<PAGE>   1
                                  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 1934 [FEE REQUIRED]

                      For the fiscal year ended December 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 1-9511

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


                          THE COAST DISTRIBUTION SYSTEM
             (Exact name of Registrant as specified in its charter)

          California                                    94-2490990
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

1982 Zanker Road, San Jose, California                       95112
----------------------------------------                  ----------
(Address of principal executive offices)                  (Zip Code)

                                 (408) 436-8611
              (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                                    (Name of Each Exchange on
       (Title of class)                                 which Registered)
       ----------------                             -------------------------
Common Stock, without par value                      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 /x/.

         As of March 24, 1997, the aggregate market value of the Common Stock
held by non-affiliates was approximately $13,395,000.

         As of March 25, 1997, a total of 5,210,723 shares of Registrant's
Common Stock were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Part III of the Form 10-K is incorporated by reference from
Registrant's Definitive Proxy Statement for its 1997 Annual Meeting which is to
be filed on or before April 29, 1997.

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

<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS

General

         The Coast Distribution System (the "Company") is the largest wholesale
distributor of replacement parts, supplies and accessories for recreational
vehicles ("RVs"), and one of the largest wholesale distributors of replacement
parts, supplies and accessories for boats, in North America. The Company
supplies more than 25,000 products and serves more than 15,000 customers
throughout the United States and Canada, from 14 regional distribution centers
in the United States that are located in California, Texas, Oregon, Arizona,
Colorado, Utah, Indiana, Pennsylvania, New York, Georgia, Florida, Wisconsin
and Alaska and 4 regional distribution centers in Canada located, respectively,
in Montreal, Toronto, Calgary and Vancouver. Reference is made to Note I to
the Consolidated Financial Statements of the Company, contained elsewhere in
this Report, for certain information regarding the respective operating results
of the Company's operations in the United States and Canada in 1995 and 1996.
The Company's customers are comprised primarily of recreational vehicle and
boat dealers and recreational vehicle and boating parts supply stores and
service centers.

         In order to improve its competitive position and increase its
profitability, the Company has introduced into the marketplace a growing number
of products that have been designed specifically for the Company by independent
product design firms and are manufactured for the Company, generally on an
exclusive basis, by a number of different independent manufacturers (the
"proprietary products"). These proprietary products are marketed by the Company
under its own brand-names in competition with brand name products from
traditional suppliers. The Company is able to obtain the proprietary products at
prices that generally are below those it would have to pay for functionally
equivalent brand name products. Sales of proprietary products accounted for
approximately 15% and 23% of the Company's net sales in the fiscal years ended
December 31, 1995 and 1996, respectively. The Company's strategy is to become a
supplier of an increasing number of the products that it distributes through
alliances or longer term relationships with product manufacturers in order to
have greater control over the supply and cost of the products it distributes
and, thereby, to increase its profitability. As a result, the Company intends to
increase the number of proprietary products that it sells and it expects that
sales of proprietary products will increase in the fiscal year ending December
31, 1997. However, at the same time, there will be a significant number of
products that the Company will continue to obtain from its traditional
suppliers. See "Business-Products" and "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations" elsewhere in this
Report.

         To provide its customers with a high level of service, the Company
utilizes a computer-based order entry and warehousing system which enables
customers to transmit orders either telephonically or electronically to the
Company, and enables the Company to prepare and invoice most orders within 24
hours of receipt. The Company also has established a national customer service
center to enable customers to obtain product information and place orders by
telephone using Company toll-free telephone numbers. In addition, the Company
has developed and implemented marketing and customer service programs
through which the Company provides its customers with catalogues and pricing and
promotional programs, all of which are designed to assist customers to increase
their profitability and to strengthen the Company's relationships with its
customers. The Company believes that the breadth of its product lines, the
proprietary products it is able to offer to its customers, the computer
integration of its operations and the marketing and customer support programs it
offers, distinguish it from other distributors of recreational vehicle and
boating parts, supplies and accessories. See "Business - Marketing."

         This Report contains forward-looking information which reflects
Management's current views of future financial performance. The forward-looking
information is subject to certain risks and uncertainties, including but not
limited to, the effects on future performance of changing product supply
relationships in the RV industry and the uncertainties created by those changes;
increased price competition within the industry; possible changes in economic
conditions, prevailing interest rates or gasoline prices, or the occurrence of
unusually severe winter weather conditions, all of which can affect both the
purchase and usage of recreational vehicles and boats and which, in turn,
affects purchases by consumers of the products that the Company sells; the
Company's reliance on borrowings to fund a substantial portion of its working
capital requirements and capital expenditures; and the effects of currency
fluctuations in the countries where the Company's foreign based affiliates are
located. For information concerning such factors and risks, see "BUSINESS -
Products - Arrangements with Manufacturers - Competition - Factors That Could
Affect Future Performance" in Part I, Item 1 of this Report and Management's
Discussion and Analysis of Financial Condition and Results of Operation. Due
to such uncertainties and risks, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the date
of this Report.

                                        2
<PAGE>   3
Expansion of Company's Business

         In 1992, the Company acquired a minority ownership interest in a
Canadian distributor of recreational vehicle parts and accessories with one
distribution center in Montreal, Canada. That company changed its name to Coast
Canada and, between 1992 and 1994, with additional capital and know-how provided
by the Company, Coast Canada expanded its business westward, opening two
additional distribution centers in Toronto and Calgary, respectively. In 1994,
the Company acquired the remaining shares of Coast Canada and in 1995 opened a
fourth distribution center, in Vancouver, British Columbia.

         In 1993 the Company acquired 5% of the outstanding common shares of H.
Burden Ltd. ("Burden"), a corporation that is incorporated in the United Kingdom
and which is engaged primarily in the wholesale distribution of recreational
vehicle replacement parts, supplies and accessories in the United Kingdom,
France and Holland. The Company also obtained an option to acquire the remaining
shares of Burden from its shareholders in installments over an approximate 5
year period ending in the first calendar quarter of 1998. By December 31, 1996,
the Company had partially exercised this option to increase its ownership to 35%
of Burden's common shares. Burden recorded consolidated net sales of
(pound)44,244,000 (U.K.) and net income of approximately (pound)1,125,000 (U.K)
in its fiscal year ended September 30, 1996. The Company has not decided whether
to exercise its option to purchase the remaining Burden shares, which would
require the payment of an aggregate cash purchase price within the next
twelve months of approximately $12,500,000.

         The Company also has ownership interests in two other foreign
distributors of recreational vehicle parts, supplies and accessories: a company
based in Sydney, Australia and the other based in Mexico City, Mexico. Both of
these distributors are small, with annual sales of less than $2,500,000 each in
1996. However, the Company believes that both of these distributors have the
potential to expand their markets and sales in the future. Burden and these
two other smaller distribution companies are each managed by local managers
who also hold ownership interests in these companies.

         The Company also has a 34% ownership interest in HWH Corporation
("HWH") a privately owned United States-based manufacturer of hydraulic leveling
devices and jacks primarily for recreational vehicles.

         Because the Company does not own a controlling interest in these
companies, it has little, if any, liquidity in its investments in those
companies and is reliant on local management to successfully operate their
businesses. In addition, as a result of the Company's investments in foreign
based distribution businesses, the Company's future operating results could be
affected by changes in foreign currency exchange rates in Canada or adverse
economic conditions in Canada or Western Europe.

         The Company's investments in HWH, Burden and in the distribution
companies based in Australia and Mexico are accounted for under the equity
method of accounting. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere in this Report.






                                        3
<PAGE>   4
The Parts, Supplies and Accessories Markets

         Many manufacturers of replacement parts, supplies and accessories rely
on independent distributors, such as the Company, to market and distribute their
products or to augment their own product distribution operations. Distributors
relieve manufacturers of a portion of the costs associated with distribution of
their products while providing geographically dispersed selling, order
processing and delivery capabilities. At the same time, distributors offer
retailers access to a broad line of products and the convenience of rapid
delivery of orders.

         The market for recreational vehicle parts, supplies and accessories
distributed by the Company includes both recreational vehicle dealers and
recreational vehicle supply stores and service centers. Optional equipment and
accessories, such as awnings, trailer hitches, air conditioning units, water
heaters and other appliances make up a large proportion of the Company's sales
to recreational vehicle dealers, while recreational vehicle replacement parts,
maintenance supplies and smaller accessories make up a larger proportion of the
Company's sales to recreational vehicle supply stores and service centers.
Although recreational vehicle supply stores and service centers generally
purchase lower cost products than those sold to recreational vehicle dealers,
supply stores and service centers generally order more frequently and purchase a
wider variety of products than do recreational vehicle dealers. The market for
boating parts, supplies and accessories is comprised primarily of independent
boat dealers that sell boats and boating parts, supplies and accessories at
retail. Independent boat dealers purchase primarily replacement parts, boating
supplies and smaller accessories from the Company. See "Business - Products."

         Sales to recreational vehicle and boat dealers generally have been more
sensitive to changes in economic conditions than have sales to supply stores and
service centers. During periods of higher interest rates or unemployment,
consumers are likely to postpone purchases of higher priced items such as
recreational vehicles and boats and higher priced accessories and convenience
items such as appliances, awnings and hitches. By contrast, continued demand
among recreational vehicle and boat owners for repair parts and supplies, and
increases in the total number of recreational vehicles and boats in use, have
increased the "aftermarket" for repair and maintenance items and for specialty
products and supplies. As a result, sales to supply stores and service centers
generally have been less sensitive to changes in economic conditions than sales
to recreational vehicle and boat dealers.

         The Company's sales are also affected by weather conditions, because
the usage and purchase of recreational vehicles and boats decline in the winter
months due to the colder weather. As a result, the Company's operating income
declines and it sometimes incurs losses in the winter months, particularly in
years in which there are unusually severe winter weather conditions such as
those encountered in the first four months of 1996. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations-Seasonality and
Inflation" in Item 7 of Part II of this Report.

Products

         General. The Company carries a full line of more than 15,000
recreational vehicle parts, supplies and accessories which it purchases from
more than 500 manufacturers. Recreational vehicle products distributed by the
Company include awnings, antennae, vents, electrical items, towing equipment and
hitches, appliances such as air conditioners, refrigerators, ranges and
generators, LP gas equipment, portable toilets and plumbing parts, hardware and
tools, specialized recreational vehicle housewares, chemicals and supplies, and
various accessories, such as ladders, jacks, fans, load stabilizers, mirrors and
compressors. The Company also distributes various replacement parts and supplies
for manufactured housing, including tie-downs, skirting, windows and doors.


                                        4

<PAGE>   5
         The Company stocks boating and marine parts, supplies and accessories
at 13 of its 14 warehouse and distribution centers in the United States and at
all four of its distribution centers in Canada. Products distributed by the
Company include boat covers, stainless steel hardware, depth sounders, anchors,
life jackets and other marine safety equipment and fishing equipment.

         Proprietary Products. In order to improve its competitive position and
increase its profitability, the Company has introduced into the marketplace a
growing number of proprietary products, which are manufactured specifically for
the Company, generally on an exclusive basis, by a number of different
manufacturers (the "proprietary products"). The proprietary products, which are
designed for the Company by independent professional product design firms or by
the independent manufacturers retained to manufacture the products for the
Company, include trailer hitches, plastic wastewater tanks, portable toilets and
toilet chemicals, vent lids and stabilizing jacks. These proprietary products
are marketed by the Company under its own brand-names in competition with brand
name products from traditional suppliers. Sales of proprietary products, on
which the Company has generally realized higher margins than on sales of
functionally equivalent name brand products, accounted for 23% of the Company's
net sales in 1996, as compared to 15% in 1995, and the Company intends to
introduce additional proprietary products which should result in an increase in
sales of those products in 1997. However, such products currently lack name
brand recognition, which may have a limiting effect on unit sales of and on the
prices that the Company is able to charge for such products. It also means that
the costs of marketing the proprietary products generally is greater, which
somewhat offsets their margin advantage. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of
this Report.

Marketing and Sales

         The Company's customers include (i) recreational vehicle dealers, which
primarily purchase optional equipment and accessories for new recreational
vehicles and replacement and repair parts for their service departments, (ii)
independent recreational vehicle supply stores and service centers that purchase
parts, supplies and accessories for resale to owners of recreational vehicles
and for their service centers, and (iii) independent boat dealers that purchase
small accessories for new boats and replacement parts and boating supplies for
resale to boat owners and operators. The Company is not dependent on any single
customer for any material portion of its business. No single customer accounted
for as much as 5% of the Company's sales in 1994, 1995 or 1996.

         During the past several years, the Company has developed marketing and
customer service programs that are designed to assist its customers to increase
their profitability and also strengthen the relationships between the Company
and its customers.

         Customer Service Center and Computerized Order Entry and Warehousing
System. The Company has designed and implemented a computer-based order entry
and warehousing system which enables customer orders to be transmitted
electronically to the Company's central computers and also enables the Company
to prepare and invoice most customer orders within 24 hours of receipt.
Approximately 1,000 of the Company's customers use this system to transmit
orders electronically to the Company's central data processing center using the
Company's toll-free telephone numbers.

         In 1995 the Company established a national customer service center in
San Jose, California, which enables the Company's customers to obtain product
information and to place orders by telephone using the Company's toll-free
telephone numbers. With the exception of holidays, the customer service center
is operational for a total of 13 hours per day, Monday through Friday, and 8
hours on Saturdays and is


                                       5

<PAGE>   6
staffed by sales personnel who are familiar with the Company's products
and are trained to promote the sale of the Company's products and to handle
customer service issues. Currently, the number of customer calls handled by the
national customer service center, which can be accessed by virtually all of the
Company's customers in the United States and Canada, ranges from 2,000 to 6,000
per day and the customer service center has enabled the Company not only to
improve customer service, but also to reduce selling expenses.

         Orders transmitted from customers either electronically or by telephone
to the national customer service center are input into the Company's IBM AS 400
computers and then are relayed to the regional distribution center selected by
the customer, where the products are selected, packed and shipped. At the time
the order is received, the customer is informed, either by electronic
confirmation, or by the sales person handling the customer's call at the
customer service center, that the order has been accepted and whether any items
are not in stock. In addition, the Company offers to participating customers a
"split shipment program" whereby, if a product is not available from the
Company's distribution center closest to the customer, the product will be
automatically ordered from another of the Company's distribution centers that
has been pre-selected by that customer.

         The Company's computer system also prints retail price stickers which
are shipped with the products ordered by the customer. The price stickers
identify the part numbers and contain the customer's name and the customer's
retail prices for the parts which are provided to the Company by the customer
and stored in the Company's computer system. The Company's computerized ordering
system also enables it to provide customers with inventory costing data with
respect to items purchased from the Company.

Distribution

         The Company's regional distribution and warehouse centers in North
America carry an inventory of up to approximately 15,000 recreational vehicle
parts, supplies and accessories. In addition, at 13 of the Company's
distribution centers in the United States and at all four of its distribution
centers in Canada, the Company carries, in varying quantities, up to
approximately 10,000 boating and marine parts, supplies and accessories. Each
regional distribution center is operated as a separate profit center.

         The Company relies primarily on independent freight companies to ship
its products.

Arrangements with Manufacturers

         General. The products which the Company distributes are purchased by it
from more than 600 different manufacturers. As is typical in the industry, in
most instances the Company acquires its products on a purchase order basis and
has no guaranteed price or delivery agreements with manufacturers. As a result,
short-term inventory shortages can occur. The Company sometimes chooses to carry
only a single manufacturer's products for certain of the product lines that it
sells, although comparable products usually are available from multiple sources.
Dependence on a single manufacturer, however, presents some risks, including the
inability to readily obtain alternative product supply sources in the event a
sole source supplier encounters quality or other production problems, which can,
and in 1996 did, adversely affect the Company's sales, as certain of the
manufacturers were unable to meet the Company's product requirements, which
resulted in lost sales opportunities for the Company (see "Recent Changes in
Relationships With Manufacturers").

         No manufacturer or supplier of products to the Company accounted for
more than 5% of the Company's product purchases in 1996, other than Recreation
Vehicle Products, Inc. ("RVP"), which supplies the Company with RV air
conditioners sold under the Coleman(R) brand name and awnings under the
Faulkner(R) brand name, the aggregate sales of which accounted for
approximately 15% of the Company's net sales in 1996.

         Manufacturers generally warrant the products distributed by the
Company and allow the Company to return defective products, including those that
have been returned to the Company by its customers. The Company does not
independently warrant the products that it distributes.

         Recent Changes in Relationships with Manufacturers. During the
five-year period ended December 31, 1995, the Company purchased substantially
all of its requirements for air conditioners, awnings and refrigerators for
recreational vehicles from Dometic Corporation ("Dometic"), a division of White
Consolidated Industries. Sales of products purchased by the Company from Dometic
accounted for 22% and 24%, respectively, of the Company's sales in 1994 and
1995. In August 1995, Dometic notified the Company that Dometic had decided to
integrate its operations


                                        6
<PAGE>   7
vertically and market its products directly to retail parts and supply stores,
repair establishments and new and used recreational vehicle dealers, in direct
competition with the Company beginning early in 1996, and, therefore, would be
terminating its supply agreement with the Company. Following that notification,
in order to ensure that the Company would have a source of supply for air
conditioners and awnings, the Company entered into a multi-year product
distribution agreement with RVP, under which RVP agreed to supply the Company
with its requirements for RV air conditioners and awnings for a minimum term of
five (5) years, beginning in 1996.

         However, during 1996 RVP encountered manufacturing and supply problems
in its efforts to meet the Company's requirements for awnings. These problems,
coupled with Dometic's entry into the market as a competitor of Coast, resulted
in a substantial decline in the Company's sales of awning products in 1996.
Since awning sales generate higher profit margins than air conditioners, this
decline adversely affected the Company's operating results in 1996, and more
than offset the positive effects of an increase in sales of air conditioners.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation."

         During 1995, three of the Company's brand name product suppliers whose
products had accounted, in the aggregate, for approximately 8% of the Company's
net sales in 1994, terminated their supply relationships with the Company as a
result of the Company's introduction of competitive proprietary products. The
full effects of those terminations were not felt, however, until 1996, because
in 1995 the Company was able to meet substantially all of the customer demand
for these types of products with a combination of its remaining inventories of
these brand name products and available supplies of its functionally comparable
proprietary products. In 1996, by contrast, the Company had to rely entirely on
proprietary products to meet customer demand, which required it to
significantly increase its orders for these products. The manufacturers,
however, encountered problems producing these products in the significantly
greater quantities required by the Company during the spring and early summer
months of 1996, when customer demand for RV products is at its greatest.
Consequently, although these problems were later resolved, the Company was
unable to fully meet customer demand for these products, which caused a further
loss of sales for the Company in 1996.




                                        7
<PAGE>   8
         As a result of the changes that have occurred in supply relationships
in the industry, there will continue to be increased competition from Dometic
and other manufacturers and distributors in the future, which could adversely
affect product pricing and the Company's sales and operating margins.
Additionally, there is no assurance that the Company will be able to recapture
fully the sales volume lost to these competitors in 1996.

Competition

         The Company faces significant competition. In addition to Dometic,
there are a number of national and regional distributors of recreational vehicle
and boating parts, supplies and accessories that compete with the Company. In
addition, certain mass merchandisers, catalog houses and national and regional
retail chains specializing in the sale of recreational vehicle or boating parts,
supplies and accessories, purchase products directly from manufacturers. Such
mass merchandisers and national and regional chains compete directly with
recreational vehicle and boating supply stores that purchase products from the
Company. Such competition affects both the volume of Company's sales, and the
prices it is able to charge for products sold, to such recreational vehicle and
boating supply stores. Additionally, there is no assurance that other changes in
supply relationships or new alliances within the recreational products industry
will not occur that would further increase competition. See "Products" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

         The Company, like most of its competitors, competes on the basis of the
quality, speed and reliability of its service, the breadth of its product lines
and price. The Company believes that it is highly competitive in each of those
areas.

Certain Factors That Could Affect Future Performance

         Changes in Industry Supply Relationships; Increases in Competition.
Since 1995 product supply relationships in the RV accessories market have
undergone significant change.  The changes led to a significant increase in
competition and created supply problems for the Company in 1996, which adversely
affected its sales and margins and caused the Company to sustain a substantial
loss, that was largely offset by other income, in 1996. Although the Company
believes that most of these supply problems have been resolved and it expects to
be able to introduce a number of new proprietary products that should contribute
to increased sales and improved profit margins in 1997, there is no assurance
that the Company will be able to recapture fully the sales it lost in 1996 or
that it will be able to return to profitability in 1997.  There also is no
assurance that additional changes, that would increase competition or create
further uncertainties for the Company, as well as others in the industry, will
not occur in the future. See "BUSINESS--Products-- Arrangements with
Manufacturers--Competition" in Part I of this Report and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II of this Report.

         Cyclical Nature of Business.  The Company's sales are affected directly
by the purchase and usage levels of RVs and boats which, in turn, depend, in
large measure, upon the extent of discretionary income available to consumers
and their confidence about economic conditions.  Weather conditions also affect
the usage of RVs and boats. As a result, the Company's sales and operating
results can be, and in the past have been, adversely affected by recessionary
economic conditions, increases in interest rates which affect the availability
and affordability of financing for purchases of RVs and boats, increases in fuel
prices which affect the costs of using RVs and boats, and unusually adverse
winter weather conditions.  A recurrence of adverse economic conditions, such as
those experienced in 1990 and 1991, increases in interest rates or fuel prices,
or the onset of unusually severe winter weather conditions affecting large
regions of North America, such as occurred during the first four months of 1996,
could result in declines in the Company's sales that would adversely affect the
Company's future operating results.

