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

                           AMENDMENT TO CURRENT REPORT

(X)    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 (FEE REQUIRED)


                         For the Fiscal Year ended June 29, 1996.
                                       OR
( )    TRANSITION  REPORT  PURSUANT TO SECTION 13 or 15 (d)  OF  THE  SECURITIES
       EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
          For the transition period from _____________ to _____________

Commission File Number:  1-9716

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

         Michigan                                        38-0493110
(State of other jurisdiction                   (IRS Employer Identification No.)
 of incorporation or organization)


    414 East Fortieth Street, Holland, Michigan                    49423
     (Address of principal executive offices)                    (Zip Code) 
                                                      
Registrant's telephone number, including area code:         (616) 786-7000

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

Title of each class                    Name of each exchange on which registered
Class A Common Stock                            American Stock Exchange

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

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  registrant's  knowledge in definitive  proxy or information  statements
incorporated  by reference in Part III of the Form 10-K or any amendment to this
Form 10-K. [X]

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
registrant was $102,811,298 as of August 30, 1996.

Number of  shares  outstanding  of each of the  registrant's  classes  of common
stock, as of August 30, 1996.

         4,261,178  shares  of Class A Common  Stock par  value,  $.10 per share
         3,575,959 shares of Class B Common Stock par value, $.10 per share
<PAGE>
                                                                              2

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

RESULTS OF OPERATIONS

General

Donnelly  Corporation's  (Company)  net  sales and net  income  are  subject  to
significant  quarterly   fluctuations   attributable   primarily  to  production
schedules of the Company's major automotive customers.  These same factors cause
quarterly  results to  fluctuate  from year to year.  The  comparability  of the
Company's  results  on a period to  period  basis  may also be  affected  by the
Company's implementation of new joint ventures, alliances and acquisitions.

Comparison of 1996 to 1995

     The Company's net sales  increased  14.7% to $439.6  million in 1996,  from
$383.3 million in 1995. Net sales for the Company's  operations in North America
increased by  approximately  12% despite a 3% decrease in North American car and
light  truck  production,  the loss of Saturn  modular  window  business  (which
represented  approximately  5% of the  Company's  net  sales in 1995)  and price
pressures  from the  Company's  major  automotive  customers.  Price  decreases,
however,  did not have a material impact on the Company's  increase in net sales
for 1996.  The  increase  in net sales  remained  strong due to higher  sales of
modular  window  systems  (particularly  for  the new  Chrysler  Caravan/Voyager
minivans),  lighting and trim products,  complete  exterior  mirror products and
door  handles.  Net sales for the  Company's  European  operations  increased by
approximately  40% from the  previous  year due to the  introduction  of modular
window programs in Langres, France for the Chrysler  Caravan/Voyager minivan and
Jeep Cherokee and stronger sales for the Company's electrochromic mirror product
line. The Company's Irish operations  experienced  significant pricing pressures
during the year from competition in Eastern Europe and Asia slightly  offsetting
the higher sales  volumes.  Consolidated  net sales remained  relatively  strong
throughout  the year,  but were  exceptionally  strong during the fourth quarter
with an increase of 24% over the fourth quarter of 1995.

     Gross profit margin  decreased to 18.6% of net sales in 1996, from 21.5% of
net sales in 1995. The gross profit margins were adversely impacted in the first
half  of  the  year  by  the  start-up  of  various  modular  window   programs,
particularly for the Chrysler Caravan/Voyager minivan, and the implementation of
a new paint line in the Company's Newaygo facility.  North American gross profit
margin performance was also significantly  impacted by technical difficulties on
a new business  program that  resulted in  significant  additional  engineering,
production  and other  costs  that  negatively  impacted  gross  margins by $2.2
million. Although this problem was largely due to factors not directly under the
Company's  control,  the issue was resolved in a timely and cooperative way that
provided  an  uninterrupted  source  of  supply to the  customer.  Finally,  the
Company's  European  operations  experienced  lower gross profit margins in 1996
compared  to  1995  due to  pricing  pressures  and  operating  expenses  at the
Company's Irish operations.

     Selling,  general  and  administrative  expenses  were 8.7% of net sales in
1996,  down from  11.8% of net sales in 1995.  These  costs  were  significantly
reduced primarily as a result of the restructuring  plan implemented in 1995 and
continued  commitment  to achieve  higher sales levels  without a  proportionate
increase in these expenses.  In addition, a patent settlement recognized in 1996
resulted  in  a  reduction  of  these  expenses  by  1.3%  of  net  sales.   See
"Business--Litigation."

     Research and development expenses for 1996 were 6.3% of net sales, compared
to 5.9% of net sales in 1995. The increase in research and development costs was
due to the technical  difficulties  on a new business  program and costs for the
design and  development  of new window,  mirror,  door handle and interior  trim
programs.

     A  restructuring  charge of $2.4 million was recorded in the fourth quarter
of 1996  related  to the  write-down  of certain  assets and the  closure of the
Company's  manufacturing  facility in Mt. Pleasant,  Tennessee.  The decision to
close the  Tennessee  facility was based on a number of factors that  included a
major loss of business during 1995 and the inability to attract  significant new
business for the plant.  These costs included accruals for severance and related
employee support programs and write-down of certain assets removed from service.
The  majority  of these  liabilities  were paid or settled  during the first six
months of 1997.

     Interest  expense  increased to $8.1 million in 1996,  from $5.0 million in
1995.  The increase over 1995 resulted from higher  borrowing  levels to support
the  Company's  investment in and advances to Donnelly  Hohe,  which was then an
equity  affiliate  of  the  Company,   and  to  support  the  Company's  capital
expenditures and higher working capital. The Company has advanced $28 million to
Donnelly Hohe under a  subordinated  loan  agreement,  $14.3 million in 1995 and
$13.7 million in 1996.  Amounts advanced to Donnelly Hohe under the subordinated
loan agreement provide for 10% interest per annum with no principal payments due
until its maturity on April 1, 1998.  The  advances  were  financed  through the
Company's  existing  borrowing  agreements.  The  increase  in  interest  income
realized by the Company was a result of the interest  charged on the advances to
Donnelly Hohe, which is presented net of amounts eliminated from equity earnings
in accordance with generally accepted accounting principles.
<PAGE>
                                                                              3

     Royalty  income was $5.2 million in 1996  compared to $3.8 million in 1995.
This  increase  resulted  from royalty  income  associated  with the sale of the
Appliance  Business in 1995.  Royalty  payments  associated with the sale of the
Appliance Business in 1995 concluded in the fourth quarter of 1996.

     Equity  in  earnings  of  affiliated  companies  was $0.1  million  in 1996
compared to $0.4 million in 1995.  Equity earnings from Donnelly Hohe, after the
elimination  of  intercompany  interest,  were offset by losses at Applied Films
Corporation ("AFC"), the Company's joint venture in Boulder Colorado, and Vision
Group. The combined impact on net income from the Company's non-automotive joint
ventures was a loss of $1.5 million in 1996,  compared to income of $0.1 million
in 1995.  AFC's results were adversely  affected by a downturn in the market for
coated glass used in the production of liquid crystal  displays.  The Company is
currently exploring opportunities to exit this business.  Vision Group continued
to experience start-up losses during 1996.

