UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-K (Mark One) [X]
  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934For
  the fiscal year ended December 31,
  2000or[  ]
  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
  EXCHANGE ACT OF 1934[No Fee Required] For the transition period from __________to
__________ Commission File Number: 0-26524 MACKIE DESIGNS INC.(Exact name of registrant as specified in
  its charter)   Washington
  91-1432133(State or other jurisdiction of
  incorporation or organization)
  (I.R.S. Employer Identification No.)16220 Wood-Red Road, N.E., Woodinville,
  Washington
  98072(Address of principal executive offices)
  (Zip Code)(425) 487-4333(Registrant's telephone number, including
  area code) Securities
registered pursuant to Section 12(b) of the Act: Title of each class
  Name of each exchange on which registeredNone
  None Securities
registered pursuant to Section 12(g) of the Act: Common Stock - no par value(Title of each class)
  Indicate by
check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.   Yes
X    No __ Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.  [   ] As of March
7, 2001, the aggregate market value of the Registrants Common Stock held by
nonaffiliates of the Registrant was $14,383,617 based on the closing sales
price of the Registrants Common Stock on the Nasdaq National Market.  On that date, there were 12,372,358 shares
of Common Stock outstanding. Portions of
the Registrants definitive Proxy Statement for its 2001 Annual Meeting of
Shareholders are incorporated by reference into Part III hereof. MACKIE DESIGNS INC.

FORM 10-KFor the Year Ended December 31, 2000

INDEX



Part IItem 1.
  BusinessItem 2.
  PropertiesItem 3.
  Legal
  ProceedingsItem 4.
  Submission of Matters to a Vote of Securities HoldersPart IIItem 5.
  Market for Registrants Common Equity and Related Stockholder MattersItem
  6.
  Selected
  Financial DataItem 7.
  Management's Discussion and Analysis of Financial Condition and
  Results of OperationsItem 7a.
  Qualitative and Quantitative Disclosures About Market RiskItem 8.
  Consolidated Financial Statements and Supplementary DataItem 9.
  Changes in and Disagreements With Accountants on Accounting and
  Financial DisclosurePart IIIItem 10.
  Directors and Executive Officers of the RegistrantItem
  11.
  Executive
  CompensationItem 12.
  Security Ownership of Certain Beneficial Owners and ManagementItem 13.
  Certain Relationships and Related TransactionsPart IVItem 14.
  Exhibits, Financial Statement Schedules and Reports on Form 8-KSignatures

PART I

Item 1.  Business

Introduction

Mackie
Designs Inc. (Mackie or the Company) develops, manufactures, sells and
supports high–quality, professional audio equipment.  The Companys products are used in a wide
variety of sound applications including home and commercial recording studios,
multimedia and video production, compact disc, read-only memory (CD-ROM)
authoring, live performances, and public address systems.  The Company offers a range of products at
suggested retail prices of up to $14,000. 
The Company distributes its products in the U.S. through a network of
independent representatives to over 1,500 retail dealers of professional audio
equipment as well as over 500 installed sound contractors.  Internationally, products are offered
through subsidiaries in Italy, France, Germany, the United Kingdom and China
and through local distributors in 70 other countries where the Company does not
have direct operations.

In June 1998,
the Company purchased Radio Cine Forniture (R.C.F.) S.p.A. (RCF), an Italian
corporation with principal offices in Reggio Emilia, Italy, and manufacturing
facilities located in northern and central Italy.  In December 2000, the company name was changed from RCF to Mackie
Designs (Italy) S.p.A (Mackie Italy). 
Mackie Italys principal activity is the manufacture of loudspeakers and
speaker components.  Its products are
distributed throughout the world, and are well recognized for quality.  Mackie Italy works in conjunction with the
Company in the development and manufacture of speaker products bearing the
MACKIE., RCF and EAW brands.

In April
2000, the Company acquired Eastern Acoustic Works, Inc. (EAW).  EAW, based in Whitinsville, Massachusetts,
designs and manufactures loudspeaker systems, including integrated signal
processing targeted at the mid to high-end of the installed and touring sound
markets.  In February 1999, EAW acquired
SIA Software Company, maker of SMAART-PRO acoustical measurement and
optimization software application.  EAW
works in conjunction with the Company in the development and manufacture of
speaker products bearing the MACKIE., RCF and EAW brands.

The
Companys primary products are analog and digital mixers, mixer-related
products, amplifiers, loudspeakers and loudspeaker components.  A mixer serves as the central component of
any professional audio system by electronically blending, routing and enhancing
sound sources, such as voices, musical instruments, sound effects and audio
tape, video tape and other pre-recorded material.  For example, using a mixer, a vocalist may be heard above the
accompaniment, background singers are combined, and individual instruments are
blended into the overall mix.  The
musician or sound technician accomplishes this task by using the mixer controls
to adjust the relative volume of each sound source.

Audio mixers
are a necessary component of any recording system, whether the system is being
used to produce an audio tape, compact disc ("CD"), video soundtrack
or multimedia CD-ROM.  A mixer is used
not only to balance sound inputs when recording initial tracks, but is also
often used to further process and edit the tracks prior to duplication and
distribution of the recording.  Mixers
are used in recording applications by commercial and home studios, in film and
video post-production, in business presentations and teleconferencing, in the
production of television and radio programming and in multimedia productions
such as CD-ROM and on-line authoring.

Mixers are
also used to control relative audio levels in live presentations at locations
such as auditoriums, ballrooms, theaters and sports arenas.  For example, a typical performing group uses
from four to 32 microphones and electronic inputs.  Large concert tours and musical road productions often have 56 or
more sound inputs, which may include pre-recorded music and sound effects.  Many churches use multiple microphones for
spoken word and music during their services.

In late
1996, the Company introduced power amplifiers, its first line of products that
are not directly related to mixers. 
Power amplifiers are used to amplify the output signals from mixers to a
level sufficient to drive loudspeakers. 
Amplifiers are used with mixers and loudspeakers in a variety of
applications, such as private and touring sound reinforcement systems,
permanent industrial and commercial installations, recording studios, and
theatre/cinema and broadcast facilities. 
The power amplifier line is distributed through the same channels as
mixers.

In August
1997, the Company introduced powered monitor speakers.  Powered monitors combine signal processing,
power amplifiers, and speakers in one cabinet housing.  Enclosing an amplifier in the speaker
eliminates one step of the path the sound signal travels, reducing the chance
of altering the original signal.  This
step is very important when recording with highly sensitive professional audio
equipment to accurately reproduce sound. 
The Companys powered monitors are used in conjunction with a mixer, and
are sold through existing mixer distribution channels.

During 1997,
the Company expanded its traditional market base with the introduction of
digital technologies.   The Companys
first digital product, the Human User Interface (HUI), provides an interface
tool for digital audio workstations (DAW). 
This DAW interface targets the rapidly growing digital audio workstation
market, and was developed in conjunction with Digidesign, a division of Avid
Technology, Inc.  DAWs are used in
video, film, multimedia and recording studios.

With the
acquisition of Mackie Italy in June 1998, the Company expanded its product line
into loudspeakers and speaker components. 
Mackie Italy manufactures raw speaker components used by third-party
speaker manufacturers.  It also produces
several families of finished loudspeakers ready for the installed sound and
professional audio markets.  Mackie
Italy also produces and sells video projectors and consumer products for car
and home use.

In July
1998, the Company began shipping the Digital 8Bus digital mixing console
(D8B).  Like analog mixers, the D8B
blends, routes and enhances sound sources but does so with the added capability
of recalling all settings and automating them in real time.  In addition, the D8Bs open hardware and
software architecture allows the customer to configure the D8B to interface
with any type of device, analog or digital, and the D8Bs internal sound
processing capabilities can be enhanced with third-party software
plug-ins.  Markets include recorded
sound, such as commercial and home studios, multimedia production, sound for
video games and film and video post-production.

During 1999,
the Mackie Industrial division was created to focus on the installed sound
market in the U.S.  This market
encompasses installations in venues ranging in size from small cafés to
commercial buildings to nationwide chains. 
The extensive Mackie Industrial product line offers all of the
components required to design a complete sound system for virtually any
installed sound application.

With the
acquisition of EAW in April 2000, the Company continued its expansion into the
mid to high-end loudspeaker and speaker component markets.  EAW designs and manufactures loudspeaker systems,
including integrated signal processing for the installed and touring sound
markets.  EAW offers over 140 standard
products.  EAW also continues to advance
the technology available to audio professionals with developments such as Close
Coupled Processing, Tuned Dipolar Arrays, Concentric Phase Aligned Arrays, the
Virtual Line Array and the new Phase PointSource Technology.  Through the Acoustical Performance
Partnership Program, EAW works with acoustical consultants and systems
contractors to provide customized solutions for clients and audiences
worldwide.

In November
2000, the Company began shipping its first digital recorder, the HDR24/96.
Every mixer sold to the recording market is connected to a recorder of some
sort making the HDR24/96 a natural product extension for the Company.  The HDR24/96 is a 24-track, 24 bit recorder
with complete on-screen editing capabilities. Utilizing off-the-shelf computer
hardware controlled by the Mackie Real Time Operating System allows the
HDR24/96 to offer powerful recording and editing features at a very low price.
In addition, the Company is able to take advantage of falling prices and
increasing speed and capabilities generated by the computer industry.

Mackie was
incorporated in Washington in 1988. 
Mackies executive offices and U.S. manufacturing facilities are located
at 16220 Wood-Red Road N.E., Woodinville, Washington 98072, and its telephone
number is (425) 487-4333.  Mackie Italy,
formerly RCF, was incorporated in Italy in 1949 and its executive offices are
located at Via G. Ferraris, 2-42029, S. Maurizio, Reggio Emilia, Italy, and its
telephone number is 390 522 354111.  The
Companys European service center is located at Uiverweg 6, 1118 DS Luchthaven
Schiphol, Netherlands, and its telephone number is (31) 20 654 40 00.  EAW was incorporated in Massachusetts in
1978 and its executive offices and manufacturing facilities are located at 1
Main Street, Whitinsville, MA 01588, and its telephone number is (508) 234-6158.

MACKIE.,
the running man figure, RCF, Artesuono, EAW and all of the names of the
Companys U.S.–produced products are registered trademarks or common law
trademarks of the Company.  To the
extent trademarks are unregistered, the Company is unaware of any conflicts
with trademarks owned by third parties. 
This document also contains names and marks of other companies.

Products

The Company
currently offers professional audio equipment in numerous product categories
including: Compact mixers, CFX compact mixers with effects, PPM powered mixers,
FR Series amplifiers, 8Bus consoles, SR Series mixers, digital consoles, other
digital automation systems, hard disk recorders, studio monitors, active and
passive loudspeakers, loudspeaker components, and contractor products.

Compact Mixers.Compact mixers were
the Companys first products and can be used as desk-top mixers or mounted in
19-inch equipment racks, which are the standard housings for professional audio
and video components.  The Company
offers four basic compact mixers: the 1202 VLZ PRO, the 1402 VLZ PRO, the 1604
VLZ PRO, and the 1642 VLZ PRO.  The
current VLZ PRO version also includes the Companys state-of-the-art XDR mic
preamps.  Applications for the Companys
compact mixers include recording and project studios, live music performances,
audio/visual presentations, broadcast, video post-production and
multi-media.  Suggested retail prices
for these mixers are from $459 to $1,249.

CFX Series.The Company
began shipping a new line of mixers, the CFX series, in 1999.  CFX mixers are intended for the amateur and
semi-pro customer as well as audio/visual and rental dealers.  They utilize the same technologies as the
compact mixers and include 16 on-board effects and a 9-band stereo graphic
equalizer.  The Companys EMAC effects
circuitry digitally processes audio at 32 bits for superior audio quality and
control.  Three models are available
with 12, 16 or 20 channels and suggested retail pricing ranges from $699 to
$1099.

PPM Series.In the first
quarter of 1999, the Company began shipping professional-quality powered
mixers.  These products combine the
Companys compact mixer technology with its FR Series amplifier technology to
provide the customer with an economical alternative to separate
components.  Each of the five models
features VLZ circuitry, EMAC digital effects processing, two 9-band graphic
equalizers, and dual FR high-current, fast recovery amplifiers.  The 808S stereo model and the 808M mono
model both feature dual 600W amplifiers and eight input channels. The 408S
stereo model and the 408M stereo model both feature dual 250W amplifiers and
eight input channels.  The 406M mono
model features dual 250W amplifiers and six input channels.  Suggested retail prices range from $699 to
$999.

Fast Recovery Series Power Amplifier.The Companys FR Series power amplifiers
are the Companys first non-mixer related products and became available in
December 1996 with the introduction of the M1200, which was later upgraded in
1998 to the M1400 and M1400i models currently at a suggested retail price of
$699. These three models, plus the M2600, introduced in 1998 at a suggested
retail price of $1,199, are designed to keep sound quality intact when pushed
to extreme levels through the use of exclusive fast recovery (FR) circuitry.  The FR Series power amps are targeted at
live sound reinforcement applications for touring companies, theaters, concert
halls, clubs, churches, DJ, and installed contractor markets. During 1999 the
Company introduced the M800 power amplifier, with a suggested retail price of
$549, bringing the Companys power amp family to four available models.

8 BusSeries.The 8Bus is a larger mixer console designed
for multi-track recording and live presentation applications.  The Company introduced 8Bus mixers in
1993.  At suggested retail prices from
$2,500 to $4,200, the 8Bus consoles have opened the market to many new users
and replaced many large systems offered by competitors that typically cost over
$50,000.  The console is available in
three basic models: the 32-channel 328, the 24-channel 248 and the 16-channel
168.  The 8Bus consoles applications
include pre-production and recording of albums for major artists and groups,
on-line video production, movie soundtrack mixdown, television dialog editing,
onstage mixing and live sound reinforcement used by touring musical groups,
theaters, concert halls, clubs and churches.

SR Series.The SR (Sound Reinforcement) Series are high
quality low cost audio mixers for live performance and play back applications.  The first product in this line, the SR 244,
a 24-channel small format utility mixer, was introduced in May 1995, followed
by the SR 324, a 32-channel version, in August 1995.  These have manufacturer suggested retail prices (MSRP) of $1,599
and $1,999 respectively.  In December
1996, the Company introduced the SR408, a 40-channel large-format sound
reinforcement console followed in March 1998, by the SR568, a 56-channel
version.  The MSRPs of the SR408 and
SR568 are $9,995 and $13,595, respectively.

The SR 244
and 324 series mixers are targeted at bands and other touring musical groups,
audio/video rental services and permanent sound reinforcement venues, including
churches, clubs, small theatres and auditoriums.  These units routinely serve double duty in end users live
portable systems and in their home recording studios since they include
features necessary for use with multi-track digital recorders.  The SR408 and SR568 large-format consoles
are intended for use in regional touring systems and for use as installed
equipment in venues such as churches, auditoriums, music clubs or sporting
facilities.

Digital Consoles.In July 1998, the Company entered the
digital mixer market with the Digital 8Bus production and post-production console
(D8B).  With a suggested retail price
of $9,999, the D8B has opened the high-end production and post-production
market to many new users at the professional and semi-professional level.  At the heart of the D8B is an Intel Celeron®
microprocessor running Mackie Real Time Operating System , the Companys own
operating system.  The D8B features 48
input channels, 24 internal and virtual channels, 8 mix buses and 12 auxiliary
buses used for effects processing and monitoring.  Each input channel includes user-configurable 4-band digital
equalization, dynamics processing, routing to internal effects processors and
surround panning capabilities.  The D8B
has 25 precision motorized faders to instantly recall mix settings and allow
for dynamic automation of mix levels. 
Rear panel card slots allow the addition of up to four DSP (Digital
Signal Processing) cards that can run third-party signal processing software
capable of providing up to 16 different effects at once.  Strategic partnerships with software suppliers
offer the customer a growing library of effects programs from which to
choose.  The D8Bs external Power
Supply/CPU unit contains card slots for synchronizing the console to other
digital devices, linking multiple consoles, connecting consoles to a LAN (Local
Area Network) and transferring files from one console to another.

