<TABLE>

CONSOLIDATED STATEMENTS OF INCOME

Holophane Corporation and Subsidiaries
(in thousands except per share data)                               Year Ended December 31,
                                                          1996              1995              1994
_____________________________________________________________________________________________________
<S>                                                    <C>               <C>               <C>      
Net Sales                                              $ 190,939         $ 181,069         $ 150,997
Cost of goods sold                                       117,284           110,591            92,590
_____________________________________________________________________________________________________
Gross Margin                                              73,655            70,478            58,407
Selling and administrative                                39,405            35,743            30,599
Research and development                                   5,533             5,559             4,979
Nonrecurring items                                             0                 0             3,875
Other expense                                                700               454               374
_____________________________________________________________________________________________________
Operating Income                                          28,017            28,722            18,580
Interest expense (including related party of
   $181 in 1996, $191 in 1995 and $200 in 1994)            2,139             2,826             2,707
Interest income                                             (527)             (581)             (452)
_____________________________________________________________________________________________________
Income Before Income Taxes                                26,405            26,477            16,325
Provision for income taxes                                 9,937            10,435             6,837
_____________________________________________________________________________________________________
Net Income                                             $  16,468         $  16,042         $   9,488
=====================================================================================================
Primary Earnings Per Share                             $    1.40         $    1.38         $    0.82
=====================================================================================================
Fully Diluted Earnings Per Share                       $    1.40         $    1.35         $    0.82
=====================================================================================================
Weighted Average Number of Shares Outstanding:
   Primary                                                11,770            11,667            11,580
   Assuming Full Dilution                                 11,770            11,863            11,580
=====================================================================================================


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

</TABLE>
<PAGE>



                   QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

(in thousands except per
 share and market data)        1ST           2ND           3RD           4TH
________________________________________________________________________________
1996
________________________________________________________________________________
Net sales                    $38,056       $44,605       $51,288       $56,990
Gross margin                  13,912        17,184        20,369        22,190
Operating income               3,577         6,336         9,393         8,711
Net income                     1,953         3,640         5,642         5,233
Net earnings per share       $  0.17       $  0.31       $  0.48       $  0.44
Market Prices: High          $ 22.50       $ 18.25       $ 20.00       $ 20.00
               Low           $ 16.00       $ 13.75       $ 15.25       $ 16.50
________________________________________________________________________________
1995
________________________________________________________________________________
Net sales                    $43,912       $43,673       $49,617       $43,867
Gross margin                  17,306        16,931        19,445        16,796
Operating income               6,947         6,535         9,036         6,204
Net income                     3,823         3,596         5,258         3,365
Net earnings per share       $  0.33       $  0.31       $  0.45       $  0.28
Market Prices: High          $ 12.50       $ 15.67       $ 19.17       $ 23.50
               Low           $ 11.33       $ 11.67       $ 14.67       $ 16.67

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

<PAGE>

<TABLE>

                           CONSOLIDATED BALANCE SHEETS


Holophane Corporation and Subsidiaries
($ in thousands except per share data) 
                                                                  December 31,
                                                             1996              1995
______________________________________________________________________________________

Assets
______________________________________________________________________________________
<S>                                                       <C>                <C>      
Current Assets:
   Cash and equivalents                                   $   8,072          $  13,356
   Accounts receivable (less allowance  of
      $1,016 and $1,015, respectively)                       33,104             24,849
   Inventories                                               13,302             13,530
   Prepaid and other deferred expenses                        3,848              4,350
______________________________________________________________________________________

Total Current Assets                                         58,326             56,085
______________________________________________________________________________________

Property, plant and equipment, net                           39,413             35,582

Goodwill (net of accumulated amortization of
   $3,184 and $2,581, respectively)                          21,276             15,764

Other Assets                                                  4,952              3,348
______________________________________________________________________________________

Total                                                     $ 123,967          $ 110,779
======================================================================================

Liabilities and Stockholders' Equity
______________________________________________________________________________________

Current Liabilities:
   Current maturities of long term debt                   $   6,390          $   6,319
   Trade payables                                            10,537              9,408
   Compensation and employee benefits                         8,383              8,660
   Income taxes payable                                       1,238              1,924
   Other accrued liabilities                                  4,589              3,730
______________________________________________________________________________________

Total Current Liabilities                                    31,137             30,041
______________________________________________________________________________________

Long Term Debt (less current maturities)                     18,866             25,091

Other Long Term Liabilities                                   6,820              5,258

Stockholders' Equity:
   Preferred stock (par value $.01 per share:
      1,000,000 shares authorized; none issued)
   Common stock (par value $.01 per share:
      20,000,000 shares authorized;
      11,895,861 shares issued)                                 119                119
   Additional paid-in capital                                43,801             42,969
   Retained earnings                                         30,527             14,059
   Common shares in treasury, at cost
     (1996: 473,369 shares; 1995: 425,148 shares)            (6,534)            (4,529)
   Cumulative translation adjustments                          (769)            (2,229)
______________________________________________________________________________________

Total Stockholders' Equity                                   67,144             50,389
______________________________________________________________________________________

Total                                                     $ 123,967          $ 110,779
======================================================================================

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

</TABLE>

<PAGE>

<TABLE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

Holophane Corporation and Subsidiaries
($ in thousands)
                                                                             Year Ended December 31,
                                                                       1996          1995            1994
___________________________________________________________________________________________________________
Cash Flows From Operating Activities:
___________________________________________________________________________________________________________
<S>                                                                 <C>            <C>            <C>     
Net Income                                                          $ 16,468       $ 16,042       $  9,488
Adjustments to reconcile net income to net cash provided by
  operating activities:
   Depreciation and amortization                                       6,487          6,107          6,803
   Loss on disposal of property, plant & equipment                       232            106          2,706
   Provision for deferred income taxes                                   253            521          1,015
Change in assets and  liabilities  net of effects  from
acquisitions:
     Accounts receivable                                              (4,053)        (4,607)        (2,217)
     Inventories                                                       1,568           (138)          (452)
     Prepaid and other deferred expenses                                (281)        (1,296)           (58)
     Trade payables                                                   (1,171)         1,275         (2,066)
     Compensation and employee benefits                                 (732)         1,150            284
     Income taxes payable                                               (780)          (904)         2,301
     Other accrued liabilities                                           892            173          1,682
     Other, net                                                           63            298            178
___________________________________________________________________________________________________________
Net cash provided by operating activities                             18,946         18,727         19,664
___________________________________________________________________________________________________________

