet under three
leases in Avon,  Connecticut for its office and production  facilities.  Each of
the leases is for a term of three years expiring  February 18, 1997,  which have
been extended through August 18, 1997. On October 31, 1996,  SpecTran  Specialty
purchased a 42,000 square foot building and  approximately  14 acres on

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which it is located in Avon,  Connecticut.  During 1997 the  Company  expects to
expand the facility to  approximately  58,000 square feet and consolidate all of
SpecTran Specialty's operations in that facility.

     General  Photonics  has assumed  APD's  lease for  offices  and  production
facilities in an approximately 45,000 square foot facility located in Danielson,
Connecticut  with a term of two years  expiring  January  14,  1998,  subject to
General Photonics' right to renew the lease for two consecutive one year renewal
terms. General Photonics has also assumed APD's lease for offices and production
facilities  in a 36,410 square foot  facility  located in Dayville,  Connecticut
under a lease  expiring  February  6,  2001,  which is  subject  to a three year
renewal option, followed by a second renewal option for an additional two years.

Item 3. LEGAL PROCEEDINGS.

     None.

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

     None.


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                                     PART II


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

     The Company's  Common Stock is traded on the NASDAQ  National Market System
under the symbol "SPTR." Set forth below is high and low sales price information
for the  Company's  Common  Stock for the periods  indicated  as reported on the
NASDAQ National Market:

                                                                Price
                                                                -----
 Fiscal Year           Fiscal Quarter Ended               High           Low
 -----------           --------------------               ----           ---

    1995               March 31, 1995                     6-5/8          4-5/8
                       June 30, 1995                      7-1/4          4-7/8
                       September 30, 1995                 7-1/8          5-1/2
                       December 31, 1995                  6-5/8          5

    1996               March 31, 1996                     8-7/8          5-1/4
                       June 30, 1996                      28-5/8         8
                       September 30, 1996                 22-1/8         12-1/2
                       December 31, 1996                  23-3/8         16-1/8

     The approximate  number of  shareholders of record of the Company's  Common
Stock as of February 26, 1997 was 728 which  includes all shares held in nominee
names by brokerage firms and financial  institutions as one  stockholder.  It is
estimated that such shares held in street name are held for approximately  6,300
stockholders.

     The Company has never declared or paid cash dividends.


                                       11
<PAGE>   12

Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.

<TABLE>
<CAPTION>

                                                              Year Ended December 31
                                                      (in thousands, except per share data)
                                        ----------------------------------------------------------------
OPERATING RESULTS                         1996          1995          1994          1993          1992
-----------------                         ----          ----          ----          ----          ----
<S>                                    <C>            <C>           <C>           <C>           <C>
Net Sales                              $ 61,571       $38,581       $26,926       $25,578       $21,371
Gross Profit                             22,375        13,061         7,623         9,615         8,734
Income (Loss) Before Income Taxes         5,537           777          (487)        5,629         5,012
Net Income (Loss)                         3,655           542          (487)        3,655         3,644
Net Income (Loss) Per Share of
  Common Stock                            .62           .10          (.09)          .67           .66

FINANCIAL POSITION
Total Assets                             62,456        40,365        31,362        26,712        22,848
Long-Term Debt                           24,000        10,000         5,240           300           367
Stockholders' Equity                     28,403        24,296        23,104        23,614        20,009

</TABLE>


                                       12
<PAGE>   13

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

      Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

Overview

     Currently,  SpecTran  develops,  manufactures,  and  markets  high  quality
optical fiber, optical fiber cables and value-added optical fiber components and
assemblies.  Prior to 1993,  the  Company  had a  narrow  customer  base and was
focused on the production of multimode  fiber for the domestic  market.  In 1993
the Company  began to  implement a strategic  plan to  diversify  its  products,
markets  and  customer  base.  As part of this plan,  the  Company  reintroduced
single-mode  fiber in 1993 and began marketing it  internationally.  In 1994 the
Company  acquired  Ensign-Bickford's  specialty  fiber  operations  (which later
became SpecTran  Specialty),  allowing the Company to become a world-wide leader
in fiber optic specialty applications. The Company entered the fiber optic cable
market in May 1995 by acquiring APD in order to participate  more extensively in
the rapid growth of the data communications  market, the principal end market of
multimode fiber. In December 1996 the Company formed General Photonics,  a joint
venture  with  General  Cable,  to develop,  manufacture  and market fiber optic
cable.

Results of Operations

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
financial data as a percentage of net sales:

                                               Years Ended December 31,
                                               ------------------------
                                            1996        1995          1994
                                            ----        ----          ----
Net Sales                                   100.0%      100.0%       100.0%
Cost of Sales                                63.7%       66.1%        71.7%
                                            ------      ------       ------
   Gross Profit                              36.3%       33.9%        28.3%
Selling and Administrative Expenses          22.1%       25.1%        23.5%
Research and Development Cost                 5.1%        7.3%         7.3%
                                            ------      ------       ------
   Income (Loss) from Operations              9.1%        1.5%       (2.5)%
Other Income (Expense), net                  (.1)%         .5%          .7%
                                            ------      ------       ------
   Income (Loss) before Income Taxes          9.0%        2.0%       (1.8)%
Income Tax Expense                            3.1%        0.6%           --
                                            ------      ------       ------
      Net Income (Loss)                       5.9%        1.4%       (1.8)%
                                            ======      ======       ======


                                       13
<PAGE>   14

Net Sales

     Net sales  increased $23.0 million,  or 59.6%,  from $38.6 million to $61.6
million in 1996. This increase was primarily due to strong market demand for the
Company's multimode and single-mode communications fiber. The acquisition of APD
in May 1995 also  contributed  to the increase in net sales.  Selling prices for
multimode  and  single-mode  fiber have  increased  in 1996,  largely due to the
strong market demand and price adjustments  related to certain raw material cost
increases in the case of multimode  fiber.  SpecTran  Communication  represented
approximately  half  of  the  Company's  net  sales  with  the  balance  divided
relatively evenly between SpecTran Specialty and APD.

Gross Profit

     Gross profit increased $9.3 million,  or 71.3%, from $13.1 million to $22.4
million in 1996.  As a percentage  of net sales,  the gross profit  increased to
36.3%  for the year  ended  December  31,  1996 from  33.9%  for the year  ended
December 31, 1995.  This increase in gross profit was primarily due to increased
net  sales in 1996 and  lower  production  costs  resulting  from  manufacturing
process  and yield  improvements.  The  increase in gross  margin was  partially
offset by lower margins at APD which was acquired in May 1995.

     As a percentage of net sales, royalties decreased from 4.1% in 1995 to 3.7%
in 1996.  This  decrease in royalties as a percentage of net sales was primarily
due to an increase in the net sales not subject to royalties.

Selling & Administrative

     Selling and administrative  expenses increased $3.9 million, or 41.1%, from
$9.7  million  to $13.6  million  for the year ended  December  31,  1996.  This
increase  was  primarily  due to  including a full year of APD  expenses in 1996
versus only seven months in 1995. A substantially higher provision for incentive
compensation  in  the  1996  period  also  contributed  to  the  increase.  As a
percentage of net sales, selling and administrative  expenses decreased to 22.1%
for the year ended  December 31, 1996 from 25.1% for the year ended December 31,
1995.

Research and Development

     Research and development  costs  increased  $305,000,  or 10.8%,  from $2.8
million to $3.1 million for the year ended December 31, 1996. As a percentage of
net sales, research and development costs decreased from 7.3% for the year ended
December 31, 1995 to 5.1% for the year ended  December 31, 1996.  The  Company's
increased research and development  spending,  in absolute dollars, is primarily
in programs designed to improve  manufacturing  cost and product  performance in
both the  multimode  and  single-mode  product  lines,  to develop  new  special
performance fiber products and to develop alternative process technologies.


                                       14
<PAGE>   15

Other Income (Expense), net

     Other  income  (expense),  net  declined  by  $277,000  for the year  ended
December  31, 1996  compared to the same period of 1995.  The decline was caused
primarily by the absence of  non-recurring  income in 1996 partially offset by a
decrease in interest  expense of $155,000 due to  capitalization  of interest in
1996 related to the Company's ongoing plant expansion.

Income Taxes

     A tax  provision  of 34% of pre-tax  income was provided for the year ended
December 31, 1996 compared to a tax provision of 30% of pre-tax  income in 1995.
The effective tax rates for 1996 and 1995 were lower than the statutory combined
federal and state tax rates due primarily to a reduction of $400,000 in 1996 and
$437,000 in 1995 in the  valuation  allowance for deferred tax assets due to the
Company's  belief that it is more likely than not that the  additional  deferred
tax assets will be realized  through the  utilization  of operating loss and tax
credit  carryforwards.  See  Note 10 of  "Notes  to the  Consolidated  Financial
Statements."

Net Income

     Net income for the year ended December 31, 1996 was $3.7 million or 5.9% of
net sales.  Net income for the same period in 1995 was $542,000,  or 1.4% of net
sales.

      Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net Sales

     Net sales  increased $11.7 million,  or 43.3%,  from $26.9 million to $38.6
million for the year ended December 31, 1995. The increase was primarily  caused
by higher sales volumes due to strong  market demand for the Company's  standard
communication  fiber,  both  multimode  and  single-mode,  as well as  specialty
products. The acquisition of APD and a full year of sales of SpecTran Specialty,
acquired in February 1994, also contributed to the increase.

Gross Profit

     Gross profit increased $5.4 million,  or 71.3%,  from $7.6 million to $13.1
million for the year ended December 31, 1995. The gross profit,  as a percentage
of net  sales,  increased  to 33.9% in 1995 from  28.3% in 1994.  Major  factors
positively  impacting  gross profit were  improved  manufacturing  efficiencies,
especially in the Company's  single-mode product line. However, the gross profit
was  negatively  impacted  in  1995  by  approximately  $1.8  million  of  costs
associated with  manufacturing  development of single-mode  fiber compared to $2
million in 1994.  Royalties on sales were  approximately  4.1% and 5.5% of total
net sales during 1995 and 1994, respectively.  The decrease in royalties was due
to a higher level of sales in 1995 not subject to royalties.

                                       15
<PAGE>   16

Selling & Administrative

     Selling and administrative  expenses increased $3.4 million, or 53.0%, from
$6.3  million  to $9.7  million  for the year  ended  December  31,  1995.  As a
percentage of net sales,  these costs increased  during 1995 to 25.1% from 23.5%
during  1994.  The  significant  increase in total  selling  and  administrative
spending was primarily due to expenses  related to the operation of the acquired
APD,  increased  personnel  costs and increased  market  development  activities
related to single-mode fiber in 1995.

