SLI INC, S-1/A, 1999-06-30

SLI INC
S-1/A, 1999-06-30
ELECTRIC LIGHTING & WIRING EQUIPMENT

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1999

REGISTRATION NO. 333-49287
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------

AMENDMENT NO. 4

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------

SLI, INC.
(Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S> <C> <C>
OKLAHOMA 3679 73-1412000
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer Identification
Classification Code Number) Number)
</TABLE>

------------------
500 CHAPMAN STREET
CANTON, MA 02021
TELEPHONE: (781) 828-2948
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
------------------
FRANK M. WARD, CHIEF EXECUTIVE OFFICER
SLI, INC.
500 CHAPMAN STREET
CANTON, MA 02021
TELEPHONE: (781) 828-2948
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
------------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:

<TABLE>
<S> <C>
WILLIAM J. SCHIFINO, ESQ. EDWARD P. TOLLEY III, ESQ.
SCHIFINO & FLEISCHER, P. A. SIMPSON THACHER & BARTLETT
ONE TAMPA CITY CENTER, SUITE 2700 425 LEXINGTON AVENUE
TAMPA, FLORIDA 33602 NEW YORK, NEW YORK 10017
(813) 223-1535 (212) 455-2000
</TABLE>

------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rue 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock par value $.01 per share...... 8,625,000 shares $32.00 $276,000,000 $81,420(3)
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) Includes 1,125,000 shares that the underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee and
calculated in accordance with Rule 457(c) under the Securities Act on the
basis of the last reported price of the Company's Common Stock on May 24,
1999, as reported by The New York Stock Exchange.
(3) $140,195 was previously paid.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DUE DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JUNE 29, 1999

PROSPECTUS
7,500,000 SHARES
(SLI, INC. LOGO)

COMMON STOCK
$ PER
SHARE
------------------

We are selling 6,000,000 shares of our common stock and the selling
shareholders named in this prospectus are selling 1,500,000 shares. We will not
receive any proceeds from the sale of the shares by the selling shareholders.
The underwriters named in this prospectus may purchase up to 1,125,000
additional shares of common stock from us solely to cover over-allotments, if
any.

Our common stock is listed on The New York Stock Exchange under the symbol
"SLI." The last reported sale price of our common stock on The New York Stock
Exchange on June 28, 1999, was $16 1/16 per share.
---------------------

INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
---------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public Offering Price $ $
Underwriting Discount $ $
Proceeds to SLI, Inc. (before expenses) $ $
Proceeds to the Selling Shareholders $ $
</TABLE>

The underwriters are offering the shares subject to various conditions. The
underwriters expect to deliver the shares to purchasers on or about
, 1999.
---------------------

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MCDONALD INVESTMENTS INC.
PRUDENTIAL SECURITIES
RAYMOND JAMES & ASSOCIATES, INC.

, 1999
<PAGE> 3

[PHOTOS]

[DESCRIPTION OF COMPANY'S PRODUCTS.]

[DESCRIPTION OF PRODUCT APPLICATIONS.]

The trademark Sylvania is owned by Osram-Sylvania, Inc. in the United
States, Canada, Mexico and Puerto Rico and by the Company in all other
jurisdictions where the name is registered. This prospectus also contains
reference to other trademarks which are not owned by the Company.

i
<PAGE> 4

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD
NOT ASSUME THAT THE INFORMATION PROVIDED BY THIS PROSPECTUS IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 7
Use of Proceeds............................................. 10
Price Range of Common Stock................................. 10
Dividend Policy............................................. 11
Capitalization.............................................. 11
Selected Condensed Consolidated Financial Data.............. 12
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 13
Business.................................................... 21
Management.................................................. 32
Certain Transactions........................................ 38
Principal and Selling Shareholders.......................... 39
Description of Certain Indebtedness......................... 40
Description of Capital Stock................................ 41
Shares Eligible for Future Sale............................. 42
Underwriting................................................ 43
Legal Matters............................................... 44
Experts..................................................... 44
Available Information....................................... 45
Index to Financial Statements............................... F-1
</TABLE>

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

In this prospectus, "SLI", "we", "us", and "our" each refer to SLI, Inc.

ii
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical financial
statements and notes thereto included elsewhere in this prospectus. As used in
this prospectus, unless the context indicates otherwise, the terms the "Company"
and "SLI" refer to SLI, Inc. and its consolidated subsidiaries. In January 1998,
the Company changed its fiscal year-end from the Sunday nearest to December 1 of
each year to the Sunday nearest to December 31. This prospectus assumes no
exercise of the underwriters' over-allotment option.

THE COMPANY

The Company believes that it is one of the six largest full-line lighting
companies in the world and one of only two major international producers
offering lamps, fixtures and ballasts. Primarily through its acquisition-based
growth strategy, the Company has developed from a specialized U.S. manufacturer
and supplier of neon lamps and miniature lighting products into one of the
world's largest vertically integrated manufacturers and suppliers of lighting
systems and services to the industrial, commercial and consumer markets. The
Company has completed 21 acquisitions since 1992 as part of its growth strategy,
with its most significant acquisition, Sylvania Lighting International, B.V.
("SLI, B.V."), being consummated in the year ended November 30, 1997 ("Fiscal
1997"). At the time of the acquisition, SLI, B.V. was the third largest lighting
company in Europe, selling a variety of products in its principal markets under
recognized brand names, including Sylvania.

Primarily as a result of the Company's acquisition strategy, net sales
increased from $94.2 million for the year ended December 1, 1996 ("Fiscal 1996")
to $773.1 million for the year ended January 3, 1999 ("Fiscal 1998"). In
addition, operating income increased from $18.5 million to $59.3 million over
the same period. For Fiscal 1998, approximately 79% and 81% of the Company's net
sales and operating income, respectively, were derived from operations outside
the United States. Net sales increased from $192.4 million for the quarter ended
April 5, 1998, to $218.9 million for the quarter ended April 4, 1999, and
operating income increased from $14.4 million to $18.6 million over the same
period.

The Company offers a complete range of lighting products throughout the
world. The Company's product categories include lamps, fixtures, miniature
lighting assemblies and ballasts. The lamp products produced by the Company
include incandescent, fluorescent, compact fluorescent, high intensity discharge
("HID"), halogen, and special and miniature lamps. The Company's commercial and
industrial fixture lines consist primarily of fluorescent ceiling mounted
fixtures; its accent and decorative fixture lines range from simple downlights
and spotlights to high performance lighting fixtures for art galleries and
museums. Miniature lighting assemblies manufactured by the Company are used in
various product applications, including automobile message centers, and aviation
and telecommunications status arrays. Magnetic and electronic ballasts designed
and manufactured by the Company supply power to start and operate fluorescent
and HID lamps and signage products (neon displays). In addition, the Company
also operates the third largest U.S. lighting maintenance service provider.

The Company's strategy is to operate as a vertically integrated, highly
automated, manufacturer providing "one stop" lighting solutions for its
customers' lighting requirements by offering both discrete lighting components
and value-added integrated products. Through its acquisition of SLI, B.V., as
well as several niche businesses, the Company is able to offer its global
customers extensive design, engineering and manufacturing capabilities, while at
the same time providing local, responsive service. The Company has 31
manufacturing facilities, as well as sales offices and distribution facilities,
in more than 30 countries. The Company's customers include wholesalers, original
equipment manufacturers ("OEMs"), retailers, architects, designers and
contractors.

The Company is incorporated under the laws of the State of Oklahoma. Its
executive offices are located at 500 Chapman Street, Canton, Massachusetts,
02021, and its telephone number is (781) 828-2948.

1
<PAGE> 6

GROWTH STRATEGY

The Company believes that it is well positioned to continue its growth
internally and through acquisitions. Management believes that its industry
knowledge, experience in consummating and integrating acquisitions and its
access to capital will facilitate the Company's external growth through future
acquisitions both domestically and internationally.

Internal growth is expected to be driven by:

- increasing sales to existing and new customers,

- introducing new lighting technologies, and

- continuing to diversify geographic operations.

Increase Sales to Existing and New Customers. The Company focuses on
expanding its markets by designing, developing and marketing "one stop" lighting
solutions, a strategy through which the Company seeks to capitalize on
cross-selling opportunities between customers of existing and acquired
businesses. The Company seeks to use its global distribution networks and
recognized brand names, including Sylvania (outside the United States, Canada,
Mexico and Puerto Rico), to market and sell the Company's products worldwide.
Moreover, the Company's international operations have broad product lines of
consumer and industrial lamps and fixtures which the Company plans to market
domestically. In addition, the Company plans to aggressively market
complementary products such as ballasts which can be offered with linear and
compact fluorescent and HID lighting products manufactured by SLI, B.V.

Introduce New Lighting Technologies. Through the introduction of new
lighting technologies, the Company has been able to participate in the high
growth and high margin segment of the lighting market. Further, because lighting
products and the related manufacturing technology are becoming increasingly
sophisticated, the Company has sought to enhance its technological capabilities
in order to fulfill its customers' outsourcing and "just-in-time" requirements
and adjust to shifts in demand. Through the acquisition of various niche
businesses operating within the lighting industry, the Company's technological
expertise has expanded, thus enabling it to manufacture more sophisticated
products. As a result of its technical know-how, the Company believes that it
can expand its business by developing new products and entering new niche
markets in which it can be one of a few leading suppliers. For example, the
Company is currently exploring opportunities for the development and integration
of fiber optic products for the automotive, aviation and consumer markets.

Diversify Geographic Operations. An important element of the Company's
growth strategy is to continue to establish highly automated manufacturing
operations in areas of high customer density or where manufacturing efficiencies
can be realized. The Company's operations are currently located in the Americas,
Europe and the Pacific Rim. The Company intends to continue to selectively
expand its operations internationally to better serve its existing customers and
to develop new customers.

The Company plans to continue to use strategic acquisitions and alliances
to effect its vertical and horizontal integration strategies. Acquisitions are
selected based upon their potential to:

- augment the Company's technology, engineering and design capabilities,

- broaden the Company's product offerings and channels of distribution,

- provide additional manufacturing facilities,

- access global markets, and/or

- effect cost reduction opportunities and other operational synergies.

Acquisitions generally involve synergies of centralized administration,
intercompany product transfer, sales and designs. For example, the acquisition
of SLI, B.V., a large user of ballasts with no ballast manufacturing capability,
produced synergistic effects for the Company and its Power Lighting Products
subsidiary, a major producer of ballasts. The Company believes that its
extensive knowledge of the lighting

2
<PAGE> 7

industry, combined with its experience in consummating numerous acquisitions and
its access to capital, provides an important competitive advantage in
identifying domestic and international acquisition opportunities and integrating
the acquired operations into the Company. Further, because of the fragmented
nature of many sectors of the lighting industry, the Company believes that there
are many opportunities available for future acquisitions.

OPERATING STRATEGY

The Company's operating strategy is designed to enhance the Company's
position as a leading international designer, manufacturer and supplier of
lighting products, while at the same time increasing profitability through:

- continued vertical integration and automation,

- improved operating efficiencies, and

- continued focus on responsiveness and product quality.

Continue Vertical Integration and Automation. The Company intends to
continue to vertically integrate its operations by broadening the range of
components which it manufactures and uses in its lighting products. The
Company's ability to manufacture a wide array of components facilitates the
production of more complex, value-added lighting products, which generally have
higher average selling prices per unit and higher margins than discrete lighting
components. The Company intends to further increase its manufacturing
capabilities and continue to expand the automation at its facilities in order to
increase production and reduce production costs.

Improve Operating Efficiencies. The Company has realized cost savings in
connection with the integration of its acquired businesses. Cost reduction
initiatives have included the consolidation of certain administrative functions,
vertical integration with existing operations and leveraging of combined
purchasing power. Certain of these acquired businesses had been operating at
significantly lower margins than the Company's base business, resulting in a
temporary contraction of consolidated margins.

Continue Focus on Responsiveness and Product Quality. The Company's
ability to conceive, design and engineer new products in a short period of time
is a significant competitive advantage. Management has developed "Competency
Centers" within its manufacturing facilities to optimize the expertise of the
Company's design, engineering, manufacturing and technical sales support teams.
In addition, the Company has developed technology to monitor and control its
production performance. As a result of various quality initiatives, the Company
has achieved a preferred supplier designation for its miniature lighting
products from several of its OEM customers, including Q-1 certification from
Ford Motor Company and a Quality Excellence award from Chrysler Corp. In
addition, certain of the Company's facilities have received QS-9000, ISO 9001
and Euro-Net ISO 9000 and 9001 certifications. Such certifications in many
instances are a pre-requisite for contractual orders, particularly with large
industrial users of the Company's products.

3
<PAGE> 8

SUMMARY OF ACQUISITIONS

The following table sets forth the 21 acquisitions which have been
consummated by the Company since October 1992:

<TABLE>
<CAPTION>
BUSINESS TYPE OF OPERATION
-------- -----------------
<S> <C>
1992
Chicago Miniature Lamp, Inc............ Supplier of miniature lighting components
1993
Glolite Sales, Ltd..................... Manufacturer of miniature neon and incandescent
bulb and string lighting products
1994
Industrial Devices, Inc................ Designer and manufacturer of miniature lighting
products
1995
Plastomer, Inc......................... Manufacturer and supplier of miniature lighting
assemblies and bulb sockets
Fredon Industrial Development, Inc..... Manufacturer of machine tools and dies
STT Holdings Limited................... Designer and engineer of lamp-making equipment
1996
Electro Fiberoptics, Inc............... Manufacturer of fiber optic lighting products
Phoenix Lighting (U.K.) Limited........ Manufacturer of halogen and specialty lamps
W. Albrecht GmbH u. Co. KG............. Manufacturer of miniature lighting products
1997
Gustav Bruckner GmbH................... Designer, engineer, and manufacturer of automated
lamp-making equipment
Valmont Electric, Inc.................. Manufacturer of magnetic and electronic ballasts
Sylvania Lighting International,
B.V.................................. Designer and manufacturer of integrated lighting
systems including lamps and fixtures
Solium, Inc............................ Designer and manufacturer of electronic ballasts
1998
Electro-Mag International,Inc.......... Ballast technology
Topluz S.A............................. Manufacturer of lamps
OSA Elektronik GmbH.................... Manufacturer of light emitting diodes
VCH International Limited.............. Manufacturer of miniature lamps and systems
SOCOP S.A.............................. Manufacturer of miniature lighting products
IllumElex Corporation.................. Lighting maintenance
1999
Lighting Partner B.V................... Manufacturer of lighting fixtures
Supreme Corporation.................... Manufacturer of lamps
</TABLE>

4
<PAGE> 9

THE OFFERING

<TABLE>
<S> <C>
Common Stock being offered by the Company............. 6,000,000 shares
Common Stock being offered by the selling
shareholders........................................ 1,500,000 shares
-----------
Total....................................... 7,500,000 shares
===========
Common Stock to be outstanding after the 35,647,873 shares
offering(a).........................................
Use of proceeds....................................... To repay a portion of outstanding
indebtedness under the Company's revolving
credit facility.
Dividend policy....................................... The Company does not intend to pay dividends
in the foreseeable future as it intends to
retain any earnings for the operation and
expansion of its business. See "Dividend
Policy."
NYSE symbol........................................... SLI
</TABLE>

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

(a) Excludes 3,665,700 shares of Common Stock reserved for issuance upon the
exercise of options currently outstanding under the Company's Incentive and
Non-Statutory Stock Option Plan (the "Stock Option Plan") and its Special
1997 Stock Option Plan (the "Special Option Plan"). The Stock Option Plan
and the Special Option Plan are collectively referred to herein as the
"Option Plans."

RISK FACTORS

See "Risk Factors" for a description of certain risks to be considered
before making an investment in the Common Stock.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business," as well as those discussed elsewhere in this
prospectus. Statements contained in this prospectus that are not historical
facts are forward-looking statements that are subject to the safe harbor created
by the Private Securities Litigation Reform Act of 1995. A number of important
factors could cause the Company's actual results for 1998 and beyond to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. These factors include, without limitation, those
discussed in "Risk Factors."

5
<PAGE> 10

SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------------------------------ -------------------
11/27/94(A) 12/3/95 12/1/96 11/30/97 1/3/99(B) 4/5/98 4/4/99
----------- ------- ------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(C):
Net sales................. $31,729 $57,402 $94,171 $329,959 $773,068 $192,420 $218,865
Cost of products sold..... 21,113 36,726 61,147 231,933 533,484 133,593 156,011
------- ------- ------- -------- -------- -------- --------
Gross margin............ 10,616 20,676 33,024 98,026 239,584 58,827 62,854
Selling, general and
administrative
expenses................ 7,777 8,462 14,552 65,549 178,235 44,448 44,254
Restructuring costs....... -- -- -- 5,115 2,022 -- --
------- ------- ------- -------- -------- -------- --------
Operating income........ 2,839 12,214 18,472 27,362 59,327 14,379 18,600
Net income.............. $ 1,110 $ 8,465 $13,436 $ 20,941 $ 33,032 $ 9,117 $ 12,772
======= ======= ======= ======== ======== ======== ========
Net income (loss) per
common
share -- basic(d)....... $ 0.06 $ 0.41 $ 0.55 $ 0.73 $ 1.14 $ 0.32 $ 0.44
======= ======= ======= ======== ======== ======== ========
Weighted average shares
outstanding -- basic(d)... 18,744 20,880 24,357 28,761 28,898 28,751 29,088
======= ======= ======= ======== ======== ======== ========
Net income (loss) per
common share --
diluted(d).............. $ 0.06 $ 0.41 $ 0.55 $ 0.71 $ 1.10 $ 0.30 $ 0.42
======= ======= ======= ======== ======== ======== ========
Weighted average shares
outstanding -- diluted(d).. 18,744 20,899 24,488 29,331 30,132 30,091 30,703
======= ======= ======= ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
AS OF 4/4/99
-------------------------
ACTUAL AS ADJUSTED(E)
-------- --------------
<S> <C> <C>
BALANCE SHEET DATA(C):
Working capital............................................. $110,422 $110,422
Total assets................................................ 754,802 754,802
Short-term debt............................................. 41,201 41,201
Long-term debt, less current portion........................ 249,678 90,078
Stockholders' equity........................................ 209,112 368,712
</TABLE>

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

(a) The Company changed its financial reporting year-end from the last Sunday
in February to the Sunday closest to December 1, which resulted in a year
containing 39 weeks in 1994.
(b) In January 1998, the Company changed its fiscal year end from the Sunday
nearest December 1 to the Sunday nearest December 31. As a result of this
change, the Company had a one-month transition period ending January 4,
1998. See the Company's Consolidated Financial Statements included
elsewhere herein.
(c) Revenues, expenses, assets, and liabilities have been significantly
affected by the number and timing of acquisitions made by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Acquisitions."
(d) See Note 2 to Notes to the Company's Consolidated Financial Statements for
stock split information.
(e) Gives effect to the offering and the application of the estimated net
proceeds to the Company therefrom as if the offering had occurred on April
4, 1999. See "Use of Proceeds."

6
<PAGE> 11

RISK FACTORS

Prospective purchasers of the Company's Common Stock should carefully
consider the following factors as well as the other information contained in
this prospectus in evaluating an investment in the Company's Common Stock.

GROWTH THROUGH ACQUISITIONS; INTEGRATION OF ACQUISITIONS

The Company's growth has been, and is expected to continue to be, driven
principally by acquisitions. While the Company intends to seek additional
acquisition opportunities, there can be no assurance that the Company will be
able to successfully identify suitable acquisition candidates, secure financing
on acceptable terms, complete acquisitions on favorable terms, successfully
integrate acquired operations into existing operations, expand into new markets
or obtain appropriate bank consents. There can also be no assurance that future
acquisitions will not have an adverse effect upon the Company's operating
results, particularly in the fiscal quarters immediately following the
completion of such acquisitions while the operations of the acquired businesses
are being integrated into the Company's operations. Once integrated, acquired
operations may not achieve levels of revenues, profitability or productivity
comparable with those achieved by the Company's existing operations, or
otherwise perform as expected. In addition, the Company competes for acquisition
and expansion opportunities with companies that have substantially greater
resources. It should be noted that the issuance of common stock in connection
with any future acquisition could result in dilution to investors. See
"Business -- Growth Strategy."

INTERNATIONAL OPERATIONS

The Company has 31 manufacturing facilities, as well as sales offices and
distribution facilities in more than 30 countries and sells its products
worldwide. For Fiscal 1998, approximately 79% and 81% of the Company's net sales
and operating income, respectively, were derived from operations outside the
United States. As a result of its international operations, the Company is
subject to risks associated with operating in foreign countries, including
limitations on remittance of dividends and other payments by foreign
subsidiaries, hyperinflation in certain foreign countries, imposition of
investment and other restrictions by foreign governments, trade barriers, the
effects of income and withholding taxes and governmental expropriation. Although
such risks have not had a material adverse effect on the Company to date, no
assurance can be given that such risks will not have a material adverse effect
on the Company in the future. See "Business -- International Operations."

FOREIGN CURRENCIES AND INTEREST RATE RISK

A significant amount of the Company's net sales is generated in foreign
currencies. For Fiscal 1998, approximately 60.0% of the Company's net sales were
denominated in European currencies, 20.6% in U.S. dollars, and the remaining
19.4% in other currencies. Costs of the Company are primarily incurred in the
same currencies and in percentages which are not materially different from the
net sales percentages. Since the Company's financial statements are denominated
in U.S. dollars, devaluation and changes in exchange rates between the dollar
and other currencies have had and will have an impact on the reported results of
the Company. To date, this impact has not been material; however, no assurance
can be given that such impact will not have a material adverse effect on the
Company in the future. The Company may, from time to time, hedge specifically
identified committed cash flows in foreign currencies using forward currency
sale or purchase contracts. In addition, international operations are subject to
a number of other currency risks, including, among others, currency exchange
controls, transfer restrictions and rate fluctuations. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- International
Operations."

COMPETITION

The global lighting industry in which the Company operates is highly
competitive. The Company competes primarily on the basis of brand awareness,
price, product quality, design and engineering, customer

7
<PAGE> 12

service and distribution strength. Competitors range from large global
diversified companies such as Philips Electronics N.V. ("Philips"), General
Electric Corp. ("General Electric"), Siemens A.G. ("Siemens") and its North
American subsidiary, Osram-Sylvania, Inc. ("Osram"), Matsushita Corp. and
Toshiba Corp. to small brokers representing Pacific Rim manufacturers. Many of
these competitors offer products which are substantially identical to those
offered by the Company. In addition, certain of the Company's competitors are
significantly larger than the Company and devote a substantial amount of money
to research and development. As a result of these competitive pressures, there
can be no assurance that the Company will be able to compete effectively or
increase prices in the future. Price increases by the Company, price reductions
by competitors, decisions by the Company with regard to maintaining profit
margins rather than market share, or other competitive or market factors or
strategies could adversely affect the Company's market share or results of
operations. Competition could prevent the institution of price increases or
could require price reductions or increased spending on research and development
and marketing and sales which could adversely effect the Company's results of
operations. See "Business -- Competition."

SOURCES OF RAW MATERIALS

For Fiscal 1998, the Company purchased approximately 90% of its
incandescent glass shells from a joint venture consisting of Philips and Osram
and approximately 80% of its fluorescent glass tubing from Osram. The joint
venture agreement automatically renews for a two-year term unless notice of
termination is provided by either party 12 months prior to the automatic renewal
date. The Osram agreement automatically renews for a one-year term unless notice
of termination is provided by either party 24 months prior to the automatic
renewal date. As of the date hereof, the Company has not received notice of
termination for either agreement. There can be no assurance that such agreements
will be renewed in the future. The termination of either agreement could have a
material adverse effect on the Company. The Company purchases certain of its
other raw materials, including plastic, metals, glass, copper, filaments, gases,
electrodes, electronic components, wire and resistors for use in the manufacture
of lamps, fixtures, ballasts and miniature lighting assemblies. All such raw
materials are readily available and are generally purchased from a variety of
independent, non-competing suppliers. Substantially all light emitting diodes
("LEDs") used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company recently acquired a European company
primarily engaged in the production of LEDs which now supplies the Company with
a small portion of its LED requirements. Any interruption in the supply of
incandescent glass shells, fluorescent glass tubing, LEDs or significant
fluctuations in the prices of other raw materials could have an adverse effect
on the Company's operations.

LABOR RELATIONS

At April 4, 1999, approximately 37% of the Company's employees were covered
by collective bargaining or similar agreements which expire at various times.
Although the Company had a three-week work stoppage at its St. Etienne, France
facility in 1997, the Company believes that it has satisfactory relations with
its unions and, therefore, anticipates reaching new agreements on satisfactory
terms as existing agreements expire. There can be no assurance, however, that
new agreements will be reached without a work stoppage or strike or will be
reached on terms satisfactory to the Company. A prolonged work stoppage or
strike could have a material adverse effect on the Company's results of
operations. See "Business -- Employees."

ENVIRONMENTAL MATTERS

The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes. The
various types of substances produced at the Company's manufacturing facilities
include air substances (mercury, sulphur dioxide and CO(2)), effluents (mercury,
suspended solids and coatings) and solid wastes (glass, cardboard and waste
solvents). While the Company believes that it is currently in material
compliance with those laws and regulations, there can be no assurance that the
Company will not incur significant costs to remediate violations of such laws
and regulations, particularly in connection with the Company's acquisitions of
existing operating facilities or to comply with changes in existing laws and

8
<PAGE> 13

regulations (or the enforcement thereof). Such costs could have a material
adverse effect on the Company's results of operations. See
"Business -- Environmental Matters."

DEPENDENCE ON KEY PERSONNEL

The Company is dependent to a significant extent upon the efforts and
abilities of its President, Chief Executive Officer and principal shareholder,
Mr. Frank M. Ward. The loss of the services of Mr. Ward could have a material
adverse effect on the Company and may constitute a default under the Company's
revolving credit facility. The Company has entered into an employment agreement
with Mr. Ward, the terms of which are set forth under "Management -- Employment
Agreements." The Company does not carry key-man life insurance on Mr. Ward.

OWNERSHIP AND SIGNIFICANT INFLUENCE OF PRINCIPAL SHAREHOLDERS

After consummation of the offering, Mr. Ward and trusts established for
members of his immediate family will own in the aggregate approximately 35.5% of
the outstanding shares of Common Stock of the Company. As a result of such
concentration of ownership, Mr. Ward and such trusts will have the ability to
exert significant influence on the policies and affairs of the Company and
corporate actions requiring shareholder approval, including the election of the
members of the Board of Directors. This concentration of ownership could have
the effect of delaying, deferring or preventing a change of control of the
Company, including any business combination with an unaffiliated party, and
could also affect the price that investors might be willing to pay in the future
for shares of Common Stock. See "Principal and Selling Shareholders."

NO DIVIDENDS ANTICIPATED

The Company intends to retain all future earnings for use in the
development of its business and does not anticipate paying any cash dividends in
the foreseeable future. In addition, cash dividend payments are prohibited under
the terms of the Company's revolving credit facility until 2002. See "Dividend
Policy" and "Description of Certain Indebtedness."

VOLATILITY OF MARKET PRICE FOR COMMON STOCK

From time to time, there may be significant volatility in the market price
for the Common Stock. Operating results of the Company, changes in general
economic conditions and the financial markets, or other developments affecting
the Company or its competitors could cause the market price for the Common Stock
to fluctuate substantially. See "Price Range of Common Stock."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have 35,647,873 shares of
Common Stock outstanding. Of these shares, all of the 7,500,000 shares sold in
the offering and 16,501,810 shares of Common Stock currently outstanding will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"). The remaining 11,646,063 shares
are deemed "restricted shares" as defined by Rule 144 under the Securities Act.
Of such restricted shares, 11,240,381 shares are currently eligible for sale
pursuant to Rule 144, subject to certain restrictions. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of stock
options) in the public market, or the perception that such sales could occur,
could adversely affect the prevailing market price for the Common Stock and the
ability of the Company to raise capital through a public offering of its equity
securities. The selling shareholders, officers, directors and certain affiliates
who will beneficially own in the aggregate 12,945,976 shares of Common Stock
following the completion of the offering, and the Company have agreed not to
offer, sell, offer to sell, solicit an offer to buy, contract to sell, pledge or
grant any option to purchase or otherwise transfer or dispose (or announce any
of the foregoing) of any shares of Common Stock, or any securities convertible
into or exercisable for Common Stock, without the prior written consent of
Salomon Smith Barney Inc., for a period of 120 days after the date of this
prospectus, except (i) in the case of the Company for the issuance of stock
options under the Option Plans, the issuance or sale of Common Stock

9
<PAGE> 14

by the Company upon exercise of outstanding stock options and the issuance of
unregistered securities in consideration for the acquisition of stock or assets
of other companies and (ii) in the case of the officers, directors and certain
affiliates collectively, the sale of no more than 50,000 shares in the
aggregate. See "Shares Eligible for Future Sale."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 6,000,000 shares of
Common Stock offered by it hereby are estimated to be approximately $159.6
million (approximately $216.4 million if the underwriters' over-allotment option
is exercised in full). This assumes a public offering price of $28.00 per share
of Common Stock, the last reported sales price of the Common Stock on The New
York Stock Exchange on June 28, 1999, and expenses payable by the Company
estimated at $800,000. The Company will not receive any proceeds from the sale
of shares of Common Stock by the selling shareholders.

The net proceeds of the offering will be used by the Company to repay a
portion of the indebtedness outstanding under the Company's revolving credit
facility, which indebtedness was incurred primarily to finance the cash portion
of the purchase price of the SLI, B.V. acquisition. Amounts repaid under the
credit facility may be reborrowed at any time prior to maturity, subject to
certain customary conditions. Indebtedness outstanding under the revolving
credit facility bears interest at various rates and matures on August 30, 2002.
See "Description of Certain Indebtedness." Any future borrowings will be
available for general corporate purposes, including acquisitions.

PRICE RANGE OF COMMON STOCK

Until May 4, 1998, the Company's Common Stock traded on the Nasdaq National
Market. Since that date, the Common Stock has traded on The New York Stock
Exchange. The following table sets forth the range of high and low sales prices
for the Company's Common Stock for each period indicated since December 4, 1995
(adjusted for stock splits).

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
FISCAL 1997
First Quarter............................................... $29.50 $11.08
Second Quarter.............................................. 16.67 11.33
Third Quarter............................................... 21.56 15.50
Fourth Quarter.............................................. 25.67 18.00
FISCAL 1998
First Quarter(1)............................................ 40.63 22.17
Second Quarter.............................................. 41.87 24.50
Third Quarter............................................... 27.13 9.25
Fourth Quarter.............................................. 27.75 10.13
FISCAL 1999
First Quarter............................................... 28.25 18.13
Second Quarter (through June 24, 1999)...................... 35.00 22.00
</TABLE>

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

(1) Includes transition month of December 1997.

Such market quotations reflect inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions.

As of April 14, 1999, the approximate number of holders of record of the
Company's Common Stock was 152 and the number of beneficial holders, including
individual participants in security position listings with clearing agencies,
was estimated at approximately 4,500.

10
<PAGE> 15

DIVIDEND POLICY

No dividends have been paid during the two most recent fiscal years, and
the Company does not intend to pay dividends in the foreseeable future as it
intends to retain any earnings for the operation and expansion of its business.
In addition, the payment of cash dividends by the Company is prohibited under
the terms of its revolving credit agreement until 2002. See "Description of
Certain Indebtedness." Any determination to pay dividends in the future,
assuming the lender's consent is obtained, will be at the discretion of the
Company's Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant at that time by the Company's Board of Directors.