Cash Flows From Investing Activities:
___________________________________________________________________________________________________________

Purchase of investment securities                                     (1,551)          (907)        (1,005)
Sale of investment securities                                          1,005              0              0
Capital expenditures                                                  (4,956)        (9,741)        (3,804)
Proceeds from the sale of assets                                          42             48          1,559
Acquisitions, net of cash acquired                                    (6,100)             0         (3,772)
___________________________________________________________________________________________________________
Net cash used in investing activities                                (11,560)       (10,600)        (7,022)
___________________________________________________________________________________________________________

Cash Flows From Financing Activities:
___________________________________________________________________________________________________________
Principal payments on long term debt                                  (9,359)        (6,312)        (9,855)
Purchase of treasury shares                                           (3,769)             0         (3,164)
Proceeds from the sale of treasury shares                                385             41              0
___________________________________________________________________________________________________________
Net cash used in financing activities                                (12,743)        (6,271)       (13,019)
___________________________________________________________________________________________________________

Effect of exchange rate changes on cash                                   73             27             62
___________________________________________________________________________________________________________
Net increase (decrease) in cash and equivalents                       (5,284)         1,883           (315)
Cash and equivalents at beginning of year                             13,356         11,473         11,788
___________________________________________________________________________________________________________

Cash and equivalents at end of year                                 $  8,072       $ 13,356       $ 11,473
===========================================================================================================

Supplemental Disclosure of Cash Flow Information:

Cash paid during the year for:
     Interest, net of amount capitalized                            $  2,160       $  2,897       $  2,832
     Income taxes paid, net                                           10,472         11,611          3,370

Non-cash investing and financing activity:
     Treasury shares used for acquisitions                             2,145           --              508
     Additional goodwill relating to contingent purchase price         1,381            964           --
     Trade payables for property, plant and equipment                    252           --             --


===========================================================================================================

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

</TABLE>

<PAGE>
<TABLE>

                            CONSOLIDATED STATEMENT OF
                              STOCKHOLDERS' EQUITY

                                                                                                            Retained
Holophane Corporation and Subsidiaries                          Common Stock             Additional         Earnings
($ in thousands)                                          _______________________         Paid-in         (Accumulated
                                                          Shares           Amount         Capital           Deficit)
______________________________________________________________________________________________________________________

<S>                                                     <C>                 <C>           <C>               <C>            
Balance at December 31, 1993                            11,895,861          $119          $42,967           ($11,471)      

Net income for the year                                                                                        9,488       
Shares used for acquisition                                                                     7                          
Purchase of treasury shares                                                                                                
Translation adjustments                                                                                                    
______________________________________________________________________________________________________________________

Balance at December 31, 1994                            11,895,861           119           42,974             (1,983)      

Net income for the year                                                                                       16,042       
Stock options exercised                                                                        (5)                         
Translation adjustments                                                                                                    
______________________________________________________________________________________________________________________

Balance at December 31, 1995                            11,895,861           119           42,969             14,059       

Net income for the year                                                                                       16,468       
Shares used for acquisitions                                                                  780                          
Purchase of treasury shares                                                                                                
Stock options exercised, 
   including related tax benefits                                                              52                          
Translation adjustments                                                                                                    
______________________________________________________________________________________________________________________

Balance at December 31, 1996                            11,895,861          $119          $43,801            $30,527       
======================================================================================================================
</TABLE>

***ABOVE TABLE SPLIT AT RIGHT MARGIN -- CONTINUED BELOW***

<TABLE>
                                             Treasury  Stock             Cumulative                         
                                          ______________________         Translation       Stockholders'    
                                          Shares          Amount         Adjustments          Equity        
________________________________________________________________________________________________________
                                                                            
<S>                                      <C>            <C>                <C>                <C>       
Balance at December 31, 1993             191,250        ($1,912)           ($2,502)           $27,201   
                                                                                              
Net income for the year                                                                         9,488   
Shares used for acquisition              (40,161)           501                                   508   
Purchase of treasury shares              277,734         (3,164)                               (3,164)  
Translation adjustments                                                        689                689   
________________________________________________________________________________________________________
                                                                                              
Balance at December 31, 1994             428,823         (4,575)            (1,813)            34,722   
                                                                                              
Net income for the year                                                                        16,042   
Stock options exercised                   (3,675)            46                                    41   
Translation adjustments                                                       (416)              (416)  
________________________________________________________________________________________________________
                                                                                              
Balance at December 31, 1995             425,148         (4,529)            (2,229)            50,389   
                                                                                              
Net income for the year                                                                        16,468   
Shares used for acquisitions            (121,629)         1,365                                 2,145   
Purchase of treasury shares              206,000         (3,769)                               (3,769)  
Stock options exercised,                                                                      
   including related tax benefits        (36,150)           399                                   451   
Translation adjustments                                                      1,460              1,460   
________________________________________________________________________________________________________
                                                                                              
Balance at December 31, 1996             473,369        ($6,534)             ($769)           $67,144   
========================================================================================================

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>

<PAGE>


           I N D E P E N D E N T     A U D I T O R S '     R E P O R T

           TO THE STOCKHOLDERS AND DIRECTORS OF HOLOPHANE CORPORATION


     We have audited the accompanying  consolidated  balance sheets of Holophane
Corporation  and  subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three  years in the period  ended  December  31,  1996.  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  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  such consolidated  financial statements present fairly, in
all material  respects,  the  financial  position of Holophane  Corporation  and
subsidiaries at December 31, 1996 and 1995, and results of their  operations and
their cash flows for each of the three years in the period  ended  December  31,
1996 in conformity with generally accepted accounting principles.




