SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

                                       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)

49 West Third Street, Holland, Michigan                     49423-2813
(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                            New York 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 $85,993,878 as of February 28, 2001.

Number of  shares  outstanding  of each of the  registrant's  classes  of common
stock, as of February 28, 2001.
        6,263,145 shares of Class A Common Stock par value, $.10 per share
        4,098,314 shares of Class B Common Stock par value, $.10 per share
<PAGE>
                       DOCUMENTS INCORPORATED BY REFERENCE

Portions  of  the  registrant's  proxy  statement  for  its  annual  meeting  of
shareholders,  held May 11, 2001, are incorporated by reference into Part III of
this report.

Restatement
On August 20, 2001, the Registrant announced that it would restate its financial
statements for all periods beginning with fiscal 1998 to reflect a change in its
accounting for its investments in Donnelly  Electronics,  Inc. and Donnelly Hohe
GmbH & Co. K.G. See Note 1 and Note 18 to the accompanying Combined Consolidated
Financial  Statements.  The results of prior  periods as  reflected in this Form
10-K/A  differ  adversely  from  previously  filed  financial  information.

                                     PART I.

ITEM 1.      BUSINESS

FORWARD-LOOKING STATEMENTS
This  report  contains  forward-looking  statements  within  the  meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  The  terms  "believe,"
"anticipate,"  "intend," "goal," "expect," and similar  expressions may identify
forward-looking  statements.  Investors are cautioned  that any  forward-looking
statements,  including  statements  regarding  the  intent,  belief  or  current
expectations  of the Company or its  management,  are not  guarantees  of future
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially  from  those in  forward-looking  statements  as a result  of
various factors including, but not limited to (i) general economic conditions in
the markets in which the Company  operates,  (ii)  fluctuation  in  worldwide or
regional  automobile  and light truck  production,  (iii)  changes in  practices
and/or policies of the Company's  significant  customers  including forced price
reductions,  (iv)  market  development  of  specific  products  of the  Company,
including   electrochromic   mirrors,   (v)  whether  the  Company  successfully
restructures its European  operations,  (vi) fluctuations in foreign  currencies
and (vii) other risks and  uncertainties.  The Company does not intend to update
these forward-looking statements.

ITEM 1 (a)    General Development of Business
Donnelly  Corporation  ("the  Company"),  incorporated in Michigan in 1936, is a
technology-driven,  customer-focused,  growth- oriented,  global supplier to the
automotive and information display industries through  manufacturing  operations
and various  joint  ventures in North and South  America,  Europe and Asia.  The
Company  primarily  supplies  automotive  customers  around  the world with rear
vision systems,  modular window systems and handle products,  which  incorporate
increasing electronic capabilities.  The Company has experienced approximately a
14%  compounded  annual  growth rate in net sales  since  fiscal 1989 due to its
strong  positions  in  the  Company's   traditional   product  markets  and  the
acquisition  in fiscal 1995 of Donnelly  Hohe GmbH & Co. KG  ("Donnelly  Hohe").
Management believes that based on information  available,  the Company is one of
the largest  exterior  rearview  mirror  manufacturers  in the world and has the
largest  market share in the U.S. for interior  rearview  prismatic  mirrors and
modular  window  systems.  During 2001, the Company will be  transitioning  to a
global product based management  structure split into two main operating groups:
Electronic  Systems  and  Exterior  Systems.  The  Company  believes  that  this
organizational  evolution  will help  position  itself to achieve even  stronger
performance with its products in the global marketplace.

The Company has been following a strategic plan designed to improve  shareholder
value by focusing on the following key areas:

  1. Developing core automotive products, primarily by increasing dollar content
     per vehicle  through the  expansion of market  share of existing  products,
     introduction of new technologies and increasing volume through  penetration
     into new and emerging markets;
  2. Improving  the overall  operating  performance  of the  Company's  European
     Operations;
  3. Extending   the   Company's   capabilities   in   value-added   electronics
     technologies.

1. Developing Core Automotive Products:

The Company's core automotive product offerings have experienced approximately a
14% compounded  annual growth rate in net sales since fiscal 1989.  Adjusted for
foreign  currency  exchange  rates and the impact of the  reduction in net sales
associated  with Lear  Donnelly,  the Company  experienced  a growth in sales of
approximately 7% for the year ended 2000. The increase in

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<PAGE>
net  sales  has been due to  growth in the  Company's  established  products  of
complete outside mirrors,  modular encapsulated windows and value-added features
on interior  mirrors;  introduction  of new  products and  technologies  such as
electrochromic  ("EC") mirrors,  bonded hardware modular window systems and door
handle products; and through acquisitions, primarily of Donnelly Hohe in Europe.
The Company also  benefits from content on strong  selling  vehicles such as the
DaimlerChrysler  minivan, the Ford Expedition,  the Ford Taurus, and the General
Motors' compact sport utility vehicles  ("SUVs") in North America as well as the
Volkswagen  Passat and Volkswagen Polo in Europe.  The continued  penetration of
the  Company's  products  in  existing  and new  markets  and its  offerings  of
value-added  innovative  technologies are an important strategy to the Company's
overall financial performance.

The continued introduction of new advanced technologies is part of the Company's
strategy.  Over the past five years,  the Company has introduced many new mirror
technologies including various lighting, electronic and mechanical features that
improve the overall safety and functionality of the vehicle's mirror system. The
Company  received a major order for  business  integrating  advanced  electronic
features into interior  rearview mirrors (both base prismatic and EC mirrors) to
support General Motors' OnStar(R) system. The first commercial  versions of this
telematics  system  were  launched  during the second  half of 2000.  Management
believes that the Company is the only company to integrate electronics into both
prismatic  and EC  mirrors.  Both kinds of mirrors may also  include  additional
electronic  features  such as compass and  temperature  displays  and  precision
interior  map  lighting.  In November  1999,  the Company  introduced  the Solid
Polymer Matrix ("SPM(TM)")  technology to produce EC automatic-dimming  rearview
mirrors  that the Company  believes are more  durable  than  competing  products
available  on  the  market.   A  recent   product   offering  is  the  Company's
SmartRelease(TM) trunk release system, which uses advanced electronic sensors to
detect heat and motion and  automatically  opens the trunk if it senses a person
trapped  inside.  The Company has received an order from General  Motors for the
Company's SmartRelease(TM) system, which will debut on the 2002 Chevrolet Impala
and Monte Carlo.  General Motors has announced that  automatic  emergency  trunk
release  systems will be included on all of their  vehicles with trunks by 2003.
The Company  believes  that the  SmartRelease(TM)  system will be added to other
customers'  vehicle lines during 2002 and 2003. In modular windows,  the Company
has most recently  developed  flush surface  window  systems  involving  various
bonding and encapsulation  systems that allow for greater design flexibility and
reduced cost to the automotive vehicle  manufacturers.  In addition, the Company
recently  commercialized  technology  for an  integrated  sliding  window system
popular in the light truck  market  segment.  Continued  emphasis  on  effective
research and product  development  is a key part of the  Company's  strategy for
future  growth.   The  Company  believes  that  its  technological  and  product
development  capabilities  will  enable it to provide  sophisticated  integrated
modules and systems and to perform  the  increased  responsibilities  automotive
suppliers are expected to manage.

The  global  market  position  of the  Company's  automotive  products  has been
enhanced  through various  operations in the emerging  markets of Asia and South
America.  In Asia, the Company  operates four joint ventures for the manufacture
and sale of the  Company's  automotive  products  into the Asian and  Australian
markets;  Varitronix EC (Malaysia)  Sdn.  Bhd.  ("Varitronix  EC") for EC mirror
cells;  Shanghai Donnelly Fu Hua Window Systems Company Ltd. ("Shanghai Donnelly
Fu Hua") for window  systems;  Shunde  Donnelly Zhen Hua Automotive  Systems Co.
Ltd. ("Shunde  Donnelly Zhen Hua"); and Shanghai  Donnelly  Ganxiang  Automotive
Systems Co. Ltd. ("Shanghai Donnelly Ganxiang") for exterior mirror products. In
South  America,  the Company  operates  Donnelly do Brasil LTDA.  ("Donnelly  do
Brasil")  for the  manufacture  and sale of  interior,  exterior  and EC  mirror
products into this market. These operations provide the Company with key entries
into emerging automotive markets,  which are expected to have a combined overall
rate of increase in industry  automotive  production greater than the markets in
North  America  and  Europe.   See  Item  1  (c)   "Narrative   Description   of
Business--Joint  Ventures" for additional  information  concerning the Company's
joint ventures.

As part of the Company's  commitment  to focus on its core  businesses in recent
years, the Company has executed  actions to reposition its non-core  businesses.
Through these actions,  the Company was able to generate  positive cash flow and
net gains to the Company,  resulting in a strong return to shareholders  for the
investments   made  to  develop   these   businesses.   Refer  to  the  section;
Repositioning Non-Core Businesses, included in this report after Joint Ventures,
for a more  detailed  discussion  of  these  actions.  The  Company  continually
assesses  its  strengths  and  weaknesses  in relation to the  direction  of the
respective industries represented by the Company's various investments.

2. Improving Operating Performance of European Operations:

During the past six years, the Company has  significantly  expanded its presence
in Europe.  The  Company's  strategy  to  penetrate  European  markets  has been
primarily through acquisitions,  the most significant of which was Donnelly Hohe
in March 1995,  and through  market  penetration of the Company's EC mirrors and
modular window systems. Donnelly Hohe, based in Germany, serves many of the main
auto producers in Europe. These include BMW, Renault,  Volkswagen,  Audi, Volvo,
Opel and Ford in exterior  mirrors.  Donnelly Hohe also offers interior  mirrors
and certain  non-automotive  products  through  three  operating  facilities  in
Germany  and one in Spain.  The Company  also  offers its mirror and  electronic
products through operating  facilities in Ireland and its modular window systems
through its facility in France.

                                       3
<PAGE>
On July 9, 2001, the Company announced a European restructuring initiative ("the
2001 plan") to further enhance the efficiency and  profitability of its European
operations through a combination of margin improvements and overhead reductions.
Objectives of the 2001 plan will be achieved  through  outsourcing of "non-core"
operations  including  work  currently  performed in the Company's Tool Shop and
Zinc Diecasting  operations.  Personnel  cutbacks will also be made in the Paint
Shop and in Manufacturing  Overhead.  The total cost of the plan is estimated at
$2.1  million  pre-tax,  or $1.4 million at net income,  related to  termination
benefits for  approximately 125 production,  engineering and support  personnel.
Costs will be recognized as specific actions are defined and approved  beginning
in the third quarter of 2001.  The plan is  anticipated to be completed in 2002.
While the Company believes that further restructuring actions may be appropriate
in Europe and  continues to evaluate  these  operations  for  improvements,  the
assessment of possible actions has not yet been completed.

The Company has  substantially  completed  two  earlier  restructuring  plans to
improve the operating  efficiency  and  profitability  of its European  exterior
mirror business.  In February 1999, the Company  announced a restructuring  plan
("the  1999  plan")  based  on  a  strategy  to   consolidate   and   streamline
manufacturing  operations  in Germany.  An $8.8  million  pre-tax  restructuring
charge, or $4.7 million at net income, was recorded for the 1999 plan, including
$1.4  million  for  impairment  of  assets  and  $7.4  million  for  anticipated
incremental cash expenditures  related to the severance and voluntary retirement
programs  for  approximately  200  production,  sales,  engineering  and support
personnel.

In May 1997, the Company  announced a plan ("the 1997 plan") for the elimination
of redundant  operations and  outsourcing of inefficient  operations  throughout
Europe, which resulted in a $10.0 million pre-tax  restructuring charge, or $5.3
million  at net  income.  A  reduction  of  $1.1  million  was  recorded  to the
restructuring  reserve  in  1998  associated  with  changes  to the  1997  plan.
Remaining actions of the 1997 plan were included in the 1999 plan.

As  required by  generally  accepted  accounting  principles  for  restructuring
charges,  the Company  reduced its total  restructuring  reserve by $3.8 million
pre-tax,  or $2.4  million at net  income,  in the fourth  quarter of 2000.  The
reduction was  attributable to (1) higher than  anticipated  voluntary  employee
attrition and (2) changing circumstances within the market and operations, which
made the outcome of some aspects of the plans uncertain.

3. Extending the Company's Electronics Capabilities:

New  applications  in  electronics  continue to play an  increasing  role in the
Company's future.  As vehicles become more  electronically  sophisticated,  auto
manufacturers are looking for opportunities to package value-added features into
new areas of the car. In response to this continued market development, in 1996,
the Company invested in a new venture,  Donnelly  Electronics,  Inc.  ("Donnelly
Electronics"),  located in Holly, Michigan,  which specializes in the design and
manufacture of circuit board  assemblies  for a variety of electronics  products
and  sub-assemblies.   In  February  2001,  the  Company  acquired  all  of  the
outstanding stock of Donnelly Electronics not currently owned by the Company. In
addition, in the first quarter of 2000, the Company purchased assets in Ireland,
which  will  be  operated  by  Donnelly  Electronics,  for  the  manufacture  of
electronic  components  in  Europe.  See Item 1 (c)  "Narrative  Description  of
Business--Joint  Ventures" for a more detailed  discussion of this venture.  The
Company  believes that electronics  represent a significant  growth area for the
Company.

The Company has developed  independently or acquired  technology for a number of
critical  electronic  product modules for use in the Company's mirror systems or
for  independent  sale.  These  products  include  memory devices for actuators,
powerfold modules, ground illumination features, electronic remote entry systems
and  other  products.  The  Company  is a leader in  developing  "plug and play"
modules that are flexible and allow  vehicle  manufacturers  to offer  different
configurations  of features through the same module. An example of these modules
is an interior EC mirror offered to a luxury vehicle manufacturer in Europe. The
mirror functions as a communications node for the vehicle's  electronics system,
representing a significant  first in the automotive  industry.  In essence,  the
electronics  that  control a number of  different  passenger  comfort and safety
functions have been integrated into the rearview mirror.

In November 1999, the Company  announced a major new order for business in which
the Company  will  package  and  integrate  advanced  electronic  features  into
interior rearview mirrors to support General Motors' new OnStar(R)  system.  The
Company began  shipping  product on this order in mid-2000  with the  electronic
content  included  in a mix of base  prismatic  and EC  mirrors.  Both  kinds of
mirrors  also  include  additional  electronic  features  such  as  compass  and
temperature displays and precision interior map lighting.

The  Company is in the  process of  developing  electronic  vision  systems  for
vehicles  that make use of advanced  sensors and video  microchip  technology to
replace interior and exterior mirror systems.  Although not yet  commercialized,
the  development  of this  technology is part of the Company's  strategy to be a
technology  leader  in the  market  for  automotive  rear-vision  systems.  This
sophisticated  camera  system  made its  debut on the  General  Motors'  Precept
concept  vehicle and represents the most

                                       4
<PAGE>
technologically advanced rear-vision product that the Company has ever produced.
The Company has been engaged in a research  program  with certain key  customers
for the development and  commercialization  of this technology.  The Company has
also begun displaying its VideoMirror(TM)  line of electronic vision systems for
vehicles that utilize advanced image  processing and display  technology to give
drivers better views of their vehicles' interiors and exteriors.

A recent  product  offering  is the  Company's  SmartRelease(TM)  trunk  release
system,   which  uses   electronic   sensors  to  detect  heat  and  motion  and
automatically  open  the  trunk  if it  senses  a  person  trapped  inside.  The
SmartRelease(TM)  will debut on the 2002 Chevrolet Impala and Monte Carlo.  This
technology  marks an  evolution  in the auto  industry's  efforts  to help  make
vehicles a safer  environment.  General  Motors has announced  that an automatic
emergency  trunk release  system will be included on all of their  vehicles with
trunks  by 2003.  The  SmartRelease(TM)  system is more  sophisticated  than the
manual emergency trunk release handles that the Company  developed and currently
supplies to auto-makers.  The electronic sensors require very little movement on
the part of a person trapped in a trunk to activate.  The Company  believes that
it will secure  additional orders of other key customers during 2001 and 2002 to
also utilize the SmartRelease(TM) trunk release system.

The  Company's net sales are subject to  fluctuations  in industry car and light
truck build,  primarily for North America and Europe.  North  American  industry
build  has been  particularly  strong in  calendar  years  1998,  1999 and 2000.
Adjusted  for car and light  truck build at  standard  industry  volumes and the
impact of the acquisition of Donnelly Hohe, the Company believes that new booked
orders will be  consistent  with  historical  growth  levels.  In addition,  the
Company  expects door handle  product sales to increase due to the withdrawal of
one of its major  competitors  from the market.  Future booked sales for outside
mirrors and inside  mirror  products  with strong  value-added  content,  handle
products and products with innovative electronic  capabilities,  are expected to
provide the main growth for the Company in the foreseeable future. Many of these
new programs, such as Onstar(R),  have begun to be launched during late calendar
2000 and many more will be  launching  over the next 18  months.  See Item 1 (b)
"Financial  Information  About  Industry  Segments"  and  Item 1 (c)  "Narrative
Description  of Business"  for a more  thorough  discussion  about the Company's
product and market segmentation.

The Company is committed to improving  shareholder  value with a strategic  plan
focused on the following  key areas:  1) developing  core  automotive  products,
primarily by  increasing  dollar  content per vehicle  through the  expansion of
market  share  of  existing   products;   2)  improving  the  overall  operating
performance of the Company's European Operations; and 3) extending the Company's
capabilities in value-added electronics technologies.  The Company believes that
these strategic  initiatives  have  established the foundation for the Company's
ability to improve  shareholder  value.  The Company believes the combination of
the strong commercial developments for new orders booked (initially launching in
late calendar  2000) and the  continued  introduction  of advanced  technologies
should  support the Company's  ability to continue  growing  shareholder  value.
Management   remains   committed   to  the  overall   strategies   of  continued
implementation  of  the  Company's  operational  systems,  introducing  new  and
innovative technologies, focusing on core businesses and developing and enabling
highly skilled people.

ITEM 1 (b)    FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company has been managed  primarily on a geographical  basis.  For 2000, the
Company had two  reportable  segments:  North  American  Operations  ("NAO") and
European Operations ("EO").  During 2001, the Company will be transitioning to a
new corporate organization structure that will focus its worldwide business into
two main operating groups:  Electronic Systems and Exterior Systems. The Company
believes that this organizational evolution will help position itself to achieve
even stronger performance with its products in the global marketplace.  See Note
4 to the combined Consolidated  Financial Statements under Item 8 of this report
for additional information regarding the Company's operating segments.

ITEM 1 (c)    NARRATIVE DESCRIPTION OF BUSINESS

FISCAL YEAR AND SEASONAL NATURE OF BUSINESS

Effective July 4, 1999, the Company changed the date of its fiscal year end from
the Saturday  nearest June 30 to December 31. The years ended December 31, 2000,
July 3,  1999,  and  June 27,  1998,  each  consisted  of 52,  53 and 52  weeks,
respectively.  The  six-month  periods ended  December 31, 1999,  and January 2,
1999,  consisted of 26 and 27 weeks,  respectively.  The six-month  period ended
December 31, 1999, is referred to as the transition period. All year and quarter
references  relate to the  Company's  fiscal years and fiscal  quarters,  unless
otherwise stated.

During the transition  period,  the Company also changed the fiscal year ends of
its German and Spanish  subsidiaries  from May 31 to December  31. Prior to this
change,  these subsidiaries  reported their results of operations on a one-month
lag.  The  Company's  results of  operations  for the  transition  period  ended
December 31, 1999,  include the results of these subsidiaries for the six months
ended  November 30, 1999. The results of operations for the period of December 1
to December 31, 1999, for

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these subsidiaries were charged to retained earnings in order to report only six
months  of  operating  results.  Cash  flow  activity  for this  same  period is
reflected as a single line item in the Combined  Consolidated  Statement of Cash
Flows.

The  Company's  net  sales  and  net  income  may  be  subject  to   significant
fluctuations  attributable  primarily to  production  schedules of the Company's
major automotive customers.  In addition,  the Company has benefited from strong
product  content on light  trucks,  including  minivans and SUVs, as compared to
automobiles.  These factors cause results to fluctuate from period to period and
year to year.


Products, Services, Markets and Methods of Distribution

Automotive Rear-Vision Systems

The Company began producing  prismatic day/night mirror glass in 1939, and today
manufactures a wide range of interior and exterior  rearview mirror products and
believes it is one of the world's largest producer of automotive rearview mirror
systems.

Electrochromic  Products.  The Company has made  significant  investments in the
development of solid-state, thin-film EC technology that has been commercialized
for mirror  applications and has potential use for various window  applications.
EC coatings  allow the user to darken  glass to the desired  degree  through the
application of an electrical current to the coating.

The Company markets, sells, manufactures and distributes EC day/night automotive
mirror  systems,  which are  electrically  dimmable to reduce the glare from the
headlights  of  other  vehicles  approaching  from the  rear.  The  Company  has
continued to actively  develop newer and more advanced EC  technologies  for the
automotive  marketplace and has developed or licensed a number of  technologies,
of which several are already available for commercial use.

The Company produces GLAREFREE(TM) EC mirrors for Ford,  Volkswagen,  Audi, BMW,
PSA, DaimlerChrysler, General Motors, Volvo, Renault, Honda, Subaru, Mitsubishi,
Porsche,  Jaguar and Daewoo. These purchase agreements  illustrate the Company's
position  as a strong  player in a global  market for EC mirrors  that  industry
sources expect to grow to $1 billion or greater.  The Company believes it is the
only  exterior  mirror  manufacturer  that is  vertically  integrated  with full
exterior EC cell manufacturing capability. With strong technologies to offer and
having  favorably  settled the patent  issues that had  hampered  its ability to
compete prior to 1996, the Company has set, and is achieving ambitious goals for
increasing its EC mirror market share in the years ahead. During the last twelve
months the Company has significantly increased its production of EC mirrors, and
is on track to  approximately  double EC  volumes  within  the next  twenty-four
months.

In late 1999,  the  Company  introduced  the  SPM(TM)  technology  to produce EC
automatic-dimming  rearview  mirrors that the Company  believes are more durable
than competing products available on the market.  Over time, the Company expects
that most or all of its EC mirror products will be based on SPM(TM)  technology.
EC mirrors using the SPM(TM)  technology began appearing on production  vehicles
in North America and Europe in 2000.

In April 1999,  the Company  formed  Schott  Donnelly LLC Smart Glass  Solutions
("Schott  Donnelly"),   a  50-50  joint  venture,   with  Schott  North  America
Manufacturing,  Inc.  ("Schott"),  one  of  the  world's  leading  producers  of
specialty glass  products.  The joint venture is seeking to develop EC glass for
automotive and architectural applications.

Interior  Rearview  Mirrors.  The  Company has a  predominant  share of the U.S.
market  for  interior  rearview  prismatic  mirrors  and in  calendar  2000 sold
approximately 27 million complete units and prism mirror elements worldwide. The
interior  rearview  mirror  product  line ranges from the basic  day/night  flip
mirror to  rear-vision  systems  that  incorporate  a variety  of  sophisticated
electronic  features into complex modular interior  rearview mirror  assemblies.
The  Company  continues  to design and market  innovative  value-added  features
integrated  into the  rearview  mirror  such as  lights,  electronic  compasses,
temperature and other display technologies.

In November 1999, the Company  announced a major new order for business in which
the Company  will  package  and  integrate  advanced  electronic  features  into
interior rearview mirrors as part of General Motors' new OnStar(R)  system.  The
Company began  shipping  product on this order in mid-2000  with the  electronic
content  included  in a mix of base  prismatic  and EC  mirrors.  Both  kinds of
mirrors may also  include  additional  electronic  features  such as compass and
temperature  displays and precision interior map lighting.  Management  believes
that  the  Company  is  the  only  company  with  the  manufacturing  orders  to
incorporate all the electronics required into both prismatic and EC mirrors.

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The Company  manufactures and markets automotive interior rearview mirrors using
EC technology that automatically  dims the mirror when headlights  approach from
the rear.  EC rearview  mirrors are a  value-added  substitute  for  traditional
prismatic  base  mirrors  and are sold for a higher  dollar  price per unit than
prismatic  base  mirrors.   The  Company   believes  that  EC  rearview  mirrors
represented  approximately  24% and 11% of all interior rearview mirrors sold by
all  suppliers to original  equipment  manufacturers  in the North  American and
European  markets,  respectively,  for the 2000  model  year.  The market for EC
mirrors  continues to grow and in 2000, EC mirrors were offered on approximately
61 car models in North  America,  compared  to only  approximately  19 models in
1991. The Company believes that EC mirrors will represent an increasing share of
the rearview mirror market,  both in terms of number of units and dollar volume,
and represent a significant growth area for the Company.

Exterior  Rearview  Mirrors.  The  Company  believes  it is one  of the  largest
exterior  rearview  mirror  manufacturers  in the world and  considers  itself a
technology and manufacturing leader with manufacturing  facilities in the United
States,  Germany,  Spain,  Ireland,  Brazil and China (through joint  ventures).
Through these manufacturing locations, the Company has a strong presence in each
major  automotive  market in the world.  The Company has booked  significant new
orders in recent  years that will make this  product  line the  fastest  growing
business for the Company. In 2000, the Company launched new business with annual
sales of approximately $40 million,  including orders for twelve General Motors'
vehicles,  the largest single  exterior  rearview  mirror order in the Company's
history.  Additionally,  in 2000,  the  Company was  awarded  the  contract  for
exterior  rearview mirrors for a North American light truck program,  which will
be introduced in 2004.

The Company has used its  expertise and customer  relationships  in the interior
mirror  market to develop its product  line and increase its share of the market
for complete  exterior  mirror  systems.  The Company  believes  that its strong
presence in the automotive  markets of North America and Europe are augmented by
the  manufacturing  locations in the emerging markets of South America and Asia.
In addition, the Company believes that a global presence in product development,
sales,  marketing,  manufacturing  and  distribution  in the markets  provides a
strong  competitive  advantage.  The Company supplies  exterior  rearview mirror
assemblies  primarily  to Honda,  Ford,  General  Motors and Mazda in the United
States and to major European  auto-makers  including BMW,  Volkswagen,  Renault,
Audi and Ford in Europe.  The Company also  supplies  exterior  rearview  mirror
systems to automakers throughout China through its Chinese joint ventures, which
are the two largest  producers  of exterior  rearview  mirrors in China,  and in
South America through its subsidiary in Brazil.

Exterior  rearview  mirrors are  combined  with  automatic  or manual  adjusting
mechanisms,  wire  harnesses  and other  hardware  within  an  injection-molded,
color-matched  housing and are more complex than base interior rearview mirrors.
The per vehicle sales price of exterior  mirrors  substantially  exceeds that of
interior  rearview  mirrors due to the greater  complexity of exterior  rearview
mirrors  and the fact that most new  vehicles  are  equipped  with two  exterior
rearview mirrors.

The Company also manufactures and markets dimmable EC exterior rearview mirrors.
The Company believes that EC rearview mirrors currently represent only 5% of all
exterior  rearview mirrors in the North American market for the 2000 model year.
The Company  believes  that EC  exterior  rearview  mirrors  will  represent  an
increasing share of the rearview mirror market, both in terms of number of units
and dollar volume,  and that the EC mirror market presents a significant  growth
opportunity for the Company.

Camera  Vision.  The Company is in the process of developing  electronic  vision
systems  for  vehicles  that make use of advanced  sensors  and video  microchip
technology to replace  interior and exterior  mirror  systems.  Although not yet
commercialized,  the  development  of this  technology  is part of the Company's
strategy  to be a  technology  leader in the market for  automotive  rear-vision
systems.  This sophisticated camera system made its debut on the General Motors'
Precept concept vehicle and represents the most technology advanced  rear-vision
product  that the Company has ever  produced.  The Company has been engaged in a
research   program  with  certain  key   customers  for  the   development   and
commercialization of this technology.  The Company has also begun displaying its
VideoMirror(TM)  line of  electronic  vision  systems for vehicles  that utilize
advanced image processing and display technology to give drivers better views of
their  vehicles'  interiors  and  exteriors.  The two principal  products  being
marketed within the  VideoMirror(TM)  line are  BabyVue(TM)  and  ReversAid(TM).
BabyVue(TM) is an in-cabin camera vision system,  which allows the driver a view
of  reverse-facing  infants.  ReversAid(TM) is an exterior camera vision system,
which uses a discreet  camera  mounted on the rear of the  vehicle to provide an
enhanced  view  of  what is  behind  the  vehicle  when  it is in  reverse.  The
ReversAid(TM)  system  can also be  modified  to  become  TowChek(TM)  to assist
drivers  backing up to hitch  without the  assistance  of a second  person.  The
VideoMirror(TM)  system was  selected as one of the thirty  "Best of CES," which
recognizes  the best new  products on display at the Consumer  Electronics  Show
held in January 2001 in Las Vegas. Both of the systems have begun to be marketed
online at www.donnelly.com. This technology is part of the Company's strategy to
be a technology leader in the market for automotive rear-vision systems.

                                       7
<PAGE>
Modular Windows

The  Company  pioneered  and today is a leading  supplier  of  modular  windows.
Modular  windows,  which have  continued to increase in  popularity  since their
introduction,  are produced by molding glass,  hardware,  weather  stripping and
other  components  into a single unit  assembly  and can be used for  automotive
windows and sunroofs.  The Company  believes its modular  windows offer improved
quality and aerodynamics,  greater design flexibility and lower production costs
for automakers than conventional  automotive  windows.  Other innovative product
offerings by the Company are flush  surface  windows  that involve  single-sided
encapsulation,  bonding of hardware  directly to glass and the  incorporation of
color-matched body hardware into the window system.

The Company's  modular window assemblies are used for rear and liftgate windows,
quarter windows, aperture windows, fixed vent windows, roll-up windows, sunroofs
and windshields. The Company produces modular windows for DaimlerChrysler, Ford,
General Motors, Honda, Isuzu and Toyota in North America and DaimlerChrysler and
Isuzu in Europe. The Company's modular windows are used on many popular vehicles
such as the DaimlerChrysler  Caravan/Voyager  minivan,  the Jeep Grand Cherokee,
the Ford Expedition,  the Ford  Taurus/Sable,  and the new generation of compact
SUVs just launched by General Motors.

The  Company   believes  that  its  materials   technology   and   manufacturing
capabilities  provide a  significant  competitive  advantage  in the  market for
modular  windows.  The Company offers a variety of modular  window  technologies
including  molded-in body color panels,  flush bonded hardware as well as single
and double sided  encapsulation.  Modular  windows can be molded using polyvinyl
chloride  ("PVC") or a urethane  reaction  injection  molding  process.  The PVC
process is less expensive primarily because the material is less costly and does
not require painting.  PVC, however, is more difficult to mold, particularly for
large windows.  The Company believes that its ability to design and mold windows
in both  process and its  expertise in PVC molding are  significant  competitive
advantages.

The Company  believes that the increasing use of modular windows reflects trends
in the automotive  industry towards increased levels of outsourcing,  demand for
integrated  modules  and  systems  and  reliance  on  suppliers  for  design and
manufacturing,  particularly  in the North American  market for light trucks and
SUVs.

Handle Products

The Company  produces a wide variety of interior and exterior  door and liftgate
handle products for Ford, Honda,  Mazda,  Nissan and Porsche.  This product line
was established  based on the Company's  capabilities in color-matched  painting
and plastic  injection  molding.  The Company  supplies  various types of handle
products  including  plastic,  diecast and chrome-plated door handles as well as
products with value-added  electronic  features.  The Company expects to benefit
from  the  recent  withdrawal  of a major  competitor  from the  North  American
marketplace.  Concurrently,  acknowledgement  by  our  customers  as  a  leading
designer and manufacturer of body colored hardware has lead to new business with
General  Motors,  Honda  and  Mazda.  Handle  products  are  synergistic  to the
Company's  complete  exterior  rearview mirror product line, and are marketed by
combining the Company's  capabilities  in design,  painting and added  features,
such as electronics  for both product lines.  The Company also began to supply a
"passive  entry"  door  handle for a future  luxury  vehicle,  which  involves a
sophisticated  system to detect  and  identify  the owner of a vehicle as he/she
approaches and automatically opens the door. These products,  when combined with
the SmartRelease(TM) trunk release product, indicate a growing sophistication in
the door closure  market and  represents  increased  growth  opportunities.  The
Company  believes  that the  market  for all types of  electronic  door  closure
mechanisms will increase over the next decade.