CAPITALIZATION

The following table sets forth the capitalization of the Company at April
4, 1999, and at April 4, 1999, as adjusted to give effect to the offering and
the application of the estimated net proceeds to the Company therefrom as
described under "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's Consolidated Financial Statements and Notes
thereto included elsewhere in this prospectus.

<TABLE>
<CAPTION>
APRIL 4, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term debt, less current portion(a)..................... $249,678 $ 90,078
Stockholders' equity:
Common Stock, $.01 par value; 100,000,000 shares authorized
29,437,741 issued, 35,647,873 shares issued as
adjusted(b)............................................... 294 356
Additional paid-in capital(c)............................... 139,470 290,706
Retained earnings........................................... 90,475 90,475
Currency translation adjustment............................. (12,825) (12,825)
Less: Treasury stock at cost (455,400 shares actual, none,
as adjusted)(d)........................................... (8,302) --
-------- --------
Total stockholders' equity........................ 209,112 368,712
-------- --------
Total capitalization.............................. $458,790 $458,790
======== ========
</TABLE>

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

(a) For a description of the Company's debt instruments, see "Description of
Certain Indebtedness" and Note 4 of Notes to the Company's Consolidated
Financial Statements.
(b) Excludes 3,665,700 shares of Common Stock reserved for issuance upon the
exercise of options currently outstanding under the Company's Option Plans
and 142,500 shares reserved for issuance pursuant to the terms of certain
1998 acquisitions. Includes 665,532 shares of Common Stock issued
subsequent to April 4, 1999 in connection with certain acquisitions and the
exercise of options.
(c) Includes $4.8 million in Common Stock to be issued pursuant to the terms of
certain 1998 acquisitions.
(d) See Note 2 to Notes to the Company's Consolidated Financial Statements for
treasury stock information.

11
<PAGE> 16

SELECTED CONDENSED CONSOLIDATED FINANCIAL DATA

The selected financial data of the Company for, and as of the end of, the
years ended January 3, 1999, November 30, 1997 and December 1, 1996 and for the
one month ended January 4, 1998 have been derived from the audited consolidated
financial statements of the Company, which have been audited by Ernst & Young
LLP, and should be read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. The selected
financial data of the Company for, and as of the end of, the nine months and
year ended November 27, 1994 and December 3, 1995, respectively, have been
derived from the audited consolidated financial statements of the Company not
included herein.

<TABLE>
<CAPTION>
ONE
NINE MONTH THREE MONTHS
MONTHS YEAR YEAR ENDED ENDED
ENDED ENDED ENDED YEAR ENDED ---------- YEAR ENDED -------------------
11/27/94(A) 12/3/95 12/1/96 11/30/97 1/4/98(D) 1/3/99(D) 4/5/98 4/4/99
----------- ------- ---------- ----------- ---------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA(B):
Net sales.................... $31,729 $57,402 $ 94,171 $329,959 $ 53,866 $773,068 $192,420 $218,865
Cost of products sold........ 21,113 36,726 61,147 231,933 40,199 533,484 133,593 156,011
------- ------- -------- -------- -------- -------- -------- --------
Gross margin................. 10,616 20,676 33,024 98,026 13,667 239,584 58,827 62,854
Selling, general and
administrative expenses.... 7,777 8,462 14,552 65,549 14,004 178,235 44,448 44,254
Restructuring costs.......... -- -- -- 5,115 -- 2,022 -- --
------- ------- -------- -------- -------- -------- -------- --------
Operating income (loss).... 2,839 12,214 18,472 27,362 (337) 59,327 14,379 18,600
Interest expense, net........ 936 803 301 1,156 1,206 16,892 3,187 4,568
Other (income) expense,
net........................ (7) (47) (1,294) (2,326) (471) 1,247 (204) (1,173)
------- ------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes...................... 1,910 11,458 19,465 28,532 (1,072) 41,188 11,396 15,205
Income taxes................. 800 2,993 6,029 7,591 (525) 8,156 2,279 2,433
------- ------- -------- -------- -------- -------- -------- --------
Net income (loss).......... $ 1,110 $8,465 $ 13,436 $ 20,941 (547) $ 33,032 $ 9,117 $ 12,772
======= ======= ======== ======== ======== ======== ======== ========
Net income (loss) per common
share -- basic(c).......... $ 0.06 $ 0.41 $ 0.55 $ 0.73 (.02) $ 1.14 $ 0.32 $ 0.44
======= ======= ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding -- basic(c).... 18,744 20,880 24,357 28,761 28,659 28,898 28,751 29,088
======= ======= ======== ======== ======== ======== ======== ========
Net income per common
share -- diluted(c)........ $ 0.06 $ 0.41 $ 0.55 $ 0.71 (.02) $ 1.10 $ 0.30 $ 0.42
======= ======= ======== ======== ======== ======== ======== ========
Weighted average shares
outstanding -- diluted(c)... 18,744 20,899 24,488 29,331 29,298 30,132 30,091 30,703
======= ======= ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA AT END OF PERIOD(B):
Working capital.............. $ (270) $9,923 $ 98,308 $117,606 $ 97,790 $ 81,240 $110,422
Total assets................. 32,929 59,530 212,002 651,661 775,463 642,847 754,802
Short-term debt.............. 9,114 65 25,174 14,821 29,874 23,337 41,201
Long-term debt, less current
portion.................... 9,015 3,147 5,607 185,434 238,530 180,171 249,678
Stockholders' equity......... 2,673 34,921 151,164 166,051 217,810 168,741 209,112
</TABLE>

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

(a) The Company changed its financial reporting year-end from the last Sunday
in February to the Sunday closest to December 1, which resulted in a year
containing 39 weeks in 1994.
(b) Revenues, expenses, assets and liabilities have been significantly affected
by the number and timing of acquisitions made by the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Acquisitions."
(c) See Note 2 to Notes to the Company's Consolidated Financial Statements for
stock split information.
(d) In January 1998, the Company changed its financial reporting year end from
the Sunday nearest December 1 to the Sunday nearest December 31. As a
result of this change, the Company had a one-month transition period ending
January 4, 1998.

12
<PAGE> 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and Notes thereto included
elsewhere in this prospectus.

GENERAL

The Company is a leading, vertically integrated manufacturer and supplier
of lighting systems, which include lamps, fixtures and ballasts. The Company has
grown from a specialized manufacturer of neon lamps and miniature lighting
products into a manufacturer and supplier of a wide variety of lighting
products, including lamps, (incandescent, fluorescent, compact fluorescent, HID,
halogen, miniature incandescent neon, LED's and special lamps), fixtures,
magnetic and electronic ballasts and fiber optic lighting systems. The Company
believes that it is one of the six largest global lighting companies and one of
only three major international producers to offer an integrated package of
lamps, fixtures and ballasts. The Company serves a diverse, international
customer base and has 31 manufacturing plants in 13 countries.

The Company was established in 1985, and completed its initial public
offering (the "IPO") in June 1995 and a subsequent offering of Common Stock in
October 1996. An important part of the Company's initial development has been
its geographic and product range expansion through acquisitions. Since its IPO,
the Company has completed 17 acquisitions, the most significant being the
acquisition in September 1997 of SLI, B.V., a privately held company
headquartered in Geneva, Switzerland, for $161.5 million in cash. At the time of
the acquisition, SLI, B.V. was the third largest lighting company in Europe,
selling a variety of products in its principal markets under recognized brand
names, including Sylvania. See "Business -- Acquisitions."

The Company's acquisition strategy has had a significant impact on year to
year comparisons of revenues and earnings. For example, revenues have increased
from $94.2 million for fiscal 1996 to $773.1 million for fiscal 1998 and net
income from $13.4 million to $33.0 million for the same periods. Debt (including
current portion) increased from $30.8 million at December 1, 1996 to $290.9
million at April 4, 1999. See "Results of Operations" and
"Business -- Acquisitions."

For the three months ended April 4, 1999, 77.9% of the Company's worldwide
net sales was generated from international operations. International operations
are subject to currency fluctuations and government actions, such as
devaluations. The Company monitors its currency exposure in each country and can
not predict future foreign currency fluctuations, which have affected and can
continue to affect the Company's balance sheet and results of operations.

In January 1998, the Company changed its financial reporting year-end from
the Sunday nearest to December 1 to the Sunday nearest to December 31. See the
Company's Consolidated Financial Statements included elsewhere herein.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, certain items in
the Company's Consolidated Statements of Income expressed as a percentage of net
sales:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
--------------------------- -------------------
12/1/96 11/30/97 1/3/99 4/5/98 4/4/99
------- -------- ------ -------- --------
<S> <C> <C> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of products sold.......................... 64.9 70.3 69.0 69.4 71.3
----- ----- ----- ----- -----
Gross margin................................. 35.1 29.7 31.0 30.6 28.7
Selling, general and administrative expenses... 15.4 19.8 23.0 23.1 20.2
Restructuring costs............................ -- 1.6 .3 -- --
----- ----- ----- ----- -----
Operating income............................. 19.7 8.3 7.7 7.5 8.5
Interest (income) expense, net................. .3 .4 2.2 1.7 2.1
Other (income) expense......................... (1.3) (.7) .2 (.1) (.5)
----- ----- ----- ----- -----
Income before income taxes..................... 20.7 8.6 5.3 5.9 6.9
Income taxes................................... 6.4 2.3 1.0 1.2 1.1
----- ----- ----- ----- -----
Net income................................... 14.3 6.3 4.3 4.7 5.8
===== ===== ===== ===== =====
</TABLE>

13
<PAGE> 18

Three months ended April 4, 1999 compared to the three months ended April 5,
1998.

Net sales. Net sales increased 13.7% from $192.4 million for the three
months ended April 5, 1998 to $218.9 million for the three months ended April 4,
1999. This increase was primarily due to generic growth generated from the
integration of incremental sales of the 1998 acquisitions into ongoing
operations. The generally higher value of the US dollar compared to other
currencies worldwide decreased net sales by approximately 1.2% for the three
months ended April 4, 1999 as compared to the three months ended April 5, 1998.

Gross Margin. Gross margin increased 6.9% from $58.8 million for the three
months ended April 5, 1998 to $62.9 million for the three months ended April 4,
1999 due primarily to the increase in sales volume. Gross margin, as a
percentage of net sales, decreased from 30.6% for the three months ended April
5, 1998 to 28.7%, for the three months ended April 4, 1999. This decrease was
primarily due to the effects of product mix as caused by the addition of the
1998 and 1999 acquisitions. The gross margin of the Company is expected to
improve as further integration of recent acquisitions into the Company evolves.

Selling, general and administrative expenses. Selling, general and
administrative expenses decreased from $44.4 million for the three months ended
April 5, 1998 to $44.3 million for the three months ended April 4, 1999. As a
percentage of net sales, selling, general and administrative expenses decreased
from 23.1% for the three months ended April 5, 1998 to 20.2% for the three
months ended April 4, 1999 as a result of the Company's strategy to decrease
selling, general and administrative expenses at recent acquisitions through
implementation of reorganization plans developed and accrued for at the time of
such acquisitions. Additionally, the Company seeks to decrease the selling,
general and administrative expenses as a percentage of net sales by utilizing
the infrastructure of its recent acquisitions as a base for further sales
growth. For example, each acquired company generally has a sales organization,
customer channels of distribution, unique markets, products and an organization
in place. By utilizing these, the Company believes it can increase sales
throughout the entire Company. The Company also integrates that portion of the
acquired business that is needed and eliminates that portion which is redundant.

Interest (income) expense, net. Interest expense, net, increased from $3.2
million for the three months ended April 5, 1998 to $4.6 million for the three
months ended April 4, 1999, primarily as a result of an increase in outstanding
borrowings of $87.4 million for the three months ended April 4, 1999.

Other (income) expense. Other income increased from $315,000 for the three
months ended April 5, 1998 to $1.1 million for the three months ended April 4,
1999. Substantially all of the other income resulted from recording the effects
of foreign exchange on financing costs.

Income before income taxes. As a result of the above factors, income
before income taxes increased from $11.4 million for the three months ended
April 5, 1998 to $15.2 million for the three months ended April 4, 1999. As a
percentage of net sales, income before provision for income taxes increased from
5.9% for the three months ended April 5, 1998 to 7.0% for the three months ended
April 4, 1999.

Income taxes. For the three months ended April 4, 1999, the Company
recorded a tax provision of $2.4 million on pretax income of $15.2 million, for
an effective rate of 16%, compared to an effective rate of 20% for the three
months ended April 5, 1998. The lower than U.S. statutory tax rate is due to the
impact of income in countries with effective tax rates lower than those in the
U.S. and realization of tax attributes, including net operating loss carry
forwards. An effective tax rate lower than the U.S. statutory effective tax rate
is expected to continue for several years due to the significant international
operations of the Company.

Year ended January 3, 1999 compared to the year ended November 30, 1997.

Net sales. Net sales increased 134.3% from $330.0 million for the year
ended November 30, 1997 to $773.1 million for the year ended January 3, 1999.
The acquisition of SLI, B.V. accounted for 119.1% of the net sales increase.
Included in the year ended January 3, 1999 was a full year of sales contribution
from SLI, B.V., totaling $542.2 million, compared to three months in the year
ended November 30, 1997, totalling $149.2 million. The remaining increase in net
sales of 15.2% was primarily due to generic growth generated from the
integration of the 1998 acquisitions into ongoing operations.
14
<PAGE> 19

Gross Margin. Gross margin increased 144.5% from $98.0 million for the
year ended November 30, 1997 to $239.6 million for the year ended January 3,
1999, due primarily to the increase in sales volume attributed to the SLI, B.V.
acquisition. Gross margin, as a percentage of net sales, increased from 29.7%
for the year ended November 30, 1997 to 31.0%, for the year ended January 3,
1999. The SLI, B.V. gross margin, as a percentage of SLI, B.V. sales, was 31.3%
for the year ended January 3, 1999. The gross margin of the Company is expected
to improve as further integration of the 1997 and 1998 acquisitions into the
Company evolves. The Company's gross margin percentage is subject to the impact
of seasonality and product mix.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $65.5 million for the year ended November
30, 1997 to $178.2 million for the year ended January 3, 1999. This increase was
largely due to the impact of the SLI, B.V. acquisition. As a percentage of net
sales, selling, general and administrative expenses increased from 19.8% for the
year ended November 30, 1997 to 23.0% for the year ended January 3, 1999,
primarily as a result of the SLI, B.V. acquisition. Included in the year ended
January 3, 1999 are one time charges totaling $525,000 related to a proposed
public offering withdrawn in May 1998, severance costs totaling $543,000 and one
time charges related to the closure of one of the Company's Colombia
manufacturing operations and the United Kingdom machinery making operations
totaling $709,000. Selling, general and administrative expenses as a percentage
of net sales is expected to decrease as the full year effects of the 1997 and
1998 reorganization and restructuring plans take effect. Additionally, the
Company seeks to decrease the selling, general and administrative expenses as a
percentage of net sales by utilizing the infrastructure of its 1997 and 1998
acquisitions as a base for further sales growth.

Restructuring costs In Fiscal 1997, and in connection with the acquisition
of SLI, B.V., the Company developed and approved restructuring plans for
existing operations which resulted in charges of approximately $5.1 million
including $3.5 million of severance costs. The restructuring included the plant
closure, personnel termination, and asset liquidation of a lamp-making operation
in the United Kingdom which became redundant due to the SLI B.V. acquisition.
The facility's land and building was sold, and the equipment was sold or
scrapped. Employee severance cost at the Company's United Kingdom machinery
making operation resulted from the downsizing due to the duplication of
functions after the SLI B.V. acquisition. Additionally, the Company's leased
Illinois warehouse and distribution location was closed and personnel were
terminated. Also, the Company's Oklahoma manufacturing operation was considered
redundant in light of the SLI B.V. acquisition and the lamp making equipment was
disposed of. This restructuring plan was completed in 1998 with cash provided
from operations used to cover the costs incurred. The Company expects to realize
approximately $3.0 million in annualized cost savings over the next two year
period as a result of reduced employee expense of $2.9 million and reduced
depreciation expense of $60,000.

In Fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operation and the Company's United Kingdom machinery making
operation. Included in these costs were the net effect of severance costs
totaling $600,000 and the write-off of lamp making equipment disposed of
totaling $1.1 million. This restructuring plan was completed in 1998 with cash
provided from operations used to cover the costs incurred. The Company expects
to realize approximately $1.5 million in annualized cost savings beginning in
1999 as a result of reduced employee expense of $1.4 million and reduced
depreciation expense of $55,000.

In connection with the purchase price accounting for the acquisition of
SLI, B.V., the Company approved a restructuring plan which resulted in
reorganization accruals of $25 million. As part of the finalization of the
reorganization accruals, $8 million of the amount initially recorded was
reversed to property, plant and equipment in 1998 leaving recorded
reorganization accruals of $17 million. The reorganization plan affected
employee terminations in Europe, Latin America, Australia and Asia and includes
the closure of leased warehouses and administrative facilities. The warehouse
closures will occur in Scandinavia and the administrative office closures will
occur in Switzerland, France, Austria and Benelux. The purchase liabilities
include severance costs, remaining payments on non-cancellable operating leases,
costs to return the facilities to the condition at the outset of the lease, the
write-off of the remaining net book value of leasehold improvements and the cost
to relocate employees. Accrued lease costs are for costs to be incurred
subsequent to the Company vacating facilities. The costs in connection with
these reorganization plans will be incurred through
15
<PAGE> 20

1999 and will be paid from cash provided by operations. The Company expects to
realize annualized savings of approximately $18 million by the end of 1999 as
result of reduced employee expense of approximately $13.4 million, reduced lease
cost of approximately $4.5 million and reduced depreciation expense of
approximately $100,000.

As part of management's evaluation and finalization of the restructuring
plan for SLI B.V. and the related restructuring accrual recorded at the time of
the acquisition, it was determined that $8.0 million ($3.9 million in severance
cost and $4.1 million in other costs) of the amount initially recorded in
purchase accounting should be reversed in the third quarter of 1998. The amount
reversed relates to the plan to consolidate European warehouse facilities. At
the time of the formulation of the plan (September 1997), management intended to
quickly prepare and present the social plan required in three European countries
to employees and government employees and government authorities for approval.
Subsequently, in August 1998, it was determined that implementing this portion
of the plan in the short term would interrupt operations more significantly than
originally anticipated. As such, management determined that delaying and slowly
implementing the plan would be a more prudent business course of action and
decrease the negative impact on operations. The remaining $1 million of the
liability will be used in fiscal 1999.

The Company believes that these restructuring plans are a necessary action
based on the termination of certain activities and are required to maintain a
competitive position. See Note 8 of Notes to the Company's Consolidated
Financial Statements.

Interest (income) expense, net. Interest expense, net, increased from $1.2
million for the year ended November 30, 1997 to interest expense, net, of $16.9
million for the year ended January 3, 1999, primarily as a result of the bank
debt incurred in connection with the SLI, B.V. acquisition. Interest income of
approximately $4.1 million was generated, for the year ended November 30, 1997,
primarily from the investment of unused proceeds from the Company's secondary
offering in October 1996. Interest income for the year ended January 3, 1999
totalled $917,000.

Other (income) expense. The other income for the year ended November 30,
1997 includes the effects of foreign exchange transactions and a $985,000 gain
for the sale of 49% interest in CML Fiberoptics to Schott Corporation in
connection with the formation of the Schott-CML Fiberoptic joint venture.
Included in other (income) expense for the year ended January 3, 1999 was a loss
on sale of assets totalling $408,000. Substantially all of the remainder of
other (income) expense resulted from recording the effects of foreign exchange
transactions. The Company, which has substantial foreign operations and
activity, enters into foreign currency contracts to protect the Company from the
risk that sales and purchases of products in foreign currencies will be
adversely affected by changes in exchange rates. The Company does not hold or
issue financial instruments for trading purposes. Reference Note 13 of the
Company's Consolidated Financial Statements.

Income before income taxes. As a result of the above factors, income
before income taxes increased 44.2%, from $28.5 million for year ended November
30, 1997 to $41.2 million for the year ended January 3, 1999. As a percentage of
net sales, income before provision for income taxes decreased from 8.6% for the
year ended November 30, 1997 to 5.3% for the year ended January 3, 1999.

Income taxes. For the year ended January 3, 1999, the Company recorded a
tax provision of $8.2 million on pretax income of $41.2 million, for an
effective rate of 19.9%, compared to an effective rate of 26.6% for the year
ended November 30, 1997. The lower than U.S. statutory tax rate is due to the
impact of income in countries with effective tax rates lower than those in the
U.S. and realization of tax attributes, including net operating loss carry
forwards. An effective tax rate lower than the U.S. statutory effective tax rate
is expected to continue for several years due to the significant international
operations of the Company. Reference Note 5 of the Company's Consolidated
Financial Statements.

Fiscal Year Transition Period

As a result of the change in the Company's fiscal year end from the Sunday
nearest to December 1 to the Sunday nearest to December 31, the Company is
presenting financial results for the one month period ended

16
<PAGE> 21

January 4, 1998. Revenues were effected in the month of December by a natural
slow down in the trade cycle in the countries where the Company operates due to
the holiday season. The net loss for this transition period was due primarily to
the seasonally low revenues and increases in selling, general and administrative
expenses resulting from the acquisition of SLI, B.V. See the Company's Condensed
Consolidated Financial Statements included elsewhere herein. For the period
ended January 4, 1998, the Company recorded a tax provision benefit of $525,000
on a pre-tax loss of $1.1 million, for an effective benefit rate of 49%. This
rate was affected by business results for the one month period and the resultant
effects of the Company's operating in many tax jurisdictions with varied rates
and special tax agreements.

Year ended November 30, 1997 compared to year ended December 1, 1996.

Net sales. Net sales increased from $94.2 million for the year ended
December 1, 1996 to $330.0 million for Fiscal 1997. This increase was primarily
attributable to the impact of the Power Lighting Products, Inc. ("PLP") and SLI,
B.V. acquisitions and to a lesser extent, growth from existing operations. Net
sales of PLP totaled $70.5 million from January 31, 1997 (the effective date of
acquisition) to November 30, 1997 and net sales of SLI, B.V. totaled $149.2
million from September 1, 1997 (the effective date of acquisition) to November
30, 1997. The Company's strategy of integrating acquisitions can affect sales
comparisons as existing capacity is utilized for internal purposes.

Gross margin. Gross margin increased from $33.0 million for the year ended
December 1, 1996 to $98.0 million for Fiscal 1997, due primarily to the increase
in sales volume attributable to the PLP and SLI, B.V. acquisitions. PLP
contributed $15.0 million to the total gross margin from the date of acquisition
and the gross margin of SLI, B.V. was $47.7 million for the period from the date
of acquisition to November 30, 1997. Gross margin, as a percentage of net sales,
decreased from 35.1% for the year ended December 1, 1996 to 29.7% for Fiscal
1997, due primarily to the impact of the lower gross margin of the ballast
business of PLP, which business has traditionally had lower gross margins than
the Company's other products. This gross margin percentage is expected to
improve as restructuring plans developed at the time of acquisition are
implemented.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $14.6 million for the year ended December
1, 1996 to $65.5 million for Fiscal 1997. This increase was largely due to the
impact of the PLP and SLI, B.V. acquisitions. As a percentage of net sales,
selling, general and administrative expenses increased from 15.4% for the year
ended December 1, 1996 to 19.8% for Fiscal 1997, primarily as a result of the
impact of the PLP and SLI, B.V. acquisitions. The Company's strategy is to
decrease selling, general and administrative expenses attributable to the
acquired companies through restructuring plans which are currently being
implemented.

Restructuring costs. In Fiscal 1997, and in connection with the
acquisition of SLI, B.V., the Company developed and approved restructuring plans
for existing operations which resulted in charges of approximately $5.1 million
including $3.5 million of severance costs. The restructuring included the plant
closure, personnel termination, and asset liquidation of a lamp-making operation
in the United Kingdom which became redundant due to the SLI B.V. acquisition.
The facility's land and building was sold, and the equipment was sold or
scrapped. Employee severance cost at the Company's United Kingdom machinery
making operation resulted from the downsizing due to the duplication of
functions after the SLI B.V. acquisition. Additionally, the Company's leased
Illinois warehouse and distribution location was closed and personnel were
terminated. Also, the Company's Oklahoma manufacturing operation was considered
redundant in light of the SLI B.V. acquisition and the lamp making equipment was
disposed of. This restructuring plan was completed in 1998 with cash provided
from operations used to cover the costs incurred. The Company expects to realize
approximately $3.0 million in annualized cost savings over the next two year
period as a result of reduced employee expense of $2.9 million and reduced
depreciation expense of $60,000.

17
<PAGE> 22

warehouses and administrative facilities. The warehouse closures will occur in
Scandinavia and the administrative office closures will occur in Switzerland,
France, Austria and Benelux. The purchase liabilities include severance costs,
remaining payments on non-cancellable operating leases, costs to return the
facilities to the condition at the outset of the lease, the write-off of the
remaining net book value of leasehold improvements and the cost to relocate
employees. Accrued lease costs are for costs to be incurred subsequent to the
Company vacating facilities. The costs in connection with these reorganization
plans will be incurred through 1999 and will be paid from cash provided by
operations. The Company expects to realize annualized savings of approximately
$18 million by the end of 1999 as result of reduced employee expense of
approximately $13.4 million, reduced lease cost of approximately $4.5 million
and reduced depreciation expense of approximately $100,000.

Interest expense, net. Interest expense, net, increased from $301,000 for
the year ended December 1, 1996 to $1,156,000 for Fiscal 1997, primarily as a
result of the bank financing in connection with the acquisition of SLI, B.V.
Interest income of approximately $4.1 million was generated in Fiscal 1997,
primarily from the investment of $98.3 million in proceeds from the Company's
public offering completed in October 1996. A portion of these proceeds was used
during the year for the PLP and SLI, B.V. acquisitions ($65.0 million), the
repurchase of Common Stock ($8.7 million) and for other capital expenditures.

Other income. Other income increased from $1.3 million in the year ended
December 1, 1996 to $2.3 million in Fiscal 1997. This increase included a
$985,000 gain from the sale by CML Fiberoptics to Schott Corporation ("Schott")
of a 49% interest in a newly-created entity, Schott-CML Fiberoptics, LLC. The
remainder of the increase and substantially all of the remaining balance of
other income for Fiscal 1997 was the result of recording the effects of foreign
exchange transactions.

Income before income taxes. As a result of the above factors, income
before provision for income taxes increased from $19.5 million for the year
ended December 1, 1996 to $28.5 million for Fiscal 1997. As a percentage of net
sales, income before provision for income taxes decreased from 20.7% for the
year ended December 1, 1996, to 8.6% for Fiscal 1997.

Income taxes. For Fiscal 1997, the Company recorded a tax provision of
$7.6 million on pre-tax income of $28.5 million, for an effective rate of 26.6%,
compared to a tax provision of $6.0 million on pre-tax income of $19.5 million,
for an effective rate of 31.0%, for the year ended December 1, 1996. The lower
effective tax rate in Fiscal 1997 was due to the impact of income in countries
with effective tax rates lower than those in the U.S. and realization of tax
attributes, including net operating loss carry forwards, attributable to the
acquisition of SLI, B.V. An effective tax rate lower than the U.S. statutory
effective tax rate is expected to continue for several years due to the
significant international operations of the Company. See Note 5 of Notes to the
Company's Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company's major uses of cash have historically been for acquisitions,
working capital to support sales growth and ongoing capital expenditures.
Sources of cash have typically included operating cash flow, bank borrowings and
proceeds from the sale of common stock.

As of November 30, 1997, the Company's cash on hand was $73.4 million. For
Fiscal 1997, net cash provided by operating activities was $31.7 million
compared to net cash provided by operating activities of $400,000 for fiscal
1996. The increase was a result of increased net income ($8 million) and an
increase in accounts payable and long-term liabilities primarily for SLI, B.V.
since the date of acquisition ($24 million). The accounts payable increase
related to the timing of purchases and payments. For Fiscal 1997, cash used in
investing activities totaled $189.3 million. The investing activities included
primarily (i) the Bruckner and PLP acquisitions in connection with which the
Company paid an aggregate amount of approximately $25.0 million and (ii) the
SLI, B.V. acquisition in connection with which the Company paid approximately
$161.5

18
<PAGE> 23

million. Net cash provided by financing activities in Fiscal 1997 aggregated
$121.9 million, which included $132.4 million in borrowings under the Company's
credit facilities net of, among other things, repurchases of Common Stock
totaling $8.7 million.

As of January 3, 1999, the Company's cash on hand was $27.4 million. For
Fiscal 1998, net cash provided by operating activities was $17.6 million and
cash used in investing activities totaled $74.2 million. The investing
activities included (i) capital expenditures, primarily for production
equipment, totaling $49.0 million and (ii) the 1998 acquisitions in connection
with which the Company paid an aggregate amount of approximately $27.7 million,
net of cash acquired. Net cash provided by financing activities in Fiscal 1998
aggregated $30.9 million, which included $35 million in net borrowings under the
Company's credit facilities, repurchases of Common Stock totaling $7.2 million
and proceeds from the exercise of stock options totaling $3.1 million.

As of April 4, 1999, the Company's cash on hand was $5.9 million. For the
three months ended April 4, 1999, net cash used in operating activities was
$28.1 million and cash used in investing activities totaled $12.8 million. The
investing activities included (i) capital expenditures, primarily for production
equipment, totaling $10.5 million and (ii) the acquisition of a lighting company
in connection with which the Company paid an aggregate amount of approximately
$2.3 million, net of cash. Net cash provided by financing activities for the
three months ended April 4, 1999 aggregated $20.6 million, which included $24.5
million in net borrowings under the Company's credit facilities, repurchases of
Common Stock totaling $5.6 million and proceeds from the exercise of stock
options totaling $1.7 million.

As of April 4, 1999, the Company had available borrowings of approximately
$70 million under the revolving credit facility, and the face amount of letters
of credit issued and outstanding under the revolving credit facility totaled
approximately $2.6 million.

The Company conducts business in countries outside of the United States,
which exposes the Company to fluctuations in foreign currency exchange rates.
The Company may enter into short-term forward exchange contracts to hedge this
risk; nevertheless, fluctuations in foreign currency exchange rates could have
an adverse effect on the Company's business. The Company does not hold or issue
financial instruments for trading or speculative purposes. The Company has
significant operations in Europe and, to a lesser extent, in Latin America. The
introduction of a single European currency is expected to reduce the currency
risks associated with inter-European transactions. However, risks will remain
with respect to transactions with customers or suppliers outside of the zone
covered by the single European currency. The Company's operations in Latin
America are carried out primarily in Brazil, Costa Rica and Colombia. Although
currently not classified as a hyper-inflationary country, Brazil has been
classified as such in the past.

The Company believes that cash from operations and borrowings available
under the Company's credit facilities will be sufficient to meet the Company's
working capital and capital expenditures needs for the next twelve months and
the foreseeable future thereafter. Capital expenditures during the next twelve
months are expected to approximate $33 million.

NET OPERATING LOSS CARRYFORWARDS

The Company had net operating loss carryforwards for tax purposes of
approximately $117.4 million at January 3, 1999, of which approximately $43.9
million expire through 2008 and $73.5 million do not expire.

The net operating losses were generated in various jurisdictions around the
world. Accordingly, notwithstanding the fact that the Company has historically
been profitable, a valuation allowance has been provided for substantially all
of the deferred tax assets related to the net operating losses. Management is
unable to forecast or project future taxable income in specific jurisdictions
and has concluded that it is more likely than not that the deferred tax asset
relative to loss carryforwards would not be realized for specific jurisdictions.