         Reliance on Borrowings; Debt Service Requirements.  The Company has
financed its growth primarily with bank borrowings and institutional debt
financing and relies heavily on bank borrowings to fund working capital
requirements and capital expenditures.  Although the Company did generate
approximately $4,180,000 of positive cash flow from operations in 1996 (despite
the decline in sales and the loss that it incurred during that year), and
expects to be able to continue to fund its working capital requirements and
capital expenditures in 1997 with a combination of internally generated funds
and available borrowings under its revolving bank credit line, the amount of its
outstanding borrowings could have adverse consequences for the Company in the
future.  Among other things, (i) the Company is likely to find it more difficult
to obtain additional financing that might be needed to fund expansion or other
business opportunities; and (ii) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of principal and interest
on indebtedness, which makes the Company more vulnerable to general economic
downturns and competitive pressures. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

Employees

         At December 31, 1996, the Company had approximately 370 full-time
employees, which includes employees in Canada. During the peak summer months,
the Company also employs part-time workers at its regional distribution centers.
None of the Company's employees is represented by a labor union. The Company
believes that its relations with employees are good.


                                        8
<PAGE>   9
ITEM 2.  PROPERTIES

         The Company operates 14 regional distribution centers in 13 states in
the United States and 4 regional distribution centers, each located in a
different Province, in Canada. Except for one facility owned by the Company, all
of these facilities are leased under net leases which require the Company to
pay, in addition to rent, real property taxes, insurance and maintenance costs.

         The following table sets forth certain information regarding these
facilities.

<TABLE>
<CAPTION>
                                                                 Square
         Geographic Location                                     Footage        Lease Expiration Date
         -------------------                                     -------        ---------------------
<S>                                                              <C>            <C>
         Visalia, California............................         70,000         February 28, 2007
         Fort Worth, Texas.............................          90,670         April 30, 1999
         San Antonio, Texas............................          46,600         April 30, 1998
         Denver, Colorado..............................          50,000         September 30, 1999
         Elkhart, Indiana..............................         109,000         December 31, 1999
         Lancaster, Pennsylvania.......................          64,900         February 29, 1999
         Atlanta, Georgia..............................          51,100         August 31, 1999
         Tampa, Florida................................          53,100         September 30, 1998
         Phoenix, Arizona..............................          36,500         March 31, 2002
         Salt Lake City, Utah..........................          37,800         March 31, 2000
         Portland, Oregon..............................          72,000         Owned
         Albany, New York..............................          52,500         April 30, 2004
         Eau Claire, Wisconsin ........................          36,000         July 31, 1998
         Anchorage, Alaska.............................          13,200         December 31, 1999
         Montreal, Quebec..............................          40,715         January 1, 2000
         Toronto, Ontario..............................          34,020         December 1, 1998
         Calgary, Alberta..............................          30,750         December 1, 1998
         Vancouver, British Columbia...................          22,839         June 1, 1999
</TABLE>
         -----------

         The Company also leases 22,876 square feet of office space in San Jose,
California where its executive offices are located.



                                        9
<PAGE>   10
ITEM 3.  LEGAL PROCEEDINGS

         The Company from time to time is named as a defendant, sometimes along
with product manufacturers and others, in product liability and personal injury
litigation. The Company believes that this type of litigation is incident to its
operations, and since it has insurance or indemnities from manufacturers
covering any potential liability, it believes that such litigation will not
materially affect the Company.


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

         None.

EXECUTIVE OFFICERS OF REGISTRANT

<TABLE>
<CAPTION>
                        Name                  Age                        Position
                        ----                  ---                        --------
<S>                                           <C>            <C>
         Thomas R. McGuire.................   53             Chairman of the Board, Chief
                                                             Executive Officer and Director

         Sandra A. Knell...................   39             Executive Vice President - Finance,
                                                             Chief Financial Officer and Secretary

         David A. Berger...................   43             Executive Vice President - Marine
                                                             Sales and Marketing

         Jeffrey R. Wannamaker.............   36             Executive Vice President - Operations

         Dennis A. Castagnola..............   49             Senior Vice President - Proprietary
                                                             Products

         James N. Stark....................   47             Senior Vice President - R.V. Sales
                                                             and Marketing
</TABLE>



                                      10
<PAGE>   11
         Set forth below is certain information regarding the Company's
executive officers.

         THOMAS R. MCGUIRE. Mr. McGuire is a founder of the Company and for more
than five years has been Chairman of the Board and Chief Executive Officer of
the Company. From 1981 until August 1985 he also served as the Company's Chief
Financial Officer and Secretary.

         SANDRA A. KNELL. Mrs. Knell has been the Company's Executive Vice
President - Finance, Chief Financial Officer and Secretary since August 1985.
From 1984 until she joined the Company, Mrs. Knell was an Audit Manager, and for
the prior four years was a senior and staff accountant, with Grant Thornton LLP
(formerly Alexander Grant & Co.). Mrs. Knell is a Certified Public Accountant.

         DAVID A. BERGER. Mr. Berger served as Executive Vice President -
Marketing from May 1988 until September 1993. Due to the growth of the Company's
marine products sales, in September 1993 the Company's marketing department was
restructured into two separate departments, one for marine products and the
other for R.V. products, and Mr. Berger was placed in charge of marketing for
the Company's marine products division. From August 1986 to May 1988, Mr. Berger
was Senior Vice President Purchasing of the Company. For the prior 14 years he
held various management positions with C/P Products Corp., a distributor of
recreational vehicle parts and accessories acquired by the Company in 1985.

         JEFFREY R. WANNAMAKER. Mr. Wannamaker joined the Company in June 1984
as Vice President/Division Manager of the Company's Texas distribution center.
Since that time, he has worked in several of the Company's distribution centers,
hiring and training new management personnel. In August 1991, Mr. Wannamaker was
promoted to Senior Vice President - Branch Operations and in 1995 was promoted
to Executive Vice President - Operations.

         DENNIS A. CASTAGNOLA. Mr. Castagnola was appointed to his current
position of Senior Vice President-Proprietary Products in May 1994, in which he
directs the Company's proprietary products program. From September 1993 until
May 1994, he served as Senior Vice President - R.V. Sales and Marketing. For the
prior 19 years, he held various positions with the Company, including Vice
President/Division Manager of the Company's Portland, Oregon Distribution
Center.

         JAMES N. STARK. Mr. Stark was appointed Senior Vice President - R.V.
Sales and Marketing in May 1994. For the prior 10 years he has held various
positions with the Company, including Vice President and Division Manager of the
Company's Tampa, Florida distribution center.


                                       11
<PAGE>   12
                                     PART II

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

         The following table sets forth for the calendar quarters indicated the
range of the high and low sales prices per share of the Company's common stock
on the American Stock Exchange.

<TABLE>
<CAPTION>
                                                        High            Low
                                                        -----         -------
<S>                                                     <C>           <C>
1995:

         First Quarter....................              $7-7/8        $6-1/2
         Second Quarter...................               7-1/4         6-1/4
         Third Quarter....................               7-5/8         6
         Fourth Quarter...................               7             5-13/16


1996:

         First Quarter....................              $8-3/4        $5-13/16
         Second Quarter...................               8-5/8         6-1/16
         Third Quarter....................               6-3/8         4-3/4
         Fourth Quarter...................               5-1/2         3-5/8
</TABLE>

         On March 24, 1997, the closing price per share of the Company's common
stock on the American Stock Exchange was $3-3/4. There were approximately 1,322
holders of record of the Company's common stock as of March 24, 1997.

Dividends

         The Company has a policy of retaining earnings to support the growth of
its business and, therefore, does not anticipate that any cash dividends will be
paid in the foreseeable future. In addition, payment of cash dividends by the
Company is limited by its loan agreements. See Note E to the Company's
Consolidated Financial Statements.


                                       12
<PAGE>   13
ITEM 6.  SELECTED FINANCIAL DATA

         The selected financial data set forth below for the fiscal years ended
December 31, 1996, 1995 and 1994 and at December 31, 1996 and 1995, are derived
from the Company's audited financial statements included elsewhere in this
report and should be read in conjunction with those financial statements. The
selected financial data for the fiscal years ended December 31, 1993 and 1992
and at December 31, 1994, 1993, and 1992 are derived from audited financial
statements which are not included in this report.

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                  -----------------------------------------------------------------
                                  1996             1995         1994           1993         1992
                                  ---------     ---------     ---------     ---------     ---------
                                                (In thousands except per share data)
<S>                               <C>           <C>           <C>           <C>           <C>
Operating Data:
---------------

Net Sales.....................    $ 139,286     $ 169,559     $ 177,774     $ 140,152     $ 121,989
Cost of sales (including
 distribution costs)..........      118,361       138,806       146,987       115,670       100,026
                                  ---------     ---------     ---------     ---------     ---------
Gross margin..................       20,925        30,753        30,787        24,482        21,963
Selling, general and
 administrative expenses......       21,525        22,260        23,216        19,639        17,837
                                  ---------     ---------     ---------     ---------     ---------
     Operating margin.........         (600)        8,493         7,571         4,843         4,126

Equity in net earnings of
 affiliated companies.........        1,529         1,204         1,237         1,504         1,393
Other income (expense)........       (1,246)       (4,271)       (3,395)       (3,302)       (3,397
                                  ---------     ---------     ---------     ---------     ---------
Earnings (loss) before
 income taxes.................         (317)        5,426         5,413         3,045         2,122
Income taxes (credits)........         (194)        2,082         1,828           608           594
                                  ---------     ---------     ---------     ---------     ---------
Net earnings (loss)...........    $    (123)    $   3,344     $   3,585     $   2,437     $   1,528
                                  =========     =========     =========     =========     =========
Net earnings (loss)
 per share(1).................    $    (.03)    $     .64     $     .70     $     .53     $     .35
                                  =========     =========     =========     =========     =========
Weighted average number
 of shares....................        5,198         5,206         5,186         4,879         4,425
                                  =========     =========     =========     =========     =========
</TABLE>


<TABLE>
<CAPTION>
                                                      At December 31,
                                    ---------------------------------------------------
                                     1996       1995       1994       1993       1992
                                    -------    -------    -------    -------    -------
                                                      (In thousands)
<S>                                 <C>        <C>        <C>        <C>        <C>
Balance Sheet Data:
-------------------

Working capital...............      $45,639    $50,004    $42,127    $33,537    $32,849
Total assets..................       88,442     92,136     85,957     69,135     66,021
Long-term obligations(2)......       33,771     38,376     32,624     28,339     30,455
Shareholders' equity..........       39,450     39,392     35,722     28,487     26,064
</TABLE>

----------------
(1)      See Note K to the Company's Consolidated Financial Statements.

(2)      Exclusive of current portion. For additional information regarding
         long-term obligations, see Note E to the Company's Consolidated
         Financial Statements.


                                       13
<PAGE>   14

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS

GENERAL

         The Company is the largest wholesale distributor of replacement parts,
accessories and supplies for recreational vehicles, and one of the largest
distributors of replacement parts, accessories and supplies for boats, in North
America.  Sales are made by the Company to retail parts and supplies stores,
service and repair establishments, and new and used recreational vehicle and
boat dealers ("After-Market Customers").  The Company's sales are affected
primarily by (i) usage of recreational vehicles and boats which affects the
consumers' needs for and purchase of replacement parts, repair services and
supplies, and (ii) sales of new recreational vehicles and boats, because
consumers often "accessorize" their recreational vehicles and boats at the time
of purchase.

         The usage and the purchase, by consumers, of recreational vehicles and
boats depend, in large measure, upon the extent of discretionary income
available to consumers and their confidence about economic conditions.  Weather
conditions also affect the usage of recreational vehicles and boats.  As a
result, the Company's sales and operating results can be, and in the past have
been, adversely affected by recessionary economic conditions, increases in
interest rates, which affect the availability and affordability of financing
for purchases of recreational vehicles and boats, increases in gasoline prices
which adversely affect the costs of using recreational vehicles and boats, and
unusually adverse winter weather conditions.  A recurrence of adverse economic
conditions, increases in interest rates or gasoline prices, or the onset of
unusually severe winter weather conditions affecting large regions of the
country, could results in declines in the Company's sales that would adversely
affect the Company's future operating.

RECENT DEVELOPMENTS IN THE RV INDUSTRY.

         Until 1993, the Company's business consisted primarily of distributing
and marketing to its customers products that Coast purchased from third party
manufacturers and that were sold under the brand names of those manufacturers.
During the past three years, the Company has introduced into the marketplace a
growing number of proprietary products, which consist of products, such as tow
hitches, vent lids, wastewater tanks, portable toilets and toilet chemicals,
that have been designed by independent design professionals, and are produced by
independent manufacturers, specifically for the Company and which are marketed
and sold by the Company under its own brand names.  Sales of proprietary
products, which accounted for 10% of the Company's net sales in 1994, increased
to 15% and then to 23% of net sales in 1995 and 1996, respectively.

         During the first quarter of 1995, three of Coast's traditional
name-brand product suppliers, the products of which accounted for 4%, 3% and 1%,
respectively, of the Company's net sales in 1994, discontinued the sale of their
products to the Company as a result of its introduction of competitive
proprietary products.

         In an unrelated development, in late 1995 Dometic Corporation
("Dometic"), which had supplied the Company with substantially all of its
requirements for air conditioners, awnings and refrigerators, that had accounted
for 22% and 24%, respectively, of the Company's net sales in 1994 and 1995,
announced it had decided to integrate its operations vertically by marketing its
products directly to after-market customers in direct competition with Coast and
other After-Market distributors and that, as a result, it was terminating its
supply agreements with the Company.  In response to that action by Dometic, the
Company entered into a supply contract with Recreational Vehicle Products, Inc.
("RVP"), which manufactures air conditioners under the Coleman(R) brand name and
awnings under the Faulkner(R) brand name.  Under that contract, RVP agreed to
supply all of the Company's requirements for RV air conditioners and awnings for
a minimum term of five years.  See "BUSINESS -- Arrangements with Manufacturers"
in Part I of this Report.

         These changes in supply relationships resulted in increased price
competition within the RV products After-Market and, at the same time, caused
supply problems for the Company, as RVP and the manufacturers of certain of the
Company's newly introduced proprietary products encountered manufacturing
difficulties in attempting to produce and ship the increased quantity of
products needed by the Company.  These supply problems prevented the Company
from fully meeting product demand of its customers and, consequently, resulted
in lost sales for the Company in 1996. Coupled with the increase in competition,
and unusually severe winter weather conditions in the first four months of 1996,
the Company's sales and margins declined and Coast sustained a net loss in 1996
of $123,000, which would have been substantially greater but for other income,
totaling $2,354,000 (net of related expenses), that was realized from the
favorable settlement of a lawsuit in the second quarter of 1996. These changes
may affect the Company's operating results in 1997. See "BUSINESS -- Factors
That Could Affect Future Performance" in Part 1 of this Report.




                                       14
<PAGE>   15
RESULTS OF OPERATIONS

         Net Sales.  Net sales in 1996 decreased by approximately $30,273,000
or 17.9% as compared to 1995.  This sales decrease was due to a number of
factors, including (i) the changes in supply relationships that occurred in
1995 and 1996 which, among other things, have caused supply shortages for the
Company as some of its new suppliers have not, as yet, been able to increase
production to levels needed to meet the Company's product requirements, which
has prevented the Company from fully replacing the sales of third-party brand
name products that are no longer sold by the Company with sales of new
products; (ii) increased price competition due to Dometic's entry into the
marketplace as a vertically integrated supplier to aftermarket customers and
price reductions by other distributors on various third-party name brand
products, which the Company believes is a strategy adopted by such distributors
in an effort to increase their market share and to respond to the competitive
threat posed by the Company's proprietary products; (iii) slowness in sales of
new recreational vehicles, during the year, which adversely affected sales of
accessories distributed by the Company and (iv) unusually severe weather
conditions throughout most of North America that extended through the first
quarter and into the second quarter of 1996, adversely affecting usage of
recreational vehicles and boats and, therefore, also purchases of Aftermarket
products, during those periods.

         Net sales in 1995 decreased by approximately $8,215,000 or 4.6% as
compared to 1994.  This sales decrease was due to (i) a slowing of sales of new
recreational vehicles in 1995 which resulted in reductions in purchases of
accessories by recreational vehicle dealers, (ii) the introduction, in the first
half of 1995, of several new proprietary products which replaced sales of
certain products that had been purchased in the past from name brand
manufacturers, as well as the termination by certain of these manufacturers of
their supply relationships with the company, and (iii) the termination by
Dometic, the Company's largest supplier, of its supply agreement with the
Company.

         Gross Margin.  The Company's gross margin decreased to 15.0% of net
sales in 1996 as compared to 18.1% of net sales in 1995.  This decrease was due
primarily to (i) changes in product mix to a greater proportion of lower margin
products that were attributable primarily to the changes in supply
relationships that occurred in 1995 and 1996 and related supply problems that
have been occasioned by those changes, which has prevented the Company from
fully replacing sales of third-party brand name products that are no longer
sold by the Company; (ii) increased price competition which, as discussed
above, also adversely affected the Company's sales revenue; and (iii) the
impact of fixed costs on a lower sales base, the combined effect of which more
than offset the more favorable margins which the Company realizes on sales of
its Proprietary Products.

         The Company's gross margin increased to 18.1% of net sales in 1995 as
compared to 17.3% of net sales in 1994.  This increase was due primarily to
sales of proprietary products, which in 1995, increased both in absolute
dollars and as a percentage of total net sales.  In 1995 sales of proprietary
products accounted for approximately 15% of net sales as compared to
approximately 10% of net sales in 1994.  The Company realizes greater profit
margins on its sales of proprietary products than it does on name brand
products obtained from traditional manufacturers.

         Selling, General and Administrative Expenses.  Selling, general and
administrative expenses increased to 15.5% of net sales in 1996 from 13.1% in
1995.  In absolute dollars, these expense declined approximately $735,000 in
1996 as compared to 1995.  Selling, general and administrative expenses
declined by nearly $1,000,000 in 1995 as compared to 1994, primarily as a
result of the expiration of certain non-competition agreements that were
entered into in connection with prior acquisitions, the expiration of certain
equipment leases, and reductions in selling expenses that were primarily
attributable to the establishment of the national customer service center.  As
a percentage of net sales, selling, general and administrative expenses were
13.1% in both 1995 and 1994.

         Equity in Net Earnings of Affiliates.  The Company has ownership
interests in certain companies in similar or related businesses, including a
34% ownership interest in HWH and a 35% ownership interest in Burden.  The
Company's ownership interest in these companies are accounted for under the
equity method of accounting.  Under this method, the Company includes in its
operating results it pro rata share of the net income of or any loss incurred
by the companies, which is reported as "equity in net earnings of affiliates."
The Company's equity in the net earnings of the companies is not cash, and the
Company is dependent upon the declaration of dividends by those companies to
realize any current cash from these investments.  Historically, HWH has paid
cash dividends in the fourth quarter of the calendar year and in 1996 and 1995,
the Company received cash dividends from HWH of $525,000 each year.  There can
be no assurance, however, that cash dividends will continue to be paid by HWH
in the future.  Although Burden has paid cash dividends in the past, such
dividends have not been significant.

         Other Income and Expense.  Interest expense is the most significant
component of Other Income & Expense.  During 1996, interest expense decreased
by $649,000 or 15.3%, as compared to 1995, as a result of: (i) a decrease in
the rate of interest charged under the Company's revolving bank credit
facility, and (ii) reductions in average long-term borrowings outstanding
during the second half of 1996 as compared to the same period in 1995.

         During 1995, interest expense increased by $677,000 or 18.9% as
compared to 1994, primarily as a result of increases in outstanding borrowings
the proceeds of which were used to fund increased working capital requirements
as a result of (i) expansion of the company's operations, both in the United
States, where the Company opened new distribution centers in Eau Claire,
Wisconsin and Anchorage, Alaska and in Canada where the Company opened a new
distribution center in Vancouver, British Columbia, and (ii) increases in
inventories due to the addition of several new proprietary product lines that
the Company introduced in late 1994 and early 1995 and the addition of marine
products at the Company's distribution centers in Canada.





                                       15
<PAGE>   16
         The Company will continue to rely on borrowings to fund a substantial
portion of its working capital requirements and future growth and, as a result,
it anticipates that interest will continue to be a significant expense for the
Company.

         Other income in 1996 includes the net proceeds of $         from
the favorable settlement of a lawsuit recorded in the second quarter of 1996,
which largely offset the losses that resulted from the decline in sales and
gross margin.

LIQUIDITY AND CAPITAL RESOURCES

         The Company finances its working capital requirements for its
operations primarily with borrowings under a long-term revolving bank credit
facility and internally generated funds.  Under that credit facility, the
Company is entitled to borrow up to the lesser of (i) $50,000,000, or (ii) an
amount equal to 80% of its eligible accounts receivable and 50% of its eligible
inventory (the "borrowing base").  Borrowings under this credit facility bear
interest at a per annum rate of interest equal to the bank's prime rate or, at
the Company's option but subject to certain limitations, borrowings under the
credit facility will bear interest at the bank's available LIBOR rate, plus
2% per annum.  At March 24, 1997, outstanding borrowings under this credit
facility were $36,342,000.  Borrowings under the credit facility are secured by
substantially all of the Company's assets and rank senior in priority to other
indebtedness of the Company and the agreement governing the credit facility
(the "Credit Agreement") contains certain restrictive covenants.  The Company
was in compliance with those covenants at December 31, 1996, the most recent
date as of which compliance with such covenants was required to be determined
under the Credit Agreement.

         The Company believes that available credit under its revolving credit
facility, together with internally generated funds, will be sufficient to
enable the Company to meet its working capital requirements over the next 12
months.

         In 1996, reductions in inventories enabled the Company to generate
cash from operating activities of $4,182,000 as compared to $184,000 in 1995.
The Company anticipates that it will be able to reduce inventories further in
1997 and, as a result, expects to generate positive cash flow from operations
in 1997, which could approximate the cash flow generated by operations in 1996.