Research & Development

     Research and development  costs increased by $853,000,  or 43.2%, from $2.0
million to $2.8  million for the year ended  December  31,  1995.  Research  and
development  costs as a percentage of net sales  remained  constant from 1994 to
1995 at 7.3%.  The  Company  has  continued  to invest in  programs  to  improve
manufacturing cost and product performance in both the single-mode and multimode
product lines, to develop new special  performance fiber products and to develop
alternative process technologies.

Other Income (Expense), net

     Other income (expense) net increased by $29,000, or 16.0%, from $183,000 to
$212,000 for the year ended  December 31, 1995.  Interest  expense  increased by
$323,000,  or  106.7%  from  $303,000  to  $626,000  during  1995 as a result of
increased levels of outstanding debt during 1995 associated with the acquisition
of  APD.  Other  income   increased  in  1995  by  $351,000   primarily  due  to
non-recurring  material recovery income and proceeds received in connection with
the conversion of the Company's  primary group health insurance  provider from a
mutual company to a stock company.

Income Taxes

     Income  tax  expense  for the year  ended  December  31,  1995 was 30.3% of
pre-tax income versus no tax provision or benefit for the previous year.  Income
tax  expense  was reduced due to a  reduction  in the  valuation  allowance  for
deferred tax assets. The valuation allowance was reduced $437,000 in 1995 due to
the  Company's  belief  at the time  that it was more  likely  than not that the
additional  deferred  tax  asset  will be  realized.  Excluding  the  effect  of
adjusting the valuation allowance, income tax expense as a percentage of pre-tax
income  was  56.0% in 1995.  See Note 10 of  "Notes  to  Consolidated  Financial
Statements."  No tax benefit was provided in 1994 due to the  uncertainty of the
future realization of net operating loss and tax credit carryforwards.

Net Income (Loss)

     The Company's  net income in 1995 was $542,000,  a 1.4% return on net sales
compared to a net loss in 1994 of $487,000.

                                       16
<PAGE>   17

                         Liquidity and Capital Resources

     The  Company's  principal  sources  of cash are cash flow from  operations,
established bank credit  facilities and existing cash balances.  During the year
ended  December 31, 1996,  the Company  generated  $4.6 million in net cash from
operating  activities.  In December  1996,  as part of the  formation of General
Photonics,  its 50-50 joint venture with General Cable, the Company sold certain
assets of APD for  approximately  $6.0  million  (subject to  adjustment),  $5.3
million of which was received in 1996, and the remainder  placed in escrow.  The
Company also contributed $100,000 to the joint venture. Also in December 1996,
the Company sold an aggregate  principal  amount  of $24.0  million  of  senior
secured  notes  and concurrently  restructured  its existing  loans from its
principal bank into a $20.0 million revolving credit agreement. Approximately
$14.0 million raised from the sale of the Notes was used to repay existing
indebtedness  leaving all $20.0  million  of the  revolving  credit agreement
available  for  use by the Company.  A  substantial   portion  of this  cash
was  used  to  fund  capital expenditures  of  $11.1  million.  The remaining
amount  was  invested  in the Company's short-term marketable securities.

     As of December 31, 1996,  the Company had  approximately  $19.0  million of
cash, cash equivalents and marketable securities,  including  approximately $1.6
million in marketable  securities classified as long-term assets, which could be
converted to cash if necessary.  The Company's net working  capital  position at
December 31, 1996 was approximately $24.3 million.

     The Company has plans for capacity expansion requiring  significant capital
expenditures  through  approximately the end of 1997.  Planned  expenditures for
capacity   expansion   include   approximately   $32.0   million  for   SpecTran
Communication  and  approximately  $9.0  million for  SpecTran  Specialty.  When
completed,  these expansions are expected to increase  SpecTran  Communication's
capacity by 100% and SpecTran Specialty's by 50%. The Company intends to finance
these expansions through a combination of cash flow from operations,  borrowings
and net proceeds from a stock offering ( see "Subsequent Event").

                                Subsequent Events

     On February 18, 1997, the Company completed a secondary public offering for
a total of  1,500,000  shares of common  stock at a price of $19.00  per  share,
including 200,000 shares sold by a selling stockholder. This offering, including
the  exercise  price of warrants  exercised by the selling  stockholder,  raised
approximately  $23.0  million for the Company (See "Note 15 to the  Consolidated
Financial Statements - Subsequent Event").

     The Company intends to use the net  proceeds  from this  offering  for the
expansion  of  manufacturing  capacity,  working  capital and general  corporate
purposes.  Pending  such use,  net  proceeds  will be  invested  in  short-term,
high-grade interest-bearing securities.

     On March 21, 1997, Dr. Raymond E. Jaeger, Chairman of the Board of
Directors, assumed the additional role of Chief Executive Officer of the
Company while Mr. Glenn E. Moore, formerly the Company's CEO, left the Company
to pursue other interests.


                                       17
<PAGE>   18

                        Recent Accounting Pronouncements

     In October 1995,  the  Financial  Accounting  Standards  Board (the "FASB")
issued  SFAS  No.  123,   "Accounting  for  Stock-Based   Compensation,"   which
established   financial  accounting  and  reporting  standards  for  stock-based
compensation plans.  Companies are encouraged,  rather than required, to adopt a
new method that accounts for stock compensation awards based on their fair value
using an option pricing model.  Companies that do not adopt this new method will
be required to make pro forma footnote  disclosures of net income as if the fair
value-based method of accounting required by SFAS No. 123 had been applied.  The
Company adopted SFAS No. 123 on January 1, 1996.  Adoption of this pronouncement
did not have a material impact on the Company's financial position or results of
operations  as the  Company  will make pro  forma  footnote  disclosures  in its
December  31,  1996,  financial  statements  (See  "Note  9 to the  Consolidated
Financial Statements - Stockholder's Equity").

     On January 1, 1996, the Company  adopted SFAS No. 121,  "Accounting for the
Impairment of Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of."
This  statement  requires  that  long-lived  assets  and  certain   identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable.  This statement also requires that long-lived assets and
certain  identifiable  intangibles to be disposed of be reported at the lower of
carrying  value or fair value less costs to sell.  Adoption of the statement had
no impact on the Company's financial statements.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The response to this Item is  submitted as a separate  section of this Form
10-K.

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

     None.


                                       18
<PAGE>   19

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information to be contained  under the heading  "Election of Directors"
in the  Company's  proxy  statement  relating  to the  1997  Annual  Meeting  of
Shareholders (the "Proxy Statement") is hereby incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION.

     The information with respect to compensation of certain executive  officers
and all executive  officers of the Company as a group to be contained  under the
heading  "Compensation  of  Executive  Officers  and  Directors"  in  the  Proxy
Statement is hereby incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The information  with respect to ownership of the Company's Common Stock by
management  and by certain  other  beneficial  owners to be contained  under the
heading "Principal Stockholders and Other Information" in the Proxy Statement is
hereby incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The  information  with  respect  to  certain   relationships   and  related
transactions to be contained  under the heading  "Certain  Transactions"  in the
Proxy Statement is hereby incorporated herein by reference.


                                       19
<PAGE>   20

                                     PART IV

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

(a)    1. & 2.    Financial Statements and Financial Statement Schedules:
                  The  response  to this  portion of Item 14 is submitted  as a
                  separate section of this Form 10-K.

             3.   Exhibits:
                  See Exhibit Index on Pages 22 through 27 of this Form 10-K.

(b)               Reports on Form 8-K filed  during the final  quarter of fiscal
                  1996: See Exhibits 10.86,  10.87,  10.88, 10.89, 10.90, 10.91,
                  10.92, 10.93, 10.94, 10.95, 10.96 and 10.97.

                                 SIGNATURES

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

Dated:                           SPECTRAN CORPORATION

   March 27, 1997                   By:    /s/  Raymond E. Jaeger
                                           --------------------------------
                                           Raymond E. Jaeger
                                           President,
                                           Chief Executive Officer and
                                           Chairman of the Board of Directors


   March 27, 1997                   By:    /s/  Bruce A. Cannon
                                           --------------------------------
                                           Bruce A. Cannon
                                           Senior Vice President,
                                           Chief Financial Officer and
                                           Chief Accounting Officer


                                       20
<PAGE>   21

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

        Signatures                          Title                      Date
        ----------                          -----                      ----

/s/  Raymond E. Jaeger       President, Chief Executive Officer   March 27, 1997
---------------------------     and Chairman of the Board of
Raymond E. Jaeger              Directors (principal executive
                                          officer)

/s/  Bruce A. Cannon            Senior Vice President, Chief      March 27, 1997
---------------------------     Financial Officer, Secretary,
Bruce A. Cannon               Treasurer and Director (principal
                              financial officer and principal
                                    accounting officer)

/s/  John E. Chapman               Senior Vice President -        March 27, 1997
---------------------------       Technology and Director
John E. Chapman


/s/  Ira S. Nordlicht                    Director                 March 27, 1997
---------------------------
Ira S. Nordlicht


/s/  Paul D. Lazay                       Director                 March 27, 1997
---------------------------
Paul D. Lazay


/s/  Richard Donofrio                    Director                 March 27, 1997
---------------------------
Richard Donofrio


/s/  Lily K. Lai                         Director                 March 27, 1997
---------------------------
Lily K. Lai


                                       21
<PAGE>   22

                   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

   3.1     Certificate  of   Incorporation   of  the  Registrant,   as  amended.
           (Incorporated by reference to Registrant's Annual Report on Form 10-K
           for its fiscal year ended December 31, 1991.)

   3.2     By-Laws of the Registrant, as amended.  (Incorporated by reference to
           Registrant's  Annual  Report on Form 10-K for its  fiscal  year ended
           December 31, 1991.)

   4.5*    Form of Stock Certificate for Voting Common Stock.

  10.1     Registrant's  1991  Incentive  Stock  Option Plan.  (Incorporated  by
           reference to the Registrant's Proxy Statement dated April 9, 1991.)

  10.7*    License  Agreement dated August 15, 1981,  between the Registrant and
           Western Electric Company, Incorporated.  (Registrant has been granted
           confidential treatment of portions of this Exhibit.)

  10.49    License  Agreement  dated as of the first day of January  1991 by and
           between the Registrant  and Corning,  Incorporated.  (Registrant  has
           been granted  confidential  treatment  of portions of this  Exhibit.)
           (Incorporated by reference to Registrant's Annual Report on Form 10-K
           for its fiscal year ended December 31, 1991.)