Over 80% of the net operating loss carryforwards relate to SLI operations
in four countries: France, Germany, Belgium and Brazil. Each of these
operations were part of the SLI, B.V. acquisition acquired in late 1997 and have
had a long history of unprofitability. Management has taken steps to improve
their financial performance, but insufficient time has elapsed since the
acquisition for management to project and forecast profitability in the near
future. In no instance can these losses be carried back to prior years to
achieve tax benefit.

Specifically, operations in France have produced a cumulative net operating
loss of $45 million and France continued to be unprofitable. Operations in
Brazil have produced a cumulative net operating loss of $15 million and Brazil
continues to be unprofitable. Whereas operations in Belgium and Germany have
shown profitability in 1998, the level of profitability is small relative to the
cumulative losses of $35 million and $12 million, respectively. As a result,
management cannot project profitability in any jurisdiction in the near term.

19
<PAGE> 24

SEASONALITY

It is expected that the Company's operations will experience certain
seasonal patterns. Generally, sales have been highest in the fourth quarter of
each year due to abbreviated daylight hours and increased holiday light usage.

IMPACT OF YEAR 2000

The year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have time-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices or engage in similar normal business activities.

In addressing the year 2000 issue, the Company has identified the following
phases. In the Awareness phase, the Company defined the year 2000 issue and
obtained executive level support and funding. In the Inventory phase, the
Company collected a comprehensive list of items that may be affected by Year
2000 compliance issues. Such items include facilities and related
non-information technology systems (embedded technology) used in production and
manufacturing systems, computer systems, hardware, and services and products
provided by third parties. In the Assessment phase, the Company evaluated the
items and affected systems identified in the Inventory phase to determine which
will need to be remediated and prioritized remediation based on the potential
impact to the Company. Affected systems include automated assembly lines and
related robotic technologies used in various aspects of the manufacturing
process. However, based on a review of its product line, the Company has
determined that most of the products it has sold and will continue to sell do
not require remediation to be year 2000 compliant. Accordingly, the Company does
not believe that the Year 2000 presents a material exposure as it relates to its
products. The remediation phase includes an analysis of the items that are
affected by Year 2000, the identification of problem areas and the repair or
replacement of non-compliant items. In the ordinary course of replacing computer
equipment and software, the Company attempts to obtain replacements that it
believes are Year 2000 compliant and requests representations from
manufacturers. The Testing phase includes testing of all proposed repairs,
including present and forward date testing which simulates dates in the Year
2000. The Implementation phase consists of placing all items that have been
remediated and successfully tested into production.

Utilizing both internal and external resources to reprogram, or replace,
test, and implement the software and operating equipment for year 2000
modifications, the Company currently anticipates that its Year 2000
identification, assessment, remediation and testing efforts will be completed by
December 31, 1999 and that such efforts will be completed prior to any currently
anticipated impact on computer equipment and software. The Company estimates
that as of April 4, 1999, it had completed approximately 50% of the initiatives
that it believes will be necessary to fully address potential Year 2000 issues
relating to computer equipment and software. The total cost of the Year 2000
project is estimated at $9.8 million and is being funded through operating cash
flows. To date the Company has incurred approximately $5.6 million ($5.1 million
capitalized for new systems and equipment and $.5 million expenses), related to
all phases of the Year 2000 projects. Of the total remaining project costs,
approximately $3.8 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $.4 million
relates to repair of hardware and software and will be expensed as incurred.

Management of the Company believes it has an effective program in place to
resolve the Year 2000 issue in a timely manner. As noted above, the Company has
not yet completed all necessary phases of the year 2000 program. In the event
that the Company does not complete any additional phases, the Company may be
unable to take orders, manufacture and ship products, invoice customers or
collect payments. In addition, disruptions in the economy generally resulting
from Year 2000 issues could also materially adversely affect the Company. The
Company could be subject to litigation for computer systems product failure, for
example, equipment shutdown or failure to properly date business records. The
amount of potential liability and lost revenue cannot be reasonably estimated at
this time.

Although the Company has not developed a comprehensive contingency plan to
address situations that may result if the Company or any of the third parties
upon which the Company is dependent is unable to

20
<PAGE> 25

achieve Year 2000 readiness, the Company's Year 2000 compliance program is
on-going and its ultimate scope, as well as the consideration of contingency
plans, will continue to be evaluated as new information becomes available. These
contingency plans involve, among other actions, manual workarounds, increasing
inventories, and adjusting staffing strategies.

The Company has contacted its vendors and other third parties that could
affect the Company's operations with respect to such vendors' year 2000
compliance status. The Company has been informed by such vendors and other third
parties that they have achieved or expect to achieve compliance by the end of
this year. There can be no guarantee, however, that such systems will be timely
converted, or that a failure to convert, or a conversion that is incompatible
with the Company's systems, would not have an adverse effect on the Company.

The foregoing Year 2000 discussion contains "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
There are many uncertainties involved in the Year 2000 issue, including the
extent to which the Company will be able to successfully remediate systems and
adequately provide for contingencies that may arise, as well as the broader
scope of the year 2000 issues as it may affect third parties that are not
controlled by the Company. Accordingly, the costs and results of the Company's
Year 2000 program and the extent of any impact on the Company's operations could
vary materially from those stated herein.

MARKET RISK

The tables below summarize information on instruments and transactions that
are sensitive to foreign currency exchange rates, including foreign currency
forward exchange agreements and foreign currency denominated debt obligations.

Debt Denominated in Foreign Currencies

<TABLE>
<CAPTION>
THERE- FAIR VALUE
1999 AFTER TOTAL 4/4/99
------ ------ ----- ----------
(DOLLARS EQUIVALENTS IN MILLIONS)
<S> <C> <C> <C> <C>
Belgium Francs
Variable Rate............................................. $ 5.0 $ -- $ 5.0 $ 5.0
Avg. Interest Rate........................................ 5.2%
Avg. Forward Currency Exchange Rate....................... 0.027
Deutsche Marks
Variable Rate............................................. $ 7.2 $ -- $ 7.2 $ 7.2
Avg. Interest Rate........................................ 5.6%
Avg. Forward Currency Exchange Rate....................... 0.553
Japanese Yen
Variable Rate............................................. $ 13.0 $ -- $13.0 $13.0
Avg. Interest Rate........................................ 1.7%
Avg. Forward Currency Exchange Rate....................... 0.008
Swiss Francs
Variable Rate............................................. $ 4.3 $ -- $ 4.3 $ 4.3
Avg. Interest Rate........................................ 2.8%
Avg. Forward Currency Exchange Rate....................... 0.676
Euro
Variable Rate............................................. $ 42.1 $ -- $42.1 $42.1
Avg. Interest Rate........................................ 4.6%
Avg. Forward Currency Exchange Rate....................... 1.081
</TABLE>

21
<PAGE> 26

Foreign Currency Forward Exchange Contracts

<TABLE>
<CAPTION>
THERE- AVERAGE FAIR VALUE
BUY CONTRACTS FUNCTIONAL CURRENCY 1999 AFTER TOTAL CONTRACT RATE 4/4/99
- ------------- ---------------------- ----- ------ ----- ------------- ----------
(DOLLARS EQUIVALENTS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Euro.......................... British Pound Sterling $14.8 $ -- $14.8 1.416 $14.2
United States Dollar.......... British Pound Sterling $ 2.6 $ -- $ 2.6 1.636 $ 2.6
</TABLE>

A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. As a result, the Company's financial
results could be significantly affected by factors such as foreign currency
exchange rates or weak economic conditions in the foreign markets in which the
Company distributes its products. The Company's operating results are exposed to
changes in exchange rates between the U.S. dollar and various other foreign
currencies.

The Company has an existing credit facility with a syndicate of banks led
by BankBoston, N.A., as administrative agent, providing to the Company and its
domestic subsidiaries (the "Borrowers") a $300 million multi-currency revolving
credit facility including a $10.0 million swing-line loan facility and a $15.0
million letter of credit facility. Non-U.S.-dollar borrowings are capped at
$75.0 million. There are no scheduled amortization payments or repayment
penalties. The facility terminates and is repayable in full on August 30, 2002.

The Company's revolving credit facility contains a number of covenants
typical in senior credit facilities that, among other things, restrict the
ability of the Company to dispose of assets (including the stock of
subsidiaries), incur additional indebtedness, create additional liens on assets,
enter into certain leases, investments or acquisitions, engage in mergers or
consolidations, make capital expenditures or engage in certain transactions with
subsidiaries and affiliates, and that otherwise restrict corporate activities.
In addition, the Company is also required to comply with certain financial
covenants including maximum leverage, minimum interest coverage and minimum net
worth. See "Description of Certain Indebtedness".

The Company believes that it will continue to use its long-term credit
facility to fund its future acquisitions, capital expenditures, and other
short-term working capital requirements.

The Company expects to generate sufficient cash flows from operations to
pay down remaining debt prior to the expiration of the credit facility (August
2002). All proceeds from the secondary offering will be used to pay down
existing debt.

The Company continues to review and analyze financing alternatives based on
capital market conditions.

22
<PAGE> 27

BUSINESS

GENERAL

The Company believes that it is one of the six largest full-line lighting
companies in the world and one of only two major international producers
offering lamps, fixtures and ballasts. Primarily through its acquisition-based
growth strategy, the Company has developed from a specialized U.S. manufacturer
and supplier of neon lamps and miniature lighting products into one of the
world's largest vertically integrated manufacturers and suppliers of lighting
systems and services to the industrial, commercial and consumer markets. The
Company has completed 21 acquisitions since 1992 as part of its growth strategy,
with its most significant acquisition, Sylvania Lighting International, B.V.
("SLI, B.V.") being consummated in the year ended November 30, 1997 ("Fiscal
1997"). At the time of the acquisition, SLI, B.V. was the third largest lighting
company in Europe, selling a variety of products in its principal markets under
recognized brand names, including Sylvania.

Primarily as a result of the Company's acquisition strategy, net sales
increased from $94.2 million for the year ended December 1, 1996 ("Fiscal 1996")
to $773.1 million for the year ended January 3, 1999 ("Fiscal 1998"). In
addition, operating income increased from $18.5 million to $59.3 million over
the same period. For Fiscal 1998, approximately 79% and 81% of the Company's net
sales and operating income, respectively, were derived from operations outside
the United States. Net sales increased form $192.4 million for the quarter ended
April 5, 1998, to $218.9 million for the quarter ended April 4, 1999, and
operating income increased from $14.4 million to $18.6 million over the same
period.

The Company's strategy is to operate as a vertically integrated
manufacturer providing "one stop" lighting solutions for its customers' lighting
requirements by offering both discrete lighting components and value-added
integrated products. Through its acquisition of SLI, B.V., as well as several
niche businesses, the Company is able to offer its global customers extensive
design, engineering and manufacturing capabilities, while at the same time
providing local, responsive service. The Company has 31 manufacturing
facilities, as well as sales offices and distribution facilities, in more than
30 countries. The Company's customers include wholesalers, original equipment
manufacturers ("OEMs"), retailers, architects, designers and contractors.

GROWTH STRATEGY

The Company believes that it is well positioned to continue its growth
internally and through acquisitions. Management believes that its industry
knowledge, experience consummating and integrating acquisitions and its access
to capital will facilitate the Company's external growth through future
acquisitions both domestically and internationally.

Internal growth is expected to be driven by:

- increasing sales to existing and new customers,

- introducing new lighting technologies, and

- continuing to diversify geographic operations.

23
<PAGE> 28

The Company plans to continue to use strategic acquisitions and alliances
to effect its vertical and horizontal integration strategies. Acquisitions are
selected based upon their potential to:

- augment the Company's technology, engineering and design capabilities,

- broaden the Company's product offerings and channels of distribution,

- provide additional manufacturing facilities,

- access global markets, and/or

- effect cost reduction opportunities and other operational synergies.

For example, the acquisition of SLI, B.V., a large user of ballasts with no
ballast manufacturing capability, produced synergistic effects for the Company
and its Power Lighting Products subsidiary, a major producer of ballasts. The
Company believes that its extensive knowledge of the lighting industry, combined
with its experience in consummating numerous acquisitions and its access to
capital, provides an important competitive advantage in identifying domestic and
international acquisition opportunities and integrating the acquired operations
into the Company. Further, because of the fragmented nature of many sectors of
the lighting industry, the Company believes that there are many opportunities
available for future acquisitions.

24
<PAGE> 29

OPERATING STRATEGY

- continued vertical integration and automation,

- improved operating efficiencies, and

- continued focus on responsiveness and product quality.

ACQUISITIONS

The following table sets forth the 21 acquisitions which have been
consummated by the Company since October 1992:

<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
Chicago Miniature Lamp, Inc.... October 1992 Supplier of miniature Buffalo Grove,
lighting
(CML-Delaware)(a) components Illinois, USA
Glolite Sales, Ltd............. April 1993 Manufacturer of miniature Pauls Valley,
neon and incandescent bulb Oklahoma, USA
and string lighting products
Industrial Devices, Inc. May 1994 Designer and manufacturer of Hackensack,
(IDI)........................ miniature lighting products New Jersey, USA
Plastomer, Inc................. March 1995 Manufacturer and supplier of Barrie, Ontario,
(CML Canada) miniature lighting Canada
assemblies and bulb sockets
Fredon Industrial.............. August 1995 Manufacturer of machine Newton,
Development, Inc. (Fredon) tools and dies New Jersey, USA
STT Holdings Limited........... November 1995 Engineer and designer of Byfleet, Surrey,
(Badalex) lamp-making equipment United Kingdom
</TABLE>

25
<PAGE> 30

<TABLE>
<CAPTION>
DATE OF
BUSINESS ACQUISITION TYPE OF OPERATION LOCATION
- -------- -------------- ---------------------------- ------------------
<S> <C> <C> <C>
Electro Fiberoptics, Inc....... December 1995 Manufacturer of fiber optic Marlborough,
(CML Fiberoptics) lighting products Massachusetts, USA
Phoenix Lighting (U.K.) December 1995 Manufacturer of halogen and Coalville,
Limited......................
(CML Europe) specialty lamps Leicestershire,
United Kingdom
W. Albrecht GmbH u. Co. KG..... May 1996 Manufacturer of miniature Bamberg,
(Alba) lighting products Germany
Gustav Bruckner GmbH........... January 1997 Engineer, designer and Coburg,
(Bruckner) manufacturer of automated Germany
lamp-making equipment
Valmont Electric, Inc.......... January 1997 Manufacturer of magnetic El Paso,
(Power Lighting Products and electronic ballasts Texas, USA
("PLP"))
Sylvania Lighting.............. September 1997 Designer and manufacturer of Haarlem,
International, B.V. (SLI, integrated lighting systems Netherlands
B.V.) including lamps and fixtures
Solium, Inc. (Solium).......... November 1997 Designer and manufacturer of Randolph,
electronic ballasts Massachusetts, USA
Electro-Mag International, March 1998 Ballast technology El Paso, Texas,
Inc.......................... USA
Topluz S.A..................... March 1998 Manufacturer of lamps Bogota, Colombia
OSA Elektronik GmbH............ May 1998 Manufacturer of light Berlin, Germany
emitting diodes
VCH International Limited...... May 1998 Manufacturer of miniature Bury St. Edmond,
lamps and systems United Kingdom
SOCOP S.A...................... July 1998 Manufacturer of miniature Besancon, France
lighting products
IllumElex Corporation.......... November 1998 Lighting maintenance Raleigh, North
Carolina, USA
Lighting Partner B.V........... January 1999 Manufacturer of lighting Goes, Netherlands
fixtures
Supreme Corporation............ May 1999 Manufacturer of lamps Mullins, South
Carolina, USA
</TABLE>

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

(a) In 1985, Mr. Frank Ward acquired all of the outstanding shares of capital
stock of Xenell, which had been engaged primarily in the business of
manufacturing neon lighting bulbs and assemblies since 1976. Mr. Ward
caused Chicago Miniature Lamp, Inc., an Oklahoma corporation ("CML") to be
organized in October 1992 for the purpose of acquiring Chicago Miniature
Lamp, Inc., a Delaware corporation ("CML-Delaware"). From 1992 to 1993, CML
and Xenell were under the common control of Mr. Ward and effective January
4, 1994, Xenell was merged into CML.

INDUSTRY OVERVIEW

The lighting industry is a large, mature market, which is characterized by
the long life cycle of its lighting products. The global lighting industry
consists of many firms, ranging from large, multinational, multiproduct,
publicly owned companies to small, single-product, private firms. The industry
includes three dominant firms, General Electric, Osram and Philips. While these
three companies are active in all of the major sectors of the global lighting
industry, concentration levels vary by sector and region. The lamp market is
highly concentrated whereas the fixture and miniature lighting markets are
highly fragmented. The ballast market is concentrated and consists of several
large companies including Power Lighting Products. Smaller firms have found or
created niches in certain markets which have been defined by specific
competencies, technologies or differentiated products. Some specialized areas,
such as normal line voltage halogens, compact fluorescents and metal halides,
have recently experienced a rapid rate of growth.

26
<PAGE> 31

The lamp market, which is estimated at approximately $7.6 billion annually,
is relatively stable because much of the demand is generated by replacement
needs. Management believes that trends toward more efficient, longer life lamps
will continue to reduce the absolute number of units sold but that increases in
the average price per unit are expected to more than offset the decline and
result in overall growth of the market. Increased usage and applications will
depend largely on economic growth, especially housing starts and new vehicle
sales. However, economic development in areas such as Eastern Europe and Central
and South America is expected to provide accelerated growth opportunities.
Aggregate sales of lamps have demonstrated moderate cyclicality and seasonality.
The fourth quarter tends to be the industry's strongest demand period, given
abbreviated daylight hours and increased holiday light usage.

The fixture market, which is estimated at approximately $14.0 billion
annually, is highly fragmented since barriers to entry to the market are low in
comparison to the lamp manufacturing business. A large number of suppliers are
active in certain segments of the market, where they offer products for specific
applications. However, several companies offer a complete range of interior,
exterior and display and decorative fixtures for commercial and industrial
applications. Competition is based primarily on product design, quality, brand
recognition and distribution outlets. Interior fixtures constitute the largest
part of the fixture market, followed by exterior fixtures and display and
decorative fixtures. Interior fixture applications include offices, department
stores, shops, hotels, schools, factories and warehouses. Exterior fixtures
include all types of fixtures used in professional outdoor applications such as
street lighting, amenity and public lighting, port, tunnels and security
lighting. The display and decorative fixtures market includes applications for
shop window displays and other public buildings. Continued demand will be
dependent upon economic growth, especially industrial and commercial
construction. As with lamps, economic development in Eastern Europe and Central
and South America is expected to provide accelerated growth opportunities.

The miniature lighting market exhibits slow product obsolescence, stable
underlying demand and moderate growth. Purchasers for miniature lighting
assemblies are primarily OEMs in the automotive, electronics and communications,
appliance and aviation industries, whose products require a wide variety of
illumination and status indicators. Miniature lamps are inserted in lighting
assemblies that may be used in circuit board and panel mount applications that
can be incorporated into a wide variety of OEM products. There has been
increased acceptance by OEMs of the use of lighting manufacturers for the
production of miniature lighting assemblies. Many OEMs have adopted and are
becoming increasingly reliant upon the outsourcing of customized assemblies, and
the Company believes that this trend will continue as OEMs attempt to (i) reduce
time to market, (ii) reduce capital investment, (iii) gain access to leading
technological solutions, and (iv) improve inventory management.

The ballast market is estimated at approximately $3.2 billion annually and
is experiencing growth due to an increasing need to conserve energy, better
luminescence output, increased lamp life and less color shift. Ballasts are used
to supply power to start and operate fluorescent, compact fluorescent and HID
lamps and signage products.

Management believes that the following trends may also lead to increased
global use of lighting products: (i) increased lighting usage by manufacturing
and service companies, operating overtime or second and third shifts, (ii)
development of more energy-efficient and user-friendly lamps, despite an
increase in cost, and (iii) increased demand by developing countries, including
Eastern Europe, Central and South America and the Pacific Rim, for lighting
products.

27
<PAGE> 32

PRODUCTS AND MARKETS

Prior to 1997, nearly two-thirds of the Company's net sales were
attributable to miniature lighting assemblies, with miniature discrete bulbs and
LEDs accounting for the bulk of the remainder. The Company's product category
profile has changed significantly with the addition of PLP and SLI, B.V. The
following table sets forth the percentage of net sales by product category for
Fiscal 1996, Fiscal 1997 and Fiscal 1998.

<TABLE>
<CAPTION>
YEAR ENDED
-----------------------------
PRODUCT 12/1/96 11/30/97 1/3/99
- ------- ------- -------- ------
<S> <C> <C> <C>
Lamps....................................................... 27% 38% 51%
Fixtures.................................................... -- 15 23
Miniature Lighting Assemblies............................... 59 21 9
Ballasts.................................................... -- 23 10
Other....................................................... 14 3 7
--- --- ---
Total............................................. 100% 100% 100%
=== === ===
</TABLE>

The Company's manufacturing and developmental activities are focused as
follows:

Lamps. The Company intends to continue to address the market's
demands for affordable, energy-efficient lamps with longer life cycles. In
this regard, the Company has produced and is continuing to develop, among
other lighting products, (i) compact fluorescent lamps with novel features
and performance characteristics, (ii) tungsten halogen lamps using line
voltage, which have the capability of replacing standard incandescent
lamps, (iii) twin-arc high pressure sodium ("SHP") and mercury-free SHP
lamps for general lighting as well as special applications such as film and
theater use, (iv) triphosphor fluorescent lamps with improved lumen
maintenance, and (v) metal halide lamps that combine energy efficient
illumination, long lamp life, excellent color rendition and compact lamp
size. Through the introduction of a new range of "high voltage" halogen
reflector lamps, known as "Hi- Spot," which has been supplemented with a
miniature 50 millimeter line voltage lamp, the Company has demonstrated
leadership in product development in this area.

Fixtures. Trend setting accent fixtures track both the requirements
of the marketplace and the emergence of new concept lamps, notably line
voltage halogen, metal halide and compact fluorescents. New low glare
fixture development by the Company has been launched in response to
guidelines recommended by certain international engineering industry groups
for reducing the potential harmful effects in the area of visual display
units, as well as lower wattage per square meter of illuminated surface. In
addition, the Company intends to continue to focus its efforts on providing
industrial and commercial lighting fixtures that will meet the changing
performance and aesthetic requirements of its customers.

Miniature Lighting Assemblies. The Company's miniature lighting
assemblies are used mainly as visual fault or status indicators. Because of
competition and rapid technological change, the Company believes that many
OEMs are motivated to work with lighting manufacturers, such as the
Company, in order to gain access to advanced manufacturing facilities
without an increase in their overall capital requirements.

Ballasts. Magnetic and electronic ballasts supply power to start and
operate fluorescent, compact fluorescent and HID lamps and signage
products. Patented technology acquired by the Company in connection with
the acquisition of Solium in Fiscal 1997 has provided the Company with new
three way switching and dimming capabilities for its fluorescent lamps. A
substantial portion of the ballasts produced by Power Lighting Products is
being used by SLI, B.V.

The Company sells its products under a variety of brand names in over 30
countries. Its flagship brand, Sylvania, is one of the world's leading lighting
brands and covers a full line of lamps, industrial and commercial fixtures, and
specialty products. Other lamp and fixture lines include Concord, architectural
and display lighting; Claude, consumer and industrial and commercial lamps and
fixtures; Lumiance, display lighting fixtures; Linolite, residential and
commercial task lighting fixtures; and Le Dauphin, high fashion table fixtures.
Ballasts are sold under the Power Lighting Products brand label. Miniature
lighting assemblies are

28
<PAGE> 33

sold under the Chicago Miniature Lamp and Alba labels. While the Company
generally sells its products under its own brand names, it also sells under its
customers' private brand labels, a practice which is common in the retail
sector. The Company also sells its products to other lighting companies under
such companies' brand labels.

The Company's focus for aiding its general lighting market development in
the U.S. has been through its service and maintenance acquisitions. By expanding
its operations to provide service and maintenance to general lighting users, the
Company is able to introduce its lamp, ballast and fixture products to such
users in a cost effective way.

CUSTOMERS

The Company's customer profile has also changed significantly since the
acquisition of SLI, B.V. in September 1997. The Company's customers currently
include wholesalers, OEMs, retailers, architects, designers and contractors
whereas, prior to the PLP and SLI, B.V. acquisitions, the Company's primary
customers for its miniature lighting products were distributors and OEMs in the
electronics and communications, automotive, appliance and aviation industries.
For Fiscal 1998, the Company's main customer base for lamps and industrial and
commercial fixtures was the wholesale channel (approximately 42% of the
Company's net sales, of which more than 10% was through international electrical
wholesalers such as Rexel, Sonepar and Hagemeyer). The retail market for lamps
is characterized by a small number of large customers which contributes to
competitive and pricing pressure from suppliers located in the Pacific Rim,
especially in compact fluorescent lamps, which provide an attractive combination
of high unit price and low freight cost. The professional installer market is
important to the Company for lamps and accent fixture products. These products,
which the Company sells under the Concord and Lumiance brands, are often
designed pursuant to customer specifications. The Company believes that no one
customer accounted for more than 10% of net sales in Fiscal 1998.

MANUFACTURING

The Company has 31 manufacturing facilities in 13 countries, including 5
facilities in the U.S. The manufacturing operations of the Company are
vertically integrated through design, engineering, manufacturing, assembly and
sales. This integration enables the Company to control product cost more
effectively, helps ensure quality and allows the Company to offer its customers
a wide array of products and services. The Company's manufacturing capabilities
include lamp forming and cutting, socket manufacturing, glass and plastic fiber
drawing, lamp equipment manufacturing, plastic injection molding, and the
production of complex molds and dies, as well as various assembly operations. In
Fiscal 1998, the Company manufactured approximately 90% of the products sold.

The Company's manufacturing operations are based on a number of "Competency
Centers." The production activities of each manufacturing facility are generally
specialized in the manufacturing of a particular line of related lighting
products. For example, the Company produces fluorescent lamps in Germany, accent
fixtures in the United Kingdom, ballasts in Texas, U.S.A., and miniature
lighting products in New Jersey, U.S.A. The design, engineering, manufacturing
and technical support sales teams associated with each product line are located
at the related manufacturing facility.

The Company has specialized design and engineering capabilities which it
uses to improve its manufacturing process by automating single, labor intensive
operations within a product assembly line, as well as automating entire product
assembly lines. Most of the Company's automated manufacturing equipment is
custom designed by its own engineers. The Company fabricates most of its own
equipment and many parts are machined in-house and customized to perform
specific functions. The Company develops and uses automated material handling,
testing and packaging systems and has automated the manufacture of its various
lamps, fixtures and miniature lighting assemblies. By automating its operations,
the Company has been able to reduce its manufacturing costs, thereby enabling it
to be competitive with many products produced worldwide.

The joint venture agreement automatically renews for a two-year term unless
notice of termination is provided by either party 12 months prior to the
automatic renewal date. The Osram agreement automatically renews for a one-year
term unless notice of termination is provided by either party 24 months prior to
the automatic renewal date. As of the date hereof, the Company has not received
notice of termination for either agreement. There can be no assurance that such
agreements will be renewed in the future. The termination of either agreement
could have a material adverse effect on the Company. The Company purchases
certain of its other raw materials, including plastic, metals, glass, copper,
filaments, gases, electrodes, electronic components, wire and resistors for use
in the manufacture of lamps, fixtures, ballasts and miniature lighting
assemblies. All such raw materials are readily available and are generally
purchased from a variety of independent, non-competing suppliers. Substantially
all LEDs used by the Company in its miniature lighting assemblies are currently
imported from the Pacific Rim. The Company recently acquired a European company
engaged in the production of LEDs which now supplies the Company with a small
portion of its LED requirements. Any interruption in the supply of incandescent
glass shells, fluorescent glass tubing, LEDs or significant fluctuations in the
prices of other raw materials could have an adverse effect on the Company's
financial condition and operations.

RESEARCH AND DEVELOPMENT

The Company's research and development expenditures were $7.5 million for
Fiscal 1998. The Company's research and development, in recent years, has been
focused on product and process innovation, applying tested lighting
technologies, rather than in the exploration of new lighting techniques. Much of
the focus has been directed toward improvements in material science to improve
lamp photometric performance, energy-efficiency and miniaturization as well as
to lengthen the life of its products and reduce or eliminate the use of
environmentally hazardous materials. Through a technical agreement, in effect
from January 1993 to September 1997, the Company was entitled to royalty-free
use of Osram's worldwide intellectual property including patents, research and
development, product and process know-how for use outside the United States,
Canada, Mexico and Puerto Rico. The agreement provides that, as of September
1997, the Company no longer had the right to receive new Osram technology and
know-how although the Company continues to have the right to use all of the
information and know-how acquired up to 1997 within its existing business
outside the United States, Canada, Mexico and Puerto Rico. This restriction does
not prohibit the Company from selling a broad range of lighting products, which
are not dependent upon Osram technology, in such areas. The Company has devoted
substantial resources to research and development over the past few years in
anticipation of the expiration of such arrangements with Osram and does not
believe that their expiration will have a material adverse effect on the
Company. Certain of the Company's competitors are significantly larger than the
Company and devote a substantial amount of money to research and development.

SALES AND MARKETING

The Company sells its lighting products through a direct sales force, sales
representatives and distribution companies. The Company currently employs
approximately 1,046 people in sales and marketing, with 695 in Europe, 87 in the
U.S., 3 in Canada, 92 in Australia, 131 in Central and South America and 38 in
Asia. In addition, the Company's sales force is augmented with independent sales
representative organizations, with approximately 677 sales people responsible
for sales in designated geographic territories in the United States, Canada and
Europe.

The Company advertises in most major electronic and electrical trade
publications. To help ensure positive results of its advertising programs, the
Company has developed a lead fulfillment and tracking program that monitors
opportunities for the internal sales force, the sales representatives and
distributors. The Company also publishes a full-line of catalog/data books and
CD-ROMs for use by its customers.

INTERNATIONAL OPERATIONS

Approximately 79% and 81% of the Company's net sales and operating income,
respectively, for Fiscal 1998 were derived from outside the United States. The
Company currently operates in more than 30 countries

30
<PAGE> 35

located in the Americas, Europe and the Pacific Rim. As a result of its foreign
sales and facilities, the Company's operations are subject to the risks of doing
business internationally.

<TABLE>
<CAPTION>
YEAR ENDED
------------------------------
12/01/96 11/30/97 1/03/99
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales:
United States............................................. $ 49,843 $129,120 $159,565
Canada.................................................... 13,084 14,605 18,426
Central and South America................................. 8,443 34,894 84,051
Europe.................................................... 22,801 135,719 463,491
Pacific Rim............................................... -- 15,621 47,535
-------- -------- --------
Total............................................. $ 94,171 $329,959 $773,068
======== ======== ========
Total Assets:
United States............................................. $140,721 $127,777 $160,172
Canada.................................................... 9,887 10,459 10,937
Central and South America................................. 11,314 51,405 87,529
Europe.................................................... 50,080 429,418 491,042
Pacific Rim............................................... -- 32,602 25,783
-------- -------- --------
Total............................................. $212,002 $651,661 $775,463
======== ======== ========
</TABLE>

THE SLI, B.V. ACQUISITION

In September 1997, the Company consummated the purchase of all of the
outstanding shares of capital stock of SLI, B.V., a privately held company
headquartered in Geneva, Switzerland for $161.5 million in cash, financed with
the Company's internal cash and borrowings under its revolving credit facility.
SLI, B.V., originally formed part of Sylvania Lighting, has been in the business
of producing lamps since 1900. GTE acquired the business in 1959, at which time
Sylvania Lighting did business exclusively in the United States. Under GTE's
ownership, Sylvania Lighting expanded into Europe in 1961, initially with its
camera "flash cube" product. Between 1966 and 1985, GTE grew the worldwide
operations of Sylvania Lighting, setting up plants in Central and South America
between 1966 and 1979 and opening operations in Australia and Asia during the
1970's. In the 1980's, Sylvania Lighting made two acquisitions; Claude Lamp
Company, a French lamp and fixture manufacturer, and Rotaflex Plc, a European
fixture manufacturer. In 1993, GTE sold the international operations of Sylvania
Lighting, excluding the North American business, to a group of private investors
and sold the North American business, including the trademark Sylvania for use
in the United States, Canada, Mexico and Puerto Rico, to Osram GmbH.