         Net cash used in investing activities totaled $1,082,000 in 1996,
$3,597,000 in 1995 and $4,617,000 million in 1994.  Capital expenditures were
$445,000 in 1996, $ 1,862,000 in 1995 and $1,948,000 in 1994.  Capital
expenditures during the three years ended December 31, 1996 related
principally to the expansion by the Company into new locations, the
acquisition of warehouse equipment, the establishment and equipping of the
national customer service center, and additional investments in data
processing equipment.  The Company also used cash of $687,000 in 1996 and
$672,000 in 1995 to acquire additional shares, that increased its equity
ownership from 25% to 35%, in H. Burden, Limited, which is an affiliate of
the Company that distributes, at wholesale in Western Europe, parts, supplies
and accessories for recreational vehicles and boats.

         The Company leases the majority of its facilities and certain of its
equipment under noncancelable operating leases.  In 1996, rent expense under
all operating leases was approximately $3.1 million.  The Company's future
lease commitments are discussed in Note F to the Company's Consolidated
Financial Statements contained elsewhere in this Report.

         Net cash used in financing activities was $3,359,000 in 1996, as
compared to net cash provided of $3,501,000 in 1995 and $4,810,000 in 1994. The
cash provided by financing activities in 1995 and 1994 were generated primarily
from increases in net borrowings aggregating $6,477,000 in 1995 and $6,832,000
in 1994 under the Company's revolving bank credit facility.  In 1996 and 1995,
the Company made principal reduction payments of $2,333,000 and $3,333,000,
respectively, on its outstanding senior subordinated notes (the "Subordinated
Notes"), principally with borrowings under its long term revolving bank credit
facility.  The Company is required to make an additional principal reduction
payment in the amount of $2,333,000 on the Subordinated Notes in 1997, which it
expects to fund with a combination of bank borrowings and internally generated
funds.







                                       16
<PAGE>   17

Seasonality and Inflation

         Seasonality. Sales of recreational vehicle and boating parts, supplies
and accessories are seasonal. The Company has significantly higher sales during
the six-month period from April through September than it does during the
remainder of the year. Because a substantial portion of the Company's expenses
are fixed, operating income declines and the Company sometimes incurs losses in
the winter months when sales are lower, particularly in years in which there
occurs unusually severe winter weather conditions in large regions of the
country.

         Set forth below is a summary of quarterly financial data for the two
years ended December 31, 1996, which indicates the effects on operating results
of the seasonality of the Company's business.

<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                                             --------------------------------------------------------------
                                              March             June             September         December
                                              1996              1996                1996             1996
                                             -------           -------           ---------         --------
         (Unaudited)                                      (In thousands except per share data)

<S>                                          <C>               <C>                <C>               <C>
Revenues..............................       $37,380           $42,159            $37,552           $22,195
Gross profit..........................         7,501             6,145              4,769             2,510
Net earnings (loss)...................           763             1,155               (464)           (1,577)
Net earnings (loss) per  share........          $.15              $.22              $(.09)            $(.30)
</TABLE>

<TABLE>
<CAPTION>
                                                                     QUARTER ENDED
                                             --------------------------------------------------------------
                                              March             June             September         December
                                              1995              1995                1995             1995
                                             -------           -------           ---------         --------
         (Unaudited)                                      (In thousands except per share data)

<S>                                           <C>              <C>                <C>               <C>
Revenues..............................       $44,355           $53,514            $46,805           $24,885
Gross profit..........................         8,631            10,057              7,723             4,342
Net earnings (loss)...................           772             2,224              1,242              (894)
Net earnings (loss) per  share........          $.15              $.42               $.24             $(.18)
</TABLE>


                                       17
<PAGE>   18
         Inflation. Generally, the Company has been able to pass inflationary
price increases on to its customers. However, inflation also may cause or may be
accompanied by increases in gasoline prices and interest rates. Such increases
adversely affect the purchase and usage of recreational vehicles and boats,
which can adversely affect sales of the Company's products.




                                       18
<PAGE>   19
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE THREE YEARS ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                       <C>
Consolidated Financial Statements:

         Report of Independent Certified Public Accountants..........................................     20

         Consolidated Balance Sheets, December 31, 1996 and 1995.....................................     21

         Consolidated Statements of Operations for the Years Ended
           December 31, 1996, 1995 and 1994..........................................................     22

         Consolidated Statements of Cash Flows
           for the Years Ended December 31, 1996, 1995 and 1994......................................     23

         Consolidated Statement of Shareholders' Equity for the
           Years Ended December 31, 1996, 1995 and 1994..............................................     25

         Notes to Consolidated Financial Statements..................................................     26

Financial Statement Schedules:

         Schedule II - Valuation and Qualifying Accounts
           for the Years Ended December 31, 1992, 1993 and 1994 .....................................     38

         (Other Financial Statement Schedules are omitted as the information is
         not required, is not material or is otherwise furnished.)
</TABLE>

                                HWH CORPORATION
                       FINANCIAL STATEMENTS AND REPORT OF
                    INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
                           DECEMBER 31, 1996 AND 1995


                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                       <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................................................     39

FINANCIAL STATEMENTS

  BALANCE SHEETS.....................................................................................     40

  STATEMENTS OF EARNINGS.............................................................................     42

  STATEMENTS OF STOCKHOLDERS' EQUITY.................................................................     43

  STATEMENTS OF CASH FLOWS...........................................................................     44

  NOTES TO FINANCIAL STATEMENTS......................................................................     46

FINANCIAL STATEMENT SCHEDULE

  SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS ...................................................     56

</TABLE>

                  H. BURDEN LIMITED AND SUBSIDIARY UNDERTAKING
                   INDEX TO FINANCIAL STATEMENTS FOR THE YEAR
                            ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         ----
<S>                                                                                                      <C>
Report of Auditors...................................................................................     57

Principal Accounting Policies........................................................................     58

Consolidated Profit and Loss Account.................................................................     60

Consolidated Balance Sheet...........................................................................     61

Balance Sheet........................................................................................     62

Consolidated Cash Flow Statement.....................................................................     63

Statement of Total Recognized Gains and Losses.......................................................     64

Notes to Financial Statements........................................................................     65
</TABLE>


                                       19
<PAGE>   20
                         [GRANT THORNTON LETTERHEAD]


                        REPORT OF INDEPENDENT ACCOUNTANTS


Board of Directors and Shareholders
The Coast Distribution System

   We have audited the accompanying consolidated balance sheets of The Coast
Distribution System and Subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

   In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Coast
Distribution System and Subsidiaries as of December 31, 1996 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

   We have also audited Schedule II for each of the three years in the period
ended December 31, 1996. In our opinion, this Schedule presents fairly, in all
material respects, the information required to be set forth therein.


/s/ GRANT THORNTON LLP

San Jose, California
March 3, 1997










                                       20
<PAGE>   21
                           CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
As of December 31,                                                                  1996         1995
-------------------------------------------------------------------------------------------------------
                                                                                  (dollars in thousands)
<S>                                                                               <C>          <C>
ASSETS
     CURRENT ASSETS
              Cash                                                                 $   214      $   501
              Accounts receivable (less allowance for
                     doubtful receivables of $1,086 in 1996 and
                     $937 in 1995)                                                  13,285       12,083
              Inventories                                                           43,193       48,225
              Prepaid expenses                                                         426          597
              Deferred income taxes                                                  2,038        1,782
              Income tax refunds receivable                                            883          285
                                                                                   -------      -------
                    Total current assets                                            60,039       63,473


     PROPERTY, PLANT & EQUIPMENT                                                     5,355        6,133
     OTHER ASSETS
              Investments in affiliates                                             12,458       10,891
              Costs in excess of net assets of acquired
                businesses                                                           9,048        9,447
              Non-competition agreements                                                35          584
              Other                                                                  1,507        1,608
                                                                                   -------      -------
                                                                                    23,048       22,530
                                                                                   -------      -------
                                                                                   $88,442      $92,136
                                                                                   =======      =======

LIABILITIES
     CURRENT LIABILITIES
              Accounts payable                                                     $ 7,322      $ 7,376
              Accrued liabilities                                                    1,911        2,005
              Notes payable                                                          1,500        1,500
              Current maturities of long-term obligations                            3,667        2,588
                                                                                   -------      -------
                    Total current liabilities                                       14,400       13,469

     LONG-TERM OBLIGATIONS                                                          33,771       38,376
     DEFERRED INCOME TAXES                                                             348          315
     COMMITMENTS                                                                       -            -
     REDEEMABLE PREFERRED STOCK OF SUBSIDIARY                                          473          584
     SHAREHOLDERS' EQUITY
              Common stock, no par value; authorized 10,000,000 shares;
                issued and outstanding, 5,210,723 shares in 1996 and
                5,155,429 shares in 1995                                            19,440       19,155
              Cumulative translation adjustment                                        (11)          75
              Retained earnings                                                     20,021       20,162
                                                                                   -------      -------
                                                                                    39,450       39,392
                                                                                   -------      -------
                                                                                   $88,442      $92,136
                                                                                   =======      =======

</TABLE>

        The accompanying notes are an integral part of these statements.





                                       21
<PAGE>   22
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Year Ended December 31,                                    1996               1995                1994
-----------------------------------------------------------------------------------------------------------
                                                       (dollars in thousands, except for per share amounts)
<S>                                                      <C>                 <C>                 <C>
Net sales                                                $139,286            $169,559            $177,774
Cost of products sold (including distribution costs)      118,361             138,806             146,987
                                                         --------            --------            --------
Gross margin                                               20,925              30,753              30,787
Selling, general and administrative expenses               21,525              22,260              23,216
                                                         --------            --------            --------
Operating margin                                             (600)              8,493               7,571
Equity in net earnings of affiliated companies              1,529               1,204               1,237
Other income (expense)
     Interest expense                                      (3,600)             (4,249)             (3,572)
     Other                                                  2,354                 (22)                177
                                                         --------            --------            --------
Earnings (loss) before income taxes                          (317)              5,426               5,413
     Income tax provision (benefit)                          (194)              2,082               1,828
                                                         --------            --------            --------
Net earnings (loss)                                      $   (123)           $  3,344            $  3,585
                                                         ========            ========            ========
Earnings (loss) per common and common equivalent share:
              Primary                                    $   (.03)           $    .64            $    .71
                                                         ========            ========            ========
              Fully diluted                              $   (.03)           $    .64            $    .70
                                                         ========            ========            ========
</TABLE>


        The accompanying notes are an integral part of these statements.







                                       22
<PAGE>   23
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
Year Ended December 31,                                                      1996        1995        1994
-----------------------------------------------------------------------------------------------------------
                                                                                (dollars in thousands)
<S>                                                                         <C>         <C>         <C>
Cash flows from operating activities:
     Net earnings (loss)                                                    $  (123)    $ 3,344     $ 3,585
     Adjustment to reconcile net earnings (loss) to net cash
      provided (used) by operating activities:
          Depreciation                                                        1,166       1,180         986
          Amortization                                                        1,084       1,501       2,167
          Loss (gain) from sale of equipment                                    (62)         (4)        (37)
          Equity in net earnings of affiliated companies,
                net of dividends                                               (950)       (645)       (172)
          Deferred income taxes                                                (110)         18        (255)
          Change in assets and liabilities net of
            effects from business acquisitions:
                Accounts receivable                                          (1,202)      1,194      (1,343)
                Inventory                                                     5,032      (5,647)     (5,249)
                Prepaids and tax refunds receivable                            (505)         80         242
                Accounts payable                                                (54)        422        (927)
                Accrued liabilities                                             (94)     (1,259)        447
                                                                            -------     -------     -------
                                                                              3,177      (5,210)     (6,830)
                                                                            -------     -------     -------
          Net cash provided (used) by operating
             activities                                                       4,182         184        (556)

Cash flows from investing activities:
     Proceeds from sale of equipment                                            124          17         283
     Decrease (increase) in other assets                                         66        (797)       (331)
     Acquisitions of businesses, net of cash acquired                          (827)       (955)     (2,621)
     Capital expenditures                                                      (445)     (1,862)     (1,948)
                                                                            -------     -------     -------
          Net cash used in investing activities                              (1,082)     (3,597)     (4,617)

Cash flows from financing activities:
     Net borrowings (repayments) under notes payable and
       line-of-credit agreements
     Proceeds from issuance of long-term debt                                (1,068)      6,477       6,832
     Repayment of long-term debt                                                161         361         273
     Issuance of common stock under employee                                 (2,613)     (3,448)     (2,475)
       stock purchase and stock option plans
     Repurchase of common stock                                                 285         716         195
     Income tax benefit of exercise of stock options                            -          (589)        -
     Redemption of redeemable preferred stock                                   -            88          53
       of subsidiary
     Dividends on preferred stock of subsidiary                                (106)        (71)        (43)
       Net cash provided (used) by financing activities                         (18)        (33)        (25)
                                                                            -------     -------     -------
                                                                             (3,359)      3,501       4,810
</TABLE>






                                       23
<PAGE>   24
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>
Year Ended December 31,                                                              1996       1995       1994
------------------------------------------------------------------------------------------------------------------
                                                                                        (dollars in thousands)

<S>                                                                                  <C>        <C>         <C>
Effect of exchange rate changes on cash                                              $  (28)    $   -       $  122
                                                                                     ------     ------      ------
NET INCREASE (DECREASE) IN CASH                                                        (287)        88        (241)
Cash beginning of year                                                                  501        413         654
                                                                                     ------     ------      ------
Cash end of year                                                                     $  214     $  501      $  413
                                                                                     ======     ======      ======
Supplemental disclosures of cash flow information:
              Cash paid during the year for:
                           Interest                                                  $3,733     $4,329      $3,621
                           Income taxes                                                 673      2,072       1,350

Supplemental schedule of non-cash investing and financing activities:

       In 1994, $1,000,000 of 9.25% convertible subordinated notes were
          converted into 200,000 shares of common stock

       In 1994, the Company issued 280,487 shares of its common stock, valued at
          $1,818,000, in connection with the investment in H. Burden Limited
          described in Note B to the financial statements

       In 1994, in connection with acquiring the remaining capital stock of the
          Coast Distribution System (Canada), Inc., as described in Note B,
          the Company issued 91,168 shares of its common stock, valued at
          $629,000, and caused preferred stock, valued at $741,000, to be issued
          by the subsidiary. In conjunction with this acquisition, liabilities
          were assumed as follows:

            Fair value of assets acquired                                            $8,536
            Cash and noncash consideration paid                                       2,764
                                                                                     ------
                Liabilities assumed                                                  $5,772
                                                                                     ======
</TABLE>

The accompanying notes are an integral part of these statements.









                                       24
<PAGE>   25
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                       Cumulative
                                                             Common      Retained      Translation
Three Years Ended December 31, 1996                          Stock       Earnings      Adjustment   Total
-----------------------------------------------------------------------------------------------------------
                                                                        (dollars in thousands)
<S>                                                          <C>          <C>            <C>        <C>
Balance at January 1, 1994                                   $15,245      $13,291         $(49)     $28,487
Net earnings for the year                                        -          3,585          -          3,585
Foreign currency translation adjustments                         -            -            (20)         (20)
Issuance of common stock under employee
     stock purchase plan                                         156          -            -            156
Exercise of stock options                                         39          -            -             39
Conversion of convertible debt into common stock               1,000          -            -          1,000
Issuance of common stock in connection with
     acquisitions                                              2,447          -            -          2,447
Income tax benefit of exercise of non-qualified
     stock options                                                53          -            -             53
Dividends on preferred stock of subsidiary                       -            (25)         -            (25)
                                                             -------      -------        -----      -------
Balance at December 31, 1994                                  18,940       16,851          (69)      35,722

Net earnings for the year                                        -          3,344          -          3,344
Foreign currency translation adjustments                         -            -            144          144
Issuance of common stock under employee
     stock purchase plan                                         171          -            -            171
Exercise of stock options                                        545          -            -            545
Repurchase of common stock                                      (589)         -            -           (589)
Income tax benefit of exercise of non-qualified
     stock options                                                88          -            -             88
Dividends on preferred stock of subsidiary                       -            (33)         -            (33)
                                                             -------      -------        -----      -------
Balance at December 31, 1995                                  19,155       20,162           75       39,392
                                                             -------      -------        -----      -------
Net loss for the year                                            -           (123)         -           (123)
Foreign currency translation adjustments                         -            -            (86)         (86)
Issuance of common stock under employee stock
     purchase plan                                               198          -            -            198
Exercise of stock options                                         87          -            -             87
Dividends on preferred stock of subsidiary                       -            (18)         -            (18)
                                                             -------      -------        -----      -------
Balance at December 31, 1996                                 $19,440      $20,021        $ (11)     $39,450
                                                             =======      =======        =====      =======
</TABLE>

         The accompanying notes are an integral part of this statement.





                                       25
<PAGE>   26
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   A summary of the significant accounting policies applied in the preparation
of the accompanying consolidated financial statements follows.

1. Principles of Consolidation. The Company consolidates the accounts of its
wholly-owned subsidiaries. This includes the accounts of The Coast Distribution
System (Canada) Inc. ("Coast Canada") subsequent to February 1994 when the
Company purchased the remaining 64% of the outstanding common stock of Coast
Canada. Previously, Coast Canada was accounted for as an equity investment.
Investments in unconsolidated affiliates (Note D) are accounted for by the
equity method. Operations of affiliates outside the United States and Canada are
generally included for periods within three months of the Company's year-end to
ensure preparation of consolidated financial statements on a timely basis. All
material intercompany transactions have been eliminated.

2. Inventories. Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market. Inventories consist primarily of
recreational replacement parts, supplies and accessories held for resale.

3. Property, Plant and Equipment. Property, plant and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, principally
on a straight-line basis. The estimated lives used in determining depreciation
and amortization are:

    Buildings and improvements               12-40 years

    Warehouse and office equipment             5-7 years

    Automobiles                                3-5 years

Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter. Currently the
amortization periods range from 5 to 17 years.

4. Revenue Recognition. Revenue from sales of product is recognized upon
shipment.

5. Industry Segment. The Company operates in one industry segment which is the
distribution of recreational replacement parts, supplies and accessories. The
Company distributes its product from 18 distribution centers located throughout
the United States and Canada. No single customer accounted for 10% or more of
the Company's revenues in 1996, 1995, or 1994.

6. Intangible Assets. The costs in excess of net assets of acquired businesses
are being amortized on a straight-line basis using periods ranging from four to
thirty years. Non-competition agreements are being amortized on a straight-line
basis over seven years. At December 31, 1996 and 1995, the accumulated
amortization applicable to intangible assets was approximately $5,369,000 and
$8,170,000, respectively. On an ongoing basis, management reviews the valuation
and amortization of intangibles. As part of this review, the Company evaluates
the recoverability of the intangibles based upon the operating income generated
by the related acquired businesses to determine if impairment has occurred.

7. Foreign Currency Translation. Exchange adjustments resulting from foreign
currency transactions are generally recognized in net earnings, whereas
adjustments resulting from the translation of financial statements are reflected
as a separate component of shareholders' equity. Net foreign currency
transaction gains or losses are not material in any of the years presented.

8. Forward Exchange Contracts. On a selective basis, the Company enters into
forward exchange contracts to reduce the impact of foreign currency fluctuations
on a portion of the inventory purchases of its subsidiary. The gains or losses
on these contracts are included in earnings in the period when the related
transactions being hedged are recognized. The contracts do not subject the
Company to significant market risk from exchange rate movements because the
contracts offset gains and losses on the balances and transactions being hedged.
At December 31, 1996, there were no forward exchange contracts outstanding.

9. Income Taxes. The Company provides a deferred tax expense or benefit equal to
the net change in the deferred tax liability or asset during the year. Deferred
income taxes represent tax credit carryforwards and future net tax effects
resulting from temporary differences between the financial statement and tax
basis of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. A valuation allowance is
provided against deferred tax assets when realization of the asset is not
expected to occur.

                                       26
<PAGE>   27
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Reclassifications. Certain reclassifications, not affecting earnings or
retained earnings, have been made to the prior years' financial statements to
conform to the current year presentation.

11. Use of Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as revenues and expenses during the
reporting period. Actual results could differ from those estimates.

NOTE B: ACQUISITIONS

   THE COAST DISTRIBUTION SYSTEM (CANADA) INC. - In 1991, the Company began
acquiring shares of Coast Canada. In 1994 the Company increased its ownership to
100% of the outstanding shares. The cumulative purchase price paid for the
shares was $2,764,000. The investment in Coast Canada was accounted for by the
equity method through February 1994, and, accordingly, the equity in net
earnings of Coast Canada is included in the Company's consolidated statements of
earnings from the date of acquisition through February 28, 1994. As of March 1,
1994 the accounts of Coast Canada have been consolidated along with the
Company's other wholly-owned subsidiaries.

   H. BURDEN LIMITED - In 1993, the Company began acquiring shares of H. Burden
Limited ("Burden"). In 1996 the Company increased its ownership to 35% of the
outstanding shares. The cumulative purchase price paid for the shares was
$4,025,000. The investment in Burden is accounted for by the equity method and,
accordingly, the equity in net earnings of Burden is included in the Company's
consolidated statements of earnings from the date of acquisition through
September 30, 1996.

   Pro forma results of operations assuming the Coast Canada and Burden
acquisitions had occurred as of the beginning of each respective year presented
have not been presented as such results do not differ materially from the
reported results of operations.

