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 1934 [FEE REQUIRED]
          For the fiscal year ended October 31, 1996
                                        OR
     [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
          For the transition period from      to     .
                  Commission file Number 2-31520

                            KIT MANUFACTURING COMPANY
              (Exact name of registrant as specified in its charter)

            California                                  95-1525261     
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)                Identification No.)
     530 East Wardlow Road, Long Beach, California        90807   
        (Address of principal executive offices)        (Zip Code)

     Registrant's telephone number, including area code (310) 595-7451
     Securities registered pursuant to Section 12(b) of the Act:

          Title of class:  Common Stock, no par value
          Name of each exchange on which registered:  American Stock
          Exchange

     Securities registered pursuant to Section 12(g) of the Act:  None
          Indicate by check mark whether the Registrant (1) has filed all
     reports required to be filed by Section 13 or 15(d) of the Securities
     Exchange Act of 1934 during the preceding 12 months (or for such
     shorter period that the registrant was required to file such reports),
     and (2) has been subject to such filing requirements for the past 90
     days.    
     Yes   X     No     

          Indicate by check mark if disclosure of delinquent filers pursuant
     to Item 405 of Regulation S-K is not contained herein, and will not be
     contained, to the best of registrant's knowledge, in definitive proxy
     or information statements incorporated by reference in Part III of this
     Form 10-K or any amendment to this Form 10-K.  [ ]

          The approximate aggregate market value of voting stock held by
     non-affiliates of Registrant was $7,062,208 as of January 10, 1997.

                                    1,110,934
     (Number of shares of Common Stock outstanding as of January 10, 1997)

          Certain information called for by Parts I, II and IV is
     incorporated by reference to the registrant's Annual Report to
     shareholders for the fiscal year ended October 31, 1996 and the
     information called for by Part III is incorporated by reference to the
     registrant's definitive proxy statement to be filed with the Commission
     within 120 days after October 31, 1996.
                    The Index to Exhibits appears on page 16.
                                33 pages in total.


                                        1
<PAGE>


                                        PART I

          Item 1.   Business

                    General                    General

                    KIT Manufacturing Company ("Registrant") was
          incorporated in California in 1947, as the successor to a business
          founded in 1945.  A description of Registrant's business during
          the last fiscal year appears on page 2 of Registrant's Annual
          Report to Shareholders for the fiscal year ended October 31, 1996,
          which is incorporated herein by reference.

                   Principal Products Produced and Industry Segments

                    Registrant designs, manufactures and sells manufactured
          housing (mobile homes) which are relocatable, factory-built
          dwellings of single and double unit design.  Constructed on wheel
          undercarriages, they are towed by truck to locations where they
          are set up and connected to utilities.  Registrant also produces
          recreational vehicles designed as short-period accommodations for
          vacationers and travelers.  These products are travel trailers
          designed to be towed behind passenger vehicles and fifth wheel
          travel trailers designed to be towed behind and attached to
          special couplers in the beds of pickup trucks.

                    Set forth below are the percentages of revenues
          contributed by each class of similar products for the last three
          fiscal years:

                                                 Products Class         
               Fiscal Year               Manufactured       Recreational
            Ended October 31,               Housing            Vehicles  

                  1994                       30%                70%
                  1995                       27%                73%
                  1996                       22%                78%

                    Certain information regarding industry segments is set
          forth on page 10 of Registrant's Annual Report to Shareholders for
          the fiscal year ended October 31, 1996, which is incorporated
          herein by reference.

                    Method of Product Distribution

                    Registrant sells its products to approximately 372
          dealers in 34 states, 41 dealers in Canada and 1 dealer in Japan. 
          Exclusive dealerships are not the pattern of the industry, and
          virtually all dealers also sell competing products.  Registrant
          generally produces manufactured housing products only against
          orders received from dealers.  Recreational vehicles are built for
          inventory particularly during the winter months in anticipation of
          greater demand during the spring months.  (See "Seasonal
          Considerations" below.)  Transportation charges are an important 


                                           2
<PAGE>
          Item 1.   Continued

          factor in the cost of Registrant's products; therefore,
          distribution is generally a function of distance to the various
          markets and competitive conditions within these markets.  (See
          Item 2, "Properties," for the locations of Registrant's principal
          plants.)

                    Registrant is not dependent upon a single customer or a
          few customers and no dealer or group of dealers accounts for a
          substantial amount of Registrant's total sales.

                    Competitive Conditions

                    The recreational vehicle and manufactured housing
          industries are highly competitive.  Registrant believes that the
          principal methods of competition in these industries are based
          upon quality, price, styling, warranty and service of products
          being offered.  Registrant also believes that it competes
          favorably with respect to these factors in the recreational
          vehicle group and has recently taken action with respect to the
          manufactured housing product line to ensure it remains competitive
          in the marketplace.  There are a large number of firms
          manufacturing and marketing products similar to those of
          Registrant within the geographical area in which Registrant's
          products are marketed.  Several of the manufacturers within these
          industries are larger than Registrant in terms of total revenue
          and resources.

                    Backlog

                    Registrant does not consider the existence and level of
          backlog at any given date to be a significant factor affecting its
          business, except in establishing its production schedules.  This
          is primarily due to the fact that orders may be cancelled up until
          the time the dealer takes delivery, although such cancellations
          have not been significant to date.  The dollar amount of backlog,
          subject to the above described cancellation provision, was
          $8,247,330 and $7,705,796 at October 31, 1996 and 1995,
          respectively.  All of the backlog existing at October 31, 1996 is
          expected to be filled within the current fiscal year.

                    Sources and Availability of Raw Materials

                    Registrant purchases raw materials and components from a
          number of alternative sources and is not dependent upon any
          particular supplier.

                   Patents

                    Although Registrant's products are marketed under
          various trade names, Registrant does not believe that patents,
          trademarks, licenses, franchises and concessions are of material
          importance to its business.


                                           3
<PAGE>

          Item 1.   Continued


                   Research and Development

                    Registrant periodically revises and redesigns its models
          in response to consumer demand.  These revisions and redesigns can
          be extensive, if necessary, in order to obtain market acceptance. 
          Registrant manufactures and sells manufactured housing and
          recreational vehicles only and does not engage in new product
          development.

                    Number of Employees

                    On October 31, 1996, Registrant had 990 employees at its
          manufacturing plants and executive offices.

                    Seasonal Considerations

                    Registrant's sales and production volume traditionally
          increase during the second and third quarters of the fiscal year. 
          During fiscal 1996, fifty-four percent of sales were achieved
          during the second and third fiscal quarters.

                    Government Regulation

                    The manufacture and distribution of Registrant's
          manufactured housing and recreational vehicle products are subject
          to governmental regulation in the United States and Canada at the
          federal, state, provincial and local levels.  Compliance with
          those governmental regulations, including provisions regulating
          the discharge of materials into the environment or otherwise
          relating to the protection of the environment, is not expected to
          have a material adverse effect on Registrant.

                    Business Risks

                    Demand for Registrant's products is dependent upon
          the availability and cost of gasoline, available credit and
          economic conditions.  Credit and the economy favorably affected
          dealers and retail purchasers of Registrant's recreational vehicle
          products in fiscal 1996.  The Registrant believes that the
          Midwestern region has seen an increase in demand in fiscal 1996
          due to the continuing economic improvement.


                                           4
<PAGE>

          Item 1.   Continued


                    Working Capital

                    Accounts receivable balances fluctuate generally with
          the timing of shipments during the month since the majority of
          sales are either on C.O.D. terms or are financed by dealers
          through flooring arrangements with financial institutions. 
          Recreational vehicle finished goods inventory balances are subject
          to seasonal variations.  (See "Method of Product Distribution" and
          "Seasonal Considerations" above.)  A short delivery lead time
          exists for the majority of recreational vehicle and manufactured
          housing raw material purchases, thereby allowing Registrant to
          maintain low levels of raw materials inventory.  Registrant is a
          party to an unsecured revolving credit agreement with a bank that
          provides financing of seasonal working capital requirements.