SLI, B.V. is an integrated designer and manufacturer of lighting systems
which are comprised of lamps and fixtures. SLI, B.V. manufactures and offers a
wide range of lamps (incandescent, fluorescent, compact fluorescent, HID,
halogen, and special lamps) and a substantially complete range of fixtures to
meet the lighting needs of its customers, which include wholesalers, OEMs,
retailers, architects, designers and contractors. SLI, B.V.'s product portfolio
is sold under several brands, most notably the Sylvania name, for which SLI,
B.V. has rights in all regions with the exception of the United States, Canada,
Mexico and Puerto Rico. SLI, B.V. manufactures approximately 90% of all its
product requirements in-house through 13 plants in nine countries; seven plants
are in Europe, four are in Central and South America and two are in Australia.
SLI, B.V. conducts its operations in over 30 countries through sales and
distribution facilities.

COMPETITION

The industry in which the Company operates is highly competitive. Most of
the Company's competitors offer products in some but not all of the markets
served by the Company. The Company competes primarily on the basis of brand
awareness, price, product quality, design and engineering, customer service and
distribution strength. The lamp manufacturing industry is dominated by Philips,
Osram and General Electric. The Company believes that it is the third largest
lighting company in Europe, behind Philips and Osram. The

31
<PAGE> 36

fixture and miniature lighting assembly markets are highly fragmented with many
suppliers. The ballast market is dominated by several large companies including
SLI's PLP. PLP's competitors in the ballast market include MagneTek, Advance
Transformer (a division of Philips) and Motorola. Some of the Company's
competitors have substantially greater resources than the Company.

ENVIRONMENTAL REGULATIONS

The Company's operations are subject to federal, state, local and foreign
laws and regulations relating to the storage, handling, generation, treatment,
emission, release, discharge and disposal of certain substances and wastes.
While the Company believes that it is currently in material compliance with
these laws and regulations, there can be no assurance that the Company will not
incur significant costs to remediate violations thereof or to comply with
changes in existing laws and regulations (or the enforcement thereof). Such
costs could have a material adverse effect on the Company's results of
operations.

The Company uses a radioactive gas in its manufacture of neon bulbs in the
United States, and maintains a U.S. Nuclear Regulatory Commission license for
the use of such gas. The Company must comply with federal, state and local
regulations pertaining to the storage and discharge of radioactive materials. In
view of the low dosage of radioactivity in the gas used, the requirements for
compliance with these regulations do not, and the Company anticipates will not,
have any material adverse effect upon its capital expenditures, results of
operations or financial condition.

PATENTS, LICENSES AND TRADEMARKS

The Company owns and has obtained licenses to various domestic and foreign
patents, patent applications and trademarks related to its products, processes
and business. While these patents and patent applications in the aggregate are
important to the Company's competitive position, no single patent or patent
application is material to the Company. The trademark Sylvania is owned by
Osram-Sylvania, Inc. in the United States, Canada, Mexico and Puerto Rico and by
the Company in all other jurisdictions where the name is registered. The
Company's license agreements generally have a duration which coincides with
either the patents or the trademarks (which have an indefinite life) covered
thereby. SLI, B.V.'s intellectual property rights are licensed from Osram, which
is a competitor of the Company, and there is no assurance that the Company's
licenses may not be subject to challenge by Osram arising out of any future
sales by the Company in the United States, Canada, Mexico and Puerto Rico.

EMPLOYEES

As of January 3, 1999, the Company employed approximately 8,760 employees
of whom 4,191 were employed in Europe, 3,280 in Central and South America, 897
in the U.S., 232 in Australia, 91 in Canada, and 69 in Asia. Manufacturing and
engineering operations employed 7,209 people, sales and marketing employed 1,046
people, and administration and finance employed 505 people. Union recognition
and collective bargaining arrangements are in place in 7 countries (including
the United States), covering a total of approximately 3,268 persons (167 in the
United States). These agreements are with various labor unions and consortiums
and expire at various dates. Management believes that it generally has a good
relationship with all its employees.

PROPERTIES

The Company's manufacturing operations are performed at the following
locations:

<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE PRODUCT
- -------- -------------- -------
<S> <C> <C>
UNITED STATES
New Jersey(a)...................... 59,200* miniature lighting assemblies,
injection molding of housings and
lenses
New Jersey(b)...................... 7,000* molds, tool and die
Oklahoma(b)........................ 30,000* miniature neon lamps and assemblies
South Carolina(b).................. 65,000 incandescent lamps
Texas(a)........................... 108,000* magnetic and electronic ballasts
</TABLE>

32
<PAGE> 37

<TABLE>
<CAPTION>
LOCATION SQUARE FOOTAGE PRODUCT
- -------- -------------- -------
<S> <C> <C>
CANADA
Ontario(b)......................... 75,000* socket and socket lamp assemblies
EUROPE
Tienen, Belgium(b)................. 308,000* HID lamps, halogen lamps for low
and line voltage and general
lighting service ("GLS") lamps
Hranice u Ase, Czech Republic(b)... 7,500* miniature lamp assembly
Besancon, France(b)................ 44,000 miniature lighting, stamping and
tooling
Besancon, France(b)................ 37,000 lighting systems
Besancon, France(b)................ 12,000 lampholder assemblies
Lyon, France(a).................... 235,000 specialty incandescent lamps
St. Etienne, France(a)............. 105,000 industrial/commercial fluorescent
fixtures
St. Marcellin, France(b)........... 42,000 table lighting fixtures
Bamberg, Germany(b)................ 54,400* miniature lamp manufacturing and
assembly
Berlin, Germany(a)................. 12,000 LED manufacturing
Coburg, Germany(a)................. 17,000* manufacturer of automated lamp
making equipment
Erlangen, Germany(c)............... 255,000* linear fluorescent lamps
Goes, Netherlands(a)............... 7,700* display fixtures
Haarlem, Netherlands(a)............ 45,000* display fixtures
Bury St. Edmonds, United 59,000 miniature lamp manufacturing
Kingdom(b).......................
Newhaven, United Kingdom(a)........ 7,900* architectural fixtures
Shipley, United Kingdom(b)......... 110,000* miniature linear fluorescent and
compact lamps
AUSTRALIA
Brookvale, Australia(a)............ 17,000 suspended linear fixtures
Gosford, Australia(b).............. 72,000 high bay industrial fixtures
CENTRAL AND SOUTH AMERICA
Santo Amaro, Brazil(b)............. 390,000 incandescent and fluorescent low
and line voltage and GLS lamps
Vinhedo, Brazil(b)................. 74,000* incandescent glass shells and
fluorescent glass tubes
Bogota, Colombia(b)................ 155,000 incandescent and fluorescent glass
and lamps
San Jose, Costa Rica(b)............ 75,000* starters and glow bottles
San Jose, Costa Rica(b)............ 19,000* miniature lighting assemblies
Juarez, Mexico(b).................. 163,000* magnetic and electronic ballasts
</TABLE>

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

(a) Leased or subleased. Such leases expire on various dates from the current
year to 2010. Lease payments for Fiscal 1999 will be approximately $10.0
million. See Note 9 to Notes to the Company's Consolidated Financial
Statements.
(b) Owned.
(c) Manufacturing facility owned, warehouse space leased.
(*) Includes warehouse space.

The Company has sales offices and distribution facilities in over 30
countries.

The Company-owned facilities in the United States, Canada, Germany, the
United Kingdom, Belgium and Costa Rica are subject to mortgages which were
entered into in connection with the Company's revolving credit facility.

LEGAL PROCEEDINGS

The Company and its subsidiaries are involved in legal proceedings from
time to time in the ordinary course of its business. As of the date of the
filing, neither the Company nor any of its subsidiaries are a party to any
litigation or proceedings which individually or in the aggregate, in the opinion
of management, is likely to have a material adverse effect on the financial
condition, results of operations or cash flow of the Company.

33
<PAGE> 38

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS AGE POSITION WITH THE COMPANY
-------------------------------- --- -------------------------
<S> <C> <C>
Frank M. Ward(a)....................... 55 President, Chief Executive Officer,
Director and Chairman of the Board
Frederick B. Howard.................... 62 Executive Vice President and Director
Richard F. Parenti..................... 45 Chief Financial Officer and Secretary
Robert J. Mancini...................... 43 Treasurer
Werner A. Arnold....................... 45 Director and President of Alba
Donald S. Dewsnap(b)................... 64 Director
Maurice B. Hare........................ 60 President of SLI Miniature Europe and
Director
Richard E. Ingram(b)................... 57 Director
</TABLE>

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

(a) Member of Special Option Committee.
(b) Member of Audit Committee, Compensation Committee and Stock Option
Committee.

DIRECTORS AND EXECUTIVE OFFICERS

Frank M. Ward has served as President, Chief Executive Officer and Director
of the Company and its predecessor, Xenell, since 1985. Prior to 1985, Mr. Ward
was President of Xenell Marketing Corporation, an organization formed to manage
the product development, marketing and distribution of the products of Xenell.
Mr. Ward holds a degree in Electrical Engineering from Northeastern University
and has completed post-graduate studies in physics and metallurgy.

Frederick B. Howard had been, until his retirement in June 1997, Vice
President and General Manager of Electronic Control Systems, a division of
Osram-Sylvania Inc., since its formation in June 1996. From 1994 until 1996, he
had been Vice President and General Manager of Osram Sylvania Glass
Technologies. Other positions held during his 35 year tenure with GTE Sylvania
Lighting included Vice President of Marketing for the Sylvania Lighting
Division -- U.S., Vice President of Lighting Special Products and Vice
President, Latin America, for International Lighting. Mr. Howard was elected a
Director of the Company in February 1998 and appointed Executive Vice President
in September 1998. Mr. Howard holds a Bachelor of Arts degree in economics from
Babson College, serves as a member of the Advisory Board of Directors, Mayer
Electric Supply Company, and is a member of the National Electric Manufacturers
Association.

Richard F. Parenti joined the Company in October 1987, and held the
position of Controller from 1988 to 1992. He was appointed Vice President
Finance in 1992 and Secretary of the Company in March 1998. Since 1992 he has
served as a senior financial officer of the Company and was appointed Chief
Financial Officer in May 1999. Mr. Parenti has a Bachelor of Business
Administration degree in accounting from Loyola University, Chicago.

Robert J. Mancini joined the Company in February 1998 as Assistant
Treasurer and was appointed Treasurer in September 1998. Prior to joining the
Company he was assistant treasurer of Hasbro, Inc. (1986 to 1998), a toy
manufacturer, where he was responsible for foreign exchange, cash management and
capital markets. Mr. Mancini has a Bachelor of Science degree in accounting from
Boston College.

Werner A. Arnold has been the President of Alba, a subsidiary of the
Company, since its formation in May 1996. From 1994 to 1996, Mr. Arnold served
as President and Chief Executive Officer of Alba-Germany. From 1985 to 1993, he
served as General Manager and Executive Vice President of Engineering, Sales and
Marketing of Alba-Germany. Mr. Arnold also served as an officer and director of
certain affiliates of Alba-Germany. Mr. Arnold was elected as a Director of the
Company in June 1996. Mr. Arnold has a Masters degree in Engineering from
Technical University of Munich, Germany.

34
<PAGE> 39

Donald S. Dewsnap has been Chairman of Norlico Corp. since 1977, a supplier
of engineered chemical dispense systems to industrial users, since 1977. Prior
thereto he was involved in industrial research at Arthur D. Little Corp. and
spent fourteen years with GTE Sylvania Lighting in various product marketing,
management and sales engineering positions. Mr. Dewsnap was elected a director
of the Company in March 1995. Mr. Dewsnap holds a Bachelor of Arts degree from
Merrimack College.

Maurice B. Hare is President of VCH International Limited, a subsidiary of
the Company, and of SLI Miniature Lighting Europe, a division formed by the
amalgamation of Alba (Germany), Socop (France) and VCH (United Kingdom),
subsidiaries of the Company. Mr. Hare was a Director and Chief Executive Officer
of VCH International Ltd. at the date of acquisition, having headed the
management buy-out of the USA and UK lamp interests of General Instrument
Corporation in 1987. Prior to that date he served for 13 years as General
Manager and Vice President of the General Instrument Lamp Division responsible
for the USA and UK businesses. Prior thereto he was involved in various
financial roles in diverse businesses both in Germany and the United Kingdom.
Mr. Hare was appointed to the Board in September 1998. Mr. Hare is a Fellow of
the UK Association of Certified Accountants and a past member of the Institute
of Taxation.

Richard E. Ingram was the Chairman of the Board of Builder Marts of
America, Inc., a national distributor of lumber and building materials from
November 1988 until May 1999 and Chief Executive Officer from November 1988
until November 1993 and from August 1998 until May 1999. He continues as a
consultant to such company. He was a founding director of Carolina First
Corporation, the holding company for Carolina First Bank, and Ingram
Enterprises, Inc., a real estate development and investment banking company. He
is also a director of Synalloy Corporation, Columbia Lumber, a retail lumber
business, and Tel-Pan Communications, Inc., a long distance telephone service
provider in Panama. He has served on the Policy Advisory Board of the Joint
Center for Urban Studies at Harvard University. Mr. Ingram was elected a
director of the Company in August 1996. Mr. Ingram is a graduate of the American
Institute of Banking and the University of North Carolina Executive Program.

Directors are elected annually by the shareholders for terms of one year
and until their successors are elected and qualified. Officers serve at the
discretion of the Board of Directors.

The Company currently pays its non-employee and non-affiliated directors an
annual fee of $10,000 for attendance at meetings of the Board of Directors or
committees thereof. All directors are reimbursed for their reasonable expenses
in connection with the performance of their duties. In March 1998, Mr. Howard
was granted an option to purchase 20,000 shares at $34.00 per share (repriced in
September 1998 to $9.9375 per share). Such option vests over five years and
expires in March 2008.

OTHER KEY EMPLOYEES

Paul A. Flynn has served as Vice President-Sales and Marketing since 1994
and is responsible for North American miniature lighting operations. From 1992
to 1994, Mr. Flynn was the Director of Sales and Marketing for IDI. Prior to
such time, he was the National Sales Manager of IDI from 1987 to 1992. Mr. Flynn
earned a Bachelor of Arts degree in marketing from Fairfield University.

John Ossenmacher has been employed by the Company since July 1997 and is
President of PLP. He is in charge of the Company's general lighting operations
in North America. He was also co-founder of Electro-Mag International, Inc.,
which was acquired by the Company in 1998. From 1992 to 1996 he was employed by
Pacific Scientific, Inc., where his most recent assignment was as President of a
division. From 1981 to 1992 he was employed by Parker Hannifin Corporation where
his most recent assignment was as Director, world-wide customer support. He
received a Bachelor of Science Degree in Electro-Mechanical Engineering from
Michigan State University, and is an active member of numerous organizations and
societies.

Carlos Pietri has been engaged in the lighting business since 1986. He
joined SLI, B.V. in 1993 and is Vice President -- International Operations. His
responsibilities include Latin America and the Pacific Rim. Prior to joining
SLI, B.V. he was employed by GTE Sylvania Lighting. Mr. Pietri earned a Bachelor
of Business Administration degree from St. John's University.

35
<PAGE> 40

Andy Smith has been in the lighting business in excess of 30 years. He
joined SLI, B.V. in 1994 and was appointed President in October 1998. He is
responsible for the Company's European operations. Before joining SLI, B.V. he
was Managing Director of Marlin Lighting for five years and prior thereto served
as managing director for several engineering companies in the United Kingdom. He
received a diploma in management studies from the London Business School.

COMMITTEES

The members of the Audit Committee, Compensation Committee and the Stock
Option Committee are Donald S. Dewsnap and Richard E. Ingram. The Audit
Committee has general responsibility for accounting and audit activities of the
Company and its subsidiaries. The Audit Committee annually reviews the
qualifications of the independent certified public accountants, makes
recommendations to the Board as to their selection, reviews the scope, fees and
results of their audit and approves their non-audit services and related fees.
The Audit Committee meets periodically with management and with the Company's
independent auditors to determine the adequacy of internal controls and other
financial reporting matters. The Compensation Committee reviews general policy
matters relating to compensation and benefits of employees generally and has
responsibility for reviewing and approving compensation and benefits for all
executive officers of the Company. The Stock Option Committee administers the
Company's Stock Option Plan and recommends grants of the specific options
thereunder. The Special Option Plan is administered by a separate committee with
the right to grant options thereunder (the "Special Option Committee").
Currently, the Special Option Committee consists of Frank Ward only, with
authority from the Board to grant options only with respect to the employees of
SLI, B.V. and its subsidiaries. None of the committees has been charged with the
responsibility to review or approve transactions between the Company and
management or their affiliates. However, all transactions between the Company
and management or their affiliates must be approved by a majority of the
independent directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No person serving on the Compensation Committee at any time during Fiscal
1998 was a present or former officer or employee of the Company or any of its
subsidiaries. During Fiscal 1998, no executive officer of the Company served as
a member of the board of directors or compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Company's Board of Directors or Compensation
Committee.

EXECUTIVE COMPENSATION

The following table sets forth certain information relating to the
compensation earned by the Chief Executive Officer of the Company and each of
the other most highly compensated executive officers of the Company whose total
cash compensation for the year indicated exceeded $100,000:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
--------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(A) OPTIONS
- --------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Frank M. Ward................................. 1998 $500,000 -- --
President and 1997 250,000 -- --
Chief Executive Officer 1996 250,000 $74,000 --
Richard F. Parenti............................ 1998 $125,000 $88,039 75,000(b)
Vice President -- Finance 1997 109,299 -- 75,000(b)
1996 100,000 -- --
</TABLE>

36
<PAGE> 41

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

(a) Represents bonus earned during the indicated fiscal year. In some
instances, all or a portion of the bonus was paid during the next fiscal
year.
(b) The options granted in 1997 were cancelled and reissued in 1998 as a result
of a repricing which occurred in September 1998. The exercise price was
reduced from $16.00 per share to $9.9375 per share.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
PERCENT OF
TOTAL POTENTIAL REALIZABLE VALUE AT
NUMBER OF OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED TO STOCK PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(A)
OPTIONS IN PRICE EXPIRATION ------------------------------
NAME GRANTED(B) FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ---------- ----------- -------- ---------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Parenti.............. 75,000 2.58 9.9375 7/3/02 469,802 1,188,028
Vice President -- Finance
</TABLE>

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

(a) The assumed annual rates of appreciation of 5% and 10% would result in the
price of the Company's stock increasing 62.9% and 159.4%, respectively over
the term of the option.
(b) All options were granted at an exercise price equal to the fair market
value of the Company's Common Stock on the date of grant. Options vest at
the rate of 20% per year for each of the first five years after the date of
grant and terminate five years from the date of grant.

TEN YEAR OPTION REPRICING

<TABLE>
<CAPTION>
NUMBER OF LENGTH OF
SECURITIES MARKET PRICE EXERCISE ORIGINAL
UNDERLYING OF STOCK AT PRICE AT NEW OPTION TERM
OPTIONS TIME OF TIME OF EXERCISE REMAINING AT
NAME DATE REPRICED(#) REPRICING($) REPRICING($) PRICE($) DATE OF REPRICING
- ---- ------- ----------- ------------ ------------ -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Parenti.......... 9/10/98 75,000 9.9375 16.00 9.9375 46 months
Robert J. Mancini........... 9/10/98 60,000 9.9375 25.92 9.9375 51 months
Frederick B. Howard......... 9/10/98 20,000 9.9375 33.69 9.9375 52 months
</TABLE>

On September 10, 1998, the Board of Directors approved the repricing of
outstanding options granted under the Company's 1995 and 1997 Incentive and
Non-Statutory Stock Option Plans held by certain key employees and the Company's
non-employee directors. The Board considered the fact that a portion of the
outstanding options that would be affected by a repricing were held by the above
named executive officers, certain key employees, including Mr. Werner Arnold,
President of a subsidiary company and director, who held options to purchase
150,000 shares, and Messrs. Dewsnap and Ingram, the Company's two non-employee
directors, who each held options to purchase 15,000 shares. It was unanimously
agreed that the continuation of the Company's growth and success in 1998 and
1999 would be dependent on the continued efforts of these individuals and other
key employees. The Board believes that stock options provide meaningful
long-term incentives for key employees. Because of the significant decline in
the market price of the Company's common stock which had occurred subsequent to
the grant of these options, from a high of $41.00 per share on April 22, 1998 to
$9.9375 per share on September 10, 1998, it was determined that these options
were not providing the incentive intended when granted. The Board concluded that
repricing the outstanding options would be an appropriate means to provide these
optionees with a continuing incentive to work for the long-term success of the
Company. The terms of the reissued options, except for the exercise price, are
the same as those of the canceled options. The repricing to $9.9375 per share
was equal to the closing market price of the Company's Common Stock on September
10, 1998, the repricing date.

37
<PAGE> 42

OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 1/3/99 OPTIONS AT 1/3/99(A)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard F. Parenti.......... -- -- 31,051 60,000 578,606 1,008,750
Vice President -- Finance
</TABLE>

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

(a) Value is based on the closing sale price of the Common Stock as reported on
The New York Stock Exchange as of the last business day prior to the end of
Fiscal 1998, $26.75, minus the exercise price, multiplied by the number of
shares to which the exercise relates.

EMPLOYMENT AGREEMENTS

The Company has entered into a two-year employment agreement with Mr. Frank
Ward, effective as of January 5, 1998, pursuant to which Mr. Ward received an
annual salary of $500,000 and was eligible for a bonus of $500,000 based upon
the Company achieving net income of $30 million for 1998 and $41 million for
1999, after accruing for the bonus amount. Although the Company realized net
income in excess of $30 million for 1998, as a result of ambiguity in the
agreement relating to the formula for calculating the net income amount and
other factors, it was determined that a bonus would not be paid and the
employment agreement amended. Subsequently, on March 4, 1999, the Board amended
Mr. Ward's contract, increasing his annual salary to $1 million commencing April
5, 1999 and eliminating the bonus provision. Mr. Ward is also entitled to
participate in all employee benefit plans, use of an automobile and certain
expense allowances.

On September 11, 1998, the Company entered into a two-year employment
agreement with Mr. Fred Howard pursuant to which Mr. Howard receives an annual
salary of $175,000 per year. In the event of death or termination of employment,
the agreement will terminate without recourse to either the Company or Mr.
Howard. Mr. Howard is also entitled to a bonus of $50,000 each year based on
certain pre-determined objectives. Mr. Howard also received options to purchase
80,000 shares of the Company's Common Stock, exercisable at $9.9375 per share,
of which 40,000 will vest on October 1, 1999 and 40,000 will vest on October 1,
2000. The agreement also provides (i) for the Company to furnish Mr. Howard with
an automobile during the term of the agreement and (ii) that in the event of the
death of Mr. Ward or a change in control of the Company, the option granted to
Mr. Howard will immediately vest and terminate within two years of the immediate
vesting.

The Company has also entered into a four-year employment agreement with Mr.
Richard Parenti, the Company's Chief Financial Officer, commencing as of May 1,
1998. Mr. Parenti receives an annual salary of $125,000 and is entitled to
participate in all employee benefits. In the event of disability that renders
the employee incapable of performing his normal duties that continues for a
period of 90 days, the Company may terminate the employee's employment. The
employment agreement is also terminable by either party for cause.

In connection with the Alba acquisition in May 1996, the Company entered
into a three-year employment agreement with Mr. Werner A. Arnold which has been
extended until May 29, 2002. Mr. Arnold receives an annual salary of DM 225,000
and is reimbursed for all reasonable and necessary business expenses and is
furnished with the use of an automobile. Under the employment agreement, Mr.
Arnold is entitled to participate in all employee benefits. The agreement also
contains a non-compete clause that prohibits Mr. Arnold from competing with the
Company for a period of five years following termination of his employment with
the Company.

STOCK OPTION PLANS

The Company's Stock Option Plan became effective on January 25, 1995, and
the Special Option Plan, as amended, became effective on September 8, 1997 (the
Stock Option Plan and the Special Option Plan

38
<PAGE> 43

collectively referred to as the "Option Plans"). Each of the Plans encompass
3,000,000 shares of Common Stock. As of April 4, 1999, there were 3,673,050
options outstanding under the Option Plans.

The Stock Option Plan was adopted as a performance incentive for officers
and employees of the Company and for certain other individuals providing
services to or acting as directors of the Company. The Special Option Plan was
adopted as a performance incentive for employees of those subsidiaries of the
Company whose principal operations are located outside of the United States and
Canada, and for certain other individuals providing services to the Company or
its subsidiaries. The Option Plans are intended to enable the optionees to
acquire or increase a proprietary interest in the success of the Company.

The Option Plans are intended to be incentive stock option plans within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Options granted under both the Special Option Plan as well as the Stock
Option Plan may be either incentive stock options within the meaning of Section
422 of the Code ("Incentive Options") or options that are not incentive stock
options ("Non-statutory Options") (Incentive Options and Non-statutory Options
being hereinafter generally referred to as "Options"). The Option Plans are
administered by the Board, which has full and final authority to operate, manage
and administer the Plans on behalf of the Company. The Board may delegate
certain of its powers to a Stock Option Committee (the "Committee").

Under the Stock Option Plan, Incentive Options may be granted only to
officers and other employees of the Company or its subsidiaries, including
members of the Board who are also employees of the Company or a subsidiary.
Non-Statutory Options may be granted to officers or other employees of the
Company or its subsidiaries, and to certain other individuals providing services
to the Company or its subsidiaries. Non-employee directors are not eligible to
participate in the Stock Option Plan.

Under the Special Option Plan, Options may be granted to employees of the
Company or any of its subsidiaries who are not also officers of the Company or
members of the Board, and to certain other individuals providing services to the
Company or its subsidiaries. No person who is either an officer of the Company
or a member of the Board is eligible to participate in the Special Option Plan.

The exercise price of an Incentive Option must be not less than 100% (or
110% with respect to any optionee beneficially owning more than 10% of the total
combined voting power of all classes of stock of the Company) of the fair market
value of the Common Stock on the date of grant, and the aggregate fair market
value (determined at the time of grant) of shares issuable to any one employee
pursuant to Incentive Options which first become exercisable in any calendar
year may not exceed $100,000. The price at which shares may be purchased
pursuant to Non-statutory Options shall be specified by the Board at the time
the Option is granted, and may be less than, equal to or greater than the fair
market value of the shares of Common Stock on the date such Non-statutory Option
is granted.

The exercisability of each Option and its date of termination (which may
not be more than ten (10) years after its date of grant) are also established by
the Board at the time of grant, except that the date of termination of any
Incentive Option granted to an optionee who owns more than 10% of the total
combined voting power of all classes of stock of the Company may not be more
than five years after its date of grant. Generally, the option price of any
shares of Common Stock purchased must be paid in cash at the time of exercise,
with shares of Common Stock, or by a combination of the above. Options generally
terminate on the earlier to occur of: (i) the stated expiration date; (ii) in
the event of termination other than by reason of death or disability, 90 days
after termination; (iii) 180 days after the death of the optionee; or (iv) 180
days after the optionee's employment terminates due to disability.

An outstanding Option immediately becomes exercisable upon the occurrence
of certain events, including any transaction which results in shareholders of
the Company immediately before such transaction ceasing to own at least 51% of
the voting stock of the Company; the approval by shareholders of a transaction
in which the Company does not survive; or a disposition of all or substantially
all the property and assets of the Company. In addition, the Board or the
Committee may accelerate the date on which any Option may be exercised and may
accelerate the vesting of any shares of Common Stock subject to any Option or
previously acquired by the exercise of any Option.

39
<PAGE> 44

Options under the Stock Option Plan may not be granted later than January
25, 2005. Options under the Special Option Plan may not be granted later than
September 8, 2007. The Board may amend the Option Plans at any time, and from
time to time, (subject to the limitation that no amendment will be effective
unless approved by the shareholders of the Company in accordance with applicable
law and regulations at an annual or special meeting held within 12 months before
or after the date of adoption of such amendment) in any instance in which such
amendment would: (i) increase the number of shares of Common Stock as to which
Options may be granted under the Option Plans; or (ii) change in substance the
provisions of the Option Plans relating to eligibility to participate in the
Option Plan.

The Special Option Plan is intended to further the growth and development
of the Company by encouraging employees and consultants of the Company and its
subsidiaries who are not also officers or directors to obtain a proprietary
interest in the Company through the grant of options to acquire shares of Common
Stock. The Special Option Plan was adopted as a performance incentive for
employees of those subsidiaries of the Company whose principal operations are
located outside of the United States and Canada, and for certain other
individuals providing services to the Company or its subsidiaries. The Company
believes that the Special Option Plan will aid in attracting and retaining
employees and consultants and in stimulating the efforts of such individuals for
the success of the Company and its subsidiaries.

CERTAIN TRANSACTIONS

The Company leases on a month-to-month basis approximately 2,200 square
feet of office space in Canton, Massachusetts from Frank M. Ward, the President,
Chief Executive Officer and a director of the Company. Rent expense on this
facility was $60,000 for each of Fiscal 1997 and Fiscal 1998. Management
believes the rent to be comparable to the rent that would be paid to an
unrelated party. At January 3, 1999, Mr. Ward owed the Company $88,569 for
advances made to him or payments made on his behalf. Such amount was repaid by
Mr. Ward in April 1999.

40
<PAGE> 45

PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth as of April 4, 1999, information with
respect to the beneficial ownership of the Common Stock by (i) each person who
is known by the Company to be the beneficial owner of more than 5% of the
Company's outstanding shares of Common Stock, (ii) each director and executive
officer of the Company, (iii) all directors and executive officers of the
Company as a group, and (iv) the selling shareholders. Unless otherwise
indicated, each of the shareholders listed below has sole voting and investment
power with respect to the shares of Common Stock beneficially owned.