Interior Lighting and Trim

In September 1997, the Company  entered into an agreement with Lear  Corporation
("Lear") to form Lear Donnelly Overhead Systems, LLC ("Lear Donnelly"),  a joint
venture for the design,  development,  marketing and production of interior trim
overhead systems and components for the global market. Through the Lear Donnelly
joint venture, the Company manufactured various interior trim products including
dome lights,  interior  door lights,  map lights,  courtesy  lamps,  lighted and
non-lighted grab handles,  visors and trim components such as overhead consoles.
In September  1999, the Company sold its interest in this joint venture to Lear.
As a result of this  transaction,  the operating results of Lear Donnelly are no
longer included in the Company's  combined  consolidated  financial  statements.
With the exception of one existing order with a European  customer,  the Company
has exited this product area.  Sales relating to this order are classified  with
the  Company's  mirror  systems and  components  related  sales.  See Item 1 (c)
"Narrative  Description  of  Business--Joint   Ventures"  for  a  more  complete
discussion on the sale of the Company's interest in Lear Donnelly.

Non-Automotive Businesses

The Company believes Information Products,  Inc. ("Information  Products"),  its
subsidiary  based in  Holland,  Michigan,  is the  world's  largest  producer of
specialty  coated and shaped glass for the computer touch screen  industry.  The
glass is used in a
                                       8
<PAGE>
wide variety of touch  screen  applications  such as  information  kiosks,  cash
registers,  industrial controls,  personalized  greeting card kiosks and others.
Sales of  Information  Products have  represented  less than 5% of the Company's
total net sales for each of the last three years.

Joint Ventures

Donnelly  Electronics.  Donnelly  Electronics was formed in the first quarter of
1997, with a partner offering expertise in automotive electronics technology. In
February 2001, the Company  acquired all of the  outstanding  equity of Donnelly
Electronics,  not then owned by the Company for $4.5  million,  paid  equally in
cash and through the issuance of the Company's Class A Common Stock.  Due to the
acquisition of the remaining interest,  the Company began consolidating Donnelly
Electronics'  financial  statements  beginning in March 2001. As of December 31,
2000, the Company owned 18.2% of the common stock of Donnelly  Electronics  (See
Note 1 to the Combined Consolidated Financial Statements). Donnelly Electronics,
based in Holly, Michigan,  designs and manufactures circuit board assemblies for
a variety of  electronic  products and  sub-assemblies.  It produces many of the
electronic  components  that the Company uses for  products  such as EC rearview
mirrors and electronic compass systems.  Donnelly  Electronics  pursues business
with other automotive  suppliers that are not competitors of the Company as well
as other  non-automotive  customers.  In  addition,  Donnelly  Electronics  will
operate  assets  purchased by the Company in the first quarter of 2000,  for the
manufacture of electronic components in Europe.

Donnelly/Arteb  LTDA  ("Donnelly/Arteb").  In fiscal  1998,  the Company  formed
Donnelly/Arteb,  which is located near Sao Paulo,  Brazil, a 50-50 joint venture
with  Industrias  Arteb S.A., to produce  interior and exterior  mirrors for the
South American automotive industry.  Donnelly/Arteb began producing  replacement
parts for  distribution  within the South  American  market in 1999.  In October
2000, the Company acquired its partner's 50% interest in Donnelly/Arteb for $1.6
million,  subsequently  changing  its name to  Donnelly do Brasil LTDA and began
consolidating  the  financial  statements of this now  wholly-owned  subsidiary.
Donnelly do Brasil is in the process of launching new programs for the Brazilian
market.  Equity in the results of the Company's  Brazilian  joint venture are no
longer  included in equity in earnings  (losses) of affiliated  companies  after
October 2000 due to the Company's  acquisition of the remaining interest in this
venture  and  subsequent  consolidation  of the  financial  statements  of  this
subsidiary.

Shunde  Donnelly  Zhen Hua. In the first  quarter of 1997,  the Company  formed,
Shunde Donnelly Zhen Hua, a joint venture with Shunde Zhen Hua Automotive  Parts
Co. Ltd.  ("Shunde  Zhen Hua"),  to  manufacture  interior and  exterior  mirror
systems for  automakers  in China.  In 1999,  Shunde Zhen Hua agreed to sell its
portion of the joint venture to Ganxiang Automobile Mirror Company ("Ganxiang"),
the  largest  automotive  mirror  supplier  in  China.  The  Company  formed  an
additional joint venture with Ganxiang; Shanghai Donnelly Ganxiang, see below.

Shanghai Donnelly Ganxiang.  In the fourth quarter of calendar 1999, the Company
formed Shanghai Donnelly Ganxiang for the manufacture,  sale and distribution of
outside  mirrors  primarily  for the Chinese  automotive  market.  The Company's
investment in Shanghai Donnelly Ganxiang  consisted of technology and a transfer
to Ganxiang of a 5% interest of its Shunde Donnelly Zhen Hua joint venture. This
transaction was finalized and approved by the Chinese  authorities in 2000. As a
result of this transaction,  the Company now holds a 25% interest in both Shunde
Donnelly Zhen Hua and Shanghai Donnelly Ganxiang.

Schott-Donnelly  LLC Smart Glass Solutions ("Schott  Donnelly").  In April 1999,
the Company formed Schott Donnelly,  a 50-50 joint venture with Schott, which is
based in Germany and is one of the world's leading  producers of specialty glass
products.  The joint venture is seeking to develop EC glass for  automotive  and
architectural  window  applications.  The Company contributed certain assets and
liabilities  upon the  formation of the joint venture and received $2 million in
cash, which was recorded as a pre-tax gain. In accordance with the LLC operating
agreement,  Schott will provide  contributions  for  operations and be allocated
100% of the net operating losses up to $9.5 million.

Applied Image Group,  Inc.  ("AIG").  In December  1998,  the Company merged its
wholly owned subsidiary,  Donnelly Optics  Corporation  ("Optics") into a wholly
owned  subsidiary  of AIG, a New York  corporation.  In the merger,  the Company
received a 13% interest in AIG and a $5 million  convertible  note. AIG develops
and manufactures opto-imaging products for the lighting, automotive, optical and
photonics industries. The Company accounts for its investment in AIG on the cost
method; therefore, the financial results of Optics are no longer included in the
Company's financial statements after December 1, 1998.

Varitronix  EC.  In 1998,  the  Company  formed  Varitronix  EC, a 50% owned and
controlled   joint  venture,   with  the  Malaysian   subsidiary  of  Varitronix
International  Ltd.  Varitronix  EC is  located in  Penang,  Malaysia,  within a
world-class  manufacturing  facility that began  producing EC cells in the first
quarter  of  1999.  With  this  production  startup,  the  Company  is the  only
automotive   supplier  in  the  world  with  EC   manufacturing   or  assembling
capabilities in North America,  Europe and Asia. Due to

                                       9
<PAGE>
the Company having board control of this joint venture, the financial statements
of  Varitronix  EC are  consolidated  with those of the  Company.  In 1999,  the
Company began consolidating the financial statements of Varitronix EC.

Donnex. The Company's agreement with Essex Specialty Products, Inc., the world's
leading  producer of automotive  adhesives and sealants,  to form a new company,
Donnex,  has  expired.  Donnex was  intended to produce  and  deliver  complete,
ready-to-install  windows  and  window  systems  to  automotive  customers  on a
just-in-time  basis  and in  sequence.  It is  expected  that the  Company  will
continue to market this innovative technology independent from Essex.

Shanghai  Donnelly Fu Hua.  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"), which produces automotive window systems for
the Chinese and Australian  markets.  Shanghai Fu Hua was originally,  itself, a
joint venture  between Ford Motor  Company and Shanghai Yao Hua Glass Works.  In
August of 2000,  Ford sold its interest in Shanghai Fu Hua to  Pilkington  Glass
Company, changing the name to Shanghai Yao Hua Pilkington Autoglass Co. Ltd. The
Company's position in Shanghai Donnelly Fu Hua as a result of the sale, however,
has remained unchanged.

Donnelly Yantai Electronics Corporation Limited. This 50% owned venture produces
coated glass for use in the Chinese LCD market. This operation is located on the
Yantai Peninsula of the People's Republic of China.

Repositioning Non-Core Businesses

As part of the Company's commitment to focus on its core businesses, the Company
has executed the following actions, associated with its non-core businesses:

     In October 2000, the Company  divested its interest in KAM. The Company had
     owned 17.1% of KAM,  which  supplies  mirrors for large trucks.  The shares
     sold resulted in a pre-tax gain of approximately $0.4 million, or $0.02 per
     share, after-tax.

     In  September  1999,  the Company  sold its 50%  interest in Lear  Donnelly
     Overhead Systems, LLC ("Lear Donnelly") to Lear Corporation, its partner in
     the joint venture,  resulting in a pre-tax gain of $14.1 million,  or $0.82
     per share, after-tax, which was recognized in the third quarter of calendar
     1999. In December  1999,  the Company  completed the final  negotiation  of
     certain issues related to the sale, resulting in an additional pre-tax gain
     to the Company of $4.4 million,  or $0.29 per share,  after-tax,  which was
     recognized in the fourth quarter of calendar 1999. The Company's  equity in
     the  financial  results  of Lear  Donnelly  has not  been  included  in the
     Company's  financial  statements  after September 1999. For a more detailed
     discussion regarding the Company's sale of its investment in Lear Donnelly,
     see Note 3 to the Combined  Consolidated  Financial Statements under Item 8
     of this Form 10-K report.

     In April 1999,  the Company formed Schott  Donnelly,  a 50-50 joint venture
     with Schott,  a wholly owned  subsidiary of Schott Glas,  which is based in
     Germany and is one of the world's  leading  producers  of  specialty  glass
     products.   See  Item  1  (c)  "Narrative  Description  of  Business--Joint
     Ventures" for a more complete discussion regarding Schott Donnelly.

     In the second and third  quarters  of fiscal  1999,  the  Company  sold its
     remaining  interest  in VISION  Group plc  ("VISION  Group").  The  Company
     received $8.6 million in proceeds and recognized a combined pre-tax gain of
     approximately $5.5 million,  or $0.35 per share,  after-tax.  The Company's
     equity in the  financial  results of VISION Group has not been  included in
     the Company's financial statements after November 1, 1998.

     In December 1998, the Company merged its wholly owned subsidiary,  Donnelly
     Optics,  into a wholly  owned  subsidiary  of  Applied  Image  Group,  Inc.
     ("AIG"), a New York Corporation.  See Item 1 (c) "Narrative  Description of
     Business--Joint Ventures" for a more complete discussion regarding AIG. The
     Company  accounts for its investment in AIG on the cost method;  therefore,
     the  financial  results of Optics have not been  included in the  Company's
     financial statements after December 1, 1998.

     In the second  quarter of fiscal 1998, the Company sold its 50% interest in
     Applied Films  Corporation  ("AFC") during an initial public offering.  The
     Company received $7.9 million in net proceeds,  after taxes and related out
     of pocket fees, and recognized a pretax gain of approximately $4.6 million,
     or $0.22 per share, after-tax.

Through repositioning these businesses,  management has been able to realize the
strong return to  shareholders  for the  investments  made to develop them. As a
result of these  transactions,  the operating  results of VISION Group,  Optics,
Lear  Donnelly  and  AFC  are  no  longer  included  in the  Company's  combined
consolidated financial statements.   The Company

                                       10
<PAGE>
continually  assesses its strengths and  weaknesses in relation to the direction
of the respective industries represented by the Company's various investments.

Marketing Staff

In North  America,  Europe,  South  America and Asia,  the  Company  markets its
automotive products by combining the engineering product expertise of members of
the Company's engineering staff with a customer focused sales force, which works
together with the Company's  customer  design teams early in the design process.
The Company's wholly owned European subsidiaries employ a sales force located in
Europe and also sell through a trading  company in Japan.  Nearly all automotive
sales are made  directly to  automakers  with the exception of some interior and
exterior mirror glass components.

The Company markets its  non-automotive  products through a sales force who also
work in  conjunction  with the  Company's  engineers.  The  Company  works  with
potential  customers  on the  development  of new  applications  for  electronic
information display products.

Sources and Availability of Raw Materials

The Company's  primary raw materials are glass,  paints,  resins and  adhesives.
Glass is supplied by third-party glass  manufacturers and by glass manufacturers
affiliated with automakers. Paints used by the Company are supplied primarily by
four suppliers. Most of the resins the Company uses are supplied by four primary
suppliers.  The Company  believes that  alternative  suppliers are available for
paints and resins. Generally, the Company has multiple sources of supply for the
important  materials and components used in its products.  Certain adhesives for
the  Company's  flush  window  systems are  supplied  solely by Essex  Specialty
Products,  Inc. and the Company believes that an alternative source of supply is
not readily available.  Because of the commodity nature of common materials such
as glass and plastics,  the Company is somewhat vulnerable to price fluctuations
in many of its material purchases.

Patents, Licenses, Etc.

While the Company owns  approximately  380 patents and considers them important,
the Company as a whole is not  dependent to any material  extent upon any single
patent or group of patents.  The Company  believes its  manufacturing  know-how,
design of its own  manufacturing  equipment  and  development  of  manufacturing
processes are more important than its patents.  The Company has licensed certain
of its own patents and  technology  and has licenses  under certain  third-party
patents and technology.

SEASONAL NATURE OF BUSINESS

The Company's net sales and net income are subject to  significant  fluctuations
attributable primarily to production schedules of the Company's major automotive
customers.  In addition, the Company has strong product content on light trucks,
including  minivans and SUVs,  as compared to  automobiles.  These factors cause
results to fluctuate from period to period and year to year.  Investments in new
product lines, acquisitions,  and the formation and disposition of subsidiaries,
joint  ventures  and  alliances  also affect the  comparability  of results on a
period-to-period basis.

WORKING CAPITAL

The  Company's  current  ratio was 1.3 on December 31, 2000,  compared to 1.2 at
December  31,  1999.  Working  capital was $43.3  million at December  31, 2000,
compared to $25.0 million at December 31, 1999. The increase in working  capital
is due to  increased  accounts  receivable  and  inventories  from  new  product
launches, and reductions in payables and restructuring accruals.

At December 31, 2000,  and December 31, 1999,  $38.5 million and $38.9  million,
respectively,   had  been  sold   under  the   Company's   accounts   receivable
securitization  agreement.  Proceeds  received under this agreement were used to
reduce  revolving  lines of credit.  The sales are  reflected  as a reduction of
accounts  receivable  and an increase to  operating  cash flows.  The  agreement
expires in December 2001;  however,  it is renewable for one-year periods at the
option of the  Company and with the  consent of bank  participants.  The Company
expects to extend the current agreement or replace it on comparable terms.

The Company's $160 million  multi-currency global revolving credit agreement had
borrowings  against it of $77.1  million and $42.5  million as of  December  31,
2000, and December 31, 1999,  respectively.  Total long-term borrowing increased
by $25.2 million at December 31, 2000, compared to December 31, 1999,  primarily
to support higher working capital and capital expenditure requirements.

                                       11
<PAGE>
Other than the items summarized  above, the Company does not believe that it, or
industries  which it serves in general,  have any special  practices  or special
conditions   affecting  working  capital  items  that  are  significant  for  an
understanding of the Company's business.

Importance of Limited Number of Customers

In 2000,  approximately  74% of the  Company's  net sales were to the  following
major automobile manufacturers:
<TABLE>
         <S>                                                                <C>
         Ford ...........................................................    27%
         DaimlerChrysler.................................................    19
         General Motors..................................................     7
         Honda...........................................................     7
         BMW.............................................................     7
         Volkswagen......................................................     7
                                                                             --
         Total...........................................................    74%
                                                                             ==
</TABLE>

The mix of the Company's product content varies by customer within each segment.
The loss of any one of these customers  would have a material  adverse effect on
the Company.

Backlog of Orders

As of December 31, 2000, and December 31, 1999, the Company's  backlog of orders
was approximately $204 and $193 million, respectively. The Company believes that
all of its existing  backlog will be delivered  during the current  fiscal year.
The Company  generally  sells to automakers  on the basis of long-term  purchase
contracts or one-year purchase orders,  which generally provide for releases for
approximately  30 to 90 days  of  production.  Unshipped  products  under  these
releases and short-term purchase orders constitute the Company's backlog.

Government Contracts

The  Company  does not believe  that any  portion of its  business is subject to
re-negotiation  of profits or termination of contracts or  sub-contracts  at the
election of the government.

Competition

Competition  in the  markets  for the  Company's  automotive  products  is based
primarily on manufacturing  capabilities,  technology,  design,  quality,  cost,
delivery and customer  relationship.  A number of the Company's  competitors are
divisions  or  subsidiaries  of  larger   corporations,   including   vertically
integrated glass companies,  with greater  financial  resources than the Company
and with well-established  relationships with auto-makers.  The level and nature
of competition involving the Company's automotive products are varied.

Interior Rearview Mirrors. While the Company has a predominant share of the U.S.
interior  rearview  prismatic  mirror  market,  the  Company  is  aware  of many
competitors in this market. The Company knows of one principal competitor in the
EC market.  The Company has several  worldwide  competitors  for interior mirror
glass sales in Japan and Europe,  although the Company  believes  each  interior
mirror glass competitor has a smaller market share than the Company.  In Europe,
the Company competes with a number of other  manufacturers of complete  interior
rearview mirror assemblies.

Exterior  Rearview  Mirrors.  The Company has many  competitors in the worldwide
exterior  rearview  mirror  market,  although  the  number of these has begun to
decrease in recent years due to consolidation.  Through the Company's operations
in North  American  and Europe,  the Company is one of the leading  producers of
automotive exterior rearview mirrors.

Modular  Windows.  The Company has many  competitors  in the  worldwide  modular
window market.  Certain  competitors are major automotive glass manufacturers or
are closely  associated  with  automobile  or glass  manufacturers.  The Company
believes that the glass  manufacturers  could further vertically  integrate into
glass molding and that these companies  would be significant  competitors due to
their size.  However,  the Company believes that it is still a technology leader
for glass encapsulation and metal bonding of attachments to glass.

Handle  Products.  The Company has many competitors in the worldwide door handle
market,  although recently there has been some consolidation with one competitor
leaving the market.  Certain  competitors already supply (or are well positioned
to supply in the future) broader interior trim or exterior  ornamentation  sets,
often  working  in concert  with door  systems  integrators.  The  Company  will
continue  to use handle  products  to  leverage  capacity  and to  strategically
support exterior

                                       12
<PAGE>
mirrors  through the sale of  coordinated  "door  sets" of exterior  mirrors and
handle  products.  Additionally,  the Company will use its  electronics  design,
development  and  manufacturing  capability  to  create  competitive  advantage,
wherever possible,  in the growing electronic door closure mechanisms market, an
area in which few competitors have yet emerged.

Other Products.  With respect to its Information Products business,  the Company
believes  it is the  world's  leading  producer  of  coated  bent  glass for the
CRT-based  electronic  display and interactive  systems market. The Company also
supplies a number of small-volume,  non-automotive  products in Europe; however,
the  Company  is not a  predominant  market  leader  for any of these  products.
Competition  in all of  these  product  areas is based  on  price,  service  and
quality.

Research and Development

Continued emphasis on effective  research and product  development is a key part
of the  Company's  strategy for future  growth.  The Company  believes  that its
technological  and product  development  capabilities  will enable it to provide
sophisticated  integrated  modules  and  systems  and to perform  the  increased
responsibilities automotive suppliers are expected to manage.

In fiscal 2000, 1999 and 1998, research and development expenditures were $35.2,
$34.2 million and $36.4  million,  respectively,  or 4.1%,  3.8% and 4.8% of the
Company's net sales for those years.  For the six-month  period ending  December
31, 1999, these expenses were $16.4 million,  or 3.9% to net sales. The increase
in these  expenses in 2000 is  primarily  due to  increased  electrochromic  and
electronic  applications,  as well as launch related  engineering  support.  The
decrease from 1998 to 1999 was primarily due to the Lear Donnelly joint venture,
the  formation  of the Schott  Donnelly  joint  venture,  the Optics  merger and
Donnelly  Electronics.  This was due to the  Company's  contribution  of certain
technologies  and  related  operating  expenses  to these  ventures,  which  are
accounted  for  under the  equity or cost  method  of  accounting.  The  Company
anticipates that it's acquisition of Donnelly  Electronics will result in higher
research and development  expenses in the future both in absolute terms and as a
percent of sales, however, the acquisition is expected to result in higher gross
profit margins. Over 80% of the Company's research and development  expenditures
are product  specific and  conducted by the  Company's  product  engineers.  The
Company  has a corporate  applied  research  group,  including  several  Ph.D's,
located at research facilities in Holland,  Michigan.  The Company owns numerous
U.S. and foreign patents and has licenses for other patents and technology.  The
Company also licenses  certain of its own patents and technology to others.  The
Company believes its  manufacturing  know-how,  design of its own  manufacturing
equipment  and  development  of  manufacturing  processes  are  other  important
competitive advantages.

ENVIRONMENTAL MATTERS

Like similar companies, the Company's operations and properties are subject to a
wide variety of increasingly  complex and stringent  federal,  state,  local and
international laws and regulations,  including those governing the use, storage,
handling,  generation,  treatment,  emission, release, discharge and disposal of
certain  materials,  substances and wastes, the remediation of contaminated soil
and  groundwater   and  the  health  and  safety  of  employees   (collectively,
"Environmental  Laws"). As such, the nature of the Company's  operations exposes
it to the risk of  claims  with  respect  to such  matters  and  there can be no
assurances that material costs or liabilities will not be incurred in connection
with such claims.

Certain Environmental Laws regulate air emissions,  water discharges,  hazardous
materials and wastes and require public disclosure related to the use of various
hazardous or toxic  materials.  Environmental  Laws relating to workplace safety
and  worker  health  also  govern  the  Company's  operations.  Compliance  with
Environmental   Laws  may   require   the   acquisition   of  permits  or  other
authorizations  for certain  activities and compliance with various standards or
procedural requirements.

Based upon its experience to date, the Company  believes that the future cost of
compliance   with   existing   Environmental   Laws  and   liability  for  known
environmental  claims  pursuant  to such  Environmental  Laws,  will  not have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations  and cash flows.  However,  future events,  such as new  information,
changes  in  existing  Environmental  Laws or  their  interpretation,  and  more
vigorous  enforcement  of policies by regulatory  authorities,  may give rise to
additional expenditures or liabilities that could be material.

Human Resources

The Company  believes its human resources are one of its fundamental  strengths.
The Company has  operated  for over 50 years under a  team-based,  participative
management  system.  The  Company  believes  that this  approach  has  increased
productivity  by emphasizing  employee  opportunity and  participation  aimed at
continuous  improvement.  The Company  believes  this  emphasis  has resulted in
enhanced  long-term  productivity,  cost  control and product  quality,  and has
helped  the  Company  attract  and  retain  capable  employees.  The  Company is
nationally recognized as a leader in the application of participative management
principles and systems.  The Company currently has approximately 6,400 employees
worldwide,  of whom  approximately  3,600 work in the Company's  North  American
operations  in the U.S. and Mexico.  During 2000,  the Company had an average of

                                       13
<PAGE>
approximately  6,200  employees  worldwide.  The  Company's  non-North  American
employees are primarily located in Germany,  Ireland,  France, Spain, Brazil and
Malaysia. The Company considers its relationship with its employees to be good.

The Company's United States workforce is non-union.  The Company's workforces in
Ireland,  Mexico  and  France  are  unionized,  as are  the  workforces  of most
companies in these countries.  The Company's workforce in Germany is represented
by a works council,  which has employee  representation.  The workforces of most
companies  in Germany are  required to be  represented  by works  councils.  The
Company's  workforce  in Spain and  Malaysia  is  non-union.  The Company has no
collective  bargaining agreements in Ireland or Mexico, where non-economic terms
of employment are governed by statute. The Company negotiates wages and benefits
approximately  annually with its German,  Spanish and Irish  workforces.  In the
third calendar quarter of 1999, the Company completed  re-negotiation of a labor
contract  that is effective  through  2003,  covering the majority of its German
workforce.  This labor  contract  allows for  greater  work  flexibility  rules,
broader  productivity  guidelines  and a delay in certain wage  increases  until
certain income  profitability  targets are accomplished.  The Company negotiates
wages  approximately  annually and benefits  approximately  bi-annually with its
workforce in Mexico.  The Company's  French  subsidiary is subject to the salary
schedule and conditions  collectively agreed to on a national and regional basis
between  employers  and  employees  in the  plastics  industry.  The  Company is
currently reducing its European workforce as part of its European  restructuring
plans. See Item 7, "Management's Discussion and Analysis of Financial Conditions
and  Results  of   Operations"   for  more   information   about  the   European
restructuring.

ITEM 1 (d)    INFORMATION ABOUT FOREIGN OPERATIONS

During 2000,  approximately 31% of combined  consolidated net sales were derived
from  the  Company's   foreign   operations.   Approximately   15%  of  combined
consolidated  net sales were derived from export  shipments  from the  Company's
United States operations to customers in foreign countries. The Company has also
licensed certain technologies to companies in Europe and Asia to manufacture and
sell in foreign markets using the Company's technology.

North American  revenues are revenues  resulting from sales originating from the
United States. U.S. and export sales are classified based on where the sales are
made  to.  Foreign  revenues  are  generated  from  sales  originating  from the
Company's   various   foreign   locations.   The  Company  has  various  foreign
subsidiaries  located in Germany,  Ireland,  Spain, France,  Mexico,  Brazil and
Malaysia. The Company operates two subsidiaries in Germany, Donnelly Hohe GmbH &
Co. KG and Donnelly Hohe Schleiz GmbH & Co. KG; three  subsidiaries  in Ireland,
Donnelly  Mirrors  Limited,  Donnelly Vision Systems Europe Limited and Donnelly
Electronics  Limited;  one in Spain,  Donnelly Hohe Espana S.A.;  one in France,
Donnelly EuroGlas Systems SARL; one in Mexico, Donnelly de Mexico, S.A. de C.V.;
one in Brazil, Donnelly do Brasil; and one in Malaysia, Varitronix EC.

The Company has established the Asian and the South American  markets as the top
two emerging  market  priorities.  To support this, the Company also has various
non-controlled  joint  ventures in Asia.  As discussed in Item 1 (c)  "Narrative
Description of Business--Joint  Ventures, " the Company has three joint ventures
located  in  China:  Shanghai  Donnelly  Fu Hua,  Shunde  Donnelly  Zhen Hua and
Shanghai Donnelly Ganxiang.

A summary of the Company's  operations by geographic  area is included in Note 4
to the  Combined  Consolidated  Financial  Statements  under Item 8 of this Form
10-K/A report.


ITEM 2.      PROPERTIES

The Company, solely or through several joint ventures, owns or leases facilities
which are located throughout North America,  Europe, Asia and South America. The
location,  square footage and use of the most significant facilities at February
28, 2001, were as follows:
<TABLE>
                                                          Combined
Location of Facility                                   Square Footage                        Use
--------------------                                   --------------                        ---
<S>                                                         <C>            <C>
North American Operations:
Holland, Michigan (11)*                                     988,000        Manufacturing, Warehouse and Office
Grand Haven, Michigan                                       156,000        Manufacturing, Warehouse and Office
Newaygo, Michigan*                                          177,000        Manufacturing, Warehouse and Office
Norton Shores, Michigan*                                     24,000        Manufacturing and Office
Detroit, Michigan*                                            4,200        Sales and Marketing Office
Mt. Sterling, Kentucky                                       45,000        Manufacturing, Warehouse and Office
Monterrey, Mexico                                           132,000        Manufacturing, Warehouse and Office

                                       14
<PAGE>
Tucson, Arizona (2)**                                        11,000        Manufacturing, Warehouse and Office
Tokyo, Japan *                                                  200        Sales and Marketing Office
European Operations:
Naas, Ireland                                                88,000        Manufacturing, Warehouse and Office
Manorhamilton, Ireland                                       25,000        Manufacturing, Warehouse and Office
Longford, Ireland*                                           37,000        Manufacturing, Warehouse and Office
Langres, France*                                             40,000        Manufacturing, Warehouse and Office
Nanterre, France*                                             2,000        Sales and Marketing Office
Collenberg, Germany (2)*                                    228,000        Manufacturing, Warehouse and Office
Dorfprozelten, Germany*                                     357,000        Manufacturing, Warehouse and Office
Schleiz, Germany (2)*                                        95,000        Manufacturing, Warehouse and Office
Barcelona, Spain                                             66,000        Manufacturing, Warehouse and Office
Palmela, Portugal                                            62,000        Warehouse and Office
Goteborg, Sweden *                                            3,100        Sales, Marketing and Design Office

Other Segments:
Holly, Michigan **                                           35,000        Manufacturing, Warehouse and Office
Shunde, China **                                             82,000        Manufacturing, Warehouse and Office
Shanghai, China **                                          120,000        Manufacturing, Warehouse and Office
Yantai, China**                                             143,000        Manufacturing, Warehouse and Office
Penang, Malaysia **                                          23,300        Manufacturing and Office
Sao Bernardo do Compo, Brazil                                14,000        Manufacturing and Office
</TABLE>

   * Leased  facilities.  Four  of the ten  Holland,  Michigan,  facilities  are
     leased.  One of the two  Collenberg,  Germany,  as well as,  one of the two
     Schleiz, Germany, facilities are leased.

  ** Owned or leased by a joint venture or non-controlled affiliate.

The Company  believes its facilities are modern,  well maintained and adequately
insured and are primarily  utilized.  Because of its rapid growth in sales,  the
Company is continually evaluating the need for additional office,  manufacturing
and warehouse space.

As  of  December  31,  2000,  the  Company  had  capital  expenditure   purchase
commitments outstanding of approximately $11.2 million.

The Company  provides a guarantee for $7.1 million in municipal  funding for one
of the Company's manufacturing facilities in Michigan.

ITEM 3.      LEGAL PROCEEDINGS

The  previously  disclosed  litigation  concerning  Arteb S.A. and the complaint
filed by Sekurit  Saint-Gobain  U.S.A.,  Inc.  against  the  Company in the U.S.
District  Court for the Eastern  District of  Michigan,  have each been  settled
without  material  effect  on  the  Company's  financial  position,  results  of
operations and liquidity, individually and in the aggregate.

On October 5, 2000, the Company filed a complaint against Reitter & Schefenacker
USA  Limited  Partnership  and Reitter &  Schefenacker  GmbH Co., KG in the U.S.
District Court for the Western District of Michigan.  The complaint alleges that
the  defendants  have  infringed  three of the  Company's  patents  relating  to
interior  rearview  mirror  assemblies   incorporating  lighting  features.  The
complaint  seeks   unspecified   damages  and  an  injunction   against  further
infringement. Defendant Reitter & Schefenacker USA Limited Partnership has filed
an answer  denying  infringement  and  alleging  that the  patents  at issue are
invalid and/or  unenforceable.  Defendant  Reitter & Schefenacker GmbH & Co., KG
has not yet filed an answer but has stated  that it intends to assert that it is
not subject to the jurisdiction of the court.

The Company and its subsidiaries are involved in certain other legal actions and
claims  incidental  to its  business,  including  those  arising  out of alleged
defects, breach of contracts, product warranties, employment-related matters and
environmental matters. An estimated loss from a legal action or claim is accrued
when events  exist that make the loss  probable  and the loss can be  reasonably
estimated.  Although  the  Company  maintains  accruals  for  such  claims  when
warranted,  there can be no assurance  that such  accruals  will  continue to be
adequate.  The Company  believes that accruals  related to such  litigation  and
claims are  sufficient  and that these items will be resolved  without  material
effect on the Company's financial position, results of operations and liquidity,
individually and in the aggregate.

                                       15
<PAGE>

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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter of the fiscal year ended December 31, 2000.