Deloitte & Touche LLP
Columbus, Ohio
February 21, 1997




<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   SUMMARY OF ACCOUNTING POLICIES


The  company is engaged in the  manufacture  and sale of lighting  fixtures  and
systems  primarily for  industrial,  commercial  and outdoor  applications.  The
company has operations in the United States,  Canada,  Mexico,  United  Kingdom,
Germany and Australia.

CONSOLIDATION
The  consolidated   financial  statements  include  the  accounts  of  Holophane
Corporation  and  all  of  its  majority-owned  subsidiaries.   All  significant
intercompany accounts, transactions and profits have been eliminated.

FOREIGN CURRENCY TRANSLATION
The assets and  liabilities  of the  company's  subsidiaries  outside the United
States are  translated  into U.S.  dollars at the rates of exchange in effect at
the balance sheet dates.  Income and expense items are translated at the average
exchange rates  prevailing  during the period.  Gains and losses  resulting from
foreign  currency  transactions  are  recognized  currently  in income and those
resulting from translation of financial statements are accumulated in a separate
component of stockholders' equity.

DISCLOSURES REGARDING FINANCIAL
INVESTMENTS
The carrying value of cash and equivalents, receivables, accrued liabilities and
accounts  payable are considered to approximate fair value due to the relatively
short maturity of the respective  instruments.  For long-term debt, the interest
rates  fluctuate  with LIBOR or prime rate and thus  their  carrying  value is a
reasonable estimate of fair value.

CASH AND EQUIVALENTS
The company  considers money market funds and all highly liquid debt instruments
with an initial  maturity  of three  months or less to be cash  equivalents.  At
December  31,  1996 and 1995,  the  company  had  approximately  $5,238,000  and
$10,806,000,  respectively,  invested in bank commercial paper and U.S. treasury
related investments at three independent trust companies.

INVENTORIES
Inventories  are  valued  at the  lower of  cost,  determined  on the  first-in,
first-out basis, or market.

PROPERTY, PLANT AND EQUIPMENT
Property,  plant and  equipment are recorded at cost.  Depreciation  is computed
using the  straight-line  method over the  estimated  useful lives of the assets
which range from one and one-half to forty years.

GOODWILL
The excess of  purchase  price over the fair  values of net assets  acquired  is
amortized on a straight-line basis over forty years.

ASSET IMPAIRMENTS
Annually,  or more frequently if events or circumstances change, a determination
is made by  management,  in accordance  with  Statement of Financial  Accounting
Standards (SFAS) No. 121, to ascertain  whether  property,  plant and equipment,
goodwill  and other  intangible  assets have been  impaired  based on the sum of
expected future  undiscounted cash flows from operating  activities.  Based upon
its most recent analysis, the company believes that property, goodwill and other
intangibles  at  December  31,  1996 are  realizable  and the  depreciation  and
amortization periods are appropriate.

SELF INSURANCE
The  company  is  self-insured   for  certain  health   insurance  and  workers'
compensation  programs in the United States. The health insurance plan agreement
contains a stop-loss  ceiling of $100,000 per eligible  individual  per year and
aggregate  annual  stop-loss   ceiling  (based  on  enrollment)  of  $1,585,000,
$1,759,000 and $2,412,000 for 1996,  1995 and 1994,  respectively.  The workers'
compensation plan agreement  contains a stop-loss ceiling of $300,000 per event.
The  company  accrues  for both  claims  reported  but not yet  paid and  claims
incurred but not yet reported.

MANAGEMENT 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  periods.
Actual results could differ from those estimates.

REVENUE RECOGNITION
Revenues are recognized at the time the products are shipped.

PER SHARE INFORMATION
All earnings per share and share data is computed based on the weighted  average
number of shares of common stock outstanding during each period, as adjusted for
the 3:2  stock  split in  December  1995,  including  common  stock  equivalents
consisting of shares subject to stock options and  contingently  issuable shares
of stock.


<PAGE>




2.   ACQUISITIONS

MetalOptics,  Inc. - On  September  1, 1996,  the company  acquired the stock of
MetalOptics,  Inc. for  $6,100,000  of cash and  $1,181,000  (77,296  shares) of
common  stock.  Under the terms of the  purchase  agreement,  the company may be
required to make  additional  payments  beginning  in 1996 of up to $500,000 and
154,589  additional shares of common stock,  contingent upon  MetalOptics,  Inc.
achieving  certain operating results during the five-year period ending December
31, 2000. At the date of  acquisition,  the market value of assets  acquired was
$13,509,000 and liabilities  assumed were $6,228,000.  Any future amounts earned
under this agreement will be recorded as additional  goodwill and amortized over
the remaining life of the goodwill recognized at the time of acquisition.

Results  of  operations  after the  acquisition  date are  included  in the 1996
Consolidated  Statements of Income. The following pro forma information has been
prepared  assuming  the  acquisition  had taken  place at the  beginning  of the
respective periods.  The pro forma information includes adjustments for interest
expense  that  would have been  incurred  to finance  the  purchase,  additional
depreciation based on the fair market value of the property, plant and equipment
acquired and the amortization of goodwill  arising from the transaction,  net of
tax. The pro forma financial  information is not  necessarily  indicative of the
results of operations as they would have been had the transaction  been effected
on the assumed dates.