                                           5
<PAGE>



          Item 2.   Properties

                    Registrant leases general executive and administrative
          offices in Long Beach, California.  The lease expires on March 14,
          1997.  Registrant owns an 11,160 square foot building, situated on
          1.7 acres, housing operational offices in Caldwell, Idaho.  The
          following table sets forth certain information about the property
          and facilities utilized by Registrant for manufacturing and plant
          administrative purposes, and the property leased to others (all
          property is owned by Registrant unless otherwise noted):

                                             Approximate   Approximate
          Facility And Location                 Acres      Square Feet

          Recreational vehicle plants:

               Caldwell, Idaho                               54,400  (1)
               Caldwell, Idaho                 20.5          55,200
               Caldwell, Idaho                 20.5          53,000
               McPherson, Kansas               18.6          47,400
               McPherson, Kansas                9.1          67,600
               Chino, California               10.0          47,700  (2)

          Manufactured housing plants:

               Caldwell, Idaho                  9.5          64,000  (3)
               Caldwell, Idaho                 13.0          81,000  (4)
               McPherson, Kansas               10.0            -0-   (5)



          (1)
             Production facility leased by Registrant during fiscal 1995. 
             Lease expires September 30, 1997.
          (2)
             Production facility leased to third party during fiscal 1996.
          (3)
             New plant production facility completed in January 1994.
          (4)
             Approximately 11,000-square foot warehouse added to production
             facility during fiscal 1993.
          (5)
             Production facility destroyed by a tornado on June 15, 1992;
            replaced in Caldwell, Idaho in 1994.





                                           6
<PAGE>



          Item 3.   Legal Proceedings

                    Not applicable.

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

                    Not applicable.









                                          7
<PAGE>

                                     PART II



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

                    Information in response to this item is incorporated by
          reference from the information appearing in Registrant's Annual
          Report to Shareholders for the fiscal year ended October 31, 1996,
          at pages 1 and 12.

          Item 6.   Selected Financial Data

                    Information in response to this item is incorporated by
          reference from the information appearing in Registrant's Annual
          Report to Shareholders for the fiscal year ended October 31, 1996,
          at page 11.

          Item 7.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations

                    Information in response to this item is incorporated by
          reference from the information appearing in Registrant's Annual
          Report to Shareholders for the fiscal year ended October 31, 1996,
          at page 3.

          Item 8.   Financial Statements and Supplementary Data

                    Information in response to this item is incorporated by
          reference from the Financial Statements and the Notes to Financial
          Statements in Registrant's Annual Report to Shareholders for the
          fiscal year ended October 31, 1996, at pages 4 through 9 and pages
          12 through 14 of this Form 10-K.

          Item 9.   Disagreements on Accounting and Financial Disclosure

                    Not applicable.






                                           8
<PAGE>



                                       PART III



          Item 10.  Directors and Executive Officers of the Registrant

                    Information with respect to this item is incorporated by
          reference from Registrant's definitive Proxy Statement to be filed
          with the Commission within 120 days after the close of
          Registrant's fiscal year.

          Item 11.  Executive Compensation

                    Information with respect to this item is incorporated by
          reference from Registrant's definitive Proxy Statement to be filed
          with the Commission within 120 days after the close of
          Registrant's fiscal year.

          Item 12.  Security Ownership of Certain Beneficial Owners and
                    Management

                    Information with respect to this item is incorporated by
          reference from Registrant's definitive Proxy Statement to be filed
          with the Commission within 120 days after the close of
          Registrant's fiscal year.

          Item 13.  Certain Relationships and Related Transactions

                    Information with respect to this item is incorporated by
          reference from Registrant's definitive Proxy Statement to be filed
          with the Commission within 120 days after the close of
          Registrant's fiscal year.









                                           9
<PAGE>


                                        PART IV



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

          (a) (1)   Financial Statements      

                                                               Annual Report
                                                                  Page(s)   

                    Balance Sheets at October 31, 1996 and           
                      1995                                           4

                    Statements of Income for each of the three
                      years in the period ended October 31, 1996     5
                     
                    Statements of Shareholders' Equity for each 
                      of the three years in the period ended 
                      October 31, 1996                               5      
                                                   

                    Statements of Cash Flows for each of
                      the three years in the period ended
                      October 31, 1996                                6      
                                                      
                    
                    Notes To Financial Statements                     7-9

                    Report of Independent Accountants                 9      
                                                  




                    The financial statements and the Report of Independent
          Accountants listed in the above index which are included in
          Registrant's Annual Report to Shareholders for the fiscal year
          ended October 31, 1996 are hereby incorporated by reference.  With
          the exception of the items referred to above and in Items 1, 5, 6,
          7 and 8, Registrant's Annual Report to Shareholders for the fiscal
          year ended October 31, 1996 is not to be deemed filed as part of
          this report.







                                          10
<PAGE>


          Item 14.  Continued

          (a) (2)   Fnancial Statement Schedules

                                                                 FORM
                                                                 10-K
                                                                 PAGE

                    Report of Independent Accountants on
                      Schedules                                   12

                    Schedules:

                    For each of the three years in the
                      period ended October 31, 1996

                      II     Valuation and  Qualifying 
                                 Accounts                         13

                      IX     Short-Term Borrowings                14





                    Schedules other than those listed above are omitted for
          the reason that they are not required or are not applicable, or
          the required information is shown in the financial statements or
          notes thereto.  Columns omitted from schedules filed have been
          omitted because the information is not applicable.

          (a) (3)   Exhibits                    Exhibits

          (3)       Articles of Incorporation and By-Laws adopted by
                    Registrant.

          (10)      Material Contracts.

                         (A)       1.   Incentive Bonus Plan.

          (13)      Annual report to security holders.

          (b)       Reports on Form 8-K                 

                    No reports on Form 8-K were filed during the fiscal
                    quarter ended October 31, 1996.






                                          11
<PAGE>
                    REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULES

          To the Shareholders and Board of Directors
          of KIT Manufacturing Company

                    Our report on the financial statements of KIT
          Manufacturing Company has been incorporated by reference in this
          Form 10-K from page 9 of the 1996 Annual Report to Shareholders of
          KIT Manufacturing Company.  In connection with our audits of such
          financial statements, we have also audited the related financial
          statement schedules listed in the index on page 11 of this Form
          10-K.

                    In our opinion, the financial statement schedules
          referred to above, when considered in relation to the basic
          financial statements taken as a whole, present fairly, in all
          material respects, the information required to be included
          therein.



          COOPERS & LYBRAND L.L.P.

          Los Angeles, California
          December 20, 1996





                                          12
<PAGE>
<TABLE>

                                             KIT MANUFACTURING COMPANY

                                                   SCHEDULE II
                                         VALUATION AND QUALIFYING ACCOUNTS
                                For The Years Ended October 31, 1996, 1995 And 1994
<CAPTION>                                                   



                   Col. A                   Col. B              Col. C             Col. D       Col. E

                                                               Additions       
                                                            (1)         (2)
                                                         Charged To  Charged To
                                            Balance At     Costs       Other                   Balance At
                                           Beginning Of     And      Accounts -  Deductions -    End Of
                   Description                Period      Expenses    Describe     Describe      Period 

        Allowance for doubtful accounts:

            <S>                               <C>           <C>                     <C>           <C>
            Year ended October 31, 1994       $49,000       $7,000                 $12,000 (A)    $44,000

            Year ended October 31, 1995       $44,000       $  -                   $  -           $44,000

            Year ended October 31, 1996       $44,000       $  -                   $1,000 (A)     $43,000




</TABLE>


        (A)           Write-off of uncollectible accounts.