Other Digital Automation Systems.The
Companys other digital automation systems include the UltraMix® Universal
Automation System and the Human User Interface (HUI).

Digital
audio workstations (DAWs) are used in commercial, project and home recording
studios, and multimedia authoring such as video production, commercials, and
other uses that combine visual and sound effects. HUI was developed in
conjunction with Digidesign, a world leader in the DAW market.  HUI is a hands-on control surface that
enhances DAW-user productivity with tactile controls and visual displays for
mixing and editing functions that were previously controlled by conventional
computer controls.  HUI, which retails
for approximately $3,500, replaces a mouse with a control surface similar to a
mixer.  The DAW market includes
multimedia, film, video, and recording studio professionals.

Hard Disk Recorder/Editors.In November 2000, The Company delivered its
first audio recorder.  A natural
extension of the Companys line of recording products, the HDR24/96 features 24
tracks of 24-bit digital audio recording on internal and external hard disk
drives.  The HDR24/96 is designed to
serve the music production, broadcast and post-production markets.  Priced at approximately $5,000, the HDR24/96
provides the recording and editing functions of computer-based digital audio
workstations at a substantially lower cost, and no computer is needed.  An Intel Celeron® microprocessor running
Mackie Real Time Operating System manages all recording and editing
functions.  The built-in ATI Rage Pro
graphics card supports powerful graphical editing of waveforms and track data
with no additional computer needed. 
Editing features include cut, copy and paste of audio tracks, track
trim, loop and fade.  Volume envelopes
can be added to any track, effectively automating any mixing console to which
the HDR24/96 is attached.  Mackie Media
removable hard drives store recording projects as a traditional recorder would
use tape. 20Gb fixed drives and 2.2 Gb Orb Drives are the current Mackie Media
options, each at a suggested retail price of $299.  The Remote 24, which serves as a remote control device for the
HDR 24/96 is available for professional installations at a suggested retail
price of $299.

Powered monitor speakers.Powered monitors
are an essential tool in accurate sound reproduction, and are used in
conjunction with mixer products. 
Powered monitors pre-process sound through equalization and cross-overs,
accurately amplify, then deliver a signal that is perfectly matched to the
speaker components.  The Company
introduced its first monitor, the HR824 active near-field studio monitor, in
August 1997.  Priced at approximately
$1,500 a pair, HR824's are primarily designed for studio recording with limited
space.  These powered monitors are
currently being used in a wide variety of applications including home and
professional studio recording, video post-production, broadcast post-production,
and home stereos.

Speakers.In 1999 the Company introduced its first
sound reinforcement speaker, the SRM450, an active, 12 2-way horn-loaded
speaker in a lightweight polystyrene enclosure, at a suggested retail price of
$899. The C300, at a suggested retail price of $499, is the 12 2-way passive
version of the SRM450, and is designed for use with the PPM Series powered
mixers.  This speaker features the same
lightweight polystyrene enclosure for easy portability and speaker configuration,
but does not feature power amps or active technology.

In 2000, the
Company introduced three major new speakers as well as one new speaker family
in this category. The SRS1500 is a 15 active subwoofer currently offered at a
suggested retail price of $899.  This
unit was designed for use with the SRM450, but works well with other full-range
speakers.  The SR1530 is the worlds
first active 3-way speaker currently offered at a suggested retail of
$1,199.  The S500 is a 15 passive 2-way
speaker designed for use with Mackie powered mixers currently offered at a
suggested retail price of $649.  The
Fussion Series speaker family currently consists of two products. The Fussion
3000, which has a suggested retail price of $4,999, is a high-output, 3-way,
medium-throw, active speaker system.  It
features high-precision transducers combined with application-specific
amplifier technology that allows this integrated system to generate high output
levels with very low distortion characteristics.  The Fussion 1800SA and 1800S, which have a suggested retail price
of $2,999 and $1,249 respectively, is an extreme output, active subwoofer
system featuring high-precision 18-inch transducers combined with
application-specific amplifier technology. 
The system is composed of two subwoofer cabinets:  the 1800SA, which contains a single 18-inch
woofer and the active electronics, and the 1800S, a single 18-inch woofer
cabinet that functions as a passive unit.

RCF Precision Components.Mackie Italy manufactures loudspeaker components.  These components are sold on an OEM basis
to
customers throughout the world who use them in their own branded
loudspeakers.  RCF Precision components
are found in some of the best performing speakers in the world.  These speakers can be heard in many large
touring sound systems as well as stadiums, auditoriums, exhibit halls,
theatres, concert halls, clubs and churches.

Professional Speakers.Mackie Italy
also makes many families of finished loudspeakers, which are marketed under the
RCF brand name.  These loudspeakers are
sold both in the traditional passive format, meaning that amplification must be
provided, and more recently in the active format, meaning that the amplifier is
built into the loudspeaker.  Mackie
Italy introduced its Art Series of loudspeakers in 1997.  The Art Series includes active and passive
speakers in a molded plastic enclosure.

Contractor Products.For 50 years
RCF, now Mackie Italy, has produced and sold a large range of commercial
products to sound reinforcement contractors who use the products to install
public address systems throughout the world. 
The products are used in everything from life safety systems to
background and foreground music systems. 
The products produced and sold to sound contractors include speakers,
amplifiers and mixers.  Mackie Italy
leads the Italian market for contractor products and has begun expanding into
other European markets where it is quickly gaining acceptance.

Consumer Products.   Mackie Italy also produces and sells video
projectors and consumer products for car and home use.

Portable Sound Reinforcement.In 1985, EAW introduced the KF850 three-way,
horn-loaded loudspeaker array system, which rapidly became the most popular
concert touring loudspeaker in the world. 
The EAW product line now offers over 40 products specifically engineered
to meet the needs of portable sound reinforcement.

Installed Sound.In 1989, EAWs success with the then-new
baseball stadium in Anaheim, CA launched its entry into the world of
permanently installed sound reinforcement. 
Since then, EAW loudspeaker systems have been installed in thousands of
large and small venues around the world. 
Today, EAWs Phased PointSource Technology represents audios cutting
edge for the largest outdoor stadiums.

Cinema Market.In 1995, EAW entered the cinema market by
creating a group of loudspeaker systems specifically engineered to meet the
needs of reproducing cinemas digitally encoded soundtracks.  Since THX first approved three-way
loudspeaker for use in THX-certified theaters, EAW has become the worlds
leading supplier of three-way screen-channel cinema loudspeaker systems.

Distribution and Sales

In the U.S., the Company uses a network of
representatives to sell to over 1,500 retail dealers and 500 installed sound
contractors, some of which have several outlets.  The Companys products are sold in musical instrument stores, pro
audio outlets and several mail order outlets. 
The Company's top 10 dealers represented approximately 32%, 37% and 34%
of the Companys net sales in the U.S. in 2000, 1999 and 1998,
respectively.  The Company has one
dealer, Guitar Center, that accounted for approximately 13%, 13% and 14% of
domestic net sales in 2000, 1999 and 1998, respectively.  No other dealer accounted for more than 10%
of domestic net sales in this period.

The Company
carefully selects and reviews its representatives and dealers, including mail
order outlets.  Representatives and
domestic dealers enter into agreements with the Company that govern the terms
under which they may sell the Companys products.  Agreements with dealers and distributors define an approved
territory and set forth the products to be sold.  These agreements are reviewed on a six-month basis, and decisions
to renew are based on several factors, including sales performance and adequate
representation of the Company and its products.  The Companys representatives are paid on a commission
basis.  Dealers retain the difference
between their cost and the sale price of products sold.

Internationally,
products are offered through subsidiaries in Europe and China and through local
distributors in 70 other countries where the Company does not have direct
operations. The Company's top 10 international distributors represented
approximately 18%, 16%, and 39% of the Companys international net sales in
2000, 1999 and 1998, respectively.  No
single international distributor accounted for more than 10% of international
net sales in this period.  Sales to
customers outside of the U.S. accounted for approximately 44%, 49%, and 43% of
the Companys net sales in 2000, 1999, and 1998, respectively.

International
distributors are selected on the basis of criteria established by the
Company.  International distributors
retain the difference between their cost and the sale price of products
sold.  Through the acquisition of Mackie
Italy, the Company now has direct sales offices in the United Kingdom, France,
Italy, Germany and China.

Marketing

The
Companys marketing strategy is designed to communicate with end-users directly
and to educate them about its products. 
The Companys in-house marketing and design department creates all of
its advertising, brochures, video, multimedia and trade show materials.  Additionally, the Companys websites are
developed and maintained in-house to provide timely and accurate product and
support information.  Materials are
provided by its marketing department to representatives, distributors and
dealers worldwide, as part of the Companys overall sales strategy.  Owners manuals and sales literature are
currently produced in several different languages.  These materials are provided as a complement to the Companys
direct advertising and customer support follow-up program.  To further enhance customer awareness and
understanding of its products, the Company advertises in leading trade
publications, provides ongoing technical training and education for
representatives and distributors, and participates in the primary industry
trade shows for the musical instrument, video, recording studio, permanent
installation and multimedia markets. 
The Company has won several national advertisement awards as a result of
this commitment to detail and excellence.

Customer Support

The
Companys customer support program is designed to enhance loyalty by building
customer understanding of product use and capabilities.  The customer service and support operation
also provides the Company with a means of understanding customer requirements
for future product enhancements.  This
understanding comes through direct customer contact, as well as through close
analysis of responses to various product registration surveys.

The Company
maintains a staff of product support specialists at its Woodinville, Washington
headquarters to provide direct technical service and support.  Telephone support through a toll-free number
is provided during scheduled business hours, and via the Companys website
after business hours.

The Company
also relies on its international distributors to support its products in
countries where the Company does not have its own offices.  These distributors are responsible for
warranty repairs and for the costs of carrying inventory required to meet
customer needs.

Service and
repairs on the Companys products sold in the U.S. are performed at its
Woodinville, Washington and Whitinsville, Massachusetts sites, and for certain
specialized products, at approximately 100 authorized warranty service centers
located throughout the U.S.  Multiple
locations are necessary for customer convenience and to minimize shipping
costs.  The Companys international
distributors service all products shipped outside of the U.S., except to
countries where the Company has its own offices.

In 2000, a
customer support and service operation was put in place in Amsterdam,
Netherlands to provide more direct service and support for the customers
throughout Europe.

Mackie Italy
has a separate technical assistance staff in Italy.  They interact directly with customers and service centers that
service Mackie Italy products.  This
technical support is provided free of charge. 
Mackie Italy offers a standard 1 year warranty on all of its products
when it sells directly to the end user. 
When it sells through independent distributors, the distributors are
responsible for warranty repairs.

Research and Development

The
Companys research and development strategy is to develop affordable,
high-quality products and related accessories for its targeted markets.  On December 31, 2000, the Companys research
and development staff consisted of 95 individuals.  The Companys research and development expenses were
approximately $9.4 million in 2000, $7.1 million in 1999, and $5.1 million in
1998.

Competition

The market
for professional audio systems in general is highly competitive.  The Company must compete with a number of
professional audio manufacturers, several of whom have significantly greater
development, sales, and financial resources than the Company.  The Companys major competitors in the mixer
market are subsidiaries of Harman International Industries, Inc. (including
Soundcraft, Spirit by Soundcraft and Allen & Heath), Yamaha Corporation,
Peavey Electronics Corporation, Teac America, Inc. (Tascam), SoundTracs PLC and
Behringer Spezielle Studiotechnik GmbH. 
Competitors in the power amplifier market include Peavey Electronics
Corporation (including Crest Audio, Inc.), Crown International and QSC Audio
Products, Inc.  Competing studio monitor
loudspeaker manufacturers include Genelec, Inc., Event Electronics LLC, Alesis
Corporation and JBL (a Harman International Industries, Inc. subsidiary).  Competing stage loudspeaker system
manufacturers include JBL, Peavey Electronics Corporation and Electro-Voice.  Competitors in the component speaker market
include JBL, Eminence Speaker Corporation, Acustica Beyma S.A. and B&C
Speakers S.p.A.  Competitors in the
commercial sound products category include JBL, Bose Corporation and TOA
Corporation.  Competing installed sound
loudspeaker system manufacturers include JBL, Electro-Voice, Community
Professional Loudspeakers and Renkus-Heinz. 
Competitors in the touring sound loudspeaker system category include
JBL, L-Acoustics, Meyer Sound Laboratories and Nexo.

The Company
competes primarily on the basis of product quality and reliability, price, ease
of use, brand name recognition and reputation, ability to meet customers'
changing requirements and customer service and support.  However, despite the Companys investment in
research and development, there can be no assurance that the Company will be
successful in developing and marketing, on a timely basis, product
modifications or enhancements or new products that respond effectively to
technological advances by others.



Proprietary Technology

The Company
has a strong interest in protecting the intellectual property assets of the
Company that reflect original research, creative development, and product
development.  As such, the Company has
sought protection through patents, copyrights, trademarks, and trade
secrets.  The Company has applied and
filed for various design and utility patents, both domestically and
internationally.  The Company has
actively used certain trademarks, and has applied for and registered specific
trademarks in the U.S. and in foreign countries.  To protect works of original authorship, the Company asserts
copyright protection.

Along with
extensive trademark and patent registration and filings, the Company has
claimed copyright protection for works of original authorship, including
product brochures, literature, advertisement, and web pages.  In certain cases, the Company has filed and
will continue to file for copyright registration in the U.S.  While copyrights provide certain legal rights
of enforceability, there can be no assurance as to the ability to successfully
prevent others from infringing upon the Companys copyrights.

The Company
has never conducted a comprehensive patent search relating to the technology
used in its products.  The Company
believes that its products do not infringe upon the proprietary rights of
others.  There can be no assurance,
however, that others will not assert infringement claims against the Company in
the future or that claims will not be successful.

While Mackie
pursues patent, trademark and copyright protection for products and various
marks, it also relies on trade secrets, know-how and continuing technology
advancement, manufacturing capabilities, affordable, high-quality products,
brand name recognition, new product introduction and direct marketing efforts
to develop and maintain its competitive position.  Mackies policy is to have each employee enter into an agreement
that contains provisions prohibiting the disclosure of confidential information
to anyone outside the Company and to recognize the Companys ownership of intellectual
property developed by employees. 
Consulting contracts generally provide for the protection of the
Companys intellectual property and the requirement of confidentiality.  There can be no assurance, however, that
these confidentiality agreements will be honored or that the Company can
effectively protect its rights to its unpatented trade secrets.  Moreover, there can be no assurance that
others will not independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to the Companys trade
secrets.  EAW pursues patent, trademark
and copyright protection for several of its processes, as well as for its
products.  By contrast, Mackie Italy has
traditionally not sought patent protection for its products.  Similarly, Mackie Italy has not pursued
trademark or copyright protection except for the name RCF.

Manufacturing

The Company
manufactures its products in its facilities in Woodinville, Washington;
Whitinsville, Massachusetts; and central and northern Italy.  Each facility is focused on core
manufacturing technologies as follows: 
electronics, loudspeakers and loudspeaker systems, and transducers,
respectively.  In addition, the
facilities work together as part of the supply chain to provide integrated products
to the market.  Many of the Companys
products share many components, which allows for integrated manufacturing of
several distinct products and in certain cases significant part purchase volume
discounts.  Much of the Companys
circuit card assembly is aided by automated assembly equipment.

The Company
relies almost exclusively on one vendor for its potentiometers and certain of
its integrated circuits but is in contact with other manufacturers of these
items regularly.  These items are
critical components in certain of the Company's products.  Interruption in, or cessation of, the supply
of these components from these suppliers could adversely affect the Companys
production capability, as the qualification process for another manufacturer,
from sample submission to production quality and quantity delivery, could take
several months.  The Company has an
approximate three month supply of potentiometers and one month supply of these
specific integrated circuits on hand at any given time which would serve to
reduce any potential disruption.

Backlog

The Company
does not generally track backlog. 
Typically, orders are shipped within two weeks after receipt.  In the case of new product introductions or
periods where product demand exceeds production capacity, the Company allocates
products to customers on a monthly basis until demand is met.