     The Company  reported net income of $8.5 million in 1996  compared to $11.0
million  for 1995.  Net  income in 1996  included  $1.1  million  of net  income
associated  with the patent and license  settlement  and a $1.4 million net loss
for  restructuring  costs,  while  1995  included  $2.0  million  of net  income
associated with the gain on the sale and restructuring of certain non-automotive
businesses.  Positively  impacting the Company's North American  operations were
higher  sales  volumes,  higher  royalty  income,  lower  selling,  general  and
administrative  costs as a  percentage  of net  sales and a patent  and  license
settlement  with a  competitor.  These  improvements  were offset by higher than
expected   start-up  costs  during  the  first  half  of  the  year,   technical
difficulties  during the third quarter on a new business  program which resulted
in a reduction of net earnings by $1.2 million,  higher research and development
costs as a percent of net sales and  restructuring  charges  taken in the fourth
quarter.  The Company's European operations  experienced lower net income at the
Company's  subsidiaries  in Ireland in addition  to start-up  losses at Langres,
France.  The Company's net income was also lower in 1996 due to the  recognition
of a $1.5 million loss for non-automotive affiliated companies.

Comparison of 1995 to 1994

     Donnelly's  net sales were $383.3  million in 1995, an increase of 14% over
the $337.3 million of net sales in 1994. The Company's  North American net sales
increased by approximately 10% while automotive  production increased 5% in 1995
over 1994 production  levels.  New business in exterior  mirrors,  door handles,
interior  systems  and  modular  systems,   along  with  the  strong  automotive
production  levels,  all  contributed to the stronger  sales level.  The Company
continues to experience pricing pressures from its automotive  customers.  Price
decreases,  however, did not have a material impact on the Company's increase in
net sales for 1995.  The Company's  European net sales were higher due to twelve
months  of net  sales  included  in 1995  for  Donnelly  Vision  Systems  Europe
("DVSE"),  compared to two months in 1994.  The Company  acquired  DVSE in April
1994.

     Gross profit margin was 21.5% in 1995 compared to 21.8% in 1994. Continuous
improvement  programs being run throughout the Company,  along with higher sales
volumes,   helped  the  Company  offset  price   pressures  from  customers  and
significant increases in raw material costs.

     Selling,  general and  administrative  expenses  were 11.8% of net sales in
1995,  an increase  from 11.3% of net sales in 1994.  The increase was primarily
due to patent  litigation  costs that were  significantly  higher in 1995 as the
Company pursued actions to protect its intellectual property.

     Research and  development  expenses were 5.9% of net sales in 1995 compared
to 6.3% of net sales in 1994.

        In the second quarter of 1995, the Company  implemented a  restructuring
plan to focus on its automotive businesses.  The restructuring plan included the
sale of the  Company's  appliance  business,  the sale of the heavy truck mirror
business and the  liquidation  of the Company's  investment  in OSD Envizion,  a
joint venture engaged in the manufacture of welding helmet shields.  The Company
received total proceeds of $14.2 million  associated with the  restructuring  of
these  businesses,  which had a  combined  net book  value of $6.5  million.  In
addition, restructuring costs of $3.0 million were also recognized consisting of
a severance  program and other expenses  associated with the plan. The severance
program included twenty-five personnel,  primarily middle and senior managers of
the Company.  The spending for these costs was essentially  completed by the end
of 1995. The restructuring of the non-automotive businesses resulted in a pretax
gain  of  $4.7  million.   These   non-automotive   businesses   represented  an
insignificant portion of the Company's operations for each period reported.

     The Company also restructured certain automotive  operations resulting in a
charge of $2.4 million in the second  quarter,  primarily for the  write-down of
operating  assets due to the loss of Saturn's  business at D&A Technology,  Inc.
("D&A"),  the  Company's  joint venture with Asahi Glass  Company.  As a result,
minority  interest  in net  income  of  subsidiaries  was $0.4  million  in 1995
compared to $0.8 million in 1994. D&A  represented 5% and 8%,  respectively,  of
the Company's net sales and net income in 1995.
<PAGE>
                                                                              4

     Interest  expense  increased to $5.0 million in 1995,  from $3.5 million in
1994,  due to  higher  interest  rates and to  increased  borrowing  to  support
increased capital spending.

     Royalty  income was $3.8 million in 1995  compared to $1.4 million in 1994.
The increase resulted  primarily from royalty income associated with the sale of
the Appliance Business in 1995. Included in other income was a $0.5 million gain
on the sale of a warehouse facility in the fourth quarter of 1995.

     Equity in earnings of  affiliated  companies  increased  to $0.4 million in
1995, from a loss of $0.1 million in 1994. Improved earnings at AFC and a slight
profit from  Donnelly  Hohe for the two month period  ending May 31, 1995,  more
than offset start-up costs at Vision Group.

     The  Company  had net  income of $11.0  million in 1995,  compared  to $7.3
million in 1994. The increase in net income was the result of a restructuring of
non-automotive businesses,  higher sales volumes, lower research and development
costs as a percentage of net sales,  higher royalty  income and improved  equity
earnings in  affiliated  companies.  Results  from foreign  operations  improved
slightly,  as  improvements  in Ireland  exceeded  start-up losses in Mexico and
France.

ACQUISITIONS AND INVESTMENT IN AFFILIATES

In the fourth  quarter of 1996,  the Company  formed a 50-50 joint  venture with
Shanghai Fu Hua Glass  Company,  Ltd. to produce  framed glass  products for the
Asian  automotive  industry.  Shanghai  Fu Hua Glass  Company  is itself a joint
venture  between Ford Motor Company and Shanghai Yao Hua Glass Works.  The joint
venture will have its  equipment  and  processes in place by September  1996 and
will begin  manufacturing  encapsulated  and framed glass products by the end of
1997. Also in the fourth quarter,  the Company formed Donnelly  Eurotrim Ltd., a
100% owned subsidiary organized under the laws of Ireland, to offer our interior
lighting and overhead trim products for the European market.

During 1996 and 1995,  VVL's  parent,  VISION Group,  PLC (VISION),  sold common
shares  in a  private  placement  and  through  public  offerings  reducing  the
Company's  ownership interest from 40% to 30.4%. The Company's equity in the net
proceeds  of these sales is  reflected  as an  increase  in  additional  paid-in
capital in the accompanying financial statements.  The aggregate market value of
the  Company's  investment  in  VISION,  based on the  quoted  market  price for
VISION's  common  shares,  which are listed on the London  Stock  Exchange,  was
approximately $44 million at June 29, 1996. The Company's  investment in the net
assets of VISION was $4.0 million at June 29, 1996.

In April  1995,  the Company  acquired an interest in Hohe GmbH & Co. KG,  since
renamed  Donnelly  Hohe  GmbH  &  Co.  KG  (Donnelly  Hohe),  a  German  limited
partnership  with  operations  in Germany  and Spain.  Donnelly  Hohe,  based in
Collenberg,  Germany,  serves  many of the main  auto  producers  in  Europe  in
exterior automotive mirrors, interior mirrors, door handles, automotive tooling,
and electronic components related to mirror systems.

The Company acquired 48% of the controlling general partnership  interest and 66
2/3% of the limited  partnership  interest for $3.6 million.  Additionally,  the
Company has  advanced  $28 million to Donnelly  Hohe under a  subordinated  loan
agreement,  $14.3 million in 1995 and $13.7 million in 1996. Amounts advanced to
Donnelly Hohe under the subordinated loan agreement provide for 10% interest per
annum with no principal  payments  due until its  maturity on April 1, 1998.  In
connection  with  the  Company's  acquisition  of the  Donnelly  Hohe  interest,
refinancing and additional loans of  approximately  $70 million were provided to
Donnelly Hohe by several banks.