ADDITIONAL ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT

Senior Corporate and Executive Officers of Registrant.

The Senior  Corporate and  Executive  Officers of the Company as of December 31,
2000 are as follows:
<TABLE>
                                                                                                                  Year First
                                                                                                                    Elected
                                                                                                                   Executive
Name                                     Age         Positions and Offices Held                                     Officer
------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>         <C>                                                             <C>
J. Dwane Baumgardner, Ph.D.               60         Director, Chairman, CEO, President                              1978
John F. Donnelly Jr.                      48         COO of Europe                                                   1986
Maryam Komejan                            50         Senior Vice President, Administration and
                                                     Corporate Secretary                                             1993
Niall R. Lynam, Ph.D.                     47         Senior Vice President, CTO                                      1992
Scott E. Reed                             43         Group President-Electronic Systems, CFO
                                                     and Chief Accounting Officer                                    1998
Russell B. Scaffede                       51         Group President-Exterior Systems                                1995
Donn J. Viola                             55         Corporate COO                                                   1996
</TABLE>

John F.  Donnelly Jr. is a descendant  of Bernard P.  Donnelly Sr. the Company's
founder,  and is the brother of Joan E. Donnelly,  a director of the Company. B.
Patrick Donnelly,  III, Joan E. Donnelly,  Thomas E. Leonard,  Gerald T. McNeive
Jr. and Rudolph B. Pruden, all Directors of the Company,  are descendants of, or
are married to  descendants  of Bernard P.  Donnelly.  There are no other family
relationships between or among the above-named executive officers.  There are no
arrangements or understandings  between any of the above-named officers pursuant
to which any of them was named an officer.

Dwane  Baumgardner has been Chief  Executive  Officer and a director since 1982,
Chairman of the Board since 1986 and President  since 1994. John F. Donnelly Jr.
was elected  Chief  Operating  Officer of the Company's  European  operations in
September  1998.  Prior to that  time he was  Senior  Vice  President  from 1993
through 1998.  Maryam  Komejan has been Senior Vice President  since 1995,  Vice
President  since 1993,  Corporate  Secretary  since 1989 and resigned  effective
January 2,  2001.  Niall  Lynam was  elected  Senior  Vice  President  and Chief
Technical  Officer in 1996.  Prior to that time he was Vice  President from 1992
through 1996.  Scott Reed joined the Company as Senior Vice  President and Chief
Financial  Officer in September  1998 and in December  2000 he was elected Group
President-  Electronic  systems,  Chief Financial  Officer and Chief  Accounting
Officer.  Prior to joining the Company,  he served as Director of  International
Finance for Chrysler  Corporation  from 1995 to 1998.  Russ Scaffede was elected
Group  President-  Exterior  Systems in December 2000. Prior to that time he was
Senior Vice President  since April 1998 and Vice  President  since October 1995.
Donn Viola joined the Company as Chief Operating  Officer of the Company's North
America  operations  in August 1996 and was elected  Corporate  Chief  Operating
Officer in December 2000. Prior to joining the Company,  he was Senior Executive
Vice President, Chief Operating Officer and member of the Board of Directors for
Mack Trucks Incorporated from 1994 to 1996.

Officers are elected by the Board of Directors.

                                    PART II.

ITEM 5.      MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
             HOLDER MATTERS


The Company's  common stock is traded on the New York 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>
     Year ended December 31, 2000
     -------------------------------------------------------------
     Fiscal                                           Dividends
     Quarter             High             Low         Declared
     -------------------------------------------------------------
     <S>               <C>              <C>             <C>
     First             $14.19           $11.75          $.10
     Second             15.00            11.75           .10
     Third              15.90            12.25           .10
     Fourth             15.25            11.55           .10
     -------------------------------------------------------------

                                       16
<PAGE>
     Six months ended December 31, 1999
     Fiscal                                           Dividends
     Quarter             High             Low         Declared
     -------------------------------------------------------------
     First             $17.25           $14.00          $.10
     Second             15.13            13.00           .10
     -------------------------------------------------------------

     Fiscal year ended July 3, 1999
     -------------------------------------------------------------
     Fiscal                                           Dividends
     Quarter             High             Low         Declared
     -------------------------------------------------------------
     First             $18.88           $14.13          $.10
     Second             16.00            12.50           .10
     Third              15.25            12.13           .10
     Fourth             17.50            12.88           .10
     -------------------------------------------------------------
</TABLE>

As of February 28, 2001, the Company had approximately 764 holders of record of
shares of Class A Common Stock.




ITEM 6.      SELECTED FINANCIAL DATA (as restated)

<TABLE>
                                                                                       Fiscal Years
                                                                     --------------------------------------------------
In thousands, except per share data            2000        1999*        1999         1998         1997        1996
------------------------------------------- ------------ ----------- ------------ ------------ ----------- ------------
<S>                                           <C>         <C>          <C>          <C>         <C>          <C>
Net Sales                                     $ 857,479   $ 421,641    $ 904,969    $ 763,311   $ 671,297    $ 439,571
Income before taxes on income                    21,581      26,486        8,990       18,615      11,553       11,966
Net Income                                       11,123      15,296        4,989       11,577       7,429        8,295
Net income per common share - Basic                1.09        1.51         0.49         1.16        0.75         0.85
Net income per common share - Diluted
                                                   1.09        1.50         0.49         1.15        0.75         0.85
Dividends declared per common share                0.40        0.20         0.40         0.40        0.36         0.32
Total assets                                    423,996     401,822      373,414      365,915     350,231      269,204
Debt including current maturities               132,698     107,477       92,215      123,761     122,901      101,916
Preferred stock                                     531         531          531          531         531          531
Shareholders' equity (total)                    114,625     110,972       98,586       99,140      91,117       88,733
Restructuring and other charges (gain)          (3,796)          --        8,777        3,468       9,965        2,399

* For the transition  period from July 4, 1999, to December 31, 1999. Net income
includes  ($1,010,000)  for the  cumulative  effect  of a change  in  accounting
principle ($.10 at earnings per share).
</TABLE>

The selected  financial data for the Company for each of the five years has been
derived  from the combined  consolidated  financial  statements  of the Company,
which have been audited by the Company's independent auditors, BDO Seidman, LLP.
The data should be read in conjunction with the combined consolidated  financial
statements and related notes thereto,  "Management's  Discussion and Analysis of
Results of Operations and Financial  Condition"  and  "Financial  Statements and
Supplementary Data" presented in Items 7 and 8 of this Form 10-K/A.

                                       17
<PAGE>
ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
             FINANCIAL CONDITION

FORWARD-LOOKING STATEMENTS

This  report  contains  forward-looking  statements  within  the  meaning of the
Private  Securities   Litigation  Reform  Act  of  1995.  The  terms  "believe,"
"anticipate,"  "intend," "goal," "expect," and similar  expressions may identify
forward-looking  statements.  Investors are cautioned  that any  forward-looking
statements,  including  statements  regarding  the  intent,  belief  or  current
expectations  of the Company or its  management,  are not  guarantees  of future
performance  and involve risks and  uncertainties,  and that actual  results may
differ  materially  from  those in  forward-looking  statements  as a result  of
various factors including, but not limited to (i) general economic conditions in
the markets in which the Company  operates,  (ii)  fluctuation  in  worldwide or
regional  automobile  and light truck  production,  (iii)  changes in  practices
and/or policies of the Company's  significant  customers  including forced price
reduction,  (iv)  market  development  of  specific  products  of  the  Company,
including  electrochromic  mirrors,  (v) whether the  Company  restructures  its
European  operations,  (vi)  fluctuations in foreign  currencies and (vii) other
risks  and   uncertainties.   The  Company  does  not  intend  to  update  these
forward-looking statements.

In this  Item  7,  references  to the  results  of  operations  for all  periods
presented and to balances as of the dates presented  relate to restated  amounts
for certain investments in and advances to affiliates. See Notes 1 and 18 of the
Notes to the accompanying Combined Consolidated Financial Statements.

OVERVIEW

The Company is a technology-driven,  customer-focused,  growth-oriented,  global
supplier to the automotive and information display  industries.  The Company has
been  managed  primarily on a geographic  basis.  For 2000,  the Company had two
reportable  segments:  North American Operations ("NAO") and European Operations
("EO").  These  were  managed  separately  as  they  each  represented  regional
operational  components,  which offered the Company's product lines in different
geographical  markets.  During  2001,  the Company  will be  transitioning  to a
global,  product-based  management  structure.  Split  into two  main  operating
groups:  Electronic Systems and Exterior Systems. The Company believes that this
organizational  evolution  will help  position  itself to achieve even  stronger
performance with its products in the global marketplace.

Effective July 4, 1999, the Company changed the date of its fiscal year end from
the Saturday  nearest June 30 to December 31. The years ended December 31, 2000,
July 3, 1999, and June 27, 1998, consisted of 52, 53 and 52 weeks, respectively.
The six-month periods ended December 31, 1999, and January 2, 1999, consisted of
26 and 27 weeks, respectively.  The six-month period ended December 31, 1999, is
referred to as the transition  period. All year and quarter references relate to
the Company's fiscal years and fiscal quarters, unless otherwise stated.

During the transition  period,  the Company also changed the fiscal year ends of
its German and Spanish  subsidiaries  from May 31 to December  31. Prior to this
change,  these subsidiaries  reported their results of operations on a one-month
lag. The Company's  results of operations for the transition  period include the
results of these  subsidiaries  for the six months ended  November 30, 1999. The
results of  operations  for the period of December 1 to December 31,  1999,  for
these subsidiaries were charged to retained earnings in order to report only six
months of operating  results in the  transition  period.  Cash flow activity for
this same period is reflected as a single line item in the Combined Consolidated
Statement of Cash Flows.

Unaudited  financial  information for the comparable  twelve-month and six-month
periods ended December 31, 1999, and January 2, 1999, respectively, is presented
in Note 2 to the Combined  Consolidated  Financial  Statements  and includes any
normal, recurring adjustments which are, in the opinion of management, necessary
for a fair presentation.

The Company's net sales and net income are subject to  significant  fluctuations
attributable primarily to production schedules of the Company's major automotive
customers.  In addition, the Company has strong product content on light trucks,
including minivans and sport utility vehicles, as compared to automobiles. These
factors  cause  results  to  fluctuate  from  period to period and year to year.
Investments  in  new  product  lines,   acquisitions,   and  the  formation  and
disposition  of  subsidiaries,  joint  ventures  and  alliances  also affect the
comparability of results on a period-to-period basis.

Mergers, Joint Ventures and Sale of Investments

In February 2001, the Company acquired all of the outstanding equity of Donnelly
Electronics,  Inc. ("Donnelly  Electronics"),  not then owned by the Company for
$4.5  million,  paid equally in cash and through the  issuance of the  Company's
Class A Common  Stock.  As of December 31, 2000,  the Company owned 18.2% of the
common stock of Donnelly Electronics, held $9

                                       18
<PAGE>
million of 7% non-voting preferred stock in Donnelly  Electronics,  and had a 7%
promissory  note of $15.2  million.  Due to the  complete  funding  of  Donnelly
Electronics by Donnelly  Corporation,  100% of the operating  losses incurred by
Donnelly  Electronics have been recognized under the equity method of accounting
prior to consolidation. The entity, formed in the first quarter of 1997, designs
and manufactures  circuit board assemblies for a variety of electronic  products
and  sub-assemblies.  It produces  many of the  electronic  components  that the
Company uses for products such as electrochromic rearview mirrors and electronic
compass systems,  and also pursues  business with other automotive  suppliers as
well as other non-automotive customers.

In October,  2000,  the Company  divested its interest in KAM Truck  Components,
Inc. ("KAM").  The shares sold resulted in a pre-tax gain of approximately  $0.4
million, or $0.02 per share, after-tax.

In October  2000,  the  Company  acquired  its  partner's  50%  interest  in its
Brazilian joint venture for $1.6 million and began  consolidating  the financial
statements  of  its  now  wholly-owned  subsidiary,  Donnelly  do  Brazil,  LTDA
("Donnelly  do Brazil").  The 50-50 joint  venture was formed in 1998 to produce
interior and exterior  mirrors for the South  American  automotive  industry and
began producing  replacement  parts for  distribution  within the South American
market in 1999.  Donnelly do Brazil is in the process of launching  new programs
for the Brazilian market. Equity in the results of the Company's Brazilian joint
venture  are no longer  included in equity in  earnings  (losses) of  affiliated
companies  after October 2000 due to the Company's  acquisition of the remaining
interest  in  this  venture  and  subsequent   consolidation  of  the  financial
statements of this subsidiary.

In 2000, the Company purchased the remaining  minority interest in Donnelly Hohe
Espana, S.A., for approximately $1.9 million.

In 1999,  the  Company's  partner in its  Shunde  Donnelly  Zhen Hua  Automotive
Systems Co. Ltd. ("Shunde Donnelly Zhen Hua") joint venture,  agreed to sell its
portion of the joint venture to Ganxiang Automobile Mirror Company ("Ganxiang"),
the largest  automotive  mirror  supplier  in China.  Shunde  Donnelly  Zhen Hua
manufactures  interior  and exterior  mirror  systems for  automakers  in China.
Subsequently,  in the fourth  quarter of calendar  1999,  the Company  formed an
additional joint venture with Ganxiang;  Shanghai Donnelly  Ganxiang  Automotive
Systems Co. Ltd. ("Shanghai  Donnelly  Ganxiang") for the manufacture,  sale and
distribution of outside mirrors primarily for the Chinese automotive market. The
Company's investment in Shanghai Donnelly Ganxiang consisted of technology and a
transfer to Ganxiang  of a 5%  interest  of its Shunde  Donnelly  Zhen Hua joint
venture. As a result of these transactions,  the Company holds a 25% interest in
both of these joint ventures.

In September  1999, the Company sold its 50% interest in Lear Donnelly  Overhead
Systems, LLC ("Lear Donnelly") to Lear Corporation ("Lear"),  its partner in the
joint venture, resulting in a pre-tax gain of $14.1 million, or $0.82 per share,
after-tax,  which was  recognized  in the third  quarter of  calendar  1999.  In
December  1999,  the Company  completed the final  negotiation of certain issues
related to the sale,  resulting in an additional  pre-tax gain to the Company of
$4.4 million, or $0.29 per share, after-tax,  which was recognized in the fourth
quarter of calendar 1999. The Company's equity in the financial  results of Lear
Donnelly  have not been  included in the Company's  financial  statements  after
September 1999. For a more detailed  discussion  regarding the Company's sale of
its investment in Lear Donnelly, (see Note 3).

Lear Donnelly operated by selling its products to Lear and to the Company, which
in turn sold them to their final customers.  The Company reported sales of $67.5
million for calendar  1999 and $11.5 million for 2000  attributable  to interior
lighting and trim products manufactured for Lear Donnelly or Lear, respectively.
Because  the  joint  venture  operated  at  approximately  break-even  since its
formation, the sale has not had and is not expected to have a material impact on
the Company's results of operations.  Because reported net sales were reduced in
2000,  gross profit and operating  margins as a percent of sales were  favorably
impacted  as  compared to  calendar  1999.  As  reported  net sales will only be
slightly  reduced in 2001 and beyond,  gross profit and  operating  margins as a
percent of sales are not expected to be materially impacted in future periods.

In April 1999,  the Company  formed  Schott-Donnelly  LLC Smart Glass  Solutions
("Schott   Donnelly"),   a  50-50  joint   venture  with  Schott  North  America
Manufacturing,  Inc. ("Schott"), a wholly owned subsidiary of Schott Glas, which
is based in Germany and is one of the world's  leading  producers  of  specialty
glass products. The joint venture is seeking to develop electrochromic glass for
automotive  and  architectural  applications.  The Company  contributed  certain
assets and  liabilities  upon the formation of the joint venture and received $2
million in cash,  which was recorded as a pre-tax gain.  In accordance  with the
LLC operating agreement, Schott will provide contributions for operations and be
allocated 100% of the net operating losses up to $9.5 million.

In 1999, the Company began consolidating the financial  statements of Varitronix
EC (Malaysia) Sdn. Bhd.  ("Varitronix  EC").  Varitronix EC is based in Malaysia
and  is the  Company's  50-50,  controlled  joint  venture  with  the  Malaysian
subsidiary of Varitronix International Ltd. ("Varitronix"). Varitronix, based in
Hong Kong,  is a global  leader in the market for liquid  crystal

                                       19
<PAGE>
displays  and  electronic  systems.  Varitronix  EC  provides  support  for  the
Company's worldwide electrochromic mirror production.

In the  second  and third  quarters  of 1999,  the  Company  sold its  remaining
interest in VISION Group plc ("VISION Group"). The Company received $8.6 million
in  proceeds  and  recognized  a combined  pre-tax  gain of  approximately  $5.5
million,  or $0.35 per  share,  after-tax.  In the second  quarter of 1997,  the
Company sold a portion of its investment in VISION Group in  conjunction  with a
public  offering of VISION Group  shares,  resulting  in a $0.9 million  pre-tax
gain.  The Company's  equity in the  financial  results of VISION Group have not
been included in the Company's financial statements after November 1, 1998.

In December  1998,  the Company  merged its wholly  owned  subsidiary,  Donnelly
Optics Corporation  ("Optics"),  into a wholly owned subsidiary of Applied Image
Group, Inc. ("AIG"), a New York Corporation. In the merger, the Company received
a 13%  interest  in AIG and a $5 million  convertible  note.  AIG  develops  and
manufactures  opto-imaging  products for the lighting,  automotive,  optical and
photonics industries. The Company accounts for its investment in AIG on the cost
method, and therefore, the financial results of Optics have not been included in
the Company's financial statements after December 1, 1998.

In 1998, the Company sold its 50% interest in Applied Films Corporation  ("AFC")
during an initial  public  offering.  The Company  received  $7.9 million in net
proceeds,  after-taxes  and related out of pocket fees, and recognized a pre-tax
gain of approximately $4.6 million, or $0.22 per share, after-tax. The Company's
equity in the  financial  results of AFC have not been included in the Company's
financial statements after November 1997.

Restructuring

On July 9, 2001, the Company announced a European restructuring initiative ("the
2001 plan") to further enhance the efficiency and  profitability of its European
operations through a combination of margin improvements and overhead reductions.
Objectives of the 2001 plan will be achieved  through  outsourcing of "non-core"
operations  including  work  currently  performed in the Company's Tool Shop and
Zinc Diecasting  operations.  Personnel  cutbacks will also be made in the Paint
Shop and in Manufacturing  Overhead.  The total cost of the plan is estimated at
$2.1  million  pre-tax,  or $1.4 million at net income,  related to  termination
benefits for  approximately 125 production,  engineering and support  personnel.
Costs will be recognized as specific actions are defined and approved  beginning
in the third quarter of 2001.  The plan is  anticipated to be completed in 2002.
While the Company believes that further restructuring actions may be appropriate
in Europe and  continues to evaluate  these  operations  for  improvements,  the
assessment of possible actions has not yet been completed.

The Company has  substantially  completed  two  earlier  restructuring  plans to
improve the operating  efficiency  and  profitability  of its European  exterior
mirror business.  In February 1999, the Company  announced a restructuring  plan
("the  1999  plan")  based  on  a  strategy  to   consolidate   and   streamline
manufacturing  operations  in Germany.  An $8.8  million  pre-tax  restructuring
charge, or $4.7 million at net income, was recorded for the 1999 plan, including
$1.4  million  for  impairment  of  assets  and  $7.4  million  for  anticipated
incremental cash expenditures  related to the severance and voluntary retirement
programs  for  approximately  200  production,  sales,  engineering  and support
personnel.

In May 1997, the Company  announced a plan ("the 1997 plan") for the elimination
of redundant  operations and  outsourcing of inefficient  operations  throughout
Europe, which resulted in a $10.0 million pre-tax  restructuring charge, or $5.3
million  at net  income.  A  reduction  of  $1.1  million  was  recorded  to the
restructuring  reserve  in  1998  associated  with  changes  to the  1997  plan.
Remaining actions of the 1997 plan were included in the 1999 plan.

As  required by  generally  accepted  accounting  principles  for  restructuring
charges,  the Company  reduced its total  restructuring  reserve by $3.8 million
pre-tax,  or $2.4  million at net  income,  in the fourth  quarter of 2000.  The
reduction was  attributable to (1) higher than  anticipated  voluntary  employee
attrition and (2) changing circumstances within the market and operations, which
made the outcome of some aspects of the plans uncertain.


RESULTS OF OPERATIONS

Comparison of 2000 to calendar 1999

North American Operations

NAO net sales increased  approximately  4.2% for the year and decreased 2.4% for
the fourth  quarter of 2000,  compared  to the same  periods of  calendar  1999,
respectively.  The increase for the year was primarily due to programs  launched
in 1999, running at full production volumes in 2000, and stronger North American
car and light truck build.  The fourth quarter of 2000

                                       20
<PAGE>
was unfavorably  impacted by volume reductions at key customers.  North American
car and light  truck  build  increased  approximately  1.2% in 2000  compared to
calendar 1999 and decreased 4.8% for the comparable fourth quarter period.

NAO gross profit  margins were down slightly for the year and fourth  quarter of
2000,  compared to the same periods in the previous  calendar  year.  The slight
decrease  in gross  profit  margin  is due  primarily  to  higher  launch  costs
associated with new electrochromic and electronic mirror products and the impact
of customer scheduling,  including plant shutdowns and reduced production levels
in the fourth  quarter of 2000.  The ability of the  Company to  maintain  gross
profit margins is dependent upon the  successful  launch of new booked  business
and the results of  continued  customer  pricing  pressures.  In  addition,  the
Company may experience changes in gross profit margins based on the sales growth
or change in mix between lower-margin and that of higher-margin products.

NAO operating  margins were below previous year levels for both the twelve-month
period and fourth quarter of 2000.  Higher sales were partially offset by higher
operating  expenses  during  the  period,   including   increased  research  and
development expenses for the support of new programs launching during the second
half of 2000. Fourth quarter  performance was adversely affected by launch costs
and lower  sales  volumes  due to  reduced  customer  demand  to adjust  vehicle
inventories.  Higher selling, general and administrative expenses were caused by
the previously  reported  increased  investments  in information  technology and
depreciation   for  recently   implemented   manufacturing,   distribution   and
administration  software.  The  Company  anticipates  that  its  acquisition  of
Donnelly Electronics will result in higher research and development expense both
in absolute terms and as a percent of sales.  However, the Company anticipates a
favorable  impact to both its  operating  and  gross  profit  margins  from this
acquisition.

European Operations

EO net sales decreased  approximately  3.2% for the year and 8.9% for the fourth
quarter of 2000,  compared to the same periods in calendar  1999,  respectively.
The strengthening of the dollar compared to the euro  significantly  reduced the
reported  sales  level  for  Europe.  Stated in local  currencies,  EO net sales
increased  approximately 11.6% and 5.9% for the year and fourth quarter of 2000,
compared to the same periods in calendar 1999, respectively. The increase in net
sales is  primarily  due to products  launched in calendar  1999 running at full
production  volumes in 2000.  For the fourth quarter of 2000, the sales increase
is partially offset by the elimination of the one-month lag in consolidating the
Company's  subsidiaries  in Germany  and Spain.  Due to the  elimination  of the
one-month  lag,  the results of these  subsidiaries  are  included for the three
months ended  December 31, 2000, as compared to the three months ended  November
30, 1999, for the fourth quarters of 2000 and calendar 1999,  respectively.  The
month of  December  is  generally  lower in sales due to  holiday  shutdowns  in
Europe.

EO gross profit  margins  decreased  during both the year and fourth  quarter of
2000, compared to the same periods of calendar 1999, primarily due to above plan
product launch costs and warranty  expense.  This decrease was largely offset by
reductions  in  general  and  administrative  expense  associated  with both the
previously mentioned restructuring actions and ongoing operational improvements.
Additionally, there was a reduction in the Company's overall pension expense due
to a benefit associated with an overfunded pension plan in Europe.

As  discussed  above,  in the fourth  quarter of 2000,  a $3.8  million  pre-tax
adjustment was made to the  restructuring  reserve,  resulting in a $2.4 million
increase in net income (see Note 5). In the first  quarter of calendar  1999, an
$8.8 million  pre-tax  restructuring  charge,  or $4.7 million  reduction to net
income, was recorded for the 1999 plan.

EO operating income,  as adjusted for the  restructuring  charge and adjustment,
was improved for the year compared to calendar  1999.  Stronger  sales and lower
selling,  general,  and  administrative  expenses  contributed  to the  improved
operating margins in 2000.

Company

Net sales were $857.5  million in 2000  compared  to $897.9  million in calendar
1999, a decrease of approximately 4.5%. Net sales for the fourth quarter of 2000
and  calendar  1999 were $199.9  million  and $212.7  million,  respectively,  a
decrease  of  approximately  6%.  Changes in  foreign  currency  exchange  rates
significantly  contributed  to the decrease in net sales for the year and fourth
quarter.  Adjusted for foreign exchange rate  fluctuations and the impact of the
reduction in net sales  associated  with Lear Donnelly,  the Company's net sales
increased  approximately  7% and 2% for the year and quarter ended  December 31,
2000,  as compared  to the prior  year.  Suppliers  in the  automotive  industry
continue to experience  significant  price pressure from their customers.  While
this  pressure  continues to squeeze the  Company's  gross profit and  operating
margins,  it did not have a material impact on net sales for the year and fourth
quarter. The impact of price pressures on gross profit margins is dependent upon
the  ability  of the  Company  to offset  these  decreases  by  improvements  in
purchased  material  prices,  product  design  changes  and  overall  operations
productivity.

                                       21
<PAGE>
Gross profit  margin for 2000 was 16.0%  compared to 15.3% in calendar  1999 and
15.8% in the fourth  quarter  of 2000  compared  to 16.5% in the same  period of
calendar 1999. The improved year-to-date gross profit margin is primarily due to
the  sale of Lear  Donnelly.  The  decline  in the  fourth  quarter  percentage,
however,  is  attributable  to the negative  impact of customer  scheduling  and
increased costs associated with new product launches and product mix.

Selling,  general  and  administrative  expenses  were $80.3  million  and $19.5
million, or 9.3% and 9.7% of net sales, for the year and fourth quarter of 2000,
compared to $80.4 million and $18.6 million,  or 9.0% and 8.7% of net sales, for
the comparable periods in calendar 1999,  respectively.  These expenses remained
relatively  flat with  previous  year levels due to  management's  focus on cost
management in both North America and Europe, despite the continued investment in
information technology. Lower exchange rates also contributed to the decrease in
the expense  for the year.  The  increase  in expense for the fourth  quarter is
attributable to the previously  announced  increased  investments in information
technology and depreciation for recently  introduced software for manufacturing,
distribution and  administration,  as well as marketing expenses associated with
new product initiatives related to electronics.

Research and  development  expenses were $35.2 million,  or 4.1% of net sales in
2000,  compared to $31.6 million,  or 3.5% of net sales, in the same period last
year.  The  increase in current  year  expenses is  primarily  due to  increased
expenditures  for  value-added   technologies   including   electrochromic   and
electronic applications,  as well as launch related engineering support. For the
fourth  quarter,  research and  development  expenses were $8.3 million and $8.6
million for 2000 and  calendar  1999,  respectively.  The decrease in the fourth
quarter is  attributable  to continuing  cost  containment  partially  offset by
launch engineering support.

Operating income was $25.3 million in 2000 compared to $16.2 million in calendar
1999,  or 3.0% and 1.8% of net sales,  respectively.  Adjusted for the impact of
the restructuring  charges,  operating income  deteriorated by $3.4 million,  or
from 2.8% of net sales  for  calendar  1999 to 2.5% of net sales for 2000 due to
increased  costs  associated with new product  launches and unfavorable  foreign
exchange rate fluctuations. This was partially offset by a positive contribution
to operating income by the Company's  Information Products  subsidiary.  For the
fourth quarter of 2000, the Company reported operating income of $7.6 million or
3.8% of net  sales  ($3.8  million  reflects  the  impact  of the  restructuring
adjustment  or 2.0% of net  sales) as  compared  to $7.8  million or 3.7% of net
sales for the  comparable  quarter of calendar  1999.  The decline in  operating
income is primarily the result of unfavorable  customer scheduling and increased
product launch costs.

Interest  expense was $7.7 million and $6.6  million in 2000 and calendar  1999,
respectively,  and $1.7 million and $1.4 million for the fourth  quarter of 2000
and calendar 1999,  respectively.  Interest expense  increased  primarily due to
higher levels of capitalized  interest in the prior year,  increased debt levels
and higher interest rates during 2000.

In September  1999, the Company sold its 50% interest in Lear Donnelly  Overhead
Systems, LLC ("Lear Donnelly") to Lear Corporation ("Lear"),  its partner in the
joint venture, resulting in a pre-tax gain of $14.1 million, or $0.82 per share,
after-tax,  which was  recognized  in the third  quarter of  calendar  1999.  In
December  1999,  the Company  completed the final  negotiation of certain issues
related to the sale, resulting in an additional pre-tax gain of $4.4 million, or
$0.29 per  share,  after-tax,  which was  recognized  in the  fourth  quarter of
calendar 1999, (see Note 3).

Interest income remained consistent at $0.4 million in 2000 and calendar 1999.

Royalty income was $2.5 million and $0.8 million for the year and fourth quarter
of 2000, compared to $0.8 million and $0.1 million for the comparable periods of
the  prior  year.  Royalty  income  was  higher  in  2000  due to new  licensing
agreements on programs that began during 2000.

Other (income) expense,  net, was ($0.6) million and ($0.4) million for the year
and  fourth  quarter  of 2000,  compared  to ($2.0)  million  and $0.2  million,
respectively, for the comparable periods of the prior year. The decrease for the
year is primarily due to the inclusion of a $2 million  pre-tax gain in calendar
1999,  which was recorded on the formation of the Schott  Donnelly joint venture
(see Note 3).

The  Company's  effective tax rate was  approximately  33.1% in 2000 compared to
31.7%  in  calendar  1999.  The  effective  tax  rate in 2000  would  have  been
substantially lower due to income tax benefits from North American export sales;
however, as indicated below, significant German deferred tax assets were written
down to reflect tax rate  decreases  enacted in the fourth  quarter of 2000. The
Company's  effective  tax rate also varies based on the level and mix in pre-tax
earnings (losses) in countries with varying effective tax rates, availability of
tax benefits and unusual pre-tax gains or losses.

                                       22
<PAGE>
The Company has recorded  $17.2 million and $18.9 million of deferred tax assets
primarily related to foreign  non-expiring net operating loss  carry-forwards at
December 31, 2000, and December 31, 1999,  respectively,  and are  substantially
offset by related  deferred tax liabilities.  A significant  portion of the loss
carry-forwards  resulted  from the  European  restructuring  charges.  These tax
assets  are  expected  to  be  realized  based  on  the  improvements  from  the
restructuring  initiative,  and continuous  improvement  in overall  operational
earnings from the  implementation of the Company's  production system throughout
Europe.  Due to a reduction in the German tax rate during the fourth  quarter of
2000,  the  related  deferred  tax assets and net  income  were  reduced by $3.4
million.

Minority  interest in net (income) loss of  subsidiaries  was ($0.1)  million in
2000,  compared to $1.4 million in calendar 1999. The previous year was impacted
by the  restructuring  charge taken at the  Company's  German  subsidiary in the
first quarter of calendar 1999 and the consolidation of the financial statements
of Varitronix EC starting in the second quarter of calendar 1999.

Equity in losses of affiliated  companies  totaled $3.2 million in 2000 compared
to $2.9 million for the  comparable  period of the prior year.  This increase is
due primarily to losses incurred at Donnelly Electronics, which is offset by the
Company's  Brazilian  joint  venture  which,  while still  operating  at a loss,
improved  compared  to the same  period of the prior  year as well as  continued
positive results from the Company's joint ventures in China. Equity in losses of
the Company's Lear Donnelly joint venture,  which impacted the first nine months
of calendar 1999, are no longer included in the Company's  financial  statements
after  September  1999 due to the sale of the  Company's  interest in this joint
venture.  Equity in the results of the Company's  Brazilian joint venture are no
longer  included in equity in earnings  (losses) of affiliated  companies  after
October 2000 due to the Company's  acquisition of the remaining interest in this
venture  and  subsequent  consolidation  of the  financial  statements  of  this
subsidiary.