  10.53    Asset Purchase Agreement between  Ensign-Bickford  Optics Company and
           SpecTran   Specialty   Optics   Company  dated   February  18,  1994.
           (Incorporated  by  reference to the  Registrant's  Report on Form 8-K
           filed March 3, 1994.)

  10.54    Stock   Purchase    Agreement   between    Ensign-Bickford    Optical
           Technologies,  Inc. and EBOT  Acquisition  Corp.  dated  February 18,
           1994.  (Incorporated by reference to the Registrant's  Report on Form
           8-K dated March 3, 1994.)

  10.55    Lease between 150 Fisher Associates Limited  Partnership and SpecTran
           Specialty  Optics Company dated February 18, 1994.  (Incorporated  by
           reference  to the  Registrant's  Report on Form 10-K dated  March 30,
           1994.)

  10.56    Lease  between Avon Park  Properties  and SpecTran  Specialty  Optics
           Company dated  February 18, 1994.  (Incorporated  by reference to the
           Registrant's Report on Form 10-K dated March 30, 1994.)

  10.57    Lease  between Avon Park  Properties  and SpecTran  Specialty  Optics
           Company dated  February 18, 1994.  (Incorporated  by reference to the
           Registrant's Report on Form 10-K dated March 30, 1994.)

                                       22
<PAGE>   23

  10.61    Stock Purchase  Agreement among APD  Acquisition  Corp. and Irving N.
           Dwyer,  David P.  DaVia,  The  Irving N.  Dwyer and  Annette M. Dwyer
           Charitable  Remainder Trust and the DaVia Charitable Remainder Trust.
           (Incorporated  by  reference to the  Registrant's  Report on Form 8-K
           filed June 7, 1995.)

  10.62    Directors  Retirement Plan dated December 27, 1995.  (Incorporated by
           reference  to the  Registrant's  Report on Form 10-K dated  March 29,
           1996.)

  10.63    Registrant's  Employee  Profit  Sharing  Plan as revised  and adopted
           effective  January  1,  1995.   (Incorporated  by  reference  to  the
           Registrant's Report on Form 10-K dated March 29, 1996).

  10.64    Lease between Mark C. Yellin and Applied Photonic Devices, Inc. dated
           January 15, 1996.  (Incorporated  by  reference  to the  Registrant's
           Report on Form 10-K dated March 29, 1996).

  10.65    Lease between  Fabrilock,  Inc. and Applied  Photonic  Devices,  Inc.
           dated   February  6,  1996.   (Incorporated   by   reference  to  the
           Registrant's Report on Form 10-K dated March 29, 1996).

  10.69    Supplemental  Retirement  Agreement between SpecTran  Corporation and
           Raymond E. Jaeger  dated May 8, 1996.  (Incorporated  by reference to
           the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

  10.70    Supplemental  Retirement  Agreement between SpecTran  Corporation and
           Bruce A. Cannon dated May 8, 1996.  (Incorporated by reference to the
           Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

  10.71    Supplemental  Retirement  Agreement between SpecTran  Corporation and
           Crawford L. Cutts dated May 8, 1996.  (Incorporated  by  reference to
           the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

  10.72    Supplemental  Retirement  Agreement between SpecTran  Corporation and
           William B. Beck dated May 8, 1996.  (Incorporated by reference to the
           Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

  10.73    Supplemental  Retirement  Agreement between SpecTran  Corporation and
           John E. Chapman dated May 8, 1996.  (Incorporated by reference to the
           Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

  10.74    Lease  between  CRJ Realty  Trust and  SpecTran  Communication  Fiber
           Technologies, Inc. dated July 22, 1996. (Incorporated by reference to
           the Registrant's Quarterly Report on Form 10-Q dated August 9, 1996.)

                                       23
<PAGE>   24

  10.75    Contractual  Agreement Between Lucent  Technologies Inc. and SpecTran
           Corporation  dated  October 3,  1996.  (Registrant  has been  granted
           confidential  treatment for portions of this Exhibit.)  (Incorporated
           by reference to the Registrant's  Quarterly Report on Form 10-Q dated
           November 13, 1996.)

  10.76    Three Year Multimode  Optical Fiber Supply  Contract  between Corning
           Incorporated  and SpecTran  Corporation  dated as of January 1, 1996.
           (Registrant has been granted  confidential  treatment for portions of
           this  Exhibit.)   (Incorporated  by  reference  to  the  Registrant's
           Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.79    Key  Employee  Incentive  Plan  effective  as  of  January  1,  1996.
           (Incorporated  by reference to the  Registrant's  Quarterly Report on
           Form 10-Q dated November 13, 1996.)

  10.80    Employment  Agreement  between  SpecTran  Corporation  and Raymond E.
           Jaeger dated as of December 14, 1992.  (Incorporated  by reference to
           the  Registrant's  Quarterly  Report on Form 10-Q dated  November 13,
           1996.)

  10.81    Employment Agreement between SpecTran Corporation and Bruce A. Cannon
           dated as of December  14,  1992.  (Incorporated  by  reference to the
           Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.82    Employment Agreement between SpecTran Corporation and John E. Chapman
           dated as of December  14,  1992.  (Incorporated  by  reference to the
           Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.83    Employment  Agreement  between  SpecTran  Corporation and Crawford L.
           Cutts dated as of January 1, 1996.  (Incorporated by reference to the
           Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.84    Employment Agreement between SpecTran Corporation and William B. Beck
           dated as of February  18,  1994.  (Incorporated  by  reference to the
           Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.85    Employment  Agreement between SpecTran Corporation and Glenn E. Moore
           dated  as  of  December  1995.  (Incorporated  by  reference  to  the
           Registrant's Quarterly Report on Form 10-Q dated November 13, 1996.)

  10.86    Note   Purchase   Agreement   between   SpecTran    Corporation   and
           Massachusetts  Mutual Life Insurance  Company dated as of December 1,
           1996.  (Incorporated by reference to the Registrant's  Current Report
           on Form 8-K dated December 31, 1996.)

                                       24
<PAGE>   25

  10.87    Note Purchase  Agreement  between  SpecTran  Corporation  and CM Life
           Insurance  Company  dated as of  December 1, 1996.  (Incorporated  by
           reference  to the  Registrant's  Current  Report  on Form  8-K  dated
           December 31, 1996.)

  10.88    Note Purchase  Agreement between SpecTran  Corporation and The Mutual
           Life  Insurance  Company  of New York dated as of  December  1, 1996.
           (Incorporated by reference to the Registrant's Current Report on Form
           8-K dated December 31, 1996.)

  10.89    Note Purchase Agreement between SpecTran Corporation and Atwell & Co.
           dated as of  December  1, 1996.  (Incorporated  by  reference  to the
           Registrant's Current Report on Form 8-K dated December 31, 1996.)

  10.90    Security Agreement among SpecTran Corporation, SpecTran Communication
           Fiber Technologies,  Inc., SpecTran Specialty Optics Company, Applied
           Photonic Devices, Inc. and Fleet National Bank, as Trustee,  dated as
           of December 1, 1996.  (Incorporated  by reference to the Registrant's
           Current Report on Form 8-K dated December 31, 1996.)

  10.91    Trademark  Security  Agreement among SpecTran  Corporation,  SpecTran
           Communication  Fiber  Technologies,  Inc.,  SpecTran Specialty Optics
           Company,  Applied Photonic Devices,  Inc. and Fleet National Bank, as
           Trustee, dated as of December 1, 1996.  (Incorporated by reference to
           the Registrant's Current Report on Form 8-K dated December 31, 1996.)

  10.92    Patent  Collateral  Assignment among SpecTran  Corporation,  SpecTran
           Communication  Fiber  Technologies,  Inc.,  SpecTran Specialty Optics
           Company,  Applied Photonic Devices,  Inc. and Fleet National Bank, as
           Trustee, dated as of December 1, 1996.  (Incorporated by reference to
           the Registrant's Current Report on Form 8-K dated December 31, 1996.)

  10.93    Pledge Agreement among SpecTran Corporation,  SpecTran  Communication
           Fiber Technologies,  Inc., SpecTran Specialty Optics Company, Applied
           Photonic Devices, Inc. and Fleet National Bank, as Trustee,  dated as
           of December 1, 1996.  (Incorporated  by reference to the Registrant's
           Current Report on Form 8-K dated December 31, 1996.)

  10.94    Mortgage,  Assignment  of Rents and  Security  Agreement  by SpecTran
           Communication  Fiber  Technologies,  Inc. to Fleet  National Bank, as
           Trustee, dated as of December 1, 1996.  (Incorporated by reference to
           the Registrant's Current Report on Form 8-K dated December 31, 1996.)

  10.95    Open-End  Mortgage,  Assignment  of Rents and  Security  Agreement by
           SpecTran Specialty Optics Company to Fleet National Bank, as Trustee,
           dated as of  December  1, 1996.  (Incorporated  by  reference  to the
           Registrant's Current Report on Form 8-K dated December 31, 1996.)

                                       25
<PAGE>   26

  10.96    Guaranty   Agreement  dated  as  of  December  1,  1996  by  SpecTran
           Communication  Fiber  Technologies,  Inc.,  SpecTran Specialty Optics
           Company and Applied Photonic Devices,  Inc. in favor of Massachusetts
           Mutual Life Insurance  Company,  CM Life Insurance  Company,  The New
           York Mutual Life Insurance Company and Atwell & Co.  (Incorporated by
           reference  to the  Registrant's  Current  Report  on Form  8-K  dated
           December 31, 1996.)

  10.97    Loan Agreement  among SpecTran  Corporation,  SpecTran  Communication
           Fiber Technologies,  Inc., SpecTran Specialty Optics Company, Applied
           Photonic  Devices,  Inc. and Fleet National Bank dated as of December
           1, 1996.  (Incorporated  by  reference  to the  Registrant's  Current
           Report on Form 8-K dated December 31, 1996.)

  10.98    Limited Liability Company Agreement of General Photonics, LLC between
           Applied Photonic  Devices,  Inc. and General Cable  Industries,  Inc.
           dated as of December  23,  1996.  (Incorporated  by  reference to the
           Registrant's Current Report on Form 8-K dated January 8, 1997.)

  10.99    Asset  Purchase  Agreement  among  Applied  Photonic  Devices,  Inc.,
           SpecTran  Corporation,  General Cable  Corporation  and General Cable
           Industries,  Inc.  dated as of December  23, 1996.  (Incorporated  by
           reference  to the  Registrant's  Current  Report  on Form  8-K  dated
           January 8, 1997.)

  10.100   Investor's  Representations,  Contribution Agreement and Subscription
           Agreement among Applied Photonic Devices,  Inc., SpecTran Corporation
           and  General   Photonics,   LLC  dated  as  of  December   23,  1996.
           (Incorporated by reference to the Registrant's Current Report on Form
           8-K dated January 8, 1997.)