The terms of the transaction allow Donnelly to purchase the remaining  ownership
interest in Donnelly Hohe through various options ranging from $3 million to $10
million. The remaining owners have an option to require the Company to buy their
interests  at any time based upon a formula that results in a price of up to $10
million.

LIQUIDITY AND CAPITAL RESOURCES

The  Company's  current ratio was 2.0 and 1.7 at June 29, 1996 and July 1, 1995,
respectively.  Working  capital was $63.5 million at June 29, 1996,  compared to
$40.5 million at July 1, 1995.  This  increase  included an increase in accounts
receivables  to support higher sales and higher  customer  tooling and increased
inventories  to support new business  programs  reaching full  production in the
first  quarter of 1997.  Accounts  receivable  were also  higher due to the year
ending on June 29 and the timing of customer  payments.  The Company's  accounts
receivable balance as a percent to sales increased from 13.3% at July 1, 1995 to
16.8% at June 29, 1996. The Company's  North American  customers pay the Company
on  pre-established  payment  dates  ranging  from  the 25th to the 30th of each
month.  Therefore,  a number of customer  payments were not received by the June
29, 1996 balance sheet date,  accounting for the increase in accounts receivable
compared to July 1, 1995.
<PAGE>
                                                                              5

Capital  expenditures  for 1996 were $20.6 million compared to $29.2 million for
1995 and $35.3 million for 1994. Capital  expenditures were lower in 1996 due to
the completion of the building additions required the last two years in Langres,
France and Newaygo,  Michigan to support new business programs,  the transfer of
the outside  mirror glass  product line to Mexico and the  consolidation  of two
older  interior  mirror  operations  into a new  facility in Holland,  Michigan.
Capital  expenditures  in 1996  included  costs for  equipment  to  support  new
business  for  complete  exterior  mirrors,  door  handles  and  modular  window
encapsulation,  bonding and  hardware  programs.  The Company  does not have any
material  commitments for capital  expenditures  other than those arising out of
the normal course of business, which were approximately $9.0 million at June 29,
1996.

In the second  quarter of 1996,  the Company  amended its revolving  credit loan
agreement by  increasing  the amount to $80 million and  extending  the maturity
date to November 2002. The revolving credit agreement had borrowings  against it
of $35.4 million at June 29, 1996. In November 1995, the Company issued a senior
note of $20.0 million with an insurance company.  Principal payments commence in
2001 until  maturity in 2006. The Company  anticipates  completing a $50 million
asset  securitization  transaction by the end of the first quarter of 1997. This
will  be  utilized  by the  Company  and  Donnelly  Hohe to  provide  additional
financing availability and reduce interest and other costs.

The Company  utilizes  interest  rate swaps and foreign  exchange  contracts  to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the  Company  in the  event of  nonperformance  by any party
under these agreements is not material.

RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the Financial  Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived  Assets and for Long-Lived  Assets to be Disposed Of." The Company
is required to adopt this  statement by its fiscal year ending in 1997.  The new
statement  requires  the  Company to review  long-lived  assets  for  impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable  through future net cash flows  generated by the
assets.  The Company  does not expect the  adoption of this  statement to have a
material impact on its financial position or results of operations.

In October  1995,  the FASB  issued SFAS No. 123,  "Accounting  for  Stock-Based
Compensation."  SFAS No. 123 allows  companies  to continue to account for their
stock-based  compensation  plans in  accordance  with APB  Opinion  No.  25, but
encourages  the  adoption  of a new  accounting  method to  record  compensation
expense based on the estimated fair value of employee stock-based  compensation.
Companies electing not to follow the new fair value based method are required to
provide  expanded  footnote  disclosures,  including  pro forma net  income  and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the  supplemental  disclosures
as required by SFAS No. 123, beginning in 1997.

No other recently  issued  accounting  standards are expected to have a material
impact on the Company.
<PAGE>
                                                                              6

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Notes to the Combined  Consolidated  Financial Statements are hereby amended
as  follows  (the  information  in Item 8 other  than the Notes to the  Combined
Consolidated Financial Statements is not altered by this Form 10-K/A):

NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF COMBINATION AND CONSOLIDATION

     The  combined  consolidated  financial  statements  include the accounts of
Donnelly  Corporation,  Donnelly  Export  Corporation  and all  majority  owned,
controlled  subsidiaries  (the  Company)  after  all  significant   intercompany
balances,  transactions and shareholdings  have been eliminated.  Investments in
20% to 50%  owned  companies  are  accounted  for  using  the  equity  method of
accounting.  Investments in affiliates  representing less than 20% ownership are
accounted  for under the cost  method.  Cost in excess of net assets of acquired
companies is being amortized on a straight-line basis over a 15 year period.

     Voting control of Donnelly  Corporation and Donnelly Export  Corporation is
vested  in  the  same   shareholders  and  the  corporations  are  under  common
management. Because of these relationships, the accounts of the two corporations
are included in the financial statements as if they were a single entity.


USE OF ESTIMATES

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.


FOREIGN CURRENCY TRANSLATION

     Except for the Company's subsidiary in Mexico, whose functional currency is
the United States dollar,  financial  statements of international  companies are
translated  into United States dollar  equivalents at exchange rates as follows:
(1) balance sheet accounts at year-end rates; and (2) income statement  accounts
at  weighted  average  monthly  exchange  rates  prevailing   during  the  year.
Translation   gains  and  losses  are  reported  as  a  separate   component  of
shareholders'  equity. For the Company's  subsidiary in Mexico,  transaction and
translation  gains or losses are reflected in net income for all accounts  other
than  intercompany  balances  of a  long-term  investment  nature  for which the
translation   gains  or  losses  are   reported  as  a  separate   component  of
shareholders' equity.  Foreign currency transaction gains and losses included in
other income are not material.


REVENUE RECOGNITION

     The Company's  primary  source of revenue is generated from the sale of its
products. The Company recognizes revenue when its products are shipped.


CASH AND CASH EQUIVALENTS

     Cash equivalents  include all highly liquid  investments with a maturity of
three months or less when purchased.


INVENTORIES

     Inventories  are stated at the lower of cost or market.  Cost is determined
by  the  last-in,  first-out  (LIFO)  method,  except  for  inventories  of  the
consolidated subsidiaries which are valued using the first-in,  first-out (FIFO)
method.


CUSTOMER TOOLING TO BE BILLED
<PAGE>
                                                                              7

     Customer  tooling to be billed  represents  costs incurred on behalf of the
Company's customers.  These costs are recoverable at the time of tool completion
and approval,  or are recovered in the program's  piece price over the program's
life, not to exceed a period of three years.


PROPERTY, PLANT AND EQUIPMENT

     Property,  plant and equipment are stated at cost. Depreciation is provided
primarily  by the  straight-line  method.  Depreciation  is  computed  over  the
estimated useful lives of the assets as follows:


                                                    Years
                                                    -----
                  Buildings....................    10 to 40
                  Machinery and equipment......     3 to 12


     For  tax  purposes,  useful  lives  and  accelerated  methods  are  used as
permitted by the taxing authorities.


INCOME TAXES

     Deferred taxes reflect the tax effects of temporary differences between the
financial statement and tax basis of assets and liabilities,  and operating loss
carryforwards. Deferred tax assets are reduced by a valuation allowance when, in
the opinion of  management,  it is more likely than not that some portion or all
of the deferred tax assets will not be realized.  Deferred  income taxes are not
provided on cumulative  undistributed  earnings of the foreign  subsidiaries and
affiliates because they are intended to be permanently reinvested.