Effective July 4, 1999, the Company adopted  Statement of Position ("SOP") 98-5,
"Reporting  on Costs of Start-up  Activities".  SOP 98-5  requires  companies to
expense  costs of start-up  activities  and  organization  costs as incurred.  A
one-time  charge of $1.0 million,  net of tax, was taken against net income as a
cumulative  effect of a change in  accounting  principle  for the  write-off  of
previously capitalized start-up and organization costs.

The Company is committed to improving  shareholder  value with a strategic  plan
focused on the following  key areas:  1) developing  core  automotive  products,
primarily by  increasing  dollar  content per vehicle  through the  expansion of
market  share  of  existing   products;   2)  improving  the  overall  operating
performance of the Company's European Operations; and 3) extending the Company's
capabilities in value-added electronics technologies.

The Company  believes that these  strategic  initiatives  have  established  the
foundation for the Company's  ability to improve  shareholder  value.  Excluding
unusual  and  non-recurring  items,  the  net  income  from  operations  for the
twelve-month period ending December 31, 2000, was $11.9 million.

Comparison of the six-month periods ended December 31, 1999, and January 2, 1999

North American Operations

NAO net sales increased approximately 3% for the six-month period ended December
31, 1999,  compared to the same period of the prior year. North American car and
light truck build  increased  approximately  6% for the  six-month  period.  The
increase  in NAO net  sales was  primarily  due to  higher  industry  production
partially offset by lower sales of modular window and door handle products and a
26 week  period  for the  transition  period  as  compared  to 27  weeks  in the
comparable 1998 period.

NAO gross  profit  margins  were up slightly  for the  six-month  period  ending
December  31,  1999,  compared  to the same  period of the prior  year.  Margins
improved  primarily due to a more  favorable  product mix.  Gross profit margins
were also  positively  influenced  by  after-market  sales for complete  outside
mirrors.

The Company's  North American  operating  margins were slightly  improved in the
transition period compared to the same period of the prior year.  Improved gross
profit margins and lower selling,  general and administrative expenses primarily
accounted for the  improvement.  During 1999,  NAO  implemented a cost reduction
program to focus administrative functional groups on best-in-class  performance,
which resulted in reduced spending levels at NAO for these expenses.

European Operations

EO net sales decreased  approximately 3% for the six-month period ended December
31,  1999,  compared to the same period of the prior year.  The  decrease in net
sales is primarily  due to a stronger  dollar  relative to European  currencies,
lower  complete  outside  mirror  product  sales in  Germany,  and  lower  prism
component sales in Ireland during the period. If exchange rates in the six-month
period had been  consistent with the same period in the prior year, EO net sales
would have been slightly higher

                                       23
<PAGE>
for the six-month period ended December 31, 1999, compared to the same period in
the prior year. The lower sales in complete outside mirrors and prism components
are  primarily due to  management's  strategy to exit  unprofitable  products in
these  markets.  European  car  build,  while  relatively  flat for the  period,
remained strong.

EO gross profit  margins were slightly  improved for the six-month  period ended
December 31, 1999, compared to the same period of the prior year. EO experienced
improvements in gross profit margins in operating facilities in both Ireland and
Germany.  Overall sales price pressures in Europe were offset by improvements in
purchased  material  costs,  impact of  restructuring  initiatives  and  general
operational productivity improvements.

EO operating  income was improved for the six-month  period ending  December 31,
1999,  compared to the same period in the previous  year.  Improved gross profit
margins,  lower selling,  general,  administrative  and research and development
costs offset the impact of lower sales volumes for the six-month period.

Company

Net sales were $421.6 million for the six-month  period ended December 31, 1999,
compared to $428.7  million for the same period in the prior year, a decrease of
approximately  1.7%.  The decrease in net sales is mainly due to the sale of the
Company's  interest in Lear  Donnelly,  a stronger  dollar  relative to European
currencies, lower sales in certain automotive products and markets and a 26 week
period versus a 27 week  comparable  period.  Also,  suppliers in the automotive
industry continue to experience significant price demands from their customers.

Gross  profit  margin for the six months  ended  December  31,  1999,  was 15.3%
compared  to 14.4% in the same  period  last year.  The  improved  gross  profit
margins are primarily due to the sale of Lear Donnelly and stronger gross profit
margins in Europe.

Selling,  general and administrative expenses were $37.6 million, or 8.9% of net
sales,  for the  six-month  period ended  December  31, 1999,  compared to $40.8
million,  or 9.5% of net sales,  in the same period of the prior year.  The 7.8%
decrease is primarily a result of the Company's  reduction of these  expenses in
both North America and Europe by focusing on  best-in-class  performance and the
impact of the Optics merger effective December 1, 1998.

Research and development  expenses were $16.5 million, or 3.9% of net sales, for
the six-month period ended December 31, 1999, compared to $19.1 million, or 4.4%
of net sales,  in the same period of the prior year.  These  expenses were lower
due to the formation of Schott Donnelly and the Optics merger.

Operating  income was $10.5 million for the six-month  period ended December 31,
1999, compared to $2.0 million for the same period of the prior year.  Operating
income  for the  respective  quarters  was $7.8  million,  or 3.7% of net sales,
compared to $3.2 million, or 1.3% of net sales. Operating income as a percent of
net sales was stronger  due to stronger  gross profit  margins,  lower  selling,
general and administrative and research and development expenses.

Interest  expense was $2.9 million for the six-month  period ended  December 31,
1999,  compared to $4.2 million for the same period of the prior year.  Interest
expense was lower  primarily  due to lower  average debt and  capitalization  of
certain interest costs during the periods presented.

In September  1999,  the Company sold its 50% interest in Lear Donnelly to Lear,
its partner in the joint venture,  resulting in a pre-tax gain of $14.1 million,
or $0.82 per  share,  after-tax  which was  recognized  in the third  quarter of
calendar 1999. In December 1999, the Company  completed the final negotiation of
certain issues related to the sale, which resulted in an additional pre-tax gain
to the  Company  of $4.4  million,  or $0.29  per  share,  after-tax,  which was
recognized in the fourth quarter of calendar 1999, (see Note 3).

Income tax expense for the six-month  period ended  December 31, 1999,  was $9.4
million,  on a pre-tax  income of $26.5  million,  for an effective  tax rate of
35.7%. The Company's  effective tax rate will vary based on the level and mix in
pre-tax earnings in countries with varying effective tax rates,  availability of
tax benefits and unusual pre-tax gains or losses.

The Company has recorded  $17.2 million and $18.9 million of deferred tax assets
primarily  related to foreign  non-expiring net operating loss  carry-forward at
December 31, 2000, and December 31, 1999,  respectively,  and are  substantially
offset by related  deferred tax liabilities.  A significant  portion of the loss
carry-forwards resulted from the European restructuring charges.

Minority  interest in net (income) loss of subsidiaries was $0.4 million for the
six-month  period ended  December 31, 1999,  compared to ($0.2)  million for the
same period of the prior year.  The change is primarily due to operating  losses
at Varitronix EC.

                                       24
<PAGE>
Equity  in losses of  affiliated  companies  improved  to $1.1  million  for the
six-month  period ended December 31, 1999,  from $1.7 million in the same period
in the prior year.  This is primarily  related to  increased  losses at Donnelly
Electronics,  partially  offset by the sale of the Company's  interest in VISION
Group, which was incurring operating losses, and operational improvements at the
Company's joint ventures in China and Lear Donnelly.

Effective July 4, 1999, the Company adopted  Statement of Position ("SOP") 98-5,
"Reporting  on Costs of Start-up  Activities".  SOP 98-5  requires  companies to
expense  costs of start-up  activities  and  organization  costs as incurred.  A
one-time  charge of $1.0 million,  net of tax, was taken against net income as a
cumulative  effect of a change in  accounting  principle  for the  write-off  of
previously capitalized start-up and organization costs.


Comparison of 1999 to 1998

North American Operations

NAO net  sales  increased  approximately  14.7% in 1999  compared  to 1998.  The
increase  was  primarily  due to  programs  launched  in  1998  running  at full
production  volumes in 1999,  new product  introductions  in the modular  window
product line,  stronger  North  American car and light truck build and a 53 week
versus  52 week  year.  North  American  car and  light  truck  build  increased
approximately 6% in 1999 compared to 1998.

NAO gross  profit  was  higher in 1999  compared  to 1998  primarily  due to the
stronger sales levels.  However,  gross profit margins decreased as a percent of
net sales due to significant customer pricing pressures and a more rapid rate of
revenue growth in modular window net sales,  relative to the net sales growth of
other  products,  such as  mirrors,  which have  higher  gross  profit  margins.
Improvements  in purchased  material costs partially  offset  pressures on gross
profit margins. A favorable  arbitration award also offset costs associated with
visor programs and also improved margins in 1998.

NAO operating  margins were flat in 1999 compared to 1998.  Higher sales volumes
and lower selling, general and administrative and research and development costs
as a percent  to net sales were  offset by an  unfavorable  mix of lower  margin
products and significant customer pricing pressures.

European Operations

EO net sales  increased  approximately  7.3% in 1999 compared to 1998.  This was
primarily due to the launch of new electrochromic mirrors and product content on
strong  selling  vehicles.  European car build,  while  relatively  flat in 1999
compared to 1998, remained strong. Exchange rates did not have a material effect
on the comparability of net sales between 1999 and 1998.

EO gross profit margin increased slightly in 1999 compared to 1998. Gross profit
performance at the operations in Spain and France continued to remain strong. EO
gross profit margins  improved despite  inventory  write-offs and other expenses
associated with the 1999 European restructuring plan and an increase to warranty
reserves.  Improvements  in  purchased  material  costs and a one-time  supplier
rebate in the third quarter of 1999 partially offset these expenses.

In the third quarter of 1999, an $8.8 million pre-tax  restructuring  charge, or
$4.7 million at net income,  was recorded  for the 1999  European  restructuring
plan.  The  restructuring  charge  included  $1.4 million for the  impairment of
assets  and  a  reserve  of  $7.4  million  for  anticipated   incremental  cash
expenditures   for  the   severance  and   voluntary   incentive   programs  for
approximately  200  production,   production  support,   sales  and  engineering
employees.

EO operating income was lower in 1999 compared to 1998 primarily due to the 1999
restructuring  charge.  EO operating  income was also impacted by  approximately
$0.9 million of costs associated with the year 2000 remediation process.

Company

Net sales were $905.0  million in 1999  compared to $763.3  million in 1998,  an
increase of approximately  19%. While customer price demands  continued to place
significant pressure on gross profits and operating margins, they did not have a
material impact on net sales for 1999 or 1998.

                                       25
<PAGE>
Gross profit margin was 14.8% in 1999 compared to 17.1% in 1998. The lower gross
profit margin is primarily  due to Lear  Donnelly  (which is accounted for under
the equity  method),  relatively  greater  revenue growth of products with lower
profit  margins at NAO,  significant  global  pricing  pressures  and  inventory
write-offs and other expenses  associated  with the 1999 European  restructuring
plan.

Selling,  general and administrative  expenses were flat at 9.2% of net sales in
1999 and 1998,  primarily as a result of the Company's ability to leverage these
expenses on higher sales volumes. In addition, these expenses were lower for the
year due to the Optics merger effective December 1, 1998.

Research and development  expenses were $34.2 million in 1999, compared to $36.4
million in 1998.  These  expenses were lower for the year  primarily due to Lear
Donnelly,  the  formation of Schott  Donnelly and Donnelly  Electronics  and the
Optics merger.

In the fourth  quarter of 1998,  the Company  recognized a $3.5 million  pre-tax
charge  against  operating  income,  or  $2.3  million,  after-tax,  due  to the
cancellation  of a customer order at Optics  relating to market  dynamics in the
digital imaging sector of the computer industry.  The charge primarily consisted
of  a  write-off  of  tooling  and  other   current   assets  and  severance  of
approximately 25 manufacturing and administrative  personnel. The severance cash
payments were completed in the second quarter of 1999.

Operating  income was $7.6 million in 1999 compared to $19.8 million in 1998, or
0.8% and 2.6% of net sales,  respectively.  Operating margins were lower in 1999
primarily  due to the  restructuring  charge,  costs  associated  with  the 1999
European  restructuring  plan and higher  growth in sales at NAO of lower margin
products.  Operating  income in 1998  benefited  from the favorable  arbitration
settlement,  which offset costs on certain  visor  programs.  However,  1998 was
unfavorably  impacted  by the charge at  Optics.  Lear  Donnelly  did not have a
material impact on the Company's operating margins for the twelve-month period.

Interest   expense  was  $7.9  million  and  $8.3  million  in  1999  and  1998,
respectively.  Interest  expenses were lower primarily due to lower average debt
during 1999 compared to 1998.  Royalty  income was $0.8 million and $0.1 million
in 1999 and 1998, respectively.

Other  income,  net  was  $2.6  million  and  $1.9  million  in 1999  and  1998,
respectively.  In the fourth quarter of 1999, the Company formed Schott Donnelly
and  received  $2  million in cash at the time of the joint  venture  formation,
which was recorded as a pre-tax gain.

In the  second  and third  quarters  of 1999,  the  Company  sold its  remaining
interest in VISION  Group.  The Company  received  $8.6  million in proceeds and
recognized a combined pre-tax gain of approximately  $5.5 million,  or $0.35 per
share, after-tax.  The Company's equity in the financial results of VISION Group
is no longer included in the Company's  financial  statements  after November 1,
1998.

In the second  quarter of 1998,  the Company sold its 50% interest in AFC during
an initial public  offering.  The Company received $7.9 million in net proceeds,
after-taxes  and related out of pocket  fees,  and  recognized a pre-tax gain of
approximately $4.6 million, or $0.22 per share, after-tax.  The Company's equity
in the financial results of AFC is no longer included in the Company's financial
statements.

The Company's  effective tax rate was 16.2% in 1999,  compared to 27.1% in 1998.
The  lower  effective  tax rate is the  result  of tax  benefits  recognized  on
domestic export sales and domestic U.S. research tax credits.  While these items
were equal to 1998 levels,  the relative  percent to the Company's lower pre-tax
earnings was higher. In addition,  local trade tax benefits in Germany favorably
impacted the Company's  effective tax rate. These benefits were partially offset
by foreign  operating  losses at Varitronix  EC for which no net operating  loss
carryforward can be utilized due to tax treatment relating to start-up companies
in Malaysia.

Minority interest in net (income) loss of subsidiaries increased to $0.9 million
in 1999,  compared to ($0.2) million in 1998,  primarily due to operating losses
at Varitronix EC.

Equity in losses of  affiliated  companies  increased  to $3.4  million  in 1999
compared to $1.8  million in 1998,  primarily  related to the  operating  losses
incurred by Donnelly Electronics.

Net income was $5.0 million in 1999 compared to $11.6 million in 1998.

                                       26
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

The  Company's  current  ratio was 1.3 on December 31, 2000,  compared to 1.2 at
December  31,  1999.  Working  capital was $43.3  million at December  31, 2000,
compared to $25.0 million at December 31, 1999. The increase in working  capital
is due to  increased  accounts  receivable  and  inventories  from  new  product
launches, and reductions in payables and restructuring accruals.

At December 31, 2000,  and December 31, 1999,  $38.5 million and $38.9  million,
respectively,   had  been  sold   under  the   Company's   accounts   receivable
securitization  agreement.  Proceeds  received under this agreement were used to
reduce  revolving  lines of credit.  The sales are  reflected  as a reduction of
accounts  receivable  and an increase to  operating  cash flows.  The  agreement
expires in December 2001,  however,  it is renewable for one-year periods at the
option of the  Company and with the  consent of bank  participants.  The Company
expects to extend the current agreement or replace it on comparable terms.

Capital  expenditures  were $43.3 million,  $57.8 million and $46.2 million,  in
2000, 1999 and 1998, respectively. Capital expenditures for the six months ended
December 31, 1999, were $21.7 million.  Capital spending primarily supported new
business  orders;  the  implementation  of new  manufacturing,  distribution and
administrative  information  systems;  and  to  support  continuous  improvement
activities  of the  Company.  The  reduction in capital  expenditures  from 1999
levels is attributable to tighter management control. Capital spending next year
is expected to remain near current spending levels.

The Company's $160 million  multi-currency global revolving credit agreement had
borrowings  against it of $77.1  million and $42.5  million as of  December  31,
2000, and December 31, 1999,  respectively.  Total long-term borrowing increased
by $25.2 million at December 31, 2000, compared to December 31, 1999,  primarily
to support higher working capital and capital expenditure requirements.

The  Company's  primary  foreign  investments  are in Germany,  Ireland,  Spain,
France,   Mexico,  China,  Brazil  and  Malaysia.  The  Company  is  exposed  to
fluctuations in many currencies.  The Company  utilizes  interest rate swaps and
foreign  exchange   contracts,   from  time  to  time,  to  manage  exposure  to
fluctuations in interest and foreign  currency  exchange rates. The risk of loss
in the event of  nonperformance  by any party  under  these  agreements  and the
effect of these transactions on the results of operations are not material.  For
a more detailed  discussion of the Company's  foreign currency  transactions and
exposures and interest rate risk, see ITEM 7 (a) - "QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK," filed with this Form 10-K report.

The Company  believes that its long-term  liquidity and capital  resource  needs
will continue to be provided  principally  by funds from  operating  activities,
supplemented by borrowings  under existing credit  facilities.  The Company also
considers equity offerings to properly manage the Company's total capitalization
position.  The  Company  considers,  from  time to  time,  new  joint  ventures,
alliances,  divestitures and  acquisitions,  the  implementation  of which could
impact the liquidity and capital resource requirements of the Company.

Recently Issued Accounting Standards

Statement of Financial  Accounting  Standards ("SFAS") No. 133,  "Accounting for
Derivative  Instruments  and Hedging  Activities,"  establishes  accounting  and
reporting standards for derivative  instruments and for hedging  activities.  It
requires that an entity  recognize all  derivatives in the balance sheet at fair
value. It also requires that unrealized  gains and losses resulting from changes
in fair  value be  included  in income or  comprehensive  income,  depending  on
whether the instrument qualifies as a hedge transaction,  and if so, the type of
hedge  transaction.  The Company has examined and updated its current derivative
use policy  and  identified  hedge  arrangements,  along with their  anticipated
treatment  on an  ongoing  basis  under  the  provisions  of SFAS No.  133.  The
implementation  of this new  standard  as of  January  1, 2001 did not to have a
material impact on the Company's results of operations or financial position.

In June 2001, the Financial  Accounting  Standards  Board issued  Statements No.
141,  Business  Combinations  (SFAS  141),  and  No.  142,  Goodwill  and  Other
Intangible  Assets (SFAS 142).  SFAS 141 requires the use of the purchase method
of  accounting  and  prohibits  the use of the  pooling-of-interests  method  of
accounting for business  combinations  initiated  after June 30, 2001.  SFAS 141
also requires that the Company recognize  acquired  intangible assets apart from
goodwill if the acquired intangible assets meet certain criteria,  and that upon
adoption of SFAS 142, the Company  reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.

SFAS 142  requires,  among  other  things,  that  companies  no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS 142 requires that the Company  identify  reporting units for the
purpose of assessing  potential  future  impairments  of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested

                                       27
<PAGE>
for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required
to be applied in fiscal years  beginning after December 15, 2001 to all goodwill
and other intangible  assets  recognized at that date,  regardless of when those
assets were  initially  recognized.  SFAS 142 requires the Company to complete a
transitional goodwill impairment test within six months of the date of adoption.
The Company is also  required to reassess the useful  lives of other  intangible
assets within the first interim quarter after adoption of SFAS 142.

The  Company's  previous  business  combinations  were  accounted  for using the
purchase  method.  As of December 31, 2000, the net carrying  amount of goodwill
and other  intangible  assets is $7.5 million.  Amortization  expense during the
year  ended  December  31,  2000 was $0.7  million.  Currently,  the  Company is
assessing but has not yet  determined how adoption of SFAS 141 and SFAS 142 will
impact its financial position and results of operations.

Euro Conversion

Effective  January 1, 1999,  eleven of fifteen member  countries of the European
Union  established  permanent  rates of exchange  between the members'  national
currency and a new common currency, the "euro." In this first phase, the euro is
available for non-cash transactions in the monetary,  capital,  foreign exchange
and  interbank  markets.  National  currencies  will  continue to exist as legal
tender and may  continue to be used in  commercial  transactions  until the euro
currency is issued in January 2002. The participating members' national currency
is to be withdrawn by July 2002. The Company's  significant  European operations
are all located in member countries participating in this monetary union.

The Company created an internal, pan-European, cross-functional team, as well as
internal teams at each operation affected by the change, to address  operational
implementation  issues  and  investigate  strategic  opportunities  due  to  the
introduction  of the euro.  The Company has  established  action  plans that are
currently being implemented to address the euro's impact on information systems,
currency  exchange  risk,  taxation,  contracts,  competition  and pricing.  The
Company  anticipates  benefiting  from the  introduction  of the euro  through a
reduction of foreign currency exposure and administration  costs on transactions
within Europe and increased  efficiency in centralized European cash management.
The Company has commenced  conversion of its European  operations  from national
currency to the euro. The change in functional currency is proceeding as planned
and is expected to be completed in 2001.

The Company does not presently  expect that the introduction and use of the euro
will materially affect the Company's foreign exchange hedging  activities or the
Company's  use  of  derivative  instruments.   Any  costs  associated  with  the
introduction of the euro have been immaterial and are expensed as incurred.  The
Company does not believe that the  introduction of the euro will have a material
impact on its results of operations or financial position.

ITEM 7 (a)    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The  Company  is  exposed to changes  in  interest  rates and  foreign  currency
exchange rates  primarily in its cash, debt and foreign  currency  transactions.
The Company  holds  derivative  instruments,  including  interest rate swaps and
forward foreign currency contracts.  Derivative  instruments used by the Company
in its hedging  activities are viewed as risk management  tools and are not used
for trading or speculative  purposes.  Analytical  techniques are used to manage
and  monitor  foreign  exchange  and  interest  rate  risk  and  include  market
valuation.  The Company believes it is, to a lesser degree, subject to commodity
risk for price  changes  that relate to certain  manufacturing  operations  that
utilize raw  commodities.  The Company  manages its exposure to changes in those
prices primarily  through its procurement and sales practices.  This exposure is
not considered material to the Company.

A discussion  of the  Company's  accounting  policies for  derivative  financial
instruments  is  included  in  Note 1 to  the  Combined  Consolidated  Financial
Statements,  under  Item 8 of this  Form  10-K  report.  Additional  information
relating to financial  instruments and debt is included in Note 9, and Note 7 to
the Combined Consolidated  financial Statements,  under Item 8 of this Form 10-K
report.  Quantitative disclosures relating to financial instruments and debt are
included in the tables below.

International  operations  are  primarily  based in Europe and,  excluding  U.S.
export sales which are  principally  denominated in U.S.  dollars,  constitute a
significant portion of the revenues and identifiable assets of the Company.  For
2000, the Company had international revenues of $267 million. As of December 31,
2000, the Company had identifiable foreign assets of $150 million. A predominant
portion of these  international  revenues and  identifiable  assets are based in
German marks. The Company has significant loans to foreign affiliates, which are
denominated in foreign  currencies.  Foreign  currency  changes against the U.S.
dollar affect the foreign  currency  transaction  adjustments on these long-term
advances to affiliates and the foreign  currency  translation  adjustment of the
Company's net investment in these affiliates,  which impact  consolidated equity
of the  Company.  International  operations  result in a large volume of foreign
currency  commitment and transaction  exposures and significant foreign currency
net asset exposures.  Since the Company manufactures its products in a number of
locations around

                                       28
<PAGE>
the world,  it has a cost base that is  diversified  over a number of  different
currencies,  as well as the U.S.  dollar,  which  serves to  counterbalance  its
foreign currency transaction risk.

Selective foreign currency  commitments and transaction  exposures are partially
hedged.  The Company does not hedge its exposure to translation gains and losses
relating to foreign currency net asset  exposures;  however,  when possible,  it
borrows in local currencies to reduce such exposure. The Company is also exposed
to fluctuations in other currencies  including:  British pounds,  French francs,
Irish punts,  Japanese yen, Mexican pesos,  Spanish pesetas,  Malaysian ringgit,
and  Brazilian  reals.  The  fair  value  of  the  foreign  currency   contracts
outstanding  has been  immaterial  each of the last two years and the transition
period.

The Company's cash position includes amounts  denominated in foreign currencies.
The Company manages its worldwide cash requirements  considering available funds
among its subsidiaries and the cost  effectiveness with which these funds can be
accessed.  The  repatriation  of cash  balances  from  certain of the  Company's
affiliates  could have adverse tax  consequences.  However,  those  balances are
generally  available  without  legal  restrictions  to  fund  ordinary  business
operations.  The  Company  has and will  continue  to  transfer  cash from those
affiliates to the parent and to other  international  affiliates when it is cost
effective to do so.

The Company  manages  its  interest  rate risk in order to balance its  exposure
between fixed and variable rates while  attempting to minimize  interest  costs.
Thirty  percent of the Company's  long-term  debt is fixed and an additional $15
million is effectively fixed through interest rate swaps as outlined below.

                                       29
<PAGE>
As of 12/31/00:
Interest Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
<TABLE>
                                                                                                                      Fair Value
Year Ending       In thousands           2001       2002       2003       2004       2005      Thereafter   Total       12/31/00
-------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
<S>                             <C>     <C>       <C>        <C>        <C>         <C>        <C>         <C>        <C>
Liabilities:
Long-term Debt
   Fixed Rate                          $    --    $11,000    $13,250    $ 7,584     $1,833     $  5,000    $38,667    $39,394
     Avg. Interest Rate         7.01%
   Variable Rate                       $    90    $11,545    $40,369    $30,308     $  233     $ 11,486    $94,031    $94,031
     Avg. Interest Rate         7.28%


Interest Rate Derivative Financial Instruments Related to Debt:
----------------------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps
   Pay Variable/Receive Fixed          $      --    $10,000    $ 5,000  $      --   $     --  $       --    $15,000     $   (401)
     Avg. Pay Rate              7.49%
     Avg. Receive Rate          6.93%



Exchange Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity

                                                                                                                      Fair Value
Year Ending       In thousands           2001       2002       2003       2004       2005      Thereafter   Total       12/31/00
-------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
Liabilities:
Long-term Debt
   Fixed Rate--US Dollar                $      --   $ 11,000    $13,250    $ 7,584    $ 1,833    $  5,000    $38,667      $39,394
   Variable Rate--US Dollar             $      --   $  5,601    $22,268    $16,712    $    22    $  9,500    $54,103      $54,103
   Variable Rate--German Mark           $      --   $  4,309    $16,852    $12,602    $    --    $  1,986    $35,749      $35,749
   Variable Rate--Other                 $      90   $  1,635    $ 1,249    $   994    $   211    $     --    $ 4,179      $ 4,179


As of 12/31/99:
Interest Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
                                                                                                                      Fair Value
Year Ending       In thousands           2000       2001       2002       2003       2004      Thereafter   Total       12/31/99
-------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
Liabilities:
Long-term Debt
   Fixed Rate                              $  --    $11,666   $10,708     $12,084    $ 6,709     $ 6,833    $48,000      $47,836
     Avg. Interest Rate         6.99%
   Variable Rate                           $  94    $   714   $ 6,183     $23,141    $17,406     $11,939    $59,477      $59,477
     Avg. Interest Rate         4.72%


Interest Rate Derivative Financial Instruments Related to Debt:
----------------------------------------------------------------------------------------------------------------------------------
Interest Rate Swaps
   Pay Variable/Receive Fixed            $20,000   $     --   $ 5,000     $ 5,000   $     --    $     --    $30,000     $   (230)
     Avg. Pay Rate              7.02%
     Avg. Receive Rate          6.48%


Exchange Rate Sensitivity:
Principal (Notional) Amount by Expected Maturity
                                                                                                                      Fair Value
Year Ending       In thousands           2000       2001       2002       2003       2004      Thereafter   Total       12/31/99
-------------------------------------- ---------- ---------- ---------- ---------- ---------- ----------- ---------- -------------
Liabilities:
Long-term Debt
   Fixed Rate--US Dollar                 $     --    $11,666    $10,708    $12,084    $ 6,709     $ 6,833    $48,000      $47,836
   Variable Rate--US Dollar              $     --    $   209    $ 2,639    $ 9,477    $ 7,197     $ 9,733    $29,255      $29,255
   Variable Rate--Euro                   $     94    $   505    $ 3,543    $13,665    $10,209     $ 2,206    $30,222      $30,222
</TABLE>

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary data for the Company are on the following
pages 31 through 55.

                                       30
<PAGE>
INDEX TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS:
-------------------------------------------------------

                                                                            Page
                                                                            ----
Combined Consolidated Statements of Income for the year ended
   December 31, 2000; six months ended December 31, 1999, and
   years ended July 3, 1999; and June 27, 1998 (as restated).............     32

Combined Consolidated Balance Sheets as of December 31, 2000;
   and December 31, 1999 (as restated)...................................     33

Combined Consolidated Statements of Cash Flows for the year ended
   December 31, 2000; six months ended December 31, 1999; and
   years ended July 3, 1999; and June 27, 1998 (as restated).............     34

Combined Consolidated Statements of Shareholders' Equity for the year
  ended December 31, 2000; six months ended December 31, 1999, and
  years ended July 3, 1999; and June 27, 1998 (as restated)..............  35-36

Notes to the Combined Consolidated Financial Statements (as restated)....     37

Management's Responsibility for Financial Reporting .....................     59

Report of Independent Certified Public Accountants ......................     60


                                       31
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF INCOME (as restated)
<TABLE>
                                                                               Six Months
                                                            Year Ended            Ended                      Fiscal Years Ended
                                                                                                    --------------------------------
                                                            December 31,        December 31,          July 3,               June 27,
In thousands, except share data                                 2000               1999                1999                   1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                   <C>                 <C>                   <C>
Net sales                                                    $ 857,479          $ 421,641           $ 904,969             $ 763,311
Cost of sales                                                  720,503            357,083             770,653               632,679
                                                          --------------------------------------------------------------------------
               Gross profit                                    136,976             64,558             134,316               130,632
Operating expenses:
Selling, general and administrative                             80,266             37,563              83,698                70,906
Research and development                                        35,179             16,463              34,221                36,418
Restructuring and other charges (credits)                       (3,796)                --               8,777                 3,468
                                                          --------------------------------------------------------------------------
Total operating expenses                                       111,649             54,026             126,696               110,792
                                                          --------------------------------------------------------------------------
               Operating income                                 25,327             10,532               7,620                19,840
                                                          --------------------------------------------------------------------------
Non-operating (income) expenses:
Interest expense                                                 7,660              2,875               7,858                 8,347
Interest income                                                   (435)              (342)               (325)                 (530)
Royalty income                                                  (2,504)              (227)               (837)                 (122)
Gain on sale of equity investments                                (352)           (18,458)             (5,498)               (4,598)
Other (income) expenses, net                                      (623)               198              (2,568)               (1,872)
                                                          --------------------------------------------------------------------------
Total non-operating (income) expenses                            3,746            (15,954)             (1,370)                1,225
                                                          --------------------------------------------------------------------------
               Income before taxes on income                    21,581             26,486               8,990                18,615
Taxes on income                                                  7,137              9,447               1,458                 5,043
                                                          --------------------------------------------------------------------------
               Income before minority interest
                   and equity earnings                          14,444             17,039               7,532                13,572
Minority interest in net (income) losses of
  subsidiaries                                                    (129)               389                 893                  (163)
Equity in losses of affiliated companies                        (3,192)            (1,122)             (3,436)               (1,832)
                                                          --------------------------------------------------------------------------
Income before cumulative effect of change in
  accounting principle                                          11,123             16,306               4,989                11,577
Cumulative effect of change in accounting principle                 --             (1,010)                 --                    --
                                                          --------------------------------------------------------------------------
Net income                                                    $ 11,123           $ 15,296             $ 4,989              $ 11,577
                                                          ==========================================================================
Per share of common stock:

     Basic EPS
     Income before cumulative effect of
            change in accounting principle                      $ 1.09             $ 1.61              $ 0.49                $ 1.16
     Cumulative effect of change in accounting principle            --              (0.10)                 --                    --
                                                          --------------------------------------------------------------------------
     Net income                                                 $ 1.09             $ 1.51              $ 0.49                $ 1.16
                                                          ==========================================================================
     Diluted EPS
     Income before cumulative effect of
            change in accounting principle                      $ 1.09             $ 1.60              $ 0.49                $ 1.15
     Cumulative effect of change in accounting principle            --              (0.10)                 --                    --
                                                          --------------------------------------------------------------------------
     Net income                                                 $ 1.09             $ 1.50              $ 0.49                $ 1.15
                                                          ==========================================================================
</TABLE>
The accompanying notes are an integral part of these statements.