Employees

At December
31, 2000, the Company and its subsidiaries had 1,452 full-time equivalent
employees, including 166 in marketing, sales and customer support, 95 in
research and development, 1,105 in manufacturing and manufacturing support
(which includes manufacturing engineering) and 86 in administration and
finance.  Approximately 144 of Mackie
Italys employees in Italy are represented by a labor union.  The Company believes relations with all
employees, union and non-union, are favorable.

Cautionary Factors That May Affect Future
Results

The
following risk factors and other information included in this Annual Report
should be carefully considered. The risks and uncertainties described below are
not exhaustive.  There may be additional
risks and uncertainties not presently known to the Company or that the Company
currently deems immaterial which may impact the Companys business
operations.  If any of the following
risks occur, the Companys business, financial condition, operating results and
cash flows could be materially adversely affected.

Development, Introduction and Shipment of New
Products.The Company
currently is developing new analog and digital mixers, recording devices,
amplifiers and loudspeakers and loudspeaker components.  Significant resource, technological,
supplier, manufacturing or other problems may delay the development,
introduction or manufacture of these products.

In the past,
when the Companys sales have been affected by delays in developing and
releasing new products, some customers waited for the Companys new products,
while others purchased products from the Companys competitors.  Delays in the completion and shipment of new
products, or failure of customers to accept new products, may affect future
results.

Variability in Quarterly Operating Results.The
Companys operating results tend to vary from quarter to quarter.  The Companys revenue in each quarter is
substantially dependent on orders received within that quarter.  Conversely, the Companys expenditures are
based on investment plans and estimates of future revenues.  The Company may, therefore, be unable to
quickly reduce spending if revenues decline in a given quarter.  As a result, operating results for that
quarter will suffer.  The Companys
results of operations for any one quarter are not necessarily indicative of
results for any future period.

Other
factors which may cause the Companys quarterly results to fluctuate include:

         increased competition in the Companys
niche markets

         timing
of new product announcements

         product
releases and pricing changes by the Company or its competitors

         market
acceptance or delays in the introduction of new products

         production
constraints

         the
timing of significant orders

         customers
budgets

         foreign
currency exchange rates

Due to all
of the foregoing factors, it is possible that in some future quarters the
Companys operating results will be below the expectations of analysts and
investors.

Rapid Technological Change.Product technology in certain of the
Companys industries evolves rapidly, making timely product innovation
essential to success in the marketplace. 
The introduction of products with improved technologies or features may
render the Companys existing products obsolete and unmarketable.  If the Company cannot develop products in a
timely manner in response to industry changes, or if the Companys products do
not perform well, the Companys business and financial condition will be
adversely affected.  Also, the Companys
new products may contain defects or errors which give rise to product liability
claims against the Company or cause them to fail to gain market acceptance.

Economic and Market Conditions.The Companys business is affected by
domestic and global economic conditions and by the health of the professional
audio market in the world.  The
Companys operations may in the future reflect substantial fluctuations from
period to period as a consequence of such general economic and market
conditions.  These factors could have a
material adverse effect on the Companys business and financial condition.

Competition.The Company expects competition to increase
from both established and emerging companies. 
If the Company fails to compete successfully against current and future
sources of competition, the Companys profitability and financial performance
may be adversely affected.

Dependence on Suppliers.Certain parts used in the Companys products
are currently available from either a single supplier or from a limited number
of suppliers.  If the Company cannot
develop alternative sources of these components, or if the Company experiences
deterioration in its relationship with these suppliers, there may be delays or
reductions in product introductions or shipments, which may materially
adversely affect the Companys operating results.

Because the
Company relies on a small number of suppliers for certain parts, the Company is
subject to possible price increases by these suppliers.  Also, the Company may be unable to
accurately forecast its production schedule. 
If the Company underestimates its production schedule, suppliers may be
unable to meet the Companys demand for components.  This delay in the supply of key components may materially
adversely affect the Companys business.

International Operations.International sales represented
approximately 44% of the Companys net sales for the year ended December 31,
2000.  The Company expects that international
sales will continue to be a significant portion of its revenue.  International sales may fluctuate due to
various factors, including:

         unexpected
changes in regulatory requirements

         tariffs
and taxes

         difficulties
in staffing and managing foreign operations

         longer
average payment cycles and difficulty in collecting accounts receivable

         fluctuations
in foreign currency exchange rates

         product
safety and other certification requirements

         political
and economic instability

The European
Community and European Free Trade Association have established certain
electronic emission and product safety requirements (CE).  All of the Companys new products meet these
requirements. Failure to obtain either a CE certification or a waiver for any
product may prevent the Company from marketing that product in Europe.

The Company
operates subsidiaries in Italy, the United Kingdom, Germany, France, the
Netherlands and China.  The Companys
business and financial condition is, therefore, sensitive to currency exchange
rates or any other restrictions imposed on these currencies.

Protection of Intellectual Property.Refer to the section captioned Proprietary
Technology in Item 1 above.

Acquisitions and Business Combinations.In April 2000, the Company acquired EAW, a
manufacturer of mid to high-end loudspeakers and loudspeaker systems.  This strategic acquisition was made to
expand the Companys product line and manufacturing capabilities.  The Company continues to integrate product
offerings.  Integration of the products
and operations may place significant burdens on the Companys management and
operating teams, and may divert managements attention from its other business
concerns.  If the Company fails to integrate
its products and operations, the Companys business and financial condition may
suffer.

In January
2001, the Company signed an agreement with Sydec NV ("Sydec") for the
purchase of all of the shares of Sydec. 
Based in Belgium, Sydec is recognized as a leading developer of products
and services in the area of embedded electronics & software, networking,
digital signal processing and Windowsä95/98/NT/2000 driver & application development.  The transaction is expected to close in early April 2001. The
Company will face the same product integration issues in 2001 related to Sydec
that are noted above for EAW.

The Company
may pursue additional acquisitions of complementary technologies, product lines
or businesses.  Further acquisitions may
include risks like those involved in the Companys acquisition of Mackie Italy
and EAW, as well as risks of entering markets where the Company has no or
limited prior experience, the potential loss of key employees of the acquired
company, and impairment of relationships with existing employees, customers and
business partners.  Further acquisitions
may also impact the Companys financial position.  For example, the Company may use significant cash or incur
additional debt, which would weaken the Companys financial position.  Goodwill and intangible assets acquired will
be amortized to expense in the future, which may reduce the Companys
profitability.

The Company
cannot guarantee that future acquisitions will improve the Companys business
or operating results.

Dependence on Key Personnel.The Companys future success will depend in
a large part on the continued service of many of its technical, marketing,
sales and management personnel and on its ability to attract, train, motivate
and retain highly qualified employees. 
The Companys employees may voluntarily terminate their employment with
the Company at any time.  Competition
for highly qualified employees is intense, and the process of locating
technical, marketing, sales and management personnel with the combination of
skills and attributes required to execute the Companys strategy is often
lengthy.  The Company believes that it
will need to hire additional technical personnel in order to enhance its
existing products and to develop new products. 
If the Company is unable to hire additional technical personnel, the
development of new products and enhancements could likely be delayed.  The loss of the services of key personnel or
the inability to attract new personnel could have a material adverse effect upon
the Companys results of operations.

Risk of Euro Non-compliance.Refer to the section captioned Euro
Conversion in Item 7 below.

Item 2.  Properties

The
Companys headquarters in Woodinville, Washington house its manufacturing,
administrative, sales and marketing, research and development and customer
support operations.  The building, which
is occupied pursuant to a lease through December 31, 2004, is an 89,000 square
foot manufacturing and office facility. 
The monthly rent stated in the lease is $56,613, adjusted annually for
changes in the Consumer Price Index (monthly rent expense in 2000 was
$63,587).  Mackie leases its facility
from Mackie Holdings, LLC, an entity owned by three significant shareholders
and directors of the Company, on terms the Company believes are at least as
favorable to the Company as might have been obtained from unaffiliated parties.

In November
1995, Mackie entered into a 10-year lease, with an option to extend for an
additional 10 years, covering property that is adjacent to Mackies existing
facility.  The building is approximately
81,250 square feet.  Mackie is using the
building for product shipping, additional vertical integration of manufacturing
processes and other manufacturing activities. 
Initial base monthly rent for the entire building is $43,063; after five
years, the base rent increases to $49,563 per month.

Mackie
Italy's primary facilities in Reggio Emilia, Italy comprise a manufacturing
facility totaling 119,000 square feet on a total site of 7 acres and a building
for administrative offices of 13,000 square feet.  Both facilities are owned by Mackie Italy.

The
Companys European service center is located in The Netherlands in a 1,234
square foot facility.  The Company
intends to consolidate service activities for Europe at this facility.  The building is occupied pursuant to a lease
dated February 2000, for a period of ten years with a termination period of
twelve months.

EAWs entire
operation is housed in a leased facility in Whitinsville, Massachusetts.  A series of ten buildings, nine of which are
connected in a manufacturing complex, utilize a total of 245,000 square feet.
The current lease, originally dated March 1, 1996 and amended several times,
expires in February 2003.  The monthly
rent is currently $50,023.

The Company
believes its existing facilities will be adequate to meet its requirements for
at least the next fiscal year.

Item 3. 
Legal Proceedings

EAW has
subrogated claims asserted against it from insurance companies who paid claims
made by EAWs landlord and other tenants in the building who were affected by a
fire started by a loaned employee in a portion of the building occupied by EAW
in 1996.  The insurance company for the
landlord alleges that EAW is liable for up to $2.1 million for damages to the
building.  The Company believes that
these losses are not attributable to it under Massachusetts law.  The Company is vigorously defending these
claims.  The claims of the other tenants
have been covered by EAWs insurance carrier. 
The ultimate resolution of this matter is not known at this time.  No provision has been made in the Companys
consolidated financial statements related to these claims.

The Company
is also involved in various legal proceedings and claims that arise in the
ordinary course of business.  Management
currently believes that these matters will not have a material adverse impact
on the Companys financial position, liquidity or results of operations.

Item 4.  Submission of Matters to a Vote of
Securities Holders

None.

PART II

Item 5.  Market for Registrants Common Equity and
Related Stockholder Matters

The
Companys Common Stock is traded on the NASDAQ National Market System under the
symbol MKIE.  The following table sets
forth the high and low sale prices as reported on NASDAQ for the periods indicated.  These prices do not include retail markups,
markdowns or commissions.



Common StockHIGH
  LOWYear Ended December 31, 1999:First Quarter
  $    
  6.88
  $   
  4.25Second Quarter
  $    
  6.38
  $   
  4.25Third Quarter
  $    
  5.00
  $   
  4.25Fourth Quarter
  $    
  6.50
  $   
  3.75Year Ended December 31, 2000:First Quarter
  $    
  7.31
  $   
  5.00Second Quarter
  $    
  7.06
  $   
  5.50Third Quarter
  $    
  8.50
  $   
  6.50Fourth Quarter
  $    
  7.81
  $   
  5.00

As of March
7, 2001, there were 12,377,358 shares of Common Stock outstanding held by
approximately 95 holders of record.  The
number of holders does not include individual participants in security position
listings.

The Company
has never paid dividends on its common stock. 
The Companys present policy is to retain earnings to finance the
Companys business.  Any future
dividends will be dependent upon the Companys financial condition, results of
operations, current and anticipated cash requirements, acquisition plans and
plans for expansion, and any other factors that the Companys Board of
Directors deems relevant.  Under its
bank loan agreement, the Company is prohibited from paying any dividends
without prior approval from the bank. 
The Company has no present intention of paying dividends on its common
stock in the foreseeable future.



Item 6. 
Selected Financial Data

(in
thousands, except per share data)

2000
  (a)
  1999
  1998
  (b)
  1997
  1996Statement of Income
  DataNet
  Sales (c)
  $207,476
  $156,340
  $104,154
  $ 
  76,582
  $ 
  74,806Gross
  Profit (c)
  $72,827
  $ 
  54,202
  $ 
  38,271
  $ 
  29,642
  $ 
  29,678Operating
  Expenses (c)
  $57,856
  $ 
  46,026
  $ 
  29,856
  $ 
  20,671
  $ 
  17,784Net
  Income
  $6,226
  $   
  3,257
  $   
  5,581
  $   
  5,537
  $   
  7,421December 31,Balance Sheet Data
  2000
  1999
  1998
  1997
  1996Working
  Capital
  $42,138
  $ 
  37,258
  $ 
  35,784
  $ 
  35,956
  $ 
  32,020Total
  Assets
  $165,198
  $120,854
  $118,890
  $ 
  53,372
  $ 
  46,256Long-Term
  Debt
  $29,970
  $ 
  15,665
  $ 
  18,984
  $          
  0
  $          
  0Shareholders
  Equity
  $57,770
  $ 
  50,307
  $ 
  49,569
  $ 
  46,478
  $ 
  42,283Per Common Share
  Data (Diluted Basis)Diluted
  Net Income Per Share
  $  
  0.49
  $     
  0.27
  $     
  0.43
  $     
  0.41
  $     
  0.55Shares
  Used In Diluted Net Income Per Share
  12,782
  12,265
  12,945
  13,401
  13,611

(a)
  Includes financial data and results of
  operations of EAW from April 1, 2000.(b)
  Includes financial data of Mackie Italy,
  which was acquired June 29, 1998.
  Results of operations for Mackie Italy are included from July 1, 1998.(c)
  Amounts have been reclassified to conform
  with the adoption of Emerging Issues Task Force Issue No. 00-10,
  "Accounting for Shipping and Handling Fees and Costs".Item 7.  Management's Discussion and Analysis of
Financial Condition and Results of Operations

General

This Annual
Report on Form 10-K and other reports incorporated by reference contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the Act). 
Forward-looking statements include, without limitation, any statement
that may predict, forecast, indicate, or imply future results, performance, or
achievements, and may contain the words believe, anticipate, expect,
estimate, project, will be, will continue, will likely result, or
words or phrases of similar meaning. 
Forward-looking statements involve risks and uncertainties which may
cause actual results to differ materially from the forward-looking statements.

The
following discussions, including but not limited to, the sections entitled
"Cautionary Factors That May Affect Future Results" and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations," describe some, but not all, of the factors that could
cause the actual results to differ materially from the forward-looking
statements.  These factors include,
among others, the following: international, national and local general economic
and market conditions; the size and growth of the professional audio equipment
market; competition with other marketers, distributors and sellers of
professional audio equipment; the Company's ability to develop and introduce
new products; the Company's ability to sustain, manage or forecast its growth
and inventories; the Company's ability to integrate the operations of companies
acquired; the Company's ability to secure and protect trademarks, patents, and
other intellectual property; the performance and reliability of the Company's
products; customer service; the loss of significant customers or suppliers;
dependence on distributors; management of increased costs of freight and
transportation; the Company's ability to meet delivery deadlines; general risks
associated with doing business in foreign countries, including, without
limitation, import duties, tariffs, foreign currency fluctuations, and
political and economic instability; changes in government regulations; its
ability to attract and retain qualified employees; liability and other claims
asserted against the Company; and other factors referenced or incorporated by
reference in this report and other reports.

The risks
included above are not exhaustive. The Company operates in a very competitive
environment and new risk factors may emerge from time to time. Management
cannot predict all such risk factors, nor can it assess the impact of all such
risk factors on the Company's business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.

The Company
derives its operating revenue from worldwide sales of digital and analog audio
mixers, speakers, amplifiers and other professional audio equipment.  A significant portion of the Companys total
sales is to customers outside the U.S. 
International sales volumes have historically been affected by foreign
currency fluctuations relative to the U.S. Dollar.  When weaknesses of local currencies have made the Company's
products more expensive, sales to those countries have declined.

The
Company's gross margins are also affected by its international sales.  Typically, gross margins from products
exported by Mackie are lower than from those sold in the U.S. due to discounts
offered to its international distributors. 
Mackie Italy does not offer discounts to its distributors.  The discounts offered by Mackie are given
because the international distributors typically incur certain expenses,
including technical support, product service and in-country advertising that
the Company normally incurs for domestic sales.  The Company offered its international distributors a
weighted-average discount of approximately 5.9% in 2000, 4.5% in 1999, and
10.1% in 1998.  The increase in
discounts in 2000 relates to higher international discounts granted by EAW.  The decrease in discounts in 1999 is
attributable to the lack of discounts offered by Mackie Italy.  Sales outside the U.S. represented
approximately 44%, 49%, and 43% of the Company's net sales in 2000, 1999 and
1998, respectively.