                                 December 31,
                              1996        1995
__________________________________________________
(In thousands, except per share amounts)

Net Sales                     $204,545   $202,912
==================================================
Net Income                     $17,088    $16,709
==================================================
Net Income per Share             $1.45      $1.42
==================================================

Antique Street Lamps, Inc. - On October 1, 1994, the company acquired all of the
assets and  assumed  certain  liabilities  of Antique  Street  Lamps,  Inc.  for
$3,772,000 of cash and $508,000 (26,774 shares) of common stock. Under the terms
of the  purchase  agreement,  the company  may be  required  to make  additional
payments  beginning in 1995 of up to 161,000  additional shares of common stock,
contingent  upon Antique  Street Lamps,  Inc.  achieving  certain  profit levels
during  the  four-year   period  ending  December  31,  1998.  At  the  date  of
acquisition,  the market value of assets acquired was $7,602,000 and liabilities
assumed were $3,322,000.  Any future amounts earned under this agreement will be
recorded as  additional  goodwill and amortized  over the remaining  life of the
goodwill recognized at the time of acquisition.  Had the acquisition occurred at
the  beginning  of 1994,  operating  results on a pro forma basis would not have
been significantly different.


3.   INVENTORIES

Inventories consist of the following (in thousands):



                                   December 31,
                                  1996      1995
==================================================
Raw materials                   $7,997     $8,239

Work in process                  3,620      3,613

Finished goods                   2,374      2,143
==================================================
Total                           13,991     13,995

Less valuation allowance         (689)      (465)
__________________________________________________

Total                          $13,302    $13,530
==================================================


4.   PROPERTY, PLANT AND EQUIPMENT

The major classes of property, plant and equipment are summarized as follows (in
thousands):

                                   December 31,
                                  1996      1995
__________________________________________________

Land                             $2,112    $1,275

Buildings and improvements       23,240    19,712

Machinery and equipment          46,897    42,101

Office and computer equipment     9,863     8,411

Construction in progress            731     1,739
__________________________________________________
Total                            82,843    73,238

Less accumulated depreciation  (43,430)  (37,656)
__________________________________________________
Total                           $39,413   $35,582
==================================================

================================================================================
                        MetalOptics #2 -- GRAPHIC OMITTED
================================================================================



<PAGE>



5.   LONG TERM DEBT AND CREDIT FACILITIES

Long term debt consists of the following (in thousands):

                                     December 31,
                                    1996     1995
__________________________________________________

Term loan                        $24,880  $31,100

Capital lease obligations            330      310
(Note 6)

Other borrowings                      46        0
__________________________________________________
Total                             25,256   31,410

Less current maturities          (6,390)  (6,319)
__________________________________________________
Total long term debt             $18,866  $25,091
==================================================

The company has a bank credit  agreement  consisting of a term loan that reduces
semi-annually  until  scheduled  maturity on September  30, 2000 and a revolving
commitment of up to $15,000,000  through the scheduled maturity date. No amounts
were borrowed under the revolving commitment at December 31, 1996 and 1995.

Under the  Agreement,  the  company can elect to borrow  Eurodollars  at .75% to
2.125%  ("Eurodollar  Margin") in excess of the London  Interbank  Offered  Rate
("LIBOR") or domestic funds at 0% to .375% ("Base Rate Margin") in excess of the
base rate ("Prime").  Eurodollar or Base Rate Margins are determined by the debt
service  coverage  ratio,  as  defined,  for any  four  fiscal  quarter  period.
Applicable  rates for domestic  and  composite  Eurodollar  loans were 8.25% and
6.66%, respectively,  at December 31, 1996. A commitment fee of .25% to .375% is
charged on the average daily unused portion of the available  commitment.  Loans
under the Agreement are  collateralized  by  substantially  all of the company's
assets.  The Agreement  contains certain  financial and operating  covenants and
also contains  provisions that limit, among other things, the amount that can be
expended for annual cash dividends and purchase of the company's  stock,  to 50%
of consolidated net income for the previous year.

Long term  debt,  excluding  capital  lease  obligations  and other  borrowings,
matures as follows for the years ended December 31 (in thousands):

                              December 31,
__________________________________________________
1997                               $6,220

1998                                6,220

1999                                6,220

2000                                6,220
__________________________________________________

Total                            $24,880
==================================================

6.   LEASES

The company leases certain  computer and plant  equipment  under capital leases.
The cost of these assets leased under capital leases is  approximately  $627,000
and  $495,000 at December  31, 1996 and 1995,  respectively.  In  addition,  the
company leases certain equipment and office space under non-cancelable operating
leases.

Future  minimum lease  payments are as follows for years ending  December 31 (in
thousands):


                               Capital  Operating
                               Leases    Leases
_________________________________________________

1997                             $167       $966

1998                              155        805

1999                               38        497

2000                                0        240

2001                                0        104

Thereafter                          0        332
_________________________________________________

Total minimum lease
   payments                       360     $2,944

Less amount representing
   interest                      (30)
______________________________________

Present value of net minimum
   lease payments (Note 5)       $330
======================================

Total  rent  expense  under  operating  leases  for  1996,  1995  and  1994  was
approximately $1,381,000, $1,032,000 and $1,065,000, respectively.