                                       32
<PAGE>
<TABLE>
DONNELLY CORPORATION AND SUBSIDIARIES
COMBINED CONSOLIDATED BALANCE SHEETS (as restated)
                                                                                December 31,                December 31,
In thousands, except share data                                                    2000                        1999
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                         <C>
ASSETS
Current assets:
Cash and cash equivalents                                                         $ 4,599                      $ 4,153
Accounts receivable, less allowance of $1,837 and $2,449                           82,802                       80,378
Inventories                                                                        55,933                       50,392
Recoverable customer tooling                                                       11,969                       22,526
Prepaid expenses                                                                   12,522                        3,664
Deferred income taxes                                                               4,499                        2,594
                                                                                ------------------------------------------
               Total current assets                                               172,324                      163,707
                                                                                ------------------------------------------
Property, plant and equipment:
Land                                                                                8,626                        8,781
Buildings                                                                          76,134                       78,656
Machinery, equipment and software                                                 221,881                      202,368
Capital projects in progress                                                       39,059                       33,405
                                                                                ------------------------------------------
                                                                                  345,700                      323,210
Less accumulated depreciation                                                     133,566                      124,824
                                                                                ------------------------------------------
               Net property, plant and equipment                                  212,134                      198,386
Investments in and advances to affiliates                                          24,483                       21,192
Other assets                                                                       15,055                       18,537
                                                                                ------------------------------------------
               Total assets                                                     $ 423,996                    $ 401,822
                                                                                ==========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                                 $ 89,163                     $ 92,098
Current maturities of long-term debt                                                   90                           94
Accruals:
Compensation                                                                       12,810                       11,816
Taxes                                                                               7,379                        9,168
Restructuring reserve                                                               3,231                        9,098
Other                                                                              16,307                       16,401
                                                                                ------------------------------------------
               Total current liabilities                                          128,980                      138,675
                                                                                ------------------------------------------
Long-term debt, less current maturities                                           132,608                      107,383
Postretirement plans                                                               37,440                       32,032
Other non-current liabilities                                                       8,990                       11,809
                                                                                ------------------------------------------
               Total liabilities                                                  308,018                      289,899
                                                                                ------------------------------------------
Minority interest                                                                   1,353                          951
Shareholders' equity:
Series preferred stock: 1,000,000 shares authorized and unissued                       --                            --
Preferred stock, 7 1/2% cumulative, $10 par; shares authorized
    250,000, issued 53,112                                                            531                          531
Common stocks:
    Class A, $.10 par; shares authorized 30,000,000, issued
        6,095,199 and 5,994,910                                                       610                          599
    Class B, $.10 par; shares authorized 15,000,000, issued
        4,098,314 and 4,158,502                                                       410                          416
    Donnelly Export Corporation, $.01 par; shares authorized
        600,000, issued 374,705 and 380,212                                             4                            4

Additional paid-in capital                                                          33,336                       32,706
Accumulated other comprehensive loss                                               (14,683)                     (11,191)
Retained earnings                                                                   94,417                       87,907
                                                                                ------------------------------------------
               Total shareholders' equity                                          114,625                      110,972
                                                                                ------------------------------------------
               Total liabilities and shareholders' equity                        $ 423,996                    $ 401,822
                                                                                ==========================================
</TABLE>
The accompanying notes are an integral part of these statements.

                                       33
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
 COMBINED CONSOLIDATED STATEMENTS OF CASH FLOWS (as restated)
<TABLE>
                                                                                        Six Months
                                                                        Year Ended        Ended               Fiscal Years Ended
                                                                                                       -----------------------------
                                                                       December 31,     December 31,       July 3,         June 27,
In thousands                                                              2000             1999             1999             1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>               <C>              <C>
OPERATING ACTIVITIES
Net income                                                              $ 11,123        $ 15,296          $ 4,989          $ 11,577
Adjustments to reconcile net income to net cash from
  (for) operating activities:
Depreciation and amortization                                             27,042          12,936           23,328            23,134

Gain on sale of equity investments                                          (352)        (18,458)          (5,498)           (4,598)
Deferred pension cost and postretirement benefits                          5,408           2,559            6,462             5,670
Change in deferred income taxes                                            5,014          (1,079)            (160)            2,946
Minority interest in income (losses) of subsidiaries                         129            (389)            (893)              163
Equity in losses of affiliated companies                                   3,192           1,122            3,436             1,832

Restructuring charges (credits)                                           (3,796)             --            8,777             3,468
Cumulative effect of change in accounting principle                           --           1,010               --                --
Changes in operating assets and liabilities:
Sale (repayment) of accounts receivable                                     (369)         (3,095)           2,402            (2,695)
Accounts receivable                                                       (6,099)         (9,967)          13,701           (24,613)
Inventories                                                               (6,622)         (7,208)             384            (4,366)
Prepaid expenses and other current assets                                  2,517           3,635           (2,968)            3,868
Accounts payable and other current liabilities                            (2,221)           (789)          24,564              (475)
Other                                                                     (3,081)         (3,769)           3,592              (966)
                                                                       -------------------------------------------------------------
               Net cash from (for) operating activities                   31,885          (8,195)          82,116            14,945
                                                                       -------------------------------------------------------------
INVESTING ACTIVITIES
Capital expenditures                                                     (43,318)        (21,670)         (57,807)          (46,164)
Investments in and advances to affiliates                                (13,162)         (9,657)          (6,957)           (1,045)
Proceeds from sale of property and equipment                                 829             297              723               677
Proceeds from sale of equity investments                                     759          24,227            8,636            11,067
Proceeds from affiliate stock redemption                                     324              --               --                --
Proceeds from sale-lease back                                                 --              --               --             7,521

Cash increase due to consolidation of subsidiary                              25             576               --                --
Other                                                                     (1,136)            506           (1,028)             (856)
                                                                       -------------------------------------------------------------
               Net cash for investing activities                         (55,679)         (5,721)         (56,433)          (28,800)
                                                                       -------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from long-term debt                                              34,261          19,342               --            13,798
Repayments on long-term debt                                              (7,236)         (3,500)         (28,767)             (429)
Investments and advances from minority partner                             1,500              --            4,482                --
Redemption of minority interest in subsidiary                               (946)             --               --                --
Common stock issance                                                       1,003             832              533             2,128
Dividends paid                                                            (4,108)         (2,048)          (4,076)           (4,031)
Other                                                                         --              --               --              (218)
                                                                       -------------------------------------------------------------
               Net cash from (for) financing activities                   24,474          14,626          (27,828)           11,248
                                                                       -------------------------------------------------------------
Effect of foreign exchange rate changes on cash                             (234)            (92)             (70)             (333)
Effect of December 1999 cash flow activity for certain
  subsidiaries (See Note 2)                                                   --             122               --                --
Increase (decrease) in cash and cash equivalents                             446             740           (2,215)           (2,940)
Cash and cash equivalents, beginning of year                               4,153           3,413            5,628             8,568
                                                                       -------------------------------------------------------------
Cash and cash equivalents, end of year                                   $ 4,599         $ 4,153          $ 3,413           $ 5,628
                                                                       =============================================================
</TABLE>
The accompanying notes are an integral part of these statements

                                       34
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (as restated)
<TABLE>
                                                                  Common Stock
                                                           ----------------------------
                                                                                                              Accumulated    Total
                                                                              Donnelly   Additional              other       share-
                                                   Preferred   Class   Class    Export    paid-in   Retained  comprehensive holders'
In thousands, except share data                      stock       A       B    Corporation capital   earnings     income     equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>      <C>       <C>    <C>        <C>        <C>        <C>
Balance, June 28, 1997 (as previously reported)       $ 531     $ 541    $ 446     $ 4    $ 28,765   $ 69,578   $ (6,038)  $ 93,827
Prior period adjustment (see Note 1 and Note 18)                                                       (2,710)               (2,710)
Balance, June 28, 1997 (as restated)                    531       541      446       4      28,765     66,868     (6,038)    91,117
Conversion of Class B to Class A                                   11      (11)
Shares Common stock issued under employee benefit
 plans                                                             20                        2,107                            2,127
Change in investment in affiliate                                                               41                               41
Income tax benefit arising from employee stock
 option plans                                                                                  355                              355
Cash dividends declared:
Preferred stock -- $.75 per share                                                                         (40)                  (40)
Common stock:
  Class A -- $.40 per share                                                                            (2,229)               (2,229)
  Class B -- $.40 per share                                                                            (1,763)               (1,763)
Net incoeme                                                                                            11,577
Other comprehensive income:
         Foreign currency translation adjustment                                                                     261
         Foreign currency transaction adjustments
             on long-term advances to affiliates                                                                  (2,306)
Total comprehensive income                                                                                                    9,532
                                                     -------------------------------------------------------------------------------
Balance, June 27, 1998                                  531       572      435       4      31,268     74,413     (8,083)    99,140

Conversion of Class B to Class A                                   19      (19)
Shares Common stock issued under employee benefit
 plans                                                              6                          527                              533
Income tax benefit arising from employee stock option
 plans                                                                                          74                               74
Cash dividends declared:
Preferred stock - $.75 per share                                                                          (40)                  (40)
Common stock:
         Class A - $.40 per share                                                                      (2,344)               (2,344)
         Class B - $.40 per share                                                                      (1,692)               (1,692)
Net income                                                                                              4,989
Othr comprehensive income:
         Foreign currency translation adjustment                                                                     943
         Foreign currency transaction adjustments on
             long-term advances to affiliates                                                                     (3,017)
Total comprehensive income                                                                                                    2,915
                                                     -------------------------------------------------------------------------------
Balance, July 3, 1999                                 $ 531     $ 597    $ 416     $ 4    $ 31,869   $ 75,326  $ (10,157)  $ 98,586

</TABLE>
Continued on page 36
                                       35
<PAGE>
DONNELLY CORPORATION AND SUBSIDIARIES
COMBINED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (as restated)
<TABLE>
                                                                  Common Stock
                                                           ----------------------------
                                                                                                              Accumulated    Total
                                                                              Donnelly   Additional              other       share-
                                                   Preferred   Class   Class    Export    paid-in   Retained  comprehensive holders'
In thousands, except share data                      stock       A       B    Corporation capital   earnings     income     equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>       <C>      <C>       <C>    <C>        <C>        <C>        <C>
Balance, July 3, 1999                                 $ 531     $ 597    $ 416    $ 4     $ 31,869   $ 75,326  $ (10,157)  $ 98,586
Subsidiary common stock issued                                                                 368                              368
Common stock issued under employee benefit plans                    2                          464                              466
Income tax benefit arising from employee stock
 option plans                                                                                    5                                5
Cash dividends declared:
Preferred stock - $.75 per share                                                                          (20)                  (20)
Common stock:
         Class A - $.20 per share                                                                      (1,196)               (1,196)
         Class B - $.20 per share                                                                        (832)                 (832)
Subsidiaries year end change (See note 2)                                                                (667)                 (667)
Net income                                                                                             15,296
Other comprehensive income:
         Foreign currency translation adjustment                                                                      448
         Foreign currency transaction adjustments on
           long-term advances to affiliates                                                                        (1,482)
Total comprehensive income                                                                                                   14,262
                                                     -------------------------------------------------------------------------------
Balance, December 31, 1999                              531       599      416      4       32,706     87,907     (11,191)  110,972

Conversion of Class B to Class A Shares                             6       (6)
Subsidiary common stock issued                                                                 654                              654
Common stock issued under employee benefit plans                    5                          344                              349
Redemption of minority shares                                                                 (368)      (505)                 (873)


Cash dividends declared:
Preferred stock - $.75 per share                                                                          (40)                  (40)
Common stock:
         Class A - $.40 per share                                                                      (2,423)               (2,423)
         Class B - $.40 per share                                                                      (1,645)               (1,645)
Net income                                                                                             11,123
Other comprehensive income:
         Foreign currency translation adjustment                                                                      67
         Foreign currency transaction adjustments on
             long-term advances to affiliates                                                                     (3,559)
Total comprehensive income                                                                                                    7,631
                                                    --------------------------------------------------------------------------------
Balance, December 31, 2000                            $ 531     $ 610    $ 410    $ 4     $ 33,336   $ 94,417   $(14,683)  $114,625
                                                    ================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.

                                       36
<PAGE>
NOTES TO THE COMBINED CONSOLIDATED FINANCIAL STATEMENTS (as restated)

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION AND RESTATEMENT

The combined consolidated  financial statements include the accounts of Donnelly
Corporation,  Donnelly Export Corporation,  and all majority owned or controlled
subsidiaries  (collectively "the Company"),  after all significant inter-company
balances,  transactions and  shareholdings  have been eliminated and adjustments
for minority  interests have been made. All other  investments in non-controlled
companies  are  accounted  for using the cost  method  of the  equity  method of
accounting  as deemed  appropriate.  Cost in excess  of net  assets of  acquired
companies is amortized on a straight-line basis over a period of 20 years.

On August 20, 2001,  the Company  announced that it would restate its historical
financial  statements to revise the accounting  treatment of certain investments
in and  advances  to  affiliates.  During a  detailed  review of the  accounting
treatment of its less than wholly owned affiliates,  the Company determined that
certain  revisions to the  accounting  treatment of its  investments in Donnelly
Electronics,  Inc.  ("Donnelly  Electronics")  and  Donnelly  Hohe Gmbh & Co. KG
("Hohe") were necessary.

The  investment in Donnelly  Electronics  had been  accounted for under the cost
method since initial  investment  in the first  quarter of fiscal 1997,  and was
subsequently  consolidated  upon  the  Company's  acquisition  of the  remaining
outstanding common stock on February 28, 2001. Prior to consolidation,  Donnelly
Electronics incurred operating losses, which were not reflected in the operating
results of the Company under the cost method of accounting. Upon further review,
it was  determined  that  this  investment  should  have been  accounted  for in
accordance  with the equity method prior to February 28, 2001.  Under the equity
method,   substantially  all  of  the  operating  losses  incurred  by  Donnelly
Electronics prior to consolidation have been included in the Company's  restated
net income, due to depletion of the Donnelly Electronics' equity and substantial
funding provided by the Company.

The  investment in Hohe had initially been accounted for under the equity method
since its acquisition in April 1995 and was subsequently  consolidated beginning
in October 1996.  Hohe incurred  operating  losses through fiscal 2000, of which
the Company absorbed 66 2/3% based upon its ownership  percentage.  Upon further
review of the accounting  treatment of this  investment,  it was determined that
the Company  should have  included  100% of the losses in its net income  during
this period as the minority  partner's  equity  basis had been  exhausted at the
initial  investment  date,  and  subsequent  funding  has been  provided  by the
Company.

The accompanying  financial  statements and notes reflect the restated  amounts.
Also refer to Note 18.

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
combined 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.
Although management's  estimates currently are not expected to change materially
in the foreseeable  future,  the results the Company will ultimately  experience
could differ from the amounts that are assumed based on the assumptions made.

FOREIGN CURRENCY TRANSLATION

The  Company's  primary  foreign  investments  are in Germany,  Ireland,  Spain,
France, Mexico, China, Brazil and Malaysia.  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 and are included in accumulated other
comprehensive income. For the subsidiary in Mexico,  transaction and translation
gains or  losses  are  reflected  in net  income  for all  accounts  other  than
inter-company   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.

                                       37
<PAGE>
REVENUE RECOGNITION

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

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
first-in,  first-out  (FIFO) method for domestic  inventories and on the FIFO or
average cost method for international inventories.

PRE-PRODUCTION COSTS

Recoverable  customer tooling represents costs recoverable from customers at the
time of tool  completion  and approval or which are  recovered in the  program's
piece  price over a period of three  years or over the  program's  useful  life.
Balances  recoverable  over a period  greater  than one year are  classified  as
long-term assets.

Design and  development  costs for  products to be sold under  long-term  supply
agreements are expensed as incurred unless a contractual  guarantee exists. If a
guarantee exists,  these costs are recognized as an asset and are recoverable at
the time of design or program approval or recovered in the program's piece price
over a period of three years or over the program's  useful life.  The balance of
these costs  capitalized  as of December  31, 2000,  and  December 31, 1999,  is
immaterial.


PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost.  Depreciation,  which includes
amortization  of assets  under  capital  leases,  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 50
         Machinery, equipment and software               3 to 15

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

Certain  costs   associated  with  software   developed  for  internal  use  are
capitalized  in capital  projects in progress and,  once placed in service,  are
transferred to machinery, equipment and software and amortized over the expected
useful lives of the software.

LONG-LIVED ASSETS

The Company reviews long-lived  assets,  including goodwill and other intangible
assets, for impairment whenever events or changes in circumstances indicate that
the  carrying  amount  of an  asset  may  not  be  fully  recoverable.  If it is
determined that an impairment  loss has occurred based on expected  undiscounted
future cash flows, a current charge to income is recognized.

WARRANTY RESERVES

The Company  accrues for  warranty  claims when events  exist that make the loss
probable  and the  loss can be  reasonably  estimated.  Adjustments  are made to
established  reserves  when  changes  in  management's  estimates  and  industry
conditions occur.

INCOME TAXES

Deferred income 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 foreign  subsidiaries
and affiliates because they are intended to be permanently reinvested.  Deferred
tax  liabilities  and assets are adjusted in the period of an enacted  change in
tax  laws or  rates  and the  effect  is  included  in  income  from  continuing
operations.

                                       38
<PAGE>
EARNINGS PER SHARE OF COMMON STOCK

Basic  earnings  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, retroactively adjusted for stock dividends
and stock splits. Diluted earnings per share is computed including the effect of
dilutive stock options.

STOCK INCENTIVE PLANS

The Company  follows the  provisions  of  Accounting  Principles  Board  Opinion
("APB")  No.  25,  "Accounting  for Stock  Issued to  Employees,"  for its stock
incentive  plans for  certain key  employees  and  directors.  Under APB No. 25,
compensation expense is recognized when the market price of the underlying stock
award on the date of grant  exceeds the related  exercise  price.  The Company's
policy is to grant options at the prevailing market price and,  accordingly,  no
compensation   expense  has  been  recognized  in  the  accompanying   financial
statements.  The pro forma  effects had the Company  followed the  provisions of
Statement of  Financial  Accounting  Standards  ("SFAS") No. 123 are included in
Note 13.

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.  These
estimates are based upon quoted amounts, the current rates available for similar
financial  instruments or calculations  discounting expected cash flows at rates
currently  offered to the Company for debt of the same  maturity.  The  carrying
value of the Company's  variable rate debt and all other  financial  instruments
approximates their fair value.

COMPREHENSIVE INCOME

Comprehensive  income  reflects  the change in equity of a  business  enterprise
during a period  from  transactions  and other  events  and  circumstances  from
non-owner sources.  For the Company,  comprehensive income represents net income
adjusted for foreign  currency  translation  adjustments  and is reported in the
accompanying combined consolidated statements of shareholders' equity.

CHANGE IN ACCOUNTING PRINCIPLE

Effective July 4, 1999, the Company adopted  Statement of Position ("SOP") 98-5,
"Reporting on the Costs of Start-up  Activities,"  which  requires  companies to
expense the costs of start-up  activities and organization costs as incurred.  A
one-time charge of $1.0 million, net of tax, was taken against net income as the
cumulative  effect of a change in  accounting  principle  for the  write-off  of
previously capitalized start-up and organization costs.

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.   FISCAL YEAR END CHANGE

Effective July 4, 1999, the Company changed the date of its fiscal year end from
the Saturday  nearest June 30 to December 31. The years ended December 31, 2000;
July 3, 1999; and June 27, 1998; consisted of 52, 53 and 52 weeks, respectively.
The six-month periods ended December 31, 1999, and January 2, 1999, consisted of
26 and 27 weeks, respectively.  The six-month period ended December 31, 1999, is
referred to as the "transition  period." All year and quarter  references relate
to the Company's fiscal years and fiscal quarters, unless otherwise stated.

During the transition  period,  the Company  changed the fiscal year ends of its
German  and  Spanish  subsidiaries  from May 31 to  December  31.  Prior to this
change,  these subsidiaries  reported their results of operations on a one-month
lag. The Company's  results of operations for the transition  period include the
results of these  subsidiaries  for the six months ended  November 30, 1999. The
results of  operations  for the period of December 1 to December 31,  1999,  for
these subsidiaries were charged to retained earnings in order to report only six
months of operating  results in the  transition  period.  Cash flow activity for
this same period is reflected as a single line item in the Combined Consolidated
Statement of Cash Flows.

Unaudited  financial  information for the comparable  twelve-month and six-month
periods ended December 31, 1999, and January 2, 1999, respectively, is presented
in the table below and includes any normal, recurring adjustments, which are, in
the opinion of management, necessary for a fair presentation.

                                       39
<PAGE>
COMBINED CONSOLIDATED STATEMENTS OF INCOME (as restated)
<TABLE>
                                                            Calendar Year Ended                    Six Months Ended
                                                      --------------------------------    ----------------------------------
                                                                        (Unaudited)                           (Unaudited)
                                                      December 31,     December 31,        December 31,        January 2,
In thousands, except share data                           2000             1999                1999               1999
----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                <C>               <C>                 <C>
Net sales                                            $     857,479     $     897,914     $      421,641      $    428,696
Cost of sales                                              720,503           760,890            357,083           366,846
                                                    ------------------------------------------------------------------------
     Gross profit                                          136,976           137,024             64,558            61,850
Operating expenses:
Selling, general and administrative                         80,266            80,438             37,563            40,823
Research and development                                    35,179            31,617             16,463            19,067
Restructuring and other charges                             (3,796)            8,777                  0                 0
                                                    ------------------------------------------------------------------------
Total operating expenses                                   111,649           120,832             54,026            59,890
                                                    ------------------------------------------------------------------------
     Operating income                                       25,327            16,192             10,532             1,960
Non-operating (income) expenses:
Interest expense                                             7,660             6,551              2,875             4,182
Interest income                                               (435)             (379)              (342)             (287)
Royalty income                                              (2,504)             (800)              (227)             (266)
Gain on sale of equity investments                            (352)          (23,588)           (18,458)             (368)
Other (income) expenses, net                                  (623)           (2,096)               198              (273)
                                                    ------------------------------------------------------------------------
Total non-operating (income) expenses                        3,746           (20,312)           (15,954)            2,988
                                                    ------------------------------------------------------------------------
     Income (loss) before taxes on income                   21,581            36,504             26,486            (1,028)
Taxes on income (credit)                                     7,137            11,581              9,447              (676)
                                                    ------------------------------------------------------------------------
     Income (loss) before minority interest and
       equity earnings                                      14,444            24,923             17,039              (352)
Minority interest in net (income) losses of
  subsidiaries                                               (129)             1,428                389              (146)
Equity in loss of affiliated companies                     (3,192)            (2,890)            (1,122)           (1,669)
                                                    ------------------------------------------------------------------------
Income (loss) before cumulative effect of change
  in accounting principle                                   11,123             23,461            16,306            (2,167)
Cumulative effect of change in accounting principle         --                (1,010)            (1,010)               --
                                                    ------------------------------------------------------------------------
Net income (loss)                                    $      11,123     $      22,451     $       15,296      $     (2,167)
                                                    ========================================================================
Per share of common stock:
     Basic EPS
     Income (loss) before cumulative effect of
       change in accounting principle                $        1.09     $        2.32     $         1.61      $      (0.22)
     Cumulative effect of change in accounting
       principle                                                --             (0.10)             (0.10)               --
                                                    ----------------- ----------------  ------------------------------------
     Net income (loss)                               $        1.09     $        2.22     $          1.51     $      (0.22)
                                                    ================= ================  ====================================

     Average common shares outstanding                  10,167,999        10,119,385         10,139,473        10,082,230
</TABLE>

3.   INVESTMENTS IN AND ADVANCES TO AFFILIATES

On February 28, 2001, the Company  acquired all of the outstanding  common stock
of Donnelly  Electronics,  not then owned by the Company for $4.5 million,  paid
equally in cash and through  the  issuance  of shares of the  Company's  Class A
Common Stock.  The  acquisition has been accounted for under the purchase method
of accounting,  and the goodwill and intagibles  recorded on a preliminary basis
as a result of the  acquisition  are being  amortized over 20 years.  Due to the
acquisition of the remaining interest,  the Company began consolidating Donnelly
Electronics'  financial  statements  beginning  in  March  2001.  Prior  to  the
acquisition  of the  remaining  interest,  the Company owned 18.2% of the common
stock of Donnelly Electronics and had advanced funds for its operations.  Due to
the  funding  of  Donnelly  Electronics  by  Donnelly  Corporation,  100% of the
operating losses incurred by Donnelly Electronics have been recognized under the
equity method of accounting prior to consolidation. Donnelly Electronics designs
and manufactures  circuit board assemblies for a variety of electronic  products
and  sub-assemblies.  It produces  many of the  electronic  components  that the
Company uses for products such as Electrochromic rearview mirrors and electronic
compass systems,  and also produces products for other automotive  suppliers and
non-automotive customers.

In October  2000,  the  Company  acquired  its  partner's  50%  interest  in its
Brazilian joint venture for $1.6 million and began  consolidating  the financial
statements  of  its  now  wholly-owned  subsidiary,  Donnelly  do  Brazil,  LTDA
("Donnelly  do Brazil").

                                       40
<PAGE>
The 50-50 joint  venture  was formed in 1998 to produce  interior  and  exterior
mirrors  for  the  South  American   automotive  industry  and  began  producing
replacement  parts for  distribution  within the South American  market in 1999.
Donnelly do Brazil is in the process of launching new programs for the Brazilian
market.  Equity in the results of the Company's  Brazilian  joint venture are no
longer  included in equity in earnings  (losses) of affiliated  companies  after
October 2000 due to the Company's  acquisition of the remaining interest in this
venture  and  subsequent  consolidation  of the  financial  statements  of  this
subsidiary.

In 2000, the Company purchased the remaining  minority interest in Donnelly Hohe
Espana, S.A., for approximately $1.9 million.

In 1999,  the  Company's  partner in its  Shunde  Donnelly  Zhen Hua  Automotive
Systems Co. Ltd. ("Shunde Donnelly Zhen Hua") joint venture,  agreed to sell its
portion of the joint venture to Ganxiang Automobile Mirror Company ("Ganxiang"),
the largest  automotive  mirror  supplier  in China.  Shunde  Donnelly  Zhen Hua
manufactures  interior  and exterior  mirror  systems for  automakers  in China.
Subsequently,  in the fourth  quarter of calendar  1999,  the Company  formed an
additional joint venture with Ganxiang;  Shanghai Donnelly  Ganxiang  Automotive
Systems Co. Ltd. ("Shanghai  Donnelly  Ganxiang") for the manufacture,  sale and
distribution of outside mirrors primarily for the Chinese automotive market. The
Company's investment in Shanghai Donnelly Ganxiang consisted of technology and a
transfer to Ganxiang  of a 5%  interest  of its Shunde  Donnelly  Zhen Hua joint
venture. As a result of these transactions,  the Company holds a 25% interest in
both of these joint ventures.

In September  1999, the Company sold its 50% interest in Lear Donnelly  Overhead
Systems, LLC ("Lear Donnelly") to Lear Corporation ("Lear"),  its partner in the
joint venture, resulting in a pre-tax gain of $14.1 million, or $0.82 per share,
after-tax,  which was  recognized  in the third  quarter of  calendar  1999.  In
consideration  for its interest in Lear  Donnelly,  the Company  received a Lear
Donnelly  product line and other net proceeds of $28.4 million,  which consisted
of $24.2 million in cash as well as certain assets, net of liabilities  assumed.
The  Company's  equity in the  financial  results of Lear  Donnelly is no longer
included in the Company's financial statements after September 1999.

At the time of the  sale,  the  value of the  product  line  transferred  to the
Company and other related issues  remained in  negotiation  or  arbitration  for
determination of final valuation. Management recorded an estimate at the time of
the sale  for the  expected  outcome  of  these  negotiations  based on the best
information  available.  In  December  1999,  the  Company  completed  the final
negotiation of these issues, which included the purchase of another product line
for  cash of $2.4  million.  The  final  negotiated  settlement  resulted  in an
additional  pre-tax  gain to the  Company of $4.4  million,  or $0.29 per share,
after-tax, which was recognized in the fourth quarter of calendar 1999.

In April 1999,  the Company  formed  Schott-Donnelly  LLC Smart Glass  Solutions
("Schott   Donnelly"),   a  50-50  joint   venture  with  Schott  North  America
Manufacturing,  Inc. ("Schott"), a wholly owned subsidiary of Schott Glas, which
is based in Germany and is one of the world's  leading  producers  of  specialty
glass products. The joint venture is seeking to develop electrochromic glass for
automotive  and  architectural  applications.  The Company  contributed  certain
assets and  liabilities  upon the formation of the joint venture and received $2
million in cash,  which was recorded as a pre-tax gain.  In accordance  with the
LLC operating agreement, losses generated by the joint venture will be allocated
to Schott until Schott has contributed $9.5 million.

In 1999, the Company began consolidating the financial  statements of Varitronix
EC (Malaysia) Sdn. Bhd.  ("Varitronix  EC").  Varitronix EC is based in Malaysia
and  is the  Company's  50-50,  controlled  joint  venture  with  the  Malaysian
subsidiary of Varitronix International Ltd. ("Varitronix"). Varitronix, based in
Hong Kong,  is a global  leader in the market for liquid  crystal  displays  and
electronic  systems.  Varitronix EC provides support for the Company's worldwide
electrochromic mirror production.

In the  second  and third  quarters  of 1999,  the  Company  sold its  remaining
interest in VISION Group plc ("VISION  Group") for $8.6 million and recognized a
combined  pre-tax  gain of  approximately  $5.5  million,  or $0.35  per  share,
after-tax.  The Company's  equity in the financial  results of VISION Group have
not been included in the Company's financial statements after November 1, 1998.

In December  1998,  the Company  merged its wholly  owned  subsidiary,  Donnelly
Optics  Corporation  ("Optics") into a wholly owned  subsidiary of Applied Image
Group, Inc. ("AIG"), a New York Corporation. In the merger, the Company received
a 13%  interest  in AIG and a $5 million  convertible  note.  AIG  develops  and
manufactures  opto-imaging  products for the lighting,  automotive,  optical and
photonics industries. The Company accounts for its investment in AIG on the cost
method; therefore, the financial results of Optics have not been included in the
Company's financial statements after December 1, 1998.

In the second  quarter of 1998,  the  Company  sold its 50%  interest in Applied
Films  Corporation  ("AFC")  during an  initial  public  offering.  The  Company
received  $7.9  million,  net of taxes  and  related  out of  pocket  fees,  and
recognized a pre-tax gain

                                       41
<PAGE>
of  approximately  $4.6 million,  or $0.22 per share,  after-tax.  The Company's
equity in the  financial  results of AFC is no longer  included in the Company's
financial statements after November 1997.