INCOME PER SHARE OF COMMON STOCK

     Income per share is computed by dividing net income, adjusted for preferred
stock  dividends,   by  the  weighted  average  number  of  shares  of  Donnelly
Corporation common stock outstanding,  as adjusted for the stock split effective
January 30, 1997  (7,802,846 in 1996,  7,744,042 in 1995 and 7,716,923 in 1994).
The  potential  dilutive  effect  from  the  exercise  of stock  options  is not
material.


FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company estimates the fair value of all financial instruments where the
carrying value differs from the fair value, primarily long-term fixed rate debt,
interest rate swaps and foreign exchange currency  contracts,  based upon quoted
amounts or the current rates available for similar  financial  instruments.  The
carrying  value of the  Company's  variable  rate debt and all  other  financial
instruments approximates their fair value.


FISCAL YEAR

     The  Company's  fiscal year is the 52 or 53 week period ending the Saturday
nearest June 30.  Fiscal years 1996,  1995 and 1994 ended on June 29, July 1 and
July 2, respectively, each included 52 weeks.


IMPAIRMENT OF ASSETS

     In March 1995,  Statement of Financial Accounting Standards (SFAS) No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," was issued. SFAS No. 121 requires long-lived assets,  including
the excess of cost over the fair value of assets of businesses  acquired,  to be
reviewed  for  impairment  losses  whenever  events or changes in  circumstances
indicate  the carrying  amount may not be  recoverable  through  future net cash
flows generated by the assets.  The Company,  consistent with existing generally
accepted  accounting  principles,  currently  states the  majority  of its fixed
assets at the 
<PAGE>
                                                                             8

lower of cost or net  realizable  value.  The Company will adopt SFAS No. 121 in
1997 and believes the effect of adoption will not be material.

                                                     
RECLASSIFICATIONS

     Certain  reclassifications  have been made to prior year data to conform to
the current year  presentation  and had no effect on net income reported for any
period.


2. NATURE OF OPERATIONS

     The Company is an international  supplier of high quality  automotive parts
and component systems from manufacturing operations in North America and Europe.
The Company supplies automotive  customers around the world with rearview mirror
systems,  modular  window  systems and interior  lighting and trim systems.  The
Company also provides products to several non-automotive markets.

     Export  revenues  are  foreign  revenues  produced by  identifiable  assets
located in the United  States.  Foreign  revenues are generated by  identifiable
assets at the Company's  subsidiaries  located in Ireland,  France and Mexico. A
summary of the Company's operations by geographic area follows:
<TABLE>
                                                      Year ended
                                         1996            1995        1994
                                                    (in thousands)
<S>                                   <C>             <C>             <C>
Revenues:
     United States .............      $ 331,469       $ 317,710       $ 296,226
     Foreign ...................         55,998          36,832          18,367
     Export:
     Americas ..................         49,655          25,016          21,557
     Asia ......................            532             981             310
     Europe ....................          1,917           2,786             785
     Other .....................           --                15              17
                                      ---------       ---------       ---------
                                      $ 439,571       $ 383,340       $ 337,262
                                      ---------       ---------       ---------
Operating Income (Loss):
     United States .............      $  15,641       $  19,857       $  16,397
     Foreign ...................         (2,150)         (2,824)         (3,276)
                                      ---------       ---------       ---------
                                      $  13,491       $  17,033       $  13,121
                                      ---------       ---------       ---------
Identifiable Assets:
     United States .............      $ 226,861       $ 186,743       $ 165,172
     Foreign ...................         44,631          37,045          18,629
                                      ---------       ---------       ---------
                                      $ 271,492       $ 223,788       $ 183,801
                                      ---------       ---------       ---------
</TABLE>
     Sales to major  automobile  manufacturers as a percent of the Company's net
sales follows:
<TABLE>
                                                  Year ended
                                           1996       1995       1994
                                           ----       ----       ----
<S>                                         <C>        <C>        <C>
Chrysler ..........................         33%        18%        18%
Ford ..............................         22         22         24
Honda .............................         16         14         12
General Motors ....................         10         17         21
                                            --         --         --
                                            81%        71%        75%
                                            ==         ==         ==
</TABLE>
<PAGE>
                                                                             9

3. INVENTORIES

     Inventories consist of:
<TABLE>
                                                             1996        1995
                                                              (in thousands)
<S>                                                        <C>           <C>
LIFO cost:
     Finished products and work in process .........       $ 6,998       $ 6,743
     Raw materials .................................         6,981         6,622
                                                           -------       -------
                                                            13,979        13,365
                                                           -------       -------
FIFO cost:
     Finished products and work in process .........         3,202         3,397
     Raw materials .................................         7,047         5,280
                                                           -------       -------  
                                                            10,249         8,677
                                                           -------       ------- 
                                                           $24,228       $22,042
                                                           -------       -------
</TABLE>
     If only the  first-in,  first-out  method of inventory  valuation  had been
used,  inventories  would have been $0.4  million and $0.5  million  higher than
reported  at June 29,  1996 and  July 1,  1995,  respectively,  and  would  have
approximated replacement cost.


4. INVESTMENTS IN AND ADVANCES TO EQUITY AFFILIATES

     The Company's  equity  affiliates  include the following:  Donnelly Hohe, a
German limited  partnership that produces  exterior  mirrors,  interior mirrors,
door handles,  automotive  tooling and electronic  components  related to mirror
systems;  Vision Group plc ("Vision Group"), the sole shareholder of VLSI Vision
Limited  that  produces an  advanced  video  microchip;  newly  formed  Shanghai
Donnelly Fu Hua Window Systems Company Ltd. (Shanghai Donnelly Fu Hua) that will
manufacture  encapsulated  and framed glass  products  for the Asian  automotive
industry;  and  Applied  Films  Corporation,  a 50%  owned  joint  venture  that
manufactures  thin-film  glass coatings used in the production of liquid crystal
displays.

     In the fourth quarter of 1996, the Company formed Shanghai Donnelly Fu Hua,
a 50-50 joint venture with Shanghai Fu Hua Glass Company,  Ltd.  Shanghai Fu Hua
Glass Company is itself a joint venture  between Ford Motor Company and Shanghai
Yao Hua Glass Works.  The joint venture will have its equipment and processes in
place by September 1996, and the venture will begin  manufacturing  encapsulated
and framed glass products by the end of the year.

     During  1996 and  1995,  Vision  Group  sold  common  shares  in a  private
placement and through public offerings reducing the Company's ownership interest
from 40% to 30.4%.  The  Company's  equity in the net proceeds of these sales is
reflected  as an  increase in  additional  paid-in  capital in the  accompanying
financial statements.  The aggregate market value of the Company's investment in
Vision Group, based on the quoted market price for Vision Group's common shares,
which are listed on the London Stock Exchange,  was approximately $44 million at
June 29, 1996.  The  Company's  investment in the net assets of Vision Group was
approximately $4 million at June 29, 1996.

     Effective  April 1, 1995,  the Company  acquired an interest in Hohe GmbH &
Co. KG, since  renamed  Donnelly  Hohe GmbH & Co. KG (Donnelly  Hohe),  a German
limited  partnership with operations in Germany and Spain.  Donnelly Hohe, based
in Collenberg, Germany, supplies many of the main automakers in Europe.