NOTE C: PROPERTY, PLANT & EQUIPMENT

   Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                                   1996         1995
----------------------------------------------------------------------
                                                 (dollars in thousands)
<S>                                               <C>          <C>
Building                                          $ 2,791      $ 2,792
Warehouse equipment                                 3,305        3,563
Office equipment                                    4,686        5,072
Leasehold improvements                                922          938
Automobiles                                            73          150
                                                  -------      -------
                                                   11,777       12,515
Less accumulated depreciation
  and amortization                                  7,059        7,019
                                                  -------      -------
                                                    4,718        5,496
Land                                                  637          637
                                                  -------      -------
                                                  $ 5,355      $ 6,133
                                                  =======      =======
</TABLE>


                                       27
<PAGE>   28
NOTE D: INVESTMENTS IN AFFILIATED COMPANIES

   The Company's 34% investment in HWH Corporation is accounted for using the
equity method of accounting. Summarized financial information of HWH at December
31, 1996 and 1995 and for each of the three years in the period ended December
31, 1996, is presented as follows:

<TABLE>
<CAPTION>

Condensed Balance Sheets
As of December 31,                                    1996      1995
-----------------------------------------------------------------------
                                                  (dollars in thousands)
<S>                                                 <C>        <C>
Cash and cash equivalents                           $ 1,626    $ 1,259
Investments                                           1,719      3,733
Receivables                                           4,029      4,495
Inventory                                             9,052      4,984
Other current assets                                    659        651
Investments and long-term receivables                 2,187      2,387
Property and equipment                                1,251      2,719
Other assets                                            100         87
                                                    -------    -------
                                                    $20,623    $20,315
                                                    =======    =======
Current liabilities                                 $ 2,789    $ 3,627
Long-term debt                                          120        141
Shareholders' equity                                 17,714     16,547
                                                    -------    -------
                                                    $20,623    $20,315
                                                    =======    =======
</TABLE>



<TABLE>
<CAPTION>
Condensed Statements of Earnings
Year Ended December 31,                    1996       1995       1994
-----------------------------------------------------------------------
                                             (dollars in thousands)
<S>                                       <C>        <C>        <C>
Net sales                                 $32,279    $30,946    $26,291
Cost of goods sold                         21,544     20,829     16,459
                                          -------    -------    -------
Gross margin                               10,735     10,117      9,832

Selling, general and
  administrative expenses                   6,837      6,069      5,820
Other income                                  375        534        478
                                          -------    -------    -------
Earnings before income taxes                4,273      4,582      4,490
Provision for income taxes                  1,535      1,584      1,436
                                          -------    -------    -------
   Net earnings                           $ 2,738    $ 2,998    $ 3,054
                                          =======    =======    =======
</TABLE>


                                       28
<PAGE>   29

   Summarized financial information of Burden at September 30, 1996 and 1995 and
for the years ended September 30, 1996 and 1995 is presented as follows:

<TABLE>
<CAPTION>
Condensed Balance Sheets
As of September 30,                                   1996        1995
------------------------------------------------------------------------
                                                   (dollars in thousands)
<S>                                                 <C>         <C>
Cash                                                 $   168    $   115
Receivables                                            8,540      7,687
Inventory                                             14,023     12,210
Other current assets                                     498        388
Property and equipment                                11,297      8,512
Other assets                                             -           92
                                                     -------    -------
                                                     $34,526    $29,004
                                                     =======    =======
Current maturities                                   $ 5,635    $ 5,158
Other current liabilities                              8,408      6,945
Long-term debt                                         8,403      5,953
Shareholders' equity                                  12,080     10,948
                                                     -------    -------
                                                     $34,526    $29,004
                                                     =======    =======
</TABLE>

<TABLE>
<CAPTION>
Condensed Statements of Earnings
Year Ended September 30,                               1996       1995
-------------------------------------------------------------------------
                                                    (dollars in thousands)
<S>                                                   <C>        <C>
Net sales                                             $64,526    $59,617
Cost of goods sold                                     52,316     47,771
                                                      -------    -------
Gross margin                                           12,210     11,846

Selling, general and
  administrative expenses                               8,818      9,276
Other (income) expense                                    803        947
                                                      -------    -------
Earnings before income taxes                            2,589      1,623
Provision for income taxes                              1,030        642
                                                      -------    -------
     Net earnings                                     $ 1,559    $   981
                                                      =======    =======
</TABLE>



                                       29
<PAGE>   30
   The Company has investments in two joint ventures, Coast to Coast RV Services
doing business in Australia and Accessorios Para Campers y Autobuses, S.A De
C.V. doing business in Mexico. These investments are being accounted for using
the equity method of accounting.

   The Company's investments in unconsolidated affiliates (excluding Coast
Canada) are summarized as follows:

<TABLE>
<CAPTION>
                                                 HWH       Burden      Other
----------------------------------------------------------------------------
                                                   (dollars in thousands)

<S>                                            <C>         <C>        <C>
Balance at 1/1/95                              $5,959      $3,024       $398
   Investments                                    -           672        140
   Equity in earnings (loss), net
     of goodwill amortization                     944         279        (19)
   Dividends received                            (525)        (34)        -
   Translation adjustments                        -            63        (10)
                                               ------      ------       ----
Balance at 12/31/95                            $6,378      $4,004       $509
   Investments                                    -           687         -
   Equity in earnings (loss), net
     of goodwill amortization                     852         512        165
   Dividends received                            (525)        (48)        -
   Translation adjustments                        -           (84)       (10)
                                               ------      ------       ----
Balance at 12/31/96                            $6,705      $5,071       $682
                                               ======      ======       ====
</TABLE>

NOTE E: LONG-TERM OBLIGATIONS

Long-term obligations consist of the following at

<TABLE>
<CAPTION>

December 31:                                                                             1996       1995
-----------------------------------------------------------------------------------------------------------
                                                                                      (dollars in thousands)
<S>                                                                                     <C>        <C>
Secured note payable to bank                                                            $27,956    $29,024

11.2% senior subordinated secured notes-due June 1, 1999                                  7,001      9,334

11.25% note collateralized by a deed of trust on land and building,
  due in monthly installments of $7, remaining principal due in November 1997               602        615

11.625% note collateralized by a deed of trust on land and building, due in
  monthly installments of $5, remaining principal due in November 1997                      433        441

10% note collateralized by a deed of trust on land and building, due in
  monthly installments of $11, final payment due in September 2004                          728        788

Other note payable                                                                          183        237

Capital lease obligations                                                                   535        525
                                                                                        -------    -------
                                                                                         37,438     40,964
Current portion                                                                           3,667      2,588
                                                                                        -------    -------
                                                                                        $33,771    $38,376
                                                                                        =======    =======
</TABLE>

   Subsequent to 1997, annual maturities of long-term obligations (in thousands)
are $2,645 in 1998, $2,576 in 1999, $28,128 in 2000, $97 in 2001 and $325
due thereafter.

Secured Note Payable to Bank

   The secured note payable to bank represents a revolving credit agreement,
collateralized by substantially all assets of the Company. The Company may
borrow up to the lesser of (i) $50,000,000 or (ii) an amount equal to 80% of the
value of their eligible accounts receivable and 50% of the value of their
eligible inventory. Interest is payable at LIBOR, (5.65625% at December 31,
1996) plus 200 basis points.

                                       30


<PAGE>   31
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11.2% Senior Subordinated Secured Notes- Due June 1, 1999

   The notes are collateralized by substantially all of the assets of the
Company and bear interest at 11.2%. The notes require semiannual interest
payments on June 1 and December 1 of each year. Annual principal payments of
$2,333,000 commenced June 1, 1994 and continue through June 1, 1999.

   The note agreements relating to the secured note payable to bank and to the
11.2% senior subordinated secured notes contain certain restrictive covenants.
Included are covenants regarding profitability, minimum liquidity ratios,
restrictions on investments, and limitations on indebtedness, payment of
dividends, long-term leases, and mergers and consolidations.

   The Company is in compliance with all the covenants.

NOTE F: COMMITMENTS

Operating Leases

    The Company leases its corporate offices, certain warehouse facilities, and
data processing equipment. These leases are classified as operating leases as
they do not meet the capitalization criteria of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases". The office and warehouse
leases expire over the next eleven years and the equipment leases expire over
the next four years. Minimum future rental commitments under non-cancelable
operating leases having an initial or remaining term in excess of one year as of
December 31, 1996 are as follows:

<TABLE>
<CAPTION>

Year Ending
December 31,                          Equipment   Facilities      Total
------------------------------------------------------------------------
                                             (dollars in thousands)
<S>                                     <C>         <C>           <C>
1997                                    $ 81        $2,930        $3,011
1998                                      79         2,555         2,634
1999                                      13         1,482         1,495
2000                                       3           454           457
2001                                       -           434           434
Thereafter                                 -         1,439         1,439
                                        ----        ------        ------
                                        $176        $9,294        $9,470
                                        ====        ======        ======
</TABLE>

    Rent expense charged to operations amounted to (in thousands) $3,116 in
1996, $3,144 in 1995 and $3,780 in 1994.


                                       31
<PAGE>   32
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE G: STOCK OPTION AND STOCK PURCHASE PLANS

Stock Option Plans - The Company has in effect a 1987 Nonqualified Stock Option
Plan and a 1993 Stock Option and Incentive Plan ("the plans") which authorize
the issuance of options to purchase 700,000 shares of the Company's common stock
to key management employees of the Company and members of the Company's Board of
Directors. The plans generally provide that option prices will not be less than
fair market value per share on the date the option is granted, or 110% of fair
market value in the case of an incentive stock option granted to any employee
who, at the time of the grant, owns or is deemed to own more than 10% of the
total combined voting power of all classes of stock of the Company.

   Accordingly, no compensation cost has been recognized for the plans. Had
compensation cost for the plans been determined based on the fair value of the
options at the grant dates consistent with the method of Statement of Financial
Accounting Standards 123, Accounting for Stock-Based Compensation ("SFAS 123"),
the Company's net earnings (loss) and earnings (loss) per share would have been
reduced to the pro forma amounts indicated below. Pro forma amounts for 1996 and
1995 may not be indicative of pro forma results in future periods because the
pro forma amounts below do not include pro forma compensation cost for options
granted prior to January 1, 1995.


<TABLE>
<CAPTION>
                                            1996         1995
                                            ----         ----
     <S>                  <C>            <C>          <C>
     Net Earnings (loss)  As reported    $(123,000)   $3,344,000
                          Pro Forma      $(193,000)   $3,256,000

     Per share            As reported    $   (0.03)   $     0.64
                          Pro Forma      $   (0.04)   $     0.63
</TABLE>

    The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively: no expected
dividends; expected volatility of 45%; risk-free interest rates of 6.1% and
7.2%; and expected lives of 4 years. A summary of the status of the Company's
stock option plan as of December 31, 1996 and 1995, and changes during the
years ending on those dates is presented below:

<TABLE>
<CAPTION>
                                                 1996                      1995                       1994
                                       ------------------------------------------------------------------------------------
                                                 Weighted Average            Weighted Average             Weighted Average
                                        Shares    Exercise Price    Shares    Exercise Price     Shares    Exercise Price
                                       ------------------------------------------------------------------------------------
    <S>                                <C>       <C>               <C>       <C>                 <C>      <C>
    Outstanding at beginning of year   198,250        $6.00         432,709       $5.75          238,576      $ 3.86
    Granted                             10,000         5.63          97,500        6.94          209,600        7.75
    Exercised                          (24,675)        3.50        (151,034)       3.57          (11,442)      (3.38)
    Forfeited                             (375)        3.62        (180,925)       6.93           (4,025)      (4.24)
                                       -------                     --------                      -------
    Outstanding at end of year         183,200         7.03         198,250        6.00          432,709        5.75

    Weighted average fair value of
      options granted during the year                 $2.40                       $3.05                       $ 2.52
</TABLE>

    The following information applies to options outstanding at December 31,
1996:

<TABLE>
<S>                                      <C>            <C>
       Range of exercise prices          $4.63-$6.50     $7.13-$7.88
       Options outstanding                    57,200         126,000
       Weighted average exercise price         $6.05           $7.47
       Weighted average remaining
          contractual life (years)                 8               6
       Options exercisable                    57,200          57,200
       Weighted average exercise price         $6.05           $7.63
</TABLE>


                                       32
<PAGE>   33

1987 Employee Stock Purchase Plan

   The Company has in effect an Employee Stock Purchase Plan under which 450,000
shares of the Company's common stock are reserved for issuance to all permanent
employees who have met minimum employment criteria. Employees who do not own 5%
or more of the outstanding shares are eligible to participate through payroll
deductions in amounts related to their basic compensation. At the end of each
offering period, shares are purchased by the participants at 85% of the lower of
the fair market value at the beginning or the end of the offering period. During
the years ended December 31, 1996 and 1995, 30,619 and 26,013 shares,
respectively, of common stock were issued under the Employee Stock Purchase
Plan. At December 31, 1996, 201,335 shares remain available for issuance in
future offering periods.

NOTE H: EMPLOYEE BENEFIT PLAN

   The Company adopted a 401(K) profit sharing plan as of January 1, 1989. All
full-time employees are eligible to participate on the first quarter following
completion of six months of employment. The plan allows participants to make
pretax contributions and apply for and secure loans from their account. The plan
provides for the Company to make discretionary contributions to be determined
annually. The Company contributed $39,803 in 1996, $41,299 in 1995 and $20,363
in 1994.

NOTE I: FOREIGN OPERATIONS

   A summary of the Company's operations by geographic area is presented below:

<TABLE>
<CAPTION>
                                         1996         1995
------------------------------------------------------------
                                      (dollars in thousands)
<S>                                    <C>          <C>
Net Sales
     United States                     $120,957     $148,021
     Canada                              19,295       22,438
     Eliminations                          (966)        (900)

Operating Margin
     United States                       (1,013)       7,073
     Canada                                 478        1,450
     Eliminations                           (65)         (30)

Identifiable Assets
     United States                       82,711       86,007
     Canada                               8,873        8,950
     Eliminations                        (3,142)      (2,821)
</TABLE>

         Transfers between geographic areas have not been presented as they are
not significant.




                                       33

<PAGE>   34
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE J: INCOME TAXES

   Pretax income for the years ended December 31 was taxed under the following
jurisdictions:

<TABLE>
<CAPTION>
                                               1996      1995      1994
------------------------------------------------------------------------
                                                (dollars in thousands)
<S>                                           <C>       <C>       <C>
Domestic                                       $(378)   $4,486    $4,021
Foreign                                           61       940     1,392
                                               -----    ------    ------
                                               $(317)   $5,426    $5,413
                                               =====    ======    ======
------------------------------------------------------------------------
</TABLE>

   The provision for income taxes is summarized as follows for the year ended
December 31:

<TABLE>
<CAPTION>
                                         1996        1995        1994
----------------------------------------------------------------------
                                            (dollars in thousands)
<S>                                     <C>         <C>          <C>
Current:
         Federal                         $(137)     $1,386      $1,308
         State                              12         273         246
         Foreign                            41         405         529
                                         -----      ------       -----
                                           (84)      2,064       2,083
                                         =====      ======       =====
Deferred:
         Federal                          (129)        (44)       (174)
         State                              14          62         (86)
         Foreign                             5         -             5
                                         -----      ------       -----
                                          (110)         18        (255)
                                         -----      ------       -----
Income tax provision                     $(194)     $2,082      $1,828
                                         =====      ======       =====
----------------------------------------------------------------------
</TABLE>



   The total operating loss carryforwards available for state income tax
purposes at December 31, 1996 aggregate $1,930,000. The earliest carryforwards
begin to expire in 1997.


                                       34
<PAGE>   35

   Deferred tax assets (liabilities) are comprised of the following at
December 31:

<TABLE>
<CAPTION>
                                          1996        1995        1994
-----------------------------------------------------------------------
                                             (dollars in thousands)
<S>                                      <C>         <C>         <C>
Deferred tax assets
   Inventory capitalization              $1,034      $  918      $1,096
   Bad debt provision                       382         345         423
   Inventory reserve                        507         403         307
   Property, plant and equipment              1          41          92
   Loss carryforwards                       145         181         252
   Other                                     45          11           5
                                         ------      ------      ------
   Gross deferred tax assets              2,114       1,899       2,175
   Less valuation allowance                 (72)        (76)        (82)
                                         ------      ------      ------
                                         $2,042      $1,823      $2,093
                                         ------      ------      ------
Deferred tax liabilities
   Unremitted earnings of affiliates     $ (257)     $ (233)     $ (197)
   Property, plant and equipment            (91)        (82)         (4)
                                         ------      ------      ------
   Gross deferred tax liabilities          (348)       (315)       (201)
                                         ------      ------      ------
   Net deferred tax assets               $1,694      $1,508      $1,892
                                         ======      ======      ======
-----------------------------------------------------------------------
</TABLE>



   A reconciliation between actual tax expense (benefit) for the year and
expected tax expense is as follows:

<TABLE>
<CAPTION>
                                                1996         1995       1994
------------------------------------------------------------------------------
                                                    (dollars in thousands)
<S>                                             <C>         <C>         <C>
Earnings (loss) before income taxes             $(317)      $5,426      $5,413
                                                -----       ------      ------
Expected income tax expense at 34%               (108)       1,845       1,840
Higher rates on earnings of foreign operations      8           69          46
Goodwill amortization                             229          267         233
Dividend exclusion on earnings of affiliate      (242)        (269)       (294)
State taxes (net of federal benefit)               44          225          79
Decrease in valuation allowance                    (4)          (6)         (2)
Exclusion of earnings (benefit) of
  foreign affiliates                             (133)         (71)        (63)
Other                                              12           22         (11)
                                                -----       ------      ------
Income tax provision                            $(194)      $2,082      $1,828
                                                =====       ======      ======
------------------------------------------------------------------------------
</TABLE>

Deferred income taxes have not been provided on the undistributed earnings of
foreign subsidiaries or foreign joint ventures as they have been and will
continue to be reinvested. Where it is contemplated that earnings will not be
reinvested, the Company believes U.S. foreign tax credits would largely
eliminate any U.S. tax.


                                       35

<PAGE>   36

NOTE K: EARNINGS PER SHARE

   Earnings per share are based upon the average number of common and dilutive
common equivalent (stock options and convertible notes) shares outstanding
during each year (5,198,402 shares in 1996, 5,205,730 shares in 1995, and
5,185,775 shares in 1994).

NOTE L: ACCRUED LIABILITIES

   Accrued liabilities consist of the following at December 31:

<TABLE>
<CAPTION>
                                                   1996          1995
-----------------------------------------------------------------------
                                                 (dollars in thousands)
<S>                                               <C>           <C>
Payroll and related benefits                      $  723        $  659
Rent                                                 267           347
Income and other taxes                               461           331
Other                                                460           668
                                                  ------        ------
                                                  $1,911        $2,005
                                                  ======        ======
</TABLE>





                                       36
<PAGE>   37
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M: NOTES PAYABLE

   At December 31, 1996 and 1995 the Company owed its affiliate HWH $1,500,000.
The notes payable are due on demand and interest is paid monthly at the
Company's current rate payable on its secured note payable to bank (see note E).

NOTE N: FINANCIAL INSTRUMENTS

   The fair values of financial instruments, other than long-term debt, closely
approximate their carrying value. Investments in affiliates consists of
securities for which a reasonable estimate of fair value could not be made as no
quoted market prices for the securities exist and the costs of determining fair
value would be excessive. As of December 31, 1996, the estimated fair value of
long-term debt, based on the current rates offered to the Company for debt of
the same remaining maturities, exceed the carrying value by approximately
$300,000.

NOTE O: SIGNIFICANT CONCENTRATIONS

   The Company's ability to satisfy demand for its products may be limited by
the availability of those products from the Company's suppliers. In 1995, the
Company entered into a multi-year supply agreement with Recreational Vehicle
Products, Inc. ("RVP"), which manufactures air conditioners under the Coleman(R)
brand name and awnings under the Faulkner(R) brand name. RVP has agreed to
supply the Company with its requirements for these products, the sales of which
accounted for 15% of the Company's net sales in 1996.

NOTE P: OTHER INCOME

   Other income consists primarily of the proceeds to the Company from the
favorable settlement of a lawsuit with a leading supplier. The resultant gain
is shown net of certain expenses incurred as a result of the Company's
involvement in the lawsuit.

                                  37

<PAGE>   38
                                                                    SCHEDULE II


                THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                        December 31, 1994, 1995 and 1996

<TABLE>
<CAPTION>
                                              Balance,                                             Balance,
                                            beginning of                                            end of
Description                                    period          Additions(1)     Deductions(2)       period
-----------                                 -----------        ------------     -------------    ----------
<S>                                         <C>                 <C>               <C>            <C>
Allowance for doubtful accounts:

Year Ended December 31, 1994                $1,000,000          $375,000          $235,000       $1,140,000
Year Ended December 31, 1995                $1,140,000          $161,000          $364,000       $  937,000
Year Ended December 31, 1996                $  937,000          $534,000          $385,000       $1,086,000
</TABLE>
---------------
(1)    Includes addition of $78,000 as a result of an acquisition of receivables
(2)    Write-off of doubtful accounts against the allowance and recoveries.

<TABLE>
<CAPTION>
                                              Balance,                                            Balance,
                                            beginning of                                           end of
Description                                   period          Additions(1)     Deductions(2)       period
-----------                                 -----------       ------------     -------------     ----------
<S>                                         <C>                <C>                <C>              <C>
Allowance for obsolete or
  slow-moving inventory:

Year Ended December 31, 1994                $  880,000         $388,000          $270,000        $  998,000
Year Ended December 31, 1995                $  998,000         $594,000          $269,000        $1,323,000
Year Ended December 31, 1996                $1,323,000         $427,000          $380,000        $1,370,000
</TABLE>
----------------
(1)    Includes addition of $149,000 as a result of an acquisition of inventory.
(2)    Write-off of slow-moving or obsolete inventory or sale of inventory at
       reduced margin.


                                       38
<PAGE>   39
               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
HWH Corporation

We have audited the accompanying balance sheets of HWH Corporation (a Montana
corporation) as of December 31, 1996 and 1995 and the related statements of
earnings, stockholders' equity and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HWH Corporation as of December
31, 1996 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.

We have also audited Schedule II for each of the three years in the period ended
December 31, 1996. In our opinion, this schedule presents fairly, in all
material respects, the information required to be set forth therein.