                                                        13
<PAGE>
<TABLE>

                                           KIT MANUFACTURING COMPANY

                                                  SCHEDULE IX
                                             SHORT-TERM BORROWINGS
                              For The Years Ended October 31, 1996, 1995 And 1994
<CAPTION>
   Col.A                                     Col.B             Col.C                Col.D            Col.E              Col.F

                            Balance At                          Maximum Amount           Weighted Average        Weighted Average
Category Of Aggregate        End Of       Weighted Average       Outstanding             Outstanding              Interest Rate  
Borrowings                  Period        Interest Rate       During The Period(B)     During The Period(C)   During The Period(C)
Year ended October 31, 1994:

 Unsecured revolving
 <S>                           <S>                <C>         <C>                          <C>                       <C>
 credit agreement (A)          -0-                *           $5,400,000                   $2,159,000                6.4% 

 Year ended October 31, 1995:

   Unsecured revolving 
   credit agreement (A)         -0-                *           $1,300,000                     $722,000               8.8%

   Year ended October 31, 1996:

   Unsecured revolving 
   credit agreement (A)         -0-                *           $1,600,000                     $697,000               8.0%

   (A)      The Registrant is party to an unsecured revolving 
   credit agreement with a bank that provides financing 
   of seasonal working capital requirements.  There are 
   no compensating balance requirements under the 
   agreement.  Major provisions of the agreement include 
   interest at the bank's prime rate and certain minimum 
   requirements as to the Registrant's working capital 
   and debt to equity relationships.  The maximum 
   borrowing permitted is the lesser of $7,500,000 or 
   the sum of 80% of eligible trade receivables and 50% 
   of inventories, less any commercial and standby 
   letters of credit outstanding up to a maximum of 
   $1,000,000.

   (B)      Based on month-end balances.
   (C)      Based on the daily balances and interest rates 
     during the year.

   *Not applicable.

</TABLE>
                                               14
<PAGE>

                                       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.

                                                 KIT Manufacturing Company
                                                 By: /s/ Dan Pocapalia    
                                                         Dan Pocapalia
                                                     Chairman of the Board,   
                                                 Chief Executive Officer and 
                                                          President

                  Pursuant to the requirements of the Securities Exchange Act of
        1934, this report has been signed below by the following persons on
        behalf of the Registrant and in the capacities and on the dates
        indicated:

        /s/ Dan Pocapalia Jan. 13, 1997    /s/ John W.H. Hinricks  Jan. 13, 1997

        Dan Pocapalia                           John W.H. Hinricks
        Chairman of the Board,                  Director
        Chief Executive Officer
        and President (Principal 
        Executive Officer)



        /s/ John F. Zaccaro   Jan. 13, 1997 /s/ Frank S. Chan Jan. 13, 1997
        John F. Zaccaro                         Frank S. Chan
        Director                                Director



        /s/ Dale J. Gonzalez  Jan. 13, 1997 /s/ Fred W. Chel Jan. 13, 1997

        Dale J. Gonzalez                        Fred W. Chel
        Vice President - Treasurer              Director
        (Principal Financial and
        Accounting Officer)







                                           15
<PAGE>

                                   INDEX TO EXHIBITS

                    EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
                                               


                                                               Sequential
                                                               Page Number

          (3)      Articles of Incorporation and By-Laws adopted 
                   by Registrant                                     17  

          (10)     Material Contracts

                         (A)      1.    Incentive Bonus Plan         18  

          (13)     Annual Report to Shareholders                      *  










          *Incorporated by reference

                                          16                        
<PAGE>


        (3)      Articles of Incorporation and By-Laws

                          The amended and restated Articles of
                 Incorporation  and By-Laws of the Registrant are hereby
                 incorporated by reference from the exhibits to Form 10-K
                 (File No. 2-31520) as filed for the fiscal year ended
                 October 31, 1987.













          *Incorporated by reference

                                        17
<PAGE>

        (10)     Material Contracts

        (A)            1.       Incentive Bonus Plan

                                Registrant maintains an Incentive Bonus
                       Plan under which incentive bonuses may be paid to
                       key management personnel pursuant to individual
                       agreements relating to the profitability of the
                       participant's area of responsibility.  The amount
                       of the bonus paid generally increases as the
                       profitability of the area of responsibility
                       increases.  Time periods for which performance is
                       measured include fiscal quarters and in some cases
                       fiscal years.  Payments are typically made within
                       75 days after the time period for which
                       performance is measured.  The agreements are
                       reviewed annually and may be terminated at will by
                       either party.








          *Incorporated by reference

                                        18
<PAGE>






                           KIT Manufacturing Company

                              1996 Annual Report











                                   19
<PAGE>
<TABLE>

   KIT Manufacturing Company
   Financial Highlights                                                  
   (Dollars in thousands except per share amounts)                       
<CAPTION>                                                               
                                  1996         1995         1994       1993        1992 
   Operating Results for the               
   Year Ended October 31                                                 
                                      
   <S>                           <C>         <C>           <C>        <C>         <C>
   Sales                         $97,158     $101,462      $89,722    $59,122     $55,469   
   Net income                    1,431(1)     1,349(2)     1,891(3)        33      1,458(4)
        Per share                $1.29(1)     $1.21(2)     $1.61(3)     $0.02      $0.99(4)
   Shares outstanding           1,110,934    1,110,934    1,177,283 1,472,389     1,472,389 
   Working capital               $8,515       $8,427       $7,622     $10,832    $12,213   
                                                                         
                  
   (1)  Includes gain on business interruption claim of $373,000, net of
   related income taxes, or $0.34 per share.                             
                                                     
   (2)  Includes gain on business interruption claim of $423,000, net of
   related income taxes, or $0.38 per share.                             
                                                     
   (3)  Includes gain on involuntary conversion of plant facility and
   equipment and business interruption claim 671,000, net of related income
   taxes, or $0.57 per share.                                            
                                      
   (4)  Includes gain on involuntary conversion of plant facility and
   equipment of $1,118,000, net of related income taxes, or $0.76 per
   share.

</TABLE>

    




   About the Company:

   KIT Manufacturing Company produces manufactured
   housing and recreational vehicles marketed by an 
   independent dealer network in 21 states in the West,
   Midwest, South and Southeast sectors and Canada and Japan.
   KIT homes are permanent living structures that are
   built utilizing materials similar to conventional
   housing. KIT recreational vehicle products are used
   primarily for camping or vacation travel and provide
   a variety of living accommodations.

                                       20
<PAGE>

   To Our Shareholders:

        Operating  income rose 19% in fiscal 1996 to $1,774,000 while sales
   declined 4%. This improvement in earnings from operations was attributed
   to  operating  efficiencies, coupled with a decline in certain expansion
   costs  in  our  newest RV and manufactured housing plants. The expansion
   projects  at  the  recreational vehicle and manufactured housing plants,
   completed  in  the latter part of fiscal 1995, were designed to increase
   operating capacity.

        Net income rose 6% to $1,431,000, or $1.29 per share, in comparison
   to  net  income  in  fiscal  1995 of $1,349,000, or $1.21 per share. Net
   income  for  both  fiscal years includes after-tax gains from a business
   interruption  claim  of  $373,000, or $.34 per share, in fiscal 1996 and
   $423,000,  or $.38 per share, in fiscal 1995. These gains are the result
   of  an  insurance  claim  arising  from  the  1992 tornado damage to our
   McPherson, Kansas manufacturing facility. This plant was closed in 1992.
        
        Industry-wide  recreational vehicle sales were impacted by economic
   uncertainty  during the third and forth quarters of fiscal 1996. Despite
   this  fact, KIT's RV sales rose in comparison to 1995. This was in large
   part  due  to  increased  demand  due  to KIT's commitment to developing
   innovative  floor  plans  and  interior  designs,  thereby providing the
   retail  consumer  with  value and quality. In addition, these continuing
   improvements  to our RV product lines have enabled the Company to expand
   its  dealer  base  by  providing  both the new and existing dealers with
   products that remain competitive in the market place.
        