7.   INCOME TAXES

The company  follows the  provisions  of SFAS No. 109. The  components of income
before income taxes for 1996, 1995 and 1994 are as follows (in thousands):

                     1996         1995       1994
__________________________________________________

Domestic          $24,781      $24,134    $15,836

Foreign             1,624        2,343        489
__________________________________________________

Total             $26,405      $26,477    $16,325
===================================================



<PAGE>



The  components  of the provision  (credit) for income taxes for 1996,  1995 and
1994 are as follows (in thousands):

                          1996      1995    1994
_________________________________________________

Current:

Federal                 $7,918    $7,691  $4,396

State and local          1,279     1,384     769

Foreign                    487       839     657
_________________________________________________
Total                    9,684     9,914   5,822
_________________________________________________
Deferred:

Federal                    171       538     874

State and local             37      (17)     141

Foreign                     45         0       0
_________________________________________________
Total                      253       521   1,015
_________________________________________________

Total                   $9,937   $10,435  $6,837
=================================================

The principal items accounting for the difference in the expected tax expense on
income before  income taxes  computed at the United  States  statutory  rate for
1996, 1995 and 1994 are as follows (in thousands):


                          1996     1995     1994
_________________________________________________
Computed expense at
  35% of pre-tax income  $9,242   $9,267   $5,714

State and local taxes       905      963      628

Operating losses
  generating no
  current tax benefit         0        0      393

Other                     (210)      205      102
__________________________________________________
Total                    $9,937  $10,435   $6,837
==================================================

The tax effect of the items  comprising  the company's net deferred tax asset as
of December 31, 1996 and 1995 are as follows (in thousands):

================================================================================
                       Glass Furnace #3 - GRAPHIC OMITTED
================================================================================

                                    December 31,
                                   1996      1995
__________________________________________________
Deferred tax assets:

Difference between book and
   tax basis of intangibles        $710    $1,171

Reserves not currently            2,104     1,280
deductible

Liabilities not currently
   deductible                     2,415     2,499

Other                                99       322
__________________________________________________
Total                             5,328     5,272

Deferred tax liabilities:

Difference between book and
tax basis of property, plant       2,049     1,458
and equipment
__________________________________________________
Net deferred tax asset           $3,279    $3,814
==================================================

At December 31, 1996 the company had foreign net  operating  loss  carryforwards
(NOLs) totaling  $1,425,000 which expire as follows:  1999 - $509,000 and 2001 -
$916,000.  For  financial  reporting  purposes,  the company has provided a full
valuation  allowance for the foreign NOLs. This valuation  allowance amounted to
$712,000 and $892,000 at December 31, 1996 and 1995, respectively.

At December  31, 1996  unremitted  earnings of  subsidiaries  outside the United
States  were  approximately  $6,000,000.  The  company  intends to  indefinitely
reinvest the undistributed earnings of its foreign subsidiaries or to repatriate
them only when it is tax  effective to do so.  Accordingly,  no deferred  income
taxes for additional  United States federal  income taxes from  distribution  of
foreign earnings have been recorded.


8.   EMPLOYEE BENEFIT PLANS

The  company  has  four  401(k)  defined  contribution  savings  plans  covering
substantially all United States union and non-union employees.  The plans, which
provide for both  mandatory  and optional  company  contributions  of 3-5%,  are
intended to qualify  under  Section  401(k) of the Internal  Revenue  Code.  The
company  matches  participant  contributions  of up to 2% of their  salary.  The
company's Canadian subsidiary has a defined  contribution  savings plan covering
substantially all non-union employees. In addition, prior to 1995, the company's
Canadian  subsidiary's  union  employees  were  covered  under a  multi-employer
defined  contribution  plan. The expense charged to operations under these plans
was $2,133,000, $2,357,000 and $1,910,000 for 1996, 1995 and 1994, respectively.


<PAGE>


The company's  Supplemental Executive Retirement Plan (SERP) allows participants
to defer up to 50% of their annual bonus.  Salary  deferrals  under the SERP are
used to fund a Rabbi Trust. Gains and losses on participant's  accounts directly
offset the SERP liability for each participant. The fair value of the investment
and  offsetting   liability  included  in  other  assets  and  other  long  term
liabilities was $2,458,000 at December 31, 1996.

Holophane Europe has a defined benefit plan,  covering  substantially all of its
employees,  in which  benefits  are  based  primarily  on years of  service  and
employee  compensation  near  retirement.  The  company's  funding  policy is in
accordance  with  local laws and income tax  regulations.  Fund  assets  consist
primarily  of common  stocks,  common  trust  funds and  government  securities.
Pension  expense for Holophane  Europe's  pension plan included in the company's
Consolidated Statements of Income for 1996, 1995 and 1994 was $258,000, $294,000
and $296,000, respectively.

The following table sets forth the funding status of Holophane Europe's plan and
amounts recognized in the company's balance sheets (in thousands):

                                   December 31,
                                 1996       1995
_________________________________________________
Accumulated benefit
   obligation, all vested      $7,427     $6,304
=================================================
Plan assets at fair value      $9,914     $8,979

Projected benefit obligation  (8,750)    (6,926)
_________________________________________________
Overfunded projected benefit
   obligation                   1,164      2,053

Unrecognized net gain from
   past experience different
   than that assumed and
   effects of changes in
   assumptions                  (767)    (1,848)
_________________________________________________
Pension asset, net of
   cumulative translation
   adjustment                   $397       $205
=================================================

================================================================================
                    Glass Furnace Shot #1 -- GRAPHIC OMITTED
================================================================================


Net periodic pension cost included the following components (in thousands):

                           Year Ended December 31,
                           1996      1995     1994
___________________________________________________
Service cost               $460      $468     $454

Interest cost               545       528      442

Actual (return) loss
on Plan assets            (569)   (1,284)      194

Net amortization and
   deferral               (178)       582    (794)
___________________________________________________
Net periodic pension
   cost                    $258      $294     $296
===================================================

Actuarial assumptions used in the accounting for the plan were as follows:

                              1996   1995    1994
___________________________________________________
Discount rate                 8.5%   8.5%    8.5%

Expected long term rate of
   return on Plan assets      8.5%   9.0%    8.0%

Average rate of increase
   in compensation levels    6.25%   6.5%    6.5%
===================================================


9.   NONRECURRING ITEM

Nonrecurring  charges of $3,875,000 were incurred by the company relating to the
discontinuance of assembly  operations in Canada in November 1994. These charges
consisted primarily of the loss on sale of property and severance liability.