  10.101   Non-Competition  Agreement  among  General  Cable  Industries,  Inc.,
           General Cable Corporation,  Applied Photonic Devices,  Inc., SpecTran
           Corporation  and General  Photonics,  LLC dated  December  23,  1996.
           (Registrant has been granted  confidential  treatment for portions of
           this Exhibit.) (Incorporated by reference to the Registrant's Current
           Report on Form 8-K dated January 8, 1997.)

  10.102   Standstill  Agreement among General Cable Industries,  Inc.,  General
           Cable  Corporation and SpecTran  Corporation dated as of December 23,
           1996.  (Incorporated by reference to the Registrant's  Current Report
           on Form 8-K dated January 8, 1997.)


                                       26
<PAGE>   27

  10.103   Letter  amendment  to  Three  Year  Multimode  Optical  Fiber  Supply
           Contract between Corning  Incorporated and SpecTran Corporation dated
           as of January  1, 1996.  (Registrant  has been  granted  confidential
           treatment for portions of this Exhibit.)  (Incorporated  by reference
           to the  Registrant's  Current  Report  on Form 8-K dated  January  8,
           1997.)

  10.104   Letter amendment to Employment  Agreement between SpecTran  Specialty
           Optics   Company  and   William  B.  Beck  dated   April  18,   1996.
           (Incorporated by reference to the Registrant's Current Report on Form
           8-K dated January 8, 1997.)

  10.105   Cross-Indemnity  Agreement  between SpecTran  Corporation and Allen &
           Company Incorporated.  (Incorporated by reference to the Registrant's
           Registration  Statement on Form S-3 (Reg.  No.  333-19449)  effective
           February 12, 1997.)


  10.106   Common Stock Purchase Warrant issued to Allen & Company Incorporated.


  11.1     Schedule of Earnings Per Share Calculation.

  21.0     Subsidiaries.

----------
*    Incorporated  by reference to Registrant's  Registration  Statement on Form
     S-1 (Reg. No. 2-83172) effective June 2, 1983.

<PAGE>   28

                              SpecTran Corporation

                                    Form 10-K

                           Items 8, 14 (a) (1) and (2)

             Index to Consolidated Financial Statements and Schedule

The following consolidated financial statements of the registrant required to be
included in Item 8 and 14 (a) (1) are listed below:

                                                                     Page
                                                                     ----

Independent Auditors' Report                                          F-2
Financial Statements:
   Consolidated Balance Sheets as of December 31, 1996 and 1995       F-3
   Consolidated Statements of Operations for the Years Ended
      December 31, 1996, 1995 and 1994                                F-4
   Consolidated Statements of Cash Flows for the Years Ended
      December 31, 1996, 1995 and 1994                                F-5
   Consolidated Statements of Stockholders' Equity for the
      Years Ended December 31, 1996, 1995 and 1994                    F-6
   Notes to Consolidated Financial Statements                   F-7 through F-24

The  following  financial  statement  schedule  of the  registrant  is  included
pursuant to Item 14 (a) (2):

Financial Statement Schedule                                         Page
----------------------------                                         ----

   I. Valuation and Qualifying Accounts                               F-25

Schedules  other than those  mentioned  above are omitted because the conditions
requiring  their  filing do not exist or because  the  required  information  is
presented in the consolidated financial statements, including the notes thereto.



                                      F-1
<PAGE>   29

                          Independent Auditors' Report


The Board of Directors and Stockholders
SpecTran Corporation:

We have audited the consolidated financial statements of SpecTran Corporation as
listed  in  the  accompanying  index.  In  connection  with  our  audits  of the
consolidated financial statements,  we also have audited the financial statement
schedule  as listed in the  accompanying  index.  These  consolidated  financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated  financial statements and financial statement schedule based on our
audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide 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 SpecTran Corporation
as of December 31, 1996 and 1995, and the results of their  operations and their
cash flows for each of the years in the  three-year  period  ended  December 31,
1996, in conformity with generally accepted accounting  principles.  Also in our
opinion,  the related financial statement schedule,  when considered in relation
to the consolidated  financial statements taken as a whole,  presents fairly, in
all material respects, the information set forth therein.

                                                      KPMG PEAT MARWICK LLP

Boston, Massachusetts
February 18, 1997



                                      F-2
<PAGE>   30

                              SpecTran Corporation
                           Consolidated Balance Sheets

                              Dollars in thousands

                             ASSETS (NOTE 8 AND 14)

                                                             1996        1995
                                                           --------    --------
Current Assets:
   Cash and Cash Equivalents                               $  3,565    $  1,625
   Current Portion of Marketable Securities (Note 2)         13,822       4,088
   Trade Accounts Receivable, net of allowance for
      doubtful accounts of $218 and $265 in 1996 and
      1995, respectively                                      7,621       7,799
   Inventories (Note 3)                                       7,254       7,415
   Deferred Income Taxes, net (Note 10)                         791         588
   Prepaid Expenses and Other Current Assets                  1,316         513
                                                           --------    --------

   Total Current Assets                                      34,369      22,028
                                                           --------    --------

Investment in Joint Venture (Note 14)                         4,135        --

Property, Plant and Equipment, net (Note 4)                  17,890      10,290

Other Assets:
   Long-term Marketable Securities (Note 2)                   1,595       1,133
   License Agreements, net (Note 5)                             804       1,004
   Deferred Income Taxes, net (Note 10)                         814       1,652
   Goodwill, net (Note 6)                                       950       4,156
   Other Long-Term Assets (Note 13)                           1,899         102
                                                           --------    --------
   Total Other Assets                                         6,062       8,047
                                                           --------    --------
        Total Assets                                       $ 62,456    $ 40,365
                                                           ========    ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities (Note 14):

   Accounts Payable                                        $  3,763    $  2,762
   Income Taxes Payable                                         301         225
   Accrued Defined Benefit Pension Liability (Note 13)        1,461         118
   Accrued Liabilities (Note 7)                               4,528       2,964
                                                           --------    --------

   Total Current Liabilities                                 10,053       6,069
                                                           --------    --------

Long-term Debt (Note 8)                                      24,000      10,000
                                                           --------    --------

Stockholders' Equity (Note 9 and 15):

   Common Stock, voting, $.10 par value;
     authorized 20,000,000 shares; outstanding
     5,400,071 shares and 5,353,686 shares
     in 1996 and 1995, respectively                             540         535
   Common Stock, non-voting, $.10 par value;
     authorized 250,000 shares, no shares outstanding          --          --
   Paid-in Capital                                           26,884      26,443
   Net Unrealized Loss on Marketable Securities (Note 2)        (16)        (22)
   Retained Earnings (Deficit)                                  995      (2,660)
                                                           --------    --------

   Total Stockholders' Equity                                28,403      24,296
                                                           --------    --------

        Total Liabilities and Stockholders' Equity         $ 62,456    $ 40,365
                                                           ========    ========

          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>   31

                              SpecTran Corporation
                      Consolidated Statements of Operations

                  Dollars in thousands except per share amounts

                                                  Years Ended December 31,
                                             ----------------------------------
                                               1996         1995         1994
                                             --------     --------     --------

Net Sales (Note 11)                          $ 61,571     $ 38,581     $ 26,926
Cost of Sales                                  39,196       25,520       19,303
                                             --------     --------     --------

   Gross Profit                                22,375       13,061        7,623

Selling and Administrative Expenses            13,641        9,669        6,319
Research and Development Costs                  3,132        2,827        1,974
                                             --------     --------     --------

Income (Loss) from Operations                   5,602          565         (670)
                                             --------     --------     --------
Other Income (Expense):
   Interest Income                                226          328          327
   Interest Expense                              (471)        (626)        (303)
   Other, Net                                     180          510          159
                                             --------     --------     --------

   Other Income (Expense), net                    (65)         212          183
                                             --------     --------     --------

Income (Loss) before Income Taxes               5,537          777         (487)
Income Tax Expense (Note 10)                    1,882          235         --
                                             --------     --------     --------

Net Income (Loss)                            $  3,655     $    542     $   (487)
                                             ========     ========     ========

Weighted Average Number of Common
   Shares Outstanding                           5,926        5,583        5,203
                                             ========     ========     ========

Net Income (Loss) per Common Share           $    .62     $    .10     $   (.09)
                                             ========     ========     ========

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>   32

                              SpecTran Corporation
                      Consolidated Statements of Cash Flows
                              Dollars in thousands

<TABLE>
<CAPTION>
                                                                      Years Ended December 31,
                                                                  --------------------------------
                                                                    1996        1995        1994
                                                                  --------    --------    --------
<S>                                                               <C>         <C>         <C>
Cash Flows from Operating Activities:
    Net income (loss)                                             $  3,655    $    542    $   (487)
    Reconciliation of net income (loss) to net cash provided by
    operating activities:
        Depreciation and amortization                                3,071       2,338       1,686
        Loss (gain) on sale of assets                                 --             8           4
        Loss on sale of marketable securities                         --            17        --
        Changes in valuation accounts                                 (380)       (632)        265
        Change in long-term deferred income taxes                    1,118         576      (1,384)
        Change in other long-term assets                              (344)       (110)         (6)
    Changes in assets and liabilities, net of effects from
    purchase of businesses:
        Current deferred income taxes                                  (83)       (339)        967
        Accounts receivable                                         (2,136)       (409)       (467)
        Inventories                                                 (3,742)     (2,501)      1,137
        Prepaid expenses and other current assets                      (50)       (260)         87
        Income taxes payable/receivable                               (150)        716        (695)
        Accounts payable and accrued liabilities                     3,606       1,854         (59)
                                                                  --------    --------    --------

 Net Cash Provided by Operating Activities                           4,565       1,800       1,048
                                                                  --------    --------    --------

 Cash Flows from Investing Activities:
    Sale of Assets of Applied Photonic Devices                       5,278        --          --
    Acquisition of businesses                                         --        (3,822)     (6,662)
    Acquisition of property, plant and equipment                   (11,100)     (2,540)     (2,500)
    Purchase of marketable securities                              (29,658)    (10,894)     (3,178)
    Proceeds from sale/maturity of marketable securities            19,458      11,839       3,137
    Proceeds from sale of equipment                                   --             5        --
    Investment in joint venture                                       (354)       --          --
                                                                  --------    --------    --------

 Net Cash Used in Investing Activities                             (16,376)     (5,412)     (9,203)
                                                                  --------    --------    --------