The Company
will continue to introduce new products and product revisions as it has in the
past.  Some anticipated new products
will require the implementation of manufacturing practices for which the
Company is not familiar.  This could
result in lower margins as the Company becomes more familiar with new
manufacturing procedures.

Results of Operations

Year Ended December
31, 2000 as Compared with Year Ended December 31, 1999

The results
of operations for the year ended December 31, 2000 include the results of
operations for EAW beginning April 1, 2000.

Net Sales

The
Companys net sales increased 32.7% to $207.5 million in 2000 from $156.3
million in 1999.  Of the $51.1 million
increase, $30.6 million was attributable to the addition of EAW.  The Company also saw significant revenue
contribution worldwide from products introduced in 1999 and 2000 in the product
categories of powered and CFX mixers, speakers, and digital products of
approximately $20.9 million.  These
increases were partially offset by an unfavorable foreign currency exchange
effect of $6.1 million and by declines in sales of M-1400 series amps and SR
series live music application mixers of approximately $2.6 million.  Sales outside the U.S. decreased to 44% of
the Companys total net sales in 2000 from 49% in 1999.  This decrease was due mainly to the inclusion
of sales by EAW whose sales outside of the U.S. comprised only 31% of its total
net sales for 2000.

Gross Profit

Gross profit
was $72.8 million in 2000 compared with $54.2 million in 1999.  Of the $18.6 million increase, $11.6 million
was attributable to the addition of EAW. 
Gross profit was also up as a result of the new products introduced
during 1999 and 2000 as noted above. 
The increase was partially offset by an unfavorable foreign currency
exchange effect on gross profit of approximately $2.4 million.  Gross margin increased slightly to 35.1% in
2000 from 34.7% in 1999.

Selling, General and Administrative

Selling,
general and administrative expense increased to $48.5 million in 2000 from
$38.9 million in 1999.  Of the $9.6
million increase, $9.3 million was attributable to the addition of EAW, $0.8
million of which represents amortization charges on intangible assets.  Higher sales volumes causing corresponding
increases in variable expenses, such as commissions, along with incremental costs
associated with an increased headcount also contributed to the increase.  These increases in expenses were partially
offset by a $2.1 million favorable impact of foreign currency exchange.  As a percentage of net sales, selling,
general, and administrative expenses decreased to 23.4% in 2000 from 24.9% in
1999.  The decline in the percentage is
primarily attributable to higher sales.

Research and Development

Research and
development expenses increased to $9.4 million in 2000 from $7.1 million in
1999.  The increase was primarily
attributable to the inclusion of EAWs research and development expenses of
$2.3 million.  As a percentage of net
sales, these expenses decreased slightly to 4.5% in 2000 compared with 4.6% in
1999.

Interest Income and Interest Expense

Interest
income decreased to $0.6 million in 2000 compared with $0.7 million in
1999.  Interest expense increased to
$4.6 million in 2000 from $2.8 million in 1999 primarily due to borrowings
related to the acquisition of EAW and to significantly higher levels of
short-term borrowing.

Other Income (Expense), net

Other
expense for 2000 was $0.5 million compared with $0.1 million in 1999.  This increase was primarily due to the
foreign exchange losses in 2000 as a result of the weakening of the Italian
Lira against the U.S. Dollar over the past twelve months.

Income Tax Provision

Income tax
expense for 2000 was $4.2 million representing an overall effective tax rate of
40.5% compared to $2.8 million and 46.3% for 1999. The decrease in the effective
tax rate was primarily attributable to foreign operations.

Year Ended December
31, 1999 as Compared with Year Ended December 31, 1998

The results
of operations for the year ended December 31, 1998 include the results of
operations for Mackie Italy beginning July 1, 1998.

Net Sales

The
Companys net sales increased 50.1% to $156.3 million in 1999 from $104.2
million in 1998.  The increase was
primarily attributable to the inclusion of a full year of Mackie Italys sales
in 1999 of $60.2 million compared to only six months in 1998 of $23.6
million.  The Company also saw
significant revenue contribution worldwide from products introduced in 1999 in
the product categories of powered and CFX mixers, speakers and amplifiers of
approximately $24.5 million.  Sales in
the new product categories were aided by the Companys successful shift to a
captive distribution model in Europe during the first half of 1999.  These increases were offset partially by
declines in sales of 8Bus series large console mixers and SR series live music
application mixers of approximately $4.5 million.  Sales outside the U.S. increased to 49% of the Companys total
net sales in 1999 from 43% in 1998. 
This increase was due mainly to the inclusion of a full year of sales by
Mackie Italy whose sales outside of the U.S. comprised 96% of its total net
sales for 1999.

Gross Profit

Gross profit
was $54.2 million in 1999 compared with $38.3 million in 1998.  The increase was primarily attributable to
the inclusion of a full year of Mackie Italys gross profit in 1999 of $25.6
million compared to only six months in 1998 of $8.6 million.  Revenues were also up as a result of the new
products introduced during 1999 and improved international distribution as
noted above.  Gross profit as a percentage
of sales decreased to 34.7% in 1999 from 36.7% in 1998.  The decrease in gross margin was the result
of lower margins realized on some of the new products introduced during 1999
and lower sales volumes of high margin 8Bus series large console mixers and SR
series live music application mixers.

Selling, General and Administrative

Selling,
general and administrative expenses increased to $38.9 million in 1999 from
$24.8 million in 1998.  The increase was
primarily attributable to the inclusion of a full year of Mackie Italys
selling, general and administrative expenses in 1999 of $17.4 million compared
to only six months in 1998 of $7.8 million. 
Higher sales volumes causing corresponding increases in variable expenses,
such as commissions, along with incremental costs associated with new product
rollouts, promotional expenses related to demo products and initial launch
expenses related to the new Mackie Industrial Division (Mackie Industrial) also
contributed to the increase.  Mackie
Industrial was created as a new division of the Company in 1999 to focus on the
installed sound market in the U.S.  This
market encompasses installations in venues ranging in size from small cafés to
commercial buildings to nationwide chains. 
Mackie Italy has traditionally served the installed sound market in
Europe and now Mackie Industrial has entered the U.S. installed market giving
the Company a worldwide presence in this large segment.  The Company did not realize significant revenues
from sales of Mackie Industrial products during 1999 as operations were still
in the development phase.  Other
contributing factors to the increase included higher legal expenses associated
with the Behringer lawsuit that was settled in November 1999.  As a percentage of net sales, selling,
general and administrative expenses increased to 24.9% in 1999 from 23.8% in
1998.

Research and Development

Research and
development expenses increased to $7.1 million in 1999 from $5.1 million in
1998.  The increase was primarily
attributable to higher spending related to new product development across all
areas of the Companys product line during 1999.  A secondary cause was the inclusion of a full year of Mackie
Italys research and development expenses in 1999 of $1.1 million compared to
only six months in 1998 of $0.8 million. As a percentage of net sales, these
expenses decreased to 4.6% in 1999 compared with 4.9% in 1998.

Interest Income and Interest Expense

Interest
income decreased to $0.7 million in 1999 compared with $0.8 million in
1998.  Interest expense increased to
$2.8 million in 1999 from $1.5 million in 1998 primarily due to borrowings
related to the acquisition of Mackie Italy and to Italian debt carried by
Mackie Italy.  Included in 1999 is a full
year of acquisition and Mackie Italy interest expense compared to only six
months in 1998.  Prior to the
acquisition in June 1998, the Company had no long-term debt.

Income Tax Provision

Income tax
expense for 1999 was $2.8 million representing an overall effective tax rate of
46.3% compared to $2.3 million and 29.2% for 1998. The increase in the
effective tax rate was primarily attributable to foreign operations.

Liquidity and Capital Resources

The Company
used internally generated cash, as well as bank borrowings, to finance its
operations during 2000 and 1999.  The
Companys operating activities used cash of $5.3 million in 2000 and generated
cash of $5.6 million in 1999.  Net cash
used by operating activities in 2000 was primarily attributable to increases in
inventories, accounts receivable and a decline in income taxes payable offset
partially by net income, increases in accounts payable and accrued expenses and
a decline in prepaid expenses and other current assets.  The large increase in inventories for 2000
over 1999 is attributable to higher levels of required inventory resulting from
the expansion of the Companys product lines, certain product release delays
and anticipated sales volume increases that did not materialize.  The increase in depreciation and
amortization expense was primarily related to the amortization of intangible
assets that were booked on the acquisition of EAW.

Net cash used in investing activities
increased to $20.6 million in 2000 from $3.1 million in 1999, due principally
to the acquisition of EAW, net of cash acquired of $19.9 million and purchases
of property, plant and equipment of $6.6 million.  These uses were partially offset by net proceeds from
transactions involving available-for-sale securities of $5.9 million.  At December 31, 2000, the Company has an
agreement for consulting services related to the implementation of an Oracle
based software system.  The agreement
totals approximately $2.8 million all of which was outstanding at December 31,
2000 and will be due and payable during 2001. 
Approximately $0.6 million was accrued as of December 31, 2000.  The Company intends to finance its 2001
capital expenditures and commitments from cash provided by operations, current
cash reserves and existing credit facilities.

Net cash
provided by financing activities increased to $25.3 million in 2000 from $2.2
million 1999, due principally to proceeds from bank credit facilities used for
the acquisition of EAW of $19.0 million and net proceeds on bank line of credit
and other short-term borrowings of $11.9 million.   These inflows were partially offset by repayments of long-term
debt related to the Mackie Italy acquisition, EAW long-term debt and Italian
based long-term debt totaling $9.2 million.

In June
1998, the Company entered into a credit agreement with a bank to provide
certain credit facilities to the Company, including a $12.8 million loan for
the acquisition of Mackie Italy of which $8.7 million was outstanding at
December 31, 2000.  The loan, which is
secured by all of the Companys assets, bears interest at the banks prime
rate, or at a specified LIBOR rate plus a specified margin, whichever the
Company chooses.  Interest on the loan
is payable monthly.  Principal is payable
on September 30 of each year in installments equal to 1/7 of the amount borrowed.  All outstanding principal and interest
amounts are due on September 30, 2003.

In April
2000, the Company borrowed long-term debt of $19.0 million in connection with
the acquisition of EAW (see Note 2 of Notes to Consolidated Financial
Statements and Form 8-K filed April 21, 2000). 
The Company also paid off approximately $5.8 million of EAWs existing
debt using cash and available-for-sale securities.  Funding for this pay down came from cash and investments.  The loan, which is an amendment to the June
1998 credit agreement, is also secured by all of the Companys assets, bears
interest at the banks prime rate, or at a specified LIBOR rate plus a
specified margin, whichever the Company chooses.  Interest on the loan is payable monthly.  Principal is payable on March 31 of each
year beginning in 2001 in installments equal to 1/7 of the amount
borrowed.  All outstanding principal and
interest amounts are due on September 30, 2003.

In September
2000, the Company restructured its U.S. bank line of credit.  The new line provides up to $15.0 million of
short-term borrowing subject to certain limitations.  These limitations reduced the maximum allowable borrowing to
$12.4 million as of December 31, 2000. 
This line of credit, which is an amendment to the June 1998 credit
agreement, is secured by all of the Companys U.S. based assets.  At December 31, 2000, there was $11.5
million outstanding on the line of credit (zero at December 31, 1999) as well
as a $1.5 million guarantee on debt of Mackie Italy.  The Company was not in compliance with the borrowing limitation
on the line of credit at December 31, 2000 by approximately $0.6 million but
obtained a waiver from the bank.  This
credit facility expires April 30, 2002.

Under the
terms of the June 1998 credit agreement and all related amendments, the Company
must maintain certain financial ratios and tangible net worth.  The agreements also provide, among other
matters, restrictions on additional financing, dividends, mergers,
acquisitions, and an annual capital expenditure limit of $15.0 million.

Mackie Italy
also has agreements with several banks in Italy that provide short-term credit
facilities totaling approximately $25.2 million.  At December 31, 2000 and 1999, there was approximately $19.8
million and $16.0 million outstanding under these facilities,
respectively.  The majority of these
credit facilities are secured by Mackie Italys receivables.  Interest rates on these credit facilities
range from 4.8% to 13.5%.

The
weighted-average interest rate on short-term borrowings for the Company of
$31.3 million at December 31, 2000 was 7%.

Mackie Italy
also has various long-term loans outstanding at December 31, 2000, totaling
approximately $6.8 million, which bear interest at rates from 6.3% to
8.9%.  These loans, certain of which are
secured by specific assets of Mackie Italy, mature at varying dates up to 2013.

The Company
believes that its existing cash, cash equivalents, available-for-sale
securities and credit facilities will be sufficient to provide adequate working
capital to fund operations over the next twelve months.  However, there can be no assurance that the
Company will not be required to seek other financing sooner or that such
financing, if required, will be available on terms satisfactory to the
Company.  The Company may also utilize
cash to acquire or invest in complementary businesses or products or to obtain
the right to use complementary technologies 
(see Note 17 of Notes to Consolidated Financial Statements).

Inflation and Changes in Foreign Currency
Exchange Rates

Although the
Company cannot accurately anticipate the effects of inflation, the Company does
not believe inflation has had or is likely to have a material effect on its
results of operations or liquidity.

Sales and
expenses incurred by foreign subsidiaries are denominated in each subsidiarys
local currency and translated into U.S. dollar amounts at average rates during
the period.  The impacts of foreign
exchange when significant are disclosed in the Results of Operations section
of Item 7 to Form 10-K.

Euro Conversion

European
business systems are being forced to handle currencies in a new way with the
introduction of the Euro.  Mackie
Italys computer system does not support the Euro, and reprogramming the system
is not an economically viable option. 
Although the date for mandatory Euro compliance is January 1, 2002, it
is believed that the existing system can be utilized until early in the fourth
quarter 2001 after which time the transition to the new system would need to
begin.  The Company has acquired an
Oracle based software system and the related computer hardware to run a single
system for all worldwide operations. 
Implementation procedures related to the system began during the third
quarter of 2000.  This system will be
Euro compliant and is scheduled to be in place in Italy during the second half
of 2001.  The cost of this system is
preliminarily estimated to be in the range of $6.0 to $8.0 million dollars.

New Accounting Pronouncements

In June
1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities.  SFAS No. 133, as amended, requires that all derivative
instruments be recorded on the balance sheet at their fair value.  Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. 
This statement, as amended, is effective for the Company beginning
January 1, 2001.  The adoption of SFAS
No. 133 will not have a material impact on the Companys consolidated financial
position or results of operations.

In December
1999, the Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) No. 101, which was adopted by the Company in the fourth quarter
of 2000.  SAB 101 provides guidance on
revenue recognition and the SEC staffs views on the application of accounting
principles to selected revenue recognition issues.  The adoption of SAB 101 did not have a material impact on the
Companys consolidated financial statements.

In September
2000, the Emerging Issues Task Force (EITF) reached consensus on Issue No.
00-10, Accounting for Shipping and Handling Fees and Costs.  Issue No. 00-10 deals with the accounting
for income billed and costs related to shipping and handling charges on
processing and delivery of customer orders. 
Historically, accounting for these elements varied significantly from
company to company.   The EITF concluded
that amounts directly billed to customers for shipping and handling should be
classified as revenue and that the related costs to provide such services may
be classified as cost of sales.

The Company
adopted Issue No. 00-10 in the fourth quarter of 2000.  Previously, the Company netted shipping and
handling charges billed to customers against selling, general and
administrative (SG&A) expense.  The
following reclassifications to net sales, cost of sales and SG&A expense
for the years ended December 31, 1999 and 1998 resulted from the adoption of
this EITF.  Net sales increased $2.5
million to $156.3 million for 1999, and $2.2 million to $104.2 million for
1998.  Cost of sales increased $5.4
million to $102.1 million for 1999, and $3.2 million to $65.9 million in
1998.  SG&A expense decreased $2.9
million to $38.9 million for 1999, and $1.0 million to $24.8 million for 1998.