/s/ GRANT THORNTON LLP


Chicago, Illinois
February 14, 1997




                                       39

<PAGE>   40
HWH CORPORATION
BALANCE SHEETS
DECEMBER 31,
================================================================================


<TABLE>
<CAPTION>
                                          ASSETS                       1996             1995
                                                                    -----------      -----------
<S>                                                                 <C>              <C>
CURRENT ASSETS
    Cash and cash equivalents ................................      $ 1,626,264      $ 1,258,956
    Investments ..............................................        1,718,522        3,733,398
    Receivables
       Trade, less allowance for doubtful accounts of $200,000
           in 1996 and $400,000 in 1995 ......................        3,993,928        4,377,586
       Notes, including affiliate notes of $1,500,000 in 1996
           and 1995 ..........................................        1,525,436        1,575,000
       Interest ..............................................            9,537           42,640
                                                                    -----------      -----------

                                                                      5,528,907        5,995,226

    Inventories ..............................................        9,052,423        4,983,865
    Other current assets .....................................          659,016          651,098
                                                                    -----------      -----------

                  Total current assets .......................       18,585,126       16,622,543

LONG-TERM INVESTMENTS AND RECEIVABLES
    Investments ..............................................          687,295          687,295
    Notes receivable, less current maturities ................              -            200,000
                                                                    -----------      -----------

                                                                        687,295          887,295
PROPERTY, PLANT AND EQUIPMENT
    Land .....................................................           58,492           58,492
    Building and building improvements .......................        1,457,558        1,401,875
    Machinery and equipment ..................................        1,155,973        1,115,054
    Transportation equipment .................................          547,349          437,440
    Office equipment .........................................          494,364          428,206
                                                                    -----------      -----------

                                                                      3,713,736        3,441,067

       Less accumulated depreciation .........................        2,462,973        2,247,809
                                                                    -----------      -----------

                                                                      1,250,763        1,193,258

       Construction in progress ..............................              -          1,525,747
                                                                    -----------      -----------

                                                                      1,250,763        2,719,005

OTHER ASSETS .................................................          100,404           87,481
                                                                    -----------      -----------

                                                                    $20,623,588      $20,316,324
                                                                    ===========      ===========
</TABLE>

                                       40
<PAGE>   41
HWH CORPORATION
BALANCE SHEETS - CONTINUED
DECEMBER 31,
================================================================================


<TABLE>
<CAPTION>
      LIABILITIES AND STOCKHOLDERS' EQUITY                            1996             1995
                                                                   -----------      -----------
<S>                                                                <C>              <C>
CURRENT LIABILITIES
    Current maturities of long-term debt ....................      $    20,000      $    20,000
    Note payable -director ..................................              -            675,000
    Accounts payable ........................................        1,397,136        1,391,823
    Accrued expenses ........................................        1,372,217        1,233,080
    Income taxes payable ....................................              -            307,354
                                                                   -----------      -----------

              Total current liabilities .....................        2,789,353        3,627,257

LONG-TERM DEBT, less current maturities .....................          120,000          140,000

COMMITMENTS AND CONTINGENCIES ...............................              -                -

DEFERRED INCOME TAX LIABLITITY ..............................              -              2,000

STOCKHOLDERS' EQUITY
    Capital stock
       Common, Class A, 8.19 votes per share; no par value;
           authorized, issued and outstanding, 10,000 shares            10,000           10,000
       Common, Class B, .63 votes per share; no par value;
           authorized, 240,000 shares; issued, 201,926 shares          264,428          264,428
    Retained earnings .......................................       17,514,442       16,311,927
    Net unrealized gain on investments available-for-sale ...            4,220           39,567
                                                                   -----------      -----------

                                                                    17,793,090       16,625,922

    Less 7,210 shares of Class B common stock in treasury in
       1996 and 1995 - at cost ..............................           78,855           78,855
                                                                   -----------      -----------

                                                                    17,714,235       16,547,067
                                                                   -----------      -----------

                                                                   $20,623,588      $20,316,324
                                                                   ===========      ===========
</TABLE>


The accompanying notes are an integral part of these statements.


                                      41


<PAGE>   42
HWH CORPORATION
STATEMENTS OF EARNINGS
YEAR ENDED DECEMBER 31,
================================================================================


<TABLE>
<CAPTION>
                                                      1996               1995               1994
                                                  ------------       ------------       ------------
<S>                                               <C>                <C>                <C>
Net sales ..................................      $ 32,279,451       $ 30,946,325       $ 26,291,351

Cost of goods sold .........................        21,544,069         20,829,025         16,458,700
                                                  ------------       ------------       ------------

           Gross profit ....................        10,735,382         10,117,300          9,832,651

Selling, general and administrative expenses         6,836,917          6,069,166          5,820,434
                                                  ------------       ------------       ------------

           Operating profit ................         3,898,465          4,048,134          4,012,217

Other income (expense)
    Dividend income ........................           169,852            160,435            130,700
    Interest income ........................           237,620            349,795            400,185
    Interest expense .......................           (44,983)           (10,943)            (7,158)
    Gain (loss) gain on sale of securities .             6,551             34,659            (52,167)
    Miscellaneous ..........................             5,750                558              6,312
                                                  ------------       ------------       ------------

                                                       374,790            534,504            477,872
                                                  ------------       ------------       ------------

           Earnings before income taxes ....         4,273,255          4,582,638          4,490,089

Income tax expense (benefit)
    Current ................................         1,485,370          1,598,399          1,482,420
    Deferred ...............................            50,000            (14,000)           (46,000)
                                                  ------------       ------------       ------------

                                                     1,535,370          1,584,399          1,436,420
                                                  ------------       ------------       ------------

           NET EARNINGS ....................      $  2,737,885       $  2,998,239       $  3,053,669
                                                  ============       ============       ============

           EARNINGS PER COMMON SHARE .......      $      13.37       $      14.65       $      14.92
                                                  ============       ============       ============
</TABLE>

The accompanying notes are an integral part of these statements.


                                      42

<PAGE>   43
HWH CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1996
================================================================================

<TABLE>
<CAPTION>

                                             Common       Common    Treasury                   Net unrealized gain     Total
                                              stock       stock       stock       Retained    (loss) on investments stockholders'
                                             Class A     Class B     at cost      earnings     available-for-sale      equity
                                             -------    --------    --------    ------------  --------------------  -------------
<S>                                          <C>         <C>        <C>         <C>               <C>              <C>
Balance at January 1, 1994 ..............    $10,000    $264,428    $(78,855)   $ 14,866,129      $      -         $ 15,061,702

Net effect of change in accounting
    for investments available-for-sale
    at January 1, 1994 ..................        -           -           -               -            42,725             42,725

Net earnings ............................        -           -           -         3,053,669             -            3,053,669

Cash dividends on common stock
    ($15.00 per share) ..................        -           -           -        (3,070,740)            -           (3,070,740)

Decrease in net unrealized gain (loss) on
    investments available-for-sale ......        -           -           -               -          (198,731)          (198,731)
                                             -------    --------    --------    ------------       ---------       ------------

Balance at December 31, 1994 ............     10,000     264,428     (78,855)     14,849,058        (156,006)        14,888,625

Net earnings ............................        -           -           -         2,998,239             -            2,998,239

Cash dividends on common stock
    ($7.50 per share) ...................        -           -           -        (1,535,370)            -           (1,535,370)

Increase in net unrealized gain (loss) on
    investments available-for-sale ......        -           -           -               -           195,573            195,573
                                             -------    --------    --------    ------------       ---------       ------------

Balance at December 31, 1995 ............     10,000     264,428     (78,855)     16,311,927          39,567         16,547,067

Net earnings ............................        -           -           -         2,737,885             -            2,737,885

Cash dividends on common stock
    ($7.50 per share) ...................        -           -           -        (1,535,370)            -           (1,535,370)

Decrease in net unrealized gain (loss) on
    investments available-for-sale ......        -           -           -               -           (35,347)           (35,347)
                                             -------    --------    --------    ------------       ---------       ------------

Balance at December 31, 1996 ............    $10,000    $264,428    $(78,855)   $ 17,514,442       $   4,220       $ 17,714,235
                                             =======    ========    ========    ============       =========       ============
</TABLE>


The accompanying notes are an integral part of these statements.


                                      43


<PAGE>   44
HWH CORPORATION
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
================================================================================


<TABLE>
<CAPTION>
                                                                    1996             1995               1994
                                                                -----------       -----------       -----------
<S>                                                             <C>               <C>               <C>
Cash flows from operating activities:
    Net earnings .........................................      $ 2,737,885       $ 2,998,239       $ 3,053,669
    Adjustments to reconcile net earnings to net
       cash (used in) provided by operating activities:
           Depreciation and amortization .................          229,647           190,396           196,381
           Loss on sale of fixed assets ..................            1,056               -                 -
           (Gain) loss on sale of securities .............           (6,551)          (34,659)           52,167
           Deferred income taxes .........................           50,000           (14,000)          (46,000)
           Provision for losses on accounts receivable ...         (108,424)           18,112            47,237
           (Increase) decrease in assets
              Receivables ................................          525,185        (1,411,153)          515,062
              Inventories ................................       (4,068,558)       (1,671,378)         (541,831)
              Prepaid expenses ...........................           10,151           (54,556)         (153,023)
              Refundable income taxes ....................          (50,069)          188,396          (188,396)
           Increase (decrease) in liabilities
              Accounts payable ...........................            5,313           826,790            32,742
              Accrued expenses ...........................          139,137            56,184           104,139
              Income taxes payable .......................         (307,354)          307,354          (254,854)
                                                                -----------       -----------       -----------

                  Total adjustments ......................       (3,580,467)       (1,598,514)         (236,376)
                                                                -----------       -----------       -----------

                  Net cash (used in) provided by operating
                     activities ..........................         (842,582)        1,399,725         2,817,293

Cash flows from investing activities:
    Disbursements on notes receivable ....................             (436)       (1,650,000)         (225,000)
    Principal payments received on notes receivable ......          250,000           855,283           207,680
    Proceeds from sale of securities .....................        1,981,638         2,944,804         2,554,631
    Purchase of securities ...............................          (15,558)         (140,177)       (4,920,615)
    Capital expenditures .................................         (376,913)       (1,476,936)         (335,594)
    Proceeds from sale of fixed assets ...................        1,615,045               -                 -
    Increase in cash surrender value of life
       insurance policy ..................................          (13,516)          (12,043)          (11,118)
                                                                -----------       -----------       -----------

                  Net cash provided by (used in)
                     investing activities ................        3,440,260           520,931        (2,730,016)
</TABLE>


The accompanying notes are an integral part of these statements.

                                       44


<PAGE>   45
HWH CORPORATION
STATEMENTS OF CASH FLOWS - CONTINUED
YEAR ENDED DECEMBER 31,
================================================================================


<TABLE>
<CAPTION>
                                                                                     1996              1995               1994
                                                                                  -----------       -----------       -----------
<S>                                                                               <C>               <C>               <C>
Cash flows from financing activities:
    Dividends paid .........................................................      $(1,535,370)      $(1,535,370)      $(3,070,740)
    Principal payment on long-term debt ....................................          (20,000)          (20,000)          (20,000)
    Proceeds from issuance of note payable .................................              -             675,000               -
    Payment of note payable ................................................         (675,000)              -                 -
                                                                                  -----------       -----------       -----------

                  Net cash used in financing activities ....................       (2,230,370)         (880,370)       (3,090,740)
                                                                                  -----------       -----------       -----------

                  NET INCREASE (DECREASE)
                     IN CASH AND CASH
                     EQUIVALENTS ...........................................          367,308         1,040,286        (3,003,463)

Cash and cash equivalents at beginning of year .............................        1,258,956           218,670         3,222,133
                                                                                  -----------       -----------       -----------

Cash and cash equivalents at end of year ...................................      $ 1,626,264       $ 1,258,956       $   218,670
                                                                                  ===========       ===========       ===========

Supplemental disclosures of cash flow information:
    Cash paid during the year for:
       Interest ............................................................      $    44,393       $    10,943       $     7,333
       Income taxes ........................................................        1,819,310         1,106,804         1,925,530

Supplemental schedule of non-cash investing and financing activities:
           Increase (decrease) in net unrealized gain (loss) on investments
              available-for-sale, net of deferred tax (benefit) expense of
              $(20,000) in 1996, $106,000 in 1995
              and $(84,000) in 1994 ........................................      $   (35,347)      $   195,573       $  (198,731)
</TABLE>


The accompanying notes are an integral part of these statements.

                                       45



<PAGE>   46
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

NATURE OF BUSINESS

HWH Corporation (the "Company") manufactures vehicle leveling systems and
related parts. The Company grants credit to customers, the majority of whom are
manufacturers and distributors in the recreational vehicle industry throughout
the United States and Europe. Certain reclassifications have been made to the
1995 amounts to conform with the 1996 presentation.

INVENTORIES

Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT

Depreciation of property, plant and equipment is provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives, using both straight-line and accelerated methods.
Depreciable lives by asset classification are as follows:

<TABLE>
<CAPTION>
                                                                    Life in
                                                                     years
                                                                     -----
<S>                                                                 <C>
Building and building improvements...............................   5 - 31
Machinery and equipment..........................................   3 - 10
Transportation equipment.........................................   3 -  7
Office equipment.................................................   5 - 10
</TABLE>



                                       46
<PAGE>   47
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

INVESTMENTS IN DEBT AND QUALIFYING EQUITY SECURITIES

Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." In accordance with SFAS No. 115, investments in debt and
qualifying equity securities are classified as either held-to-maturity, trading
or available-for-sale. Held-to-maturity investments are debt securities that the
Company has the positive intent and ability to hold to maturity. These
investments are recorded at amortized cost. Debt and equity securities purchased
principally for the purpose of resale in the near term are classified as trading
investments and are recorded at fair value. Unrealized gains or losses on these
investments are included in earnings of the current period. Other debt and
equity securities that are not categorized as held-to-maturity or trading are
classified as available-for-sale and reported at fair value. Unrealized gains or
losses on these securities are reported as a separate component of stockholders'
equity, net of applicable income tax expense or benefit. The effect of adopting
this statement was not material.

INCOME TAXES

Deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities as
measured by the enacted tax rates which will be in effect when these differences
reverse. Deferred tax expense (benefit) is the result of changes in deferred tax
assets and liabilities. The principal types of differences between assets and
liabilities for financial statement and tax return purposes are inventory
capitalization, bad debt provision, and warranty claims accrual.

EARNINGS PER SHARE

Earnings per common share are computed by dividing net earnings by the weighted
average number of shares of common stock outstanding during the year.

LOAN ACQUISITION COSTS

Loan acquisition costs are being amortized over the life of the bond issue on a
straight-line basis.


                                       47
<PAGE>   48
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE A - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

CASH EQUIVALENTS

For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with an original maturity of three months or
less to be cash equivalents.

USE OF ESTIMATES

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


================================================================================
NOTE B - NOTES RECEIVABLE

Notes receivable at December 31, 1996 and 1995 consist of the following:

<TABLE>
<CAPTION>
                                                                                         1996            1995
                                                                                      ----------      ----------
<S>                                                                                   <C>             <C>
Unsecured note receivable from The Coast Distribution System ("Coast"), an
    affiliated company, due on demand, with interest to be paid monthly at LIBOR
    plus 1.5% (6.875% at December 31, 1996) ....................................      $1,500,000      $1,500,000

9.5% note, receivable in installments of $50,000 on January 1, 1996 and 1997,
    with the balance due January 1, 1998, interest to be paid semiannually,
    collateralized by certain real estate and
    personal property, balance of note paid in 1996 ............................             -           250,000

Other ..........................................................................          25,436          25,000
                                                                                      ----------      ----------

                                                                                       1,525,436       1,775,000

    Less current maturities ....................................................       1,525,436       1,575,000
                                                                                      ----------      ----------

                                                                                      $      -        $  200,000
                                                                                      ==========      ==========
</TABLE>



                                       48
<PAGE>   49
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE C - INVESTMENTS

The Company holds the following investments as of December 31:

<TABLE>
<CAPTION>
                                                  1996            1995
                                               ----------      ----------
<S>                                            <C>             <C>
Current
    Marketable equity securities ........      $1,718,522      $2,019,900
    Government mutual funds .............             -           112,951
    U.S. treasury securities ............             -         1,349,179
    Obligations of political subdivisions             -           251,368
                                               ----------      ----------

                                               $1,718,522      $3,733,398
                                               ==========      ==========
Long-term
    Marketable corporate bonds ..........      $  257,282      $  257,282
    Obligations of political subdivisions         430,013         430,013
                                               ----------      ----------

                                               $  687,295      $  687,295
                                               ==========      ==========
</TABLE>

The amortized cost and fair value of available-for-sale securities as of
December 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                                                          Gross       Gross      Amortized
                                                           Amortized    Unrealized  Unrealized    Cost at
                                                              Cost        Gains       Losses     Fair Value
                                                           ----------   ----------  ----------   ----------
<S>                                                        <C>            <C>         <C>        <C>
      Marketable equity securities.................        $1,712,301     $111,265    $105,044   $1,718,522
                                                           ==========     ========    ========    =========
</TABLE>

Proceeds from sales of available-for-sale securities were approximately $381,000
for the year ended December 31, 1996. These sales resulted in gross realized
gains of approximately $62,000 and gross realized losses of approximately
$55,000 using a specific identification basis. The net unrealized holding gain
decreased approximately $55,000 in 1996.



                                       49
<PAGE>   50
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE C - INVESTMENTS - CONTINUED

The amortized cost and fair value of held-to-maturity securities as of December
31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
                                                        Gross          Gross
                                           Amortized  Unrealized    Unrealized
                                             Cost       Gains         Losses      Fair Value
                                           --------   ----------    ----------    ----------
<S>                                        <C>        <C>            <C>           <C>
Marketable corporate bonds ..........      $257,281      $  -         $9,435      $247,846
Obligations of political subdivisions       430,014       3,960          -         433,974
                                           --------      ------       ------      --------

                                           $687,295      $3,960       $9,435      $681,820
                                           ========      ======       ======      ========
</TABLE>

The amortized cost and fair value of securities being held-to-maturity as of
December 31, 1996, by contractual maturity, are shown below:
<TABLE>
<CAPTION>
                                            Amortized
                                              Cost        Fair Value
                                            ---------     ----------
<S>                                         <C>           <C>
Due in one year or less ..............      $     -       $    -
Due after one year through five years        330,014       332,824
Due after five years through ten years       100,000       101,150
Due after ten years ..................       257,281       247,846
                                            --------      --------

                                            $687,295      $681,820
                                            ========      ========
</TABLE>


                                       50
<PAGE>   51
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE D - INVENTORIES

Inventories consist of the following at December 31:

<TABLE>
<CAPTION>
                            1996          1995
                         ----------      ----------
<S>                      <C>             <C>
Purchased materials      $4,872,386      $3,175,177
Work-in-process ...       3,416,685       1,322,151
Finished goods ....         763,352         486,537
                         ----------      ----------

    Total .........      $9,052,423      $4,983,865
                         ==========      ==========
</TABLE>


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

NOTE E - RELATED PARTY TRANSACTIONS

During the years ended December 31, 1996, 1995 and 1994, the Company had sales
to Coast of approximately $2,600,000, $3,700,000 and $3,600,000, respectively.
Coast owns 69,971 shares, or approximately 36% of the Company's outstanding
Class B common stock. Trade receivable balances from Coast at December 31, 1996
and 1995 were approximately $348,000 and $55,000, respectively.

During the years ended December 31, 1996, 1995 and 1994, the Company paid for
production services from UP Electronics, an affiliated company, which totaled
approximately $2,420,000, $1,540,000, and $1,120,000, respectively. Amounts due
to UP Electronics included in accounts payable at December 31, 1996 and 1995
were approximately $589,000 and $292,000, respectively. In addition, during the
years ended December 31, 1996 and 1995, the Company paid for production services
to CCO, Inc., an affiliated company, which totaled approximately $1,310,000 and
$190,000, respectively. Amounts due to CCO, Inc. included in accounts payable at
December 31, 1996 were approximately $124,000. No amounts were due at December
31, 1995.

Leases with CDC Limited ("CDC"), an affiliated company, and UP Electronics are
described in note H.

In 1995, a Director of the Company loaned $675,000 to the Company in the form of
a demand note, bearing interest at an annual rate of 5.5%. The note was paid in
1996.


                                       51

<PAGE>   52
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE F - PLEDGED ASSETS AND LONG-TERM DEBT

In August, 1983, the Company obtained $400,000 of the City of Wilton, Iowa,
Industrial Development Revenue Bonds, Series 1983 for the purpose of providing
funds to construct and expand the existing manufacturing facility of the
Company. The bonds bear interest equal to a defined money market certificate
rate (5.34% at December 31, 1996) and mature in annual amounts of $20,000 on
each August 1 through 2003. As of December 31, 1996, $140,000 of the bonds
remain outstanding.

The Company maintains a $120,000 line of credit, which expires February, 1997,
with interest at the bank's base rate. There were no outstanding borrowings
under the line of credit as of December 31, 1996 and 1995.

The outstanding revenue bonds and any amounts borrowed under the line of credit
are collateralized by all receivables, inventories and property and equipment of
the Company.

Future annual maturities of long-term debt as of December 31, 1996 are as
follows:

Year ending December 31,

<TABLE>
    <S>                                             <C>
    1997.........................................   $  20,000
    1998.........................................      20,000
    1999.........................................      20,000
    2000.........................................      20,000
    2001.........................................      20,000
    2002 and thereafter..........................      40,000
                                                     --------
                                                     $140,000
                                                     ========
</TABLE>



================================================================================
NOTE G - PROFIT-SHARING PLAN

The Company has a profit-sharing plan for all eligible employees who have met
certain qualifications as prescribed by the plan. The Company's contribution is
discretionary and determined annually by the Board of Directors. Amounts
contributed for the years ended December 31, 1996, 1995 and 1994 were
approximately $533,000, $407,000, and $350,000, respectively.


                                       52
<PAGE>   53
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE H - LEASE COMMITMENTS

The Company leases certain machinery and equipment from CDC, under a master
lease agreement dated October 1, 1996. The lease is for a period of one year.
The lease requires annual rentals of $875,000 plus the payment of insurance and
normal maintenance.

The Company also leases space and certain facilities from UP Electronics. The
lease requires monthly rent payments which are determined, in part, on actual
production services performed by UP Electronics.