The Company has  advanced 80 million  German marks to Donnelly  Hohe,  valued at
$38.5 million at December 31, 2000, under subordinated loan agreements.  Amounts
advanced to Donnelly Hohe under the subordinated loan agreements provide for 10%
interest per annum with no principal  payments due until  maturity.  Outstanding
loan maturities  range from October 1, 2001, to October 1, 2002.  These advances
are eliminated as  inter-company  transactions in the  consolidation of Donnelly
Hohe with the  Company's  financial  statements.  The  Company has the option to
purchase the  remaining  minority  ownership  interest in Donnelly  Hohe through
various  options.  The  minority  partners  also have an option to  require  the
Company to buy their interests at any time based upon a  predetermined  formula,
which is currently valued at less than $2 million.

Summarized  balance  sheet and income  statement  information  for the Company's
non-consolidated  affiliates  accounted  for  using the  equity  method is shown
below:
<TABLE>
                                                                    6 months ended
In thousands                                               2000      Dec. 31, 1999    1999          1998
------------------------------------------------------ ------------- ------------- ------------- -------------
<S>                                                     <C>           <C>           <C>           <C>
Summarized Balance Sheet Information
     Current assets                                           8,378         4,009        50,128        64,389
     Noncurrent assets                                        6,586         5,655        43,158        51,708
     Current liabilities                                     21,469         2,483        36,340        32,541
     Noncurrent liabilities                                     254        14,942        36,945        31,893
                                                       ------------- ------------- ------------- -------------
     Net equity (deficit)                                    (6,759)       (7,761)       20,001        51,663
                                                       ============= ============= ============= =============

Summarized Income Statement Information
     Net sales                                               19,427         6,849       225,430       103,825
     Costs and expenses                                      27,478         9,831       233,092       112,049
                                                       ------------- ------------- ------------- -------------
     Net loss                                                (8,051)       (2,982)       (7,662)       (8,224)
                                                       ============= ============= ============= =============
</TABLE>

4.   NATURE OF OPERATIONS

The Company is a  technology-driven,  customer-focused,  growth-oriented  global
supplier  to  the  automotive  and  information   display   industries   through
manufacturing  operations and various joint ventures in North and South America,
Europe and Asia. The Company primarily supplies automotive  customers around the
world with rear vision  systems,  modular  window  systems and handle  products,
which incorporate increasing electronic capabilities.

The Company has been managed  primarily on a geographical  basis.  For 2000, the
Company had two  reportable  segments:  North  American  Operations  ("NAO") and
European  Operations  ("EO").  The operating segments were managed separately as
they  each  represented  regional  operational  components,  which  offered  the
Company's product lines in different  geographic markets.  While each reportable
segment offers all of the Company's  automotive  product lines,  the majority of
the Company's net sales from modular windows and handle products  originate from
NAO.  NAO sales also  include  touch  screen  sales,  which are  supplied to the
information display industry.  Operating financial  information is available and
is utilized regularly by the Company's corporate  management team to assess each
segment's  performance.  The corporate  management team,  which  establishes the
overall  strategy  and  policy  standards  for the  Company,  has  included  the
Company's  chief  executive   officer,   chief  operating  officers  and  senior
executives in  administration,  finance,  operations and  technology.  The chief
operating  officer of each  segment,  each of whom was a member of the corporate
management team, has been  responsible for the management of  profitability  and
cash flow for each respective segment's operations.

The NAO segment  includes all of the  Company's  majority-owned  North  American
operations,  which includes non-automotive businesses.  This represents a change
to the previous segment definition that was based on a combination of geographic
location and the product markets they served. This change was made in accordance
with the guidance  provided in SFAS No. 131 as a result of changes in the manner
in which the Company has managed the  business.  During  2000,  the Company also
changed  the  way in  which  it  allocated  corporate  expenses  to the  various
segments.  Due to these changes, data for all prior periods has been restated to
conform to the current segment definitions and allocation methods.

During 2001, the Company will be transitioning  to a new corporate  organization
structure that will focus its worldwide business into two main operating groups:
Electronic Systems and Exterior Systems.  Each of these operating groups will be
represented  by a  group  president  who  will  be a  member  of  the  corporate
management team. The Company will be reevaluating  its segment  definitions over
the  course  of  2001  as it  transitions  to this  new  corporate  organization
structure.

                                       42
<PAGE>
The  accounting  polices of the  reportable  operating  segments are the same as
those  described in the summary of  significant  accounting  policies in Note 1.
Revenues  are  attributed  to segments  based on the location of where the sales
originate.  The Company evaluates  performance based on segment profit, which is
defined as earnings  before  interest,  taxes,  depreciation  and  amortization,
excluding  significant special gains, losses and restructuring  charges.  Due to
the Company's corporate headquarters being located in the United States, certain
estimates  are  made  for  allocations  to NAO of  centralized  corporate  costs
incurred in support of NAO.  Centralized European overhead costs are included in
EO. The Company accounts for inter-segment sales and transfers at current market
prices and inter-segment services at cost.

                                       43
<PAGE>
A summary of the Company's operations by its business segments follows:
<TABLE>
                                                                                        Other       Inter-segment      Total
In thousands (as restated)                                       NAO          EO      Segments*     Eliminations     Segments
---------------------------------------------------------- ------------ ------------ ------------- ---------------- ------------
<S>                                                          <C>          <C>          <C>         <C>               <C>
Year ended December 31, 2000:
Revenues.........................................            $ 579,588    $ 267,483    $ 20,813    $   (10,405)       $ 857,479
Segment profit...................................               55,027        9,394         279             --           64,700
Depreciation and amortization....................               15,832       10,197         393             --           26,422
Identifiable assets..............................              253,163      136,105      38,011        (16,893)         410,386
Investment in equity affiliates..................                   --           --       4,376             --            4,376
Capital expenditures.............................               30,814       11,047         875             --           42,736

Year ended December 31, 1999 (unaudited):
Revenues.........................................            $ 556,202    $ 276,369    $ 71,472    $    (6,129)       $ 897,914
Segment profit...................................               57,697        9,263       (2,982)           --           63,978

Six months ended December 31, 1999:
Revenues.........................................            $ 263,458    $ 135,633    $ 25,990    $    (3,440)       $ 421,641
Segment profit...................................               24,913        6,998     (1,203)             --           30,708
Depreciation and amortization....................                7,014        5,473          66             --           12,553
Identifiable assets..............................              235,934      128,884      31,275        (12,077)         384,016
Investment in equity affiliates..................                   --           --       2,903             --            2,903
Capital expenditures.............................               15,607        5,184         733             --           21,524

Six months ended January 2, 1999 (unaudited):
Revenues.........................................            $ 254,786    $ 139,978    $ 35,595    $    (1,663)        $428,696
Segment profit...................................               20,772        5,128        (775)            --           25,125

Fiscal year ended July 3, 1999:
Revenues.........................................             $547,531     $280,714     $81,077    $    (4,353)        $904,969
Segment profit...................................               53,557        7,394     (2,555)             --           58,396
Depreciation and amortization....................               12,799       10,277       (387)             --           22,689
Identifiable assets..............................              211,351      129,193      28,326         (9,612)         359,258
Investment in equity affiliates..................                   --           --      11,291             --           11,291
Capital expenditures.............................               38,871       13,598       3,068             --           55,537

Fiscal year ended June 27, 1998:
Revenues.........................................             $477,518     $261,635    $ 27,628    $    (3,470)        $763,311
Segment profit...................................               45,768       12,058       4,504             --           62,330
Depreciation and amortization....................               12,389       10,855       (682)             --           22,562
Identifiable assets..............................              202,784      140,701      19,654         (5,423)         357,716
Investment in equity affiliates..................                   --           --      16,730             --           16,730
Capital expenditures.............................               28,531       14,257       1,552             --           44,340
</TABLE>
*Other Segments category includes the Company's automotive joint ventures.

                                       44
<PAGE>
<TABLE>
                                            Years Ended                     Six Months Ended            Fiscal Years Ended
                                 ----------------------------------- ------------------------------- -------------------------
                                                     (unaudited)                       (unaudited)
                                    December 31,     December 31,      December 31,    January 2,      July 3,     June 27,
In thousands (as restated)              2000             1999              1999           1999           1999        1998
------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>               <C>               <C>              <C>            <C>          <C>
Segment profit from reportable
segments.........................  $     64,421      $     66,960      $     31,911     $   25,900     $  60,951   $  57,826
Segment profit from other
segments.........................           279            (2,982)           (1,203)          (775)       (2,555)      4,504
Interest, net....................        (7,225)           (6,172)           (2,533)        (3,895)       (7,533)     (7,817)
Depreciation and amortization....       (27,042)          (22,900)          (12,936)       (13,363)      (23,328)    (23,134)
Restructuring and other
(charges) credits................         3,796            (8,777)               --             --        (8,777)     (3,468)
Gain on sale of equity
investments......................           352            23,588            18,458            368         5,498       4,598
Gain on formation of joint
venture..........................            --             2,000                --             --         2,000          --
Corporate and other expenses*....       (13,000)          (15,213)           (7,211)        (9,263)      (17,266)    (13,894)
                                 ---------------------------------------------------------------------------------------------
Income (loss) before taxes
   on income.....................  $     21,581      $     36,504      $     26,486     $   (1,028)    $   8,990   $  18,615
                                 =============================================================================================
</TABLE>

* Corporate and other expenses category includes centralized corporate functions
such  as  advanced  research,  corporate  administration  including  information
technology,  human  resources  and  finance  and  other  costs  associated  with
corporate development and financing initiatives.

<TABLE>
                                                                                                December 31,     December 31,
In thousands (as restated)                                                                          2000             1999
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>              <C>
Identifiable Assets:
Total assets of reportable segments.....................................................         $  389,268       $  364,818
Total assets of other segments..........................................................             38,011           31,275
Elimination of intersegment receivables.................................................            (16,893)         (12,077)
Corporate and other assets*.............................................................             13,610           17,806
                                                                                               ---------------------------------
Total Consolidated Assets...............................................................         $  423,996       $  401,822
                                                                                               =================================
</TABLE>

* Corporate and other assets category includes  tax-related assets, fixed assets
related to centralized  corporate and advanced  research  functions,  consisting
primarily of buildings and equipment, capitalized costs and financial assets.

The following summarizes the Company's sales by product line:
<TABLE>
                                                            Year         Six Months
                                                            Ended            Ended                    Fiscal Years Ended
                                                                                               ---------------------------------
                                                        December 31,       December 31,            July 3,         June 27,
In thousands                                                2000               1999                 1999             1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                <C>                   <C>              <C>
Mirror systems and components.....................        $ 434,493          $ 203,534           $  414,981       $  355,823
Modular window systems............................          328,140            161,594              335,345          286,470
Interior lighting and trim........................           11,503             21,806               73,626           42,175
Handle products...................................           45,871             19,273               57,318           51,251
Other products....................................           37,472             15,434               23,699           27,592
                                                      --------------------------------------------------------------------------
                                                          $ 857,479          $ 421,641           $  904,969       $  763,311
                                                      ==========================================================================
</TABLE>

                                       45
<PAGE>
Sales to major automobile manufacturers as a percentage of the Company's net
sales follows:
<TABLE>

                                                                  Year           Six Months
                                                                  Ended            Ended              Fiscal Years Ended
                                                                                                -------------------------------
                                                               December 31,     December 31,        July 3,         June 27,
                                                                  2000              1999              1999            1998
                                                             ------------------------------------------------------------------
<S>                                                                <C>                <C>               <C>               <C>
Ford ......................................................         27%               28%               24%               27%
DaimlerChrysler............................................         19                21                21                20
General Motors.............................................          7                 8                 6                 5
Honda......................................................          7                 7                 7                 8
BMW........................................................          7                 6                 6                 7
Volkswagen.................................................          7                 6                 6                 6
                                                             ------------------------------------------------------------------
                                                                    74%               76%               70%               73%
                                                             ==================================================================
</TABLE>

A summary of the Company's  operations  by geographic  area follows and does not
include  sales of joint  ventures in which the Company  holds a  non-controlling
ownership interest:
<TABLE>

                                                                    Year          Six Months
                                                                    Ended            Ended            Fiscal Years Ended
                                                                                                 ------------------------------
                                                                December 31,     December 31,       July 3,        June 27,
In thousands                                                        2000             1999            1999            1998
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>             <C>            <C>
Revenues:
North American:
     United States..........................................    $   464,321       $   223,791     $  482,062     $  420,544
     Export:
         Americas...........................................        115,511            53,754        122,513         76,433
         Asia...............................................          8,994             4,853          6,847          3,313
         Europe.............................................             45               488          1,355          2,002
         Other..............................................            461               140            386            350
                                                              -----------------------------------------------------------------
                                                                $   589,332       $   283,026     $  613,163     $  502,642

Germany.....................................................        137,443            79,329        177,196        173,857
Ireland.....................................................         71,664            30,431         61,682         43,245
Other Foreign...............................................         59,040            28,855         52,928         43,567
                                                              -----------------------------------------------------------------
                                                                $   857,479       $   421,641     $  904,969     $  763,311
                                                              =================================================================
</TABLE>

<TABLE>
                                                                                              December 31,      December 31,
In thousands (as restated)                                                                        2000              1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>                <C>
Long-Lived Assets:
United States...........................................................................       $   139,992      $   125,750
Germany.................................................................................            45,370           48,393
Ireland.................................................................................            10,145            9,563
Other Foreign...........................................................................            22,994           19,400
                                                                                             ----------------------------------
                                                                                               $   218,501      $   203,106
                                                                                             ==================================
</TABLE>

                                       46
<PAGE>
5.   RESTRUCTURING AND OTHER CHARGES

In February 1999, the Company announced a European restructuring plan ("the 1999
plan")  based on a strategy  to improve  the overall  operating  efficiency  and
customer  service  of the  European  organization  by 1)  re-organizing  certain
manufacturing  and  customer  service  functions  into a more  customer  focused
structure,  2)  consolidating  two of the German  manufacturing  facilities,  3)
implementing  throughout Europe the Donnelly  Production  System,  the Company's
approach  to  lean   manufacturing   processes  and  4)  re-aligning  sales  and
engineering  functions throughout Europe. An $8.8 million pre-tax  restructuring
charge, or $4.7 million at net income, was recorded for the 1999 plan, including
$1.4  million for the  impairment  of assets and $7.4  million  for  anticipated
incremental  cash  expenditures  for  the  severance  and  voluntary  retirement
programs  for  approximately  200  production,  production  support,  sales  and
engineering  employees.  In May 1997,  the Company had recorded a $10.0  million
pre-tax restructuring charge, or $5.3 million at net income, for the elimination
of redundant  operations,  as well as, outsourcing of inefficient  operations in
Europe  ("the 1997  plan").  A reduction  of $1.1  million  was  recorded to the
restructuring  reserve in 1998  associated  with  changes to the 1997 plan.  The
Company included the remaining  actions of the 1997 plan in the 1999 plan. As of
December 31, 2000, the Company had  terminated 197 employees  under the combined
plans. In addition, the Company has experienced a net reduction of approximately
76 employees through normal attrition.

The Company also funded  approximately $3.1 million of capital  expenditures for
the construction of shipping and warehousing  facilities associated with actions
in support of the combined  plans.  These costs do not qualify as  restructuring
within the technical  accounting  guidelines  and therefore were included in the
Company's capital expenditures.

As required by the generally  accepted  accounting  principles for restructuring
charges, the Company reduced its restructuring  reserve by $3.8 million pre-tax,
or $2.4 million at net income,  in the fourth  quarter of 2000. The reduction is
attributable to (i) savings  associated with higher than  anticipated  voluntary
employee  attrition and (ii) continuing  developments  within the market and the
operations,  which  have made the  outcome  uncertain  for some  aspects  of the
combined plans. The ending reserve balance of $3.2 million  represents the costs
associated  with the  remaining  planned  actions  expected to be  substantially
completed  during 2001.  While the Company  believes that further  restructuring
actions  may be  appropriate  in  Europe  and it  continues  to  evaluate  these
operations for improvements, the assessment of possible actions has not yet been
completed.

Details of the European restructuring reserves are as follows:
<TABLE>

                                                                        Severance and          Asset             Restructuring
In thousands                                                               Benefits         Impairment               Total
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>               <C>                   <C>
1997 plan..............................................                    $   9,965         $     --             $   9,965
1999 plan..............................................                        7,426            1,351                 8,777
     1998 reserve reduction............................                       (1,117)              --                (1,117)
     2000 reserve reduction............................                       (3,448)            (348)               (3,796)
     Amounts utilized..................................                       (8,172)            (530)               (8,702)
     Impact of foreign currency changes................                       (1,775)            (121)               (1,896)
                                                                   -------------------------------------------------------------
Accrued Restructuring Costs at December 31, 2000                           $  2,879          $    352             $  3,231
                                                                   =============================================================
</TABLE>

Other

In the fourth  quarter of 1998,  the Company  recognized a $3.5 million  pre-tax
charge  against  operating  income,  or  $2.3  million,  after-tax,  due  to the
cancellation  of a customer order at Optics,  relating to market dynamics in the
digital imaging sector of the computer industry.  The charge primarily consisted
of  a  write-off  of  tooling  and  other   current   assets  and  severance  of
approximately 25 manufacturing and administrative  personnel. The severance cash
payments were completed in the second quarter of 1999.  This business was merged
into a new company in the second quarter of 1999, (see Note 3).

6.   INVENTORIES

Inventories consist of:
<TABLE>
                                                                                              December 31,      December 31,
In thousands                                                                                      2000              1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>                <C>
Finished products and work in process.................................................           $ 18,124          $ 14,882
Raw materials.........................................................................             37,809            35,510
                                                                                            -----------------------------------
                                                                                                 $ 55,933          $ 50,392
                                                                                            ===================================
</TABLE>
                                       47
<PAGE>
7.   DEBT AND OTHER FINANCING ARRANGEMENTS

Debt consists of:
<TABLE>
                                                                                              December 31,      December 31,
In thousands                                                                                      2000              1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>               <C>
Borrowings under revolving credit agreements at 7.28% and 4.72 %......................           $ 78,031          $ 42,468
Senior Notes:
     6.67%, due 2003, principal payable in semi-annual installments of $1,750.........              6,250             9,750
     7.22%, due 2004, principal payable in semi-annual installments of $1,750.........              9,750            13,250
     6.70%, due 2005, principal payable in semi-annual installments of $2,333.........             17,667            20,000
Industrial revenue bonds:
     Adjustable  rates (4.84% at December 31,  2000 and 4.73% at December 31, 1999)
     due in 2008-2010.................................................................              9,500             9,500
     8.13%, due in 2012...............................................................              5,000             5,000
Other.................................................................................              6,500             7,509
                                                                                            -----------------------------------
Total.................................................................................            132,698           107,477
Less current maturities...............................................................                 90                94
                                                                                            -----------------------------------
                                                                                                $ 132,608         $ 107,383
                                                                                            ===================================
</TABLE>

The Company has an unsecured $160 million multi-currency global revolving credit
agreement  which bears interest,  at the election of the Company,  at a floating
rate  under  one of  three  alternative  elections.  A  variable  facility  fee,
currently at .125%, is paid on the credit line. This revolving  credit agreement
terminates in September  2002, at which time the Company may extend for one-year
periods with the consent of all the participating banks.

The $9.5 million industrial revenue bonds are secured by letters of credit which
expire in 2002. 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 December 31, 2000, the Company was in compliance
with all  related  covenants.  Retained  earnings  available  for  dividends  at
December 31, 2000, are $20.2 million.

Certain  maturities  are generally  classified as long-term due to the intent to
refinance  these  under  the  revolving  credit   agreement.   Annual  principal
maturities consist of:
<TABLE>
                  Year ending               In thousands                                            Amount
                  ----------------------------------------------------------------------------------------
                  <S>                                                                           <C>
                  2001......................................................................... $       90
                  2002.........................................................................     22,545
                  2003.........................................................................     53,619
                  2004.........................................................................     37,892
                  2005.........................................................................      2,066
                  2006 and thereafter..........................................................     16,486
                                                                                                ----------
                                                                                                $  132,698
                                                                                                ==========
</TABLE>

Interest payments of $7.0 million,  $4.1 million,  $7.8 million and $8.6 million
were made in 2000, the six-month  period ended December 31, 1999, and years 1999
and 1998, respectively.

8.   ACCOUNTS RECEIVABLE SECURITIZATION

The Company has an agreement  to sell,  on a revolving  basis,  an interest in a
defined pool of trade  accounts  receivable of up to $50 million.  The agreement
expires in December 2001,  however,  it is renewable for one-year periods at the
option of the  Company and with the  consent of bank  participants.  The Company
expects to extend the current  agreement or replace it on comparable  terms.  At
December 31, 2000,  and  December  31, 1999, a $38.5  million and $38.9  million
interest, respectively, had been sold under this agreement with proceeds used to
reduce  revolving  lines of credit.  The sale is  reflected  as a  reduction  of
accounts   receivable  and  as  operating  cash  flows.  As  collections  reduce
previously sold  interests,  new accounts  receivable are customarily  sold. The
proceeds of sales are less than the face amount of accounts  receivable  sold by
an amount that  approximates  the purchaser's  financing cost of issuing its own
commercial paper backed by these accounts receivable.  The Company, as agent for
the purchaser,  retains collection and administrative  responsibilities  for the
participating interests of the defined pool.


                                       48
<PAGE>
9.   FINANCIAL INSTRUMENTS

The Company  utilizes  interest  rate swaps and foreign  exchange  contracts  to
manage exposure to fluctuations in interest and foreign currency  exchange rates
and  accordingly  accounts for them on a hedging rather than trading basis.  The
risk of loss to the  Company in the event of  nonperformance  by any party under
these  agreements is not material.  At December 31, 2000, and December 31, 1999,
the Company had  interest  rate swaps with an aggregate  notional  amount of $15
million and $30 million,  respectively.  These effectively converted $15 million
and $30 million of the Company's  variable  interest rate debt to fixed rates at
December 31, 2000, and December 31, 1999, respectively. The Company is currently
paying a  weighted-average  fixed  rate of  7.49%,  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 entered into foreign exchange  contracts to hedge against changes in
foreign  currency  exchange  rates for the  benefit  of its Irish  subsidiaries.
Foreign  exchange  contracts  outstanding  were $1.4 million and $2.0 million at
December 31, 2000,  and December 31, 1999,  respectively.  The foreign  exchange
contracts require the Company to exchange foreign currencies for Irish punts and
generally mature within twelve months. Deferred gains and losses are included on
a net basis in the  Company's  combined  consolidated  financial  statements  as
either other assets or other liabilities and are recognized in income as part of
a sale transaction when it is recognized.

The carrying  value and  estimated  fair value of all financial  instruments  in
which the fair value  differs from  carrying  value at December  31,  2000,  and
December 31, 1999, are as follows:
<TABLE>
                                                                                December 31, 2000         December 31, 1999
                                                                             --------------------------------------------------
                                                                              Carrying       Fair       Carrying       Fair
In thousands                                                                    Value        Value        Value       Value
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>          <C>         <C>
Liabilities:
Long-term, fixed-rate debt.............................................       $38,667      $39,394      $48,000      $47,836
Derivatives:
Interest rate swaps....................................................            --         (401)          --         (230)
Foreign exchange contracts.............................................            --          172           --         (134)
</TABLE>

SFAS No. 133  establishes  accounting  and reporting  standards  for  derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives in the balance sheet at fair value. It also requires that unrealized
gains and losses  resulting  from changes in fair value be included in income or
comprehensive  income,  depending on whether the instrument qualifies as a hedge
transaction, and if so, the type of hedge transaction. SFAS No. 133 is effective
for  the  Company  on  January  1,  2001.   The  Company  does  not  expect  the
implementation  of this new standard to have a material impact on its results of
operations or financial position.

10.  BENEFIT PLANS

A.    Pension Benefits

The Company  sponsors defined benefit pension plans covering  substantially  all
domestic  employees  and  employees at the Company's  Donnelly  Mirrors  Limited
facility  in  Ireland.  Pension  costs for the plans are funded in amounts  that
equal or exceed  regulatory  requirements.  Plan assets are primarily  corporate
equity and debt securities.

                                       49
<PAGE>
Assumptions used in determining net periodic pension cost are as follows:
<TABLE>
                                                                    Year          Six Months
                                                                    Ended            Ended                Fiscal Years Ended
                                                                                                     ------------------------------
                                                                December 31,     December 31,           July 3,        June 27,
                                                                    2000             1999                 1999           1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>               <C>                 <C>              <C>
Discount rate............................................               8.00%             7.50%            7.00%            7.75%
Compensation increase....................................               5.00%             5.00%            5.00%            5.00%
Expected return on plan assets...........................               9.50%             9.50%            9.50%            9.50%
In thousands:
------------
Service cost.............................................       $      4,355      $      2,371        $  5,085          $  4,284
Interest cost............................................              7,069             3,343           6,459             5,881
Expected return on plan assets...........................             (7,725)           (3,727)         (7,087)           (6,023)
Net amortization and deferral............................               (684)             (147)           (175)               84
                                                              ---------------------------------------------------------------------
Net periodic benefit cost................................       $      3,015      $      1,840        $  4,282          $  4,226
                                                              =====================================================================
</TABLE>

The  following  tables  provide a  reconciliation  of the  changes in the plans'
benefit obligations, fair value of assets and funded status:

<TABLE>
                                                                                                   Year          Six Months
                                                                                                  Ended            Ended
                                                                                               December 31,      December 31,
In thousands                                                                                       2000             1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                             <C>             <C>
Change in benefit obligation
Benefit obligation at beginning of period.............................................          $   86,278       $   91,314
Service cost..........................................................................               4,355            2,371
Interest cost.........................................................................               7,069            3,343
Plan participants' contributions......................................................                 103               81
Actuarial losses (gains)..............................................................              10,492           (9,850)
Foreign exchange rate changes.........................................................                (592)            (121)
Benefits paid.........................................................................              (1,999)            (860)
                                                                                              --------------------------------
Benefit obligation at end of period...................................................          $  105,706       $   86,278
                                                                                              ================================

Change in plan assets
Fair value of plan assets at beginning of period......................................          $   86,326       $   82,811
Actual return on plan assets..........................................................                 685            4,533
Foreign exchange rate changes.........................................................              (1,149)            (270)
Plan participants' contributions......................................................                 168               81
Benefits paid.........................................................................              (2,087)            (829)
                                                                                              --------------------------------
Fair value of plan assets at end of period............................................          $   83,943       $   86,326
                                                                                              ================================

Funded status.........................................................................          $  (21,763)      $       48
Unrecognized net actuarial (gain).....................................................                (359)         (19,066)
Unrecognized transition obligation....................................................                  38              123
Unrecognized prior service cost.......................................................              (3,851)          (4,115)
                                                                                              --------------------------------
Accrued benefit cost..................................................................          $  (25,935)      $  (23,010)
                                                                                              ================================
</TABLE>

B.   Postretirement Health Care Benefits

The  Company  provides  certain  health  care and life  insurance  benefits  for
eligible  active and retired  domestic  employees hired before July 1, 1998. The
plan  contains  cost-saving  features  such as  deductibles,  coinsurance  and a
lifetime  maximum and is unfunded.  The Company  accrues,  during the employee's
years of service, the expected cost of providing  postretirement benefits to the
employee and the employee's beneficiaries and covered dependents. Funding policy
for these benefits is to pay covered expenses as incurred.

                                       50
<PAGE>
Assumptions used in determining net periodic  postretirement benefit cost are as
follows:
<TABLE>
                                                                    Year          Six Months
                                                                    Ended            Ended            Fiscal Years Ended
                                                                                                  --------------------------
                                                                December 31,     December 31,       July 3,       June 27,
                                                                    2000             1999            1999          1998
----------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>             <C>             <C>            <C>
Discount rate...............................................        8.00%           7.50%           7.00%          7.75%
Health care cost trend (a)..................................        7.00%           7.00%           8.00%          9.00%
In thousands:
   Service cost.............................................     $    581       $     318       $    650       $    504
   Interest cost............................................         1085             497            938            977
   Amortization of transition obligation over 22 periods....          360             180            360            360
   Net other amortization...................................           10              15             30              9
                                                              ---------------------------------------------------------------
   Net periodic benefit cost.............................        $  2,036       $   1,010       $  1,978       $  1,850
                                                              ===============================================================
</TABLE>

(a) Gradually declining to 6.5% in 2004 and remaining level thereafter.

The  following  tables  provide a  reconciliation  of the  changes in the plans'
benefit obligations, fair value of assets and funded status:
<TABLE>
                                                                                                 Year           Six Months
                                                                                                Ended              Ended
                                                                                             December 31,       December 31,
In thousands                                                                                     2000              1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>               <C>
Change in benefit obligation
Benefit obligation at beginning of period...........................................         $    13,185       $     13,276
Service cost........................................................................                 581                318
Interest cost.......................................................................               1,085                497
Actuarial (gains) losses............................................................               1,065               (812)
Benefits paid.......................................................................                (200)               (94)
                                                                                           ------------------------------------
Benefit obligation at end of period.................................................         $    15,716       $     13,185
                                                                                           ====================================

Funded status.......................................................................         $   (15,716)      $    (13,185)
Unrecognized net actuarial (gain) loss and prior service cost.......................                 (98)            (1,152)
Unrecognized transition obligation..................................................               5,221              5,581
                                                                                           ------------------------------------
Accrued benefit cost................................................................         $   (10,593)      $     (8,756)
                                                                                           ====================================
</TABLE>

The  assumed  health  care cost  trend  rates have a  significant  effect on the
amounts reported. A 1% change in assumed health care cost trend rates would have
the following effects:
<TABLE>
In thousands                                                                                   1% Increase      1% Decrease
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>            <C>
Effect on service and interest cost components............................................       $   124        $  (146)
Effect on postretirement benefit obligation...............................................       $   845        $  (934)
</TABLE>
                                       51
<PAGE>
11.  TAXES ON INCOME (as restated)
<TABLE>
                                                                     Year          Six Months
                                                                    Ended             Ended            Fiscal Years Ended
                                                                                                  ------------------------------
                                                                 December 31,     December 31,       July 3,        June 27,
In thousands                                                         2000             1999             1999           1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                <C>              <C>             <C>
Income before taxes on income consists of:
Domestic..................................................       $    20,089       $    28,637      $   27,655      $   21,937
Foreign...................................................             1,492            (2,151)        (18,665)         (3,322)
                                                               -----------------------------------------------------------------
                                                                 $    21,581       $    26,486      $    8,990      $   18,615
                                                               =================================================================
Tax expense (benefit) consists of:
Current:
Domestic..................................................       $       704       $     9,787      $    1,169      $      818
Foreign...................................................             1,457               908           1,839              79
                                                               -----------------------------------------------------------------
                                                                 $     2,161       $    10,695      $    3,008      $      897
                                                               -----------------------------------------------------------------

Deferred:
Domestic..................................................       $     3,781       $     1,156      $    5,484      $    5,025
Foreign...................................................             1,195            (2,404)         (7,034)           (879)
                                                               -----------------------------------------------------------------
                                                                       4,976            (1,248)         (1,550)          4,146
                                                               -----------------------------------------------------------------
                                                                 $     7,137       $     9,447      $    1,458      $    5,043
                                                               =================================================================
Deferred Tax Benefits Recorded on Equity Losses...........       $     2,281       $       882      $    1,367      $      172
                                                               =================================================================
</TABLE>

The  difference  between the Company's  income tax provision and 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          Six Months
                                                            Ended            Ended                 Fiscal Years Ended
                                                                                              ------------------------------
                                                        December 31,     December 31,            July 3,        June 27,
                                                            2000             1999                 1999            1998
----------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>               <C>                 <C>             <C>
Income taxes at federal statutory rate...........                35%             35%                  34%           35%
Impact of:
     Tax asset adjustment for rate change........                15             --                    --            --
     Available tax credits.......................                (2)            --                   (10)           (6)
     Foreign subsidiary earnings.................                (7)             2                     5            (1)
     Export sale tax benefits....................               (11)            (2)                  (15)           (4)
     Other.......................................                 3              1                     2             3
                                                      ----------------------------------------------------------------------
Effective tax rate...............................               33%             36%                  16%            27%
                                                      ----------------------------------------------------------------------
Income taxes paid (in thousands).................     $       8,237     $   10,584            $    1,506      $   2,164
                                                      ======================================================================
</TABLE>

The tax rate in Germany  decreased by approximately 10 percentage  points during
the fourth quarter of 2000. As a result of this change, the related deferred tax
assets and net income were reduced by $3.4 million.