        The  manufactured  housing  division is currently in the process of
   expanding  its  plant  by  approximately  40%.  This expansion should be
   completed  sometime  in  March 1997. Management feels that the increased
   capacity  as  well  as  the  progress  made  through several operational
   changes,  should  position KIT to take advantage of the expanding demand
   for the KIT manufactured home in all of our sales regions.
        
        The most recent National RV show in Louisville, Kentucky as well as
   our annual manufactured housing "neighborhood" show in Boise, Idaho held
   during  the  latter  part of 1996 provided management with an optimistic
   view  of  what  lies  ahead  for  fiscal  1997. Our recreational vehicle
   p r oduct  lines  and  our  manufactured  homes,  with  a  multitude  of
   innovations,  were  well  received  by  the  dalers. Both of these shows
   generated a significant amount of sales to the existing dealers and gave
   us the opportunity to enhance our dealer network.
        
        The  Company  remains  in  a  strong  financial  position  to  take
   advantage of anticipated current and future demand. KIT has no long term
   debt  and  its  line  of  credit  remains  unused at fiscal year end. In
   addition,  working capital increased from fiscal 1995 and current assets
   remain at more than double current liabilities.

        Fiscal  1997  will  see  the  Company  continue  to  concentrate on
   providing  new  and  existing  dealers  with  high  quality,  innovative
   products.  First  quarter  operations  will  be  affected  by the severe
   weather  and  flooding conditions on the West coast, however, management
   feels  confident  in the coming fiscal year that the Company will remain
   creative as well as competitive in our market territory.

   Sincerely,

   Dan Pocapalia
   Chairman, President and
   Chief Executive Officer

                                    21
<PAGE>

   Recreational Vehicles

        KIT  is  one  of  the largest manufacturers of  travel trailers and
   fifth-wheels  in  the  United  States. This position is the result of 52
   years of delivering the highest quality and value to our customers. In a
   recent  survey  of  all  recreational  vehicle  dealers by the RVDA, KIT
   ranked as one of the highest rated manufacturers in the United States on
   product design, floor plans, construction and service.
        T h e  baby-boomer  generation  along  with  younger  families  are
   discovering  the  affordability  and  comfort  of  recreational  vehicle
   travel.  The  Company's  philosophy  of  uncompromising  quality control
   standards  has driven KIT to new heights in retail customer loyalty from
   the oldest to the newest members of RV lifestyle.
        KIT's  RV  products  incorporate  high quality, reliable name-brand
   appliances,  interior  components  and  accessories. In our 1997 product
   lines,  the  Company  introduced  many  new innovations in our models in
   response  to  our  customers' requests. In addition to the new interiors
   introduced  in  the  1996 models, the 1997 floor plans have been further
   enhanced.  Because  of these changes, KIT has been able to significantly
   improve the size of its dealer network. 
        KIT  produces  a wide range of recreational vehicle products in its
   manufacturing  facilities  in Caldwell, Idaho and McPherson, Kansas. KIT
   RV s measure from 17 to 39 feet in length, are more than eight feet wide
   and provide sleeping accommodations from 2 to 10 persons.
        KIT  produces  its travel trailers and fifth-wheels under the brand
   names of Road Ranger, Companion, Sportsmaster and Patio Hauler.
        T h e  entry  level  Sportsmaster    brand  continues  to  move  up
   dramatically  in  the  market  place,  offering many quality features as
   standard equipment. 
        The  Road  Ranger  and Companion name lines, with over thirty floor
   plans,  are  in the mid-priced market. These models feature a wide range
   of  features  for  the consumer. Road Ranger Elite and Companion Cordova
   models  are  our  high-end  product  offering.  These models provide the
   largest  living  and  storage areas in their price range. They appeal to
   the  discerning buyer and offer a vast selection of features as standard
   equipment.
        Designed  for adventure, the Patio Hauler features a cargo area for
   hauling  off-road  vehicles and other sporting equipment. The cargo area
   then converts to an enclosed patio when the "toys" are removed. The five
   available  floor  plans all feature the patio concept as well as provide
   the  buyer  with  a  separate, fully appointed living area away from the
   patio.
        Retail  prices  for  the  more  than  30 KIT floor plans range from
   $11,000  to  $48,000.  This range covers approximately 80 percent of the
   travel trailer and fifth-wheel market.
        More  than  300  independent dealers now distrbute KIT recreational
   vehicles  to  the  retail  consumer  throughout  the  continental United
   States,  Canada  and  Japan. KIT provides its dealer network system with
   national  media  advertising,  sales  literature,  training  and special
   support programs, along with its national reputation for product quality
   and service.
        RV  use  is  a  flourishing source of recreation and relaxation for
   many  Americans  regardless of age or economic background. Over the past
   52  years,  KIT  has  supplied  this growing market with the quality and
   affordability  that   fulfills the desires of people who enjoy this type
   of  comfort  and  convenience.  The  Company  continues  to  strive  for
   excellence  in  its  products  and  service  in its quest to make the RV
   experience a most enjoyable one for its many satisfied customers.

   Manufactured Housing

        T h e   manufactured  housing  division  continues  its  profitable
   operations. Value pricing coupled with a continuing emphasis on reducing
   operating  costs  has  had a positive effect on the financial results of
   the housing products division.
        M a nufactured  housing  builds  both  single  and  multi-sectioned
   dwellings  designed  to  be  transported  to  a  prepared  homesite.
   Multi-sectioned  homes  offer  the  appearance  and  living  space  of
   traditional  site-built  housing and have become the dominant portion of
   our  sales.  KIT  homes  are  built  in  a  controlled environment which
   minimizes  the  variables  inherent  in  outdoor  construction.  By
   standardizing  models  we  can  build homes with greater efficiency, and
   consequently  at  lower  cost,  than  site-built  homes  with  the  same
   features.
        The manufactured housing division continues to aggressively develop
   new products that incorporate innovative floor plans, modern  colors and
   functional  design.  KIT  manufactured  homes  are  distributed  from
   production  facilities  in  Caldwell,  Idaho  through  a  network  of
   approximately 63 dealers located in 9 Western states.
        KIT's  homes  are  marketed in five product lines. The Oakcrest 14'
   wide  home offers gracious, convenient living in modest floor space. The
   Royal  Oaks    home  appeals  to  buyers  with  an  interest  in  deluxe
   entry-level housing. Our Sierra homes are generally larger and provide a
   wide  array  of  styles  and custom features. The Golden State line, our
   most elegant series of homes, provides outstanding value for individuals
   who  place  a  premium  on  comfort  and luxury. Introduced in 1994, the
   Briercrest  was  designed  specifically  with subdivision application in
   mind  as  the  home  is  sold  with  an  attached garage and is basement
   applicable.  Living  space  in  the  52 available floor plans range from
   about  530  to  more than 2,500 square feet. Retail prices, exclusive of
   land costs, range from approximately $20,000 to $120,000.
        As  the nation continues to search for solutions to the  problem of
   a f f ordable,  single-family  housing,  KIT  stands  ready  to  provide
   attractive, energy-efficient homes at competitive prices.