<TABLE>
<CAPTION>
SHARES TO BE
SHARES BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING OFFERING
--------------------- SHARES --------------------
BEING
NAME AND ADDRESS(A) NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------- ---------- ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Frank M. Ward........................... 10,629,571(b) 35.9% 1,100,000 9,529,571 26.7%
Patrick J. Cox and
Marianne Connaughton,
Trustees of Trusts
established for the children
of Frank M. Ward(c)................... 2,071,595 7.0 -- 2,071,595 5.8
The Frank M. Ward
Charitable Remainder
Unitrust dated 10/9/96,
Patrick J. Cox -- Trustee............. 1,019,000 3.4 250,000 500,000 2.2
Richard F. Parenti(d)................... 56,551 * -- 56,551 *
Robert Mancini(e)....................... 18,000 * -- 18,000 *
Werner A. Arnold(f)..................... 247,500 1.0 150,000 97,500 *
Donald S. Dewsnap(g).................... 23,925 * -- 23,925 *
Frederick B. Howard(h).................. 10,100 * -- 10,100 *
Richard E. Ingram(i).................... 40,950 * -- 40,950 *
Maurice B. Hare......................... 0 * -- 0 *
All directors and
executive officers as
a group (8 persons)................... 11,855,381 40.0% 1,250,000 10,605,381 29.8
</TABLE>

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

* Less than 1%
(a) The address of the Company's directors and officers is SLI, Inc., 500
Chapman Street, Canton, Massachusetts 02021.
(b) Includes 268,784 shares owned by the Frank M. Ward Family Trust, of which
Mrs. Ward is one of two Trustees.
(c) Ms. Connaughton is the sister of Mr. Frank Ward. The address of the Trusts
is c/o Veritas Advisers, Inc., 84 State Street, Boston, Massachusetts
02109.
(d) Includes 10,500 shares owned by Mr. Parenti and 46,051 shares subject to
options exercisable within 60 days of the date of this prospectus.
(e) Includes 18,000 shares subject to options exercisable within 60 days of the
date of this prospectus.
(f) Includes 225,000 shares owned by Mr. Arnold and 22,500 shares subject to
options exercisable within 60 days of the date of this prospectus.
(g) Includes 3,000 shares subject to options exercisable within 60 days of the
date of this prospectus.
(h) Includes 10,000 shares subject to options exercisable within 60 days of the
date of this prospectus.
(i) Includes 3,450 shares owned by Mr. Ingram, 34,500 shares owned by Richard
E. Ingram as trustee of the Donna C. Ingram Trust and 3,000 shares subject
to options exercisable within 60 days of the date of this prospectus.

41
<PAGE> 46

DESCRIPTION OF CERTAIN INDEBTEDNESS

REVOLVING CREDIT FACILITY

The Company has an existing credit facility with a syndicate of banks led
by BankBoston, N.A., as administrative agent, providing to the Company and its
domestic subsidiaries (the "Borrowers") a $300 million multi-currency revolving
credit facility including a $10.0 million swing-line loan facility and a $15.0
million letter of credit facility. Non-US-dollar borrowings are capped at $75.0
million. There are no scheduled amortization payments or repayment penalties.
The facility terminates and is repayable in full on August 30, 2002. As of April
4, 1999, approximately $230 million was outstanding under the revolving credit
facility, including borrowings denominated in US dollars, German deutschemarks,
Belgian francs, Swiss francs, Japanese yen and Euros.

The Borrowers are required to make mandatory prepayments of loans at
specified times and subject to certain exceptions, in amounts equal to (a) 100%
of the net proceeds of certain dispositions of assets or the stock of
subsidiaries or the incurrence of certain indebtedness, and (b) 50% of the net
proceeds of the issuance of any equity securities. The maximum availability
under the credit facility is reduced by the amount of any mandatory repayment
from the proceeds of asset or subsidiary stock dispositions.

The facility is secured by a security interest in substantially all of the
tangible and intangible personal property and in the owned real property of the
Company and certain of its subsidiaries, in the capital stock of the Company's
wholly-owned domestic subsidiaries, and in 65% of the capital stock of, or other
equity interests in, each non-US subsidiary of the Company, other than SLI, B.V.
and its subsidiaries (in each case, to the extent permitted by applicable
contractual and legal provisions).

At the Company's option, the interest rates per annum applicable to the
revolving credit facility are either adjusted LIBOR plus a margin ranging from
0.75% to 1.75%, or, with respect to US-dollar-denominated loans only, an
adjusted base rate plus a margin ranging from zero to 0.75%. The adjusted base
rate is the higher of BankBoston's prime rate for lending in US dollars or the
federal funds effective rate plus 0.50%. The interest rates per annum applicable
to the swing-line facility are either adjusted base rate plus a margin ranging
from zero to 0.75%, with respect to US dollar borrowings, or BankBoston's
applicable non-US-dollar base rate plus a margin ranging from 1.0% to 2.0%. The
Borrowers pay a per annum fee ranging between 0.75% and 1.75% of the aggregate
face amount of letters of credit and bank guaranties outstanding under the
facility, and a fee ranging between 0.25% and 0.375% per annum on the undrawn
portion of the revolving credit facility commitment.

Events of default under the facility include failure to pay principal and
interest on amounts outstanding, and fees with respect to letters of credit
outstanding and undrawn commitments, failure to comply with covenants, failure
to pay other indebtedness when due, certain bankruptcy or insolvency events and
certain changes in control. For this purpose, a change in control occurs on the
date on which (i) any person (other than Frank M. Ward, or any other owner of 5%
of the Company's Common Stock as of September 8, 1997) beneficially owns more
than 35% of the total voting power of the Company; or (ii) Frank M. Ward ceases
to be employed as Chief Executive Officer of the Company.

In each of the fiscal years 1998, 1999 and 2000, the maximum leverage
ratio, or indebtedness to EBITDA, may not exceed (i) 3.75 to 1, (ii) 3.50 to 1
and (iii) 3.00 to 1, respectively. For the fiscal year 2000 and thereafter, the
maximum leverage ratio may not exceed 2.75 to 1. The consolidated interest
coverage ratio, or the ratio of (a) for the period of four consecutive fiscal
quarters to (b) the Company's consolidated

42
<PAGE> 47

interest expense for the same period, may not be less than 3.5 to 1. Through the
fiscal year ended 1999 and at all times thereafter, the consolidated cash flow
coverage ratio, or the ratio (a) for the period of 4 consecutive fiscal
quarters, minus capital expenditures for such periods, minus income taxes paid
in cash for such period, to (b) all debt service for such period, may not be
less than 1.30 to 1 and 1.50 to 1, respectively. In addition, the Company is
required to maintain a minimum consolidated net worth of at least (i) $154
million plus (ii) 75% of positive net income in each fiscal year. The Company is
also prohibited from paying cash dividends to its shareholders, or from spending
more than an aggregate amount of $15 million to repurchase shares of its Common
Stock. The Company is currently in compliance with all of its financial
covenants.

DESCRIPTION OF CAPITAL STOCK

COMMON STOCK

The Company's Amended and Restated Certificate of Incorporation authorizes
the Company to issue up to 100,000,000 shares of Common Stock, $.01 par value
per share. After giving effect to the offering, the Company will have 35,647,873
shares of Common Stock issued and outstanding. Subject to the rights of the
holders of any outstanding shares of preferred stock and such restrictions as
are imposed by the Company's lenders, holders of Common Stock are entitled to
receive such dividends, if any, as may be declared by the Board of Directors out
of funds legally available for such purpose. Upon the liquidation, dissolution
or winding-up of the Company, after payment in full of creditors and any
liquidation preference payable to the holders of any preferred stock, the
remaining assets of the Company will be distributed ratably to the holders of
the Common Stock, in proportion to the number of shares held by them.

Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. Because holders of Common Stock do not
have cumulative voting rights in the election of directors, the holders of a
majority of the shares of Common Stock represented at a meeting can elect all
the directors. Holders of Common Stock do not have preemptive rights to
subscribe for or purchase any additional shares of capital stock issued by the
Company. All outstanding shares of Common Stock are, and the shares of Common
Stock offered hereby will be when issued, duly authorized, validly issued, fully
paid and non-assessable.

PREFERRED STOCK

The Company's Amended and Restated Certificate of Incorporation authorizes
the issuance of up to 5,000,000 shares of Preferred Stock, $.01 par value
("Preferred Stock"). No shares of Preferred Stock are outstanding, but the Board
of Directors is empowered by the Company's Amended and Restated Certificate of
Incorporation to designate and issue from time to time one or more series of
Preferred Stock without shareholder approval. The Board of Directors has the
power to establish the preferences, limitations and optional or other special
rights of each series of Preferred Stock so issued. Because the Board of
Directors has the power to establish the preferences and rights of each series
of Preferred Stock, it may afford the holders of any series of Preferred Stock
preferences and rights, voting otherwise, senior to the rights of holders of
Common Stock. The Board of Directors, without approval of the holders of Common
Stock, could issue Preferred Stock with voting rights that could adversely
affect the voting power of holders of Common Stock. The issuance of Preferred
Stock could be used to delay or prevent a change in control of the Company
opposed by the Board of Directors. The Company has no present intention to issue
any shares of Preferred Stock.

Under the Company's Amended and Restated Certificate of Incorporation, the
Board of Directors is authorized to divide the Preferred Stock into one or more
series with such attributes, powers, designations, preferences and relative,
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereof as provided in the adopting resolution or
resolutions providing for the issue of such series.

TRANSFER AGENT

The transfer agent for the Common Stock is the American Stock Transfer &
Trust Company, New York, New York.
43
<PAGE> 48

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company will have 35,647,873 shares of
Common Stock outstanding. Of these shares, all of the 7,500,000 shares sold in
the offering and 16,501,810 shares of Common Stock currently outstanding will be
freely tradable without restriction or further registration under the Securities
Act. The remaining 11,646,063 shares are deemed "restricted shares" under Rule
144 in that they were originally issued and sold by the Company in private
transactions in reliance upon exemptions under the Securities Act. The
restricted shares may not be sold except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption from
registration, such as the exemption provided by Rule 144 under the Securities
Act. The selling shareholders, officers, directors and certain affiliates who
will beneficially own an aggregate of 12,945,976 shares of Common Stock
following the completion of the offering, and the Company have agreed that, for
a period of 120 days after the date of this prospectus, they will not, without
the prior written consent of Salomon Smith Barney Inc., offer, sell, offer to
sell, solicit an offer to buy, contract to sell, pledge or grant any option to
purchase or otherwise transfer or dispose (or announce any of the foregoing) of
any shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock, except (i) in the case of the Company, for the
issuance of stock options under the Stock Option plans, the issuance or sale of
Common Stock by the Company upon exercise of outstanding stock options and the
issuance of unregistered securities in consideration for the acquisition of
stock or assets of other companies and (ii) in the case of the officers,
directors and certain affiliates collectively, the sale of no more than 50,000
shares in the aggregate. Upon the expiration of the 120-day period,
substantially all of the outstanding shares held will be eligible for sale,
subject to the restrictions of Rule 144. In connection with certain 1998
acquisitions, the Company is holding 142,500 shares of Common Stock to be issued
pursuant to the terms of the purchase agreements.

In general, Rule 144 allows a shareholder (including persons who may be
deemed "affiliates" of the Company under Rule 144) who has beneficially owned
restricted shares for at least one year to sell a number of shares of Common
Stock within any three-month period that does not exceed the greater of (i) one
percent of the then outstanding shares of Common Stock; or (ii) the average
weekly trading volume in the Common Stock during the four calendar weeks
immediately preceding the date on which notice of sale is filed with the
Securities and Exchange Commission (the "Commission"). Sales under Rule 144 are
also subject to certain requirements as to the manner and notice of sale and the
availability of public information about the Company. A shareholder (or
shareholder whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned his shares for at least two years (as computed under Rule
144), is entitled to sell shares under Rule 144 without regard to the volume and
manner of sale limitations described above. Shares properly sold in reliance
upon Rule 144 to persons who are not "affiliates" are thereafter freely tradable
without restrictions or registration under the Securities Act. As defined in
Rule 144, an "affiliate" of an issuer is a person who directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such issuer.

The preceding description does not give effect to the shares of Common
Stock that may be offered and sold pursuant to the Company's Stock Option Plans.
The shares of Common Stock issued under such plans are covered by an effective
registration statement on Form S-8 filed under the Securities Act. Shares issued
upon the exercise of stock options generally will be available for sale in the
public market.

No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock, or the availability of shares for future sales, will
have on the market price of the Common Stock prevailing from time to time. Sales
of substantial amounts of Common Stock (including shares issued upon the
exercise of stock options) in the public market, or the perception that such
sales could occur, could adversely affect the prevailing market price for the
Common Stock and the ability of the Company to raise capital through a public
offering of its equity securities.

44
<PAGE> 49

UNDERWRITING

Subject to the terms and conditions stated in the underwriting agreement
dated the date hereof, each underwriter named below has severally agreed to
purchase, and we and the selling shareholders have agreed to sell to such
underwriter, the number of shares set forth opposite the name of such
underwriter.

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Salomon Smith Barney Inc. ................................
BancBoston Robertson Stephens, Inc. ......................
Bear, Stearns & Co. Inc. .................................
Lehman Brothers Inc. .....................................
McDonald Investments Inc. ................................
Prudential Securities Incorporated .......................
Raymond James & Associates, Inc. .........................
---------
Total........................................... 7,500,000
=========
</TABLE>

The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of certain legal matters by counsel and to certain other conditions.
The underwriters are obligated to purchase all the shares (other than those
covered by the over-allotment option described below) if they purchase any of
the shares.

The underwriters, for whom Salomon Smith Barney Inc., BancBoston
Securities, Inc., Bear, Stearns & Co. Inc., Lehman Brothers Inc., McDonald
Investments Inc., Prudential Securities Incorporated and Raymond James &
Associates, Inc. are acting as representatives, propose to offer some of the
shares directly to the public at the public offering price set forth on the
cover page of this prospectus and some of the shares to certain dealers at the
public offering price less a concession not in excess of $ per share. The
underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share on sales to certain other dealers. If all of the shares are not
sold at the initial offering price, the representatives may change the public
offering price and the other selling terms.

We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 1,125,000 additional shares of
common stock at the public offering price less the underwriting discount. The
underwriters may exercise such option solely for the purpose of covering
over-allotments, if any, in connection with this offering. To the extent such
option is exercised, each underwriter will be obligated, subject to certain
conditions, to purchase a number of additional shares approximately
proportionate to such underwriter's initial purchase commitment.

The selling shareholders, officers, directors and certain affiliates who
will beneficially own an aggregate of 12,945,976 shares of Common Stock
following the completion of this offering, and the Company have agreed that they
will not offer, sell, contract to sell, announce their intention to sell, pledge
or otherwise dispose of, directly or indirectly, or file or cause to be filed
with the Commission a registration statement under the Securities Act relating
to, any shares of the Common Stock of the Company or securities convertible into
or exchangeable or exercisable for any shares of Common Stock without the prior
written consent of Salomon Smith Barney Inc. for a period of 120 days after the
date of this prospectus, except (i) in the case of the Company for the issuance
of stock options under the Option Plans, the issuance or sale of Common Stock by
the Company upon exercise of outstanding stock options and the issuance of
unregistered securities in consideration for the acquisition of stock or assets
of other companies and (ii) in the case of the officers, directors and certain
affiliates collectively, the sale of no more than 50,000 shares in the
aggregate. Salomon Smith Barney Inc. in its sole discretion may release any of
the securities subject to these lock-up agreements at any time without notice.

The Company's Common Stock is listed on The New York Stock Exchange under
the symbol "SLI".

45
<PAGE> 50

The following table shows the underwriting discounts and commissions to be
paid to the underwriters by us and the selling shareholders in connection with
this offering. These amounts are shown assuming both no exercise and full
exercise of the underwriters' option to purchase additional shares of Common
Stock.

<TABLE>
<CAPTION>
PAID BY SLI PAID BY THE SELLING SHAREHOLDERS
---------------------------- --------------------------------
NO EXERCISE FULL EXERCISE NO EXERCISE FULL EXERCISE
----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Per share................................ $ $ $ $
Total.................................... $ $ $ $
</TABLE>

In connection with this offering, Salomon Smith Barney Inc., on behalf of
the underwriters, may purchase and sell shares of Common Stock in the open
market. These transactions may include over-allotment, syndicate covering
transactions and stabilizing transactions. Over-allotment involves syndicate
sales of Common Stock in excess of the number of shares to be purchased by the
underwriters in this offering, which creates a syndicate short position.
Syndicate covering transactions involve purchases of the Common Stock in the
open market after the distribution has been completed in order to cover
syndicate short positions. Stabilizing transactions consist of certain bids or
purchases of Common Stock made for the purpose of preventing or retarding a
decline in the market price of the Common Stock while this offering is in
process.

The underwriters also may impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.

Any of these activities may cause the price of the Common Stock to be
higher than the price that otherwise would exist in the open market in the
absence of such transactions. These transactions may be effected on The New York
Stock Exchange or in the over-the-counter market, or otherwise and, if
commenced, may be discontinued at any time.

The representatives have performed certain investment banking and advisory
services for us from time to time for which they have received customary fees
and expenses. Their representatives may, from time to time, engage in
transactions with and perform services for us in the ordinary course of their
business. Some of the representatives may be lenders under our credit facility
that is being partially repaid with the proceeds of this offering.

We estimate that the total expenses of this offering (excluding
underwriting discounts and commissions) will be $800,000.

We and the selling shareholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, or to contribute to payments the underwriters may be required to make in
respect of any of those liabilities.

This offering is being conducted pursuant to Conduct Rule 2710(c)(8) of the
National Association of Securities Dealers, Inc.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Crowe & Dunlevy, P.C., Tulsa, Oklahoma. Certain legal matters in
connection with the offering are being passed upon for the Company by Schifino &
Fleischer, P. A., Tampa, Florida, and for the underwriters by Simpson Thacher &
Bartlett, New York, New York.

EXPERTS

The consolidated financial statements of the Company and related financial
statement schedule of the Company for and as of the end of the years ended
December 1, 1996, November 30, 1997 and January 3, 1999 and for the one month
ended January 4, 1998 and the consolidated financial statements of SLI, B.V. for
and as of the end of the eight months ended August 31, 1997 and for and as of
the end of years ended December 31, 1995 and 1996 appearing in this Prospectus
have been audited by Ernst & Young LLP, independent auditors, and the historical
statements of operations data and historical balance sheet data for the Company
for and as

46
<PAGE> 51

of the end of the years ended December 1, 1996, November 30, 1997 and January 3,
1999 and for the one month ended January 4, 1998 under the heading "Selected
Condensed Consolidated Financial Data" appearing in this prospectus have been
derived from such consolidated financial statements of the Company audited by
Ernst & Young LLP, as set forth in their report thereon appearing elsewhere
herein. Such consolidated financial statements, financial statement schedule and
statements of operations data and balance sheet data are included herein in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.

The financial statements of CML Canada for the years ended December 1,
1996, November 30, 1997 and January 3, 1999 and for the one month ended January
4, 1998 appearing in this prospectus and Registration Statement have been
audited by Hards Pearson, independent auditors, as set forth in their reports
thereon appearing elsewhere herein. Such financial statements are included
herein in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.

AVAILABLE INFORMATION

A registration statement on Form S-1 (the "Registration Statement") under
the Securities Act, has been filed with the Securities and Exchange Commission,
Washington, D. C. 20549, with respect to the Common Stock offered hereby. This
prospectus does not contain all the information set forth in the Registration
Statement and exhibits and schedules thereto, certain portions having been
omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement and such exhibits and schedules
filed as a part thereof. The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission, 450 Fifth Avenue, N. W., Judiciary Plaza, Washington, D. C. 20549;
and at the regional offices of the Commission at 7 World Trade Center, New York,
New York 10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N. W., Judiciary Plaza,
Washington D. C. 20549, at prescribed rates. The Commission maintains a World
Wide Web site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants such as the Company which
file electronically with the Commission. In addition, reports, proxy statements
and other information concerning the Company can also be inspected and copied at
the offices of The New York Stock Exchange, 20 Broad Street, New York, New York
10005.

47
<PAGE> 52

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SLI, INC. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements
Consolidated Balance Sheets as of January 3, 1999 and
November 30, 1997......................................... F-3
Consolidated Statements of Operations for the years ended
January 3, 1999, November 30, 1997 and December 1, 1996
and for the one month ended January 4, 1998............... F-4
Consolidated Statements of Stockholders' Equity for the
years ended January 3, 1999, November 30, 1997 and
December 1, 1996 and for the one month ended January 4,
1998...................................................... F-5
Consolidated Statements of Cash Flows for the years ended
January 3, 1999, November 30, 1997 and December 1, 1996
and for the one month ended January 4, 1998............... F-6
Notes to Consolidated Financial Statements.................. F-7
SLI, INC. AND SUBSIDIARIES
Unaudited Condensed Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheet as of April
4, 1999................................................... F-24
Unaudited Condensed Consolidated Statement of Operations for
the three months ended April 4, 1999 and April 5, 1998.... F-25
Unaudited Condensed Consolidated Statements of Cash Flows
for the three months ended April 4, 1999 and April 5,
1998...................................................... F-26
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-27
CHICAGO MINIATURE LAMP (CANADA), INC.
Auditor's Report............................................ F-29
Financial Statements
Balance Sheet as at January 3, 1999, January 4, 1998,
November 30, 1997 and December 1, 1996.................... F-30
Statement of Income for the years ended January 3, 1999,
November 30, 1997 and December 1, 1996 and for the one
month ended January 4, 1998............................... F-31
Statement of Retained Earnings for the years ended January
3, 1999, November 30, 1997 and December 1, 1996 and for
the one month ended January 4, 1998....................... F-32
Statement of Cash Flows for the years ended January 3, 1999,
November 30, 1997 and December 1, 1996 and for the one
month ended January 4, 1998............................... F-33
Notes to the Financial Statements........................... F-34
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES
Report of Independent Auditors.............................. F-39
Consolidated Financial Statements
Consolidated Balance Sheets as of August 31, 1997, December
31, 1996 and December 31, 1995............................ F-40
Consolidated Statements of Income for the eight months ended
August 31, 1997 and for the years ended December 31, 1996
and 1995.................................................. F-41
Consolidated Statements of Stockholders' Equity for the
eight months ended August 31, 1997 and for the years ended
December 31, 1996 and 1995................................ F-42
Consolidated Statements of Cash Flows for the eight months
ended August 31, 1997 and for the years ended December 31,
1996 and 1995............................................. F-43
Notes to Consolidated Financial Statements.................. F-44
</TABLE>

F-1
<PAGE> 53

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)

We have audited the accompanying consolidated balance sheets of SLI, Inc.
(formerly Chicago Miniature Lamp, Inc.) and subsidiaries as of January 3, 1999
and November 30, 1997, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years ended January 3, 1999,
November 30, 1997, and December 1, 1996, and for the month ended January 4,
1998. Our audits also included the financial statement schedule for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996 and for the month
ended January 4, 1998, listed in the index at Item 16(b). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits. We did not audit the financial statements of
Chicago Miniature Lamp (Canada), Inc., a wholly owned subsidiary, which
statements reflect net sales and income before income taxes of approximately
$18,426,000 and $3,406,000, $14,605,000 and $2,671,000 and $13,031,000 and
$2,281,000 for the years ended January 3, 1999, November 30, 1997, and December
1, 1996, respectively, and $1,087,000 and $83,000 for the month ended January 4,
1998. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Chicago Miniature Lamp (Canada), Inc., is based solely on the report of the
other auditors.

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 and the report of other auditors provides a
reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the consolidated financial position of SLI, Inc. (formerly Chicago Miniature
Lamp, Inc.) and subsidiaries at January 3, 1999 and November 30, 1997, and the
consolidated results of their operations and their cash flows for the years
ended January 3, 1999, November 30, 1997, and December 1, 1996, and for the
month ended January 4, 1998 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule for
the years ended January 3, 1999, November 30, 1997, and December 1, 1996 and for
the month ended January 4, 1998, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Ernst & Young LLP

Chicago, Illinois
February 12, 1999

F-2
<PAGE> 54

SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 27,390 $ 73,416
Accounts receivable, less allowances for doubtful accounts
of $9,369 in 1999 and $7,889 in 1997................... 160,582 140,380
Inventories............................................... 149,453 124,086
Prepaid expenses and other................................ 15,735 12,120
-------- --------
Total current assets.............................. 353,160 350,002
Property, plant, and equipment, net......................... 341,210 269,650
Other assets:
Goodwill, net of accumulated amortization................. 38,353 7,651
Other intangible assets, net of accumulated
amortization........................................... 29,091 12,039
Other..................................................... 13,649 12,319
-------- --------
Total assets...................................... $775,463 $651,661
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable.................................. $ 28,086 $ 5,432
Current portion of long-term debt......................... 1,788 9,389
Accounts payable.......................................... 121,484 102,104
Accrued expenses.......................................... 100,778 107,616
Income taxes payable...................................... 3,234 7,855
-------- --------
Total current liabilities......................... 255,370 232,396
Long-term debt, less current portion........................ 238,530 185,434
Other liabilities:
Deferred income taxes..................................... 10,952 5,532
Other long-term liabilities............................... 52,801 62,248
-------- --------
Total other liabilities........................... 63,753 67,780
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value -- Authorized -- 5,000,000
shares, none issued and outstanding.................... -- --
Common stock, $.01 par value -- Authorized -- 100,000,000
shares -- Issued -- 29,346,498 and 29,302,796 shares in
1999 and 1997, respectively............................ 293 293
Common stock to be issued................................. 8,419 --
Additional paid-in capital................................ 131,399 126,835
Retained earnings......................................... 77,703 45,218
Cumulative translation adjustment......................... 4,080 2,377
Less: Treasury stock at cost, 315,900 and 643,345 shares
in 1999 and 1997....................................... (4,084) (8,672)
-------- --------
Total stockholders' equity........................ 217,810 166,051
-------- --------
Total liabilities and stockholders' equity........ $775,463 $651,661
======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 55

SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------------------- MONTH ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
-------------- ---------------- --------------- --------------
(NOTE 2)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales............................. $ 773,068 $ 329,959 $ 94,171 $ 53,866
Cost of products sold................. 533,484 231,933 61,147 40,199
----------- ----------- ----------- -----------
Gross margin.......................... 239,584 98,026 33,024 13,667
Selling, general, and administrative
expenses............................ 178,235 65,549 14,552 14,004
Restructuring costs................... 2,022 5,115 -- --
----------- ----------- ----------- -----------
Operating income (loss)............... 59,327 27,362 18,472 (337)
Other (income) expenses:
Interest expense.................... 17,809 5,238 936 1,312
Interest income..................... (917) (4,082) (635) (106)
Other, net.......................... 1,247 (2,326) (1,294) (471)
----------- ----------- ----------- -----------
Income (loss) before income taxes..... 41,188 28,532 19,465 (1,072)
Income taxes.......................... 8,156 7,591 6,029 (525)
----------- ----------- ----------- -----------
Net income (loss)..................... $ 33,032 $ 20,941 $ 13,436 (547)
=========== =========== =========== ===========
Net income (loss) per common share --
Basic............................... $ 1.14 $ .73 $ .55 $ (.02)
=========== =========== =========== ===========
Weighted-average shares outstanding --
Basic............................... 28,898,124 28,760,505 24,357,099 28,658,634
=========== =========== =========== ===========
Net income (loss) per common share --
Dilutive............................ $ 1.10 $ .71 $ .55 $ (.02)
=========== =========== =========== ===========
Weighted-average shares outstanding --
Dilutive............................ 30,131,604 29,330,889 24,487,855 29,298,133
=========== =========== =========== ===========
</TABLE>

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

F-4
<PAGE> 56

SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
COMMON STOCK
------------------ COMMON
NUMBER STOCK ADDITIONAL CUMULATIVE
OF PAR TO BE PAID-IN TREASURY RETAINED TRANSLATION
SHARES VALUE ISSUED CAPITAL STOCK EARNINGS ADJUSTMENT TOTAL
---------- ----- ------ ---------- -------- -------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 3,
1995...................... 23,558,171 $236 $ -- $ 23,805 -- $10,841 $ 39 $ 34,921
Comprehensive income:
Net income................ -- -- -- -- -- 13,436 -- 13,436
Translation adjustment
(net of taxes of
$180)................... -- -- -- -- -- -- 551 551
--------
Comprehensive income........ 13,987
Issuance of common stock:
Public offering, including
over allotment, net of
offering costs.......... 5,287,125 53 -- 98,291 -- -- -- 98,344
Acquisition............... 225,000 2 -- 3,248 -- -- -- 3,250
Exercise of stock
options................. 116,394 1 -- 661 -- -- -- 662
---------- ---- ------ -------- ------- ------- ------- --------
Balance at December 1,
1996...................... 29,186,690 292 -- 126,005 -- 24,277 590 151,164
Comprehensive income:
Net income................ -- -- -- -- -- 20,941 -- 20,941
Translation adjustment
(net of taxes of
$771)................... -- -- -- -- -- -- 1,787 1,787
--------
Comprehensive income...... 22,728
Issuance of common stock:
Additional offering
costs................... -- -- -- (212) -- -- -- (212)
Acquisition............... 4,500 -- -- 100 -- -- -- 100
Exercise of stock
options................. 111,606 1 -- 942 -- -- -- 943
Purchase of 643,345 shares
for treasury.............. -- -- -- (8,672) -- -- (8,672)
---------- ---- ------ -------- ------- ------- ------- --------
Balance at November 30,
1997...................... 29,302,796 293 -- 126,835 (8,672) 45,218 2,377 166,051
Comprehensive income:
Net income................ -- -- -- -- -- (547) -- (547)
Translation adjustment
(net of taxes of
$738)................... -- -- -- -- -- -- (3,210) (3,210)
--------
Comprehensive income
(loss).................... -- -- -- -- -- -- -- (3,757)
---------- ---- ------ -------- ------- ------- ------- --------
Balance at January 4,
1998...................... 29,302,796 293 -- 126,835 (8,672) 44,671 (833) 162,294
Comprehensive income:
Net income................ -- -- -- -- -- 33,032 -- 33,032
Translation adjustment (net
of taxes of $2,101)....... -- -- -- -- -- -- 4,913 4,913
--------
Comprehensive income........ 37,945
Issuance of common stock:
Acquisitions.............. 680,000 7 8,419 12,591 -- -- -- 21,017
Exercise of stock
options................. 295,947 2 3,770 3,772
Purchase 604,800 shares
for treasury............ -- -- -- -- (7,218) -- -- (7,218)
Retire treasury shares.... (932,245) (9) -- (11,797) 11,806 -- -- --
---------- ---- ------ -------- ------- ------- ------- --------
Balance at January 3,
1999...................... 29,346,498 $293 $8,419 $131,399 $(4,084) $77,703 $ 4,080 $217,810
========== ==== ====== ======== ======= ======= ======= ========
</TABLE>

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

F-5
<PAGE> 57

SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ONE
YEAR ENDED MONTH
------------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
-------------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................ $ 33,032 $ 20,941 $ 13,436 $ (547)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization.................. 17,280 7,252 3,165 1,462
Deferred income taxes.......................... 470 (3,094) 907 (566)
Changes in operating assets and liabilities:
Accounts receivable......................... 2,361 (15,597) (5,110) 7,141
Inventories................................. (14,009) 695 (4,873) (2,709)
Prepaid expenses and other.................. 1,715 (182) (440) (12,628)
Accounts payable............................ 2,084 21,051 (3,478) (8,292)
Accrued expenses............................ (14,555) (4,669) 1,452 (988)
Income taxes payable........................ 1,268 (1,825) (652) (45)
Stockholder payable/receivable.............. (53) 594 (594) 303
Other long-term liabilities................. (12,012) 5,617 (3,420) (1,778)
-------- --------- -------- --------
Net cash provided by (used in) operating
activities..................................... 17,581 30,783 393 (18,647)
INVESTING ACTIVITIES
Purchases of property, plant, and equipment...... (48,970) (23,116) (8,921) (1,966)
Proceeds from disposal of property, plant and
equipment...................................... 2,529 -- -- --
Acquisitions, net of cash acquired............... (27,721) (165,325) (10,293) --
Maturities of held-to-maturity investments....... -- 2,102 --
-------- --------- -------- --------
Net cash used for investing activities........... (74,162) (188,441) (17,112) (1,966)
FINANCING ACTIVITIES
Net borrowings (repayments) of short term debt... 313 (4,541) 1,804 858
Net borrowings of revolving credit line.......... 50,494 183,375 -- --
Proceeds from long-term debt..................... 7,214 5,730 24,442 (1,089)
Payments of long-term debt....................... (22,967) (52,128) (3,214) --
Payment of deferred financing costs.............. -- (2,616) (297) --
Proceeds from issuance of common stock -- net of
offering costs................................. -- (212) 98,344 --
Repurchase of shares for treasury................ (7,218) (8,672) -- --
Exercise of stock options........................ 3,079 943 662 --
-------- --------- -------- --------
Net cash provided by (used in) financing
activities..................................... 30,915 121,879 121,741 (231)
Effect of exchange rate changes on cash.......... 484 168 -- --
-------- --------- -------- --------
Net increase (decrease) in cash and cash
equivalents.................................... (25,182) (35,611) 105,022 (20,844)
Cash and cash equivalents, beginning of year..... 52,572 109,027 4,005 73,416
-------- --------- -------- --------
Cash and cash equivalents, end of year........... $ 27,390 $ 73,416 $109,027 $ 52,572
======== ========= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest....................................... $ 18,120 $ 2,097 $ 936 $ --
Income taxes................................... $ 4,138 $ 7,447 $ 3,802 $ 1,510
</TABLE>

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

F-6
<PAGE> 58

SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND ACQUISITIONS

SLI, Inc. (formerly Chicago Miniature Lamp, Inc. (an Oklahoma corporation))
and subsidiaries (collectively, the Company) operates in a single business
segment and is a vertically integrated manufacturer and supplier of lighting
systems, which include lamps, fixtures and ballasts. Through its 20 acquisitions
completed since 1992, the Company has grown from a specialized manufacturer of
neon lamps and miniature lighting products into a manufacturer and supplier of a
wide variety of lighting products, including lamps, (incandescent, fluorescent,
compact fluorescent, HID, halogen, miniature incandescent, neon, LED's and
special lamps), fixtures, magnetic and electronic ballasts and fiber optic
lighting systems. The Company serves a diverse, international customer base and
at January 3, 1999 had 31 manufacturing plants in 13 countries.