In March
2000, the Financial Accounting Standards Board issued Interpretation No. 44
(FIN 44), Accounting for Certain Transactions involving Stock
Compensation.  FIN 44 clarifies the
application of Accounting Principles Board Opinion No. 25 (APB 25) and was
effective July 1, 2000.  FIN 44
clarifies the definition of employee for purposes of applying APB 25, the
criteria for determining whether a plan qualifies as a noncompensatory plan,
the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and the accounting for an exchange of
stock compensation awards in a business combination.  The adoption of FIN 44 did not have a material impact on the
Companys consolidated financial statements.

Item 7a.  Qualitative and Quantitative Disclosures
About Market Risk

Interest Rate Risk

The Company
did not have any derivative financial instruments as of December 31, 2000 and
1999.  However, the Company is exposed
to interest rate risk. The Companys interest income and expense are most
sensitive to changes in the general level of U.S. and European interest rates.  In this regard, changes in U.S. and European
interest rates affect the interest earned on the Companys cash equivalents and
available-for-sale securities as well as interest paid on debt.

At December
31, 2000, the Company had cash and cash equivalents, available-for-sale
securities and bonds of $8.2 million and short-term borrowings of $31.3
million, all subject to variable short-term interest rates.  A hypothetical change in the interest rate
of 10% (for example from 8% to 8.8%) would not have a material effect on the
Companys earnings for the year ended December 31, 2000.

The Company
has lines of credit and other debt whose interest rates are based on various
published prime rates that may fluctuate over time based on economic changes in
the environment.  The Company is subject
to interest rate risk, and could be subject to increased interest payments if
market interest rates fluctuate.  The
Company does not expect any change in the interest rates to have a material
adverse effect on the Companys results of operations.

Foreign Currency
Risk

The Company
operates foreign subsidiaries in Canada, Italy, the United Kingdom, Germany,
France, the Netherlands, China and the Czech Republic.  The Companys business and financial
condition are, therefore, sensitive to currency exchange rates or any other
restrictions imposed on their currencies. Sales and expenses incurred by
foreign subsidiaries are denominated in the subsidiarys local currency and
translated into U.S. Dollar amounts at average rates during the period.  The Company does not employ any derivative
based hedging strategies, however, it may do so in the future.  The Company also has a significant natural
hedge in the form of Italian based manufacturing and European based operating,
interest and tax expenses.

Foreign
exchange rate sensitivity analysis can be quantified by estimating the impact
on the Company's earnings as a result of hypothetical changes in the value of
the U.S. Dollar, the Company's functional currency, relative to the other
currencies in which the Company transacts business.  All other things being equal, an average 10% increase in the
value of the U.S. Dollar, throughout the year ended December 31, 2000, would
have had the effect of reducing net income approximately $0.2 million.

Item 8.  Consolidated Financial Statements and
Supplementary Data

See pages 26
to 51.

Report of KPMG LLP,
Independent Auditors



The
Board of Directors and Shareholders
Mackie Designs, Inc.

We have
audited the accompanying consolidated balance sheets of Mackie Designs Inc.,
and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, cash flows, and shareholders equity and
comprehensive income for the years then ended. 
In connection with our audits of the consolidated financial statements,
we have also audited the consolidated financial statement schedule listed in
the accompanying index insofar as it relates to the years ended December 31,
2000 and 1999.  These consolidated
financial statements and consolidated financial statement schedule are the
responsibility of the Companys management. 
Our responsibility is to express an opinion on these consolidated
financial statements and consolidated financial statement schedule based on our
audits.

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

In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Mackie Designs
Inc., and subsidiaries as of December 31, 2000 and 1999, and the results
of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.  Also, in our opinion, the related
consolidated financial statement schedule for the years ended December 31, 2000
and 1999, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.



KPMG LLP

Seattle,
Washington
February 22, 2001

Report of Ernst & Young LLP, Independent
Auditors



The
Board of Directors and Shareholders
Mackie Designs Inc.

We have
audited the accompanying consolidated statements of income, cash flows and
shareholders equity and comprehensive income for year ended December 31,
1998.  Our audit also included the
financial statement schedule listed in the Index at Item 14(a).  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 audit.

We conducted
our audit in accordance with auditing standards generally accepted in the
United States.  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 audit provides a reasonable
basis for our opinion.

In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated results of operations and cash flows of
Mackie Designs, Inc., for the year ended December 31, 1998, in conformity
with accounting principles generally accepted in the United States.  Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth herein.



Ernst & Young LLP



Seattle,
Washington
February 26, 1999



MACKIE DESIGNS INC.CONSOLIDATED
BALANCE SHEETS




December 31,2000
  1999ASSETSCurrent assets:Cash and cash equivalents
  $3,837,892
  $4,629,234Available-for-sale securities
  509,333
  6,328,146Accounts receivable, less allowance for doubtful accounts of
           $1,079,000 and $1,146,000,
  respectively
  39,085,103
  31,679,300Inventories
  63,470,535
  39,678,922Prepaid expenses and other current assets
  1,514,093
  1,832,411Deferred income taxes
  3,148,057
  2,488,666Total current assets
  111,565,013
  86,636,679Property, plant and equipment, net
  23,567,445
  20,501,755Intangible assets, net
  24,418,784
  7,321,725Bonds
  3,891,279
  3,902,473Other assets, net
  1,755,123
  2,491,247Total assets
  $165,197,644
  $120,853,879LIABILITIES AND
  SHAREHOLDERS' EQUITYCurrent liabilities:Short-term borrowings
  $31,280,882
  $16,009,408Accounts payable
  21,912,383
  16,142,548Accrued expenses
  10,502,723
  8,257,304Income taxes payable
  706,143
  2,009,952Current portion of long-term debt
  5,024,473
  6,959,779Total current liabilities
  69,426,604
  49,378,991Long-term debt
  29,970,403
  15,664,662Employee and other liabilities
  3,932,350
  3,778,149Deferred income taxes
  4,098,067
  1,725,095Total liabilities
  $107,427,424
  $70,546,897Commitments, contingencies and subsequent
  eventShareholders' equity:Preferred stock, no par value:Authorized shares  5,000,000; Outstanding
  shares  noneCommon stock, no par value:Authorized shares  40,000,000; Issued and
  outstanding shares  12,372,358 
                    and 12,107,758 in
  2000 and 1999, respectively
  27,720,181
  25,802,401Retained earnings
  31,885,054
  25,658,852Accumulated other comprehensive loss
  (1,835,015)
  (1,154,271)Total shareholders' equity
  57,770,220
  50,306,982Total liabilities and shareholders' equity
  $165,197,644
  $120,853,879

See accompanying Notes to Consolidated Financial Statements.





MACKIE DESIGNS INC.CONSOLIDATED STATEMENTS OF INCOME



Years Ended December 31,2000
  1999
  1998Net sales
  $207,476,130
  $156,339,988
  $104,154,006Cost of goods sold
  134,648,908
  102,138,192
  65,882,635Gross profit
  72,827,222
  54,201,796
  38,271,371Operating expenses:Selling, general, and administrative
  48,486,522
  38,879,323
  24,761,282Research and development
  9,369,709
  7,146,954
  5,094,333Total operating expenses
  57,856,231
  46,026,277
  29,855,615Operating income
  14,970,991
  8,175,519
  8,415,756Interest income
  615,649
  740,962
  781,861Interest expense
  (4,580,955)
  (2,772,243)
  (1,520,648)Other income (expense), net
  (538,055)
  (76,190)
  206,016Income before income taxes
  10,467,630
  6,068,048
  7,882,985Income taxes
  4,241,428
  2,810,781
  2,302,211Net income
  $6,226,202
  $3,257,267
  $5,580,774Net income per share:Basic
  $0.51
  $0.27
  $0.44Diluted
  $0.49
  $0.27
  $0.43Weighted average common and potential
  common shares used in computing net income per share:Basic
  12,211,230
  12,214,982
  12,594,090Diluted
  12,782,181
  12,264,679
  12,945,170

See accompanying Notes to Consolidated
Financial Statements.


MACKIE DESIGNS INC.CONSOLIDATED STATEMENTS OF CASH FLOWS  Years Ended December 31,2000
  1999
  1998Operating
  activitiesNet income
  $6,226,202
  $3,257,267
  $5,580,774Adjustments to reconcile
  net income to net cash provided (used) by operating activities:Depreciation
  and amortization
  7,375,627
  6,399,855
  4,743,883Loss on asset
  dispositions
  83,496
  
  1,231Deferred
  stock compensation
  449,250
  
  Deferred
  income taxes
  (816,727)
  (1,311,115)
  (503,819)Changes in
  operating assets and liabilities, net of acquisition:Accounts
  receivable
  (3,538,996)
  (3,888,511)
  (3,227,231)Inventories
  (17,889,095)
  (2,749,123)
  (5,063,801)Prepaid
  expenses and other current assets
  1,316,249
  (78,184)
  875,644Other
  assets
  562,224
  (1,064,760)
  (734,940)Accounts
  payable and accrued expenses
  1,871,954
  4,854,571
  575,844Income
  taxes payable
  (1,209,991)
  402,601
  (532,733)Other
  long term liabilities
  280,554
  (174,250)
  (169,647)Cash provided
  (used) by operating activities
  (5,289,253)
  5,648,351
  1,545,205Investing
  activitiesAcquisition of
  businesses, net of cash acquired
  (19,894,937)
  
  (14,645,175)Purchases of
  available-for-sale securities
  (2,358,160)
  (8,951,129)
  (18,769,653)Proceeds from sales of
  available-for-sale securities
  5,947,121
  
  7,375,556Proceeds from maturities
  of available-for-sale securities
  2,358,160
  8,985,000
  15,948,839Purchases of property,
  plant and equipment
  (6,609,324)
  (3,115,942)
  (5,337,924)Proceeds from asset
  dispositions
  
  
  28,799Cash used in investing activities
  (20,557,140)
  (3,082,071)
  (15,399,558)Financing
  activitiesProceeds from long-term
  debt
  21,130,263
  396,385
  17,239,457Payments on long-term
  debt
  (9,200,886)
  (2,890,132)
  (1,608,935)Net proceeds (payments)
  on bank line of credit and short-term borrowings
  11,877,004
  5,974,760
  (811,478)Repurchase and retirement
  of common stock
  
  (1,308,259)
  (2,638,125)Net proceeds from
  exercise of stock options
  1,468,530
  8,325
  83,250Cash provided by financing activities
  25,274,911
  2,181,079
  12,264,169Effect of exchange rate changes on cash
  (219,860)
  (241,736)
  738,615Increase (decrease) in cash and cash
  equivalents
  (791,342)
  4,505,623
  (851,569)Cash and cash equivalents at beginning of
  year
  4,629,234
  123,611
  975,180Cash and cash equivalents at end of year
  $3,837,892
  $4,629,234
  $123,611Supplemental
  disclosuresCash paid for interest
  $3,911,000
  $2,409,000
  $1,617,000Cash paid for income taxes
  $5,591,000
  $3,468,000
  $2,397,000  See accompanying Notes to Consolidated
Financial Statements.


MACKIE DESIGNS INC.CONSOLIDATED STATEMENTS OF
SHAREHOLDERS EQUITY AND COMPREHENSIVE INCOME  Common
  Stock
  
  Retained
  Earnings
  
  Accumulated
  Other Comprehensive Income (Loss)
  
  TotalShares
  
  AmountBalance at December 31, 1997
  12,733,650
  
  $29,657,210
  
  $16,820,811
  
  
  
  $46,478,021Exercise of stock options
  15,000
  
  83,250
  
  
  
  
  
  83,250Repurchase of common shares
  (392,164)
  
  (2,638,125)
  
  
  
  
  
  (2,638,125)Net
  income
  
  
  
  
  5,580,774
  
  
  
  5,580,774Foreign currency translation adjustment, net of tax
  
  
  
  
  
  
  65,137
  
  65,137Comprehensive income
  
  
  
  
  
  
  
  
  5,645,911Balance at December 31, 1998
  12,356,486
  
  27,102,335
  
  22,401,585
  
  65,137
  
  49,569,057Exercise of stock options
  1,500
  
  8,325
  
  
  
  
  
  8,325Repurchase of common shares
  (250,228)
  
  (1,308,259)
  
  
  
  
  
  (1,308,259)Net
  income
  
  
  
  
  3,257,267
  
  
  
  3,257,267Foreign currency translation adjustment, net of tax
  
  
  
  
  
  
  (1,211,927)
  
  (1,211,927)Unrealized loss on
  available-for-sale securities
  
  
  
  
  
  
  (7,481)
  
  (7,481)Comprehensive income
  
  
  
  
  
  
  
  
  2,037,859Balance at December 31, 1999
  12,107,758
  
  25,802,401
  
  25,658,852
  
  (1,154,271)
  
  50,306,982Exercise of stock options
  264,600
  
  1,468,530
  
  
  
  
  
  1,468,530Amortization of deferred stock compensation
  
  
  449,250
  
  
  
  
  
  449,250Net
  income
  
  
  
  
  6,226,202
  
  
  
  6,226,202Foreign currency translation adjustment, net of tax
  
  
  
  
  
  
  (688,225)
  
  (688,225)Reclassification adjustment for loss included in net income on 
      available-for-sale securities
  
  
  
  
  
  
  7,481
  
  7,481Comprehensive income
  
  
  
  
  
  
  
  
  5,545,458Balance at December 31, 2000
  12,372,358
  
  $27,720,181
  
  $31,885,054
  
  $(1,835,015)
  
  $57,770,220  See accompanying Notes to Consolidated
Financial Statements.   MACKIE DESIGNS INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2000 1. 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of PresentationThe
consolidated financial statements include the accounts of Mackie Designs, Inc.
and its wholly-owned subsidiaries (the Company).  In December 2000, the name of the Company's subsidiary, Radio
Cine Forniture S.p.A. (RCF), was changed from RCF to Mackie Designs (Italy)
S.p.A (Mackie Italy).  All significant
intercompany accounts and transactions have been eliminated in
consolidation.  Certain amounts reported
in previous years have been reclassified to conform to the 2000 presentation. OperationsThe Company develops,
manufactures, sells, and supports high-quality, professional audio
equipment.  The Company sells to
retailers and distributors throughout the world, generally on open credit
terms.  Sales to customers outside of
the U.S. approximated 44%, 49%, and 43% of net sales in 2000, 1999, and 1998,
respectively. Use of EstimatesThe
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual
results may differ from those estimates. Foreign Currency TranslationAssets and liabilities
denominated in foreign currencies are translated at the exchange rate on the
balance sheet date.  Net sales, costs
and expenses are translated at average rates of exchange prevailing during the
period. Translation adjustments resulting from this process are charged or
credited to other comprehensive income (loss) in shareholders equity.  Realized and unrealized gains and losses on
foreign currency transactions are included in other income (expense), net. Revenue RecognitionRevenues from sales of products
are generally recognized upon shipment under an agreement with a customer when
risk of loss has passed to the customer and collection of any resulting
receivable is reasonably assured.  The
Company has certain software related products within its digital product
line.  The Company follows the
principles of AICPA Statement of Position 97-2, Software Revenue Recognition
in recognizing revenues for these products, which generally occurs when the
Company has customer acceptance and collection of any resulting receivable is
reasonably assured. Cash EquivalentsThe Company considers all liquid
investments purchased with a maturity at purchase of three months or less to be
cash equivalents. Marketable SecuritiesManagement determines the
appropriate classification of marketable securities at the time of purchase and
re–evaluates such designation as of each balance sheet date.  Debt securities are treated as held-to-maturity
when the Company has the positive intent and ability to hold the securities to
maturity.  Held-to-maturity securities
are stated at amortized cost.  Zero
coupon bonds held by Mackie Italy are the only securities the Company treats as
held-to-maturity (see Note 3 of Notes to Consolidated Financial Statements). Debt and
marketable equity securities not treated as held-to-maturity are classified as
available-for-sale.  Available-for-sale
securities are primarily high-grade U.S. corporate and government securities,
all of which are recorded at amortized cost, which approximates fair
value.  Available-for-sale securities
are classified in the balance sheet as current based on maturity dates.  Unrealized gains and losses on
available-for-sale securities are excluded from the results of operations and
are reported as a component of comprehensive income (loss) in shareholders'
equity.