The Company acquired 48% of the general  partnership  interest and 662/3% of the
limited  partnership  interest for $3.6 million.  Additionally,  the Company has
advanced $28 million to Donnelly Hohe under a subordinated loan agreement, $14.3
million in 1995 and $13.7  million in 1996.  Amounts  advanced to Donnelly  Hohe
under the subordinated loan agreement provide for 10% interest per annum with no
principal  payments due until its maturity on April 1, 1998. In connection  with
the  Company's  acquisition  of the  Donnelly  Hohe  interest,  refinancing  and
additional loans of approximately  $70 million were provided to Donnelly Hohe by
several  banks.  The terms of the  transaction  allow  Donnelly to purchase  the
remaining  ownership  interest in Donnelly Hohe through  various options ranging
from $3 million to $10 million.  The remaining  owners have an option to require
the  Company  to buy their  interests  at any time  based  upon a formula  which
results in a price range of up to $10 million.
<PAGE>
                                                                             10

     Summarized balance sheet and income statement information for the Company's
non-consolidated  affiliates  accounted  for  using  the  equity  method  are as
follows.  Income statement  information  includes  Donnelly Hohe's twelve months
ended May 31, 1996,  and two months ended May 31, 1995. All  significant  others
presented  include  twelve  months  ending  in the  month of June for each  year
presented.
<TABLE>
                                                  1996        1995
                                                   (in thousands)
<S>                                             <C>          <C>
Summarized Balance Sheet Information
       Current assets .......................   $  90,927    $  80,443
       Non-current assets ...................      82,052       80,986
       Current liabilities ..................      69,931       57,857
       Non-current liabilities ..............      87,905       89,860
       Net equity ...........................   $  15,143    $  13,712
Summarized Income Statement Information
       Net sales ............................   $ 250,904    $  77,756
       Costs and expenses ...................     254,403       77,547
       Net income (loss) ....................   $  (3,500)   $     209
</TABLE>
5. DEBT AND OTHER FINANCING ARRANGEMENTS

     Debt consists of:
<TABLE>
                                                            1996        1995
                                                                (in thousands)
<S>                                                     <C>             <C>
Borrowings under revolving credit
 agreements at 4.15% and 7.50% .................        $ 35,418        $ 15,700

Senior Notes, due 2004, principal
 payable in installments beginning
 in 1999, interest at 6.67% ....................          15,000          15,000

Senior Notes, due 2005, principal
 payable in installments beginning
 in 2000, interest at 7.22% ....................          15,000          15,000

Senior Notes, due 2006, principal
 payable in installments beginning
 in 2001, interest at 6.70% ....................          20,000            --

Industrial revenue bonds:

$9,500 at adjustable rates
 (3.80% at June 29, 1996), due in
 2008-2010; $5,000 at a fixed rate
 of 8.13%, due in 2012 .........................          14,500          14,500

Other ..........................................           1,998           6,602
                                                                 
Total ..........................................         101,916          66,802

Less current maturities ........................             159             428
                                                    
                                                        $101,757        $ 66,374
</TABLE>
     The Company has an unsecured $80 million  Revolving  Credit Loan  Agreement
which  expires  November  20,  2002.  Interest  is at prime  unless one of three
alternative elections are made by the Company.

     The $9.5 million  industrial revenue bonds are secured by letters of credit
which must be renewed annually.  All industrial revenue bonds are collateralized
by the purchased land, building and equipment. The senior notes are unsecured.

     The various borrowings subject the Company to certain restrictions relating
to, among other things,  minimum net worth, payment of dividends and maintenance
of certain  financial  ratios.  At June 29, 1996,  the Company was in compliance
with all related  covenants.  Retained earnings  available for dividends at June
29, 1996, are $19.6 million.

     Annual principal maturities consist of:
<PAGE>
                                                                            11
<TABLE>
Year ending                                     Amount
                                             (in thousands)
<S>                                          <C>
1997 .....................................   $    159
1998 .....................................        117
1999 .....................................      3,525
2000 .....................................      7,000
2001 .....................................     20,357
2002 and thereafter ......................     70,758
                                             $101,916
</TABLE>
     The Company provides  guarantees for $7.3 million in municipal  funding for
the  construction of a manufacturing  facility and up to $5.0 million of Applied
Films Corporation borrowings.

     Interest payments of $7.8 million,  $5.0 million and $3.7 million were made
in 1996, 1995 and 1994, respectively.


6. FINANCIAL INSTRUMENTS

     The Company utilizes interest rate swaps and foreign exchange  contracts to
manage exposure to fluctuations in interest and foreign currency exchange rates.
The risk of loss to the  Company  in the  event of  nonperformance  by any party
under these  agreements is not material.  At June 29, 1996 and July 1, 1995, the
Company  had  interest  rate  swaps  with an  aggregate  notional  amount of $60
million,  $30 million and $40 million of which were  offsetting at June 29, 1996
and July 1, 1995, respectively.  These effectively converted $30 million and $20
million of the Company's  variable interest rate debt to fixed rates at June 29,
1996 and July 1, 1995, respectively.  The Company is currently paying a weighted
average  fixed rate of 7.17%,  calculated  on the notional  amounts.  These swap
agreements  have  varied  expirations  through  2003.  The  notional  amounts of
interest rate swaps do not represent amounts exchanged by the parties,  and thus
are not a  measure  of the  exposure  to the  Company  through  its use of these
instruments.  Net receipts or payments under the agreements are recognized as an
adjustment to interest expense.

     The Company's Irish  subsidiaries  enter into foreign exchange contracts to
hedge  against  changes in foreign  currency  exchange  rates.  The  Company had
foreign exchange contracts outstanding of $7.8 million and $13.3 million at June
29, 1996 and July 1, 1995, respectively.  The foreign exchange contracts require
the Company to exchange foreign currencies for Irish pounds and generally mature
within 12 months.

     In accordance  with the  requirements of SFAS No. 107,  "Disclosures  About
Fair Value of Financial  Instruments" (see Note 1), the Company has provided the
following fair value  estimates for  instruments in which the fair value differs
from carrying value at June 29, 1996:
<TABLE>
                                                   Carrying Value     Fair Value
                                                          (in thousands)
<S>                                                   <C>              <C>
Liabilities
   Long-term fixed rate debt ................         $ 55,000         $ 53,630
Derivatives
   Interest rate swaps ......................             --               (423)
   Foreign exchange contracts ...............             --                274
</TABLE>

7. BENEFIT PLANS

A. Pension Benefits

     The Company sponsors  defined benefit pension plans covering  substantially
all employees.  Pension costs for the plans are funded in amounts which equal or
exceed regulatory  requirements.  Benefits under these plans are based primarily
on years of service and compensation.

     Assumptions and net periodic pension cost are as follows:
<PAGE>
                                                                            12
<TABLE>
                                                         Year ended
                                              1996          1995          1994
                                                        (in thousands)
<S>                                            <C>         <C>         <C>
Discount rate ..............................      8.00%       8.25%       8.25%
Compensation increase ......................      5.00%       5.00%       5.00%
Expected return on plan assets .............      9.50%       9.50%       9.50%
Service cost ...............................   $ 3,545     $ 3,544     $ 3,178

Interest cost ..............................     5,060       4,560       3,912
Actual gain on plan assets .................    (8,528)     (6,389)       (854)

Net amortization and deferral ..............     4,550       2,563      (2,292)

Net periodic pension cost ..................   $ 4,627     $ 4,278     $ 3,944
</TABLE>
     The funded status of the defined benefit pension plans is summarized below:
<TABLE>
                                          1996          1995
                                             (in thousands)
<S>                                      <C>         <C>
Accumulated benefit obligation,
 including vested benefits of
 $43,101 and $38,997 .................   $(43,945)   $(40,328)
Effect of projected compensation
 increases ...........................    (23,826)    (23,462)
Projected benefit obligation
 for service rendered to date ........    (67,771)    (63,790)
Plan assets at fair value,
 primarily corporate equity and
 debt securities .....................     55,784      47,180
Projected benefit obligation
 in excess of plan assets ............    (11,987)    (16,610)
Unrecognized net transition obligation        408         492
Unrecognized prior service cost ......        530         120
Unrecognized net loss ................      1,926      10,165
Net pension liability ................   $ (9,123)   $ (5,833)
</TABLE>                             

B. Postretirement Health Care Benefits

     The Company  provides  certain health care and life insurance  benefits for
eligible  active and retired  employees.  The plan contains cost saving features
such as deductibles, coinsurance and a lifetime maximum and is unfunded.