 Cash Flows from Financing Activities:
    Borrowings of long-term debt                                    28,000       4,760       5,240
    Reduction of debt                                              (14,000)       --          (367)
    Tax effect of disqualifying disposition of ISO shares              117        --           120
    Proceeds from exercise of stock options and warrants               329        --           101
    Deferred financing costs                                          (695)       --          --
                                                                  --------    --------    --------

 Net Cash Provided by Financing Activities                          13,751       4,760       5,094
                                                                  --------    --------    --------

 Increase (Decrease) in Cash and Cash Equivalents                    1,940       1,148      (3,061)
 Cash and Cash Equivalents at Beginning of Year                      1,625         477       3,538
                                                                  --------    --------    --------

 Cash and Cash Equivalents at End of Year                         $  3,565    $  1,625    $    477
                                                                  ========    ========    ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>   33

                              SpecTran Corporation
                 Consolidated Statements of Stockholders' Equity
              For the Years Ended December 31, 1996, 1995 and 1994
                              Dollars in thousands

<TABLE>
<CAPTION>
                                                                              Net
                                                                           Unrealized
                                                                            Gain(Loss)
                                            Common Stock                       on        Retained      Total
                                        ---------------------    Paid-in    Marketable   Earnings   Stockholders'
                                          Shares    Par Value    Capital    Securities   (Deficit)     Equity
                                        ---------   ---------   ---------   ---------    ---------    ---------
<S>                                     <C>         <C>         <C>         <C>          <C>          <C>
Balance at December 31, 1993            5,165,075   $     517   $  25,812        --      $  (2,715)   $  23,614

   Exercise of Stock Options
   (Note 9)                                42,334           3          96        --           --             99
   Tax Effect of Disqualifying
     Disposition of ISO
     Shares (Note 10)                        --          --           120        --           --            120
   Unrealized Loss on
      Marketable Securities                  --          --          --          (242)        --           (242)
   Net Loss                                  --          --          --          --           (487)        (487)
                                        ---------   ---------   ---------   ---------    ---------    ---------

Balance at December 31, 1994            5,207,409         520      26,028        (242)      (3,202)      23,104

   Exercise of Stock Options
   (Note 9)                                 1,833        --             7        --           --              7
   Issuance of Shares in
     Connection with
     Acquisition (Note 14)                144,444          15         408        --           --            423
   Unrealized Gain on
     Marketable Securities                   --          --          --           220         --            220
   Net Income                                --          --          --          --            542          542
                                        ---------   ---------   ---------   ---------    ---------    ---------

Balance at December 31, 1995            5,353,686         535      26,443         (22)      (2,660)      24,296

   Exercise of Stock Options
   (Note 9)                                46,385           5         324        --           --            329
   Tax Effect of Disqualifying
      Disposition of ISO shares              --          --           117        --           --            117
      (Note 10)
   Unrealized Gain on
     Marketable Securities                   --          --          --             6         --              6
   Net Income                                --          --          --          --          3,655        3,655
                                        ---------   ---------   ---------   ---------    ---------    ---------

Balance at December 31, 1996            5,400,071   $     540   $  26,884   $     (16)   $     995    $  28,403
                                        =========   =========   =========   =========    =========    =========
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>   34

                              SPECTRAN CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1996 and 1995

1 - Nature of Business and Summary of Significant Accounting Policies

Nature of Business

     SpecTran Corporation (the "Company")  develops,  manufactures and markets a
wide range of fiber optic  products.  These include  multimode  and  single-mode
optical fiber and cable for use in data  communications  and  telecommunications
applications.  The Company also develops special performance  fibers,  coatings,
cables,  cable assemblies and other value-added products for use in a variety of
specialty markets.

Principles of Consolidation and Basis of Accounting

     The consolidated  financial  statements include the accounts of the Company
and all wholly owned  subsidiaries:  SpecTran  Communication Fiber Technologies,
Inc.,  SpecTran  Specialty Optics Company and Applied Photonic Devices,  Inc. In
December 1996 the Company  announced the formation of General  Photonics  LLP, a
50-50 joint venture between the Company and General Cable Corporation  ("General
Cable"),  a subsidiary of Wassall plc. The Company sold certain of the assets of
Applied  Photonic  Devices,  Inc.  to  General  Cable and then  contributed  the
remaining non-cash assets of APD to General Photonics for a 50% equity interest.
(See Note 14).  General  Photonics  will be accounted  for as an  unconsolidated
subsidiary  under the equity method of accounting  pursuant to which the Company
will  record  its  50%  interest  in its net  operating  results.  Prior  to the
formation of General Photonics, APD's results of operations, including net sales
and  expenses,  were  consolidated  with those of the Company.  All  significant
intercompany balances and transactions have been eliminated.

     Management  uses  estimates  and  assumptions  in preparing  the  financial
statements in accordance with generally accepted  accounting  principles.  Those
estimates and assumptions  affect the reported amounts of assets and liabilities
and the  reported  revenue  and  expenses.  Actual  results  may  vary  from the
estimates.

     Certain 1995 and 1994 balances have been reclassified to be consistent with
the current year's presentation.

Revenue Recognition

     Sales revenues are recognized upon shipment of goods.  Customers  generally
have  the  right to  return  for  replacement  any  goods  which do not meet the
customer's  purchase order  specifications.  Sales revenues and cost of sales as
reported in the  consolidated  statements of operations  are adjusted to reflect
estimated returns and warranty costs.


                                      F-7
<PAGE>   35

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995

Marketable Securities

     Marketable securities are classified as available-for-sale  and reported at
fair value, with unrealized gains and losses excluded from earnings and reported
as a separate component of stockholders'  equity, net of estimated income taxes.
Gains and losses on the sale of marketable securities are recognized at the time
of sale on a specific identification basis.

Inventories

     Inventories  are  stated  at the  lower of cost or  market  value.  Cost is
determined by the first-in, first-out method.

Statements of Cash Flows

     For purposes of the  statements  of cash flows,  the Company  considers all
highly  liquid debt  instruments  purchased  with  original  maturities of three
months or less to be cash equivalents.

     Supplemental  disclosure of cash flow information includes cash paid during
the year for (in thousands):

                                          1996          1995          1994
                                         ------        ------        ------
     Interest                            $  780        $  510        $  239
     Income Taxes                         1,044           100           560

Property, Plant and Equipment

     Property,  plant and equipment are carried at cost. Machinery and equipment
assembled  by the Company are valued at the cost of component  parts  purchased,
plus the  approximate  labor  and  overhead  costs to the  Company.  Significant
renewals and betterments are capitalized. The cost of maintenance and repairs is
charged to income as incurred.  Repairs and  maintenance  costs amounted to $1.5
million, $1.0 million and $697,000 in 1996, 1995 and 1994, respectively.

     Depreciation is provided by the straight-line  method. The principal annual
rates of depreciation are:

     Buildings and building improvements..................4%
     Machinery and equipment.......................20% to 33-1/3%

     Depreciation  expense of  property,  plant and  equipment  amounted to $2.5
million, $1.9 million and $1.4 million in 1996, 1995 and 1994, respectively.


                                      F-8
<PAGE>   36

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995

Cost in Excess of Net Assets Acquired and Other Intangibles

     The Company  monitors its cost in excess of net assets acquired  (goodwill)
and its other  intangibles  to determine  whether any impairment of these assets
has occurred. In making such determination with respect to goodwill, the Company
evaluates  the  performance,   on  an  undiscounted  basis,  of  the  underlying
businesses which gave rise to such amount.  Amortization of goodwill is recorded
on a straight-line basis over the estimated useful life of 15 years.

     With  respect  to other  intangibles,  which  include  the cost of  license
agreements and patents, the Company bases its determination of impairment on the
performance, on an undiscounted basis, of the related products.

License Agreement and Other Assets

     The total cost of the license agreement obtained in 1991 is being amortized
and charged to expense based on a ten year life.  Amortization  expense amounted
to $201,000 for 1996, 1995 and 1994.  Deferred financing costs are amortized and
charged  to  expense  over the  lives of the  related  debt.  Patents  are being
amortized over a seventeen year life.

Single-mode Fiber Manufacturing Development Costs

     Manufacturing  development  costs are expensed as incurred.  In addition to
Research  and   Development   expenses  for   single-mode   fiber,   there  were
manufacturing  development  start-up  costs  relating  to  single-mode  fiber of
approximately $1.8 million in 1995 and $2.0 million in 1994, respectively,  that
were included in cost of sales. There were no manufacturing development start-up
costs relating to single-mode fiber in 1996.

Income Taxes

     The Company accounts for income taxes using the asset and liability method.
Under this method,  deferred tax assets and  liabilities  are recognized for the
estimated  future tax  consequences  attributable  to  differences  between  the
financial  statement  carrying  amounts of existing  assets and  liabilities and
their  respective tax bases.  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.  The
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized in income in the period that includes the enactment date.

Income (Loss) per Share of Common Stock

     Income  (loss)  per  share  of  common  stock as  computed  is based on the
weighted  average  number of shares  outstanding  during the periods,  including
common stock equivalents of stock


                                      F-9
<PAGE>   37

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995

purchase warrants and stock options. For 1994, the stock  purchase warrants and
stock  options  have not been  included in the computation of loss per share
since the effect would be antidilutive. Fully diluted income per share
approximates primary income per share for all periods presented.

Financial Instruments

     Financial  instruments of the Company consist of cash and cash equivalents,
marketable securities,  accounts receivable, accounts payable, accrued expenses,
bank loan and senior  secured  notes.  The carrying  amounts of these  financial
instruments approximate their fair value.

Stock-Based Compensation

     Statement of Financial  Accounting  Standards  Number 123,  "Accounting for
Stock-Based Compensation",  encourages, but does not require companies to record
compensation cost for stock-based employee compensation plans at fair value. The
Company has chosen to continue to account for stock-based compensation using the
intrinsic value method prescribed in Accounting  Principles Board Opinion Number
25,  "Accounting  for Stock Issued to Employees,"  and related  Interpretations.
Accordingly,  compensation  cost for stock options is measured as the excess, if
any, of the quoted market price of the Company's  stock at the date of the grant
over the amount an employee must pay to acquire the stock.