The
amortized cost of debt securities treated as held-to-maturity is adjusted for
accretion of discounts or amortization of premiums to maturity, over the
estimated life of the security.  Such
amounts are included in interest income.

InventoriesInventories are valued at the
lower of cost, as determined by the first-in, first-out method, or market.

Property, Plant and EquipmentProperty, plant and equipment
are stated at cost, less accumulated depreciation and amortization.  Significant additions and improvements are
capitalized.  Maintenance and repairs
are expensed as incurred.  Depreciation
and amortization are computed using the straight-line method over the estimated
useful lives of buildings, machinery and equipment, and furniture and fixtures
of thirty-three years, five to seven years, and three to five years,
respectively.  Leasehold improvements
are amortized over the shorter of their useful lives or the term of the
lease.  Direct internal and external
costs of computer software developed for internal use are capitalized in
accordance with SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. 
Capitalized costs are amortized using the  straight-line method over the estimated useful lives beginning
when each module is complete and ready for its intended use.

IntangiblesIntangibles represent goodwill
resulting from the excess of the purchase price over the fair value of assets
acquired as well as other specifically identified intangible assets resulting
from acquisitions.  Intangibles are
being amortized on the straight-line method over the estimated useful lives of goodwill,
developed technology and trademarks of twenty years and assembled workforce of
five years.

Impairment of Long-Lived AssetsThe Company
periodically assesses the recoverability of long-lived assets including
property, plant and equipment, goodwill and other intangible assets.  Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
undiscounted net cash flows expected to be generated by the asset.  If such assets are considered to be impaired,
the impairment to be recognized is measured as the amount by which the carrying
amount of the assets exceeds the fair value of the assets.  Assets to be disposed of are reported at the
lower of the carrying amount or the fair value less cost to sell.

Fair Value of Financial InstrumentsThe carrying amounts of the
Companys cash, available-for-sale securities, accounts receivable, bonds,
short-term borrowings, accounts payable and long-term debt approximate fair
value because they are of a short-term nature or have interest rates that
approximate market rates.

Warranty CostsThe Company provides an accrual
for future warranty costs at the time of sale of products.  The warranty for the Companys products
generally covers defects in materials and workmanship for a period of one to
six years.

Advertising CostsThe cost of advertising included
in selling, general and administrative expense is expensed as incurred.  For 2000, 1999, and 1998, the Company
incurred advertising expenses of $3.9 million, $4.2 million, and $3.7 million,
respectively.

Stock CompensationThe Company applies the
disclosure-only provisions of Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based Compensation.  Accordingly, the Company accounts for
stock-based employee compensation using the intrinsic-value method prescribed
in Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. 
Compensation expense for employee stock options is measured as the
excess, if any, of the fair value of the Companys common stock at the date of
grant over the stock option exercise price and is recognized on a straight-line
basis over the vesting period.

Income TaxesIncome taxes are accounted for
under the asset and liability method of accounting. Under this method, deferred
tax assets and liabilities are recognized for the future tax consequences
attributed to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and tax credits
and loss carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences and carryforwards are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.  A valuation allowance is established
when necessary to reduce deferred tax assets to amounts expected to be
realized.

Income Per ShareBasic income per share is
computed on the basis of the weighted average number of common shares
outstanding for the year.  Diluted
income per share is computed on the basis of the weighted average number of
common shares plus dilutive potential common shares outstanding.  Dilutive potential common shares are
calculated under the treasury stock method and consist of employee stock
options outstanding.

ConcentrationsThe Company is subject to concentrations
of credit risk from its holdings of cash, cash equivalents, and
securities.  The Companys credit risk
is managed by investing in high-quality money market instruments, securities of
the U.S. Government and its agencies, and high-quality corporate issues.  In addition, a significant portion of the
Companys accounts receivable is due from customers outside of the U.S.  The Company generally requires letters of
credit or advance payments for international sales made by its U.S.
divisions.  No individual country
outside of the U.S. accounted for more than 10% of net sales in any of the
periods presented.

The Company
relies almost exclusively on one vendor for its potentiometers and certain of
its integrated circuits, but is in contact with other manufacturers of these
items regularly.  These items are
critical components in certain of the Company's products.  Interruption in, or cessation of, the supply
of these components from these suppliers could adversely affect the Companys
production capability, as the qualification process for another manufacturer,
from sample submission to production quality and quantity delivery, could take
several months.  The Company has an
approximate three month supply of potentiometers and one month supply of these
specific integrated circuits on hand at any given time which would serve to
reduce any potential disruption.

Comprehensive IncomeThe Companys comprehensive
income includes all items which comprise net income, the effect of foreign
currency translation and unrealized gains/losses on available-for-sale
securities.  Comprehensive income is
shown in the Consolidated Statements of Shareholders Equity and Comprehensive
Income.

New Accounting PronouncementIn June 1998, the Financial
Accounting Standards Board issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities.   
SFAS No. 133, as amended, requires that all derivative instruments be
recorded on the balance sheet at their fair value.  Changes in the fair value of derivatives are recorded each period
in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction.  This statement,
as amended, is effective for the Company beginning January 1, 2001.  The adoption of SFAS No. 133 will not have a
material impact on the Companys consolidated financial position or results of
operations.

In December
1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
(SAB) No. 101,which was adopted by the Company in the fourth quarter of
2000.    SAB 101 provides guidance on
revenue recognition and the SEC staffs views on the application of accounting
principles to selected revenue recognition issues.  The adoption of SAB 101 did not have a material impact on the
Companys consolidated financial statements.

In September
2000, the Emerging Issues Task Force (EITF) reached consensus on Issue No.
00-10, Accounting for Shipping and Handling Fees and Costs.  Issue No. 00-10 deals with the accounting
for income billed and costs related to shipping and handling charges on
processing and delivery of customer orders. 
Historically, accounting for these elements varied significantly from
company to company.   The EITF concluded
that amounts directly billed to customers for shipping and handling should be
classified as revenue and that the related costs to provide such services may
be classified as cost of sales.

The Company
adopted Issue No. 00-10 in the fourth quarter of 2000.  Previously, the Company netted shipping and
handling charges billed to customers against selling, general and
administrative (SG&A) expense. The following reclassifications to net
sales, cost of sales and SG&A expense for the years ended December 31, 1999
and 1998 resulted from the adoption of this EITF.  Net sales increased $2.5 million to $156.3 million for 1999, and
$2.2 million to $104.2 million for 1998. 
Cost of sales increased $5.4 million to $102.1 million for 1999, and
$3.2 million to $65.9 million in 1998. 
SG&A expense decreased $2.9 million to $38.9 million for 1999, and
$1.0 million to $24.8 million for 1998.



In March
2000, the Financial Accounting Standards Board issued Interpretation No. 44
(FIN 44), Accounting for Certain Transactions involving Stock
Compensation.  FIN 44 clarifies the
application of Accounting Principles Board Opinion No. 25 (APB 25) and was
effective July 1, 2000.  FIN 44 clarifies
the definition of employee for purposes of applying APB 25, the criteria for
determining whether a plan qualifies as a noncompensatory plan, the accounting
consequence of various modifications to the terms of a previously fixed stock
option or award, and the accounting for an exchange of stock compensation
awards in a business combination.  The
adoption of FIN 44 did not have a material impact on the Companys consolidated
financial statements.

2.ACQUISITIONS
          In April 2000, the Company
acquired 100% of the capital stock of Eastern Acoustic Works, Inc. (EAW).  EAW designs and manufactures loudspeaker
systems, including integrated signal processing for the installed and touring
sound markets and is based in Whitinsville, Massachusetts.  The acquisition was accounted for under the
purchase method of accounting.  The
aggregate purchase price, plus related acquisition costs, was approximately
$19.6 million.  The excess of the
purchase price over the fair value of net tangible assets acquired ($0.9
million) approximating $18.7 million is included in intangible assets.  A total of $8.2 million of the purchase
consideration was specifically allocated to identifiable intangible assets,
including developed technology ($5.2 million), assembled workforce ($1.6
million), and trademark ($1.4 million). 
The remaining $10.5 million is goodwill.  Goodwill, developed technology and trademark are being amortized
on the straight line method over 20 years, while the assembled workforce is
being amortized on the straight line method over 5 years.  The results of EAW have been included in the
Companys consolidated results of operations from the date of acquisition.

On June 29,
1998, the Company acquired 100% of the capital stock of Mackie Italy, an
Italian corporation.  Mackie Italy is a
manufacturer of loudspeakers and speaker components based in Reggio Emilia,
Italy.  The acquisition was accounted
for under the purchase method of accounting. 
The aggregate purchase price, plus related acquisition costs, was
approximately $15.0 million.  The excess
of the purchase price over the fair value of net assets acquired, aggregating
approximately $8.0 million, is included in goodwill.  The results of operations of Mackie Italy have been included in
the Companys consolidated results of operations from the date of acquisition.

The
following table presents unaudited pro forma consolidated financial information
for the years ended December 31, 2000 and 1999 as if the acquisition of EAW had
occurred on January 1 of each year after giving effect to certain adjustments,
including amortization of intangibles:





Years Ended
  December 31,2000
  1999Net sales
  $217,244,380
  $195,933,141Net income
  $5,584,668
  $1,833,240Diluted income per share
  $0.44
  $0.15

The
unaudited pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the operating results that would have
occurred had the acquisition taken place on the basis assumed above.  In addition, the pro forma results are not
intended to be a projection of the future results and do not reflect any
synergies that might have been achieved from the combined operations.

3. 
INVESTMENTS

The
amortized cost of available-for-sale securities approximated fair market value
and was as follows:

December 31,2000
  1999U.S. Government securities
  $509,333
  $479,922Bank certificates of deposit
  
  574,725Corporate debt securities
  
  5,273,499$509,333
  $6,328,146

As of
December 31, 2000 and 1999, available-for-sale securities had contractual
maturities of one year or less.

Mackie Italy
holds various zero-coupon Italian bank bonds as collateral for two bank term
loans (see Note 8 of Notes to Consolidated Financial Statements).  The bonds aggregated $3.9 million at both
December 31, 2000 and 1999, and are carried at amortized cost, which
approximates market value.  The bank
bonds have various maturities ranging from 2001 to 2004, however reinvestment
is required under the collateral agreement so the maturity date is effectively
2004.  The interest rates on these bonds
range from 3.4% to 7.0% (average rate was 6.8% at both December 31, 2000 and
1999).  These bonds are treated as
held-to-maturity and are restricted as to their use.

4. 
INVENTORIES

Inventories
consist of the following:

December 31,2000
  1999Raw materials
  $31,579,234
  $16,499,299Work in process
  4,830,897
  4,845,789Finished goods
  27,060,404
  18,333,834$63,470,535
  $39,678,922

5. 
INTANGIBLE ASSETS

Intangible
assets consist of the following:

December 31,2000
  1999Goodwill
  $17,974,295
  $7,907,866Developed technology
  5,200,000
  Assembled workforce
  1,660,000
  Trademark
  1,380,000
  26,214,295
  7,907,866Less accumulated amortization
  1,795,511
  586,141$24,418,784
  $7,321,725

6. 
PROPERTY, PLANT AND EQUIPMENT

Property,
plant and equipment consist of the following:

December 31,2000
  1999Land
  $2,014,365
  $2,150,614Buildings
  3,298,929
  2,794,308Machinery and equipment
  21,868,448
  19,304,674Furniture and fixtures
  12,785,406
  8,506,274Leasehold improvements
  3,803,423
  2,957,17543,770,571
  35,713,045Less accumulated depreciation and amortization
  20,203,126
  15,211,290$23,567,445
  $20,501,755

7. 
INCOME TAXES

Components
of income before income taxes are as follows:

2000
  1999
  1998United States
  $9,212,206
  $6,900,322
  $8,790,207Foreign
  1,255,424
  (832,274)
  (907,222)Income before income taxes
  $10,467,630
  $6,068,048
  $7,882,985

The
provision for income taxes is as follows:

2000
  1999
  1998Current taxes on income:United States
  $3,919,127
  $2,763,450
  $2,717,660Foreign
  1,139,028
  1,358,446
  88,370Total current income taxes
  5,058,155
  4,121,896
  2,806,030Deferred income taxes:United States--federal
  (826,296)
  (644,963)
  (480,000)United States--state
  (130,954)
  -
  -Foreign
  140,523
  (666,152)
  (23,819)Total deferred income taxes
  (816,727)
  (1,311,115)
  (503,819)Total income taxes
  $4,241,428
  $2,810,781
  $2,302,211

The tax
effects of temporary differences that give rise to significant components of
the Companys deferred tax assets and liabilities are as follows:

December 31,2000
  1999Deferred tax assets:Accrued expenses
  $1,241,922
  $911,416Bad
  debt allowances
  313,534
  251,899Inventory adjustments
  1,016,595
  1,279,659Net
  operating loss carryforwards
  447,575
  386,033Tax
  credit carryforwards
  259,091
  335,091Other items, net
  866,637
  548,0574,145,354
  3,712,155Less
  valuation allowance
  (98,974)
  (74,425)4,046,380
  3,637,730Deferred tax liabilities:Property, plant and equipment
  2,363,345
  2,874,159Specifically identifiable intangible assets
  2,633,045
  Total deferred tax liabilities
  4,996,390
  2,874,159Net deferred tax assets (liabilities)
  $(950,010)
  $763,571

In
connection with the acquisition of EAW in 2000, the Company recorded a net
deferred tax liability of $3.1 million.

The deferred
tax assets (liabilities) of foreign jurisdictions comprised $1.5 million and
($2.1) million at December 31, 2000, respectively and $2.1 million and ($2.5)
million at December 31, 1999, respectively.

A
reconciliation from the U.S. statutory income tax rate of 34% to the effective
income tax rate is as follows:



2000
  1999
  1998Tax at the statutory rate
  $3,558,994
  34.0%
  $2,063,136
  34.0%
  $2,680,215
  34.0%Effect of the research and development tax
  credit
  (398,581)
  (3.8)
  (200,000)
  (3.3)
  (280,000)
  (3.6)Foreign sales corporation tax benefit
  (336,029)
  (3.2)
  (311,835)
  (5.1)
  (251,090)
  (3.2)Limitation of recognition of benefit of
        foreign operating losses
  
  
  36,008
  0.6
  179,094
  2.3Nondeductible expenses and other
        permanent differences
  464,616
  4.4
  553,739
  9.1
  (360,822)
  (4.6)Goodwill
  253,174
  2.4
  99,789
  1.6
  66,526
  0.9Foreign tax greater than U.S. statutory
        rate
  587,313
  5.6
  569,944
  9.4
  268,288
  3.4State taxes, net of federal benefit
  111,941
  1.1
  
  
  
  $4,241,428
  40.5%
  $2,810,781
  46.3%
  $2,302,211
  29.2%

At December
31, 2000, the Company had U.S. and international net operating loss
carryforwards of approximately $0.8 million and $0.4 million,
respectively.  These carryforwards
generally begin expiring in 2013.

The
valuation allowance for deferred tax assets increased by approximately $25,000
and $74,000 in 2000 and 1999, respectively.