                                       52
<PAGE>
Deferred income taxes 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  non-current
deferred tax assets with other assets on the  accompanying  balance sheets.  The
tax effects of temporary  differences,  which give rise to a significant portion
of deferred tax assets (liabilities), are as follows:
<TABLE>
                                                                                          December 31,          December 31,
In thousands                                                                                  2000                  1999
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>                    <C>
Fixed assets....................................................................          $     (18,679)        $     (13,779)
Retirement plans................................................................                  9,396                 8,146
Postretirement benefits.........................................................                  3,778                 3,065
Loss carryforwards..............................................................                 22,652                21,525
Accrued expenses and other......................................................                (10,140)               (9,481)
Valuation allowance.............................................................                   (889)                 (850)
                                                                                      -------------------------------------------
Net deferred tax asset .........................................................          $       6,118         $       8,626
                                                                                      ===========================================
</TABLE>

Deferred taxes are classified in the accompanying balance sheets as follows:
<TABLE>


                                                                                          December 31,          December 31,
In thousands                                                                                  2000                  1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>                   <C>
Current income tax asset........................................................          $        4,499        $       2,594
Non-current income tax asset....................................................                   1,619                6,032
                                                                                      -------------------------------------------
Net deferred tax asset..........................................................          $         6,118       $       8,626
                                                                                      ===========================================
</TABLE>

At  December  31,  2000,  the  Company  has $56.1  million of  consolidated  net
operating  loss   carryforwards   which  do  not  expire  and  $8.1  million  of
consolidated  net  operating  loss   carryforwards   which  expire  in  2020.  A
significant  portion  of the loss  carry-forwards  resulted  from  the  European
restructuring  charges.  These tax assets,  which are largely  offset by related
liabilities, are also expected to be realized based on the improvements from the
restructuring  initiative,  and continuous  improvement  in overall  operational
earnings from the  implementation of the Company's  production system throughout
Europe.

12.  PREFERRED STOCK AND COMMON STOCK (as restated)

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 December 31, 2000.  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
with none 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.

The following table sets forth the computation of basic and diluted earnings per
share for each period reported:
<TABLE>
                                                                        Year       Six Months Ended
                                                                       Ended                              Fiscal Years Ended
                                                                                                       --------------------------
                                                                    December 31,     December 31,        July 3,       June 27,
In thousands, except per share data                                     2000             1999             1999           1998
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>               <C>               <C>          <C>
Net income....................................................      $  11,123          $ 15,296         $ 4,989      $ 11,577
 Less:  Preferred stock dividends.............................            (40)              (20)            (40)          (40)
                                                                  ----------------------------------------------------------------
Income available to common stockholders.......................      $  11,083           $ 15,276        $ 4,949      $ 11,537
                                                                  ================================================================

Weighted-average shares.......................................          10,168            10,139         10,091         9,961
 Plus:  Effect of dilutive stock options......................              14                31             29           111
                                                                  ----------------------------------------------------------------
 Adjusted weighted-average shares.............................          10,182            10,170         10,120        10,072
                                                                  ================================================================

Basic earnings per share......................................      $     1.09         $    1.51       $   0.49     $    1.16
                                                                  ================================================================
Diluted earnings per share....................................      $     1.09         $    1.50       $   0.49     $    1.15
                                                                  ================================================================
</TABLE>
                                       53
<PAGE>
13.  STOCK PURCHASE AND OPTION PLANS

The Company's  1998  Employees'  Stock  Purchase Plan permits the purchase in an
aggregate  amount  of up to  300,000  shares of Class A Common  Stock.  Eligible
employees  may purchase  stock at market  value,  or 85% of market value up to a
maximum of $25,000 per employee in any calendar  year. The Company issued 31,038
shares in 2000,  16,287 shares in the six-month  period ended December 31, 1999,
and 14,182 shares in 1999 under this plan. The Company also issued 16,831 shares
in 1999 and 18,963 shares in 1998 under a previous plan.

The Company's Stock Option Plans permit the granting of either  non-qualified or
incentive  stock  options to certain key  employees and directors to purchase an
aggregate  amount of up to 975,000 shares of the Company's Class A Common Stock.
The  options  granted  under  the  1987  and  1997  Employee  Option  Plans  and
Non-employee  Director Stock Option Plan become  exercisable twelve months after
date of grant and expire ten years after the date of grant.  The options granted
under the 1998  Employee  Stock  Option Plan become  exercisable  in three equal
annual installments,  beginning twelve months after the date of grant and expire
ten years after the date of grant. Although the plan administrator may establish
the  non-qualified  option  price at below  market  value at the date of  grant,
incentive  stock  options may be granted only at prices not less than the market
value. At December 31, 2000, 579,629 options were available for grant.

     A summary of the Company's  stock option  activity and related  information
     follows:
<TABLE>

                                                                                                               Weighted-
                                                                                                                Average
                                                                                          Shares Under      Exercise Price
In thousands, except per share data                                                         Option             Per Share
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                        <C>               <C>
Outstanding at June 28, 1997                                                                  523            $     12.45
----------------------------------------------------------------------------------------------------------------------------
Exercisable at June 28, 1997                                                                  426                  12.05
----------------------------------------------------------------------------------------------------------------------------
Granted in fiscal 1998                                                                        164                  21.94
Exercised                                                                                    (171)                 10.64
Canceled                                                                                      (18)                 20.42
----------------------------------------------------------------------------------------------------------------------------
Outstanding at June 27, 1998                                                                  498                  15.92
----------------------------------------------------------------------------------------------------------------------------
Exercisable at June 27, 1998                                                                  350                  13.34
----------------------------------------------------------------------------------------------------------------------------
Granted in fiscal 1999                                                                        123                  16.98
Exercised                                                                                     (35)                  9.75
Canceled                                                                                      (23)                 19.81
----------------------------------------------------------------------------------------------------------------------------
Outstanding at July 3, 1999                                                                   563                  16.38
----------------------------------------------------------------------------------------------------------------------------
Exercisable at July 3, 1999                                                                   441                  16.21
----------------------------------------------------------------------------------------------------------------------------
Granted in the six-month period ended December 31, 1999                                       161                  15.44
Exercised                                                                                      (2)                  8.48
Canceled                                                                                       (5)                 16.97
----------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 1999                                                              717                  16.19
----------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31, 1999                                                              559                  16.40
----------------------------------------------------------------------------------------------------------------------------
Granted in fiscal 2000                                                                         87                  12.40
Exercised                                                                                      (9)                  9.96
Canceled                                                                                      (45)                 16.48
----------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31, 2000                                                              750                  15.80
----------------------------------------------------------------------------------------------------------------------------
Exercisable at December 31, 2000                                                              580            $     16.35
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
                                                                                            Weighted-Average
                                                                          ------------------------------------------------------
                                             Number of Options                      Option Price                 Remaining
                                     -----------------------------------------------------------------------
Exercise Price Range                   Outstanding        Exercisable     Outstanding       Exercisable      Contractual Life
--------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                <C>              <C>              <C>               <C>
          $8.48 - $14.938                  333                250              $13.16           $13.41            5.25yrs
          $15.44 - $22.69                  417                330              $17.92           $18.58            7.08yrs
</TABLE>

Pro forma  information  regarding  net  income and net income per share has been
determined  as if the Company had  accounted for its stock awards using the fair
value  method  consistent  with  SFAS No.  123 and had  recognized  compensation
expense. The fair value of these awards was estimated at the date of grant using
the  Black-Scholes  option  pricing  model with the  following  weighted-average
assumptions: risk-free interest rates of 5.15%, 6.52%, 6.07% and 5.45%; dividend
yield of 2.9%, 2.6%, 2.5% and 2.06%; expected market price volatility factors of
0.319,  0.313,  0.316 and 0.311; and an expected option life of seven

                                       54
<PAGE>
years,  for 2000,  the six-month  period ended December 31, 1999, and the fiscal
years ended July 3, 1999, and June 27, 1998, respectively.

The weighted-average,  grant-date fair value of options were $3.80, $5.28, $5.76
and $7.53 for stock options granted in 2000, the six-month period ended December
31,  1999,  and the  fiscal  years  ended  July 3,  1999;  and  June  27,  1998;
respectively.

Pro forma information under SFAS No. 123 is as follows:
<TABLE>
                                                                     Year             Six Months
                                                                     Ended              Ended                Fiscal Years Ended
                                                                 December 31,          December 31       ---------------------------
                                                                     2000                1999               July 3,       June 27,
In thousands, except per share data                                                                          1999          1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>                 <C>                  <C>           <C>
Net income:
   As reported..........................................          $ 11,123            $ 15,296             $  4,989      $ 11,577
   Pro forma............................................            10,732              14,924                4,145        10,544
Basic net income per share of common stock:
   As reported..........................................          $   1.09            $   1.51             $   0.49      $   1.16
   Pro forma............................................              1.05                1.47                 0.41          1.05
Diluted net income per share of common stock:
   As reported..........................................          $   1.09            $   1.50             $   0.49      $   1.15
   Pro forma............................................              1.05                1.46                 0.41          1.04
</TABLE>

14.  COMMITMENTS AND CONTINGENCIES

A.   Litigation

On October 5, 2000, the Company filed a complaint against Reitter & Schefenacker
USA Limited  Partnership  and Reitter & Schefenacker  GmbH & Co., KG in the U.S.
District Court for the Western District of Michigan.  The complaint alleges that
the  defendants  have  infringed  three of the  Company's  patents  relating  to
interior  rearview  mirror  assemblies   incorporating  lighting  features.  The
complaint  seeks   unspecified   damages  and  an  injunction   against  further
infringement. Defendant Reitter & Schefenacker USA Limited Partnership has filed
an answer  denying  infringement  and  alleging  that the  patents  at issue are
invalid and/or  unenforceable.  Defendant  Reitter & Schefenacker GmbH & Co., KG
has not yet filed an answer but has stated  that it intends to assert that it is
not subject to the jurisdiction of the court.

The Company and its subsidiaries are involved in certain other legal actions and
claims  incidental  to its  business,  including  those  arising  out of alleged
defects, breach of contracts, product warranties, employment-related matters and
environmental matters. An estimated loss from a legal action or claim is accrued
when events  exist that make the loss  probable  and the loss can be  reasonably
estimated.  Although  the  Company  maintains  accruals  for  such  claims  when
warranted,  there can be no assurance  that such  accruals  will  continue to be
adequate.  The Company  believes that accruals  related to such  litigation  and
claims are  sufficient  and that these items will be resolved  without  material
effect on the Company's financial position, results of operations and liquidity,
individually and in the aggregate.

B.   Other

As  of  December  31,  2000,  the  Company  had  capital  expenditure   purchase
commitments outstanding of approximately $11.2 million.

The Company  provides a guarantee for $7.1 million in municipal  funding for one
of the Company's manufacturing facilities in Michigan.

                                       55
<PAGE>
15.  LEASES

Future minimum lease payments, excluding renewal options, consist of:
<TABLE>
                                                                                                  Capital          Operating
Year ending            In thousands                                                               Leases            Leases
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                              <C>               <C>
2001....................................................................................         $    168          $    4,484
2002....................................................................................               50               3,316
2003....................................................................................                8               2,092
2004....................................................................................               --               1,464
2005....................................................................................               --                 829
2006 and thereafter.....................................................................               --                 101
                                                                                                 ----------------------------
Total minimum lease payments............................................................              226          $   12,286
                                                                                                                   ==========
Less amount representing interest and other.............................................              (11)
                                                                                                 ---------
Present value of net minimum lease payments.............................................         $    215
                                                                                                 =========
</TABLE>

The  company  has  operating  leases for office,  warehouse,  and  manufacturing
facilities and  manufacturing  equipment.  Rental expense  charged to operations
amounted to approximately $4.5 million, $5.2 million, and $4.3 million for 2000,
1999, and 1998, respectively,  and approximately $2.4 million for the six months
ended December 31, 1999. In 1998, the company  entered into an agreement for the
sale and leaseback of newly installed injection molding equipment. The equipment
was sold at cost  and no gain or loss was  recognized  on the  transaction.  The
lease has an  effective  6.4%  fixed  interest  rate and a 40%  balloon  for the
Company's option to purchase the equipment after the full seven-year term and is
classified as an operating lease.

16.  COMMON STOCK PRICE PER SHARE - UNAUDITED

The Company's  common stock is traded on the New York 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>
                                                     Year Ended                Six Months Ended            Fiscal Year Ended
                                                    December 31,                 December 31,                   July 3,
                                                        2000                         1999                         1999
---------------------------------------------------------------------------------------------------------------------------------
Quarter                                          High          Low            High          Low            High         Low
---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>          <C>               <C>          <C>            <C>          <C>
First...................................      $   14.19    $    11.75        $ 17.25      $ 14.00        $ 18.88      $ 14.13
Second..................................          15.00         11.75          15.13        13.00          16.00        12.50
Third...................................          15.90         12.25             --           --          15.25        12.13
Fourth..................................          15.25         11.55             --           --          17.50        12.88
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                                       56
<PAGE>
17.  QUARTERLY FINANCIAL DATA--UNAUDITED AND RESTATED
<TABLE>
                                                                     First        Second      Third      Fourth      Total
In thousands, except per share data                                 Quarter      Quarter     Quarter     Quarter     Year
---------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>         <C>         <C>        <C>
Year ended December 31, 2000:
Net sales.....................................................    $237,404      $227,492    $192,684    $199,899    $ 857,479
Gross profit..................................................      41,280        38,794      25,328      31,574      136,976
Operating income (loss).......................................      10,637         9,664      (2,586)      7,612       25,327
Net income....................................................       5,567         5,530      (1,680)      1,706       11,123
         Basic net income per share...........................        0.55          0.54       (0.17)       0.17         1.09
         Diluted net income per share.........................        0.55          0.54       (0.17)       0.17         1.09
Dividends declared per share of common stock..................        0.10          0.10        0.10        0.10         0.40

Six months ended December 31, 1999:
Net sales.....................................................    $208,917      $212,724          --          --    $ 421,641
Gross profit..................................................      29,472        35,086          --          --       64,558
Operating income..............................................       2,698         7,834          --          --       10,532
Net income....................................................       8,230         7,065          --          --       15,296
         Basic net income per share...........................        0.81          0.70          --          --         1.51
         Diluted net income per share.........................        0.81          0.69          --          --         1.50
Dividends declared per share of common stock..................        0.10          0.10          --          --         0.20

Fiscal year ended July 3, 1999:
Net sales.....................................................    $189,603      $239,093    $233,154    $243,119     $904,969
Gross profit..................................................      26,761        35,089      37,963      34,503      134,316
Operating income..............................................      (1,232)        3,192      (1,107)      6,767        7,620
Net income....................................................      (2,967)          800       1,081       6,075        4,989
       Basic net income per share.............................       (0.30)         0.08        0.11        0.60         0.49
       Diluted net income per share...........................       (0.30)         0.08        0.11        0.60         0.49
Dividends declared per share of common stock..................        0.10          0.10        0.10        0.10         0.40
</TABLE>

Effective  July 4,  1999,  the  Company  changed  its method of  accounting  for
start-up and organization costs.

18.      RESTATEMENT OF FINANCIAL STATEMENTS

As  described in Note 1, the  Company's  financial  statements  for the relevant
periods  have been  restated  to properly  reflect  financial  position  and net
income.  The  following  tables  detail  the  effects  of  the  restatement  (in
thousands, except per share data):
<TABLE>
                                                           Year Ended                      Six Months Ended
Income Statement Data                                   December 31, 2000                 December 31, 1999
------------------------------------------------------------------------------------------------------------------
                                                  As Previously     As Restated      As Previously     As Restated
                                                     Reported                          Reported
                                                ------------------------------------------------------------------
<S>                                                 <C>               <C>              <C>               <C>
Net sales                                           $857,479          $857,479         $421,641          $421,641
Gross profit                                         136,976           136,976           64,558            64,558
Net income                                            18,456            11,123           18,031            15,296
Basic  net income per share                          $  1.81           $  1.09          $  1.78           $  1.51
Diluted net income per share                         $  1.81           $  1.09          $  1.77           $  1.50
</TABLE>
                                       57
<PAGE>
<TABLE>
                                                     Fiscal Year Ended                  Fiscal Year Ended
Income Statement Data                                  July 3, 1999                       June 27, 1998
------------------------------------------------------------------------------------------------------------------
                                                 As Previously     As Restated      As Previously     As Restated
                                                    Reported                          Reported
                                                ------------------------------------------------------------------
<S>                                                 <C>               <C>              <C>               <C>
Net sales                                           $904,969          $904,969         $763,311          $763,311
Gross profit                                         134,316           134,316          130,632           130,632
Net income                                            10,592             4,989           13,009            11,577
Basic net income per share                           $  1.05           $  0.49          $  1.30           $  1.16
Diluted net income per share                         $  1.04           $  0.49          $  1.29           $  1.15
</TABLE>

<TABLE>
Balance Sheet Data                                As of December 31, 2000            As of December 31, 1999
------------------------------------------------------------------------------------------------------------------
                                              As Previously     As Restated      As Previously     As Restated
                                                 Reported                           Reported
                                             ---------------------------------------------------------------------
<S>                                                 <C>               <C>              <C>               <C>
Current assets                                      $172,741          $172,324         $163,934          $163,707
Total assets                                         464,020           423,996          428,863           401,822
Current liabilities                                  128,980           128,980          138,675           138,675
Total liabilities and minority interest              329,239           309,371          305,068           290,850
Shareholders' equity                                 134,781           114,625          123,795           110,972
</TABLE>

The follow table  details  unauditied  quarterly  financial  data as  previously
reported (refer to Note 17):

<TABLE>
                                                                     First        Second      Third      Fourth      Total
In thousands, except per share data                                 Quarter      Quarter     Quarter     Quarter     Year
---------------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>           <C>         <C>         <C>        <C>
Year ended December 31, 2000:
Net sales.....................................................    $237,404      $227,492    $192,684    $199,899    $ 857,479
Gross profit..................................................      41,280        38,794      25,328      31,574      136,976
Operating income (loss).......................................      10,949         9,848      (2,387)      7,741       26,151
Net income....................................................       6,774         7,137         631       3,914       18,456
         Basic net income per share...........................        0.67          0.70        0.06        0.38         1.81
         Diluted net income per share.........................        0.67          0.70        0.06        0.38         1.81
Dividends declared per share of common stock..................        0.10          0.10        0.10        0.10         0.40

Six months ended December 31, 1999:
Net sales.....................................................    $208,917      $212,724          --          --    $ 421,641
Gross profit..................................................      29,472        35,086          --          --       64,558
Operating income..............................................       2,824         7,970          --          --       10,794
Net income....................................................       9,923         8,108          --          --       18,031
         Basic net income per share...........................        0.98          0.80          --          --         1.78
         Diluted net income per share.........................        0.97          0.80          --          --         1.77
Dividends declared per share of common stock..................        0.10          0.10          --          --         0.20

Fiscal year ended July 3, 1999:
Net sales.....................................................    $189,603      $239,093    $233,154    $243,119     $904,969
Gross profit..................................................      26,761        35,089      37,963      34,503      134,316
Operating income..............................................      (1,112)        3,310        (944)      6,847        8,101
Net income....................................................      (1,990)        1,451       3,820       7,311       10,592
       Basic net income per share.............................       (0.20)         0.14        0.38        0.72         1.05
       Diluted net income per share...........................       (0.20)         0.14        0.38        0.72         1.04
Dividends declared per share of common stock..................        0.10          0.10        0.10        0.10         0.40
</TABLE>

The above  disclosures of restated net income includes tax benefits  recorded of
$2,737,  $1,014,  $1,443 and $182,  respectively,  primarily on equity losses of
Donnelly Electronics.


                                       58
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The management of Donnelly Corporation is responsible for the preparation and
integrity of the combined consolidated financial statements and all other
information contained in this Annual Report. The financial statements were
prepared in accordance with generally accepted accounting principles and include
amounts that are based on management's informed estimates and judgments.

In fulfilling  its  responsibility  for the integrity of financial  information,
management  has  established  a system  of  internal  accounting  control  which
provides reasonable assurance that assets are properly safeguarded and accounted
for  and  that   transactions  are  executed  in  accordance  with  management's
authorization and recorded and reported properly.

The  financial   statements  have  been  audited  by  our   independent   public
accountants, BDO Seidman, LLP, whose unqualified report is presented on the next
page. The independent  accountants provide an objective assessment of the degree
to  which  management  meets  its   responsibility  for  fairness  of  financial
reporting.  They regularly  evaluate the internal control  structure and perform
such tests and other  procedures as they deem  necessary to reach and express an
opinion on the fairness of the financial statements.

The Audit  Committee  of the Board of  Directors,  consisting  solely of outside
Directors,  meets with the  independent  public  accountants  and  management to
review and discuss  the major  audit  findings,  the  adequacy  of the  internal
control   structure  and  quality  of  financial   reporting.   The  independent
accountants also have free access to the Audit Committee to discuss auditing and
financial reporting matters with or without management present.



/s/ DWANE BAUMGARDNER
J. Dwane Baumgardner, Ph.D.
Chairman, Chief Executive Officer and President



/s/ KEVIN BROWN
Chief Financial Officer
and Chief Accounting Officer


                                       59
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

DONNELLY CORPORATION
HOLLAND, MICHIGAN

We have audited the combined consolidated balance sheets of Donnelly Corporation
and  subsidiaries  as of December  31, 2000  and 1999, and the related  combined
consolidated  statements of income,  shareholders' equity and cash flows for the
year ended December 31, 2000, the six-month  period ended December 31, 1999, and
each of the two years for the  periods  ended July 3, 1999,  and June 27,  1998.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

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

In our opinion, the combined consolidated financial statements referred to above
present fairly,  in all material  respects,  the financial  position of Donnelly
Corporation  and  subsidiaries as of December 31, 2000 and 1999, and the results
of their  operations  and their cash flows for the year ended December 31, 2000,
the six-month  period ended December 31, 1999, and each of the two years for the
periods ended July 3, 1999,  and June 27, 1998, in  conformity  with  accounting
principles generally accepted in the United States of America.

As discussed in Notes 1 and 18, the combined  consolidated  financial statements
have been restated to reflect the effect of a change in the accounting treatment
for certain  investments  in and advances to  affiliates.  Also, as discussed in
Note 1 to the combined consolidated  financial  statements,  the Company changed
its method of accounting for start-up and  organization  costs effective July 4,
1999.

/s/ BDO SEIDMAN
BDO Seidman, LLP
Grand Rapids, Michigan
February 8, 2001,  except Note 3, which is dated  February  26, 2001 and Notes 1
and 18, which are dated August 20, 2001


                                       60
<PAGE>
ITEM 9.      CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
             FINANCIAL DISCLOSURE

Not Applicable.

                                    PART III.

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors of  Registrant.  Information  relating to the  directors  and director
nominees  of the  Registrant  contained  in the  Registrant's  definitive  Proxy
Statement for its Annual  Meeting of  Shareholders  held May 11, 2001, and to be
filed pursuant to Regulation 14A, is incorporated by reference.

Executive  Officers of the  Registrant.  Information  relating to the  executive
officers of the Registrant is included under Item 4 of this Form 10-K/A report.


ITEM 11.     EXECUTIVE COMPENSATION

Information  relating to executive  compensation  is contained under the caption
"Executive  Compensation"  in the Company's  definitive  Proxy Statement for its
Annual Meeting of  Shareholders  held May 11, 2001, and the  information  within
those sections is incorporated by reference.


ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  sections  entitled  "Voting  Securities  and  Principal  Holders  Thereof,"
"Nominees for Election as Directors" and "Securities Ownership of Management" in
the definitive  Proxy Statement for the Company's Annual Meeting of Shareholders
held May 11, 2001, and the information  within those sections is incorporated by
reference.


ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The section  entitled  "Certain  Transactions" in the definitive Proxy Statement
for the Company's  Annual  Meeting of  Shareholders  held May 11, 2001,  and the
information within that section is incorporated by reference.


                                    PART IV.

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

(a)  Documents Filed As Part Of This Report

1.   Financial Statements.  See Item 8.
2.   Financial  Statement  Schedules.

          (i) Donnelly  Corporation.  The  following  are included in Part IV of
     this report for the year ended  December 31, 2000,  six-month  period ended
     December 31, 1999,  and for the years ended July 3, 1999 and June 27, 1998,
     as applicable:

     Report of Independent Certified Public Accountants on
       Financial Statement Schedule (page 64)
     Schedule II, Valuation and Qualifying Accounts (page 65)

          (ii) Donnelly  Electronics,  Inc.  Financial  Statements  for Donnelly
     Electronics,  Inc. with the report thereon of BDO Seidman, LLP dated August
     15, 2001.  See pages 66 to 82.

     All other  schedules are not submitted  because they are not  applicable or
     because the required  information is included in the Combined  Consolidated
     Financial Statements or notes thereto (as restated).

3.   Exhibits.  Reference  is made to the Exhibit  Index,  which is found on the
     last two pages of the body of this Form 10-K/A Annual Report  preceding the
     exhibits.

                                       61
<PAGE>
(b)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the year ended  December
31, 2000.

(c) Exhibits

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

(d)  Financial Statement Schedules

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



                                       62
<PAGE>

                                   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



                                                By  /s/ J. DWANE BAUMGARDNER
                                                    J. Dwane Baumgardner
                                                    Chairman, Chief Executive
                                                    Officer and President

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 in
the  capacities and on the date  indicated.  The persons named below each hereby
appoint J. Dwane Baumgardner and Kevin Brown, and each of them severally, as his
or her attorney in fact, to sign in his or her name and on his or her behalf, as
a director or officer of the Registrant, and to file with the Commission any and
all amendments to this report on Form 10-K/A.



/s/ J. DWANE BAUMGARDNER                            /s/ KEVIN BROWN
J. Dwane Baumgardner                                Kevin L. Brown
Chairman, Director,                                 Senior Vice President,
Chief Executive Officer                             Chief Financial Officer
and President                                       and Chief Accounting Officer



/s/ JOHN A. BORDEN*                                 /s/ ARNOLD F. BROOKSTONE*
Director                                            Director

/s/ B. PATRICK DONNELLY III*                        /s/ JOAN E. DONNELLY*
Director                                            Director

/s/ R. EUGENE GOODSON*                              /s/ THOMAS E. LEONARD*
Director                                            Director

/s/ GERALD T. MCNEIVE JR.*                          /s/ RUDOLPH B. PRUDEN*
Director                                            Director

/s/ DONALD R. UHLMANN*
Director


*By: /s/ J. Dwane Baumgardner
     Attorney-In-Fact


DATE:  September 28, 2001
Donnelly Corporation
Annual Report - Form 10-K/A

                                       63
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT
SCHEDULE


DONNELLY CORPORATION
HOLLAND, MICHIGAN


The audits  referred to in our report  dated  February 8, 2001,  relating to the
combined   consolidated   financial   statements  of  Donnelly  Corporation  and
subsidiaries, which is included in Item 8 of this Form 10-K/A for the year ended
December 31, 2000, included the audit of the financial statement schedule listed
in  the  accompanying   index.   This  financial   statement   schedule  is  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion,  such  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.



/s/BDO SEIDMAN, LLP
BDO Seidman, LLP

Grand Rapids, Michigan
February 8, 2001

                                       64
<PAGE>
DONNELLY CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS

Changes in Reserve for Uncollectible Accounts and Sales Returns and Allowances:
<TABLE>

                                                                   December 31,      December 31,        July 3,
In thousands           Period Ended                                   2000              1999              1999
----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
Balance at beginnin of period...............................       $ 2,449           $ 1,665           $ 1,095
Increase due to potentially uncollectible receivables.......           160               685               662
Increase due to consolidation of subsidiary.................                              90
Decrease due to significant recoveries*.....................          (491)
Decrease due to write-off of bad debts......................          (154)
Decrease due to merger of subsidiary into
       non-consolidated joint venture.......................                                              (100)
Impact of foreign currency changes..........................          (133)
Miscellaneous...............................................             6                 9                 8
                                                                -----------------------------------------------
Balance at end of period....................................       $ 1,837           $ 2,449           $ 1,665
                                                                ===============================================
</TABLE>

  *    Significant recoveries related to process improvements in accounts
       receivable management which has substantially reduced exposure for
       overdue receivables.

                                       65
<PAGE>
                                                      Donnelly Electronics, Inc.






                                                            Financial Statements
                                                    Year Ended December 31, 2000
                                              Six Months Ended December 31, 1999
                                                        Year Ended June 26, 1999
                                            Year Ended June 27, 1998 (unaudited)


                                       66
<PAGE>
                                                      Donnelly Electronics, Inc.




                                                                        Contents



Independent Auditors'Report                                                   68



Financial Statements
         Balance Sheets                                                    69-70
         Statements of Operations                                             71
         Statements of Equity (Deficit)                                       72
         Statements of Cash Flows                                          73-74
         Notes to Financial Statement                                      75-82


                                       67
<PAGE>
Independent Auditors' Report


Donnelly Electronics, Inc.
Holly, Michigan

We have audited the accompanying balance sheets of Donnelly Electronics, Inc. as
of December  31,  2000,  December  31, 1999 and June 26,  1999,  and the related
statements  of  operations,  equity  (deficit) and cash flows for the year ended
December  31, 2000,  the six months  ended  December 31, 1999 and the year ended
June  26,  1999.  These  financial  statements  are  the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Donnelly Electronics,  Inc. as
of December  31, 2000,  December 31, 1999 and June 26, 1999,  and the results of
its  operations  and cash flows for the year ended  December 31,  2000,  the six
months ended  December  31, 1999 and the year ended June 26, 1999 in  conformity
with accounting principles generally accepted in the United States of America.


/s/ BDO Seidman, LLP

Grand Rapids, Michigan
August 15, 2001

                                       68
<PAGE>
<TABLE>
                                                 December 31,        December 31,           June 26,       June 27,
                                                         2000                1999               1999           1998
                                                                                                        (unaudited)
----------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                <C>                <C>             <C>
Assets (Notes 6 and 9)

Current Assets
         Cash and cash equivalents               $          -       $     382,226      $      28,200   $    207,010
         Accounts receivable - trade                   945,667            385,429            377,013         30,071
         Accounts receivable - affiliate (Note 9)    3,563,062          1,732,370            795,823        226,057
         Inventories (Note 3)                        2,315,161          1,154,510            831,616        385,052
         Recoverable customer tooling                  775,212            157,863             72,292          1,916
         Prepaid expenses and other                      3,925             38,614             13,214         11,061
----------------------------------------------------------------------------------------------------------------------

Total Current Assets                                 7,603,027          3,851,012          2,118,158        861,167
----------------------------------------------------------------------------------------------------------------------

Property, Plant and Equipment
         Machinery and equipment                     7,033,586          5,663,919          2,882,918      2,055,000
         Tooling                                       128,137            361,953             64,853          2,134
         Leasehold improvements                        227,975            149,767             32,053         12,181
         Furniture and fixtures                         55,038             50,421             47,178         44,604
----------------------------------------------------------------------------------------------------------------------

                                                     7,444,736          6,226,060          3,027,002      2,113,919
         Less accumulated depreciation and
           amortization                              1,420,978            855,628            607,654        355,507
----------------------------------------------------------------------------------------------------------------------

Net Property, Plant and Equipment                    6,023,758          5,370,432          2,419,348      1,758,412
----------------------------------------------------------------------------------------------------------------------

Other Assets (Note 4)
         Recoverable customer tooling                  775,213            157,864             72,292          1,916
         Notes receivable - shareholders                70,385             24,000             24,000              -
         Deposits                                      491,810            260,236            335,439         55,000
----------------------------------------------------------------------------------------------------------------------

Total Other Assets                                   1,337,408            442,100            431,731         56,916
----------------------------------------------------------------------------------------------------------------------

Total Assets                                     $  14,964,193      $   9,663,544      $   4,969,237   $  2,676,495
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       69
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                                  Balance Sheets

<TABLE>
                                                December 31,     December 31,            June 26,        June 27,
                                                       2000             1999                1999            1998
                                                                                                      (unaudited)
--------------------------------------------------------------------------------------------------------------------
<S>                                             <C>              <C>                <C>              <C>
Liabilities and Equity (Deficit)

Current Liabilities
         Checks issued in advance of deposits   $    269,425     $     -            $     -         $     -
         Outstanding borrowings on line of
           credit (Note 6)                           650,000           -                  -               671,000
         Accounts payable - trade                  4,048,147         1,863,909          1,269,926         932,359
         Accrued expenses                            663,738           388,476             82,567          20,080
         Deferred revenues                            78,828            28,666             28,666         -
         Current maturities of advances
           from affiliate (Note 9)                15,540,572           -                  -               -
         Current maturities of long-term
           debt (Note 6)                             218,725           201,900            201,900          96,000
--------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                         21,469,435         2,482,951          1,583,059       1,719,439

Advances from Affiliate (Note 9)                      -             14,483,553          7,606,305       1,219,574
Long-Term Debt, less current                         253,726           458,427            559,378         293,971
maturities (Note 6)
--------------------------------------------------------------------------------------------------------------------

Total Liabilities                                 21,723,161        17,424,931          9,748,742       3,232,984
--------------------------------------------------------------------------------------------------------------------

Equity (Deficit)
         Preferred stock, non-redeemablenon-
         voting, 7% cumulative, $1,000 par;
         shares authorized 15,000, shares
         issued and outstanding 9,000 (Note 9)     9,000,000           -                  -               -
         Common stock, no par; shares
         authorized 150,000, shares issued
         and outstanding 100,000                      -                -                  -               -
         Losses in excess of capital              (8,924,642)
         Accumulated deficit                      (6,834,326)          -                  -               -
         Member's deficit                             -             (7,761,387)        (4,779,505)       (556,489)
--------------------------------------------------------------------------------------------------------------------

Total Deficit                                     (6,758,968)       (7,761,387)        (4,779,505)       (556,489)
--------------------------------------------------------------------------------------------------------------------

Total Liabilities and Deficit                   $ 14,964,193     $   9,663,544      $   4,969,237   $   2,676,495
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying independent auditors' report and notes to financial statements.