10.   STOCK OPTIONS

The  Holophane  Stock Option Plan  authorizes  the grant of options,  restricted
stock and  awards of  performance  shares of common  stock to  officers  and key
employees. Options are to be granted at exercise prices equal to the fair market
value of such stock as of the date of grant. The number of authorized options to
be granted under this plan is 1,982,000.  Stock option activity is summarized as
follows:


<PAGE>



                           Year Ended December 31,
                           1996     1995     1994
___________________________________________________
Outstanding at
beginning                802,425  537,000  297,000
of year

Weighted average          $11.27   $11.03   $10.00
exercise price

Granted                  209,600  271,500  240,000

Weighted average          $19.88   $11.73   $12.31
exercise price

Exercised               (36,150)  (3,675)        0

Weighted average          $10.67   $10.90      ---
exercise price

Canceled                 (3,050)  (2,400)        0

Weighted average          $14.15   $12.33      ---
exercise price
___________________________________________________
Outstanding at end of
   year                  972,825  802,425  537,000

Weighted average          $13.14   $11.27   $11.03
   exercise price
===================================================
Exercisable at end of
   year                  385,800  225,225   86,250
===================================================
Available for grant at
   end of year           963,900  373,500  645,000
===================================================

The  company   applies  APB  Opinion  25  in  accounting  for  its  fixed  stock
compensation  plans.  Accordingly,  no compensation cost has been recognized for
the plan in 1996,  1995 or 1994.  All options  granted have a maximum term of 10
years  and  vest  ratably  over  four  years.  The  weighted  average  remaining
contractual life of these options is 7.8 years.

The fair value of the options presented above was estimated at the date of grant
using a Black-Scholes  option pricing model with the following  weighted average
assumptions for 1996 and 1995,  respectively:  risk-free interest rates of 7.24%
and  5.68%;  dividend  yields of 0%;  volatility  factor of .23;  and a weighted
average  expected  option life of six years.  Because the effect of applying the
fair  value  method to the  company's  stock  options  results in net income and
earnings per share that are not materially  different  from amounts  reported in
the  consolidated  statements  of  income,  pro forma  information  has not been
provided.


11.     RELATED PARTY TRANSACTIONS

The company had an agreement with a stockholder  to pay a management  consulting
fee and  certain  other  transactional  fees,  through  June 1999 with a base of
$250,000 per year, adjusted for inflation.  The agreement was terminated in 1993
in connection with the company's  initial public offering.  At December 31, 1996
and 1995,  a  liability  of  $2,181,000  and  $2,318,000,  respectively,  net of
discount at 8%, has been included in other long term liabilities  related to the
termination  of this  agreement.  Payments  under this  agreement were $316,000,
$306,000 and $299,000 for 1996, 1995 and 1994, respectively.


12.   GEOGRAPHICAL AREA INFORMATION
        (in thousands)

                        1996      1995      1994
___________________________________________________
Net Sales to Customers
___________________________________________________
United States        $157,981   $144,548  $120,574

Europe                 23,376     23,137    20,282

Other                   9,582     13,384    10,141
___________________________________________________
Total                $190,939   $181,069  $150,997
===================================================
Transfers Between Geographic Areas
(eliminated in consolidation)
___________________________________________________
United States          $7,694    $11,781    $4,350

Other                       0          0       577
___________________________________________________
Total                  $7,694    $11,781    $4,927
===================================================

Operating Income (loss)
___________________________________________________

United States         $25,882    $25,825   $17,290

Europe                  1,791      2,743     2,200

Other                     344        154     (910)
___________________________________________________
Total                 $28,017    $28,722   $18,580
===================================================
Identifiable assets
___________________________________________________
United States        $101,361    $89,771   $79,881

Europe                 20,166     18,356    17,644

Other                   2,440      2,652     1,827
___________________________________________________
Total                $123,967   $110,779   $99,352
===================================================

================================================================================
                         Castlight #6 -- GRAPHIC OMITTED
================================================================================

<PAGE>

================================================================================
                       MANAGEMENT DISCUSSION AND ANALYSIS
================================================================================


RESULTS OF OPERATIONS 1996 COMPARED WITH 1995

Net sales for the year were at a record level of $190.9 million,  an increase of
$9.8 million,  or 5.4% over 1995.  Domestic sales of $158.0 million grew a total
of 9.3% in 1996,  up 4.6% due to internal  growth and 4.7% from the  MetalOptics
acquisition completed in September. In 1996, results were negatively impacted by
softness in new retail store  construction and severe winter weather  conditions
in North America that delayed  construction  projects.  Canadian sales were down
33.5% in local  currency  compared to the previous year, a result of poor winter
weather  in the first  quarter  of the year and  decreased  activity  in highway
infrastructure projects. European sales revenues were up 1.6% in local currency,
reflecting a soft business  climate in the United  Kingdom,  offset by continued
volume growth in continental  Europe. 1996 operating results reflect competitive
pricing conditions in all of the company's lighting markets.

Gross margin increased $3.2 million or 4.5% to $73.7 million in 1996,  primarily
the result of higher sales volume.  Gross margin as a percent of sales decreased
slightly  in  1996 to  38.6%  compared  to  38.9%  in  1995.  Adjusting  for the
MetalOptics  acquisition,  gross  margin as a percent  of sales was flat in 1996
compared to 1995.

Aggregate selling and  administrative  expenses were $39.4 million,  or 20.6% of
sales,  compared  to $35.7  million  or 19.7%  of  sales  in 1995.  Sales  force
expansion and process improvement  programs contributed to increased selling and
administrative  spending in 1996. Research and development expenses were 2.9% of
sales in 1996 (3.0% adjusting for the MetalOptics  acquisition) compared to 3.1%
in 1995.

Interest expense of $2.1 million decreased $0.7 million in 1996 compared to 1995
due to lower  outstanding  balances and lower average  interest rates.  Interest
income also decreased $0.1 million in 1996 due to lower average interest rates.