SLI Inc. acquired 6 companies in 1998 for approximately $31.9 million in
cash and 680,000 of newly issued common shares and 225,000 of common shares to
be issued, valued at approximately $21.0 million and the assumption of
approximately $27 million in debt. Pursuant to the terms of the acquisition
agreement, 225,000 shares are to be issued on the earlier of January 1, 2000 or
the commencement of production of the European linear fluorescent ballast and
attainment of certain minimum direct material costs. In 1997, the Company
acquired 4 companies for approximately $187.1 million in cash and the assumption
of approximately $1.4 million of debt. The Company acquired 3 companies in 1996
for approximately $12.5 million in cash and 225,000 of newly issued common
shares valued at approximately $3.3 million and the assumption of approximately
$4.9 million of debt. These acquisitions were accounted for as purchases, and
accordingly, the assets and liabilities of the acquired entities have been
recorded at their estimated fair values at the dates of acquisition. The excess
of purchase price over the estimated values of the net assets acquired, in the
amount of $33.7 million in 1998 and $800,000 in 1997 has been recorded in
goodwill and amortized over estimated useful lives. The purchase price
allocation for one of the 1998 acquisitions is subject to adjustment upon the
completion of an asset appraisal. Any adjustment is not expected to be material.

The largest acquisition occurred in 1997, when the Company acquired all the
outstanding capital stock of Sylvania Lighting International, B.V. and its
subsidiaries (SLI B.V.) for $161.5 million in cash financed with the Company's
cash and the Company's credit facility (Note 4). SLI, B.V. is an integrated
designer, manufacturer and seller of lighting systems. SLI, B.V. has a total of
15 manufacturing facilities in Europe, Latin America and Australia and sells to
customers throughout the world. There was no excess of purchase price over the
fair value of assets acquired.

Based on unaudited data, the following table presents selected financial
information for the Company and its subsidiaries on a pro forma basis, assuming
the companies acquired in 1997 had been consolidated since December 4, 1995:

<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30, DECEMBER 1,
1997 1996
------------ -----------
<S> <C> <C>
Net sales................................................... $755,364 $808,372
Net income.................................................. 22,264 17,071
Net income per share........................................ .77 .70
</TABLE>

The pro forma results are not necessarily indicative of future operations
or the actual results that would have occurred had the acquisitions been made as
of December 4, 1995. Pro forma data has not been presented for 1998 because the
effect of the 1998 acquisitions on operations was not significant.

F-7
<PAGE> 59
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

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

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

FISCAL YEAR

In January 1998, the Company changed its financial reporting year-end to
the Sunday nearest to December 31 of each year. Previously, the fiscal year
ended the Sunday nearest December 1. Accordingly, the accompanying statements of
operations, stockholders' equity and cash flows include results for the one
month transition period ending January 4, 1998. All references herein for the
years 1996, 1997 and 1998 represent the fiscal years ended December 1, 1996,
November 30, 1997 and January 3, 1999.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

INVENTORIES

Inventories are stated at the lower of cost, determined by the first in,
first out (FIFO) method, or market. Inventories consist of the following
(dollars in thousands):

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
<S> <C> <C>
Raw materials............................................... $ 35,638 $ 28,262
Work in process............................................. 17,389 14,693
Finished goods.............................................. 96,426 81,131
-------- --------
$149,453 $124,086
======== ========
</TABLE>

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives:

<TABLE>
<S> <C>
Buildings and improvements.................................. 25-39 years
Machinery and equipment..................................... 12-25 years
Molds....................................................... 10-20 years
Furniture and fixtures...................................... 5-10 years
</TABLE>

Leasehold improvements are amortized on a straight-line basis over the
shorter of the estimated useful lives of the assets or the remaining lease term.

F-8
<PAGE> 60
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired related to the business acquisitions described
in Note 1. Goodwill is amortized on a straight-line basis over the respective
useful lives which range from 25 to 40 years. Accumulated amortization is
approximately $855,000 and $593,000 at January 3, 1999 and November 30, 1997,
respectively. Amortization expense was approximately $253,000, $216,000,
$200,000, and $53,000, for fiscal 1998, 1997, and 1996, respectively and $9,000
for the one month ended January 4, 1998. The Company continually reviews its
goodwill for impairment whenever events or changes in circumstances indicate the
carrying value may not be recoverable. In performing the review for
recoverability, the Company estimates the future cash flows expected to result
from the use of the goodwill. If the sum of the expected future cash flow
(undiscounted and without interest charges) is less than the carrying amount of
the goodwill, an impairment loss is recognized. Measurement of an impairment
loss for goodwill that the Company expects to hold and use is based on the
excess of the carrying value over its fair value. To date, there have been no
adjustments to the carrying amounts of the goodwill resulting from these
evaluations.

OTHER INTANGIBLE ASSETS

Other intangible assets include the fair value of engineering technology,
patents and, noncompete agreements associated with the acquisitions described in
Note 1. The intangibles are being amortized using the straight-line method over
their respective useful lives or contract periods, which range from 3 to 25
years. Accumulated amortization is approximately $3,105,000 and $2,290,000 at
January 3, 1999 and November 30, 1997, respectively. Amortization expense was
approximately $684,000, $480,000, and $392,000 for fiscal 1998, 1997, and 1996,
respectively and $57,000 for the one month ended January 4, 1998. Other
intangible assets, net of accumulated amortization consists of (dollars in
millions):

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
-------------- ----------------
<S> <C> <C>
Engineering technology................................... $24.4 $ 7.2
Patents and non-compete agreements....................... 7.8 7.1
----- -----
32.2 14.3
Accumulated amortization................................. 3.1 2.3
----- -----
Other intangibles, net of accumulated amortization....... $29.1 12.0
</TABLE>

TREASURY STOCK

The board of directors has authorized, subject to certain business and
market conditions, the repurchase of shares of the Company's stock. At January
3, 1999, a total of 1,248,145 shares have been repurchased under these plans.
Retirements of treasury stock totaled 932,245 shares as of January 3, 1999.

FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in interest and foreign exchange rates. Financial
instruments are not used for trading purposes.

The Company and its subsidiaries utilize forward foreign currency exchange
contracts to minimize the impact of currency movements, principally on
anticipated intercompany inventory purchases and loans denominated in currencies
other than their functional currencies.

F-9
<PAGE> 61
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company may enter into interest rate swap agreements to limit the
effect of increases in the interest rates on any floating rate debt. The
differential is accrued as interest rates change and is recorded in interest
expense. Upon termination of interest rate swap agreements any resulting gain or
loss is recognized over the remaining term of the underlying debt obligation.

REVENUE RECOGNITION

Revenues from product sales are recognized at the time of shipment.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the year
incurred and totaled $7,533,000 and $1,926,000 for fiscal 1998 and 1997,
respectively and $628,000 for the one month ended January 4, 1998. The costs
incurred in fiscal 1996 were not material.

ADVERTISING COSTS

Advertising costs are charged to expense in the period incurred.
Advertising expense for 1998, 1997, and 1996 was approximately $10,500,000,
$4,535,000 and $250,000, respectively.

INCOME TAXES

Deferred income taxes are recognized based on the expected future tax
consequences of differences between the financial statement and tax bases of
assets and liabilities, calculated using enacted tax rates in effect for the
year in which the differences are expected to be reflected in the tax return.
Tax benefits subsequently realized which are related to deferred tax assets with
a valuation allowance recorded in connection with a business acquisition will
first reduce goodwill and other non-current assets related to the acquisition to
zero and any remaining tax benefit will be accounted for in the current
statement of operations.

FOREIGN CURRENCY TRANSLATION

Transactions arising in foreign currencies have been translated at rates of
exchange in effect at the dates of the transactions. Gains or losses during the
year have been included in net income. Assets and liabilities of foreign
affiliates are translated at current exchange rates, and income statement
accounts are translated at the average rates during the period. Related
translation adjustments are reported as a component of comprehensive income.

STOCK SPLITS AND RECAPITALIZATION

On August 5, 1996, the Company approved a three-for-two stock split of its
outstanding common stock to be effected in the form of a 50% stock dividend. The
dividend was paid on August 27, 1996, to shareholders of record August 16, 1996.

On February 11, 1998, the Company approved a three-for-two stock split of
its outstanding common stock to be effected in the form of a 50% stock dividend.
The dividend was paid on March 6, 1998 to shareholders of record February 23,
1998.

All share and per share data have been adjusted to reflect these stock
splits as of the earliest period presented.

F-10
<PAGE> 62
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

EARNINGS PER SHARE

Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
became effective in the fourth quarter of 1997 and requires presentations of
earnings per share -- "basic" and "diluted." Basic earnings per share is
computed by dividing income available to common stockholders (the numerator) by
the weighted-average number of common shares (the denominator) for the period.
The computation of the diluted earnings per share is similar to the basic
earnings per share, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued.

The numerator in calculating both basic and diluted earnings per share for
each year is reported net income. The denominator is based on the following
weighted-average number of common shares:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Basic.............................................. 28,898,124 28,760,505 24,357,099
========== ========== ==========
Diluted............................................ 30,131,604 29,330,889 24,487,855
========== ========== ==========
</TABLE>

The difference between basic and diluted weighted-average common shares
results from the assumption that dilutive stock options outstanding were
exercised.

The following stock options are not included in the diluted earnings per
share calculation since in each case the exercised price is greater than the
average market price:

<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Stock options............................................. 181,606 -- --
======= ======= =======
</TABLE>

ADOPTION OF ACCOUNTING PRINCIPLES

The Company has adopted Financial Accounting Standards Board's Statement of
Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income.
Statement 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this Statement
had no impact on the Company's net income or shareholders' equity. Statement 130
requires the Company's foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity, to be included in
other comprehensive income. Prior year financial statements have been
reclassified to conform to the requirements of Statement 130.

The Company has adopted the SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information (Statement 131), Statement 131 superseded
FASB Statement No. 14, Financial Reporting For Segments of a Business
Enterprise. Statement 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. The adoption of Statement 131 is solely a reporting requirement and
therefore did not have an effect on the Company's financial position or results
of operations.

The Company has adopted the SFAS No. 132, Employer's Disclosures about
Pensions and Other Postretirement Benefits (Statement 132). Statement 132
standardizes the disclosure requirements for pensions and other postretirement
benefits, requires additional information on changes in the benefit obligation
and fair values of plan assets and eliminates certain disclosures. The adoption
of Statement 132 is solely a reporting requirement and therefore did not have an
effect on the Company's financial position or results of operations.

F-11
<PAGE> 63
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In June 1998, the SFAS No. 133 Accounting for Derivative Instruments and
Hedging Activities (Statement 133), which is required to be adopted in fiscal
years beginning after June 15, 1999. Statement 133 requires all derivatives to
be recognized in the balance sheet as either assets or liabilities at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in income. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined what the effect of Statement 133 will be on the earnings and
financial position of the Company.

RECLASSIFICATIONS

Certain amounts in the fiscal 1997 and 1996 financial statements have been
reclassified to conform with the fiscal 1998 presentation.

3. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following:

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 11,810 $ 8,051
Buildings and improvements.................................. 70,545 66,726
Machinery and equipment..................................... 268,442 189,748
Molds....................................................... 14,460 10,662
Furniture and fixtures...................................... 6,058 6,493
-------- --------
371,315 281,680
Less: Accumulated depreciation.............................. 30,105 12,030
-------- --------
$341,210 $269,650
======== ========
</TABLE>

Depreciation expense was approximately $16,175,000, $6,500,000, $2,700,000
and $1,167,000 for fiscal 1998, 1997 and 1996 and the one month ended January 4,
1998, respectively.

4. DEBT

LONG TERM DEBT

Long-term Debt consists of the following:

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Revolving credit facility................................... $229,749 183,375
Other debt.................................................. 10,569 11,448
-------- --------
240,318 194,823
Less: Current portion....................................... 1,788 9,389
-------- --------
Total long term debt.............................. $238,530 $185,434
======== ========
</TABLE>

F-12
<PAGE> 64
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company has an existing credit facility which provides for a $300
million multi-currency revolving credit facility including a $10 million
swing-line loan facility and a $15 million letter of credit facility. Non US
dollar borrowings are limited to $75 million. Borrowings under this agreement
totaled $229,749,000 at January 3, 1999. This agreement expires August 30, 2002.
At the Company's option, the U.S. dollar loans bear interest at LIBOR (5.1% at
January 3, 1999) plus a margin, or an adjusted base rate (7.8% at January 3,
1999) plus a margin, payable quarterly. Foreign-denominated loans bear interest
at local spot rates. The interest margin of 1.5% for LIBOR loans and .5% for
prime loans at January 3, 1999 fluctuates on the Company's leverage ratio. The
agreement provides for a quarterly commitment fee, based on the Company's
leverage ratio as it relates to the available portion of the commitment (37.5
basis points at January 3, 1999). Mandatory prepayments are required upon the
occurrence of additional debt, or offering of equity, as defined in the
agreement.

The Company is required to comply with a number of affirmative and negative
covenants under its credit agreements. Among other things, the credit agreements
require the Company to satisfy certain financial tests and ratios (including
minimum interest coverage ratios, maximum leverage ratios, and minimum net worth
requirements).

At January 3, 1999, long-term debt includes $7,848,000 denominated in
Deutsche Marks (bearing interest at 5.24% per annum), $5,422,000 denominated in
Belgian Francs (bearing interest at 5.15% per annum) and $9,479,000 in Japanese
Yen (bearing interest at 2.05% per annum) under the credit agreement.

The Company uses interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt (Note 13).

Interest expense was $17,809,000 , $5,238,000, and $936,000, for fiscal
1998, 1997, and 1996, respectively and $1,312,000 for the one month period ended
January 4, 1998.

As of January 3, 1999, annual debt principal payments required were as
follows (dollars in thousands):

<TABLE>
<S> <C>
1999........................................................ $ 1,788
2000........................................................ 2,415
2001........................................................ 1,369
2002........................................................ 230,590
2003........................................................ 771
Thereafter.................................................. 3,385
--------
$240,318
========
</TABLE>

SHORT-TERM DEBT

Short-term borrowings in the amounts of approximately $28.1 million and
$5.4 million at January 3, 1999 and November 30, 1997, respectively, primarily
consisted of borrowings by subsidiaries located outside of the United States
under the terms of uncommitted lines of credit or other short-term borrowing
arrangements. The weighted average interest rate on short term borrowings
outstanding at January 3, 1999 was 8.4%. No material compensating balances are
required or maintained.

F-13
<PAGE> 65
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INCOME TAXES

The following is a summary of income (loss) before income taxes (dollars in
thousands):

<TABLE>
<CAPTION>
ONE
YEAR ENDED MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Domestic operations......................... $(5,249) $14,005 $ 9,280 $(1,170)
Foreign operations.......................... 46,437 14,527 10,185 98
------- ------- ------- -------
$41,188 $28,532 $19,465 $(1,072)
======= ======= ======= =======
</TABLE>

The following is a summary of the provision (benefit) for income taxes
(dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Federal:
Current................................... $(1,050) $ 7,729 $3,082 $(307)
Deferred.................................. 390 (3,002) 632 (28)
------- ------- ------ -----
(660) 4,727 3,714 (335)
State:
Current................................... (295) 1,005 425 (27)
Deferred.................................. 16 (413) (49) (3)
------- ------- ------ -----
(279) 592 376 (30)
Foreign:
Current................................... 7,800 1,951 1,615 (249)
Deferred.................................. 1,295 321 324 89
------- ------- ------ -----
9,095 2,272 1,939 (160)
------- ------- ------ -----
$ 8,156 $ 7,591 $6,029 $(525)
======= ======= ====== =====
</TABLE>

The Company's manufacturing facility in Costa Rica is operated under a tax
holiday, which expires in 2005. The impact of this tax holiday was an increase
to net income of $905,000 or $.03 per share for fiscal 1998, $1,393,000 or $.05
per share for fiscal 1997 and $1,309,000 or $.05 per share for fiscal 1996.

F-14
<PAGE> 66
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A reconciliation between the provision (benefit) for income taxes computed
at statutory rates and the amount reflected in the accompanying consolidated
statements of operations is as follows (dollars in thousands):

<TABLE>
<CAPTION>
YEAR ENDED ONE MONTH
--------------------------------------- ENDED
JANUARY 3, NOVEMBER 30, DECEMBER 1, JANUARY 4,
1999 1997 1996 1998
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
Computed federal tax provision (benefit) at
U.S. statutory rates...................... $14,416 $9,986 $ 6,618 $(375)
Increase (decrease) in taxes resulting from:
Amortization of goodwill.................. 70 118 35 30
Nonstatutory stock options................ (880) (185) -- --
State income taxes (benefit), net of
federal benefit (taxes)................ (130) 396 205 (70)
Effect of different income taxes of other
countries.............................. (2,400) (573) (1,484) (381)
Net operating losses not benefited........ 1,276 -- -- 271
Utilization of net operating loss
carryforwards.......................... (4,196) (2,211) -- --
Other..................................... -- 60 655 --
------- ------ ------- -----
$ 8,156 $7,591 $ 6,029 $(525)
======= ====== ======= =====
</TABLE>

The significant items comprising net deferred tax liabilities are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
JANUARY 3, 1999 NOVEMBER 30, 1997
--------------- -----------------
<S> <C> <C>
Assets:
Net operating loss carryforwards...................... $ 45,565 $ 46,065
Reserves.............................................. 1,063 4,608
Accruals.............................................. 1,019 573
Other................................................. 1,717 416
-------- --------
Total assets.................................. 49,364 51,662
Liabilities:
Accelerated tax depreciation.......................... (11,521) (9,984)
Other................................................. (4,391) (2,383)
-------- --------
Total liabilities............................. (15,912) (12,367)
-------- --------
33,452 39,295
Less: Valuation allowance for net operating loss
carryforwards......................................... (44,404) (44,827)
-------- --------
Net deferred tax liabilities............................ $(10,952) $ (5,532)
======== ========
</TABLE>

For tax purposes, the Company had available at January 3, 1999, net
operating loss carryforwards for foreign tax purposes of approximately
$117,351,000.

F-15
<PAGE> 67
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The expiration dates of operating loss carryforwards at January 3, 1999 are
as follows (dollars in thousands):

<TABLE>
<S> <C>
1999........................................................ $ 11,438
2000........................................................ 5,823
2001........................................................ 4,212
2002........................................................ 14,924
2003........................................................ 4,809
Thereafter.................................................. 2,676
No expiration date.......................................... 73,469
--------
$117,351
========
</TABLE>

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Payroll and related expenses................................ $ 29,013 $ 27,596
Warranty and customer rebates............................... 22,159 27,036
Restructuring expenses...................................... 6,552 17,147
Value-added taxes payable................................... 5,327 7,249
Other....................................................... 37,727 28,588
-------- --------
$100,778 $107,616
======== ========
</TABLE>

7. OTHER LONG-TERM LIABILITIES

Other long-term liabilities consist of the following:

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Pension..................................................... $25,558 $18,240
Restructuring expenses...................................... -- 18,831
Other....................................................... 27,243 25,177
------- -------
$52,801 $62,248
======= =======
</TABLE>

8. RESTRUCTURING

RESTRUCTURING OF EXISTING OPERATIONS

In fiscal 1997, the Company approved restructuring plans which resulted in
charges of approximately $5.1 million, including $3.5 million of severance
costs. This restructuring included the plant closure, personnel termination, and
asset liquidation of a lamp-making operation in the United Kingdom (U.K.), which
became redundant due to the SLI B.V. acquisition. The facility's land and
building were sold, and the equipment was sold or scrapped. Employee severance
cost at the Company's U.K. machinery making operation resulted from the
downsizing due to the duplication of functions after the SLI B.V. acquisition.
Additionally, the Company's leased Chicago, Illinois warehouse and distribution
location was closed and personnel were terminated. Also, the Company's Pauls
Valley, Oklahoma manufacturing operation was considered redundant in light of
the SLI

F-16
<PAGE> 68
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

B.V. acquisition and the lamp making equipment was disposed of and the building
held pending rehabilitation for an undesignated future use. Severance costs of
$3.5 million included the elimination of redundancies of 92 employees at the
U.K. lamp making location, 67 employees at the U.K. machinery making location
and 23 employees at the Chicago, Illinois location. The restructuring plan was
completed in 1998 and restructuring accruals were fully used.

In fiscal 1998, the Company developed and approved restructuring plans for
existing operations which resulted in charges of $2.0 million. The restructuring
plans included closure costs associated with the Company's Colombia lamp
manufacturing operations and the Company's U.K. machinery making operation.
Included in these costs were the net effect of severance costs totaling $600,000
and the write-off of lamp making equipment disposed of totaling $1.1 million.
Severance costs relate to the elimination of 171 employees at the Company's
Colombia operation. This restructuring plan was completed in 1998 and
restructuring accruals were fully used. The results of operations of the
activities which will not be continued were not significant to the consolidated
financial statements.

RESTRUCTURING OF ACQUIRED OPERATIONS

In connection with the purchase price accounting for the acquisition of SLI
B.V., effective September 1, 1997, the Company approved a restructuring plan,
which resulted in reorganization accruals of $25.0 million ($16.8 million of
severance costs and $8.2 million of other costs). $8 million ($3.9 million of
severance costs and $4.1 million of other costs) of the amount initially
recorded was reversed in fiscal 1998 through an adjustment to property, plant
and equipment. The remaining purchase liabilities recorded include the
following:

(i) Severance costs of $12.9 million include the termination of 180
employees in Europe, 268 employees in Latin America, 19 employees in
Australia and 28 employees in Asia. Approximately $9.2 million of severance
cost was paid as of January 3, 1999. The remainder will be paid in fiscal
1999.

(ii) Costs of $4.1 million are associated with the closure of leased
warehouse and administrative facilities. These costs represent remaining
payments on non-cancelable operating leases (which expire through 2000),
costs to return the facilities to the condition at the outset of the lease,
the write-off of the remaining net book value of leasehold improvements and
the cost to relocate employees. Accrued lease costs are for costs to be
incurred subsequent to the Company vacating the facilities. The warehouse
closures will occur in France, Belgium and Scandinavia and the
administrative office closures will occur in Switzerland, France, Austria
and Benelux. As of January 3, 1999, $2.6 million of the accrual had been
utilized. The remainder will be paid in fiscal 1999.

F-17
<PAGE> 69
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. COMMITMENTS AND CONTINGENCIES

LEASES

The Company leases certain facilities and equipment under operating lease
and sublease agreements that expire at various dates from the current year to
2010. As of January 3, 1999, the aggregate minimum future commitments under
operating leases are as follows (dollars in thousands):

<TABLE>
<S> <C>
2000........................................................ $ 9,958
2001........................................................ 8,493
2002........................................................ 5,035
2003........................................................ 3,837
2004........................................................ 3,088
Thereafter.................................................. 4,831
-------
$35,242
=======
</TABLE>

Rent expense for fiscal 1998, 1997, and 1996, was approximately
$10,622,000, $2,846,000 and $948,000, respectively and $238,000 for the one
month ended January 4, 1998.

10. STOCK OPTION PLAN

The Company's Board of Directors has approved amended stock option plans
for up to 6,000,000 shares of common stock. The first plan provides for the
granting of both incentive stock options (as defined in section 422 of the
Internal Revenue Code) and nonqualified stock options. The second plan provides
for the granting of incentive stock options to employees outside the U.S. and
Canada and certain other persons. Options may be granted under the plans on such
terms and at such prices as determined by the Board of Directors, except that
the per share exercise price of incentive stock options cannot be less than the
fair market value of the common stock on the date of grant. Each option will be
exercisable after the period or periods specified in the option agreement, but
no option may be exercisable after the expiration of 10 years from the date of
grant.

The Company has elected to follow APB No. 25 and related interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB No. 123 requires use
of option valuation models that were not developed for the use in valuing
employee stock options. Pro forma information regarding net income is required
by FASB No. 123, which also requires that the information be determined as if
the Company had accounted for the employee stock options granted subsequent to
December 3, 1995, under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for fiscal
1998, 1997 and 1996, respectively: weighted average risk-free interest rates of
5.3%, 6.1%, and 6.5%; no dividend yield; and a weighted-average expected life of
the option of 7 years. The volatility factor was assumed to be 0.3.

The Black-Scholes option valuation model was developed for the use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's option, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period of the respective
option. Because FASB No. 123 is applicable only to options granted

F-18
<PAGE> 70
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

subsequent to December 3, 1995, its pro forma impact will not be fully reflected
until 2001. The Company's pro forma net income and pro forma net income per
share -- basic and net income per share -- dilutive would be $21,912,000, $.76
and $.73; $18,248, $.63 and $.62; and $13,039, $.54 and $.53 for the years ended
January 3, 1999, November 30, 1997 and December 1, 1996 respectively.

The table below summarized option activity through January 3, 1999:

<TABLE>
<CAPTION>
WEIGHTED-
RANGE OF AVERAGE
NUMBER OF EXERCISE EXERCISE
OPTIONS PRICES PRICE
----------------- -------------- ---------
<S> <C> <C> <C>
Outstanding at December 3, 1995............. 517,500 $ 5.555- 7.889 $ 6.471
Options granted during 1996................. 339,750 9.111-15.554 13.257
Options exercised during 1996............... (116,394) 5.555- 7.167 6.440
Options canceled during 1996................ (187,505) 5.555- 9.111 7.568
----------
Outstanding at December 1, 1996............. 553,351 5.555-15.554 10.474
Options granted during 1997................. 3,297,700 12.917-19.917 17.822
Options exercised during 1997............... (111,606) 5.555-12.667 8.449
Options canceled during 1997................ (46,802) 12.667-15.167 14.125
----------
Outstanding at November 30, 1997............ 3,692,643 5.555-19.917 17.051
Options canceled during the month ended
January 4, 1998........................... (15,000) 13.000 13.000
----------
Outstanding at January 4, 1998.............. 3,677,643 5.555-19.917 17.067
Options granted during 1998................. 2,912,100 9.938-33.688 12.520
Options exercised during 1998............... (295,947) 5.555-18.667 11.877
Options canceled during 1998................ (2,599,001) 9.938-33.688 18.054
----------
Outstanding at January 3, 1999.............. 3,694,795 13.206
==========
</TABLE>

Information with respect to stock options outstanding and stock options
exercisable at January 3, 1999:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
---------------------------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED
OUTSTANDING AT REMAINING AVERAGE
RANGE OF EXERCISE PRICES JANUARY 3, 1999 CONTRACTUAL LIFE EXERCISE PRICE
- ------------------------ --------------- ---------------- --------------
<S> <C> <C> <C>
$5.555 - 9.938............................. 2,245,650 9.48 years $ 9.731
10.250 - 15.167............................. 338,000 9.40 years 11.208
16.000 - 20.563............................. 873,645 8.77 years 18.614
23.938 - 32.417............................. 237,500 9.41 years 29.012
---------
3,694,795
=========
</TABLE>

<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
--------------------------------
NUMBER WEIGHTED
EXERCISABLE AT AVERAGE
RANGE OF EXERCISE PRICES JANUARY 3, 1999 EXERCISE PRICE
------------------------ --------------- --------------
<S> <C> <C>
$ 5.555 - 9.938............................................ 587,250 $ 9.147
10.250 - 15.167........................................... 27,000 14.296
16.000 - 20.563........................................... 163,145 18.569
-------
777,395
=======
</TABLE>

F-19
<PAGE> 71
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. EMPLOYEE BENEFIT PLANS

The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The domestic plans cover union employees of SLI, Inc. As a result of
the SLI B.V. acquisition in 1997, the Company also has plans covering employees
in various foreign locations. The principal locations are Germany, the United
Kingdom, and Switzerland. Benefits are based on years of service and
compensation. The Company's funding policy is consistent with the funding
requirements of Federal law and regulations in the United States and regulations
of foreign jurisdictions. The Plans' 1998 and 1997 combined funded status (based
on the most recent valuations) and the amounts recognized in the accompanying
consolidated balance sheets are as follows (dollars in thousands):

<TABLE>
<CAPTION>
JANUARY 3, NOVEMBER 30,
1999 1997
---------- ------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year..................... $ 55,586 $ 1,268
Service cost................................................ 2,011 427
Interest cost............................................... 3,820 859
Actuarial loss (gain)....................................... 4,207 1,034
Acquisitions................................................ -- 50,530
Translation difference...................................... 1,142 1,997
Benefits paid............................................... (3,543) (529)
-------- --------
Benefit obligation at end of year........................... $ 63,223 $ 55,586
======== ========
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year.............. $ 41,880 $ 1,063
Actual return on plan assets................................ 6,951 783
Acquisitions................................................ -- 38,483
Translation difference...................................... 332 1,688
Employer contribution....................................... 3,081 392
Benefits paid............................................... (3,543) (529)
-------- --------
Fair value of plan assets at end of year.................... $ 48,701 $ 41,880
======== ========
Funded status of the plan (underfunded)..................... $(14,522) $(13,706)
Unrecognized transition amount.............................. 80 75
Unrecognized net actuarial loss............................. 822 1,196
Unrecognized prior service cost............................. 16 14
-------- --------
Accrued benefit cost........................................ $(13,604) $(12,421)
======== ========
</TABLE>

The components of net periodic pension cost are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
1998 1997 1996
------- ------ ----
<S> <C> <C> <C>
Service cost................................................ $ 2,011 $ 608 $ 44
Interest cost............................................... 3,820 1,149 81
Expected return on plan assets.............................. (3,266) (814) (63)
Net amortization and deferral............................... -- -- (7)
------- ------ ----
Net pension cost............................................ $ 2,565 $ 943 $ 55
======= ====== ====
</TABLE>

F-20
<PAGE> 72
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ASSUMPTIONS

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------- ------------
(U.S. ONLY)
<S> <C> <C> <C>
Discount rate............................... 4.3% to 17% 4.5% to 24% 6.5% to 7.5%
Weighted average discount rate.............. 6.0% 6.5% 7.1%
Expected return on plan assets.............. 5.0% to 7.5% 5.0% to 8.5% 6.5% to 9%
Assumed rate of compensation increase....... 2.5% to 15% 2.5% to 19% 5%
</TABLE>

The Company also maintains separate defined benefit plans for which
actuarial valuations were not obtained. These plans have benefit obligations of
approximately $4.6 million and $4.4 million at January 3, 1999 and November 30,
1997, respectively. The pension expense for these plans, consisting primarily of
interest cost, for fiscal 1998, 1997, and 1996 was approximately $300,000,
$344,000, and $124,000.