2 - Marketable Securities

     A summary of marketable  securities  available for sale for the years ended
December 31, 1996 and 1995 is as follows (in thousands):

                                                                         Quoted
                            Purchase Amortized  Unrealized  Unrealized   Market
                             Price     Cost        Gains       Losses    Value
                            -------   -------     -------     -------   -------
1996
Money Market                $ 4,715   $ 4,715     $  --       $  --     $ 4,715
U.S. Government and
  Agency Obligations            902       900        --            12       888
Corporate Debt Securities       860       859        --             3       856
Commercial Paper              8,959     8,959        --             1     8,958
                            -------   -------     -------     -------   -------
Total                       $15,436   $15,433     $  --       $    16   $15,417
                            =======   =======     =======     =======   =======

1995
Mutual Funds                $ 1,190   $ 1,190     $  --       $  --     $ 1,190
U.S. Government and
  Agency Obligations          3,925     3,923           2          32     3,893
Corporate Equities              130       130           8        --         138
                            -------   -------     -------     -------   -------
Total                       $ 5,245   $ 5,243     $    10     $    32   $ 5,221
                            =======   =======     =======     =======   =======


                                      F-10
<PAGE>   38

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


In November,  1995, the Company received 5,119 shares of stock,  with a value of
$130,000,  as a result of the conversion of State Mutual Life Assurance  Company
of America,  the  Company's  health  insurer,  from a mutual  company to a stock
company. This stock was sold in 1996.

The amortized cost and estimated market value of debt securities are shown below
(in thousands):

                                      1996                       1995
                             ------------------------   ------------------------
                             Amortized     Quoted       Amortized     Quoted
                                Cost     Market Value     Cost      Market Value
                             ---------   ------------   ---------   ------------
Expected Maturities:
   Within one year              $592         $588         $2,917      $2,894
   One to five years           1,167        1,156          1,006         999

Proceeds  from  sales of  marketable  securities  during  1996 and 1995  were $1
million and $1.5  million,  respectively.  Pretax losses of $19,000 for 1996 and
$17,000 for 1995 were recognized on these sales.

3 - Inventories

     Inventories consisted of (in thousands):

                                                      December 31,
                                                 ---------------------
                                                  1996           1995
                                                 ------         ------
          Raw Materials                          $3,677         $3,132
          Work in Process                         1,209          1,508
          Finished Goods                          2,368          2,775
                                                 ------         ------
                                                 $7,254         $7,415
                                                 ======         ======

4 - Property, Plant and Equipment

     Property, plant and equipment consisted of (in thousands):

                                                            December 31,
                                                       ----------------------
                                                         1996           1995
                                                       -------        -------

Land and Land Improvements                             $   937        $   408
Buildings and Improvements                               3,840          3,729
Machinery and Equipment                                 19,213         17,229
Construction in Progress                                 8,611          1,641
                                                       -------        -------
                                                        32,601         23,007
Less:  Accumulated Depreciation                         14,711         12,717
                                                       -------        -------
Property, Plant and Equipment, net                     $17,890        $10,290
                                                       =======        =======

                                      F-11
<PAGE>   39

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     The Company has plans for capacity expansion requiring  significant capital
expenditures  through  approximately the end of 1997.  Planned  expenditures for
capacity   expansion   include   approximately   $32.0   million  for   SpecTran
Communication and approximately $9.0 million for SpecTran Specialty.

5 - License Agreements

     In  February,  1983,  the  Company  obtained  from  Corning,   Incorporated
("Corning") a limited, non-assignable,  non-exclusive royalty-bearing license to
make,  use and sell  optical  fiber under  certain of  Corning's  United  States
patents owned or filed for on or before January 1, 1988. The Company  granted to
Corning a non-exclusive royalty-free license for any United States patents filed
for on or before January 1, 1988 related to the subject matter of the Corning or
Company patents licensed under the agreement.

     In  January,  1991,  the  Company  entered  into a new fiber  manufacturing
license  agreement  with Corning  which  expanded and extended the original 1983
agreement.   The  new   agreement   gives   SpecTran  the  ability  to  increase
substantially  its fiber  production  using  Corning's  United  States  patents,
providing for an immediate  considerable increase in licensed fiber eligible for
manufacture by SpecTran in 1991, with further annual increases  through the year
2000.  The Company  paid a $2 million fee for the new license  agreement in four
semiannual  installments  of $500,000,  beginning in January,  1991. The license
obtained   from   Corning  is   limited,   non-assignable,   non-exclusive   and
royalty-bearing,  to make, use and sell optical fiber under certain of Corning's
United  States  patents  owned or filed for on or before  January 1,  1996.  The
license  has a term  equal to the life of the last to expire of the  Corning  or
Company patents licensed under the agreement. Corning has the right to terminate
the  license in the event that more than 30% of the  Company's  voting  stock is
acquired,  directly or indirectly, by another manufacturing company. The Company
granted to Corning a  non-exclusive  royalty-free  license for any United States
patents  filed for on or before  January 1, 1996 related to optical  fiber.  The
Company  believes that its  manufacturing  and sale of single-mode  fiber is not
subject to the Corning license agreement.

     At December 31, 1996, the Company or its subsidiaries had a non-assignable,
non-exclusive,  unlimited, royalty-bearing license from Lucent Technologies Inc.
("Lucent"),    formerly   AT&T   Technologies,   Inc.   and   a   non-exclusive,
royalty-bearing  license granted by Sumitomo Electric Industries,  Ltd. to make,
use and sell optical fibers under certain patents owned by those  companies.  No
payments are required under these licenses other than royalty payments.

     During  1996,  approximately  36%  and  62% of  the  Company's  net  sales,
respectively,  were  subject to the Corning and Lucent  licenses.  During  1995,
approximately 43% and 61% of the Company's net sales, respectively, were subject
to the Corning and Lucent licenses.  The Corning license contains certain annual
quantity limitations which increase annually through the year 2000.



                                      F-12
<PAGE>   40

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     Total royalties expensed during the years ended December 31, 1996, 1995 and
1994 were $2.3 million, $1.6 million and $1.5 million, respectively.

6 - Goodwill

     Goodwill consisted of (in thousands):

                                                         December 31,
                                                    ----------------------
                                                      1996           1995
                                                    -------        -------

     Goodwill                                       $ 1,181        $ 4,435
     Less Accumulated Amortization                     (231)          (279)
                                                    -------        -------
                                                    $   950        $ 4,156
                                                    =======        =======

7 - Accrued Liabilities

         Accrued liabilities consisted of (in thousands):

                                                           December 31,
                                                      ---------------------
                                                       1996           1995
                                                      ------         ------

     Salaries and Wages                               $  827         $  436
     Royalties                                         1,149            889
     Health Insurance                                    514            411
     Incentive Compensation                            1,451            503
     Other                                               587            725
                                                      ------         ------
                                                      $4,528         $2,964
                                                      ======         ======

8 - Long-Term Debt

     Long-term debt consisted of (in thousands):

                                                                  December 31,
                                                               -----------------
                                                                 1996      1995
                                                               -------   -------

Revolving credit loan facility at the lower of prime or
   LIBOR plus 1.5%, repaid in April 1996                       $  --     $10,000
Series A Senior Secured Notes at 9.24% interest                 16,000      --
Series B Senior Secured Notes at 9.39% interest                  8,000      --
                                                               -------   -------
              Total                                            $24,000   $10,000
                                                               =======   =======

     In  December  1996,  the  Company  sold to a  limited  number  of  selected
institutional investors an aggregate principal amount of $24.0 million of senior
secured  notes (the  "Notes"),  consisting  of $16.0  million of 9.24%  interest
Series A Senior  Secured  Notes due December 26, 2003 (the "Series A Notes") and
$8.0 million of 9.39%  interest  Series B Senior  Secured Notes due December 26,
2004 (the  "Series B Notes").  Interest  on the Notes is


                                      F-13
<PAGE>   41

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


payable  semi-annually,  with five equal annual  principal  repayments  required
beginning  December 26, 1999 for Series A Notes and December 26, 2000 for Series
B Notes.  The Notes  constitute  senior secured debt of the Company secured by a
first  priority  security  interest  in  substantially  all of the assets of the
Company and all  current and  hereinafter  created or acquired  subsidiaries,  a
pledge by the Company of the issued and  outstanding  stock of its  subsidiaries
and mortgages on real estate owned by the Company's subsidiaries.  The Company's
obligations  are also  guaranteed by the Company's  subsidiaries  and rank on an
equal basis with all other senior secured indebtedness of the Company. The Notes
also provide for certain  financial and  non-financial  covenants usual for this
type of transaction.  The Company used approximately $14.0 million from the sale
of the Notes to repay all outstanding indebtedness and restructured its existing
$22.0 million of total borrowing capacity with its principal bank, composed of a
$14.5 million  revolving credit agreement and $7.5 million in equipment and real
estate term loans,  into a $20.0 million  revolving credit  agreement,  maturing
December 1999,  with the same security  interest in the Company's  assets as the
Notes.  The Company has the option to select from time to time the interest rate
on the  revolving  credit  agreement at either the LIBOR rate plus 1.5% or Fleet
Bank's prime rate provided  that,  under certain  circumstances,  Fleet Bank may
deem that the LIBOR rate is not  available.  As of December 31, 1996 the Company
had no borrowing against the revolving credit agreements.

9 - Stockholders' Equity

(a)  Warrants

     As part of an  agreement  entered  into in  September,  1990  with  Allen &
Company,  Incorporated (Allen),  warrants to purchase 350,000, 30,000 and 20,000
shares of SpecTran  voting  common stock at an exercise  price of $2.00  through
August 14, 1999, were issued to Allen, Richard A.M.C.  Johnson, who retired as a
director of the Company in 1996, and Patrick E. Brake, a former  director of the
Company,  respectively.  At December 31, 1996 Allen owned none of the  Company's
outstanding  stock; if the entire Allen warrant were exercised,  Allen would own
approximately 6.1% of the Company's outstanding stock. In June, 1992 the Johnson
warrant was exercised and in January, 1993 the Brake warrant was exercised.  For
related subsequent event, see Note 15.

(b)  Stock Options

     Pursuant to the Company's  Incentive Stock Option Plan adopted in November,
1981, as amended,  incentive and nonqualified options may be granted to purchase
up to an aggregate of 455,000 shares of the Company's voting Common Stock,  $.10
par value,  at prices not less than 100% of the fair market  value of the shares
at the time the options are granted.  Currently,  all options are exercisable in
full three years from the date of grant in cumulative annual  installments of 33
1/3%  commencing  one year after the date of grant,  and expire ten years  after
grant.


                                      F-14
<PAGE>   42

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     Under its  provisions,  no options  were to be issued  under the  Incentive
Stock Option Plan  adopted in  November,  1981 (Old Plan) after the plan reached
its tenth anniversary.  During the year ended December 31, 1991, a new Incentive
Stock  Option  Plan  (New  Plan)  was  adopted.  The  terms  of the New Plan are
identical to those of the Old Plan except that (1) the number of shares eligible
for issuance is 625,490, (2) provision is made for the  non-discretionary  grant
of  nonqualified  options to directors  who are not  full-time  employees of the
Company or any subsidiary  ("outside  directors")  and (3) provision is made for
all  outstanding  options to vest upon the occurrence of a change in control (as
defined in the New Plan).