                                       22
<PAGE>

   KIT Manufacturing Company
   Management's  Discussion  And  Analysis  of  Results  of Operations and
   Financial Condition

   Results of Operations

   Fiscal 1996 Compared to 1995

        Sales  declined 4% to $97.2 million compared to the prior year. Net
   income  increased  to  $1,431,000,  or  $1.29  per  share,  compared  to
   $1,349,000,  or  $1.21  per  share, in 1995. Net income in 1996 and 1995
   i n cludes  after-tax  gains  from  insurance  proceeds  on  a  business
   interruption  claim  of  $373,000,  or $0.34 per share and  $423,000, or
   $0.38  per  share, respectively. Both divisions implemented modest price
   increases  in  1996  and  1995 to counter cost increases in raw material
   costs.  Operating  income  in  the  manufactured  housing  division rose
   significantly  due  a  major decrease in operating costs as the division
   completed a consolidation of two operating plants.
        Recreational  vehicle division sales increased 2% to $75.6 million.
   Despite  an  overall  decrease  in  RV  shipments  of 5% to 5,229 units,
   fifth-wheel  model shipments rose to 2,501 units from 2,320 shipped last
   year.  Travel trailer shipments declined 15% to 2,732 units, however the
   model  mix  moved toward higher priced units.  Management of the Company
   believes that the trend in sales of higher priced units will continue in
   fiscal 1997.
        Manufactured  housing  sales  declined  21% to $21.6 million.  This
   decrease reflected a 49% decline in shipments of single-section homes to
   59  units  and a 22% decrease in shipments of multi-section homes to 519
   units. Total unit shipments decreased 26% to 578 homes in fiscal 1996.
        Gross  profit  as a percent of sales increased to 11% in comparison
   to  9.2%  in 1995. The primary reasons for the increase were an increase
   in  operating  efficiencies,  improved  sales  volume  and  a decline in
   start-up costs at the new RV plant and a decline in manufactured housing
   costs due to the plant consolidation.
        Selling,  general  and  administrative expenses rose 13% to 9.2% of
   sales  in  comparison  to fiscal 1995. The Company increased its selling
   costs  in  RV's  in  order  to  maintain  market  share  as  competition
   increased.
        Net  interest expense of $13,000 as compared to net interest income
   of  $42,000 in 1995 was the result of higher average borrowing levels as
   the Company maintained its inventories at a higher average level than in
   fiscal 1995.

   Fiscal 1995 Compared to 1994

        Sales  increased 13% to $101.5 million compared to fiscal 1994. Net
   income  decreased  to  $1,349,000,  or  $1.21  per  share,  compared  to
   $1,891,000,  or  $1.61 per share, in fiscal 1994. Net income in 1995 and
   1994  includes  an  after tax-gain from insurance proceeds on a business
   interruption claim and an after-tax gain on an involuntary conversion of
   plant  facility  and  equipment  of  $423,000  or  $.38  per  share, and
   $671,000, or $0.57 per share, respectively. 
        Recreational vehicle division sales increased 18% to $74.2 million.
   Product  line innovations and new models resulted in an overall increase
   in RV shipments of 10% to 5,516 units. Travel trailer shipments rose 19%
   to  3,196  units.  Fifth-wheel  model shipments increased to 2,320 units
   from 2,318 shipped in 1994. 
        Manufactured  housing  sales  rose  1% to $27.3 million. Total unit
   shipments decreased to 781 units in fiscal 1995. 
        Gross  profit  as a percent of sales declined to 9.2% in comparison
   to  10.6% in 1994. The primary reasons for the decrease were an increase
   in  sales  of  lower  margin  RV's  over  fiscal 1994 and an increase in
   start-up and plant consolidation costs.
        Selling,  general  and administrative expenses decreased 5% to 7.8%
   of  sales  in comparison to fiscal 1994 as the Company continued to hold
   down these costs.
        Net  interest  income  of  $42,000 as compared to $16,000 in fiscal
   1994 was the result of lower average borrowing levels than in 1994.

   Liquidity and Capital Resources

        The  financial  position of the Company continues to remain strong.
   The current ratio at fiscal year end 1996 rose to 2.1 from 2.0 in fiscal
   1995 due to an increase in receivables and inventories. 
        In  addition  to funding capital requirements with available funds,
   the  Company,  through  financing  activities,  funds  seasonal  working
   capital requirements with cash from periodic borrowings on its unsecured
   revolving  line  of  credit.  See  Note  4  of  the  Notes  to Financial
   Statements  for  discussion  of  the  line  of  credit.  There  were  no
   borrowings against the line of credit at fiscal year-end 1996 or 1995.
        The  Company  believes that available funds, supplemented as needed
   with  funds  available  on  its  line  of  credit,  will provide it with
   sufficient  resources to meet present and reasonably foreseeable working
   capital requirements and other cash needs.


                                   23
<PAGE>

<TABLE>
   KIT Manufacturing Company                                             
   Balance Sheets                                              
<CAPTION>             
                                                               
   October 31,                                                 1996             1995 
   ASSETS                                                           
   Current Assets                                                        
       <S>                                                  <C>               <C>
       Cash and cash investments                            $2,281,000        $2,218,000     
       Accounts receivable, net of allowance for doubtful
          accounts of $43,000 in 1996 and $44,000 in 1995    8,026,000         7,350,000 
       Inventories                                           7,169,000         5,667,000 
       Prepaids and deferred income taxes                    1,241,000         1,589,000 
             Total Current Assets                           18,717,000        16,824,000     
   Property, Plant and Equipment, at cost
       Land                                                    492,000           492,000   
       Buildings and improvements                            6,856,000         6,898,000 
       Machinery and equipment                               4,233,000         3,942,000 
       Construction in progress                                175,000             8,000     
                                                            11,756,000        11,340,000     
          Less accumulated depreciation                     (5,437,000)       (4,952,000)
                                                             6,319,000         6,388,000
   Other Assets                                                103,000            90,000

                                                           $25,139,000          $23,302,000    
                                                               
   LIABILITIES AND SHAREHOLDERS' EQUITY                                  
                            
   Current Liabilities                                                   
      Accounts payable                                      $3,685,000        $3,954,000     
      Accrued payroll and payroll related liabilities        2,256,000         2,203,000 
      Accrued marketing programs                             1,104,000           741,000   
      Accrued expenses                                       1,664,000         1,309,000 
      Income taxes payable                                      24,000           190,000
         Total Current Liabilities                           8,733,000         8,397,000 
      Deferred Income Taxes                                  1,469,000         1,399,000 
                                                            10,202,000         9,796,000 
   Commitments and Contingencies                                         
             

   Shareholders' Equity                                                  
             
       Preferred stock, $1 par value; authorized 1,000,000
         shares; none issued                                             

       Common stock, without par value; authorized 
       5,000,000 shares;issued and outstanding 1,110,934 
       shares in 1996 and 1995                                 750,000           750,000   
       Additional paid-in capital                              842,000           842,000          
       Retained earnings                                    13,345,000        11,914,000     
          Total Shareholders' Equity                        14,937,000        13,506,000     

                                                           $25,139,000       $23,302,000    
</TABLE>

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

                                    24
<PAGE>
<TABLE>

   KIT Manufacturing Company
   Statements of Income                                                  
<CAPTION>                       
                                                                         
   For the Years Ended October 31,             1996           1995                 1994 
 
  <S>                                     <C>                 <C>               <C>
  Sales                                   $97,158,000         $101,462,000      $89,722,000    
   Costs and expenses  
       Cost of sales                       86,473,000           92,098,000       80,246,000
       Selling, general and administrative 
        expenses                            8,911,000            7,872,000        7,472,000 
                                           95,384,000           99,970,000       87,718,000     

   Operating income                         1,774,000            1,492,000        2,004,000 

   Other income                                                          
             
       Interest (expense) income, net          (13,000)             42,000            16,000    
       Gain on involuntary conversion of plant
          facility and equipment                                                     779,000   
       Gain on business interruption claim     620,000             701,000           312,000   
   Income before income taxes                2,381,000           2,235,000         3,111,000 
   Provision for income taxes                  950,000             886,000         1,220,000 

   Net income                               $1,431,000          $1,349,000        $1,891,000     

   Net income per share                          $1.29               $1.21             $1.61     

   Shares outstanding                        1,110,934           1,110,934         1,177,283 