Rent expense under all leases for the years ended December 31, 1996, 1995 and
1994 was approximately $944,000, $905,000, and $734,000, respectively.



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

NOTE I - ACCRUED EXPENSES

Accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>
                                                                      1996               1995
                                                                  -----------         -----------
<S>                                                               <C>                 <C>
Payroll.......................................................    $   124,526         $   153,051
Profit-sharing................................................        533,456             407,177
Warranty claims...............................................        500,000             500,000
Commissions...................................................         98,764             106,359
Other.........................................................        115,471              66,493
                                                                  -----------         -----------

                                                                   $1,372,217          $1,233,080
                                                                   ==========          ==========
</TABLE>

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

NOTE J - INCOME TAXES

The difference between income tax rates computed by applying the Federal
statutory income tax rate to income before provision for income taxes and the
effective income tax rate is reconciled as follows at December 31:

<TABLE>
<CAPTION>
                                                               1996            1995           1994
                                                               ----            ----           ----
<S>                                                            <C>             <C>            <C>
Federal statutory rate.......................................  34.0%           34.0%          34.0%
Other - net..................................................   1.9            .6             (2.0)
                                                               ----            ----           ----

Effective income tax rate....................................  35.9%           34.6%          32.0%
                                                               ====            ====           ====
</TABLE>



                                       53
<PAGE>   54
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE J - INCOME TAXES - CONTINUED

The tax effects of existing temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax liabilities
at December 31 are as follows:

<TABLE>
<CAPTION>
                                                         1996            1995
                                                      ---------       ---------
<S>                                                   <C>             <C>
Deferred income tax assets:
    Allowance for doubtful receivables .........      $  70,000       $ 140,000
    Warranty claims ............................        175,000         175,000
    Uniform inventory capitalization ...........         95,000          80,000
    Depreciation ...............................          3,000             -
                                                      ---------       ---------

           Total deferred income tax assets ....        343,000         395,000

Deferred income tax liabilities:
    Unrealized gain on investments .............         (2,000)        (22,000)
    Depreciation ...............................            -            (2,000)
                                                      ---------       ---------

           Total deferred income tax liabilities         (2,000)        (24,000)
                                                      ---------       ---------

           Net deferred tax assets .............      $ 341,000       $ 371,000
                                                      =========       =========
</TABLE>


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

NOTE K - MAJOR CUSTOMERS

Net sales for the years ended December 31, 1996, 1995 and 1994 included sales to
the following major customers:

<TABLE>
<CAPTION>
                                                                                 Net Sales
                                                            ----------------------------------------------------
                                                               1996                 1995                1994
                                                            -----------          -----------         -----------
<S>                                                        <C>                  <C>                 <C>
Customer A...........................................      $  5,447,000         $  5,461,000        $  4,810,000
Customer B...........................................         5,483,000            3,913,000           3,597,000
Customer C...........................................         2,634,000            3,683,000           2,458,000
                                                            -----------          -----------         -----------

                                                            $13,564,000          $13,057,000         $10,865,000
                                                            ===========          ===========         ===========
</TABLE>

At December 31, 1996, approximately 43% of total receivables was due from the
Company's two most significant customers.



                                       54
<PAGE>   55
HWH CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
DECEMBER 31, 1996, 1995 AND 1994
================================================================================


NOTE L - STOCK PURCHASE PLAN

Under the provisions of a stock purchase plan, the Company has offered to
purchase its outstanding common stock at a price of $82 per share which is equal
to five times the after tax earnings per share, averaged over the past five
years. The total value of shares to be offered for purchase is determined
annually by the Board of Directors. This offer is effective through April 1,
1997.


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

NOTE M - LITIGATION

The Company is a defendant in several lawsuits seeking monetary damages.
Management believes that the outcome of these lawsuits will not have a material
impact on the Company.


                                       55
<PAGE>   56
                          FINANCIAL STATEMENT SCHEDULE

HWH CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994



<TABLE>
<CAPTION>                                         Additions charged to
                            Balance at      --------------------------------                          Balance
                             beginning        Costs and               Other                          at end of
Description                 of period          expenses             accounts     Deductions (1)        period
-----------                 -----------     ----------              ---------      --------------      --------
<S>                             <C>            <C>                <C>             <C>               <C>
Allowance for doubtful
  receivables

Year ended
    December 31,
    1996                        $400,000       $  91,576          $     -         $291,576  (2)     $200,000

Year ended
    December 31,
    1995                        $400,000       $  18,112          $     -        $  18,112  (1)     $400,000

Year ended
    December 31,
    1994                        $330,000       $  47,237          $     -        $ (22,763) (1)     $400,000


Warranty reserve

Year ended
    December 31,
    1996                        $500,000        $473,341          $     -         $473,341          $500,000

Year ended
    December 31,
    1995                        $500,000        $421,467          $     -         $421,467          $500,000

Year ended
    December 31,
    1994                        $500,000        $398,494          $     -         $398,494          $500,000
</TABLE>


Note:    (1)  Uncollectible receivables charged off, net of recoveries.
         (2)  Amount includes $91,576 in uncollectible receivables charged off
              and a $200,000 reduction in the allowance.




                                       56
<PAGE>   57

                            [LOGO OF GRANT THORNTON]


REPORT OF THE AUDITORS TO THE MEMBERS OF
H BURDEN LIMITED

We have audited the accompanying consolidated balance sheet of H Burden
Limited and subsidiaries as of 30 September 1996 and the related consolidated
statements of profit and loss account and cash flows for the year ended. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
in the United Kingdom and 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 audit provides 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 H Burden Limited as
of 30 September 1996 and the results of their operations and their cash flows
for the year then ended, in conformity with generally accepted accounting
principles in the United Kingdom.

Generally accepted accounting principles in the United Kingdom vary in certain
significant respects from generally accepted accounting principles in the
United States. Application of generally accepted accounting principles in the
United States would have affected the results of operations for the year ending
30 September 1996 and the shareholders' equity as of 30 September 1996 to the
extent summarized in Note 27 to the consolidated financial statements.


GRANT THORNTON
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
KETTERING
12 DECEMBER 1996






                                       57
<PAGE>   58

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

PRINCIPAL ACCOUNTING POLICIES

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

BASIS OF PREPARATION

The financial statements have been prepared in accordance with applicable
accounting standards and under the historical cost convention.

The principal accounting policies of the group have remained unchanged from
the previous year and are set out below.

BASIS OF CONSOLIDATION

The group financial statements consolidate those of the company and of its
subsidiary undertakings (see note 8) drawn up to 30 September 1996. The results
of subsidiary undertakings acquired during the year have been included from the
date of acquisition. Profits or losses on intra-group transactions are
eliminated in full. On acquisition of a subsidiary, all of the subsidiary's
assets and liabilities which exist at the date of acquisition are recorded at
their fair values reflecting their condition at that date.

Goodwill arising on consolidation, representing the excess of the fair value of
the consideration given over the fair values of the identifiable net assets
acquired, is written off to reserves immediately on acquisition.

TURNOVER

Turnover is the total amount receivable by the group for goods supplied and
services provided, excluding VAT and trade discounts.

DEPRECIATION

Depreciation is calculated to write down the cost of all tangible fixed assets
other than freehold land and certain freehold buildings by equal annual
installments over their expected useful lives.

The periods generally applicable are:

                   Freehold buildings           - 25 years
                   Short leasehold premises     - the lease term
                   Plant and equipment          - 5 to 10 years
                   Motor vehicles               - 4 to 5 years

No depreciation is provided on certain freehold buildings or long leasehold
premises, as it is the group's policy to maintain these assets in a continual
state of sound repair. The useful economic lives of these assets are thus so
long and residual values so high that any depreciation would not be material.
Residual values are based on prices prevailing at the date of acquisition or
subsequent valuation.  Provision is made in the profit and loss account for any
permanent diminution in value.

INVESTMENTS

Investments are stated at cost less amounts written off.







                                       58

<PAGE>   59

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

PRINCIPAL ACCOUNTING POLICIES (CONTINUED)

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

STOCKS

Stocks are stated at the lower of cost and net realisable value.

DEFERRED TAXATION

Deferred tax is provided for under the liability method using the tax rates
estimated to arise when the timing differences reverse and is accounted for to
the extent that it is probable that a liability or asset will crystallise.
Unprovided deferred tax is disclosed as a contingent liability.

FOREIGN CURRENCIES

Transactions in foreign currencies are translated at the exchange rate ruling
at the date of the transaction. Monetary assets and liabilities in foreign
currencies are translated at the rates of exchange ruling at the balance sheet
date. The financial statements of foreign subsidiaries are translated at the
rate of exchange ruling at the balance sheet date. The exchange differences
arising from the retranslation of the opening net investment in subsidiaries
are taken directly to reserves. Where exchange differences result from the
translation of foreign currency borrowings raised to acquire foreign assets
(including equity investments) they are taken to reserves and offset against the
differences arising from the translation of those assets. All other exchange
differences are dealt with through the profit and loss account.

CONTRIBUTIONS TO PENSION FUNDS

DEFINED CONTRIBUTION SCHEME

The pension costs charged against profits represent the amount of the
contributions payable to the scheme in respect of the accounting period.

DEFINED BENEFIT SCHEME

The pensions costs charged against profits are based on an actuarial method and
assumptions designed to spread the anticipated costs of providing these
benefits over the service lives of the employees entitled to receive them, so as
to ensure that the regular cost of providing benefits represents a
substantially level percentage of the current and expected future payroll.
Variations from regular cost are spread over the remaining service lives of
current employees in the scheme.

LEASED ASSETS

Assets held under finance leases and hire purchase contracts are capitalised in
the balance sheet and depreciated over their expected useful lives. The
interest element of leasing payments represents a constant proportion of the
capital balance outstanding and is charged to the profit and loss account over
the period of the lease.

All other leases are regarded as operating leases and the payments made under
them are charged to the profit and loss account on a straight-line basis over
the lease term.






                                       59

<PAGE>   60

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

                                                                        1996
                                                NOTE      pounds       pounds
                                                ----      ------     ----------
TURNOVER                                         1                   42,846,548
change in stocks of finished goods                                    1,397,739
                                                                     ----------

                                                                     44,244,287
Purchases of goods for resale                                        32,838,484
                                                                     ----------

                                                                     11,405,803
Staff costs                                      3                    3,986,798
                                                                     ----------

                                                                      7,419,005
Depreciation                                     1       387,930
Other operating charges                                4,591,457      4,979,387
                                                       ---------      ----------

OPERATING PROFIT                                18                    2,439,618

Net interest                                     2                      721,843
                                                                     ----------

PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION                                  1                    1,717,775

Tax on profit on ordinary
activities                                       4                      593,250
                                                                     ----------

PROFIT FOR THE FINANCIAL YEAR                   17                    1,124,525

Dividends                                        6                       90,040
                                                                     ----------
PROFIT RETAINED                                 16                    1,034,485
                                                                     ==========

      The accompanying accounting policies and notes form an integral part
                         of these financial statements.





                                       60
<PAGE>   61

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

CONSOLIDATED BALANCE SHEET AT 30 SEPTEMBER 1996

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

                                                                        1996
                                                    Note   pounds      pounds
                                                    ----  ---------   ---------
FIXED ASSETS
Tangible assets                                       7               7,564,108

CURRENT ASSETS
Stocks                                                9   8,960,739
Debtors                                              10   5,775,064
Cash at bank and in hand                                    107,162
                                                         ----------

                                                         14,842,965
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR                                      11   8,940,905
                                                         ----------

NET CURRENT ASSETS                                                    5,902,060
                                                                     ----------

TOTAL ASSETS LESS CURRENT LIABILITIES                                13,466,168

CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR                             12               5,369,634

PROVISIONS FOR LIABILITIES AND
CHARGES                                              14                  32,632
                                                                     ----------

                                                                      8,063,902
                                                                     ==========

CAPITAL AND RESERVES
Called up share capital                              15                 101,670
Share premium account                                16                 777,213
Other reserve                                        16                  31,707
Profit and loss account                              16               7,153,312
                                                                     ----------

SHAREHOLDERS' FUNDS                                  17               8,063,902
                                                                     ==========

Equity shareholders' funds                                            7,967,902
Non-equity shareholders' funds                                           96,000
                                                                     ----------
                                                                      8,063,902
                                                                     ==========

The financial statements were approved by the Board of Directors on 12 December
1996.

M S Bowyer

                           Directors

E C Lister


      The accompanying accounting policies and notes form an integral part
                         of these financial statements.







                                       61
<PAGE>   62

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

BALANCE SHEET AT 30 SEPTEMBER 1996

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

                                                                        1996
                                                  Note     pounds      pounds
                                                  ----    ---------   ---------
FIXED ASSETS
Tangible assets                                     7                 2,999,799
Investments                                         8                 2,128,906
                                                                      ---------

                                                                      5,128,685
CURRENT ASSETS
Stocks                                              9      4,863,801
Debtors                                            10      6,187,688
Cash at bank and in hand                                       9,423
                                                          ----------

                                                          11,060,912
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR                                    11      7,536,153
                                                          ----------

NET CURRENT ASSETS                                                    3,524,759
                                                                      ---------

TOTAL ASSETS LESS CURRENT LIABILITIES                                 8,653,444

CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR                           12                 2,687,832

PROVISIONS FOR LIABILITIES AND
CHARGES                                            14                         0
                                                                      ---------

                                                                      5,965,612
                                                                      =========

CAPITAL AND RESERVES
Called up share capital                            15                   101,670
Share premium account                              16                   777,213
Profit and loss account                            16                 5,086,729
                                                                      ---------

SHAREHOLDERS' FUNDS                                                   5,965,612
                                                                      =========

Equity shareholders' funds                                            5,869,612
Non-equity shareholders' funds                                           96,000
                                                                      ---------
                                                                      5,965,612
                                                                      =========

The financial statements were approved by the Board of Directors on 12
December 1996.

M S Bowyer

                      Directors

E C Lister

      The accompanying accounting policies and notes form an integral part
                         of these financial statements.







                                       62
<PAGE>   63

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

                                                                       1996
                                                         NOTE         pounds
                                                         ----         ------
NET CASH INFLOW FROM OPERATING ACTIVITIES                 18         1,302,857
                                                                    ----------

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid                                                         (702,472)
Interest received                                                        1,146
Dividends paid                                                         (90,040)
                                                                    ----------

NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE                                              (791,366)
                                                                    ----------

TAXATION
Corporation tax paid                                                  (219,260)
                                                                    ----------

INVESTING ACTIVITIES
Purchase of tangible fixed assets                                   (2,506,749)
Sale of tangible fixed assets                                           51,179
                                                                    ----------

NET CASH OUTFLOW FROM INVESTING ACTIVITIES                          (2,455,570)
                                                                    ----------

NET CASH OUTFLOW BEFORE FINANCING                                   (2,163,339)

FINANCING
Issue of shares                                                        100,985
Receipts from borrowing                                              2,186,567
Repayment of borrowing                                                (286,435)
Purchase of own shares                                                (100,985)
Capital element of finance lease rentals                               (19,118)
                                                                    ----------

NET CASH INFLOW FROM FINANCING                            19         1,881,014
                                                                    ----------

DECREASE IN CASH AND CASH EQUIVALENTS                     20          (282,325)
                                                                    ==========

      The accompanying accounting policies and notes form an integral part
                         of these financial statements.







                                       63
<PAGE>   64

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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


STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

                                                                   1996
                                                                  pounds
                                                                  ------

Profit for the financial year                                   1,034,485

Currency differences on foreign currency net investments         (115,450)
                                                                ---------

TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR                    919,035
                                                                =========


      The accompanying accounting policies and notes form an integral part
                         of these financial statements.








                                       64
<PAGE>   65

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

1   TURNOVER AND PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

    The turnover and profit before taxation are attributable to one
    activity, the supply of caravan, camping and marine accessories.

    An analysis of turnover by geographical market is given below:

                                                                        1996
                                                                       pounds
                                                                     ----------
    United Kingdom                                                   25,559,503
    Other European countries                                         17,287,045
                                                                     ----------
                                                                     42,846,548
                                                                     ==========

    The profit on ordinary activities is stated after:

                                                                        1996
                                                                        Franc
                                                                     ----------
    Auditors' remuneration:
    Audit services                                                      58,428
    Non-audit services                                                   7,300

    Depreciation of tangible fixed assets:
    Owned                                                              387,930
    Held under finance leases and hire purchase contracts                    0

    Hire of plant and machinery                                          5,562
    Other operating lease rentals                                      126,514
                                                                    ==========

2   NET INTEREST

                                                                        1996
                                                                       pounds
                                                                    ----------

    On bank loans and overdrafts                                       719,507
    Other interest payable and similar charges                           3,482
                                                                    ----------

                                                                       722,989
    other interest receivable and similar income                        (1,146)
                                                                    ----------

                                                                       721,843
                                                                    ==========







                                       65
<PAGE>   66

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

3   DIRECTORS AND EMPLOYEES

    Staff costs during the year were as follows:
                                                                       1996
                                                                      pounds
                                                                    ----------

    Wages and salaries                                               3,345,504
    Social security costs                                              491,253
    Other pension costs                                                150,041
                                                                    ----------

                                                                     3,986,798
                                                                    ==========

    The average number of employees of the group during the year was:

                                                                       1996
                                                                      Number
                                                                    ----------

    Office and management                                                   68
    Selling and distribution                                               139
                                                                    ----------

                                                                           207
                                                                    ==========

    Remuneration in respect of directors was as follows:

                                                                       1996
                                                                      pounds
                                                                    ----------

    Management remuneration                                            115,717
                                                                    ==========

    The emoluments of the directors, excluding pension contributions,
    were as follows:

                                                                       1996
                                                                      pounds
                                                                    ----------

    The Chairman                                                        46,764
                                                                    ==========

    The emoluments of the other director, excluding pension
    contributions, fell within the following range:

                                                                       1996
                                                                      Number
                                                                    ----------

    Francs 25,001 to Francs 30,000                                           1
                                                                    ==========








                                       66
<PAGE>   67

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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


4   TAX ON PROFIT ON ORDINARY ACTIVITIES

    The tax charge is based on the profit for the year and represents:

                                                                       1996
                                                                      pounds
                                                                    ----------

    UK corporation tax @ 33%                                           416,434
    Overseas taxation payable                                          181,040
                                                                    ----------

                                                                       597,474

    Adjustments in respect of prior year:
    Corporation tax                                                     10,776
    Deferred tax (note 14)                                             (15,000)
                                                                    ----------

                                                                       593,250
                                                                    ==========

5   PROFIT FOR THE FINANCIAL YEAR

    The parent company has taken advantage of Section 230 of the Companies Act
    1985 and has not included its own profit and loss account in these financial
    statements. The group profit for the year includes pounds 801,875 which is
    dealt with in the financial statements of the company.

6   DIVIDENDS

                                                                       1996
                                                                      pounds
                                                                    ----------

    Equity dividend:
    Ordinary shares - interim dividend of pounds 15.88 per share
    paid 24 September 1996                                              90,040
                                                                    ==========








                                       67
<PAGE>   68

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

7   TANGIBLE FIXED ASSETS

<TABLE>
<CAPTION>
                                                                       Long             Short
                                                  Freehold           leasehold         leasehold
                                                  land and           land and          land and       Plant and        Motor
                                 Total            buildings          buildings         buildings      machinery       vehicles
   The group                     pounds            pounds             pounds            pounds         pounds          pounds
   ---------                     ------           ---------          ---------         ---------      ---------      ----------
<S>                            <C>               <C>                 <C>               <C>            <C>            <C>
Cost
At 1 October 1995               8,228,220         4,498,985          1,148,236           22,000       1,435,176       1,123,823
Additions                       2,506,749                 0          2,026,139                0         204,307         276,303
Exchange adjustment              (265,392)         (211,537)                 0                0         (41,272)        (12,583)
                               ----------         ---------          ---------           ------       ---------       ---------
                               10,469,577         4,287,448          3,174,375           22,000       1,598,211       1,387,543
Disposals                        (254,470)           (6,803)                 0                0          (8,725)       (238,942)
                               ----------         ---------          ---------           ------       ---------       ---------
At 30 September 1996           10,215,107         4,280,645          3,174,375           22,000       1,589,486       1,148,601
                               ----------         ---------          ---------           ------       ---------       ---------
Depreciation
At 1 October 1995               2,549,138           774,526                  0            9,284         995,702         769,626
Provided in the year              387,930           121,810                  0              574         115,263         150,283
Exchange adjustment               (84,354)          (45,748)                 0                0         (31,921)         (6,685)
                               ----------         ---------          ---------           ------       ---------       ---------
                                2,852,714           850,588                  0            9,858       1,079,044         913,224
Eliminated on disposals          (201,715)           (5,566)                 0                0          (8,654)       (187,495)
                               ----------         ---------          ---------           ------       ---------       ---------
At 30 September 1996            2,650,999           845,022                  0            9,858       1,070,390         725,729
                               ----------         ---------          ---------           ------       ---------       ---------
Net book amount at
30 September 1996               7,564,108         3,435,623          3,174,375           12,142         519,096         422,872
                               ==========         =========          =========           ======       =========       =========
</TABLE>

The gross value of the land and buildings on which depreciation is being
provided is pounds 3,631,738.