     Effective  July 4, 1993,  the Company  adopted  SFAS No.  106,  "Employers'
Accounting  for  Postretirement  Benefits Other Than  Pensions."  This Statement
requires the accrual,  during the employee's  years of service,  of the expected
cost of providing those benefits to an employee and the employee's beneficiaries
and covered dependents.  The net transition obligation represents the difference
between the accrued  postretirement  benefit costs prior to the adoption of SFAS
No. 106 and the Plan's unfunded accumulated postretirement benefit obligation as
of July 4, 1993. The net  transition  obligation of $7.9 million at July 4, 1993
is being amortized over 22 years.

     The  components  of the net  periodic  postretirement  benefit  cost are as
follows:
<TABLE>
                                                               Year ended
                                                          1996     1995     1994
                                                              (in thousands)
<S>                                                       <C>      <C>      <C>
Service cost ..........................................   $  450   $  402   $  388
Interest cost .........................................      830      779      661
Amortization of net transition obligation over 22 years      360      360      360
Unrecognized net loss .................................       20       13     --
Net periodic postretirement benefit cost ..............   $1,660   $1,554   $1,409
</TABLE>
     The postretirement health care liability recognized in the balance sheet is
as follows:
<PAGE>
                                                                            13
<TABLE>
                                                 1996         1995
                                                    (in thousands)
<S>                                             <C>         <C>
Retirees ....................................   $ (5,946)   $ (5,973)
Fully eligible active participants ..........        (66)        (14)
Other active participants ...................     (5,467)     (4,961)
Accumulated postretirement benefit obligation    (11,479)    (10,948)
Unrecognized transition obligation ..........      6,841       7,201
Unrecognized net loss .......................      1,486       1,519
Postretirement health care liability ........   $ (3,152)   $ (2,228)
                                                ========    ========
</TABLE>
     The assumed health care inflation rate used in measuring the postretirement
health care  liability is 9.0% for 1997,  declining  uniformly to 6% in 2000 and
remaining level thereafter. The health care cost trend rate has an effect on the
amounts reported.  Increasing the assumed health care inflation rate by 1% would
increase the postretirement  health care liability by $0.6 million,  and the net
periodic  postretirement  benefit  cost for the year by  $40,000.  The  weighted
average discount rate used in determining the accumulated postretirement benefit
obligation was 8.0% and 7.75% in 1996 and 1995, respectively.


8. TAXES ON INCOME

Effective July 4, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes."  The  cumulative  effect of this  accounting  change of $0.5  million is
reported  separately  in the 1994  combined  consolidated  statement  of income.
Deferred  income  taxes under SFAS No. 109 reflect the tax effects of  temporary
differences  between  the  amounts  of  assets  and  liabilities  for  financial
reporting purposes and those amounts as measured by income tax laws. The Company
has grouped the  noncurrent  deferred  tax assets with other  assets and the net
noncurrent  deferred tax liability with certain other liabilities on the balance
sheet. The tax effects of temporary differences which give rise to a significant
portion of deferred tax assets (liabilities) are as follows:
<TABLE>
                                       1996        1995
                                         (in thousands)
<S>                                   <C>        <C>
Fixed assets ......................   $(5,581)   $(4,237)
Retirement plans ..................     3,106      1,641
Postretirement benefits ...........     1,103        780
Loss carryforwards ................     2,095        636
Accrued expenses and other ........      (280)      (271)

Net deferred tax asset (liability)    $   443    $(1,451)
</TABLE>
Per Balance Sheet:
<TABLE>
                                       1996        1995
                                         (in thousands)
                                      <C>         <C>
Current income tax asset ..........   $ 1,912      2,197
Noncurrent income tax asset .......     2,095       --
Noncurrent income tax liability ...    (3,564)    (3,648)

Net deferred tax asset (liability)    $   443    $(1,451)
</TABLE>
     At June 29,  1996,  the  Company  has $2.1  million of net  operating  loss
carryforwards, the majority of which expire in 2010 or are indefinite.
<PAGE>
                                                                            14
<TABLE>
                                                         Year ended
                                              1996        1995         1994
                                                    (in thousands)
<S>                                          <C>         <C>         <C>
Income before taxes on income consists of:
      Domestic ...........................   $ 15,647    $ 18,692    $ 14,453
      Foreign ............................     (3,298)     (1,869)     (3,445)
                                             $ 12,349    $ 16,823    $ 11,008
Tax expense (benefit) consists of:
      Current:
           Domestic ......................   $  6,909    $  7,920    $  4,782
           Foreign .......................          8         (17)        (16)
                                                6,917       7,903       4,766
      Deferred:
           Domestic ......................     (2,156)     (1,761)     (1,101)
           Foreign .......................       (570)       (347)       (331)
                                               (2,726)     (2,108)     (1,432)
                                             $  4,191    $  5,795    $  3,334
</TABLE>
     The  difference  from the amount that would be  computed  by  applying  the
federal statutory income tax rate to income before taxes on income is reconciled
as follows:
<TABLE>
                                                       Year ended
                                             1996          1995        1994
                                                      (in thousands)
<S>                                          <C>        <C>           <C>
Income taxes at federal statutory rate         35%          35%          34%
Impact of:
        Available tax credits ........         --           (2)         (11)
        Foreign subsidiary earnings ..          5            2            7
        DISC earnings ................         (6)          (2)          (3)
        Other ........................         --            1            3
Effective tax rate ...................         34%          34%          30%
Income taxes paid ....................   $  3,731     $ 10,332     $  3,149
</TABLE>
9. PREFERRED STOCK AND COMMON STOCK

     Each share of 7 1/2% cumulative preferred stock is entitled to one vote for
the election of the members of the Board of Directors not elected by the holders
of Class A Common  Stock,  and all other matters at all  shareholders'  meetings
whenever  dividend  payments  are in arrears for four  cumulative  quarters.  No
arrearage  existed at June 29, 1996. The preferred  stock is redeemable in whole
or in part, if called by the Company, at $10.50 per share.  Additionally,  there
are 1,000,000 authorized shares of series preferred stock, no par value. At June
29, 1996 and July 1, 1995, no series preferred stock was outstanding.

     Each share of Class A Common  Stock and Class B Common Stock is entitled to
one vote and ten votes, respectively, at all shareholders' meetings. The holders
of Class A Common Stock are entitled to elect  one-quarter of the members of the
Board of Directors.  The remaining directors are elected by the holders of Class
B Common Stock and any preferred stock entitled to vote.


10. STOCK PURCHASE AND OPTION PLANS

     The  Company's  Employees'  Stock  Purchase Plan permits the purchase in an
aggregate  amount  of up to  437,800  shares of Class A Common  Stock.  Eligible
employees  may  purchase  stock at market  value,  or 90% of market value if the
price is $8.00 per share or higher,  up to a maximum of $5,000 per  employee  in
any calendar year. The Company issued 17,460 shares in 1996 and 22,771 shares in
1995 under this plan.