</TABLE>

<TABLE>

   Statements of Shareholders' Equity                               
<CAPTION>                                                                    
                                         Common Stock          Additional            Retained            
                                     Shares         Amount    Paid-In Capital        Earnings           Total
   <S>                              <C>           <C>           <C>                 <C>              <C>
   Balance, October 31, 1993        1,472,389     $994,000      $1,115,000          $11,821,000      $13,930,000
       Net income                                                                     1,891,000        1,891,000
       Repurchase of Common Stock    (361,455)    (244,000)       (273,000)          (3,147,000)      (3,664,000)
   Balance, October 31, 1994        1,110,934      750,000         842,000           10,565,000       12,157,000
       Net income                                                                     1,349,000        1,349,000
   Balance, October 31, 1995        1,110,934      750,000         842,000           11,914,000       13,506,000
       Net income                                                                     1,431,000        1,431,000
   Balance, October 31, 1996        1,110,934     $750,000        $842,000          $13,345,000      $14,937,000    

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

</TABLE>

                                         25
<PAGE>

<TABLE>

   KIT Manufacturing Company
   Statements of Cash Flows                                              
<CAPTION>                       

   For the Years Ended October 31,                          1996               1995                 1994 
   Cash Flows From Operating Activities:
     <S>                                                 <C>                <C>                 <C>
     Cash received from customers                        $96,711,000        $100,449,000        $87,480,000
     Interest received                                        53,000              87,000            116,000
     Cash received from operations                        96,764,000         100,536,000         87,596,000
     
     Cash paid to suppliers and employees                 95,593,000         101,061,000         84,133,000
     Interest paid                                            66,000              45,000            100,000
     Income taxes paid                                     1,073,000             908,000            837,000
     Cash disbursed for operations                        96,732,000         102,014,000         85,070,000
   Net cash provided by (used in) operating activities        32,000          (1,478,000)         2,526,000

   Cash Flows From Investing Activities:
      Purchase of property, plant and equipment, net        (434,000)         (1,251,000)         (3,622,000)
      Insurance proceeds from involuntary conversion of 
        plant facility and equipment and business 
        interruption claim                                   620,000             701,000           1,259,000
      Changes in other current and non-current assets       (155,000)           (379,000)           (358,000)
   Net cash provided by (used in) investing activities        31,000            (929,000)         (2,721,000)

   Cash Flows From Financing Activities:
      Funds used to repurchase common stock                                                       (3,664,000)
      Proceeds from line-of-credit borrowings              4,900,000           2,800,000           9,800,000
      Principal payments on line-of-credit borrowings     (4,900,000)         (2,800,000)         (9,800,000)
   Net cash used in financing activities                                                          (3,664,000)

   Net increase (decrease) in cash                            63,000          (2,407,000)         (3,859,000)
   Cash and cash investments at beginning of year          2,218,000           4,625,000           8,484,000
   Cash and cash investments at end of year               $2,281,000          $2,218,000          $4,625,000     

   Reconciliation of Net Income to Net Cash Provided by
      (Used in) Operating Activities:
   Net income                                             $1,431,000          $1,349,000          $1,891,000     
   Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:                        
                                                
   Depreciation                                              670,000             597,000             478,000
   Gain on involuntary conversion of plant facility
      and equipment and business interruption claims        (620,000)           (701,000)         (1,091,000)
   Increase in accounts and notes receivable                (676,000)         (1,209,000)         (1,151,000)
   (Increase) decrease in inventories                     (1,501,000)         (1,575,000)             41,000
   Increase in accounts payable and accruals                 894,000              29,000           2,225,000
   (Decrease) increase in income taxes payable              (166,000)             32,000             133,000

   Net cash provided by (used in) operating activities       $32,000         $(1,478,000)         $2,526,000

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

                                         26
<PAGE>

   KIT Manufacturing Company
   Notes to Financial Statements

   1. Summary of Significant Accounting Policies

   Cash  and Cash Investments
        The Company places its temporary cash investments, all of which are
   considered  cash equivalents, in high quality financial instruments. The
   Company  also maintains deposits at financial institutions in amounts in
   excess of federally insured limits. Management believes that credit risk
   related  to  its  investments  is  limited  due  to  the  quality of the
   investments and the Company's policy which limits credit exposure to any
   one financial institution.

   Valuation of Inventories
        Inventories are stated at the lower of cost (last-in, first-out for
   material and first-in, first-out for labor and overhead) or market.

   Depreciation and Amortization
        For  financial reporting purposes, depreciation and amortization of
   p r o perty,  plant  and  equipment  is  generally  provided  for  on  a
   straight-line  basis,  using estimated useful lives of 10 years for land
   improvements, 20 to 33-1/3 years for buildings and improvements, 3 to 10
   years  for  equipment  and  lease terms for leasehold improvements. Upon
   sale  or  disposition  of  assets,  any  gain or loss is included in the
   statement  of  income.  Expenditures  for maintenance, repairs and minor
   r e n ewals  are  charged  to  expense  as  incurred;  expenditures  for
   betterments and major renewals are capitalized.

   Income Taxes
     The  Company  follows  Statement of Financial Accounting Standards No.
   109,  "Accounting  for  Income  Taxes,"  (SFAS  109), which requires the
   recognition  of  deferred  tax  liabilities  and assets for the expected
   future  tax  consequences  of  events  that  have  been  included in the
   financial  statements  or  tax  returns. Under this method, deferred tax
   liabilities  and  assets  are determined based on the difference between
   the  financial  statement  and tax bases of assets and liabilities using
   enacted  rates  in  effect  for  the  year  in which the differences are
   expected to reverse.

   Income Per Share
     Income  per  share amounts are based on the weighted average number of
   common  shares  outstanding  during  the  year.  During fiscal 1994, the
   Company  repurchased 361,455 common shares from the family of one of its
   f o unders.  Total  weighted  average  common  shares  outstanding  were
   1,110,934 for fiscal 1996 and 1995, and 1,177,283 for fiscal 1994. 



   Insurance
     The  Company  is  self-insured for workers  compensation for its plant
   locations,  officers  and  directors, and product liability. The Company
   has  recognized  an  estimated  potential liability for incurred but not
   reported  claims.  The  Company  recognized  experience refunds from its
   medical  insurance  carrier  amounting  to  $230,000 in 1996, $195000 in
   1995, and $168,000 in 1994.

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

   Stock Options
     In  October  1995,  the Accounting Standards Board issued Statement of
   Financial  Accounting  Standards  No.  123,  Accounting  for Stock Based
   Compensation  ("SFAS  123")  which is effective for transactions entered
   into  in fiscal years that begin after December 15, 1995. The Company is
   currently studying the effects of adopting SFAS 123.



   2.  Involuntary  Conversion of Plant Facility and Equipment and Business
   Interruption Claim
     In  mid-June,  1992,  the McPherson, Kansas manufactured housing plant
   f a cility  was  destroyed  by  a  tornado.  In  addition,  all  of  the
   manufacturing  equipment  and  inventories  were  lost to water and wind
   damage.  The storm also destroyed the finished goods inventory of the RV
   manufacturing  plant  in  the  same  location.  A  gain  of $779,000 was
   recorded  by  the  Company  in 1994, representing the difference between
   insurance  proceeds  and  the net book value of those items destroyed by
   the  tornado. The Company has also recorded gains in 1996, 1995 and 1994
   of  $620,000,  $701,000  and  $312,000,  respectively,  for  a  business
   interruption claim  relative to this matter. The insurance proceeds were
   used to construct the new manufactured housing plant in Caldwell, Idaho,
   which became operational in February 1994.