                                       68
<PAGE>   69

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

TANGIBLE FIXED ASSETS (CONTINUED)

<TABLE>
<CAPTION>
                                                    Long
                                       Freehold   leasehold   Plant
                                       land and   land and     and       Motor
                            Total      buildings  buildings  machinery  vehicles
The company                 pounds       pounds    pounds     pounds     pounds
-----------                 ------     ---------  ---------  ---------  --------
<S>                         <C>        <C>        <C>        <C>        <C>
Cost
At 1 October 1995           1,943,507   463,320           0   658,614      821,573
Additions                   2,256,381         0   2,026,139    18,243      211,999
                            ---------   -------   ---------   -------    ---------
                            4,199,888   463,320   2,026,139   676,857    1,033,572
Disposals                    (187,690)        0           0         0     (187,690)
                            ---------   -------   ---------   -------    ---------
At 30 September 1996        4,012,198   463,320   2,026,139   676,857      845,882
                            ---------   -------   ---------   -------    ---------
Depreciation
At 1 October 1995           1,008,939         0           0   409,204      599,735
Provided in the year          159,862         0           0    55,128      104,734
                            ---------   -------   ---------   -------    ---------
                            1,168,801         0           0   464,332      704,469
Eliminated on disposals      (156,382)        0           0         0     (156,382)
                            ---------   -------   ---------   -------    ---------
At 30 September 1996        1,012,419         0           0   464,332      548,087
                            ---------   -------   ---------   -------    ---------
Net book amount at
  30 September 1996         2,999,779   463,320   2,026,139   212,525      297,795
                            =========   =======   =========   =======    =========
</TABLE>







                                       69
<PAGE>   70

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

CONSOLIDATED PROFIT AND LOSS ACCOUNT

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

8       INVESTMENT IN SUBSIDIARY UNDERTAKINGS

                                                                    Pounds
                                                                    ------
        Cost at 1 October 1996 and at 30 September 1996           2,128,906
                                                                  =========

        At 30 September 1996 the company held more than 20% of the allotted
        share capital of the following undertakings:

<TABLE>
<CAPTION>
                                           Country of
                                        registration (or
                                         incorporation)         Description and
        Name of company                   and operation         proportion held
        ---------------                 ----------------      --------------------
<S>                                     <C>                   <C>
        Joy & King Limited                   England          Ordinary shares 100%
        Dolphin Leisure Limited              England          Ordinary shares 100%
        Mark Dowland Marine Limited          England          Ordinary shares 100%
        Mike Davies Leisure Limited          England          Ordinary shares 100%
        Galliots Limited                     England          Ordinary shares 100%
        CMC Holding BV                       Holland          Ordinary shares 100%
        CMC Holland BV*                      Holland          Ordinary shares 100%
        CMC France SCP*                      France           Ordinary shares 100%
        Schaft Estate BV*                    Holland          Ordinary shares 100%
        Nieuwe Schaft Estate BV*             Holland          Ordinary shares 100%
        Caravanne Equipement SA*             France           Ordinary shares 100%
        SCI CMC*                             France           Ordinary shares 100%
        CMC Camping Master Collection        Germany          Ordinary shares 100%
        Deutschland GmbH*
        CMC Belgium BVBA*                    Belgium          Ordinary shares 100%
</TABLE>

        * Held by subsidiary undertaking CMC Holding BV.

        The nature of the subsidiary undertakings businesses are those of the
        supply of caravan, camping and marine accessories, with exception to Joy
        & King Limited and Galliots Limited who are dormant. As of 1 October
        1996, following hive-up to its parent undertaking, Mark Dowland Marine
        Limited also became dormant.

        All of the subsidiary undertakings have been consolidated in the group
        financial statements.

9       STOCKS

<TABLE>
<CAPTION>
                                    The group         The company
                                      1996                1996
                                     pounds              pounds
                                    ---------         -----------
<S>                                 <C>               <C>
        Goods for resale            8,960,739          4,863,801
                                    =========          =========
</TABLE>

        In the opinion of the directors the replacement cost of stocks is not
        materially different from their book value.








                                       70
<PAGE>   71

BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

TO THE FINANCIAL STATEMENTS (CONTINUED)

THE YEAR ENDED 30 SEPTEMBER 1996

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

10      DEBTORS

<TABLE>
<CAPTION>
                                             The group     The company
                                                1996           1996
                                               pounds         pounds
                                             ---------     -----------
<S>                                          <C>           <C>
        Trade debtors                        5,456,922      3,971,188
        Amounts owed by group undertakings           0      2,104,067
        Other debtors                           64,407         36,578
        Prepayments and accrued income         253,735         75,855
                                             ---------      ---------
                                             5,775,064      6,187,688
                                             =========      =========
</TABLE>

        THE COMPANY

        Included above are the following amounts which are due after more than
        one year:

<TABLE>
<CAPTION>
                                                 1996
                                                pounds
                                                ------
<S>                                             <C>
        Amounts owed by group undertakings      296,451
                                                =======
</TABLE>

11      CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

<TABLE>
<CAPTION>
                                               The group    The company
                                                 1996          1996
                                                pounds        pounds
                                               ---------    -----------
<S>                                            <C>          <C>
        Bank loans (see note 12)                  615,895       366,554
        Bank overdrafts                         2,984,869     2,081,278
        Trade creditors                         2,914,495     2,167,803
        Amounts owed to group undertakings              0     1,198,364
        Current taxation                          618,698       395,410
        Social security and other taxes           751,317       601,188
        Other creditors                           485,110       485,110
        Pension contributions                       6,129         6,129
        Accruals                                  564,392       234,317
                                                ---------     ---------
                                                8,940,905     7,536,153
                                                =========     =========
</TABLE>

        The bank overdrafts are secured by a fixed and floating charge over all
        the assets of the group and company. The overdraft of CMC Holding BV is
        also secured by an undertaking from H Burden Limited, that the equity
        capital of CMC Holding BV will be maintained at a level of at least NLG
        500,000.






                                       71
<PAGE>   72

BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

TO THE FINANCIAL STATEMENTS (CONTINUED)

THE YEAR ENDED 30 SEPTEMBER 1996

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

12      CREDITORS: AMOUNTS CALLING DUE AFTER MORE THAN ONE YEAR

<TABLE>
<CAPTION>
                                      The group           The company
                                         1996                 1996
                                        pounds               pounds
                                      ---------           -----------
<S>                                   <C>                 <C>
        Bank loans                    5,340,634            2,687,832
        Other loans                      29,000                    0
                                      ---------            ---------
                                      5,369,634            2,687,832
                                      =========            =========
</TABLE>

<TABLE>
<CAPTION>
                                                              1996
        Bank loans (excluding current instalments)           pounds
        ------------------------------------------           ------
<S>                                                          <C>
        THE GROUP

        Mortgage on freehold land and buildings at a fixed
        interest rate (30 September 1996 - 6.3% per annum),
        repayable in quarterly instalments of NLG 32,000
        commencing 31 March 1987                              680,597

        Capital consolidation credit at variable interest
        rates (30 September 1996 - 6.1% per annum),
        repayable in quarterly instalments of NLG 3,335
        commencing 31 March 1990                               36,050

        Mortgage on freehold land and buildings at 2.10%
        per quarter, repayable in quarterly instalments of
        NLG 7,182                                              77,724

        Mortgage on freehold land and buildings at 1.56%
        per quarter, repayable in quarterly instalments
        of NLG 12,117                                         132,270

        Long term bank loan at 3 month short term market
        interest rate plus 1.75%. Repayable in quarterly
        instalments of 15,000 FrFr commencing 19
        October 1989                                           51,951

        Long term bank loan at 3 month short term market
        interest rate plus 2%. Repayable in one
        instalment on 30 April 2001                           371,083

        Long term bank loan at fixed interest rate (30
        September 1996 -7.0% per annum), repayable in
        quarterly instalments of NLG 13,350 from 31
        December 1991                                         375,952
</TABLE>








                                       72
<PAGE>   73

BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

TO THE FINANCIAL STATEMENTS (CONTINUED)

THE YEAR ENDED 30 SEPTEMBER 1996

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

        CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (CONTINUED)

<TABLE>
<CAPTION>
                                                                        1996
                                                                       pounds
                                                                      --------
<S>                                                                   <C>
        Long term bank loan at fixed interest rate (30 September
        1996 - 7.0% per annum), repayable in quarterly instalments
        of NLG 21,360 from 30 June 1991                                 592,586

        Long term loan of FrFr 1,800,000 established in October
        1992, carrying interest at 10.85% per annum and repayable
        before 30 September 1999                                        222,649

        Long term loan at variable interest rate (30 September 1996
        - 4.9% per annum), repayable in quarterly instalments of
        NLG 25,000 from 31 December 1995                                111,940

        Bank loans included in the books of H Burden Limited
        (see below)                                                   2,687,832
                                                                      ---------
                                                                      5,340,634
                                                                      =========

                                                                        1996
        THE COMPANY                                                    pounds
        -----------                                                  ----------
<S>                                                                  <C>
        Bank loan at 1.5% above LIBOR per annum repayable by
        quarterly instalments of pounds 25,000                          687,832

        Long term property loan with no fixed repayment date.
        Interest is currently charged at 1.5% above Base Rate         2,000,000
                                                                      ---------
                                                                      2,687,832
                                                                      =========
</TABLE>

        The loans relating to the Dutch subsidiary, CMC Holding BV and its
        sub-group (note 8) are secured by the following:

        -       a fixed charge over the freehold property of the CMC Holding BV
                for NLG 8,500,000

        -       state guarantees

        -       a guarantee from H Burden Limited of 3,000,000 French Francs

        -       assignment of stock

        -       assignment of rental income

        -       assignment of the shares held of CMC France SCP

        -       assignment of all accounts receivable

        The amount payable by instalments within five years in respect of the
        group and the company primarily relate to a bank loan which is secured
        by way of a mortgage over the freehold property at Pytchley Lodge Road
        Industrial Estate, Kettering and a second mortgage over the company's
        leasehold land and buildings at Canley, Coventry.






                                       73
<PAGE>   74

BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

TO THE FINANCIAL STATEMENTS (CONTINUED)

THE YEAR ENDED 30 SEPTEMBER 1996

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

13      BORROWINGS

        Borrowings are repayable as follows:

<TABLE>
<CAPTION>
                                               The group   The company
                                                  1996        1996
                                                 pounds       pounds
                                               ---------   -----------
<S>                                            <C>         <C>
        Within one year
        Bank and other borrowings               3,600,764    2,447,832

        After one and within two years:
        Bank and other borrowings                 278,088      100,000

        After two and within five years:
        Bank and other borrowings               1,390,683      300,000

        After five years:
        Bank and other borrowings               3,700,863    2,287,832
                                                ---------    ---------
                                                8,970,398    5,135,664
                                                =========    =========
</TABLE>

        Borrowings repayable after five years comprise:
<TABLE>
<CAPTION>
                                               The group   The company
                                                  1996        1996
                                                 pounds       pounds
                                               ---------   -----------
<S>                                            <C>         <C>
        Bank loans                              4,875,737   2,787,832
        Other loans                                29,000           0
                                                ---------   ---------
                                                4,904,737   2,787,832
                                                =========   =========
</TABLE>

14      PROVISIONS FOR LIABILITIES AND CHARGES

<TABLE>
<CAPTION>
                                        Deferred       Other
                                        taxation     provisions      Total
        The group                        pounds        pounds       pounds
        ---------                       --------     ----------     ------
<S>                                     <C>          <C>            <C>
        At 1 October 1995                15,000        66,649       81,649
        Utilised during the year        (15,000)      (34,017)     (49,017)
                                        -------       -------      -------
        At 30 September 1996                  0        32,632       32,632
                                        =======       =======      =======
</TABLE>







                                       74
<PAGE>   75

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENT (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

    PROVISIONS FOR LIABILITIES AND CHARGES (CONTINUED)

                                                                     Deferred
                                                                     taxation
                                                                      pounds
                                                                     --------

    THE COMPANY

    At 1 October 1995                                                  15,000
    Utilised during the year                                          (15,000)
                                                                     --------
    At 30 September 1996                                                    0
                                                                     ========

15  SHARE CAPITAL

                                                                       1996
                                                                      pounds
                                                                      ------
    Authorised, allotted, called up and fully paid

    5,670 ordinary shares of pounds 1 each                              5,670
    96,000 deferred shares of pounds 1 each                            96,000
                                                                     --------
                                                                      101,670
                                                                     ========

    DEFERRED SHARES

    The deferred shares are non-equity shares which carry no entitlement to a
    dividend. Holders of deferred shares have no right to notice of, or
    attendance to, or vote at any general meeting held by the company. Deferred
    shareholders have the right on a winding-up to receive the amount paid up
    for such shares.

    SHARE ISSUE AND SUBSEQUENT ACQUISITION OF COMPANY'S OWN SHARES

    64 ordinary shares of pounds 1 each were issued at pounds 1,577.89 per share
    on 22 May 1996 in order that the company could acquire 64 ordinary shares of
    pounds 1 each, representing 0.06% of the called up capital. The total
    consideration received of pounds 100,985 was used to acquire the shares. No
    transfer is required to capital redemption reserve under the Companies Act
    1985, as the proceeds of the fresh issue are applied by the company in
    making a purchase of its own shares.







                                       75
<PAGE>   76

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

16  SHARE PREMIUM ACCOUNT AND RESERVES

                                 Share premium      Reserve on      Profit and
                                    account        consolidation   loss account
                                    pounds            pounds           pounds
                                 -------------     -------------   ------------

    THE GROUP

    At 1 October 1995               777,213             31,707      6,234,277
    Retained profit for the year          0                  0      1,034,485
    Exchange differences                  0                  0       (115,450)
                                    -------             ------      ---------
    At 30 September 1996            777,213             31,707      7,153,312
                                    =======             ======      =========

                                 Share premium      Reserve on      Profit and
                                    account        consolidation   loss account
                                    pounds            pounds           pounds
                                 -------------     -------------   ------------
    THE COMPANY

    At 1 October 1995               777,213                  0      4,284,854
    Retained profit for the year          0                  0        801,875
                                    -------              -----      ---------
    At 30 September 1996            777,213                  0      5,086,729
                                    =======              =====      =========

    The cumulative amount of goodwill arising from acquisitions in current and
    prior years which has been written off to group reserves is pounds 31,278.

17  RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

                                                                        1996
                                                                       pounds
                                                                   ------------

    Profit for the financial year                                    1,124,525
    Dividends                                                          (90,040)
                                                                     ---------

                                                                     1,034,485
    Exchange differences                                              (115,450)
    Issue of shares                                                    100,985
    Purchase of own shares                                            (100,985)
                                                                     ---------

    Net increase in shareholders' funds                                919,035
    Shareholders' funds at 1 October 1995                            7,144,867
                                                                     ---------

    Shareholders' funds at 30 September 1996                         8,063,902
                                                                     =========






                                       76
<PAGE>   77

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

18  NET CASH INFLOW FROM OPERATING ACTIVITIES

                                                                      1996
                                                                     pounds
                                                                   ----------
    Operating profit                                                2,439,618
    Depreciation                                                      387,930
    Loss on sale of tangible fixed assets                               1,576
    Increase in stocks                                             (1,397,739)
    Increase in debtors                                              (712,737)
    Increase in creditors                                             614,247
    Movements on provisions                                           (30,038)
                                                                   ----------
    Net cash inflow from operating activities                       1,302,857
                                                                   ==========

19  ANALYSIS OF CHANGES IN FINANCING

                          Share capital        Loans and        Total financing
                            (including       finance lease       net of cash at
                             premium)         obligations       bank and in hand
                               1996               1996                1996
                              pounds             pounds              pounds
                          -------------      -------------      ----------------

    At 1 October 1995       878,883             4,293,256          5,172,139
    Net cash inflow
      from financing              0             1,881,014          1,881,014
    Foreign exchange
     rate changes                 0              (188,741)          (188,741)
                            -------             ---------          ---------
    At 30 September 1996    878,883             5,985,529          6,864,412
                            =======             =========          =========

20  ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS

                                                                       1996
                                                                      pounds
                                                                   -----------

    At 1 October 1995                                              (2,600,912)
    Net cash outflow                                                 (282,325)
    Effect of foreign exchange rate changes                             5,530
                                                                   ----------
    At 30 September 1996                                           (2,877,707)
                                                                   ==========







                                       77
<PAGE>   78

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

21  ANALYSIS OF CASH AND CASH EQUIVALENTS

    Cash and cash equivalents comprise:

                                                                      Change in
                                           1996           1995          1996
                                          pounds         pounds        pounds
                                       -----------    -----------    -----------
    Cash at bank and in hand              107,162         72,709        34,453
    Bank overdrafts                    (2,984,869)    (2,673,621)     (311,248)
                                       ----------     ----------      --------
                                       (2,877,707)    (2,600,912)     (276,795)
                                       ==========     ==========      ========

22  CAPITAL COMMITMENTS

                                               The group      The company
                                                 1996            1996
                                                pounds          pounds
                                               ---------      -----------

    Contracted for but not provided
      in these financial statements              66,000          66,000
                                                 ======          ======

23  CONTINGENT LIABILITIES

    THE GROUP

    There were no contingent liabilities at 30 September 1996.

    THE COMPANY

    H Burden Limited has given guarantees, in favour of Lloyds Bank plc,
    amounting to pounds 50,000 on behalf of Dolphin Leisure Limited and
    unlimited guarantees in favour of Joy & King Limited, Mike Davies Leisure
    Limited, Galliots Limited and Mark Dowland Marine Limited.

    The company has given a guarantee in favour of Lloyds Bank SA amounting to
    3,000,000 French Francs on behalf of the Dutch subsidiary, CMC Holding BV
    and its subgroup (note 8).








                                       78
<PAGE>   79

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

24  PENSION CONTRIBUTIONS

    Defined contribution scheme

    The group operates a defined contribution pension scheme for the benefit of
    the employees. The assets of the scheme are administered by trustees in a
    fund independent from those of the group.

    Defined benefit scheme

    The group operates a defined benefit scheme for the benefit of certain
    employees. The assets of the scheme are administered by trustees in a fund
    independent from those of the group.

    Pension costs are assessed in accordance with the advice of a qualified
    actuary using the accrued benefits method. The assumptions which have the
    most significant effect on the results of the valuation are a rate of
    interest of 8.5% per annum coupled with an allowance for increases in
    members' earnings of 8% per annum. The most recent actuarial valuation was
    as at 1 October 1995. The market value of the scheme assets at 1 October
    1995 was pounds 965,579.

    The actuarial value of these funds shows the fund covers the value of the
    benefits that have accrued to members.

    The contributions of the group have been 9.5% since 1 October 1991.

25  LEASING COMMITMENTS

    At 30 September 1996 the group has annual non-cancellable operating lease
    commitments relating to the rental of land and buildings of pounds 99,000,
    expiring after five years.

26  POST BALANCE SHEET EVENT

    THE COMPANY

    On 1 October 1996 the trade, assets and liabilities of Mark Dowland Marine
    Limited, a wholly owned subsidiary, were transferred to H Burden Limited.

27  UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")

    The accompanying financial statements have been prepared in conformity with
    accounting principles generally accepted in the United Kingdom. The
    principles differ in a number of important respects from accounting
    principles generally accepted in the United States. With respect to the
    financial statements of the Company, as shown in the following summary,
    there were significant adjustments to net profit for the year ended 30
    September 1996, and shareholders' equity as of 30 September 1996, which
    would have been required had accounting principles generally accepted in the
    United States been applied.







                                       79
<PAGE>   80

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAF")(CONTINUED)

A   DEPRECIATION

    As disclosed in note 7, no depreciation is provided or certain freehold
    buildings. For US GAAP purposes, these buildings are being depreciated over
    30 years.

B   COST OF SALES AND GROSS PROFIT

    The UK GAAP financial statements do not disclose an amount for gross profit.
    Also, certain costs relating to the sale of products are classified as staff
    costs and operating charges and sales discounts are classified as operating
    charges. For US GAAP purposes, amounts would be reclassified resulting in
    cost of sales and gross profit as follows:

                                                               Year ended
                                                              30 September
                                                                  1995
                                                                 pounds
                                                              ------------

    Sales                                                      41,715,888
    Cost of sales                                              33,821,602
                                                               ----------

    Gross profit                                                7,894,286
    Selling, general and administrative expenses                5,700,683
                                                               ----------

    Operating profit                                            2,193,603
                                                               ==========

    This adjustment does not affect net profit or net shareholders' equity.


C   PROVISION FOR LIABILITIES AND CHARGES

    The UK GAAP balance sheet includes provision for liabilities and charges as
    other non-current liabilities. The nature of these items is such that for US
    GAAP purposes, they would be classified as current liabilities. Accordingly,
    as of 30 September 1996 pounds 32,632 has been reclassified as current
    liabilities. This adjustment does not affect net profit or net shareholders'
    equity.

D   RENT INCOME

    One of the company's foreign subsidiaries rents property and premises to
    third parties. The rental income from these activities amounted to pounds
    202,718 for the year ended 30 September 1996. In the UK GAAP financial
    statements this amount has been classified as a reduction of operating
    expenses. Under US GAAP the rental income would be shown as non-operating
    income. This adjustment would not affect net profit or shareholders' equity.

E   DEFERRED INCOME TAXES

    As a result of the adjustments described above and other reconciling items,
    under US GAAP the company will record deferred taxes net of amounts provided
    under UK GAAP.






                                       80
<PAGE>   81

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")(CONTINUED)

F   CUMULATIVE TRANSLATION ADJUSTMENT

    The consolidated group includes foreign subsidiaries located in The
    Netherlands, France, Germany and Belgium. For each of these entities, the
    local currency is the functional currency. As such, all translation
    adjustments are included in shareholders' equity. For UK GAAP purposes, this
    amount is included in profit and loss account (retained earnings). For US
    GAAP purposes, cumulative translation adjustment is shown separately within
    shareholders' equity. This adjustment does not affect net profit or net
    shareholders' equity.

                                                         Cumulative translation
                                                               adjustment
                                                                pounds
                                                         ----------------------

    Balance at 30 September 1995                               357,367
    Changes in period                                         (115,450)
                                                              --------
    Balance at 30 September 1996                               241,917
                                                              ========

G   The following reconciliations show the effect on net profit for the years
    ended 30 September 1996 of using the US GAAP basis of accounting for the
    matters outlined in items a to f above.