     The Company's Stock Option Plans permit the granting of either nonqualified
or incentive stock options to certain key employees and directors to purchase an
aggregate  amount of up to 862,500 shares of the Company's Class A Common Stock.
The options,  which become exercisable twelve months after date of grant, expire
ten years after date of grant. Although the plan administrator may establish the
nonqualified  option  price at below  market  value at date of grant,  incentive
stock options may be granted only at prices not less than the market value.
<PAGE>
                                                                             15

     Options have been granted to purchase  common stock at prices  ranging from
$9.20 to $20.125  per share.  Options  were  exercised  during  1995 and 1996 at
prices ranging from $9.20 to $10.60 per share. A summary of option  transactions
follows:
<TABLE>
                                                 Year ended
                                           1996    1995   1994
                                             (in thousands)
<S>                                       <C>     <C>     <C>
Options outstanding, beginning of year    412     361     283
Options granted ......................     80      76      79
Options exercised ....................    (47)    (13)     (1)
Options expired ......................    (36)    (12)     --
Options outstanding, end of year .....    409     412     361

Exercisable, end of year .............    337     343     282
</TABLE>
The Company has reserved 364,975 shares for future grants at June 29, 1996 

In  1995,   the  FASB  issued  SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation."  SFAS No. 123 allows  companies  to continue to account for their
stock-based  compensation  plans in  accordance  with APB  Opinion  No.  25, but
encourages  the  adoption  of a new  accounting  method to  record  compensation
expense based on the estimated fair value of employee stock-based  compensation.
Companies electing not to follow the new fair value based method are required to
provide  expanded  footnote  disclosures,  including  pro forma net  income  and
earnings per share, determined as if the company had adopted the new method. The
Statement is required to be adopted by the Company's fiscal year ending in 1997.
Management intends to continue to account for its stock-based compensation plans
in accordance with APB Opinion No. 25 and provide the  supplemental  disclosures
as required by SFAS No. 123, beginning in 1997.


11. COMMITMENTS AND CONTINGENCIES

A. Patent Litigation

     Certain  electrochromic  mirror  technology  of the  Company  has  been the
subject  of  patent  litigation  between  the  Company  and  Gentex  Corporation
("Gentex"). Following the settlement of prior litigation, Gentex filed a lawsuit
against the Company on June 7, 1993,  alleging that the Company's  solid polymer
film  electrochromic  mirror  infringed a patent  owned by Gentex.  On March 21,
1994, the Company's motion for summary judgment of non-infringement  was granted
and the  lawsuit  was  dismissed.  Gentex  filed an  appeal of this  ruling.  On
November  3, 1995,  the Court of Appeals for the Federal  Circuit  affirmed  the
summary judgment  decision and dismissed  Gentex's appeal. On December 18, 1995,
the Court of Appeals  for the  Federal  Circuit  denied  Gentex's  request for a
rehearing.

     The  Company was also a party to three  subsequent  lawsuits  involving  10
patents owned by the Company.  In one of these suits, the Court granted Gentex's
motion for  summary  judgment  that two of the  Company's  patents  relating  to
lighted  mirrors are  invalid.  The  Company  believes  that its lighted  mirror
patents are not  invalid  and has filed on appeal on this  issue.  The appeal is
currently pending.

     On April 1, 1996,  the Company  entered  into a settlement  agreement  with
Gentex which resolved all aspects of these three lawsuits except for the pending
appeal  referred to above.  Under the  agreement,  Gentex paid the Company  $6.0
million  in  settlement  fees and will pay an  additional  $0.2  million  if the
Company  prevails  in  its  appeal.   In  addition,   the  settlement   includes
cross-licensing  of certain patents which each party may practice within its own
core  technology  area,  and an  agreement  that the  parties  will  not  pursue
litigation  against  each other on certain  other  patents  for a period of four
years.  This settlement was recognized in selling,  general and  administrative,
net of related patent litigation costs previously capitalized. Patent litigation
costs  included  in  selling,  general  and  administrative  expenses  were $3.7
million, $3.1 million and $0.8 million in 1996, 1995, and 1994, respectively.

B. Other Litigation

     The  Company  and its  subsidiaries  are  involved  in certain  other legal
actions and claims,  including  environmental  claims,  arising in the  ordinary
course of business.  Management believes (based on advice of legal counsel) that
such  litigation  and claims will be  resolved  without  material  effect on the
Company's financial position,  results of operation and liquidity,  individually
and in the aggregate.
<PAGE>
                                                                             16

C. Other

     As  of  June  29,  1996,  the  Company  had  capital  expenditure  purchase
commitments outstanding of approximately $9 million.


12. LEASES

The Company leases various  facilities and equipment.  Rental expense charged to
operations  amounted to  approximately  $3.8 million for 1996,  $2.5 million for
1995 and $2.5 million for 1994. In 1995 the Company entered an agreement for the
sale and leaseback of newly installed modular window production  equipment.  The
equipment  was  sold  at  cost  and  no  gain  or  loss  was  recognized  on the
transaction.  The lease which has six one year renewal terms,  an effective 6.9%
fixed  interest rate and a 40% balloon for the Company  option to purchase after
the full seven year term is classified as an operating lease.

     Future minimum lease payments, excluding renewal options, consist of:
<TABLE>
Year ending                    Amount
                           (in thousands)
<S>                            <C>
1997 ..............            $3,688
1998 ..............             1,196
1999 ..............               514
2000 ..............               578
2001 ..............               221
2002 and thereafter               485
                               $6,682
</TABLE>

13. RESTRUCTURING OF OPERATIONS

     In the fourth quarter of 1996, the Company recorded a restructuring  charge
of $2.4 million  related to the  write-down of certain assets and the closure of
the Company's manufacturing facility in Mt. Pleasant, Tennessee. The decision to
close the  Tennessee  facility was based on a number of factors that  included a
major loss of business one year ago and the inability to attract significant new
business for the plant.  These costs include  accruals for severance and related
employee  support programs and write-off of certain assets removed from service.
The majority of these  liabilities  will be paid or settled during the first six
months of 1997.

       In the second  quarter of 1995, the Company  implemented a  restructuring
plan to focus on its automotive businesses.  The restructuring plan included the
sale of the  Company's  appliance  business,  the sale of the heavy truck mirror
business and the  liquidation  of the Company's  investment  in OSD Envizion,  a
joint venture engaged in the manufacture of welding helmet shields.  The Company
received total proceeds of $14.2 million  associated with the  restructuring  of
these  businesses,  which had a  combined  net book  value of $6.5  million.  In
addition, restructuring costs of $3.0 million were also recognized consisting of
a severance  program and other expenses  associated with the plan. The severance
program included twenty-five personnel,  primarily middle and senior managers of
the Company.  The spending for these costs was essentially  completed by the end
of 1995. The restructuring of the non-automotive businesses resulted in a pretax
gain  of  $4.7  million.   These   non-automotive   businesses   represented  an
insignificant portion of the Company's operations for each period reported.

     The Company also restructured  certain automotive  operations in the second
quarter  of  1995,  resulting  in a charge  of $2.4  million  primarily  for the
write-down  of  operating  assets due to the loss of  Saturn's  business  at D&A
Technology,  Inc.  (D&A),  the  Company's  former joint venture with Asahi Glass
Company.  In the first quarter of 1996, the Company  dissolved the joint venture
and acquired  Asahi's 40% interest in D&A for  approximately  $2.1 million.  D&A
represented 5% and 8%, respectively,  of the Company's combined consolidated net
sales and net income in 1995.