                                    27
<PAGE>

   KIT Manufacturing Company
   Notes to Financial Statements

   3. Stock Options
     During June 1994, the Company granted to five officers of the Company,
   options  to  purchase up to 96,944 shares of the Company's common stock,
   at  100% of the then fair value, or $10.38 per share. Also in June 1994,
   the Company granted to one such officer an additional option to purchase
   up  to  35,056 shares of the Company's common stock, at 110% of the then
   fair  value,  or  $11.41  per  share. Options granted vest in four equal
   annual  installments beginning one year after the date of the grant. The
   options  to  purchase  the  96,944  shares of the Company's common stock
   remain  outstanding  (subject  to  termination  of  employment, death or
   permanent  disability  of  the  holder,  as  set  forth    in the option
   agreements)  for a period of 10 years from the date of grant. The option
   to  purchase  the 35,056 additional shares of the Company's common stock
   remains  outstanding  (subject  to  termination  of employment, death or
   permanent  disability  of  the  holder,  as  set  forth    in the option
   agreements)  for  a period of 5 years from the date of grant. On October
   31,  1996  and  1995,  total  unexercised options were 132,000, of which
   66,000 and 33,000 options, respectively, were exercisable.



   4. Bank Credit Line
     The Company is party to an unsecured revolving credit agreement with a
   bank  that  provides financing of seasonal working capital requirements.
   There  are  no  compensating  balance  requirements under the agreement.
   Major  provisions of the agreement include interest at the lesser of the
   bank s prime rate or market rate, and certain minimum requirements as to
   the  Company  s  working  capital  and  debt-to-equity relationships. At
   October  31,  1996,  there  was  no outstanding balance on the revolving
   credit  line,  and  the  maximum  borrowing  permitted was the lesser of
   $7,500,000  or  the  sum of 80% of eligible trade receivables and 50% of
   i n ventories,  less  any  commercial  and  standby  letters  of  credit
   outstanding  up  to  a  maximum of $1,000,000. Interest costs charged to
   expense  for  the fiscal years 1996, 1995 and 1994 were $66,000, $45,000
   and  $100,000,  respectively.  In  fiscal  1994, the Company capitalized
   $40,000 of interest cost to buildings and improvements.

   5. Commitments and Contingencies
     The  Company  was  contingently  liable at October 31, 1996 to various
   financial  institutions  on  repurchase  agreements  in  connection with
   wholesale  inventory  financing. In general, inventory is repurchased by
   the  Company upon customer default with a financing institution and then
   resold through normal distribution channels. The total value of finished
   units  subject  to  such  agreements as of October 31, 1996 and 1995 was
   approximately $15,644,000 and $15,350,000, respectively.
     In  addition,  the  Company  is  contingently  liable  to  financial
   institutions  for  standby  letters  of  credit  totalling  $748,000 and
   $415,000 as of October 31, 1996 and 1995, respectively. These letters of
   c r e d i t   were  established  to  satisfy  the  self-insured  workers
   compensation  regulations  of  the  states in which the Company conducts
   manufacturing operations.
     Management does not expect that losses, if any, from the contingencies
   described  above  will  be  of  material  importance  to  the  financial
   condition or earnings of the Company.

<TABLE>
   6. Income Taxes
           The components of the provision (benefit) for income taxes are
   as follows (dollars in thousands):             
<CAPTION>
   October 31,                            1996           1995              1994 
   Current:                                                 
         <S>                            <C>            <C>               <C>
         Federal                        $712,000       $724,000          $783,000    
         State                           195,000        216,000           187,000     
                                         907,000        940,000           970,000
     
   Deferred:                                                
         Federal                          47,000        (19,000)          195,000     
         State                            (4,000)       (35,000)           55,000 
                                          43,000        (54,000)          250,000
     
                                        $950,000       $886,000        $1,220,000
</TABLE>
                                                 
<TABLE>
     The sources of deferred taxes were as follows:
   October 31,                               1996           1995           1994
<CAPTION>     
   <S>                                   <C>            <C>              <C>
   Accrued warranty costs                $(52,000)      $(59,000)        $(70,000)
   Workers' compensation reserves          31,000        (35,000)         (58,000)
   State income and franchise taxes         7,000         70,000          (75,000)
   Involuntary conversion of plant 
   facility & equipment                                                   325,000
   Inventory cost capitalization          (16,000)      (121,000)          81,000
   Accelerated depreciation                70,000         92,000           47,000
   Product liability reserves and other     3,000         (1,000)                       
                                          $43,000       $(54,000)        $250,000
</TABLE>
                                         28
<PAGE>

KIT Manufacturing Company
Notes to Financial Statements

<TABLE>
  6. Income Taxes Continued
      Reconciliation of the effective tax rates and the U.S. statutory tax rate is summarized as follows:
<CAPTION>
  October 31,                                 1996               1995              1994
  <S>                                         <C>                <C>               <C>
  Statutory tax rate                          34.0%              34.0%             34.0%
  State tax provision, net of 
    federal tax effect                         4.1                5.3              (1.0)
  Tax exempt interest                          (.3)               (.4)             (1.0)
  Other                                        2.1                 .7               1.1
                                              39.9               39.6              39.2
</TABLE>

<TABLE>
      The components of the deferred tax asset and liability are as follows:
<CAPTION>
  October 31,                                 1996               1995           
  Deferred tax asset:
    <S>                                      <C>                <C>
    Allowance for doubtful accounts          $20,000            $20,000
    Inventory adjustment                     138,000            122,000
    Accrued expenses                         592,000            573,000
    State income taxes                        97,000            104,000
                                            $847,000           $819,000
  Deferred tax liability:
    Accelerated depreciation                $374,000           $304,000  
    Involuntary conversion of plant 
      facility and equipment               1,095,000          1,095,000 
                                          $1,469,000         $1,399,000  

</TABLE>
   The Company did not record a valuation allowance against the deferred
   tax asset in fiscal 1996 or 1995.

<TABLE>
   7.  Inventories
     Inventories are summarized as follows:                           
<CAPTION>
   October 31,                                    1996           1995 
   <S>                                        <C>              <C>
   Raw material                               $3,413,000       $2,543,000
   Work in process                             1,230,000        1,055,000
   Finished goods                              2,526,000        2,069,000
                                              $7,169,000       $5,667,000
</TABLE>

   The excess of current replacement cost over last-in, first-out cost was
   $1,234,000 at October 31, 1996 and $1,308,000 at October 31, 1995.


   8. Industry Segment Information
     Information  about  the  Company's  operations within industry segments 
     for the years ended October 31, 1996, 1995 and 1994 is presented on 
     page 10.


   Report of Independent Accountants

   To the Shareholders and Board of Directors of KIT Manufacturing Company

     We  have  audited the accompanying balance sheets of KIT Manufacturing
   Company  as  of  October 31, 1996 and 1995 and the related statements of
   income,  shareholders equity, and cash flows for each of the three years
   in the period ended October 31, 1996. These financial statements are the
   responsibility  of  the  Company  s management. Our responsibility is to
   express an opinion on these financial statements based on our audits.
     We conducted our audits in accordance with generally accepted auditing
   standards. Those standards require that we plan and perform the audit to
   obtain  reasonable  assurance about whether the financial statements are
   free  of  material  misstatement. An audit includes examining, on a test
   basis,  evidence supporting the amounts and disclosures in the financial
   statements.  An  audit also includes assessing the accounting principles
   used and significant estimates made by management, as well as evaluating
   the overall financial statement presentation. We believe that our audits
   provide a reasonable basis for our
   opinion.
     In  our  opinion,  the  financial statements referred to above present
   fairly,  in  all  material  respects,  the  financial  position  of  KIT
   Manufacturing Company as of October 31, 1996 and 1995 and the results of
   its  operations  and  its  cash flows for each of the three years in the
   period  ended  October  31,  1996, in conformity with generally accepted
   accounting principles.