                                                           Year ended
                                                          30 September
                                                              1996
                                                             pounds
                                                          ------------
    Net profit in accordance with UK GAAP                  1,124,525
    Adjustment for depreciation on freehold property         (43,297)
    Adjustment for income taxes                              (73,000)
                                                           ---------
    Net income as adjusted to US GAAP                      1,008,228
                                                           =========







                                       81
<PAGE>   82

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP")(CONTINUED)

    The following reconciliations show the effect on shareholders' equity for
    the years ended 30 September 1996, of using the US GAAP basis of accounting
    for the matters outlined in items a to f above.

                                                            Year ended
                                                           30 September
                                                               1996
                                                              pounds
                                                           ------------

    Shareholders' equity in accordance with UK GAAP          8,063,902
    Reconciliation adjustments:
      Depreciation                                            (345,191)
                                                             ---------
    Ending shareholders' equity in accordance
      with US GAAP                                           7,718,711
                                                             =========

    The following information shows the resulting balance sheets as of
    30 September 1996, of using the US GAAP basis of accounting for the matters
    outlined in items a to f above.

                                                            Year ended
                                                           30 September
                                                               1996
                                                              pounds
                                                           ------------
    Cash                                                       107,162
    Receivables                                              5,456,922
    Inventory                                                8,960,739
    Other current assets                                       318,142
    Property and equipment                                   7,218,917
    Other assets                                                     0
                                                            ----------
                                                            22,061,882
                                                            ==========

    Current maturities                                       3,600,764
    Other current liabilities                                5,372,773
    Long term debt                                           5,369,634
    Shareholders' equity                                     7,718,711
                                                            ----------
                                                            22,061,882
                                                            ==========






                                       82
<PAGE>   83

H BURDEN LIMITED AND ITS SUBSIDIARY UNDERTAKINGS

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 30 SEPTEMBER 1996

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

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    Under UK GAAP, taxation payments, returns on investments and servicing of
    finance are shown as a separate activity in the consolidated statements of
    cash flows. Under US GAAP, these amounts would be included in cash flows
    from operating activities.

    Also, the company reconciles the statement of cash flows to an amount that
    includes bank overdraft balances. Under US GAAP, changes to such balances
    re generally included as financing activities.








                                       83
<PAGE>   84
ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Except for information concerning the Company's executive officers
which is included in Part I of this Report, the information required by Item 10
is incorporated by reference from the Company's definitive proxy statement to be
filed with the Commission on or before April 29, 1997 for the Company's 1997
annual shareholders' meeting.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 29, 1997 for the Company's 1997 annual shareholders' meeting.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 29, 1997 for the Company's 1997 annual meeting.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 29, 1997 for the Company's 1997 annual shareholders' meeting.


                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

         (a)     The following documents are filed as part of this Report:

                 (1)      Financial Statements of The Coast Distribution System
                          and Financial Statement Schedules:  See Index to
                          Financial Statements on Page 19.

                 (2)      Separate Financial Statements of HWH Corporation, a
                          50% or less owned person:  See Index to Financial
                          Statements of HWH Corporation on Page 19.

                 (3)      Separate Financial Statements of H. Burden Limited,
                          a 50% or less owned person: see Index to Financial
                          Statements of H. Burden Limited on Page 19.

                 (4)      Exhibits:


                                       84

<PAGE>   85
<TABLE>
<CAPTION>

  Exhibit
  Number
  -------
<S>              <C>
    3.1*         Articles of Incorporation of the Company, as currently in
                 effect.

    3.2*         Bylaws of the Company, as currently in effect.

   10.1**        Bank of America NT&SA Loan Agreement (Receivables and
                 Inventory).

   10.2**        Bank of America NT&SA Master Note.

   10.3**        Bank of America NT&SA Security Agreement (Receivables and
                 Inventory).

   10.4**        Bank of America NT&SA Security Agreement (Equipment and Farm
                 Products).

   10.5**        Continuing Guarantee of Indebtedness of Coast R.V., Inc. by
                 Coast Fabrication, Inc.

   10.6**        Continuing Guarantee of Indebtedness of Coast R.V., Inc. by
                 Thomas R. McGuire.

   10.7**        1983 Employee Incentive Stock Option Plan.

   10.8**        Industrial Lease Agreement dated May 30, 1978.

   10.10**       Standard Lease Agreement dated July 19, 1983.

   10.11         Agreement of Purchase and Sale dated September 13, 1984, among
                 the Company, Trailer Equipment Distributors, Inc. ("Tedco") and
                 its Principal Shareholder. (Incorporated by reference to the
                 same numbered exhibit in the Company's Current Report on Form
                 8-K dated September 26, 1984.)

   10.12         Lease Agreement dated September 26, 1984, by and between the
                 Company and Tedco. (Incorporated by reference to the same
                 numbered exhibit in the Company's Current Report on Form 8-K
                 dated September 26, 1984.)

   10.13         Option Agreement, with form of Real Estate Purchase Agreement
                 attached, relating to the warehouse and office facility being
                 leased by the Company from Tedco. (Incorporated by reference to
                 the same numbered exhibit in the Company's Current Report on
                 Form 8-K dated September 26, 1984.)

   10.14         Bank Loan Agreement dated July 19, 1984, between the Company
                 and Bank of America NT&SA. (Incorporated by reference to the
                 same numbered exhibit in the Company's Annual Report on Form
                 10-K for the fiscal year ended December 31, 1984.)

   10.15         Agreement of Purchase and sale dated May 3, 1985, between the
                 Company and Rogers Distributing Corporation. (Incorporated by
                 reference to the same numbered exhibit in the Company's
                 Quarterly Report on Form 10-Q for the quarter ended March 31,
                 1985.)

   10.16         Stock Purchase Agreement dated April 29, 1985, among the
                 Company and certain purchasers named therein. (Incorporated by
                 reference to the same numbered exhibit in the Company's
                 Quarterly Report on Form 10-Q for the quarter ended March 31,
                 1985.)

   10.17*        Amended and Restated 1983 Employee Stock Option Plan.
</TABLE>


                                      85

<PAGE>   86
   10.18         Agreement of Purchase and Sale dated June 25, 1985, between
                 Coast R.V., Inc. and Coachmen Industries, Inc. (Incorporated by
                 reference to the same numbered exhibit in the Company's Current
                 Report on Form 8-K dated June 28, 1985.)

   10.19         Loan and Security Agreement dated June 28, 1985, between Coast
                 R.V., Inc. and Mellon Financial Services Corporation.
                 (Incorporated by reference to the same numbered exhibit in the
                 Company's Current Report on Form 8-K dated June 28, 1985.)

   10.20         Note Purchase Agreement dated June 27, 1985 relating to the
                 Company's 11.5% Convertible Subordinated Notes due 1993.
                 (Incorporated by reference to the same numbered exhibit in the
                 Company's Current Report on Form 8-K dated June 28, 1985.)

   10.21         Amendment No. 2 dated February 29, 1988 to Loan and Security
                 Agreement between Coast R.V., Inc. and Mellon Financial
                 Services Corporation. (Incorporated by reference to the same
                 numbered exhibit in the Company's Annual Report on Form 10-K
                 dated March 28, 1988.)

   10.22         Nonqualified Stock Option Plan - 1987.  (Incorporated by
                 reference to Exhibit 4.1 in the Company's Registration
                 Statement on Form S-8 (File No. 33-15322) filed with the
                 Commission on June 25, 1987.)

   10.23         1987 Employee Stock Purchase Plan.  (Incorporated by reference
                 to Exhibit 4.1 in the Company's Registration Statement on Form
                 S-8 (File No. 33-18696) filed with the Commission on December
                 1, 1987.)

   10.24         Agreement of Purchase and Sale of Assets dated as of March 24,
                 1988 entered into between the Company and SunWest Wholesale
                 Distributors. (Incorporated by reference to the same numbered
                 exhibit to the Company's Current Report on Form 8-K dated April
                 1, 1988.)

   10.25         Note Agreement dated as of March 15, 1988 between the Company
                 and Massachusetts Mutual Life Insurance Company and MassMutual
                 Corporate Investors. (Incorporated by reference to the same
                 numbered exhibit to the Company's Current Report on Form 10-K
                 dated April 1, 1988.)

   10.26         Stock Purchase Agreement dated as of May 22, 1989 relating to
                 the acquisition of shares of HWH Corporation. (Incorporated by
                 reference to the same numbered exhibit to the Company's Current
                 Report on Form 8-K dated May 24, 1989.)

   10.27         Letter Agreement between Company and Furman Selz relating to
                 HWH Shares. (Incorporated by reference to the same numbered
                 exhibit to the Company's Current Report on Form 8-K dated May
                 24, 1989.)

   10.28         Note Agreement dated as of June 1, 1989 among the Company and
                 Massachusetts Mutual Life Insurance Company, MassMutual
                 Participation Investors, and MassMutual Corporate Investors,
                 relating to sale and issuance of $14,000,000 of 10-year
                 Subordinated Notes and $1,000,000 of 6-year Convertible
                 Subordinated Notes. (Incorporated by reference to the same
                 numbered exhibit to the Company's Current Report on Form 8-K
                 dated August 17, 1989.)




                                      86


<PAGE>   87
   10.29         Asset Purchase Agreement dated as of August 17, 1989 which
                 provides for the acquisition of substantially all of the assets
                 of Griffin's Outboard Marine, Inc. (Incorporated by reference
                 to the same numbered exhibit to the Company's Current Report on
                 Form 8-K dated August 17, 1989.)

   10.30         Amendment dated September 22, 1989 to Griffin's Outboard Marine
                 Asset Purchase Agreement. (Incorporated by reference to the
                 same numbered exhibit to the Company's Current Report on Form
                 8-K dated September 22, 1989.)

   10.31         1993 Stock Option and Incentive Plan.  (Incorporated by
                 reference to Exhibit 4.3 to the Company's Registration
                 Statement on Form S-8 (No. 33-64582) filed with the Commission
                 on June 17, 1993.)

   10.32         Share Option Agreement dated as of March 19, 1993, among the
                 Company, H. Burden Limited ("Burden) and the shareholders of
                 Burden, pursuant to which the Company has acquired common
                 shares, and may acquire additional common shares, of Burden.
                 (Incorporated by reference from Exhibit 2.1 to the Company's
                 Current Report on Form 8-K dated April 29, 1994.)

   10.33         Second Amended and Restated Loan Agreement between the Company
                 and Mellon Bank, together with First Amendment thereto
                 (Incorporated by reference to Exhibit 10.1 to the Company's
                 Quarterly Report on Form 10-Q for the Quarter ended June 30,
                 1995.)

   10.34         Distribution Agreement dated October 11, 1995 between the
                 Company and Recreation Vehicle Products, Inc. (Incorporated by
                 reference to Exhibit 10.1 to the Company's Quarterly Report on
                 Form 10-Q for the Quarter ended September 30, 1995).

   11.1          Statement re Computation of Earnings per Share

   21            Subsidiaries.

   23.1          Consent of Grant Thornton, Independent Certified Public
                 Accountants, re Consolidated Financial Statements of The Coast
                 Distribution System.

   23.2          Consent of Grant Thornton, Independent Certified Public
                 Accountants, re Financial Statements of HWH Corporation.

   23.3          Consent of Grant Thornton, Independent Certified Public
                 Accountants, re Consolidated Financial Statements of H. Burden
                 Limited.

   24            Power of Attorney - Included on Signature Page

   27            Financial Data Sheet







                                      87


<PAGE>   88
Compensation Plans and Arrangements
-----------------------------------

         1983 Employee Stock Option Plan, as amended -- See Exhibit 10.17 above.

         Nonqualified Stock Option Plan - 1987 -- See Exhibit 10.22 above.

         1987 Employee Stock Purchase Plan, as amended -- See Exhibit 10.32
         above.

         1993 Stock Option and Incentive Plan -- See Exhibit 10.31 above.

----------------
 *       Incorporated by reference to the same numbered exhibit in the
         Company's Registration Statement on Form S-1 (File No. 33-4393) filed
         with the Commission on March 28, 1986.

**       Incorporated by reference to the same numbered exhibit in the
         Company's Registration Statement No. 2-86420LA on Form S-18.

         (b) There were no reports on Form 8-K filed by the Company during the
             quarter ended December 31, 1996.






                                      88


<PAGE>   89
                                   SIGNATURES

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

Dated:  March 28, 1997              THE COAST DISTRIBUTION SYSTEM



                                    By:   /s/ Thomas R. McGuire
                                          -------------------------------------
                                          Thomas R. McGuire,
                                          Chairman and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons in the
capacities and on the dates indicated.

         Each person whose signature to this Report appears below hereby
appoints Thomas R. McGuire, Sandra A. Knell and David Berger, or any of them, to
act severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for each of them, to sign on his behalf, individually and in the
capacities stated below, and to file any and all amendments to this Annual
Report, which amendment or amendments may make changes and additions as such
attorneys-in-fact may deem necessary or appropriate.

<TABLE>
<CAPTION>
               Signature                                  Title                           Date
               ---------                                  -----                           ----
<S>                                            <C>                                   <C>
        /s/ Thomas R. McGuire                  Chairman of the Board of              March 28, 1997
--------------------------------------         Directors, Chief Executive
           Thomas R. McGuire                   Officer and Director

          /s/ Sandra A. Knell                  Executive Vice President              March 28, 1997
--------------------------------------         (Principal Financial and
            Sandra A. Knell                    Principal Accounting Officer)

           /s/ John E. Turco                   Director                              March 28, 1997
--------------------------------------
             John E. Turco

         /s/ Louis B. Sullivan                 Director                              March 28, 1997
--------------------------------------
           Louis B. Sullivan

                                               Director                              March   , 1997
--------------------------------------
           Robert S. Throop

          /s/ Ben A. Frydman                   Director                              March 28, 1997
--------------------------------------
            Ben A. Frydman

         /s/ Brian P. Friedman                 Director                              March 28, 1997
--------------------------------------
           Brian P. Friedman
</TABLE>


                                      S-1
<PAGE>   90
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                         Sequentially
  Exhibit                                                                                                  Numbered
  Number                                                                                                     Page
  -------                                                                                                ------------
<S>              <C>                                                                                      <C>
    3.1*         Articles of Incorporation of the Company, as currently in effect.                             --

    3.2*         Bylaws of the Company, as currently in effect.                                                --

   10.1**        Bank of America NT&SA Loan Agreement (Receivables and Inventory).                             --

   10.2**        Bank of America NT&SA Master Note.                                                            --

   10.3**        Bank of America NT&SA Security Agreement (Receivables and Inventory).                         --

   10.4**        Bank of America NT&SA Security Agreement (Equipment and Farm Products).                       --

   10.5**        Continuing Guarantee of Indebtedness of Coast R.V., Inc. by Coast Fabrication, Inc.           --

   10.6**        Continuing Guarantee of Indebtedness of Coast R.V., Inc. by Thomas R. McGuire.                --

   10.7**        1983 Employee Incentive Stock Option Plan.                                                    --

   10.8**        Industrial Lease Agreement dated May 30, 1978.                                                --

   10.10**       Standard Lease Agreement dated July 19, 1983.                                                 --

   10.11         Agreement of Purchase and Sale dated September 13, 1984, among the Company, Trailer
                 Equipment Distributors, Inc. ("Tedco") and its Principal Shareholder.  (Incorporated by
                 reference to the same numbered exhibit in the Company's Current Report on Form 8-K
                 dated September 26, 1984.)                                                                    --

   10.12         Lease Agreement dated September 26, 1984, by and between the Company and Tedco.
                 (Incorporated by reference to the same numbered exhibit in the Company's Current Report
                 on Form 8-K dated September 26, 1984.)                                                        --

   10.13         Option Agreement, with form of Real Estate Purchase Agreement attached, relating to the
                 warehouse and office facility being leased by the Company from Tedco.  (Incorporated by
                 reference to the same numbered exhibit in the Company's Current Report on Form 8-K
                 dated September 26, 1984.)                                                                    --
</TABLE>
<PAGE>   91
<TABLE>
<CAPTION>
                                                                                                           Sequentially
  Exhibit                                                                                                    Numbered
  Number                                                                                                       Page
  -------                                                                                                  ------------
<S>              <C>                                                                                        <C>
   10.14         Bank Loan Agreement dated July 19, 1984, between the Company and Bank of America NT&SA.
                 (Incorporated by reference to the same numbered exhibit in the Company's Annual Report
                 on Form 10-K for the fiscal year ended December 31, 1984.)                                       --

   10.15         Agreement of Purchase and sale dated May 3, 1985, between the Company and Rogers
                 Distributing Corporation.  (Incorporated by reference to the same numbered exhibit in
                 the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985.)               --

   10.16         Stock Purchase Agreement dated April 29, 1985, among the Company and certain purchasers
                 named therein.  (Incorporated by reference to the same numbered exhibit in the
                 Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985.)                   --

   10.17*        Amended and Restated 1983 Employee Stock Option Plan.                                            --

   10.18         Agreement of Purchase and Sale dated June 25, 1985, between Coast R.V., Inc. and
                 Coachmen Industries, Inc.  (Incorporated by reference to the same numbered exhibit in
                 the Company's Current Report on Form 8-K dated June 28, 1985.)                                   --

   10.19         Loan and Security Agreement dated June 28, 1985, between Coast R.V., Inc. and Mellon
                 Financial Services Corporation.   (Incorporated by reference to the same numbered
                 exhibit in the Company's Current Report on Form 8-K dated June 28, 1985.)                        --

   10.20         Note Purchase Agreement dated June 27, 1985 relating to the Company's 11.5% Convertible
                 Subordinated Notes due 1993.   (Incorporated by reference to the same numbered exhibit
                 in the Company's Current Report on Form 8-K dated June 28, 1985.)                                --

   10.21         Amendment No. 2 dated February 29, 1988 to Loan and Security Agreement between Coast
                 R.V., Inc. and Mellon Financial Services Corporation.  (Incorporated by reference to
                 the same numbered exhibit in the Company's Annual Report on Form 10-K dated March 28,
                 1988.)                                                                                           --

   10.22         Nonqualified Stock Option Plan - 1987.  (Incorporated by reference to Exhibit 4.1 in
                 the Company's Registration Statement on Form S-8 (File No. 33-15322) filed with the
                 Commission on June 25, 1987.)                                                                    --

   10.23         1987 Employee Stock Purchase Plan.  (Incorporated by reference to Exhibit 4.1 in the
                 Company's Registration Statement on Form S-8 (File No. 33-18696) filed with the
                 Commission on December 1, 1987.)                                                                 --

   10.24         Agreement of Purchase and Sale of Assets dated as of March 24, 1988 entered into
                 between the Company and SunWest Wholesale Distributors.  (Incorporated by reference to
                 the same numbered exhibit to the Company's Current Report on Form 8-K dated April 1,
                 1988.)                                                                                           --
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<PAGE>   92
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   10.25         Note Agreement dated as of March 15, 1988 between the Company and Massachusetts Mutual
                 Life Insurance Company and MassMutual Corporate Investors.  (Incorporated by reference
                 to the same numbered exhibit to the Company's Current Report on Form 10-K dated
                 April 1, 1988.)                                                                                  --

   10.26         Stock Purchase Agreement dated as of May 22, 1989 relating to the acquisition of shares
                 of HWH Corporation.  (Incorporated by reference to the same numbered exhibit to the
                 Company's Current Report on Form 8-K dated May 24, 1989.)                                        --

   10.27         Letter Agreement between Company and Furman Selz relating to HWH Shares.  (Incorporated
                 by reference to the same numbered exhibit to the Company's Current Report on Form 8-K
                 dated May 24, 1989.)                                                                             --

   10.28         Note Agreement dated as of June 1, 1989 relating to sale and issuance of $14,000,000 of
                 10-year Subordinated Notes and $1,000,000 of 6-year Convertible Subordinated Notes.
                 (Incorporated by reference to the same numbered exhibit to the Company's Current Report
                 on Form 8-K dated August 17, 1989.)                                                              --

   10.29         Asset Purchase Agreement dated as of August 17, 1989 which provides for the acquisition
                 of substantially all of the assets of Griffin's Outboard Marine, Inc.  (Incorporated by
                 reference to the same numbered exhibit to the Company's Current Report on Form 8-K
                 dated August 17, 1989.)                                                                          --

   10.30         Amendment dated September 22, 1989 to Griffin's Outboard Marine Asset Purchase
                 Agreement.  (Incorporated by reference to the same numbered exhibit to the Company's
                 Current Report on Form 8-K dated September 22, 1989.)                                            --

   10.31         1993 Stock Option and Incentive Plan.  (Incorporated by reference to Exhibit 4.3 to the
                 Company's Registration Statement on Form S-8 (File No. 33-64582) filed with the
                 Commission on June 17, 1993.)                                                                    --

   10.32         Share Option Agreement dated as of March 19, 1993, among the Company, H. Burden
                 Limited ("Burden) and the shareholders of Burden, pursuant to which the Company has
                 acquired common shares, and may acquire additional common shares, of Burden.
                 (Incorporated by reference from Exhibit 2.1 to the Company's Current Report on Form 8-K
                 dated April 29, 1994.)                                                                           --

   10.33         Second Amended and Restated Loan Agreement between the Company and Mellon Bank,
                 together with First Amendment thereto (Incorporated by reference to Exhibit 10.1 to the
                 Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1995.)                    --

   10.34         Distribution Agreement dated October 11, 1995 between the Company and Recreation
                 Vehicle Products, Inc. (Incorporated by reference to Exhibit 10.1 to the Company's
                 Quarterly Report on Form 10-Q for the Quarter ended September 30, 1995).                         --

   11.1          Statement re Computation of Earnings per Share
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   21            Subsidiaries.

   23.1          Consent of Grant Thornton, Independent Certified Public Accountants, re Consolidated
                 Financial Statements of The Coast Distribution System.

   23.2          Consent of Grant Thornton, Independent Certified Public Accountants, re Financial
                 Statements of HWH Corporation.

   23.3          Consent of Grant Thornton, Independent Certified Public Accountants, re Consolidated
                 Financial Statements of H. Burden Limited.

   24            Power of Attorney - Included on Signature Page.                                                 --

   27            Financial Data Sheet.
</TABLE>