8. 
DEBT

Long-term
debt consisted of the following at December 31:



2000
  1999Revolving Credit Note (A)
  $8,714,557
  $10,500,000Revolving Credit Note (B)
  19,000,000
  Capital Leases (C)
  431,636
  Bank Term Loan (D)
  
  4,670,472Bank Term Loan (E)
  3,626,724
  3,870,187Bank Term Loan (F)
  584,630
  802,127Other Notes (G)
  2,637,329
  2,781,65534,994,876
  22,624,441Less current portion
  5,024,473
  6,959,779$29,970,403
  $15,664,662

(A)
  Borrowings under the Revolving Credit Note ($12.8 million Mackie
  Italy acquisition loan) bear interest at the banks prime rate, or at a
  specified LIBOR rate plus a specified margin, whichever the Company
  chooses.  At December 31, 2000, the
  interest rate in effect was 9.0%. 
  Interest is payable monthly. 
  Principal is payable in installments equal to 1/7 of the amount
  borrowed ($12.8 million) on September 30 of each year.  All outstanding principal and interest
  amounts are due on September 30, 2003.(B)
  Borrowings under the Revolving Credit Note ($19.0 million EAW
  acquisition loan) bear interest at the banks prime rate, or at a specified
  LIBOR rate plus a specified margin, whichever the Company chooses.  At December 31, 2000, the interest rate in
  effect was 9.0%.  Interest is payable
  monthly.  Principal is payable in
  installments equal to 1/7 of the amount borrowed ($19.0 million) on March 31
  of each year.  All outstanding
  principal and interest amounts are due on September 30, 2003.

(C)
  EAW leases certain
  equipment under capital lease agreements.. 
  At December 31, 2000 outstanding principal totaled $0.4 million..  Interest has been imputed at rates ranging
  from 7.0% to 15.0%.  Total principal
  due in 2001 is $0.2 million. 
  Completion dates of all leases range from 2001 to 2003.(D)
  The Bank Term Loan, which
  was paid off in February 2000, bore interest at the six-month Euribor rate
  plus 0.65%.  Interest-only payments
  were made semi-annually and the principal was due on February 5, 2000.(E)
  The Bank Term Loan bears
  interest at the six-month LIBOR rate plus 2.0% (8.9% at December 31,
  2000).  Interest-only payments are
  made semi-annually and the principal is due in 2003.  This loan is secured by a bank bond held
  by Mackie Italy, which will be used to repay the principal amount of the loan
  at the time of maturity in 2004.(F)
  The Bank Term Loan bears a fixed interest rate of 7.1%.  Interest-only payments are made
  semi-annually.  In addition, semi-annual
  principal payments of approximately $0.08 million are payable with the final
  principal payment due in 2004.  This
  loan is secured by a bank bond held by Mackie Italy.(G)
  The other notes bear interest at rates from 6.3% to 8.9%.  Principal payments on these loans are made
  in varying amounts until 2013. 
  Certain of these loans are secured by specific assets of Mackie Italy.



The
long-term debt described above in (D) through (G) are denominated in Italian
lira and have been converted to U.S. Dollars using applicable rates for the
periods presented for disclosure purposes.

Future
aggregate annual principal payments of long-term debt at December 31, 2000 are
as follows:

2001
  $5,024,4732002
  5,269,1982003
  22,791,3322004
  723,9812005
  322,818Thereafter
  863,074$34,994,876

In September
2000, the Company restructured its U.S. bank line of credit.  The new line provides up to $15.0 million of
short-term borrowing subject to certain limitations.  These limitations reduced the maximum allowable borrowing to
$12.4 million as of December 31, 2000. 
This line of credit, which is an amendment to the June 1998 credit
agreement, is secured by all of the Companys U.S. based assets.  At December 31, 2000, there was $11.5
million outstanding on the line of credit (zero at December 31, 1999) as well
as a $1.5 million guarantee on debt of Mackie Italy.  The Company was not in compliance with the borrowing limitation
on the line of credit at December 31, 2000 by approximately $0.6 million but
obtained a waiver from the bank.  This
credit facility expires April 30, 2002.

Under the
terms of the June 1998 credit agreement and all related amendments, the Company
must maintain certain financial ratios and tangible net worth.  The agreements also provide, among other
matters, restrictions on additional financing, dividends, mergers,
acquisitions, and an annual capital expenditure limit of $15.0 million.

Mackie Italy
also has agreements with several banks in Italy that provide short-term credit
facilities totaling approximately $25.2 million.  At December 31, 2000 and 1999, there was approximately $19.8
million  and $16.0 million outstanding
under these facilities, respectively. 
The majority of these credit facilities are secured by Mackie Italys
receivables.  Interest rates on these
credit facilities range from 4.8% to 13.5%.

The
weighted-average interest rate on short-term borrowings for the Company of
$31.3 million at December 31, 2000 was 7.0%.

9.       EMPLOYEE
AND OTHER LIABILITIES

Under
Italian law, Mackie Italy employees are entitled to severance benefits
calculated primarily based upon compensation and length of service.  These severance benefits vest immediately
and are payable upon the employees separation from the Company.  This liability aggregated approximately $3.2
million at both December 31, 2000 and 1999. 
In addition, Mackie Italy commissioned sales agents are entitled to
similar severance benefits based upon commissions earned and length of
service.  This liability aggregated
approximately $0.5 million and $0.6 million at December 31, 2000 and 1999,
respectively.  Under these severance
programs, severance expense of approximately $0.7 million was recognized in
both 2000 and 1999.

The
termination indemnity liability is calculated in accordance with local civil
and labor laws based on each employees length of service, employment category
and remuneration.  There is no vesting
period or funding requirement associated with the liability.  The liability recorded on the balance sheet
is the amount that the employees would be entitled to if the employees
terminated at that date.

10. 
RELATED-PARTY TRANSACTION

The Company
has an agreement to receive marketing and sales services from a company in
which a director and shareholder of the Company is a partner. This agreement is
substantially similar to agreements the Company has with its other independent
representatives.  Expenses under this
agreement amounted to $0.3 million for each of the years ended December 31,
2000, 1999 and 1998.

11. 
EMPLOYEE BENEFIT PLANS

The Company
has qualified profit-sharing plans under the provisions of Internal Revenue
Code Section 401(k).  These plans are
available to all employees meeting the eligibility requirements.  Contributions are based on a matching
formula as defined in each of the plans. 
Additional contributions are at the discretion of the Board of
Directors.  Contributions to the
respective plans vest ratably over a 5-year period.  The Company made combined contributions of $0.5 million, $0.1
million, and $0.1 million to the plans in 2000, 1999, and 1998, respectively.

The Company
self-insures for health care costs of its eligible employees and dependents at
certain of its divisions.  The Company
has insurance policies which cover individual claims and have an approximate
$1.0 million annual stop loss limit on total claims for all employees in the
aggregate.  Estimated costs of all
incurred claims that are not covered by insurance are recognized in the
financial statements.

12. 
NET INCOME PER SHARE

The
following table represents a reconciliation of the numerators and denominators
of the basic and diluted earnings per share calculations:



2000
  1999
  1998Numerator:Numerator for basic and
  diluted net income per share  net income
  $6,226,202
  $3,257,267
  $5,580,774Denominator:Denominator for basic net
  income per share  weighted average common shares
  12,211,230
  12,214,982
  12,594,090Effect of dilutive stock
  options
  570,951
  49,697
  351,080Denominator for diluted
  net income per share
  12,782,181
  12,264,679
  12,945,170Basic net income per share
  $0.51
  $0.27
  $0.44Diluted net income per share
  $0.49
  $0.27
  $0.43

Stock
options totaling 1,707,000, 3,086,000 and 325,000 shares in 2000, 1999 and
1998, respectively, were excluded from the calculation of diluted net income
per share, as they were antidilutive.

13. 
SHAREHOLDERS EQUITY

The Company
has a stock option plan for the granting of incentive and non-qualified stock
options (the Plan) under which 6.5 million shares are reserved for grants.  The exercise price of incentive stock
options granted under the Plan may not be less than the fair market value of
the common stock on the date of grant. 
The exercise price of non-qualified stock options granted under the Plan
may be greater or less than the fair market value of the common stock on the
date of grant, as determined by the stock option committee of the Companys
Board of Directors at its discretion. 
The options generally vest over a four-year period and expire no later
than ten years after the date of grant.

In
connection with the acquisition of EAW, certain key employees of EAW were
granted a total of 199,998 non-qualified stock options with an exercise price
of $0.01.  These options are linked to
continued employment with the Company and vest ratably over a two-year period
from the April 6, 2000 grant date.  The
Company is also recognizing compensation expense related to these options on a
straight line basis over the vesting period of which $0.8 million remained
unamortized at December 31, 2000.  None
of these options were exercisable as of December 31, 2000.

The
following table summarizes the Companys stock option activity for the
three-year period ended December 31, 2000:

Shares subject to option
  
  Option price range
  
  Weighted average exercise priceOptions outstanding at December 31, 1997
  2,852,200
  
  $5.55  13.88
  
  $6.04Granted
  608,200
  
  $6.25  7.75
  
  $6.56Forfeited
  (27,500)
  
  $8.75
  
  $8.75Exercised
  (15,000)
  
  $5.55
  
  $5.55Options outstanding at December 31, 1998
  3,417,900
  
  $5.55  13.88
  
  $6.11Granted
  355,500
  
  $4.75  5.91
  
  $4.79Forfeited
  (360,900)
  
  $6.00  8.75
  
  $6.42Exercised
  (1,500)
  
  $5.55
  
  $5.55Options outstanding at December 31, 1999
  3,411,000
  
  $4.75  13.88
  
  $5.94Granted
  1,087,197
  
  $0.01  7.00
  
  $4.88Forfeited
  (105,600)
  
  $5.50  6.69
  
  $6.21Exercised
  (264,600)
  
  $5.55
  
  $5.55Options outstanding at December 31, 2000
  4,127,997
  
  $0.01  13.88
  
  $5.68

At December
31, 2000, 2,024,653 shares of common stock were available for future grants.

The
following table summarizes information about options outstanding and
exercisable at December 31, 2000:

Options OutstandingRange of exercise price
  
  Options outstanding
  
  Weighted average remaining contractual life
  (years)
  
  Weighted average exercise price$0.01
  
  199,998
  
  9.75
  
  $  
  0.01$4.75  8.00
  
  3,832,999
  
  6.68
  
  $  
  5.89$8.01  13.88
  
  95,000
  
  5.81
  
  $  
  9.29$0.01  13.88
  
  4,127,997
  
  6.81
  
  $  
  5.68

Options ExercisableWeighted average exercise
  priceRange of
  exercise price
  2000
  1999
  1998
  
  2000
  1999
  1998$4.75  
  8.00
  2,308,775
  2,341,275
  1,955,950
  
  $  
  5.88
  $  
  5.81
  $  
  5.69$8.01 13.88
  95,000
  73,750
  55,000
  
  $  
  9.29
  $  
  9.44
  $  
  9.45$4.75 13.88
  2,403,775
  2,415,025
  2,010,950
  
  $  
  6.01
  $  
  5.92
  $  
  5.79

The Company
follows the intrinsic value method in accounting for its stock options.  Had compensation costs been determined
consistent with SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the proforma amounts as indicated below:



2000
  1999
  1998Net income 
  - as reported
  $ 
  6,226,202
  $ 
  3,257,267
  $ 
  5,580,774Net income 
  - pro forma
  $ 
  4,691,382
  $ 
  2,063,092
  $ 
  4,538,586Basic net income per share  as reported
  $         
  0.51
  $         
  0.27
  $         
  0.44Basic net income per share  pro forma
  $         
  0.38
  $         
  0.17
  $         
  0.36Diluted net income per share  as reported
  $         
  0.49
  $         
  0.27
  $         
  0.43Diluted net income per share  pro forma
  $         
  0.37
  $         
  0.17
  $         
  0.35

The fair
value of each option grant was estimated using the Black-Scholes option-pricing
model for both options granted with an exercise price equal to market price at
the time of issuance and those granted with an exercise price less than market
price at the time of issuance.  2000 was
the first year in which the Company issued options below market price at the
time of issuance.

The
following weighted-average assumptions for 2000, 1999 and 1998, respectively
were used for options granted with an exercise price equal to the market price
at the time of issuance: risk-free interest rates of 6.20%, 5.79% and 5.28%;
expected option life of 7.0 years for all three years; expected volatility of
62.7%, 61.6% and 61.4%; and no expected dividends.  The weighted-average fair value of options granted during the
years 2000, 1999, and 1998 was $4.04, $3.18, and $4.30, respectively.



The
following weighted-average assumptions for 2000 were used for options granted
with an exercise price less than the market price at the time of issuance:
risk-free interest rate of 6.22%; expected option life of 3.0 years; expected
volatility of 62.7%; and no expected dividends. The weighted-average fair value
of these options was $6.12. The weighted-average exercise price was $.01.

The Company
fulfilled the authorization from its Board of Directors to repurchase up to
850,000 shares of its outstanding common stock during the three year period
ended December 31, 1999.  These
purchases were executed through open market purchases at prevailing market
prices.  As of December 31, 1999, the
Company had repurchased all 850,000 shares authorized under the program at a
total cost of approximately $5.6 million. 
No additional authorizations are currently pending.

14. 
COMMITMENTS AND CONTINGENCIES

The Company
has a lease for an 89,000 square foot office and manufacturing facility with an
entity owned by three significant shareholders and directors of the
Company.  The monthly rent stated in the
lease is $56,613, adjusted annually for changes in the Consumer Price Index
(monthly rent expense as of December 2000 was $63,587).  The lease expires December 31,
2004.  Annual rent expense under this
lease was $0.8 million, $0.7 million, and $0.8 million in 2000, 1999 and 1998,
respectively.  The Company expects only
minor increases in rent expense during the remaining four years of the lease
term in relation to Consumer Price Index adjustments.  Taxes, insurance, utilities, and maintenance are the
responsibility of the Company.  Future
minimum rental payments under this lease and other equipment and facility
leases at December 31, 2000 are as follows:



2001
  $ 
  2,271,0002002
  2,084,0002003
  1,591,0002004
  1,470,0002005
  225,000Thereafter
  $ 
  7,641,000

The Company
expects to renew or replace certain leases at expiration.  Total rent expense for 2000, 1999, and 1998
was $2.2 million, $1.6 million, and $1.7 million, respectively.

At December
31, 2000, the Company has an agreement for consulting services related to the
implementation of an Oracle based software system.  The agreement totals approximately $2.8 million all of which was
outstanding at December 31, 2000 and will be due and payable during 2001.
Approximately $0.6 million was accrued as of December 31, 2000.

EAW has
subrogated claims asserted against it from insurance companies who paid claims
made by EAWs landlord and other tenants in the building who were affected by a
fire started by a loaned employee in a portion of the building occupied by EAW
in 1996.  The insurance company for the
landlord alleges that EAW is liable for up to $2.1 million for damages to the
building.  The Company believes that
these losses are not attributable to it under Massachusetts law.  The Company is vigorously defending these
claims.  The claims of the other tenants
have been covered by EAWs insurance carrier. 
The ultimate resolution of this matter is not known at this time.  No provision has been made in the Companys
consolidated financial statements related to these claims.

The Company
is also involved in various legal proceedings and claims that arise in the
ordinary course of business.  Management
currently believes that these matters will not have a material adverse impact
on the Companys financial position, liquidity or results of operations.