DEFINED CONTRIBUTION PLANS

The Company sponsors a number of defined contribution plans. Participation
in these plans is available to all U.S. non-union employees and employees in
various other countries. Company contributions to these plans are based on
either a percentage of employee contributions or on a specified amount per hour
based on the provisions of each plan. The Company's expense under these plans
was approximately $2,674,000, $650,000, and $38,000, for fiscal 1998, 1997, and
1996, respectively.

12. CAPITAL STOCK

In December 1996, the Company amended its Articles of Incorporation to
increase the authorized shares of common stock to 100,000,000 shares.

At January 3, 1999, 3,694,795 shares of common stock have been reserved for
future issuance upon the exercise of stock options.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

INTEREST RATE RISK MANAGEMENT

The Company uses interest rate swaps to reduce the impact on interest
expense of fluctuating interest rates on its variable rate debt. Under the
Company's interest rate swap agreement, which expires February 2, 2001, the
Company agreed with the counterparty to exchange, at quarterly intervals, the
difference between the Company's fixed pay rate and the counterparty's variable
pay rate of three-month LIBOR. At January 3, 1999, the notional principal
amounts of fixed interest rate swap agreements was $40 million having a fixed
rate of 5.82%.

In connection with the interest swap agreement, the Company sold an option
to the counterparty effective through February 2, 2001, whereby the counterparty
may terminate the swap agreement on January 29, 1999. The fair value of the
option at January 3, 1999, was estimated to be approximately $672,288.

FOREIGN EXCHANGE RISK MANAGEMENT

The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts (forward
contracts). Gains and losses associated with currency rate changes on forward
contracts hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging from foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction, when recorded; however, a loss is not deferred if

F-21
<PAGE> 73
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

deferral would lead to the recognition of a loss in future periods. The
aggregate foreign exchange (losses) gains recorded in fiscal 1998, 1997, and
1996 were approximately ($329,554), $1,664,000 and $1,283,000, respectively.

The forward contracts have maturities of one to 12 months. The
counterparties to the Company's forward contracts consist of a number of major
international financial institutions. The credit ratings and concentration of
risk of these financial institutions are monitored on a continuing basis and
management believes they present no significant credit risk to the Company.

The following table summarizes by major currency the contractual amounts of
the Company's forward contracts in U.S. dollars. Foreign currency amounts are
translated at year-end rates at the respective reporting date. The "buy" amounts
represent the U.S. equivalent of commitments to purchase foreign currencies and
"sell" amounts represent the U.S. equivalent of commitments to sell foreign
currencies according to local needs in foreign subsidiaries. Some of the forward
contracts involve the exchange of two foreign currencies according to local
needs in foreign subsidiaries.

At January 3, 1999 and November 30, 1997, the contractual amounts were:

<TABLE>
<CAPTION>
JANUARY 3, 1999 NOVEMBER 30, 1997
---------------- ------------------
BUY SELL BUY SELL
------- ------ -------- -------
<S> <C> <C> <C> <C>
Belgium francs...................................... $ -- $ -- $ 6,170 $ --
Deutsche marks...................................... -- -- 8,759 --
French francs....................................... -- -- 2,516 --
Swiss francs........................................ -- -- 2,179 1,236
U.S. dollars........................................ 5,096 -- 4,695 --
Euro................................................ 20,174 -- --
Other............................................... -- -- 3,290 --
------- ------ ------- ------
Total..................................... $25,270 $ -- $27,609 $1,236
======= ====== ======= ======
</TABLE>

FAIR VALUE OF FINANCIAL INSTRUMENTS

All financial instruments are held for purposes other than trading. The
carrying amount of cash and cash equivalents, accounts receivable, short-term
borrowings, accounts payable, and accruals are a reasonable estimate of their
fair value due to the short-term nature of these instruments. The estimated fair
value for long-term debt at January 3, 1999 and November 30, 1997 was
approximately equal to the carrying amounts at those dates. At January 3, 1999
and November 30, 1997 the carrying value of forward exchange contracts were
$359,000 and ($657,000), respectively and fair value was approximately equal to
the carrying amounts.

F-22
<PAGE> 74
SLI, INC.
(FORMERLY CHICAGO MINIATURE LAMP, INC.)
AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

\ 14. SELECTED QUARTERLY FINANCIAL DATA

The following is a summary of unaudited quarterly financial data for fiscal
1998 and 1997. Fiscal 1997 information has been restated to reflect the new
reporting period.

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1998
Net sales..................................... $192,420 $185,669 $181,957 $213,022
Gross margin.................................. 58,827 56,572 55,996 68,189
Net income.................................... 9,117 7,518 6,661 9,736
Net income per common share-Basic............. .32 .26 .23 .34
Net income per common share-Diluted........... .30 .25 .23 .32
1997
Net sales..................................... $ 46,188 $ 49,289 $ 94,622 $186,027
Gross margin.................................. 13,993 14,278 28,479 53,314
Net income.................................... 6,108 4,650 3,591 5,372
Net income per common share -- Basic.......... .21 .16 .13 .19
Net income per common share -- Diluted........ .21 .16 .12 .18
</TABLE>

15. GEOGRAPHIC SEGMENT INFORMATION

Financial Information for the fiscal years 1998, 1997 and 1996 and for the
month ended January 4, 1998 summarized by geographic area is as follows:

<TABLE>
<CAPTION>
MONTH
1998 1997 1996 ENDED
------------------- ------------------- -------- 1/4/98
REVENUES ASSETS REVENUES ASSETS REVENUES REVENUES
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States................ $159,565 $160,172 $129,120 $127,777 $49,843 $ 9,986
Canada....................... 18,426 10,937 14,605 10,459 13,084 1,687
Europe....................... 463,491 491,042 135,719 429,418 22,801 31,383
Latin America................ 84,051 87,529 34,894 51,405 8,443 6,580
Other........................ 47,535 25,783 15,621 32,602 -- 4,230
-------- -------- -------- -------- ------- -------
Total.............. $773,068 $775,463 $329,959 $651,661 $94,171 $53,866
======== ======== ======== ======== ======= =======
</TABLE>

16. NONCASH ACTIVITIES

The following discloses noncash investing activities during fiscal 1998,
1997 and 1996 (dollars in millions):

<TABLE>
<S> <C> <C> <C>
Common shares issued in connection with acquisitions........ $21.0 $ -- $3.3
Liabilities assumed in connection with acquisitions......... $27.0 $1.4 $4.9
</TABLE>

F-23
<PAGE> 75

SLI, INC. (FORMERLY CHICAGO MINIATURE LAMP, INC.) AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF APRIL 4, 1999 AND FOR THE THREE MONTHS ENDED APRIL 4, 1999
AND APRIL 5, 1998.

F-24
<PAGE> 76

SLI, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
APRIL 4,
1999
-----------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 5,856
Accounts receivable, net.................................. 167,756
Inventories............................................... 155,930
Prepaid expenses and other................................ 22,206
--------
Total current assets.............................. 351,748
--------
PROPERTY, PLANT AND EQUIPMENT, AT COST:..................... 352,131
Less -- Accumulated depreciation.......................... 25,757
--------
326,374
--------
OTHER ASSETS:
Goodwill, net of accumulated amortization................. 35,592
Other intangible assets, net of accumulated
amortization........................................... 28,655
Other assets.............................................. 12,433
--------
Total other assets................................ 76,680
--------
Total assets...................................... $754,802
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term notes payable.................................. $ 40,597
Current portion of long-term debt......................... 604
Accounts payable.......................................... 112,176
Accrued income taxes payable.............................. 5,886
Other accrued expenses.................................... 82,063
--------
Total current liabilities......................... 241,326
--------
LONG-TERM DEBT, LESS CURRENT PORTION........................ 249,678
--------
OTHER LIABILITIES:
Deferred income taxes..................................... 3,704
Other long-term liabilities............................... 50,982
--------
Total other liabilities........................... 54,686
--------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value --
Authorized -- 100,000,000 shares
Issued -- 29,437,741 shares at April 4, 1999........... 294
Common stock to be issued................................. 4,819
Additional paid-in capital................................ 134,651
Foreign currency translation adjustment................... (12,825)
Retained earnings......................................... 90,475
Treasury stock at cost, 455,400 shares at April 4, 1999... (8,302)
--------
Total stockholders' equity........................ 209,112
--------
Total liabilities and stockholders' equity........ $754,802
========
</TABLE>

See accompanying notes to the condensed financial statements.

F-25
<PAGE> 77

SLI, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
-------------------
APRIL 4, APRIL 5,
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales................................................... $218,865 $192,420
Cost of products sold....................................... 156,011 133,593
-------- --------
Gross margin................................................ 62,854 58,827
Selling, general and administrative expenses................ 44,254 44,448
-------- --------
Operating income............................................ 18,600 14,379
Other (income) expense
Interest, net............................................. 4,568 3,187
Minority interest......................................... (54) 111
Other, net................................................ (1,119) (315)
-------- --------
Income before income taxes.................................. 15,205 11,396
Income taxes................................................ 2,433 2,279
-------- --------
Net Income........................................ $ 12,772 $ 9,117
======== ========
Net income per common share -- basic
Net income per share............................ $ 0.44 $ 0.32
======== ========
Weighted average shares outstanding............. 29,088 28,751
======== ========
Net income per common share -- diluted
Net income per share............................ $ 0.42 $ 0.30
======== ========
Weighted average shares outstanding............. 30,703 30,091
======== ========
</TABLE>

See accompanying notes to the condensed financial statements.

F-26
<PAGE> 78

SLI, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------
APRIL 4, APRIL 5,
1999 1998
-------- ---------
(UNAUDITED)
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES......... $(28,123) $ 6,131
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant, and equipment............... (10,451) (10,748)
Acquisitions, net of cash acquired........................ (2,323) (15,402)
-------- ---------
Net cash used in investing activities............. (12,774) (26,150)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds of lines of credit........................... 25,085 1,227
Proceeds from long-term debt.............................. 412 --
Payments of long-term debt................................ (989) (4,320)
Repurchase of shares for treasury......................... (5,568) --
Exercise of stock options................................. 1,693 1,977
-------- ---------
Net cash provided by (used in) financing
activities....................................... 20,633 (1,116)
Effect of exchange rate changes on cash..................... (1,270) (1,047)
-------- ---------
Net decrease in cash and cash equivalents......... (21,534) (22,182)
Cash and cash equivalents, beginning of period.............. 27,390 52,572
-------- ---------
Cash and cash equivalents, end of period.................... $ 5,856 $ 30,390
======== =========
</TABLE>

See accompanying notes to the condensed financial statements.

F-27
<PAGE> 79

SLI, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 GENERAL

The interim consolidated financial statements presented have been prepared
by SLI, Inc. ("Company") without audit and, in the opinion of management,
reflect all adjustments of a normal recurring nature necessary for a fair
presentation of (a) the results of operations and cash flows for the three month
periods ended April 4, 1999 and April 5, 1998 and (b) the financial position at
April 4, 1999. Interim results are not necessarily indicative of results for a
full year.

The consolidated financial statements and notes are condensed and do not
contain certain information included in the annual financial statements and
notes of the Company. The consolidated financial statements and notes in the
financial statements included herein should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K filed with
the Securities and Exchange Commission.

NOTE 2 INVENTORIES

Inventories are stated at the lower of cost or market and include
materials, labor and overhead. Cost is determined by the first-in, first-out
(FIFO) method. Inventories consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
APRIL 4,
1999
--------
<S> <C>
Raw Materials............................................... $ 35,980
Work in process............................................. 17,358
Finished Goods.............................................. 102,592
--------
$155,930
========
</TABLE>

NOTE 3 COMPREHENSIVE INCOME

During the three months ended April 4, 1999 and April 5, 1998, total
comprehensive income (loss) amounted to ($4.1) million and $4.5 million,
respectively. The components of comprehensive income are net income and
cumulative foreign currency translation adjustment.

NOTE 4 SEASONALITY

NOTE 5 COMMON STOCK TO BE ISSUED

In connection with certain 1998 acquisitions, the Company is holding
142,500 shares of common stock to be issued pursuant to the terms of the
purchase agreements.

NOTE 6 INCOME TAXES

The Company's effective tax rate is lower than the U.S. statutory effective
tax rate due to the impact of income in countries with effective tax rates lower
than those in the U.S. and realization of tax attributes, including net
operating loss carry forwards.

NOTE 7 TREASURY STOCK

The board of directors has authorized, subject to certain business and
market conditions, the repurchase of shares of the Company's stock. At April 4,
1999, a total of 1,491,645 shares have been repurchased under these plans.
Retirements of treasury stock totaled 1,036,245 shares as of April 4, 1999.

F-28
<PAGE> 80
SLI, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 8 RESTRUCTURING OF ACQUIRED OPERATIONS

In connection with the purchase price accounting for the acquisition of SLI
B.V., effective September 1, 1997, the Company approved a restructuring plan,
which resulted in reorganization accruals of $25.0 million. $8 million of the
amount initially recorded was reversed in fiscal 1998 through an adjustment to
property, plant and equipment. The remaining purchase liabilities recorded
include the following:

(i) Severance costs of $12.9 million include the termination of 180
employees in Europe, 268 employees in Australia and 28 employees in Asia.
Approximately $9.2 million of severance cost was paid as of April 4, 1999.
The remainder will be paid throughout fiscal 1999.

(ii) Costs of $4.1 million are associated with the closure of leased
warehouse and administrative facilities. These costs represent remaining
payments on non-cancelable operating leases (which expire through 2000),
costs to return the facilities to the condition at the outset of the lease,
the write-off of the remaining net book value of leasehold improvements and
the cost to relocate employees. Accrued lease costs are for costs to be
incurred subsequent to the Company vacating the facilities. The warehouse
closures will occur in France, Belgium and Scandinavia and the
administrative office closures will occur in Switzerland, France, Austria
and Benelux. As of April 4, 1999 $3.1 million of the accrual had been
utilized.

NOTE 9 NET INCOME PER SHARE DATA

The numerator in calculating both basic and diluted earnings per share for
each year is reported net income. The denominator is based on the following
weighted-average number of common shares:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
-------------------
APRIL 4, APRIL 5,
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Basic....................................................... 29,088 28,751
Diluted..................................................... 30,703 30,091
</TABLE>

The difference between basic and diluted weighted-average common shares
results from the assumption that dilutive stock options outstanding were
exercised.

NOTE 10 ADOPTION OF ACCOUNTING PRINCIPLES

In June 1998, the SFAS No. 133 Accounting for Derivatives Instruments and
Hedging Activities (Statement 133), which is required to be adopted in fiscal
years beginning after June 15, 1999. Statement 133 requires all derivatives to
be recognized in the balance sheet as either assets or liabilities at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in income. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined what the effect of statement 133 will be on the earnings and
financial position of the Company.

F-29
<PAGE> 81

AUDITOR'S REPORT

To the Shareholder of
Chicago Miniature Lamp (Canada) Inc.

We have audited the balance sheets of Chicago Miniature Lamp (Canada) Inc.
as at January 3, 1999, January 4, 1998, November 30, 1997 and December 1, 1996
and the statements of income, retained earnings and cash flows for the periods
then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at January 3, 1999, January
4, 1998, November 30, 1997, and December 1, 1996 and the results of its
operations and the changes in its financial position for the periods then ended
in accordance with generally accepted accounting principles in the United
States.

Hards Pearson
Chartered Accountants

Barrie, Canada,
January 29, 1999.

F-30
<PAGE> 82

CHICAGO MINIATURE LAMP (CANADA) INC.

BALANCE SHEET
AS AT JANUARY 3, 1999
CANADIAN $

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
CURRENT
Cash........................................ $ 154,335 $ 1,156,194 $ 1,476,387 $ 985,424
Accounts receivable......................... 4,121,696 3,310,152 2,996,235 2,630,575
Inventory (note 3).......................... 2,943,649 1,557,128 1,360,003 1,661,931
Prepaid expenses............................ 38,060 49,278 45,695 31,019
Due from related parties (note 4)........... 4,145,066 291,029 254,974 --
----------- ----------- ----------- -----------
Total current assets.............. 11,402,806 6,363,781 6,133,294 5,308,949
Fixed assets (note 5)....................... 8,559,505 8,066,973 8,007,320 6,779,361
Goodwill (note 6)........................... 1,110,101 1,140,724 1,143,277 1,261,167
----------- ----------- ----------- -----------
$21,072,412 $15,571,478 $15,283,891 $13,349,477
=========== =========== =========== ===========

LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT
Bank indebtedness........................... $ -- $ -- $ -- $ --
Accounts payable and accrued charges........ 2,222,969 1,586,085 1,503,962 1,350,297
Income taxes payable........................ 906,916 119,129 73,301 614,565
Due to related parties (note 4)............. -- -- -- 471,450
----------- ----------- ----------- -----------
TOTAL CURRENT LIABILITIES......... 3,129,885 1,705,214 1,577,263 2,436,312
Due to SLI, Inc. (note 7)................... 2,932,821 2,011,075 1,939,000 1,353,400
Accrued start-up costs...................... -- -- -- 333,058
Deferred income taxes....................... 2,127,172 1,927,172 1,919,672 1,683,081
----------- ----------- ----------- -----------
Total liabilities................. 8,189,878 5,643,461 5,435,935 5,805,851
----------- ----------- ----------- -----------
SHAREHOLDER'S EQUITY
Capital stock (note 8)...................... 5,000,000 5,000,000 5,000,000 5,000,000
Deferred translation loss (note 9).......... (156,496) -- -- --
Retained earnings........................... 8,039,030 4,928,017 4,847,956 2,543,626
----------- ----------- ----------- -----------
Total shareholder's equity........ 12,882,534 9,928,017 9,847,956 7,543,626
----------- ----------- ----------- -----------
$21,072,412 $15,571,478 $15,283,891 $13,349,477
=========== =========== =========== ===========
</TABLE>

See accompanying notes.

F-31
<PAGE> 83

CHICAGO MINIATURE LAMP (CANADA) INC.

STATEMENT OF INCOME
CANADIAN $

PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
1999 1998 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES.................................... $26,915,467 $1,494,358 $19,465,058 $16,872,470
Cost of product sold......................... 20,495,620 1,235,145 14,604,964 12,458,853
----------- ---------- ----------- -----------
GROSS MARGIN................................. 6,419,847 259,213 4,860,094 4,413,617
Selling, general and administration
expenses................................... 618,373 81,449 680,764 759,321
----------- ---------- ----------- -----------
INCOME BEFORE INTEREST AND MANAGEMENT FEE.... 5,801,474 177,764 4,179,330 3,654,296
Interest on long-term debt................... -- -- -- 55,662
Management fee............................... 790,461 44,375 525,000 510,000
----------- ---------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES..... 5,011,013 133,389 3,654,330 3,088,634
----------- ---------- ----------- -----------
Provision for income taxes
Current.................................... 1,700,000 45,828 1,180,000 946,100
Deferred................................... 200,000 7,500 170,000 152,907
----------- ---------- ----------- -----------
1,900,000 53,328 1,350,000 1,099,007
----------- ---------- ----------- -----------
NET INCOME FOR THE PERIOD.......... $ 3,111,013 $ 80,061 $ 2,304,330 $ 1,989,627
=========== ========== =========== ===========
</TABLE>

See accompanying notes.

F-32
<PAGE> 84

CHICAGO MINIATURE LAMP (CANADA) INC.

STATEMENT OF RETAINED EARNINGS
CANADIAN $

PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
1999 1998 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
RETAINED EARNINGS, BEGINNING OF PERIOD.......... $4,928,017 $4,847,956 $2,543,626 $ 553,999
Net income for the period....................... 3,111,013 80,061 2,304,330 1,989,627
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD................ 8,039,030 4,928,017 4,847,956 2,543,626
========== ========== ========== ==========
</TABLE>

See accompanying notes.

F-33
<PAGE> 85

CHICAGO MINIATURE LAMP (CANADA) INC.

STATEMENT OF CASH FLOWS
CANADIAN $

PERIOD ENDED JANUARY 3, 1999
(WITH COMPARATIVE FIGURES FOR THE ONE MONTH ENDED JANUARY 4, 1998
AND THE YEARS ENDED NOVEMBER 30, 1997 AND DECEMBER 1, 1996)

<TABLE>
<CAPTION>
1999 1998 1997 1996
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income for the period.................... $ 3,111,013 $ 80,061 $ 2,304,330 $ 1,989,627
Add charges to income not resulting in a
current outlay of cash
Depreciation and amortization.............. 685,963 56,973 587,045 494,518
Deferred income taxes...................... 200,000 7,500 170,000 152,907
Loss on sale of fixed assets............... -- -- 4,975 83,643
Net decrease in accrued start-up costs....... -- -- (333,058) (322,871)
Adjustment to deferred taxes and goodwill
recorded upon amalgamation................. -- -- 165,254 --
Net change in non-cash working capital
balances (note 10)......................... (762,176) (386,674) (466,007) (212,175)
----------- ---------- ----------- -----------
CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES................................. 3,234,800 (242,140) 2,432,539 2,185,649
----------- ---------- ----------- -----------
FINANCING ACTIVITIES
Advances from (to) related parties........... (3,088,787) 36,020 (140,824) 89,513
Reduction in long-term debt.................. -- -- -- (793,400)
----------- ---------- ----------- -----------
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES................................. (3,088,787) 36,020 (140,824) (703,887)
----------- ---------- ----------- -----------
INVESTING ACTIVITIES
Purchase of fixed assets..................... (1,147,872) (114,073) (1,836,156) (1,645,604)
Proceeds on disposal of fixed assets......... -- -- 35,404 234,954
----------- ---------- ----------- -----------
CASH USED IN INVESTING ACTIVITIES............ (1,147,872) (114,073) (1,800,752) (1,410,650)
----------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN CASH DURING THE
PERIOD..................................... (1,001,859) (320,193) 490,963 71,112
Cash, beginning of period.................... 1,156,194 1,476,387 985,424 914,312
----------- ---------- ----------- -----------
CASH, END OF PERIOD.......................... 154,335 1,156,194 1,476,387 985,424
=========== ========== =========== ===========
</TABLE>

See accompanying notes.

F-34
<PAGE> 86

CHICAGO MINIATURE LAMP (CANADA) INC.

NOTES TO THE FINANCIAL STATEMENTS
JANUARY 3, 1999

1. OPERATIONS

The company is a manufacturer and supplier of miniature light socket
assemblies to the automotive industry. The assemblies are used primarily for
instrument clusters, warning lights, climate control modules and courtesy
lights.

ARTICLES OF AMENDMENT

On May 9, 1997, the company filed articles of amendment to change its name
to Chicago Miniature Lamp (Canada) Inc. The company was formerly known as
Plastomer Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements of the company have been prepared in accordance
with generally accepted accounting principles, on a basis consistent with that
of the preceding period. The following is a summary of the more significant
accounting policies:

INVENTORY

Inventory is valued at the lower of cost or net realizable value. Cost has
been determined on the first-in, first-out basis. Net realizable value for
finished goods has been defined as standard selling price less normal profit
margin. Net realizable value for raw materials has been defined as net
replacement cost.

FIXED ASSETS

Based on purchase accounting, the fixed assets are stated at the lower of
appraised value, as determined by appraisals dated April 5, 1995 and May 3,
1995, less accumulated depreciation and net recoverable amount. Additions after
these dates are stated at the lower of cost less accumulated depreciation and
net recoverable amount. Depreciation is provided when the asset is placed into
service on the straight-line basis, with half rates applied in the year of
acquisition, over the following periods:

<TABLE>
<S> <C>
Buildings................................................... 35 years
Machinery and equipment..................................... 5 - 20 years
Moulds and dies............................................. 10 years
Software.................................................... 5 years
</TABLE>

GOODWILL

Goodwill is recorded at cost less accumulated amortization. Amortization is
provided on the straight-line basis over a period of 40 years.

TRANSLATION OF FOREIGN CURRENCY

Transactions arising in foreign currencies [principally United States
dollars and British pounds] have been translated at rates of exchange in effect
at the dates of the transactions. Monetary items denominated in foreign
currencies have been translated at rates of exchange in effect at the balance
sheet date. Gains or losses during the period have been included in net income.

F-35
<PAGE> 87
CHICAGO MINIATURE LAMP (CANADA) INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

3. INVENTORY

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Raw materials................................. $1,543,765 $ 824,676 $ 820,977 $1,029,503
Work-in-progress and finished goods........... 1,239,563 681,763 488,337 625,370
Capitalized variances......................... 53,810 (49,310) (49,310) (27,175)
Tooling....................................... 106,511 99,999 99,999 34,233
---------- ---------- ---------- ----------
$2,943,649 $1,557,128 $1,360,003 $1,661,931
========== ========== ========== ==========
</TABLE>

4. DUE FROM (TO) RELATED PARTIES

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Canadian Dollars
Power Lighting Products, Inc. ................... $ 24,567 $ 24,712 $ 12,625 $ --
British Pounds
Badalex Ltd. .................................... -- (54,320) (54,320) (88,962)
Exchange....................................... -- (70,888) (76,048) (106,754)
United States Dollars
SLI, Inc. ....................................... 3,161,951 275,698 264,438 (205,797)
Socop Industries................................. 9,899 -- -- --
SLI Miniature Lighting Ltd. ..................... (481,300) -- -- --
Exchange....................................... 1,429,949 115,827 108,279 (69,937)
---------- -------- -------- ---------
$4,145,066 $291,029 $254,974 $(471,450)
========== ======== ======== =========
</TABLE>

The following is a summary of the related party transactions for the
period:

<TABLE>
<S> <C>
INTERCOMPANY SALES (IN CANADIAN DOLLARS)
Socop Industries............................................ $ 41,649
SLI Miniature Lighting Ltd. ................................ 8,994
SLI, Inc. .................................................. 386,728
----------
$ 437,371
==========
OTHER RELATED PARTY TRANSACTIONS
Lamps purchased from SLI Miniature Lighting Ltd. ........... $1,781,166
Capital equipment purchased from Bruckner................... 435,082
Insurance premiums paid to SLI, B.V. ....................... 22,524
Rework performed for IDI Internacional, S.A. (Costa Rica)... 30,816
Management fees paid to SLI, Inc. .......................... 790,461
==========
</TABLE>

The above corporations deal on terms that are substantially the same as
independent customers. SLI, Inc. pays certain expenditures on behalf of the
company and purchases finished goods. They also provide executive, information
system and marketing services for which they receive a yearly management fee.

F-36
<PAGE> 88
CHICAGO MINIATURE LAMP (CANADA) INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

5. FIXED ASSETS

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Land........................................... $ 75,000 $ 75,000 $ 75,000 $ 75,000
Buildings...................................... 1,353,926 1,387,000 1,391,090 1,434,107
Machinery and equipment........................ 4,775,234 4,829,048 4,641,387 3,475,312
Moulds and dies................................ 1,300,184 1,391,400 1,260,623 884,760
Software....................................... 48,648 30,255 31,355 42,700
Construction-in-progress....................... 1,006,513 354,270 607,865 867,482
---------- ---------- ---------- ----------
$8,559,505 $8,066,973 $8,007,320 $6,779,361
========== ========== ========== ==========
</TABLE>

The fixed assets are shown at cost less accumulated depreciation.

6. GOODWILL

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Cost........................................... $1,224,939 $1,224,939 $1,224,939 $1,323,602
Less accumulated amortization.................. (114,838) (84,215) (81,662) (62,435)
---------- ---------- ---------- ----------
$1,110,101 $1,140,724 $1,143,277 $1,261,167
========== ========== ========== ==========
</TABLE>

7. DUE TO SLI, INC.

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
United States Dollars
Note payable................................... $1,916,250 $1,416,250 $1,385,000 $1,010,000
Exchange..................................... 1,016,571 594,825 554,000 343,400
---------- ---------- ---------- ----------
$2,932,821 $2,011,075 $1,939,000 $1,353,400
========== ========== ========== ==========
</TABLE>

No interest and no specific terms of repayment have been negotiated.

8. CAPITAL STOCK

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
---------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
AUTHORIZED
Unlimited voting, 6% non-cumulative,
redeemable, retractable Class AA special
shares.......................................
Unlimited common shares........................
ISSUED AND FULLY PAID
5,000,000 common shares........................ $5,000,000 $5,000,000 $5,000,000 $5,000,000
========== ========== ========== ==========
</TABLE>

9. DEFERRED TRANSLATION LOSS

The unrealized loss on translation of foreign exchange on the balance due
to SLI, Inc. has been deferred to reflect the long-term nature of this advance.

F-37
<PAGE> 89
CHICAGO MINIATURE LAMP (CANADA) INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

10. NET CHANGE IN NON-CASH WORKING CAPITAL BALANCES

<TABLE>
<CAPTION>
JANUARY 3, JANUARY 4, NOVEMBER 30, DECEMBER 1,
1999 1998 1997 1996
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
Accounts receivable............................ (811,544) $(313,917) (365,660) $ 10,922
Income taxes receivable........................ -- -- -- 133,139
Inventory...................................... (1,386,521) (197,125) 301,928 (205,552)
Prepaid expenses............................... 11,218 (3,583) (14,676) 3,637
Accounts payable and accrued charges........... 636,884 82,123 153,665 (768,886)
Income taxes payable........................... 787,787 45,828 (541,264) 614,565
----------- --------- --------- ---------
$ (762,176) $(386,674) $(466,007) $(212,175)
=========== ========= ========= =========
</TABLE>

Decreases in assets and increases in liabilities result in a source of
funds. Increases in assets and decreases in liabilities result in a use of funds
and are indicated by brackets.

11. PENSION PLAN

Prior to July 31, 1997 the company maintained a defined benefit pension
plan of which substantially all employees were members. Current and past service
costs were charged to income as incurred and funded as required by actuarial
valuations.

The pension expense, all for current service costs, was $62,579 in 1997.
Effective July 1, 1997 the company introduced a Group Registered Retirement
Savings Plan and began the process of winding-up the defined benefit plan. The
accumulated net assets of the defined benefit plan were distributed to the
members for transfer to a "locked-in" Registered Retirement Savings Plan.

12. OPERATING LEASES

Minimum lease payments over the next three years with respect to vehicle
and office equipment operating leases are as follows:

13. FINANCIAL INSTRUMENTS

It is management's opinion that the company is not exposed to significant
interest, currency, or credit risks arising from financial instruments. The fair
values of short-term investments, accounts receivable, accounts payable and
accrued liabilities and long-term debt are represented by their carrying values.

14. CONTINGENT LIABILITIES

(A) GUARANTEES

The company has pledged an unlimited guarantee in favour of BANKBOSTON,
N.A. over the indebtedness of its parent company, SLI, Inc.

(B) INCOME TAXES

In April 1998 Revenue Canada issued a Notice of Assessment with respect to
the year ended December 30, 1994 and Notices of Reassessment for the periods
ended March 29th and December 3rd, 1995.