     In the fourth quarter of 1994, the Company recognized  restructuring  costs
of $1.2 million to cover a severance program and other expenses  associated with
the restructuring of Donnelly Mirrors Limited.


14. QUARTERLY FINANCIAL DATA--UNAUDITED
<PAGE>
                                                                             17

     The Company's  common stock is traded on the American  Stock Exchange under
the Symbol  "DON." Market  quotations  regarding the range of high and low sales
prices of the Company's common stock were as follows:
<TABLE>

Fiscal                           1996                           1995
--------------------------------------------------------------------------------
Quarter                   High          Low                High         Low
--------------------------------------------------------------------------------
<S>                     <C>           <C>               <C>           <C>
First                   $ 16 3/4      $ 14 1/2          $ 17 1/2      $ 15 1/8
Second                    15 5/8        13 3/4            17 5/8        13 1/4
Third                     14 7/8        13                18            15 1/8
Fourth                    16 1/8        13 3/4            17 5/8        14 7/8
--------------------------------------------------------------------------------
</TABLE>
<TABLE>
                                                 First      Second      Third     Fourth     Total
                                                Quarter     Quarter    Quarter    Quarter    Year
                                                      (in thousands, except per share data)
<S>                                             <C>         <C>        <C>        <C>        <C>
1996
    Net sales ...............................   $ 90,523    $106,823   $116,445   $125,780   $439,571
     Gross profit ...........................     13,685      20,030     22,153     25,873     81,741
     Operating income (loss) ................     (2,087)      3,899      3,920      7,759     13,491
    Net Income (loss):
          Income (loss) .....................     (1,789)      2,629      2,503      5,111      8,454
         Per common share ...................       (.23)        .34        .32        .65       1.08
    Dividends declared per share of common stock     .10         .10        .10        .10        .40
1995
     Net sales ..............................   $ 86,741    $ 98,460   $ 96,708   $101,431   $383,340
     Gross profit ...........................     18,101      22,312     21,019     21,136     82,568
    Operating income ........................        811       7,274      4,828      4,120     17,033
    Net Income (loss):
         Income (loss) ......................        (85)      4,699      3,076      3,319     11,009
          Per common share ..................       (.01)        .61        .40        .42       1.42
     Dividends declared per share of common stoc     .08         .08        .08        .08        .32
</TABLE>
     All per share data has been adjusted for the stock split effective  January
30,  1997.  The impact of certain  transactions  on the 1996 and 1995  quarterly
results  of  operations  is  discussed  in  Notes  11 and 13.  See  Management's
Discussion  and Analysis of Results of Operations  and  Financial  Condition for
discussion of the Company's results of operations.
<PAGE>
                                                                      
                                    PART IV.

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

(c)     EXHIBITS

The response to this  portion of Item 14 is  submitted as a separate  section of
this report.

SIGNATURES

Pursuant to the requirements of Section 13 (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.

DONNELLY CORPORATION



/s/William R. Jellison
Vice President, Corporate
Controller and Treasurer





<PAGE>
                                                            
                            Annual Report - Form 10-K

                                  Exhibit Index

3.        Articles of Incorporation  and Bylaws are incorporated by reference to
          Exhibit 3.1 and 3.2 of  Registrant's  Registration  Statement  on Form
          S-1, as  amended,  dated March 9, 1988,  (Registration  No.  33-17167)
          ("S-1 Registration Statement").

4.        A specimen stock  certificate of the Class A Common Stock was filed as
          part  of a  Registration  Statement  on  Form  S-1  (Registration  No.
          33-17167) as Exhibit 4.1, and the same is hereby  incorporated  herein
          by reference.

10.1      Amended and Restated First Chicago Revolving Credit Loan Agreement

10.2      Nationwide Life Insurance  Company Debt Agreement was filed as part of
          Form 10-K for the fiscal year ending July 1, 1995 as Exhibit  10.1 and
          is hereby incorporated herein by reference.

10.3      An English  language  summary of an Acquisition  Agreement and related
          documents  written in German  between the  Registrant,  Donnelly GmbH,
          Hohe GmbH & Co. KG ("Hohe") and other related  parties,  dated May 25,
          1995,  consolidated  financial statements of Hohe as of March 31, 1995
          and  1994  (audited)  and  pro  forma  financial  information  of  the
          Registrant  were filed as part of Form 8-K on June 9, 1995,  which has
          been  subsequently  amended  and are  hereby  incorporated  herein  by
          reference.

10.4      Nationwide Life Insurance  Company Debt Agreement was filed as part of
          Form 10-K for the fiscal year ending July 2, 1994 as Exhibit  10.1 and
          is hereby incorporated herein by reference.

10.5      The Principal Mutual Debt Agreement was filed as part of Form 10-K for
          the fiscal  year  ending  July 3, 1993 as  Exhibit  10.2 and is hereby
          incorporated herein by reference.

10.6      A Merger  Agreement  for the  Merger of  Donnelly  Coated  Corporation
          ("DCC")  into  Applied  Coated  Corporation,  among  Registrant,  DCC,
          Applied Films Lab, Inc. and Cecil Vanalsburg, John Chapin, and Richard
          Condon,  dated  February 24, 1992, was filed as part of a Registration
          Statement on Form S-2  (Registration  No.  33-47036) and Exhibit 10.7,
          and the same is hereby incorporated herein by reference.

10.7      The form of Indemnity  Agreement  between  Registrant  and each of its
          directors was filed as a part of a Registration  Statement on Form S-1
          (Registration  No.  33-17167) as Exhibit 10.8,  and the same is hereby
          incorporated herein by reference.

10.8      The  Donnelly  Corporation  Stock  Option  Plan was filed as part of a
          Registration  Statement  on Form S-1  (Registration  No.  33-17167) as
          Exhibit 10.9, and the same is hereby incorporated herein by reference.

10.9      The  Donnelly   Corporation   1987  Employees'  Stock  Purchase  Plan,
          including amendments was filed as part of a Registration  Statement on
          Form S-8  (Registration No. 33-34746) as Exhibit 28.1, and the same is
          hereby incorporated herein by reference.

10.10     The Donnelly Corporation Non Employee Director's Stock Option Plan was
          filed as part of a  Registration  Statement on Form S-8  (Registration
          No.  33-55499)  as  Exhibit  99,  and the same is hereby  incorporated
          herein by reference.

22        Schedule of Affiliates.

24        Consent  of BDO  Seidman,  LLP,  independent  public  accountants  for
          Form-10K for the fiscal year ending June 29, 1996.

24a       Consent  of BDO  Seidman,  LLP,  independent  public  accountants  for
          Form-10K/A for the fiscal year ending June 29, 1996.

27        Financial Data Schedules.
<PAGE>
                                                                           
                                  Exhibit 24a

              Consent of Independent Certified Public Accountants

We hereby consent to the  incorporation by reference of our reports dated August
2, 1996, relating to the combined consolidated financial statements and schedule
of Donnelly Corporation  appearing in the corporation's amended annual report on
Form 10-K for the year ended June 29,  1996,  in that  corporation's  previously
filed Form S-8 Registration  Statements for that corporation's 1987 Stock Option
Plan   (Registration  No.   33-26555),   1987  Employees'  Stock  Purchase  Plan
(Registration  No.  33-34746)  and  Non-Employee  Directors'  Stock  Option Plan
(Registration No. 33-55499).




/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
April 14, 1997