15.  SEGMENT
AND GEOGRAPHIC INFORMATION

The
Company identifies its business segments based on management
responsibility using a combination of products and geographic factors.  The Company has three reportable
segments:  Mackie Designs Inc. (Mackie),
its Italian subsidiary (Mackie Italy) and its U.S. subsidiary, Eastern
Acoustic Works, Inc. (EAW).  The
Mackie segment offers audio mixers and other professional audio equipment.  The Mackie Italy segment offers
loudspeakers, loudspeaker components and Mackie product offerings through its
subsidiaries.  The EAW segment, acquired
in April 2000, offers loudspeakers targeted at the mid to high-end of the
installed and touring sound markets.  A
summary of key financial data by segment is as follows:



Mackie
  Mackie 
  Italy
  EAW
  Elimination
  of
  intercompany
  amounts
  Total(in thousands)Year ended December 31, 2000:Net sales, to external customers
  $110,039
  $ 66,839
  $  
  30,598
  $       
  
  $ 
  207,476Net sales, intersegment
  13,781
  26,298
  1,678
  (41,757)
  Operating income
  11,793
  4,490
  38
  (1,350)
  14,971Interest income
  2,141
  394
  
  (1,919)
  616Interest expense
  (2,350)
  (2,536)
  (1,614)
  1,919
  (4,581)Depreciation and amortization
  4,124
  1,891
  1,361
  
  7,376Income taxes
  3,570
  1,199
  (528)
  
  4,241Purchases of property, plant & equipment
  4,853
  1,012
  744
  
  6,609Total property, plant & equipment, net
  9,586
  10,714
  3,267
  
  23,567Total assets
  118,933
  85,981
  33,982
  (73,698)
  165,198



Year ended December 31, 1999:Net sales to external customers
  $ 96,134
  $ 60,206
  $      
  
  $         
  
  $ 
  156,340Net sales, intersegment
  8,542
  4,733
  
  (13,275)
  Operating income
  6,754
  1,958
  
  (536)
  8,176Interest income
  1,658
  366
  
  (1,283)
  741Interest expense
  (999)
  (3,056)
  
  1,283
  (2,772)Depreciation and amortization
  4,386
  2,014
  
  
  6,400Income taxes
  2,351
  460
  
  
  2,811Purchases of property, plant & equipment
  1,499
  1,617
  
  
  3,116Total property, plant & equipment, net
  8,508
  11,994
  __
  
  20,502Total assets
  73,450
  70,374
  __
  (22,970)
  120,854

Year ended December 31, 1998:Net sales to external customers
  $ 80,569
  $ 23,585
  $      
  
  $         
  
  $ 
  104,154Operating income
  8,050
  366
  
  
  8,416Interest income
  1,276
  148
  
  (642)
  782Interest expense
  (583)
  (1,580)
  
  642
  (1,521)Depreciation and amortization
  3,796
  948
  
  
  4,744Income taxes
  2,238
  64
  
  
  2,302Purchases of property, plant & equipment
  4,269
  1,069
  
  
  5,338Total property, plant & equipment, net
  11,184
  13,385
  __
  __
  24,569Total assets
  57,222
  62,590
  __
  (922)
  118,890

The net
assets of foreign operations of the Company were approximately $13.6 million at
December 31, 2000.

Major
operations of the Company outside the U.S. include manufacturing facilities in
Italy, and sales and support offices in Germany, the United Kingdom, France,
the Netherlands and China.  Geographic
information for the three years ended December 31, 2000 is presented in the
table that follows. Sales between affiliated entities are excluded from the
numbers below.  Net sales, as shown in
the table below, are based upon the geographic area into which the products
were sold and delivered. As such, U.S. export sales of $31.3 million, $17.4
million and $24.1 million in 2000, 1999 and 1998, respectively, have been
excluded from U.S. reported net sales. 
The profit on transfers between geographic areas is not recognized until
sales are made to non-affiliated customers. 
Long-lived assets exclude goodwill, bonds and deferred income taxes and
are those assets that can be directly associated with a particular geographic
area.



Years Ended December 31,2000
  1999
  1998(in thousands)Net sales:U.S.
  $   
  115,466
  $    
  80,039
  $    
  58,971Italy
  20,038
  19,857
  9,645Europe, excluding Italy
  39,340
  35,161
  21,965The Americas, excluding U.S.
  13,900
  9,994
  8,082Asia-Pacific, including Australia and New
  Zealand
  15,556
  8,524
  3,999Other
  3,176
  2,765
  1,492$  
  207,476
  $  
  156,340
  $    
  104,154Long-lived assets:U.S.
  $    
  13,343
  $    
  8,695
  $    
  11,718Italy
  11,678
  14,078
  13,878Europe, excluding Italy
  300
  218
  888Asia
  2
  2
  2$    
  25,323
  $    
  22,993
  $    
  26,48616. 
QUARTERLY FINANCIAL DATA (UNAUDITED) (In thousands, except per share
data)



2000
  First
  Second
  Third
  FourthNet sales
  $ 45,191
  $ 56,857
  $ 51,434
  $ 53,994Gross profit
  $ 16,191
  $ 21,278
  $ 17,550
  $ 17,808Net income
  $  
  2,419
  $  
  2,246
  $     
  925
  $     
  636Basic net income per share
  $    
  0.20
  $    
  0.19
  $    
  0.08
  $    
  0.05Diluted net income per share
  $    
  0.20
  $    
  0.17
  $    
  0.07
  $    
  0.051999
  First
  Second
  Third
  FourthNet sales
  $ 32,298
  $ 39,969
  $ 40,984
  $ 43,089Gross profit
  $ 10,204
  $ 13,910
  $ 13,877
  $ 16,211Net income (loss)
  $ (1,369)
  $  
  1,121
  $  
  1,713
  $  
  1,792Basic and diluted net income (loss) per share
  $   (0.11)
  $     0.09
  $     0.14
  $     0.15

17.    
SUBSEQUENT EVENT

In January
2001, the Company entered into an agreement to acquire all the outstanding
shares of Sydec NV (Sydec) for a total of approximately $4.5 million in cash.
The transaction is expected to close in early April 2001.  Based in Belgium, Sydec is recognized as a
leading developer of products and services in the area of embedded electronics &
software, networking, digital signal processing and Windowsä95/98/NT/2000 driver and application development.



Item 9.  Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

The
information required by this Item is included in the Companys Form 8-K dated
May 7, 1999 and filed on May 14, 1999 relating to a change in the Companys
certifying accountants from Ernst & Young LLP to KPMG LLP and is
incorporated herein by reference.



PART III

Item 10.  Directors and Executive Officers of the
Registrant

The
information required by this Item is included in the Companys definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders under the heading
"Proposal No. 1:  Election of
Directors" and is incorporated herein by reference.



Item 11.Executive Compensation

The
information required by this Item is included in the Companys definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders under the heading
"Executive Compensation" and is incorporated herein by reference.



Item 12.Security
Ownership of Certain Beneficial Owners and Management

The
information required by this Item is included in the Companys definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders under the heading
"Principal Shareholders" and is incorporated herein by reference.



Item 13.Certain
Relationships and Related Transactions

The
information required by this Item is included in the Companys definitive Proxy
Statement for its 2001 Annual Meeting of Shareholders under the heading
"Certain Transactions" and is incorporated herein by reference.



PART IV

Item 14.  Exhibits, Financial Statement Schedules and
Reports on Form 8-K

(a)      Documents filed as part of this report:

1.Consolidated Financial Statements:Independent Auditors' Reports on Consolidated Financial StatementsConsolidated Balance Sheets at December 31,
  2000 and 1999Consolidated Statements of Income for each
  of the years in the three-year period ended December 31, 2000Consolidated Statements of Cash Flows for
  each of the years in the three-year period ended December 31, 2000Consolidated Statements of Shareholders' Equity and Comprehensive
  Income for each of the years in the three-year period ended December 31, 2000Notes to Consolidated Financial Statements2.   Financial Statement Schedules:Schedule II - Valuation and Qualifying AccountsAll financial statement schedules not
  listed are omitted either because they are not applicable, not required, or
  the required information is included in the consolidated financial statements
  or notes thereto.3.       Exhibits:  See Index to Exhibits on page 57.(b)Reports on Form 8-K:
          None.SIGNATURES

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



MACKIE DESIGNS INC.By:
  /s/ Greg C. MackieGreg C. MackieChairman of the BoardDate:
  March 30, 2001

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities indicated on March 30, 2001.



Signature
  
  Title/s/ Greg C. Mackie
  
  Chairman of the Board and DirectorGreg C. Mackie
  
  (Principal Executive Officer)/s/ James T. Engen
  
  Chief Executive Officer and DirectorJames T. Engen/s/ William A. Garrard
  
  Vice President and Chief Financial OfficerWilliam A. Garrard
  
  (Principal Financial and Accounting
  Officer)/s/ David M. Tully
  
  Treasurer and DirectorDavid M. Tully/s/ Raymond B. Ferguson
  
  DirectorRaymond B. Ferguson/s/ Gregory Riker
  
  DirectorGregory Riker/s/ C. Marcus Sorenson
  
  DirectorC. Marcus Sorenson/s/ Roy D. Wemyss
  
  DirectorRoy D. Wemyss

SCHEDULE II - VALUATION
AND QUALIFYING ACCOUNTS

MACKIE DESIGNS INC.



Description
  Balance
  at
  Beginning
  of Period
  RCF
  Allowances
  at Date of
  Acquisition
  Additions
  Charged to
  Expenses
  Deductions
  
  Describe
  Balance
  at
  End of 
  PeriodYEAR ENDED DECEMBER 31, 2000:Allowances deducted from
  asset accounts:Allowance
  for uncollectible accounts receivable
  $ 1,146,000
  
  $  
  752,000
  $ 819,000 (1)
  $ 1,079,000YEAR ENDED DECEMBER 31, 1999:Allowances deducted from
  asset accounts:Allowance
  for uncollectible accounts receivable
  $ 1,421,000
  
  $  
  471,000
  $ 746,000 (1)
  $ 1,146,000YEAR ENDED DECEMBER 31, 1998:Allowances deducted from
  asset accounts:Allowance
  for uncollectible accounts receivable
  $  
  481,000
  $  1,008,000
  $   
  279,000
  $
  347,000 (1)
  $ 1,421,000

(1)  Uncollectible accounts
written off, net of recoveries, and adjustment to reserves.

INDEX TO EXHIBITS



Exhibits
  Description3.1
  Restated Articles of Incorporation.  Incorporated by reference to
  Exhibit 3.1 to Registrant's Registration Statement filed under the  Securities Act of 1933 on Form S–1,
  as amended, Registration No. 33–93514.3.2
  Restated Bylaws.  Incorporated by reference to Exhibit 3.2 to Registrant's
  Registration Statement filed under the Securities Act of 1933 on Form S–1,
  as amended, Registration No. 33–93514.4.1
  See Articles II, III and IV of
  Exhibit 3.1 and Sections 1, 5 and 9 of Exhibit 3.2 confirming
  the rights of the holders of Common Stock.10.1
  Mackie Designs Inc. Second Amended and
  Restated 1995 Stock Option Plan. 
  Incorporated by reference to Exhibit 10.1 to Registrants Annual
  Report on Form 10-K for the year ended December 31, 1997.10.2
  Industrial Lease, dated December 15,
  1994, by and between Mackie Holdings, L.L.C. and Mackie Designs Inc.  Incorporated by reference to
  Exhibit 10.3 to Registrant's Registration Statement filed under the
  Securities Act of 1933 on Form S–1, as amended, Registration
  No. 33–93514.10.3
  Industrial Real Estate Lease, dated
  April 28, 1995, by and between Intrawest Properties Partnership U.S. and
  Mackie Designs Inc.  Incorporated by
  reference to Exhibit 10.4 to Registrant's Registration Statement filed
  under the Securities Act of 1933 on Form S–1, as amended,
  Registration No. 33–93514.10.4
  Exhibit C to Industrial Real Estate
  Lease, dated  April 28, 1995, by
  and between Intrawest Properties Partnership U.S. and Mackie Designs
  Inc.  Incorporated by reference to
  Exhibit 10.4A to Registrant's Registration Statement filed under the
  Securities Act of 1933 on Form S–1, as amended, Registration
  No. 33–93514.10.5
  Mackie Sales Representative Agreement,
  dated January 24, 1994, by and between Mackie Designs Inc. and
  C.M. Sorenson Co. dba Calwest Marketing So.  Incorporated by reference to
  Exhibit 10.5 to Registrant's Registration Statement filed under the
  Securities Act of 1933 on Form S–1, as amended, Registration
  No. 33–93514.10.6
  Exhibit C to Mackie Sales
  Representative Agreement, dated 
  January 24, 1994, by and between Mackie Designs Inc. and C. M. Sorenson
  Co. dba Calwest Marketing So. 
  Incorporated by reference to Exhibit 10.5A to Registrant's
  Registration Statement filed under the Securities Act of 1933 on Form S–1,
  as amended, Registration No. 33–93514.10.7
  Mackie Designs Inc. 401(k) Profit Sharing
  Plan dated December 20, 1993. 
  Incorporated by reference to Exhibit 10.15 to Registrant's
  Registration Statement filed under the Securities Act of 1933 on Form S–1,
  as amended, Registration No. 33–93514.10.8
  Employee Agreement dated May 19, 1997
  between William A. Garrard and Mackie Designs Inc.  Incorporated by reference to Exhibit 10.3 to Registrant's
  Quarterly Report on Form 10–Q for the period ended June 30,
  1997.10.9
  Promissory Note dated October 27, 1997 made
  by Mackie Designs Inc. to the order of U. S. Bank of Washington, National
  Associated, in the principal amount of $5,000,000.  Incorporated by reference to Exhibit 10.18 to Registrants
  Annual Report on Form 10-K for the period ended December 31, 1997.10.10
  Credit Agreement dated June 18, 1998
  between U.S. Bank National Association and Mackie Designs Inc. in the
  principal amount of $14,000,000. 
  Incorporated by reference to Exhibit 10.1 to Registrants Quarterly
  Report on Form 10-Q for the period ended June 30, 1998.10.11
  Acquisition Note dated June 18, 1998 made
  by Mackie Designs Inc. to the order of U.S. Bank National Association in the
  principal amount of $13,000,000. Incorporated by reference to Exhibit 10.2 to
  Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
  1998.10.12
  Revolving Note dated June 18, 1998 made by
  Mackie Designs Inc. to the order of U.S. Bank National Association in the
  amount of $5,000,000. Incorporated by reference to Exhibit 10.3 to
  Registrant's Quarterly Report on Form 10-Q for the period ended June 30,
  1998.10.13
  First Amendment to Credit Agreement dated
  June 29, 1998 between Mackie Designs Inc. and U.S. Bank National Association.
  Incorporated by reference to Exhibit 10.4 to Registrant's Quarterly Report on
  Form 10-Q for the period ended June 30, 1998.10.14
  Stock Purchase and Sale Agreement between
  the Company and Radio Cine Forniture (R.C.F.) S.p.A. consisting of letters
  dated November 9, 1997, April 30, 1998, June 25, 1998, and June 29, 1998.
  Incorporated by reference to Exhibit 2.1 to Registrant's Current Report on
  Form 8-K dated June 29, 1998.10.15
  Loan Agreement dated October 21, 1999
  between James T. Engen and Mackie Designs, Inc. in the amount of
  $250,000.  Incorporated by reference
  to Exhibit 10.20 to Registrants Annual Report on Form 10-K for the period
  ended December 31, 1999.10.16
  Second Amendment to Employment Agreement of
  William A. Garrard dated September 28, 1999 between William A. Garrard and
  Mackie Designs, Inc.  Incorporated by
  reference to Exhibit 10.21 to Registrants Annual Report on Form 10-K for the
  period ended December 31, 1999.10.17
  Stock Purchase and Sale Agreement dated
  April 6, 2000 between the Company and Eastern Acoustic Works, Inc.  Incorporated by reference to Exhibit 2.2
  to Registrants Current Report on Form 8-K dated April 6, 2000.*10.18
  Fourth Amendment dated March 31, 2000 to
  Credit Agreement dated June 29, 1998 between Mackie Designs Inc. and U.S.
  Bank National Association.*10.19
  Fifth Amendment dated July 28, 2000 to
  Credit Agreement dated June 29, 1998 between Mackie Designs Inc. and U.S.
  Bank National Association.10.20
  Sixth Amendment dated September 28, 2000 to
  Credit Agreement dated June 29, 1998 between Mackie Designs Inc. and U.S.
  Bank National Association.*10.21
  Employment Agreement of Wyatt Hyora dated
  July 26, 2000 between Wyatt Hyora and Mackie Designs, Inc.*10.22
  Employment Agreement of Laura Stutsman
  dated December 12, 2000 between Laura Stutsman and Mackie Designs, Inc.11.1
  Computation of net income per share.  Incorporated by reference to the Notes to
  Consolidated Financial Statements in the Annual Report to Shareholders of
  Mackie Designs Inc. for the year ended December 31, 2000.13.1
  Annual Report to Shareholders of Mackie
  Designs Inc. for the year ended December 31, 2000.*21.1
  Subsidiaries of Mackie Designs Inc.*23.1
  Consent of KPMG LLP, Independent Auditors.*23.2
  Consent of Ernst & Young LLP,
  Independent Auditors.

______________________________

* Filed herewith