The effective tax rate in 1996 was 37.6%,  down from 39.4%  experienced in 1995.
The  lower  effective  income  tax rate in 1996 is the  result  of tax  benefits
generated  from the  utilization  of a Foreign  Sales  Corporation  and Canadian
income  on which no net tax  expense  was  recognized  for  financial  reporting
purposes.

Net income  was $16.5  million in 1996,  compared  to $16.0  million in 1995 and
primary earnings per share rose to $1.40 per share, up from $1.38 in 1995.

Overall, increased net sales, lower net interest costs and a lower effective tax
rate led to higher net earnings for 1996.


RESULTS OF OPERATIONS 1995 COMPARED WITH 1994

1995 net sales were $181.1 million,  an increase of $30.1 million,  or 20%, over
1994.  Sales increased  across all divisions and  geographical  areas.  Domestic
sales grew 20% to $144.5 million in 1995,  fueled by internal  growth of 15% and
5% from the  acquisition  of the Antique  Street  Lamps'  business in the fourth
quarter  of 1994.  Canadian  sales  were up 32% in local  currency  compared  to
previous  year,  a result of the  restructuring  of  operations  during 1995 and
increased activity in highway infrastructure  projects.  European sales revenues
were  up  11%  in  local  currency,  reflecting  significant  volume  growth  in
continental   Europe.   1995  operating  results  reflect   competitive  pricing
conditions in all of the company's lighting markets.

Gross margin  increased  $12.1 million or 20.7%,  to $70.5 million in 1995.  The
increase is  primarily  the result of higher  sales  volume.  Gross  margin as a
percent of sales increased slightly in 1995 to 38.9% compared to 38.7% in 1994.

Aggregate selling and  administrative  expenses were $35.7 million,  or 19.7% of
sales,  compared  to $30.6  million  or 20.3%  of  sales in 1994.  Research  and
development  expenses  were  3.1% of sales in 1995 and  increased  approximately
11.6% over 1994.

Although our debt was lower,  interest  expense of $2.8 million  increased  $0.1
million  in 1995  compared  to 1994.  This  increase  was the  result  of higher
interest  rates.  Interest  income also  increased  $0.1  million in 1995 due to
higher average interest rates.

The tax rate in 1995 was 39.4%,  down from the 41.9% rate  experienced  in 1994.
The higher effective 1994 income tax rate was due to the Canadian  restructuring
charge in 1994 on which no tax benefit was  realizable  for financial  reporting
purposes.

Net income was $16.0  million in 1995 and primary  earnings  per share rose from
$0.82 to $1.38 per  share.  Pro forma  earnings  per share  were  $1.06 in 1994,
adjusted for the Canadian restructuring charge.

Overall,  increased  net sales  and  improved  gross  margin  led to higher  net
earnings from continuing operations for 1995.



<PAGE>



CAPITAL RESOURCES AND LIQUIDITY

The  company's  principal  sources of liquidity  have been cash  generated  from
operating  activities and amounts available under the company's bank agreements.
During the three year period  ended  December 31,  1996,  the company  generated
approximately $57.3 million of cash from operating  activities and an additional
$1.6  million  from the sale of assets.  The company has  significantly  reduced
working  capital   requirements   through   programs  that  emphasize   accounts
receivable,  inventory and accounts payable management. As of December 31, 1996,
the company had approximately $8.1 million in cash.

At December  31,  1996,  outstanding  long-term  indebtedness  amounted to $25.3
million  (including the current portion of $6.4 million).  This represents a net
decrease of $6.2 million from December 31, 1995.

The company's Credit Agreement provides for a reducing term loan and a revolving
credit  facility of up to $15 million,  through  September 30, 2000. At December
31,  1996  there was $15  million  available  for  borrowing  under  the  Credit
Agreement. The Agreement contains provisions that limit, among other things, the
amount  that can be  expended  for annual  cash  dividends  and  purchase of the
company's stock to 50% of consolidated net income for the previous year.

The  company's  primary  liquidity  requirements  are  the  funding  of  capital
expenditures,  scheduled  principal and interest  payments on  indebtedness  and
working capital needs.  Capital  expenditures  in 1996 totaled $5.0 million,  as
compared to $9.7 million in 1995 and $3.8 million in 1994.  Cash on hand,  funds
generated from operations and amounts  available under the Credit  Agreement are
expected to adequately  fulfill the company's  anticipated  requirements in 1997
and in the foreseeable future.


IMPACT OF INFLATION

The company is subject to the effects of inflation.  While the company  attempts
to pass along  inflationary  increases  in its costs by  increasing  the selling
prices of its products,  it has not always been  successful in passing along the
entire amount of such  increases due to the level of competition in its markets.
The operating  efficiencies  and reduced unit cost of production which have been
achieved through the company's  capital  expenditure  programs and other process
improvements  have  mitigated  the impact of  inflation  on the  company's  cost
structure.


SAFE HARBOR STATEMENT

Except for the historical information contained herein, the matters discussed in
this  annual  report are  forward-looking  statements  which  involve  risks and
uncertainties,  including but not limited to economic, competitive, governmental
and technological factors affecting the company's operations,  markets, services
and related products,  prices and other factors discussed in the company's prior
filings with the Securities and Exchange Commission.


STOCK MARKET PRICES AND DIVIDENDS

Since November 3, 1993, the company's common stock has been listed on the Nasdaq
National  Market  under the  symbol  "HLPH."  As of March 14,  1997,  there were
approximately  2,300 record holders of the company's common stock. See Quarterly
Results of  Operations  on page 8 for market  prices on common stock during 1996
and 1995. No dividends on the common stock were paid in 1996 or 1995.