     At the  Company's  Annual  meeting in 1996,  the  holders  of Common  Stock
approved an amendment to the New Plan  increasing the number of shares of Common
Stock reserved for issuance by 250,000.

     Activity in the plans for the years ended December 31, 1996,  1995 and 1994
is summarized below (in thousands except per share amounts):

<TABLE>
<CAPTION>
                                       Shares
                                      Available             Shares Under Option
                                     for Option   Shares            Price          Amount
                                     ----------   -------    ------------------    ------
<S>                                   <C>         <C>        <C>         <C>          <C>
Balance at December 31, 1993           123,625    347,239    $1.188 -   $22.250    $2,935

   Increase in Shares Reserved         255,000         --       --        --        --
   Options Granted                    (125,600)   125,600    $4.750 -    $8.870       831
   Options Exercised                        --    (42,334)   $1.375 -    $3.370      (101)
   Options Forfeited                    19,234    (19,234)   $3.375 -   $22.250      (228)
                                       -------    -------    --------   -------    ------

Balance at December 31, 1994           272,259    411,271    $1.188 -   $22.250     3,437

   Options Granted                    (139,750)   139,750    $5.375 -    $5.500       733
   Options Exercised                        --     (1,833)   $3.375 -    $4.750        (6)
   Options Forfeited                     5,700     (5,700)   $6.000 -   $22.250       (57)
                                       -------    -------    --------   -------    ------

Balance at December 31, 1995           138,209    543,488    $1.375 -   $22.250     4,107

   Increase in Shares Reserved         250,000         --        --       --        --
   Options Granted                    (165,500)   165,500    $5.500 -   $21.750     2,594
   Options Exercised                        --    (46,385)   $1.375 -   $15.250      (329)
   Options Forfeited                    11,900    (11,900)   $3.375 -   $15.250      (100)
                                       -------    -------    --------   -------    ------

Balance at December 31, 1996           234,609    650,703    $1.375 -   $22.250    $6,272
                                       =======    =======    ========   =======    ======

</TABLE>
                                      F-15
<PAGE>   43

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     As of  December  31,  1996,  options  for  356,591  shares  were vested and
exercisable at an aggregate exercise amount of $2.9 million ($8.20 per share).

The  Company  applies  Accounting  Principles  Board  Opinion No. 25 and related
interpretations  in  accounting  for its  stock  option  plan.  Accordingly,  no
compensation  cost has been  recognized  for its fixed stock options  plan.  Had
compensation  cost for the Company's stock option plan been determined  based on
the fair value at the grant dates for awards under the plan  consistent with the
provisions  of FASB  Statement  123, the  Company's  net income and earnings per
share for the year ended  December  31, 1996 would have been  reduced to the pro
forma amounts indicated below:

                                                   1996      1995
                                                 -------   -------
          Net income (in thousands):
             As reported                         $ 3,655   $   542
             Pro forma                           $ 3,340   $   233

          Net income per  share
             As reported                         $   .62   $   .10
             Pro forma                           $   .56   $   .04

The fair value of options  granted under the  Company's  fixed stock option plan
during 1996 and 1995 were estimated on the date of grant using the Black-Scholes
option-pricing  model with the following  weighted-average  assumptions used: no
dividend yield,  expected  volatility of 64%, risk free interest rate of 7%, and
expected life of five years.

10 - Income Taxes

     Income tax expense  attributable to income (loss) from  operations  differs
from the computed  expected  tax expense  (benefit)  determined  by applying the
federal income tax rate of 34 percent as follows (in thousands):

                                                      1996      1995      1994
                                                    -------   -------   -------
Computed expected tax expense (benefit) at 34%      $ 1,883   $   264   $  (165)
   State income taxes, net of federal effect
     and change in valuation allowance                  298        81       (31)
   Research and experimentation credits                --         244      (244)
   Goodwill amortization                                 74        50      --
   Increase (decrease) in valuation allowance for
     deferred income taxes                             (400)     (437)      417
   Other                                                 27        33        23
                                                    -------   -------   -------
                                                    $ 1,882   $   235   $  --
                                                    =======   =======   =======


                                      F-16
<PAGE>   44

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     Total income tax expense  (benefit) for the years ended  December 31, 1996,
1995 and 1994 was allocated as follows (in thousands):

                                                    1996       1995       1994
                                                  -------    -------    -------
Income tax expense (benefit) attributable to:

  Income from operations                          $ 1,882    $   235    $  --
  Stockholders' equity, for
     compensation expense for tax purposes
     from the disqualifying disposition of
     stock options                                   (117)      --         (120)
                                                  -------    -------    -------

                                                  $ 1,765    $   235    $  (120)
                                                  =======    =======    =======

     Income  tax  expense  (benefit)  attributable  to  income  from  continuing
operations consists of (in thousands):

                                                Current    Deferred     Total
                                               --------    --------    --------
Year ended December 31, 1996:
   Federal                                     $    687    $    668    $  1,355
   State                                            560         (33)        527
                                               --------    --------    --------

                                               $  1,247    $    635    $  1,882
                                               ========    ========    ========

Year ended December 31, 1995:
   Federal                                     $    277    $   (120)   $    157
   State                                            158         (80)         78
                                               --------    ---------   --------

                                               $    435    $   (200)   $    235
                                               ========    ========    ========

Year ended December 31, 1994:
   Federal                                     $     --    $     27    $     27
   State                                             --         (27)        (27)
                                               --------    --------    --------

                                               $     --    $     --    $     --
                                               ========    ========    ========

                                      F-17
<PAGE>   45

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


The significant components of deferred income tax expense (benefit) attributable
to income from  operations for the years ended December 31, 1996,  1995 and 1994
are as follows (in thousands):

                                                    1996       1995       1994
                                                  -------    -------    -------

Deferred tax expense (benefit) (exclusive
  of the effects of other components
  listed below)                                   $ 1,035    $   237    $  (417)

Increase (decrease) in valuation
  allowance for deferred income taxes                (400)      (437)       417
                                                  -------    -------    -------

Deferred income tax expense (benefit)
  attributable to income from operations          $   635    $  (200)   $  --
                                                  =======    =======    =======

     The tax  effect of  temporary  differences  that  give rise to  significant
portions of the deferred tax assets and deferred tax  liabilities  are presented
below (in thousands):

                                                              1996        1995
                                                            -------     -------
Deferred tax assets:

   Accounts receivable                                      $   125     $   115
   Inventories                                                  536         433
   Accrued liability - compensation related expense             115         122
   Accrued liability - pension                                  219         121
   Other nondeductible reserves and accruals                      9         (49)
   Fixed assets                                                --           (27)
   Net operating loss carryforward benefit                      204         998
   Credit carryforwards benefit                               1,583       1,657
                                                            -------     -------

     Total gross deferred tax assets                          2,791       3,370
     Less valuation allowance                                  (630)     (1,030)
                                                            -------     -------

     Net deferred tax assets                                  2,161       2,340

Deferred tax liabilities                                       (556)       (100)
                                                            -------     -------

Net deferred tax assets                                       1,605       2,240

Less current portion                                            791         588
                                                            -------     -------

Long-term deferred tax asset                                $   814     $ 1,652
                                                            =======     =======


                                      F-18
<PAGE>   46

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     The valuation allowance for deferred tax assets as of December 31, 1996 and
1995 was $630,000 and $1 million, respectively.  Based on the Company's level of
net income and projected future  earnings,  the Company believes that it is more
likely than not that a portion of the deferred tax asset will be realized in the
future.  During 1996, the portion of the deferred tax asset which is expected to
be realized  increased from 1995;  therefore,  the Company reduced its valuation
allowance by $400,000.  The remaining  valuation  allowance relates primarily to
the risk that a portion of the tax credit  carryforwards will not be used before
they expire.

     At December  31,  1996,  the Company had the  following  income tax credits
available to offset future income taxes (in thousands):

                                                      Amount          Expires
                                                      ------          -------

Federal Investment Tax Credits                          $841         1997-2001
Alternative Minimum Tax Credit                           742         Indefinite

11 - Major Customers

     The  approximate  net product sales by the Company to customers  accounting
for 10% or more of total net annual sales are as follows (in thousands):

                            1996               1995               1994
                            ----               ----               ----
   Customer               Amount    %        Amount     %       Amount     %
   --------               ------    -        ------     -       ------     -

       A                  $7,902    13       $5,040    13       $4,034    15
       B                                      4,153    11        5,077    19
       C                                                         2,592    10

Substantially   all  of  the   Company's   business  is  to   customers  in  the
telecommunications  and data  communications  industries.  International  sales,
primarily in Asia and Europe,  accounted  for 25%, 22% and 11% of total sales in
1996, 1995 and 1994, respectively.

12 - Commitments

     SpecTran  Specialty Optics Company leases office and production  facilities
under leases through  February 18, 1997 which have been extended  through August
18, 1997. SpecTran  Communication  Fiber Technologies,  Inc. leases office space
under a lease through June 30, 1997.  The  scheduled  rental  payments  required
under these  operating  leases for 1997 are  $169,000.  The Company has no lease
commitments  after  1997.  Lease  commitments  of APD were  assumed  by  General
Photonics LLC.

                                      F-19
<PAGE>   47

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     Total rent expense for the years ended December 31, 1996, 1995 and 1994 was
$634,000,  $364,000  and  $242,000,  respectively.  A portion  of the total rent
expense for 1996 and 1995 was for APD, since its acquisition in May, 1995.

13 - Employee Benefit Plans

     a) Defined Benefit Pension Plan

     The Company sponsors a defined benefit pension plan covering  substantially
all of its employees.  The benefits are based on years of service and an average
of the  employee's  highest ten  consecutive  years of earnings.  The  Company's
funding policy is, to the extent  possible,  to contribute  annually the maximum
amount that can be deducted for federal income tax purposes.  Contributions  are
intended to provide not only for  benefits  attributed  to service to date,  but
also for those expected to be earned in the future.

     The  Company  had an  unrecognized  net  gain  in 1996  as  compared  to an
unrecognized net loss in 1995, which was due to a change in the discount rate to
7.0% in 1995 from  8.5% in 1994 as a result of  declining  interest  rates.  The
discount  rate for 1996 was increased to 7.5% based on current  interest  rates.
The following  table sets forth the plan's funded status and amounts  recognized
in the Company's consolidated balance sheets at December 31, 1996 and 1995.