F-38
<PAGE> 90
CHICAGO MINIATURE LAMP (CANADA) INC.

NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)

The effect of these Notices is to disallow certain deductions and
Investment Tax Credits pursuant to Section 37 of the Income Tax Act. The Company
has not paid any amount in respect of the Notices and has responded by filing
Notices of Objection for each of the tax periods in question.

Based on the information currently available, if these assessments were to
be upheld, the Company's exposure would be approximately $190,000 less any
amount recovered under certain warranties.

If any payment is ultimately required, it will be recorded in the period
paid.

15. COMMITMENTS

The company has committed to $225,000 of capital asset purchases for the
coming year. Progress payments totaling $105,000 have been made to suppliers as
a result of these commitments. These payments are included under
"Construction-in-progress" [Note 5] in the financial statements.

The company is also committed to the transfer of certain equipment to Socop
Industries (a fully-owned subsidiary of SLI Miniature Lighting Ltd. and a
related party) in the coming year. The items to be transferred are as follows:

<TABLE>
<S> <C>
Production equipment........................................ $500,157
Tooling inventory........................................... 101,312
Dies........................................................ 145,570
Raw materials............................................... 11,257
--------
$758,296
========
</TABLE>

The items will be transferred at cost with no specific terms of repayment.

16. UNCERTAINTY DUE TO THE YEAR 2000 ISSUE

The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect and entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.

17. COMPARATIVE AMOUNTS

Certain comparative amounts have been reclassified from those previously
presented to confirm to the presentation of the current period's financial
statements.

F-39
<PAGE> 91

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.)

We have audited the accompanying consolidated balance sheets of Sylvania
Lighting International B.V. and subsidiaries as of August 31, 1997, December 31,
1996 and December 31, 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for the eight months ended August 31, 1997
and the years ended December 31, 1996 and December 31, 1995. 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.

In our opinion, based on our audits, the financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Sylvania Lighting International B.V. and subsidiaries at August 31,
1997, December 31, 1996 and December 31, 1995, and the consolidated results of
their operations and their cash flows for the eight months ended August 31,
1997, and the years ended December 31, 1996 and December 31, 1995, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
March 20, 1998

F-40
<PAGE> 92

SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(L IN THOUSANDS)

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. L 13,731 L 28,175 L 35,370
Accounts receivable, less allowances for doubtful accounts
of L4,113 in 1997, L4,547 in 1996 and L4,207 in 1995... 55,923 63,477 73,375
Inventories............................................... 55,459 54,239 67,536
Prepaid expenses and other................................ 10,420 10,672 12,758
-------- -------- --------
Total current assets.............................. 135,533 156,563 189,039
Property, plant, and equipment, net......................... 40,266 40,232 41,294
Other assets:
Goodwill, net of accumulated amortization................. 1,059 1,097 237
Other intangible assets, net of accumulated
amortization........................................... 159 162 1,100
Deferred income taxes..................................... 1,557 576 1,433
-------- -------- --------
Total assets...................................... L178,574 L198,630 L233,103
======== ======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term notes payable.................................. L 815 L 2,187 L 4,054
Current portion of long-term debt......................... 3,461 4,051 7,831
Accounts payable.......................................... 40,351 53,199 61,975
Accrued expenses.......................................... 37,659 38,608 43,791
Income taxes payable...................................... 2,913 2,115 2,442
-------- -------- --------
Total current liabilities......................... 85,199 100,160 120,093
Long-term debt, less current portion........................ 26,059 23,910 31,812
Other liabilities:
Deferred income taxes..................................... 4,238 3,265 4,025
Negative goodwill, net of accumulated amortization........ 10,699 11,093 953
Other long-term liabilities............................... 14,884 19,274 34,221
-------- -------- --------
Total other liabilities........................... 29,821 33,632 39,199
Commitments and contingencies
Redeemable preference shares................................ 12,595 12,959 8,989
Stockholders' equity:
Ordinary shares -- A, NLG 1.00 par value -- Authorized --
300,000 shares -- Issued and outstanding -- 60,000
shares................................................. 24 24 24
Ordinary shares -- B, NLG .35 par value -- Authorized --
200,000 shares -- Issued and outstanding -- 40,000
shares................................................. 6 6 6
Additional paid-in capital................................ 35 35 35
Retained earnings......................................... 35,907 36,345 34,585
Foreign currency translation adjustment................... (11,072) (8,441) (1,640)
-------- -------- --------
Total stockholders' equity........................ 24,900 27,969 33,010
-------- -------- --------
Total liabilities and stockholders' equity........ L178,574 L198,630 L233,103
======== ======== ========
</TABLE>

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

F-41
<PAGE> 93

SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(L IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................ L213,894 L356,732 L370,667
Cost of products sold.................................... 146,330 253,818 250,228
-------- -------- --------
Gross margin............................................. 67,564 102,914 120,439
Selling, general and administrative expenses............. 62,839 94,708 99,452
-------- -------- --------
Operating income......................................... 4,725 8,206 20,987
Other (income) expenses:
Interest expense, net.................................. 1,526 3,644 2,842
Other, net............................................. 611 (415) (11)
-------- -------- --------
Income before income taxes............................... 2,588 4,977 18,156
Income taxes............................................. 1,538 2,254 3,302
-------- -------- --------
Net income............................................... 1,050 2,723 14,854
Dividends on preference shares........................... 1,488 963 861
-------- -------- --------
Net income (loss) attributed to ordinary shareholders.... L (438) L 1,760 L 13,993
======== ======== ========
</TABLE>

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

F-42
<PAGE> 94

SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(L IN THOUSANDS)

<TABLE>
<CAPTION>
ORDINARY SHARES
------------------- FOREIGN
NUMBER ADDITIONAL CURRENCY
OF PAID-IN RETAINED TRANSLATION
SHARES PAR VALUE CAPITAL EARNINGS ADJUSTMENT
------- --------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1995..................... 100,000 L30 L35 L20,592 L (1,892)
Net income attributed to ordinary
shareholders................................. -- -- -- 13,993 --
Translation adjustment......................... -- -- -- -- 252
------- --- --- ------- --------
Balance at December 31, 1995................... 100,000 30 35 34,585 (1,640)
Net income attributed to ordinary
shareholders................................. -- -- -- 1,760 --
Translation adjustment......................... -- -- -- -- (6,801)
------- --- --- ------- --------
Balance at December 31, 1996................... 100,000 30 35 36,345 (8,441)
Net loss attributed to ordinary shareholders... -- -- -- (438) --
Translation adjustment......................... -- -- -- -- (2,631)
------- --- --- ------- --------
Balance at August 31, 1997..................... 100,000 L30 L35 L35,907 L(11,072)
======= === === ======= ========
</TABLE>

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

F-43
<PAGE> 95

SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(L IN THOUSANDS)

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... L 1,050 L 2,723 L 14,854
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization.......................... 4,979 4,770 4,051
Amortization of negative goodwill...................... (394) (591) (54)
Deferred income taxes.................................. (9) (16) 2,147
Changes in operating assets and liabilities:
Accounts receivable................................. 636 (1,893) 12,267
Inventories......................................... (4,251) 4,929 (7,128)
Prepaid expenses and other.......................... (407) 54 (7,928)
Accounts payable.................................... (8,471) (32) (4,008)
Accrued expenses.................................... 1,640 (640) (7,704)
Income taxes payable................................ 746 (287) 818
Other long-term liabilities......................... (3,330) 196 (4,358)
-------- -------- --------
Net cash provided by (used for) operating activities..... (7,811) 9,213 2,957
INVESTING ACTIVITIES
Purchases of property, plant, and equipment.............. (6,123) (8,914) (15,715)
Acquisitions, net of cash acquired....................... (1,537) (250)
-------- -------- --------
Net cash used for investing activities................... (6,123) (10,451) (15,965)
FINANCING ACTIVITIES
Net repayments of lines of credit........................ (779) (2,263) (5,363)
Proceeds from borrowings................................. 9,193 7,164 6,472
Payments of long-term debt............................... (5,442) (8,437) (684)
Dividends paid........................................... (1,852) (941) (431)
-------- -------- --------
Net cash provided by (used for) financing activities..... 1,120 (4,477) (6)
Effect of exchange rate changes on cash.................. (1,630) (1,480) 1,482
-------- -------- --------
Net decrease in cash and cash equivalents................ (14,444) (7,195) (11,532)
Cash and cash equivalents, beginning of year............. 28,175 35,370 46,902
-------- -------- --------
Cash and cash equivalents, end of year................... L 13,731 L 28,175 L 35,370
======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest............................................... L 1,583 L 3,417 L 3,661
======== ======== ========
Income taxes........................................... L 772 L 1,701 L 926
======== ======== ========
Equipment capitalized under lease agreements............. L -- L 892 L 4,261
======== ======== ========
Shareholder notes converted to redeemable preference
shares................................................. L -- L 5,961 L --
======== ======== ========
</TABLE>

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

F-44
<PAGE> 96

SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND ACQUISITIONS

Sylvania Lighting International B.V., (the Company or SLI) was incorporated
in July 1992 and is registered in the Netherlands. Operations commenced in
January 1993 with the acquisition of the international lighting business of GTE
Corporation and GTE International Incorporated (SLI acquisition). The Company
designs, manufactures and sells a complete line of lighting systems which are
comprised of lamps and fixtures. The Company serves a diverse international
customer base and markets, operates primarily in western Europe, Australia and
Latin America and has major plants in 9 countries (outside the United States).

Effective May 1, 1995, the assets of Nijssen Lighting Division B.V. were
acquired for approximately L290,000 in cash.

Effective June 30, 1995, the Company acquired all the assets and assumed
certain liabilities of Lumiance O.Y. for total consideration of L261,000,
including a loan payable of approximately L147,000 (repaid in 1995).

On February 5, 1996, SLI acquired the assets and assumed certain
liabilities of Kliktube Systems of Australia Pty. Ltd. and Kliktube Systems (NZ)
Ltd. for approximately L1,537,000.

The above acquisitions were accounted for using the purchase method and the
purchase price was allocated to assets acquired and liabilities assumed based on
the estimated fair market value existing at the date of acquisition. The excess
of purchase price over fair market value of net assets acquired is reflected in
the accompanying consolidated balance sheets as goodwill. Goodwill of L243,000
and L914,000 was recorded in connection with the 1995 and 1996 acquisitions,
respectively. The operating results of the above acquired businesses have been
included in the accompanying statements of operations from the respective
acquisition dates.

PRINCIPLES OF CONSOLIDATION

These statements have been prepared in conformity with United States
Generally Accepted Accounting Principles and are presented in pounds sterling
(L).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

F-45
<PAGE> 97
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVENTORIES

Inventories are stated at the lower cost, determined by the first in, first
out (FIFO) method, or market. Inventories consist of the following (L in
thousands):

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Raw materials....................................... L11,729 L 9,407 L10,373
Work in process..................................... 5,321 5,454 6,795
Finished goods...................................... 38,409 39,378 50,368
------- ------- -------
L55,459 L54,239 L67,536
======= ======= =======
</TABLE>

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost. The Company provides for
depreciation using the straight-line method over the following estimated useful
lives:

<TABLE>
<S> <C>
Buildings and improvements.................................. 20-55 years
Machinery and equipment..................................... 10-16 years
Furniture and fixtures...................................... 3-6 years
</TABLE>

Leasehold improvements are amortized on a straight-line basis over the
shorter of the estimated useful lives of the assets or the remaining lease term.

GOODWILL

Goodwill represents the excess of the purchase price over the fair value of
identifiable net assets acquired related to the business acquisitions. The
Company continually evaluates the value and future benefits of its goodwill. The
Company assesses recoverability from future operations using income from
operations of the related acquired business as a measure. Under this approach,
the carrying value of goodwill would be reduced if it becomes probable that the
Company's best estimate for expected undiscounted future cash flows of the
related business would be less than the carrying amount of goodwill over its
remaining amortization period. There have been no adjustments to the carrying
amounts of goodwill resulting from these evaluations. Goodwill is amortized on a
straight-line basis over 20 years. Amortization expense was approximately
L54,000, L38,000, and L6,000 for the eight months ended August 31, 1997 and for
the years ended December 31, 1996 and 1995.

NEGATIVE GOODWILL

Negative goodwill represents the remaining excess of fair value of
identifiable net assets acquired over the purchase price related to the business
acquisition after first reducing the values assigned to noncurrent assets to
zero.

Negative goodwill is amortized on a straight-line basis over 20 years.
Amortization benefit was approximately L394,000, L591,000, and L54,000, for the
eight months ended August 31, 1997 and for the years ended December 31, 1996,
and 1995, respectively.

OTHER INTANGIBLE ASSETS

Other intangible assets include the fair value of trademarks and patents
acquired at the date of acquisition of the international lighting businesses of
GTE Corporation and GTE International Incorporated. The

F-46
<PAGE> 98
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

carrying value of the intangible assets is regularly reviewed by management to
determine if there has been any permanent impairment in value.

FINANCIAL INSTRUMENTS

The Company uses derivative financial instruments to reduce its exposure to
adverse fluctuations in foreign exchange rates. Financial instruments are not
used for trading purposes.

REVENUE RECOGNITION

Revenues from product sales are recognized at the time of shipment.

RESEARCH AND DEVELOPMENT

Research and development costs are charged to operations in the year
incurred and totaled L4,449,000, L6,674,000 and L6,948,000 for the eight months
ended August 31, 1997 and for the years ended December 31, 1996 and 1995,
respectively.

ADVERTISING COSTS

Advertising costs are expensed as incurred and totaled L2,064,000,
L5,053,000 and L7,698,000 for the eight months ended August 31, 1997 and the
years ended December 31, 1996 and 1995, respectively.

INCOME TAXES

FOREIGN CURRENCY TRANSLATION

Transactions arising in foreign currencies have been translated at rates of
exchange in effect at the dates of the transactions. Gains or losses during the
year have been included in net income. Assets and liabilities of subsidiaries
not located in the United Kingdom are translated at current exchange rates, and
income statement accounts are translated at the average rates during the period.
Related translation adjustments are reported as a component of stockholders'
equity.

Where the Company operates in countries with hyper-inflationary economies,
adjustments are made to ensure the financial results fairly reflect the
financial position of the foreign operation. The local currency financial
results are recorded in a functional currency, monetary amounts being recorded
at the balance sheet closing rate and non-monetary amount at historical rate
ruling when the transaction occurred. The financial statements remeasured into
the functional currency are then translated into sterling using the method
above.

F-47
<PAGE> 99
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consists of the following:

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Buildings and improvements......................... L 7,645 L 7,673 L 7,723
Machinery and equipment............................ 37,714 38,662 30,995
Furniture and fixtures............................. 7,097 3,530 3,282
Construction in progress -- equipment.............. 4,340 1,959 6,305
-------- -------- -------
56,796 51,824 48,305
Less: Accumulated depreciation..................... (16,530) (11,592) (7,011)
-------- -------- -------
L 40,266 L 40,232 L41,294
======== ======== =======
</TABLE>

4. DEBT

DEBT CONSISTS OF THE FOLLOWING:

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
First German facility, FIBOR plus 1.25%............. L 5,938 L 6,512 L 7,787
Second German facility, FIBOR plus 1.25%............ 6,101 6,691 7,961
Swiss facility, LIBOR plus 1.5%..................... 5,000 -- 7,000
First Belgian facility, LIBOR plus 1%............... 2,738 3,660 2,471
Second Belgian facility, LIBOR plus 1%.............. 3,420 4,231 2,187
Shareholder notes payable........................... -- -- 6,943
All other credit facilities......................... 2,148 4,373 4,448
Capital lease obligations........................... 4,990 4,681 4,900
------- ------- --------
30,335 30,148 43,697
Less: Current portion............................... (4,276) (6,238) (11,885)
------- ------- --------
L26,059 L23,910 L 31,812
======= ======= ========
</TABLE>

Under each of the German facilities, the Company was initially granted five
year credit lines (the "German Credit Lines") of up to DM 25,000,000 (L8,621,000
at the exchange-rate prevailing at August 31, 1997) and a short-term borrowing
facility of DM 10,000,000 (L3,448,000 at the August 31, 1997 exchange rate). The
German Credit Lines decreased during the period of the five year facility to
L7,328,000 each at August 31, 1997. The German credit lines each had an interest
rate of 4.55%, per annum at August 31, 1997.

The Swiss facility initially provided for the Company to borrow up to
L7,000,000 under a revolving facility repayable in full by January 1999. The
facility was amended subsequently to limit the borrowings to L5,000,000. This
facility bears interest at the rate of 8.57% per annum which rate is fixed
through April 1998.

Under the First Belgian facility, the Company was initially granted a
credit line (the "First Belgian Credit Line") of up to Bfr. 240,000,000,
(L4,007,000 at the exchange-rate prevailing at August 31, 1997) and three other
facilities (the "First Belgian Additional Facilities") aggregating Bfr.
200,000,000 (L3,339,000 at the exchange rate prevailing at August 31, 1997).
Under the Second Belgian facility, the Company was initially granted a credit
line (the "Second Belgian Credit Line") of up to Bfr. 260,000,000 (L4,341,000 at
the exchange rate prevailing at August 31, 1997) and three other facilities (the
"Second Belgian Additional Facilities") aggregating Bfr. 160,000,000 (L2,671,000
at the exchange rate prevailing at August 31, 1997). The interest rate on the
First and Second Belgian Credit Line was 4.41% at August 31, 1997. The First and

F-48
<PAGE> 100
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Second Belgian Additional Facilities are available for short-term borrowings or
for guarantees of foreign currency contracts. These facilities have not been
utilized by the Company as of August 31, 1997.

Subsequent to, and as a result of, the acquisition of the Company by
Chicago Miniature Lamp, Inc. (CML) (Note 15), the German Credit Lines, the First
Belgian Credit Line and the Second Belgian Credit Line were terminated and
repaid with the proceeds from intercompany loans from CML.

The classification "All other credit facilities" primarily represents the
borrowings under various local overdraft facilities of other Company locations.
Such borrowings and related covenants are not individually material to the
financial condition or results of operations of the Company. At August 31, 1997,
the Company has available credit under these facilities of approximately
L31,000,000 of which approximately L7,000,000 has been utilized by the Company.

The remaining facilities require the Company to comply with a number of
affirmative and negative covenants including satisfying certain financial tests
and ratios.

In addition, the Company had notes payable to shareholders at December 31,
1995. The original borrowings were made in January 1993 in connection with the
SLI acquisition. Interest was capitalized to the notes until December 31, 1994.
In December 1996, these notes and accrued interest were converted to 80,311
redeemable preference shares (Note 13).

Interest expense was L1,746,000, L4,193,000, and L4,409,000 for the eight
months ended August 31, 1997 and the years ended December 31, 1996 and December
31, 1995, respectively.

5. INCOME TAXES

The following is a summary of the provision for income taxes:

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Current.......................................... L1,440 L2,245 L1,131
Deferred......................................... 98 9 2,171
------ ------ ------
L1,538 L2,254 L3,302
====== ====== ======
</TABLE>

The Company's effective income tax rate differs from the statutory tax rate
of the United Kingdom of 33% in 1995 and 1996 and from January 1, 1997 to March
31, 1997 (31% thereafter) primarily as a result of the nonrecognition of current
tax losses in certain countries. Additional differences result from the effect
of different income tax rates of other countries, the utilization of tax loss
carryforwards and differences in book and tax bases of noncurrent assets and
liabilities.

F-49
<PAGE> 101
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The significant items comprising deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Net operating loss carryforwards................. L 37,136 L 32,455 L 26,343
Reserves......................................... 576 326 1,532
Other............................................ 1,026 232 264
-------- -------- --------
Total assets............................. 38,738 33,013 28,139
Liabilities:
Differences between book and tax bases of
depreciable assets............................ (11,050) (6,115) (8,806)
Other............................................ (3,624) (2,418) (355)
-------- -------- --------
Total liabilities........................ (14,674) (8,533) (9,161)
-------- -------- --------
24,064 24,480 18,978
Less: Valuation allowance for net operating loss
carryforwards.................................... (26,745) (27,169) (21,570)
-------- -------- --------
Net deferred tax liabilities....................... L (2,681) L (2,689) L (2,592)
======== ======== ========
</TABLE>

As of December 31, 1996, the last complete tax period of the Company, SLI
had estimated loss carryforwards for tax purposes of approximately L91 million.
Approximately 25% of these loss carryforwards relate to operations in France (a
portion of which will expire through 2002), approximately 25% of these loss
carryforwards relate to operations in Belgium (which do not expire) and the
remaining loss carryforwards relate to operations in various other tax
jurisdictions outside the United Kingdom.

6. RESTRUCTURING

The Company approved a restructuring plan as part of the SLI purchase
business combination in fiscal 1993. The purchase liabilities recorded included
approximately L26.7 million for severance and related costs and L13.4 million
for costs associated with the shutdown and consolidation of certain acquired
facilities. During 1996, L10.7 million of provision established in purchase
accounting in connection with the SLI acquisition were reversed and recorded as
negative goodwill, as management determined that these provisions were no longer
necessary. At August 31, 1997, liabilities for approximately L1.0 million in
severance costs and L2.1 million for facility-related costs remained on the
balance sheet.

F-50
<PAGE> 102
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS

LEASES

The Company leases certain facilities and equipment under operating lease
and sublease agreements that expire at various dates from the current year to
2015. Certain of the agreements contain options to renew the leases for terms
similar to those currently in effect. The Company also has capital lease
obligations totaling L4,990,000 at August 31, 1997 which expire through December
2015. The current portion of the capital leases at August 31, 1997, is L485,000.
As of August 31, 1997, the aggregate minimum future commitments under operating
leases are as follows:

<TABLE>
<CAPTION>
(L IN THOUSANDS)
----------------
<S> <C>
1998....................................................... L 3,245
1999....................................................... 2,780
2000....................................................... 2,288
2001....................................................... 1,251
2002....................................................... 950
Thereafter................................................. 2,602
-------
L13,116
=======
</TABLE>

Rent expense for the eight months ended August 31, 1997 and the years ended
December 31, 1996 and December 31, 1995, was L4,550,000, L6,194,000 and
L5,703,000, respectively.

CAPITAL EXPENDITURES

The Company has obligations for capital expenditures of approximately
L3,100,000, L3,573,000 and L1,447,000 at August 31, 1997, December 31, 1996 and
December 31, 1995. In addition, the Company has an obligation to buy a plot of
land for DM 2,103,750 at the option of the landowner. This option expires in
2015.

8. CONTINGENCIES

The Company has received amounts from financial institutions secured on
trade receivables with recourse. These transactions have been recorded as a
sale. These amounts totaled L7,194,000, L7,532,000 and L5,437,000 at August 31,
1997, December 31, 1996 and December 31, 1995, respectively.

9. RELATED PARTY TRANSACTION

The Company had a monitoring and service agreement of US$500,000 per year
with CVC Capital Partners Limited, a related party. In connection with the
business combination described in Note 15, the amount accrued at August 31, 1997
(US$583,000) was paid in full and the agreement terminated.

10. CONCENTRATIONS

The Company purchased approximately 90% of its incandescent glass shells
from a single supplier and approximately 80% of its fluorescent glass tubing
from a second supplier, pursuant to long-term agreements.

At August 31, 1997, approximately 46% of the Company's employees were
covered by collective bargaining or similar agreements which expire at various
times. The Company believes it has satisfactory relations with the bargaining
units and therefore anticipates reaching new agreements on satisfactory terms as
existing agreements expire.

F-51
<PAGE> 103
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. STOCK OPTIONS AND RIGHTS

During 1996, the Chief Executive Officer (CEO) exercised his option to
acquire 2,000 "A" ordinary shares and 1,980 preference shares at US$1 per
ordinary share and US$100 per preference share (L0.62 and L62 at August 31,
1997, respectively).

In addition, options had been granted to senior managers to subscribe for
0.25% of the equity of the Company in each class of shares at a price of US$2
per ordinary share and US$200 per preference share (L1.24 and L124, respectively
at August 31, 1997) and, for a group of senior operating managers, 2% of the
equity of the Company in each class of shares at a price of US$900 per ordinary
share and US$100 per preference share (L558 and L62, respectively at August 31,
1997), upon a sale or listing of the Company, as defined in the shareholders'
agreement. Upon exercise, these shares come from existing shareholders, so no
shares had been reserved for issuance under the option plans. No options have
been exercised at August 31, 1997. Effective with the sale of the Company in
September 1997, these options were exercised.

12. EMPLOYEE BENEFIT PLANS

DEFINED BENEFIT PLANS

The Company sponsors separate noncontributory, defined-benefit pension
plans (the Plans) covering eligible employees, including employees in foreign
countries. The principal locations are Germany, France, the United Kingdom, and
Switzerland. Benefits are based on years of service and compensation. The Plans'
August 31, 1997 and December 31, 1996 and 1995 combined funded status (based on
the most recent valuations) and the amounts recognized in the accompanying
consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
---------- ------------ ------------
(L IN THOUSANDS)
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits................................... L28,078 L28,963 L29,498
Nonvested benefits................................ 1,238 1,276 1,303
------- ------- -------
Accumulated benefit obligation...................... 29,316 30,239 30,801
Effect of future salary increases................... 3,585 3,699 3,767
------- ------- -------
Projected benefit obligation........................ 32,901 33,938 34,568
Plan assets at fair value, primarily common stocks
and fixed income securities....................... 24,640 24,076 24,698
------- ------- -------
Plan assets less than projected benefit
obligation........................................ 8,261 9,862 9,870
Unrecognized transition amount...................... -- 2,609 2,907
Unrecognized net (gain) loss........................ -- (2,276) (1,435)
Unamortized prior service cost...................... -- -- --
------- ------- -------
Accrued pension cost................................ L 8,261 L10,195 L11,342
======= ======= =======
</TABLE>

F-52
<PAGE> 104
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of net periodic pension cost for the significant locations
are as follows:

<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR ENDED
------------ ---------------------------
AUGUST 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Service cost..................................... L 791 L 1,265 L 1,353
Interest cost on projected benefit obligation.... 1,675 2,532 2,375
Actual return on plan assets..................... (1,218) (1,936) (1,651)
Net amortization and deferral.................... (206) (218) (168)
------- ------- -------
Net pension cost................................. L 1,042 L 1,643 L 1,909
======= ======= =======
</TABLE>

The assumptions used for the significant locations were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------- -------------
<S> <C> <C> <C>
Discount rate used to determine present
value of the projected benefit
obligations.............................. 4.5% to 7.5% 4.5% to 9.0% 4.5% to 9.0%
Expected long-term rate of return on
assets................................... 5.0% to 8.5% 5.0% to 10.0% 5.0% to 10.0%
Assumed rate of increase in future
compensation levels...................... 2.5% to 4.5% 2.5% to 6.0% 2.5% to 6.0%
</TABLE>

DEFINED CONTRIBUTION PLANS

The Company sponsors a number of defined contribution plans. Participation
in these plans is available to employees in various countries. Company
contributions to these plans are based on either a percentage of employee
contributions or on a specified amount per hour based on the provisions of each
plan. The Company's expense under these plans was approximately L927,000,
L1,324,000, and L1,669,000 for the eight months ended August 31, 1997 and the
years ended December 31, 1996 and December 31, 1995, respectively.

13. CAPITAL STOCK

The "A" ordinary shares each carry the right to cast 100 votes, the "B"
ordinary shares each carry the right to cast 35 votes and the redeemable
preference shares each carry the right to cast one vote.

At August 31, 1997, the Company has issued 179,311 preference shares of
which 99,000 were issued in 1993 and 80,311 were issued in December 1996 upon
the conversion of notes payable to shareholders (Note 4).

The preference shares are mandatorily redeemable January 29, 2003, at an
amount equal to the face amount of the shares and any cumulative dividends
(L13.3 million at August 31, 1997). Dividends were 10% in 1995 and in 1996 the
articles of association were amended to fix the dividend rate at 12.5% per year.
The amount of dividends for the period ended August 31, 1997, includes L88,000
representing appreciation to face value.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

FOREIGN EXCHANGE RISK MANAGEMENT

The Company hedges certain foreign currency transactions and firm foreign
currency commitments by entering into forward exchange contracts (forward
contracts). Gains and losses associated with currency rate changes on forward
contracts hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging foreign currency
commitments are deferred off-balance sheet and included as a component of the
related transaction, when recorded; however, a loss is not deferred if deferral
would lead to the recognition of a loss in future periods. The aggregate
realized foreign exchange

F-53
<PAGE> 105
SYLVANIA LIGHTING INTERNATIONAL B.V. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

gains/(losses) recorded for the eight months ended August 31, 1997 and for the
years ended December 31, 1996 and 1995 were approximately L(201,000), L(420,000)
and L(693,000) , respectively.

At August 31, 1997, December 31, 1996 and December 31, 1995, the Company
had foreign currency forward contracts with notional amounts totaling L21.3
million, L28.7 million and L28.0 million, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable, and accruals are a reasonable estimate
of their fair value due to the short-term nature of these instruments. The
Company's long-term borrowings have variable interest rates and carrying value
approximates fair value at August 31, 1997. The fair value of the foreign
currency forward contracts at August 31, 1997 was L21.0 million.

15. SUBSEQUENT EVENTS

Effective September 1, 1997, Chicago Miniature Lamp, Inc. acquired all the
outstanding capital stock of SLI.

F-54
<PAGE> 106

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

7,500,000 SHARES

SLI, INC.

COMMON STOCK

(SLI, INC. LOGO)

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

PROSPECTUS

, 1999

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

SALOMON SMITH BARNEY
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
LEHMAN BROTHERS
MCDONALD INVESTMENTS INC.
PRUDENTIAL SECURITIES
RAYMOND JAMES & ASSOCIATES, INC.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 107

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 16. EXHIBITS

<TABLE>
<S> <C> <C>
23.1(a) -- Consent of Ernst & Young LLP
</TABLE>

II-1
<PAGE> 108

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the Company's registration statement to be
signed on its behalf by the undersigned, thereunto authorized, in the Town of
Canton, Commonwealth of Massachusetts, on June 29, 1999.

SLI, INC.

By: /s/ FRANK M. WARD
------------------------------------
Frank M. Ward
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>

/s/ FRANK M. WARD Chief Executive Officer June 29, 1999
- ----------------------------------------------------- and Director
Frank M. Ward

/s/ RICHARD F. PARENTI Chief Financial Officer June 29, 1999
- -----------------------------------------------------
Richard F. Parenti

Director
- -----------------------------------------------------
Werner A. Arnold

* /s/ DONALD S. DEWSNAP Director June 29, 1999
- -----------------------------------------------------
Donald S. Dewsnap

Director
- -----------------------------------------------------
Maurice B. Hare

/s/ FREDERICK HOWARD Director June 29, 1999
- -----------------------------------------------------
Frederick Howard

* /s/ RICHARD INGRAM Director June 29, 1999
- -----------------------------------------------------
Richard Ingram

*By: /s/ FRANK M. WARD
-----------------------------------------------
Frank M. Ward
Attorney-in-Fact
</TABLE>

II-2

<PAGE> 1

EXHIBIT 23.1(a)

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data" to the use of our report dated February
12, 1999, with respect to the consolidated financial statements and schedule of
SLI, Inc. (formerly Chicago Miniature Lamp, Inc.) and to the use of our report
dated March 20, 1998 with respect to the consolidated financial statements of
Sylvania Lighting International B.V., included in Amendment No. 3 to the
Registration Statement (Form S-1) and related Prospectus of SLI, Inc. for the
registration of 7,500,000 shares of common stock.

Ernst & Young LLP

Chicago, Illinois
June 29, 1999