================================================================================
                             U.K. -- GRAPHIC OMITTED
================================================================================

<PAGE>

<TABLE>

                                FINANCIAL HISTORY

Holophane Corporation and Subsidiaries
(in thousands except % and per share data)                                                 Year Ended December 31,
                                                                   1996             1995           1994            1993  
_________________________________________________________________________________________________________________________
Summary of Operations
_________________________________________________________________________________________________________________________
<S>                                                              <C>             <C>            <C>             <C>            
Net sales                                                        $190,939        $181,069       $150,997        $138,818       
Gross margin                                                       73,655          70,478         58,407          53,594       
Nonrecurring items                                                      0               0          3,875           3,424       
Operating income                                                   28,017          28,722         18,580          13,880       
Interest expense, net                                               1,612           2,245          2,255           6,230       
Income (loss) before income taxes, cumulative effect
  of accounting change and extraordinary item                      26,405          26,477         16,325           7,650       
Provision for income taxes                                          9,937          10,435          6,837           3,075       
Income (loss) before cumulative effect of
  accounting change and extraordinary item                         16,468          16,042          9,488           4,575       
Cumulative effect of accounting change (a)                              0               0              0           3,693       
Extraordinary items, net of tax (b)                                     0               0              0          (4,098)      
Net income (loss)                                                  16,468          16,042          9,488           4,170       
Preferred stock dividends                                               0               0              0           2,137       
Net income (loss) available to common shareholders                $16,468         $16,042         $9,488          $2,033       

_________________________________________________________________________________________________________________________

Balance Sheet Data

_________________________________________________________________________________________________________________________
Working capital:
     Cash                                                          $8,072         $13,356        $11,473         $11,788       
     Other                                                         19,117          12,688          8,437           5,550       
Total assets                                                      123,967         110,779         99,352          95,915       
Long term debt, including current maturities                       25,256          31,410         37,722          45,671       
Redeemable,  preferred stock                                            0               0              0               0       
Stockholders' equity (deficit)                                    $67,144         $50,389        $34,722         $27,201       

_________________________________________________________________________________________________________________________

Per Common Share Data             (c)

_________________________________________________________________________________________________________________________
Primary net earnings (loss) before cumulative effect of
   accounting change and extraordinary items                        $1.40           $1.38          $0.82           $0.29       
Primary net earnings (loss)                                         $1.40           $1.38          $0.82           $0.24       
Fully diluted net earnings (loss)                                   $1.40           $1.35          $0.82           $0.24       
Book value                                                          $5.88           $4.39          $3.03           $2.33       

_________________________________________________________________________________________________________________________

Other Data

_________________________________________________________________________________________________________________________
Gross margin as a % of net sales                                    38.6%           38.9%          38.7%           38.6%       
Operating income as a % of net sales                                14.7%           15.9%          12.3%           10.0%       
Weighted average number of primary common shares                   11,770          11,667         11,580           8,414       
Weighted average number of fully diluted common shares             11,770          11,863         11,580           8,414       

_________________________________________________________________________________________________________________________


</TABLE>

*** ABOVE TABLE SPLIT AT RIGHT MARGIN -- CONTINUED BELOW***


<TABLE>

_________________________________________________________________________________________________
Summary of Operations                                     1992            1991           1990
_________________________________________________________________________________________________
<S>                                                     <C>             <C>            <C>          
Net sales                                               $129,863        $118,166       $115,650     
Gross margin                                              47,074          42,029         39,261     
Nonrecurring items                                             0               0              0     
Operating income                                          12,035           7,773          9,468     
Interest expense, net                                      8,220           9,887         10,848     
Income (loss) before income taxes, cumulative effect                                                
  of accounting change and extraordinary item              3,815          (2,114)        (1,380)    
Provision for income taxes                                   661              64            227     
Income (loss) before cumulative effect of                                                           
  accounting change and extraordinary item                 3,154          (2,178)        (1,607)    
Cumulative effect of accounting change (a)                     0               0              0     
Extraordinary items, net of tax (b)                            0               0         (5,464)    
Net income (loss)                                          3,154          (2,178)        (7,071)    
Preferred stock dividends                                  2,260           1,958          1,845     
Net income (loss) available to common shareholders          $894         ($4,136)       ($8,916)    
                                                                                                    
_________________________________________________________________________________________________
                                                                                                    
Balance Sheet Data                                                                                  
                                                                                                    
_________________________________________________________________________________________________
Working capital:                                                                                    
     Cash                                                 $3,013          $1,145         $2,156     
     Other                                                 5,498          16,121         16,647     
Total assets                                              88,014          99,745        111,494     
Long term debt, including current maturities              63,777          76,677         82,550     
Redeemable,  preferred stock                              16,905          14,645         12,687     
Stockholders' equity (deficit)                          ($10,608)        ($7,546)       ($2,858)    
                                                                                                    
_________________________________________________________________________________________________
                                                                                                    
Per Common Share Data             (c)                                                               
                                                                                                    
_________________________________________________________________________________________________
Primary net earnings (loss) before cumulative effect of                                             
   accounting change and extraordinary items               $0.11          ($0.53)        ($0.45)    
Primary net earnings (loss)                                $0.11          ($0.53)        ($1.16)    
Fully diluted net earnings (loss)                          $0.11          ($0.53)        ($1.16)    
Book value                                                     ---            ---             ---   
                                                                                                    
_________________________________________________________________________________________________
                                                                                                    
Other Data                                                                                          
                                                                                                    
_________________________________________________________________________________________________
Gross margin as a % of net sales                           36.2%           35.6%          33.9%     
Operating income as a % of net sales                        9.2%            6.6%           8.2%     
Weighted average number of primary common shares           7,775           7,765          7,665     
Weighted average number of fully diluted common shares     7,775           7,765          7,665     
                                                                                                    
_________________________________________________________________________________________________


(a)    Represents the effect of adopting SFAS No. 109 "Accounting for Income Taxes."
(b)    Relates to early retirement of debt.
(c)    Adjusted to reflect stock splits.

</TABLE>