     Actuarial present value of benefit obligations (in thousands):

                                                               1996       1995
                                                             -------    -------

        Vested benefit obligation                            $   803    $   613
                                                             =======    =======
        Accumulated benefit obligation                       $   901    $   751
                                                             =======    =======
        Projected benefit obligation                         $ 1,650    $ 1,437
     Plan assets at fair value - primarily mutual funds        1,195        912
                                                             -------    -------
     Projected benefit obligation in excess of plan assets       455        525
     Unrecognized net gain (loss)                                 36       (163)
     Unrecognized net obligation at January 1, 1991
         being recognized over 17.4 years                       (197)      (244)
                                                             -------    -------
     Accrued pension cost                                    $   294    $   118
                                                             =======    =======

     Net pension cost for 1996 and 1995 included the following components:

                                                            1996      1995
                                                           -----     -----
     Service cost - benefits earned during period          $ 289     $ 151
     Interest cost on projected benefit obligation           103        66
     Actual return on assets                                (129)     (186)
     Net amortization and deferral                            65       146
                                                           -----     -----
     Net pension cost                                      $ 328     $ 177
                                                           =====     =====

                                      F-20
<PAGE>   48

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     Assumptions used in the accounting as of December 31 were as follows:

                                                           1996       1995
                                                          ------     ------
     Discount rate                                          7.5%       7.0%
     Rates of increase in compensation levels               5.0%       5.0%
     Expected long-term rate of return on assets            8.5%       8.5%

     b) Supplemental Retirement Agreements

     The Company  entered  into  supplemental  retirement  agreements  with five
executive  officers in 1996. These agreements provide benefits based on years of
service and average eligible pay for executives.  The following table sets forth
the plan's  funded status and amounts  recognized in the Company's  consolidated
balance sheets at December 31, 1996 and 1995.

     Actuarial present value of benefit obligations (in thousands):

                                                                    1996
                                                                   -------

        Vested benefit obligation                                  $     0
                                                                   =======
        Accumulated benefit obligation                             $ 1,170
                                                                   =======
        Projected benefit obligation                               $ 1,398
     Unrecognized prior service cost                               $(1,096)
                                                                   -------
     Accrued pension cost                                          $   302
                                                                   =======

     Net pension cost for 1996 and 1995 included the following components:

                                                              1996       1995
                                                              ----       ----

Service cost - benefits earned during period                  $116       $--
Interest cost on projected benefit obligation                   84        --
Net amortization and deferral                                    2        100
                                                              ----       ----
Net pension cost                                              $202       $100
                                                              ====       ====

     Assumptions used in the accounting as of December 31 were as follows:

                                                                   1996
                                                                   ----

          Discount rate                                             7.0%
          Rates of increase in compensation levels                  5.0%
          Expected long-term rate of return on assets               8.5%
          COLA increase                                             3.5%

                                      F-21
<PAGE>   49

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


     c) Defined Contribution Pension Plan

     The  Company  sponsors  a  defined   contribution   pension  plan  covering
substantially all of its employees.  Contributions to the plan are discretionary
and  amounted  to  $361,000,  $83,000  and  $114,000  in 1996,  1995  and  1994,
respectively.

     d) Directors Retirement Plan

     In December,  1995 the Company  adopted a Directors  Retirement  Plan which
provides  for  retirement  benefits  for all  outside  directors  with five full
calendar  years of  service  as of the  later  of age 70 or the  date of  actual
retirement  as a  director.  There was no expense  in 1996 to  provide  for past
service costs.

     e) Bonus Plans

     The  Company   sponsors  an  Employee  Profit  Sharing  Plan  covering  all
employees. The Company also sponsored a transitional plan covering key employees
in 1995 and  adopted a Key  Employee  Incentive  Plan in 1996 which  replaced an
Income  Growth  Incentive  Plan in 1994.  These plans provide for the payment of
bonuses if certain performance objectives are obtained. Bonuses of $1.4 million,
$380,000 and $331,000,  respectively,  were charged to operations in 1996,  1995
and 1994.

14 - Acquisitions/Joint Venture

a)  Applied Photonic Devices, Inc.

     On May 23, 1995 the Company purchased all the outstanding  capital stock of
Applied  Photonic  Devices,  Inc.  ("APD")  for  cash  and  common  stock  worth
approximately $3.9 million. The Company also retired  approximately  $600,000 of
APD bank debt. APD,  located in Danielson,  Connecticut,  manufactures and sells
fiber optic cable and related components.

     The purchase method of accounting was used and the results of operations of
APD are included in the consolidated financial statements from May 23, 1995.

     Goodwill of $3.3 million  resulted from the purchase and is being amortized
over 15 years.  Amortization  expense  amounted to $217,000 and $127,000 in 1996
and 1995, respectively.

     In December 1996, the Company announced the formation of General Photonics,
a 50-50 joint  venture  between the Company and General  Cable,  a subsidiary of
Wassall plc.  General Cable  purchased  certain assets of the Company's  optical
fiber  cable  subsidiary,  APD,  for  approximately  $6.0  million  (subject  to
adjustment)  and then  contributed  them to General  Photonics  for a 50% equity
interest.


                                      F-22
<PAGE>   50

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


APD contributed its remaining assets to General  Photonics in exchange for its
50% equity  interest.  The net assets, including  goodwill,  of General
Photonics totaled $10.2 million at December 31, 1996.  The Company will account
for its interest in the joint  venture under the equity  method  and no gain or
loss has  been  recognized  as a  result  of this transaction.

     The following pro forma statement of operations for the year ended December
31, 1996  presents the results of  operations as if the Company had entered into
the joint venture as of January 1, 1996 (in thousands):

Statements of Operations (unaudited)

                                                                1996
                                                               -------

          Sales                                                $51,413
          Cost of Sales                                         31,977
                                                               -------
          Gross Profit                                          19,436
          Operating Expenses                                    14,632
          Equity in Earnings of Joint Venture                      530
          Other Income                                             297
                                                               -------
          Income Before Taxes                                    5,631
          Income Tax Expense                                     1,915
                                                               -------
          Net Income                                           $ 3,716
                                                               =======

          Net Income per Share of Common Stock                 $   .63
                                                               =======

          Weighted Average shares outstanding                    5,926

b)  Ensign-Bickford Acquisitions

     On  February  18, 1994 the Company  purchased  substantially  all assets of
Ensign-Bickford   Optics   Company   ("EBOC")   and   Ensign-Bickford    Optical
Technologies,  Inc.  ("EBOT"),  wholly  owned  subsidiaries  of  Ensign-Bickford
Industries, Inc., for approximately $7 million. EBOC, renamed SpecTran Specialty
Optics  Company,  manufactures  and sells  optical  fibers,  cables and  related
components.   The  operations  of  EBOT,  which  were  conducted  in  Van  Nuys,
California, were moved to Sturbridge, Massachusetts.

     The purchase method of accounting was used and the results of operations of
SpecTran  Specialty  Optics Company are included in the  consolidated  financial
statements from February 18, 1994.


                                      F-23
<PAGE>   51

                              SPECTRAN CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                           December 31, 1996 and 1995


15 - Subsequent Event

     On February 18, 1997 the Company  completed a secondary  public offering of
1,500,000  shares  of  common  stock  at a price of  $19.00  per  share.  Of the
1,500,000  shares,  1,300,000  were sold by the  Company  and 200,000 by Allen &
Company, a selling stockholder. The following table sets forth the stockholders'
equity of the  Company as of  December  31, 1996 on a pro forma basis to reflect
(i) the sale of  1,300,000  shares of common  stock  offered by the Company at a
public offering price of $19.00 and (ii) the exercise by the selling stockholder
of its warrant to purchase  200,000  shares of common stock at an exercise price
of $2.00 per share.

                                                             December 31, 1996
                                                            Actual    Pro Forma
                                                           --------   ---------
                                                              (in thousands)
Stockholders' Equity:
Common Stock, voting, $.10 par value; authorized
   20,000,000 shares; 5,400,071 outstanding;
   6,900,071 (pro forma)                                   $    540    $    690
Common Stock, non-voting, $.10 par value; authorized
   250,000 shares; non issued                                  --          --
Paid-in Capital                                              26,884      49,952
Net Unrealized Loss on Marketable Securities                    (16)        (16)
Retained Earnings                                               995         995
                                                           --------    --------
Total Stockholders' Equity                                 $ 28,403    $ 51,621
                                                           ========    ========

16 - Quarterly Financial Information (unaudited)
In thousands of dollars except per share data

Quarters                           First       Second        Third       Fourth
--------------------------------------------------------------------------------

1996
Net Sales                         $13,473      $15,281      $16,161      $16,656
Gross Profit                        4,756        5,318        6,220        6,081
Net Income                            684          833        1,007        1,131
Net Income per Share                  .12          .14          .17          .19

1995
Net Sales                         $ 7,965      $ 9,099      $ 9,971      $11,546
Gross Profit                        2,894        2,841        3,359        3,967
Net Income                             83            8          179          272
Net Income per Share                  .02         --            .03          .05




                                      F-24
<PAGE>   52

                              SPECTRAN CORPORATION

                 Schedule I - Valuation and Qualifying Accounts
              For the Years Ended December 31, 1996, 1995 and 1994
                              Dollars in Thousands

            Column A                Column B    Column C   Column D    Column E
            --------                --------    --------   --------    --------
                                    Balance at  Additions               Balance
                                    Beginning  Charged to               at End
           Description              of Period   Expenses   Deductions  of Period
           -----------              ---------   --------   ----------  ---------

For the Year Ended December 31, 1996:

 Allowance - Net Deferred Tax Asset  $  1,030   $   --      $    400    $    630
                                     ========   ========    ========    ========

 Allowance for Doubtful Accounts     $    265   $           $     47    $    218
                                     ========   ========    ========    ========

 Allowance for Obsolete Inventory    $    467   $   --      $    194    $    273
                                     ========   ========    ========    ========


For the Year Ended December 31, 1995:

 Allowance - Net Deferred Tax Asset  $  1,467   $   --      $    437    $  1,030
                                     ========   ========    ========    ========

 Allowance for Doubtful Accounts     $    124   $    141    $   --      $    265
                                     ========   ========    ========    ========

 Allowance for Obsolete Inventory    $    556   $   --      $     89    $    467
                                     ========   ========    ========    ========


For the Year Ended December 31, 1994:

 Allowance - Net Deferred Tax Asset  $  1,050   $    417    $     --    $  1,467
                                     ========   ========    ========    ========

 Allowance for Doubtful Accounts     $    100   $     82    $     58    $    124
                                     ========   ========    ========    ========

 Allowance for Obsolete Inventory    $    434   $    300    $    178    $    556
                                     ========   ========    ========    ========


                                      F-25