   Los Angeles, California                   Coopers & Lybrand, LLP
   December 20, 1996


                                         29
<PAGE>
<TABLE>

   KIT Manufacturing Company
   Industry Segment Information                                                 
<CAPTION>                                                            
   October 31,                                 1996           1995           1994 
   (Dollars in thousands)                                                       
                                   
   SALES       
        <S>                                  <C>             <C>            <C>
        Manufactured housing                 $21,580         $27,304        $26,908
        Recreational vehicles                 75,578          74,158         62,814
             Total sales                     $97,158        $101,462        $89,722   

   INCOME BEFORE INCOME TAXES
      Operating income                                                          
        Manufactured housing                    $933            $(53)        $1,196 
        Recreational vehicles                    841           1,545            808    
        Total operating income                 1,774           1,492          2,004     
      Interest income (expense), net             (13)             42             16
     
      Gain on involuntary conversion of 
         plant and equipment                                                    779  
      Gain on business interruption claim        620             701            312    
      Income before income taxes              $2,381          $2,235         $3,111
     

   IDENTIFIABLE ASSETS                                                          
                              
        Manufactured housing                 $7,207         $6,447         $8,413     
        Recreational vehicles                17,932         16,855         13,478
        Total assets                        $25,139        $23,302        $21,891
     



   DEPRECIATION          
        Manufactured housing                   $234           $232           $171 
        Recreational vehicles                   436            365            307  
        Total depreciation                     $670           $597           $478 

   CAPITAL EXPENDITURES            
        Manufactured housing                   $127           $253         $3,025
        Recreational vehicles                   307            998            597  
        Total capital expenditures             $434         $1,251         $3,622
</TABLE>
     
      
     Operating income represents income before net interest income, gain on
   involuntary conversion of plant facility and equipment, gain on business
   interruption  claims and income taxes. Non-direct operating expenses are
   allocated   to  industry  segments  based  on  a  percentage  of  sales.
   Identifiable  assets,  depreciation  and  capital expenditures are those
   items  that  are  used  in the operations in each industry segment, with
   jointly used items being allocated based on a percentage of sales.

                                    30
<PAGE>

<TABLE>

   KIT Manufacturing Company  
   Selected Financial Data                                                      
<CAPTION>     
                                                                                
     
   October 31,                            1996      1995      1994      1993      1992 
   (Dollars in thousands except per share amounts)            
   FISCAL YEAR 
     <S>                                 <C>       <C>         <C>       <C>        <C>
     Sales                               $97,158   $101,462    $89,722   $59,122    $55,469
     Net income                           $1,431(1)  $1,349(2)  $1,891(3)    $33     $1,458(4)
     Cash dividends paid                 $         $         $         $           $    
     Capital expenditures                   $434     $1,251      $3,622   $1,804       $423   
     Depreciation                           $670       $597        $478     $331       $313 

   AT YEAR-END 
     Working capital                      $9,984     $8,427      $7,622   $10,832   $12,213     
     Current ratio                         2.1:1      2.0:1       1.9:1     2.7:1     4.1:1     
     Property, plant and equipment, net   $6,319     $6,388      $5,762    $3,965    $2,535 
     Total assets                        $25,139    $23,302     $21,891   $21,308   $18,795
     Long-term obligations               $          $           $         $         $
     Shareholders' equity                $14,937    $13,506     $12,157   $13,930   $13,897     

   PER SHARE
     Net income                            $1.29(1)   $1.21(2)    $1.61(3)   $0.02    $0.99(4)
     Shareholders' equity                 $13.45     $12.16      $10.94      $9.46    $9.44     

   (1)    Includes gain on a business interruption claim of $373,000, net of
          related income taxes, or $0.34 per share.                                    
                                   
   (2)    Includes gain on a business interruption claim of $423,000, net of
          related income taxes, or $0.38 per share.                                    
                                   
   (3)    Includes gain on involuntary conversion of plant facility and equipment
          and a business interruption claim of $671,000, net of related income taxes, or $0.57 per share.                         
                              
   (4)    Includes gain on involuntary conversion of plant facility and equipment
          of $1,118,000, net of related income taxes, or $0.76 per share.

</TABLE>


                                      31
<PAGE>

<TABLE>

   KIT Manufacturing Company
   Quarterly Statistics
   (Dollars in thousands except per share amounts)     
   (Unaudited)                                                                  
<CAPTION>               
                             First Quarter     Second Quarter      Third Quarter       Fourth Quarter
   Fiscal 1996 
   <S>                           <C>                <C>                <C>                  <C>
   Sales                         $17,971            $28,679            $23,924              $26,584   
   Gross profit                    1,954              3,450              3,206                2,075     
   Income before income taxes         11                839              1,415                  116    
   Net income                          7                503                826(1)                95   
   Net income per share            $0.01              $0.45              $0.74(1)             $0.09     
                                                                                
     
   Fiscal 1995                                                                  
   Sales                         $21,851             $26,425            $27,537             $25,649   
   Gross profit                    2,208               2,763              2,301               2,092     
   Income before income taxes        444               1,136                467                 188    
   Net income                        262                 674(2)             273                 140  
   Net income per share            $0.24               $0.61(2)           $0.25               $0.11     
                                                                                
     
   (1)    Includes gain on a business interruption claim of $373,000, net of
          related income taxes, or $0.34 per share.                                    
                                        
   (2)    Includes gain on a business interruption claim of $423,000, net of
          related income taxes, or $0.38 per share.
</TABLE>



<TABLE>
   Market Prices of Common Stock
<CAPTION>
                             First Quarter       Second Quarter    Third Quarter       Fourth Quarter
   Fiscal 1996                                                                         
    <S>                         <C>                 <C>                 <C>                 <C>
    High                        14 1/4              16 1/4              15 1/4              13 7/8    
    Low                         11                  10 1/4              10 1/8              10 1/4    
                                                                              
   Fiscal 1995                                                                  
    High                        12 3/4              12                  12 5/8              12 1/4    
    Low                         10                   9 7/8              10                  10 1/4
     
                                                                                
     
       KIT common stock is traded on the American Stock Exchange. The above table
   reflects the high and low sales prices for each quarterly fiscal period in the past two
   years. There are approximately 346 shareholders of record on January 10, 1997.

</TABLE>

                                              32
<PAGE>

   Corporate Information
                                                       
   Directors                                Stock Registrar and Transfer Agent
   Dan Pocapalia                            ChaseMellon Shareholder Services,LLC
   Chairman of the Board,                   Ridgefield Park, New Jersey
   President and Chief Executive 
   Officer of KIT                                 
                                             
                                                                              
   Fred W. Chel                             Legal Counsel
   Business Consultant,                     O'Melveny & Myers
   Custom Fibreglass                        Los Angeles, California
   Manufacturing Company       
                                   
                                                                                
   Frank S. Chan, Jr.
   Certified Public Accountant, Partner,    Accountants
   Frank S. Chan & Company                  Coopers & Lybrand L.L.P.
                                            Los Angeles, California        
                         
   John W. H. Hinrichs
   Senior Vice President & Cashier,
   Farmers & Merchants Bank of Long Beach   Form 10-K                 
                                            A copy of the Company's current 
                                            annual report filed
   John F. Zaccaro                          with the Securities and Exchange
   President and Executive Producer,        Commission (SEC) on FORM 10-K,
   The International Health and             exclusive of exhibits, will be
   Health and Medical Film Festival, Inc.   furnished to shareholders without
                                            charge upon written request to 
                                            Marlyce A. Faldetta, Corporate 
   Officers                                 Secretary, KIT Manufacturing 
                                            Company, Post Office Box 848,
   Dan Pocapalia                            Long Beach, California 90801.
   Chairman of the Board, President
   and Chief Executive Officer
                                            Executive Offices
   Dale J. Gonzalez                         KIT Manufacturing Company
   Senior Vice President and Treasurer      530 East Wardlow Road, P.O. Box 848
                                            Long Beach, California 90801
   Gerald R. Wannamaker  
   Executive Vice President - Operations                                        
          
   Matthew S. Pulizzi                       Annual Meeting of Shareholders
   Vice President - Customer Relations      Tuesday, March 11, 1997, 9:00 A.M.
                                            Long Beach Marriott
   Marlyce A. Faldetta                      4700 Airport Plaza Drive
   Corporate Secretary                      Long Beach, California



                                   33