                                       70
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                        Statements of Operations
<TABLE>
                                                       Year  Six Months Ended              Year       Year Ended
                                                       Ended December 31, 1999             Ended         June 27,
                                           December 31, 2000                            June 26,             1998
                                                                                            1999      (unaudited)
--------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>               <C>              <C>
Net Sales (Note 9)                              $ 19,427,002       $ 6,848,587       $ 7,571,920      $  7,072,763
Cost of Sales (Note 9)                            15,886,035         5,949,085         6,914,859        5,614,506
--------------------------------------------------------------------------------------------------------------------

Gross profit                                       3,540,967           899,502           657,061        1,458,257

Selling, General and Administrative
 Expenses (Note 9)                                 9,956,232         3,424,907         4,571,072        2,576,208
--------------------------------------------------------------------------------------------------------------------

Operating Loss                                    (6,415,265)       (2,525,405)       (3,914,011)      (1,117,951)
--------------------------------------------------------------------------------------------------------------------

Non-Operating Income (Expenses)
         Interest expense                         (1,408,170)         (425,451)         (378,774)         (52,040)
         Interest income                               8,614            12,603             9,238           12,772
         Other, net                                 (236,145)          (44,629)              531             (759)
--------------------------------------------------------------------------------------------------------------------

Non-Operating Expenses, net                       (1,635,701)         (457,477)         (369,005)         (40,027)
--------------------------------------------------------------------------------------------------------------------

Net Loss                                        $ (8,050,966)     $ (2,982,882)     $ (4,283,016)    $ (1,157,978)
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying independent auditors' report and notes to financial statements.

                                       71
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                  Statements of Equity (Deficit)
<TABLE>
                                Preferred        Common     Losses in    Accumulated      Member's          Total
                                    Stock         Stock     Excess of        Deficit        Equity         Equity
                                                              Capital                    (Deficit)      (Deficit)
--------------------------------------------------------------------------------------------------------------------
<S>                           <C>          <C>          <C>            <C>            <C>           <C>
Balance, June 29, 1997        $    -       $     -      $     -        $     -        $    601,489  $     601,489
(unaudited)

Net loss for the year              -             -            -              -          (1,157,978)    (1,157,978)
(unaudited)
-------------------------------------------------------------------------------------------------------------------

Balance,  June 27, 1998            -             -            -              -            (556,489)      (556,489)
(unaudited)

Member contributions               -             -            -              -              60,000         60,000
Net loss for the year              -             -            -              -          (4,283,016)    (4,283,016)
-------------------------------------------------------------------------------------------------------------------

Balance, June 26, 1999             -             -            -              -          (4,779,505)    (4,779,505)

Member contributions               -             -            -              -               1,000          1,000
Net loss for the six month         -             -            -              -          (2,982,882)    (2,982,882)
period
-------------------------------------------------------------------------------------------------------------------

Balance, December 31, 1999         -             -            -              -          (7,761,387)    (7,761,387)

Member contributions               -             -            -              -              53,385         53,385
 Net loss for the year                                                    (6,834,326)   (1,216,640)    (8,050,966)
"C" Corporation conversion         -             -         (8,924,642)       -           8,924,642        -
Preferred stock issued          9,000,000        -            -              -              -           9,000,000
     (Note 9)
-------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2000    $ 9,000,000  $     -      $  (8,924,642) $  (6,834,326) $     -       $  (6,758,968)
-------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying independent auditors' report and notes to financial statements.

                                       72
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                        Statements of Cash Flows
<TABLE>
                                                                Year      Six Months           Year      Year Ended
                                                               Ended           Ended          Ended        June 27,
                                                         December 31,     December 31,       June 26,       1998
                                                                2000             1999           1999     (unaudited)
----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>          <C>               <C>
Operating Activities
         Net loss                                      $  (8,050,966)    $(2,982,882)  $ (4,283,016)   $ (1,157,978)
                  Depreciation and amortization              710,422         247,975        252,625         257,107
                  Loss (gain) on disposal of
                    property and equipment                   198,295         -                 (477)          1,301
                  Changes in operating assets and
                    liabilities:
                           Accounts receivable - trade      (560,238)         (8,416)      (346,942)         (8,825)
                           Accounts receivable -
                              affiliate                   (1,830,692)       (936,547)      (569,766)        (70,252)
                           Inventories                    (1,160,651)       (322,894)      (446,564)           (777)
                           Recoverable customer tooling   (1,234,698)       (171,143)      (140,752)         31,977
                           Prepaid expenses and other         34,689         (25,400)        (2,153)        (11,061)
                           Accounts payable - trade        2,184,238         593,983        335,567         504,164
                           Accrued expenses                  275,262         305,909         62,487           6,670
                           Deferred revenues                  50,162         -               28,666             -
----------------------------------------------------------------------------------------------------------------------
Net cash used for operating activities                    (9,384,177)     (3,299,415)    (5,108,325)       (447,674)
----------------------------------------------------------------------------------------------------------------------

Investing Activities
         Issuance of notes receivable                        (53,385)        -              (24,000)        -
         Payment received on notes receivable                  7,000         -                 -            -
         Capital expenditures                             (1,562,043)     (3,199,059)      (913,084)     (1,460,350)
         Net change in deposits                             (231,574 )        75,203       (280,439)         (5,000)
----------------------------------------------------------------------------------------------------------------------

Net cash used for investing activities                    (1,840,002)     (3,123,856)    (1,217,523)     (1,465,350)
----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       73
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                        Statements of Cash Flows
<TABLE>
                                                                Year    Six Months           Year       Year Ended
                                                                Ended        Ended          Ended         June 27,
                                                         December 31,   December 31,       June 26,        1998
                                                                2000           1999          1999      (unaudited)
-------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>             <C>             <C>
Financing Activities
         Net change in checks issued in advance
             of deposits                                     269,425        -             -                -
         Net change in outstanding borrowings on
             line of credit                                  650,000        -            (671,000)         201,000
         Proceeds from long-term debt                        -              -             529,516          473,078
         Repayments of long-term debt                       (187,876)     (100,951)      (158,209)         (83,107)
          Advances from affiliates (Note 9)               10,057,019     6,877,248      6,386,731        1,068,074
         Member contributions                                 53,385         1,000         60,000          -
--------------------------------------------------------------------------------------------------------------------

Net cash from financing activities                        10,841,953     6,777,297      6,147,038        1,659,045
--------------------------------------------------------------------------------------------------------------------

Increase (Decrease) in Cash and Cash Equivalents            (382,226)      354,026       (178,810         (253,979)
Cash and Cash Equivalents, beginning of period               382,226        28,200        207,010          460,989
--------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, end of period               $     -         $   382,226  $      28,200   $      207,010
--------------------------------------------------------------------------------------------------------------------
</TABLE>

See accompanying independent auditors' report and notes to financial statements.

                                       74
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------

1.     Summary of                 Nature of Business
       Significant
       Accounting
       Policies

                    Donnelly    Electronics,    Inc.   (Company)   designs   and
                    manufactures  advanced electronic circuit boards and related
                    products  which are sold to automotive  suppliers as well as
                    non-automotive customers primarily in Michigan.

                    The  Company  was  initially  formed  in 1996 as a  Michigan
                    Limited  Liability  Company and was  subsequently  converted
                    into a "C" Corporation effective March 1, 2000.

                    The  Company  was  an  18%  owned   affiliate   of  Donnelly
                    Corporation  (Donnelly)  as of December 31,  1999,  June 26,
                    1999,  and June 27, 1998. As of December 31, 2000,  Donnelly
                    owned 18% of the Company's  common stock and held $9 million
                    of 7% non-voting preferred stock.

                    On December 29, 2000,  Donnelly gave notice of its intent to
                    acquire all of the outstanding stock of the Company which it
                    did not currently own pursuant to an option  agreement dated
                    January 1, 1998. This  transaction was finalized in February
                    2001, with Donnelly  acquiring all of the outstanding equity
                    of the Company not then owned by Donnelly for $4.5  million,
                    paid equally in cash and through the issuance of  Donnelly's
                    Class A Common Stock.

                    Unaudited Financial Information

                    Unaudited financial  information for the year ended June 27,
                    1998,  as  presented  in the  financial  statements  and the
                    accompanying notes to the financial statements,  is provided
                    for comparison  purposes and includes any normal,  recurring
                    adjustments,  which  are,  in  the  opinion  of  management,
                    necessary for a fair presentation.

                                       75
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------

                    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.  Although  management's  estimates are
                    not   currently   expected  to  change   materially  in  the
                    foreseeable  future, the results the Company will ultimately
                    experience could differ from the amounts assumed.

                    Revenue Recognition

                    The Company's  source of revenue is generated  from the sale
                    of its  products.  Revenue is  recognized  when products are
                    shipped.  Amounts  billed  to  customers  for  shipping  and
                    handling  are  included  in net  sales  while  shipping  and
                    handling  costs incurred by the Company are included in cost
                    of sales.

                    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 first-in, first-out (FIFO) method.

                                       76
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------


                    Pre-Production Costs

                    Pre-production  costs  incurred  for tools that the  Company
                    will  not  own  are   capitalized  as  incurred  up  to  the
                    contractually guaranteed reimbursement amount and classified
                    as recoverable customer tooling. These costs are recoverable
                    from the customer under guaranteed contractual agreements at
                    the time of tool  completion,  approval  and billing or over
                    the  contractual  period,  which is  generally  three years,
                    through piece rate charges at the time each part is shipped.
                    Pre-production  costs  incurred  for tools that the  Company
                    will own for use in  producing  products  under  contractual
                    arrangements  are  capitalized as incurred and classified as
                    property, plant and equipment.

                    Property, Plant and Equipment

                    Property,   plant  and   equipment   are   stated  at  cost.
                    Depreciation   and   amortization   are  computed  over  the
                    estimated useful lives of the assets, generally three to ten
                    years, primarily by the straight-line method.

                    Long-Lived Assets

                    The  Company  reviews   long-lived   assets  for  impairment
                    whenever  events or changes in  circumstances  indicate that
                    the   carrying   amount   of  an  asset  may  not  be  fully
                    recoverable. If it is determined that an impairment loss has
                    occurred  based on expected  future  operating  undiscounted
                    cash flows,  the asset is written down to its  estimated net
                    realizable value.

                    Warranty Reserves

                    The Company  accrues for  warranty  claims when events exist
                    that make the loss  probable and the loss can be  reasonably
                    estimated. Adjustments are made to established reserves when
                    changes in  management  estimates  and  industry  conditions
                    occur.

                                       77
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------

                    Income Taxes

                    Prior to its conversion to a "C" Corporation effective March
                    1,  2000,  the  Company  was a pass  through  entity for tax
                    purposes.  Effective  March 1, 2000,  deferred  income taxes
                    reflect the tax effects of temporary differences between the
                    financial  statement and tax base 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.

                    Research and Development Costs

                    Research,  development  and  product  improvement  costs are
                    charged  to  expense   as  they  are   incurred.   Research,
                    development  and  product   improvement  costs  included  in
                    selling,  general and administrative  expenses  approximated
                    $4.7 million,  $1.9 million,  and $1.6 million for the years
                    ended  December 31, 2000,  June 26, 1999, and June 27, 1998,
                    and $1.4 million for the six months ended December 31, 1999.

2.    Fiscal Year
      End Change    Fiscal Year End Change  Effective  July 4, 1999, the Company
                    changed  the  date of its  fiscal  year  end  from  the last
                    Saturday  in June to December  31. The years ended  December
                    31, 2000, June 26, 1999, and June 27, 1998, all consisted of
                    52 weeks.  The  six-month  period  ended  December 31, 1999,
                    consisted  of 27 weeks.  All year  references  relate to the
                    Company's fiscal years, unless otherwise stated.


3.     Inventories  Inventories consist of:
<TABLE>
                                                         December 31,    December 31,      June 26,    June 27,
                                                                 2000            1999          1999        1998
                                                                                                    (unaudited)
                                  --------------------------------------------------------------------------------

                                  <S>                    <C>             <C>           <C>          <C>
                                  Finished goods and
                                  work in process        $    234,317    $    160,557  $    116,979 $    98,776
                                  Raw materials             2,080,844         993,953       714,637     286,276
                                 --------------------------------------------------------------------------------

                                                         $  2,315,161    $  1,154,510  $    831,616 $   385,052
                                  --------------------------------------------------------------------------------
</TABLE>

                                       78
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------



4.     Other Assets  Notes Receivable - shareholders

                    The Company has notes  receivable from  shareholders.  These
                    notes  require no monthly  payments and bear  interest at 7%
                    with no specified maturity date.

                    Deposits

                    The Company  makes  deposits on certain  equipment  while in
                    production by vendors.  The deposit  amounts will be used to
                    decrease  the  amount  due  for  the   equipment   upon  its
                    completion.

5.      Employee
        Benefit
        Plans       Employee   Benefit   Plans   The   Company   has  a  defined
                    contribution   401(k)  plan   covering   substantially   all
                    employees   with  six  months  of  service.   Employees  may
                    contribute  to the  plan  an  amount  not to  exceed  15% of
                    eligible  compensation.  The Company may make  discretionary
                    matching  contributions  to  the  plan,  which  approximated
                    $36,000,  $37,000,  and $38,000 for the years ended December
                    31, 2000,  June 26, 1999, and June 27, 1998, and $21,000 for
                    the six months ended December 31, 1999.

6.     Debt and
       Other
       Financing
       Arrangements   The Company has a line of credit with a bank in the amount
                    of  $1,000,000  that bears  interest at 0.5% below the prime
                    rate  (effectively 9.0% at December 31, 2000) and matures on
                    April 1, 2001. The line of credit is secured by all tangible
                    and intangible assets of the Company.
<TABLE>
                    Long-term debt consists of the following:
                                                        December 31,  December 31,       June 26,      June 27,
                                                                2000          1999           1999          1998
                                                                                                    (unaudited)
                                  --------------------------------------------------------------------------------
                                  <S>                  <C>            <C>           <C>            <C>
                                  Secured term loan
                                   payable to bank     $     154,762  $    242,762  $     290,762  $    386,892
                                  Secured term loan
                                   payable to bank           217,689       414,764        467,715        -
                                  Other                      -               2,801          2,801         3,079
                                  --------------------------------------------------------------------------------

                                                             472,451       660,327        761,278       389,971
                                  Less current maturities    218,725       201,900        201,900        96,000
                                  --------------------------------------------------------------------------------

                                                       $     253,726  $    458,427  $     559,378  $    293,971
                                  --------------------------------------------------------------------------------
</TABLE>

                                       79
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------

                    The Company has two secured term loan agreements with a bank
                    which  mature  on  August  1,  2002 and  December  1,  2003,
                    respectively.  The agreements  provide for monthly principal
                    payments of $8,000 and $8,825,  respectively,  plus interest
                    at the prime rate (effectively 9.5% at December 31, 2000).

                    Maturities of long-term debt are as follows:

<TABLE>
                                  Year ending
                                  --------------------------------------------------------------------------------
                                  <S>                                                            <C>
                                  2001                                                           $      218,725
                                  2002                                                                  156,662
                                  2003                                                                   97,064
                                  --------------------------------------------------------------------------------

                                                                                                 $      472,451
                                  --------------------------------------------------------------------------------
</TABLE>


7.     Taxes on Income
                    The tax effect of temporary  differences  which give rise to
                    deferred tax assets (liabilities) are as follows:

<TABLE>
                                  December 31,                                                             2000
                                  --------------------------------------------------------------------------------
                                  <S>                                                            <C>
                                  Net operating loss carryforwards                               $    2,392,000
                                  Accumulated depreciation                                             (426,000)
                                  --------------------------------------------------------------------------------

                                                                                                      1,966,000
                                  Valuation allowance                                                (1,966,000)
                                  --------------------------------------------------------------------------------

                                  Net deferred tax asset                                         $      -
                                  --------------------------------------------------------------------------------
</TABLE>

                    Net  operating  loss   carryforwards  of  $6.8  million  are
                    available to offset federal  taxable income in future years,
                    expiring in 2020.  At December 31, 2000,  the  Company's net
                    deferred   tax  assets  are  fully  offset  by  a  valuation
                    allowance.  Prior to March 1, 2000,  the  Company was a pass
                    through  entity for tax  purposes and no deferred tax assets
                    or liabilities were recorded.

                                       80
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------


8.     Operating Lease
                    The Company is obligated  under a five-year  operating lease
                    arrangement,  covering  its entire  manufacturing  facility,
                    which  expires  in  September  2001.  Future  minimum  lease
                    payments  under the lease,  excluding  renewals and purchase
                    options,  are $103,500 for 2001.  Under the lease agreement,
                    the  Company  has the option to renew the lease for  another
                    five years under the same terms,  except the monthly  rental
                    charge may be adjusted to reflect  changes in the landlord's
                    cost of financing upon commencement of the renewal term. The
                    Company also has the option to purchase  the property  prior
                    to 180 days before the  expiration  of the lease,  including
                    the five-year extension period, under the terms specified in
                    the lease agreement. Rent expense under all operating leases
                    was approximately  $281,000,  $247,000, and $223,000 for the
                    years ended  December 31, 2000,  June 26, 1999, and June 27,
                    1998,  and $123,000  for the six months  ended  December 31,
                    1999.

9.     Transactions With
       Affiliates

                    Current   affiliate   receivable   amounts  represent  trade
                    accounts receivable from Donnelly.  Accounts receivable with
                    affiliated companies accounted for 79%, 82%, 68%, and 88% of
                    the  outstanding  accounts  receivable at December 31, 2000,
                    December 31, 1999, June 26, 1999, and June 27, 1998.

                    Advances from  affiliate  consists of funds  advanced to the
                    Company from  Donnelly  primarily for the purpose of funding
                    negative  results of operations and expenditures for ongoing
                    capital projects. Advances from affiliate are due in full on
                    the later of June 30,  2001 or the  closing  under  "put" or
                    "call" options. The current agreement provides for quarterly
                    payments of interest only at a rate of 7.0%, with the entire
                    unpaid balance due at maturity, and is secured by all of the
                    assets of the Company.  This interest is  subordinate to any
                    security interest of the Company's principal commercial bank
                    in  the  Company's  assets.  In  conjunction  with  the  "C"
                    Corporation  conversion  effective March 1, 2000, $9 million
                    of funds  previously  advanced to the Company from  Donnelly
                    were converted to 9,000 preferred shares of the Company with
                    par value of $1,000 per share.

                                       81
<PAGE>
                                                      Donnelly Electronics, Inc.

                                                   Notes to Financial Statements
           (Information as of and for the year ended June 27, 2998 is unaudited)
--------------------------------------------------------------------------------


                    Net sales include sales to Donnelly of  approximately  $12.6
                    million,  $5.2 million, and $7.0 million for the years ended
                    December 31, 2000,  June 26,  1999,  and June 27, 1998,  and
                    $5.1 million for the six months ended December 31, 1999.

                    The Company is assessed charges by Donnelly included in cost
                    of sales which approximated $.6 million,  $1.4 million,  and
                    $0 for the years ended December 31, 2000, June 26, 1999, and
                    June 27,  1998,  and $.3  million  for the six months  ended
                    December 31, 1999.  The Company is also assessed  charges by
                    Donnelly  related to the use of  personnel,  facilities  and
                    equipment  reflected in selling,  general and administrative
                    expenses which  approximated $5.6 million,  $1.7 million and
                    $1.1 for the fiscal years ended December 31, 2000,  June 26,
                    1999, and June 27, 1998, and $2.3 million for the six months
                    ended December 31, 1999.

                                       82
<PAGE>
                           ANNUAL REPORT - FORM 10-K/A

                                  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 Form 10-K for the fiscal year ended June 28, 1997,  as Exhibit
          4 and is hereby incorporated herein by reference.

10.1      Multi  Currency  Revolving  Credit Loan Agreement was filed as part of
          Form 10-QA for the quarter  ended  September 16, 1997, as Exhibit 10.1
          and is  hereby  incorporated  herein  by  reference.  Amendment  dated
          September 1999, to the Multi Currency  Revolving Credit Loan Agreement
          dated as of September  16,  1997,  as amended,  by and among  Donnelly
          Corporation,  Donnelly Hohe GmbH & Co. KG, the borrowing  subsidiaries
          party  thereto,  the banks named herein,  and Bank One,  Michigan,  as
          agent for the  banks  was  filed as part of Form 10-Q for the  quarter
          ended  October 2, 1999,  as  Exhibit  10.2 and is hereby  incorporated
          herein by reference.

10.2      Nationwide Life Insurance  Company Debt Agreement was filed as part of
          Form 10-K for the fiscal year ended 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,
          Donnelly Hohe GmbH & Co. KG ("Hohe") and other related parties,  dated
          May 25, 1995, was filed as Exhibit 2 to a Form 8-K dated June 9, 1995,
          and is hereby  incorporated  herein by reference.  An English language
          translation of an Amendment to the Acquisition  Agreement was filed as
          Exhibit 10.1 to Form 10-Q for the quarter ended March 28, 1998, and is
          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 ended 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 ended  July 3,  1993,  as Exhibit  10.2 and is hereby
          incorporated herein by reference.

10.6      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.

10.7      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.

10.8      The  Donnelly   Corporation   1987  Employees'  Stock  Purchase  Plan,
          including  amendments was  originally  filed as part of a Registration
          Statement on Form S-8 (Registration No. 33-34746) as Exhibit 28.1, and
          has been  subsequently  amended and filed as part of Form 10-Q for the
          quarter  ended  September  27,  1997,  as  Exhibit  10.2 and both such
          exhibits are hereby incorporated herein by reference.

10.9      The Donnelly  Corporation Amended and Restated Non Employee Director's
          Stock Option Plan.

10.10     The Donnelly Corporation Executive Compensation Plan was filed as part
          of Form 10-K/A for the fiscal year  ending June 29,  1996,  as Exhibit
          10.11 and is hereby incorporated by reference.

10.11     The  Donnelly  Corporation  Amended  and  Restated  Unfunded  Deferred
          Director Fee Plan.

10.12     The Donnelly  Corporation Pension Plan for Outside Directors was filed
          as part of Form 10-K/A for the fiscal year  ending June 29,  1996,  as
          Exhibit 10.13 and is hereby incorporated by reference.

10.13     The Donnelly  Corporation  Supplemental  Retirement  Plan was filed as
          part of Form  10-K/A for the fiscal  year  ending  June 29,  1996,  as
          Exhibit 10.14 and is hereby incorporated by reference.

                                       83
<PAGE>
10.14     The Amended Donnelly Corporation Deferred  Compensation Plan was filed
          as part of Form 10-Q for the quarter  ended  September  30,  2000,  as
          Exhibit 10.1 and is hereby incorporated by reference.

10.15     Letter  from  Donnelly  Corporation  to Mr.  Donn Viola dated July 12,
          1996,  as modified on July 22, 1996,  was filed as part of Form 10-K/A
          for the fiscal  year  ending June 29,  1996,  as Exhibit  10.17 and is
          hereby incorporated by reference.

10.16     Letter  from  Donnelly  Corporation  to  Mr.  Russell  Scaffede  dated
          September  15,  1995,  was filed as part of Form 10-K/A for the fiscal
          year ending June 29, 1996, as Exhibit 10.18 and is hereby incorporated
          by reference.

10.17     An English language summary of the Security Pooling  Agreement written
          in German between the Registrant and Donnelly Hohe GmbH & Co. KG dated
          September  15,  1995,  was filed as part of Form 10-K/A for the fiscal
          year ending June 29, 1996, as Exhibit 10.19 and is hereby incorporated
          by reference.

10.18     Receivables Purchase Agreement among Donnelly Receivables Corporation,
          Falcon Asset Securitization Corporation and the First National Bank of
          Chicago  dated as of  November  14,  1996,  was  filed as part of Form
          10-K/A for the fiscal year ending June 29, 1996,  as Exhibit 10.20 and
          is hereby incorporated by reference.

10.19     The Donnelly  Corporation 1997 Employee Stock Option Plan was filed as
          part of a  Registration  Statement  on Form S-8 on November  25, 1997,
          (Registration  No.  333-40987)  as  Exhibit  4, and the same is hereby
          incorporated by reference.

10.20     Amended and Restated  Operating  Agreement  for Donnelly  Electronics,
          L.L.C.,  dated January 1, 1998, was filed as part of Form 10-K for the
          fiscal  year  ended  June 27,  1998,  as  Exhibit  10.21 and is hereby
          incorporated by reference.

10.21     Agreement by and between  Donnelly  Electronics,  L.L.C.  and Donnelly
          Corporation, dated January 1, 1998, was filed as part of Form 10-K for
          the fiscal year ended June 27,  1998,  as Exhibit  10.22 and is hereby
          incorporated by reference.

10.22     Letter from  Donnelly  Corporation  to Mr. Scott Reed dated August 17,
          1998,  was filed as part of Form 10-K for the  fiscal  year ended June
          27, 1998, as Exhibit 10.21 and is hereby incorporated by reference.

10.23     The Donnelly  Corporation  401(k) Retirement  Savings Plan (January 1,
          1999,  Restatement)  was  filed as part of Form  10-Q for the  quarter
          ended April 3, 1999,  as Exhibit  10.2 and is hereby  incorporated  by
          reference.  The First  Amendment  to the Donnelly  Corporation  401(k)
          Retirement  Savings Plan (January 1, 1999,  Restatemenet) was filed as
          part of Form S-8 filed on September  28, 2001,  as Exhibit 4(b) and is
          hereby incorporated by reference. The Second Amendment to the Donnelly
          Corporation   401(k)   Retirement   Savings  Plan  (January  1,  1999,
          Restatement)  was  filed as part of Form S-8  filed on  September  28,
          2001, as Exhibit 4(c) and is hereby incorporated by reference.

10.24     Agreement and Plan of Merger among Applied Image Group,  Inc.,  Optics
          Acquisition,  Inc.,  Donnelly Optics Corporation and Bruno Glavich was
          filed as an  Exhibit  to Form 8-K/A  dated  January  4,  1999,  and is
          incorporated herein by reference.

10.25     The Donnelly  Corporation 1998 Employee Stock Option Plan was filed as
          Exhibit A to the Proxy  Statement  for the  October 16,  1998,  Annual
          Meeting of Shareholders and is hereby incorporated by reference.

10.26     The Donnelly Corporation 1998 Employees' Stock Purchase Plan was filed
          as Exhibit B to the Proxy  Statement for the October 16, 1998,  Annual
          Meeting of Shareholders and is hereby incorporated by reference.

10.27     Joint Venture Agreement by and among Schott Corporation,  Schott North
          America  Manufacturing,  Inc.,  Schott Glass and Donnelly  Corporation
          dated as of April 5, 1999, and exhibits thereto, including the Limited
          Liability  Company  Agreement  of  Schott-Donnelly   LLC  Smart  Glass
          Solutions  dated as of April 5, 1999,  the Schott  Technology  License
          Agreement  dated as of  April 5,  1999,  and the  Donnelly  Technology
          License Agreement dated as of April 5, 1999, was filed as part of Form
          10-K for the  transition  period  dated July 4, 1999,  to December 31,
          1999, as Exhibit 10.28 and is hereby incorporated by reference.

10.28     Redemption and Purchase Agreement dated September 1999, by and between
          Lear  Corporation,   Marlette  JV  Acquisition  Corporation,  Donnelly
          Corporation and Lear Donnelly Overhead Systems,  LLC was filed as part
          of Form 10-Q for the quarter  ended  October 2, 1999,  as Exhibit 10.1
          and is hereby incorporated herein by reference.

                                       84
<PAGE>
10.29     Agreement  dated  December 16,  1999,  between  Lear  Corporation  and
          Donnelly Corporation regarding the purchase by Donnelly Corporation of
          the  outstanding  capital  stock of Eurotrim was filed as part of Form
          10-K for the  transition  period  dated July 4, 1999,  to December 31,
          1999, as Exhibit 10.30 and is hereby incorporated by reference.

10.30     Amendment  dated  January 15, 2000,  to the Multi  Currency  Revolving
          Credit Loan Agreement  dated as of September 16, 1997, as amended,  by
          and among  Donnelly  Corporation,  Donnelly  Hohe GmbH & Co.  KG,  the
          borrowing  subsidiaries  party thereto,  the banks named therein,  and
          Bank One, Michigan, as agent for the banks.

10.32     First  amendment  dated  October  20,  2000,  to the  January 1, 1997,
          Donnelly Corporation  Deferred  Compensation Plan was filed as part of
          Form 10-Q for the quarter  ended  September  30, 2000, as Exhibit 10.1
          and is hereby incorporated herein by reference.

10.33     Agreement  and  Plan  of  Merger  among  Donnelly  Electronics,  Inc.,
          Donnelly Electronics  Acquisition Corporation and Donnelly Corporation
          was filed as an  Exhibit  to Form 8-K dated  March  13,  2001,  and is
          incorporated herein by reference.

21 *      Schedule of Affiliates.

23        Consent of BDO Seidman, LLP, independent public accountants.

* Previously filed.


                                       85
<PAGE>
Exhibit 23

Consent of Independent Certified Public Accountants


Donnelly Corporation
Holland, Michigan

We hereby  consent  to the  incorporation  by  reference  of our  reports  dated
February 8, 2001, except for Note 3, which is dated February 26, 2001, and Notes
1 and 18, which are dated August 20, 2001, relating to the combined consolidated
financial  statements  and  schedule of Donnelly  Corporation  appearing  in the
corporation's annual report on Form 10-K/A for the year ended December 31, 2000,
in that corporation's  previously filed Form S-8 Registration Statements for the
Amended  401(k)  Retirement  Savings  Plan,  Amended  and  Restated  Nonemployee
Director Stock Option Plan (Registration No.  333-55499),  1998 Employees' Stock
Purchase Plan  (Registration  No.  333-67969),  1998 Employee  Stock Option Plan
(Registration No. 333-67967),  1997 Employee Stock Option Plan (Registration No.
333-40987),  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



Grand Rapids, Michigan
September 28, 2001

                                       86