KellerFurniture
                     The Keller Manufacturing Company, Inc.























                                  Annual Report
                                      2000


<PAGE>
                              TO OUR SHAREHOLDERS
                              -------------------

On behalf of our employees,  managers,  officers and directors,  I report to you
our year of 2000.

     This year we earned $0.36 a share vs. $0.66 a share in 1999. Our net profit
was $2,022,089  vs.  $3,780,769 in 1999.  Our net shipments  decreased  slightly
compared to 1999.  In 2000 we shipped  $55,391,644  compared to  $55,751,215  in
1999.

     Our decline in  profitability  can be  accounted  for in three basic areas.
First, was our conscious  decision to increase our production in order to reduce
our larger than normal  backlog.  We did this with the addition of  small-scaled
second  shifts in all three of our  manufacturing  facilities.  Start-up  costs,
increased  operating costs and increased  labor costs  contributed to erosion of
profitability  during this period of time.  Although it  increased  costs it did
prove effective in reducing our order backlog.  By the end of the second quarter
2000 our order  backlog  returned to more normal  operating  levels.  This was a
critical need to keep customer satisfaction and to generate future orders.

     Second, by emphasizing so strongly on production we circumvented several of
our operating  objectives.  Indirect  labor costs  increased,  yield  production
decreased,  and our  amount of parts  loss  increased.  All three had an adverse
affect on profitability.

     Third,  the rising costs in health care along with a retroactive  cost from
worker's compensation increased overhead costs during 2000.

     As we enter 2001 we are focusing on our operating  objectives  with a clear
plan to reduce costs and increase  efficiencies.  Action plans have been created
to focus our  efforts  in five  strategic  areas to  increase  productivity  and
decrease costs:  (Action Plan #1) To Achieve Budgeted Yield; (Action Plan #2) To
Reduce Indirect Labor;  (Action Plan #3) To Reduce Parts Loss;  (Action Plan #4)
To Deliver the Needed Parts for Build;  (Action  Plan #5) To Provide  Consistent
Shipments To Our Customers.

     Many of our issues with  turnover are behind us and we are now staffing our
plants  to the  proper  level  for  current  production  requirements.  We  have
suspended  the second  shift in two of the three plants and will be staffing our
facilities  with only the  required  people  to  maximize  efficiency  and lower
indirect labor costs.

     We have  revitalized our efforts in the area of safety and have initiated a
comprehensive  program to reduce  costs in this  area.  At the same time we have
restructured  our worker's  compensation  program to allow us the opportunity to
realize reductions in costs while trying to minimize claims.

     By focusing our efforts in these areas I believe we can  positively  impact
our  profitability.  In the similar  fashion that we reduced  backlog in 2000, I
feel confident that with the proper  execution and focus we can achieve  similar
results in cost reductions.  The Keller team looks forward to the challenges and
opportunities before us in 2001.

     This annual report,  along with other Keller news and  information,  can be
seen on our website at: www.kellerfurniture.com.

                                   Sincerely,

                                   /s/ Steven W. Robertson

                                   Steven W. Robertson
                                   President and CEO


<PAGE>

SELECTED FINANCIAL DATA

The following  table sets forth selected  financial data as of and for the years
ended  December 31, 2000,  1999,  1998,  1997, and 1996 and are derived from the
audited,  consolidated  financial  statements  of the  Company.  These  selected
financial  data are not covered by the  auditors'  report and are  qualified  in
their  entirety  by  reference  to,  and  should  be read in  conjunction  with,
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations,"  and the Consolidated  Financial  Statements of the Company and the
related notes thereto included herein.

<TABLE>
<CAPTION>
                                                                          YEAR ENDED
                                                                         December 31,
                                        -------------------------------------------------------------------------------
Statements of Income Data:
                                               2000           1999              1998             1997             1996
                                               ----           ----              ----             ----             ----
<S>                                     <C>            <C>               <C>              <C>              <C>
Net Sales                               $55,391,644    $55,751,215       $60,144,243      $58,736,617      $54,168,278
Cost of Goods Sold                       43,406,132     41,670,927        43,459,950       40,955,515       38,948,486
                                        ------------------------------------------------------------------------------
Gross Profit                             11,985,512     14,080,288        16,684,293       17,781,102       15,219,792
Selling, General and
Administrative                            8,724,051      8,282,022         7,965,041        8,834,796        7,561,206
Other Income, Net                           142,674        359,997           451,503
                                        ------------------------------------------------------------------------------
Income Before Income  Taxes               3,404,135      6,158,263         9,170,755        8,946,306        7,658,586
Income Taxes                              1,382,046      2,377,494         3,514,750        3,448,011        2,988,903
                                        ------------------------------------------------------------------------------
Net Income                              $ 2,022,089    $ 3,780,769       $ 5,656,005      $ 5,498,295      $ 4,669,683
                                        ===========    ===========       ===========      ===========      ===========

Net Income Per Share Of
  Common Stock - (Basic and Dilutive)   $      0.36    $      0.66       $      0.97      $      0.94      $      0.79



Weighted Average Number of Shares
Outstanding                               5,611,354      5,753,211         5,853,954        5,847,325        5,883,603

Cash Dividends Declared Per
   Common Share                         $      0.14    $      0.14       $      0.18      $      0.16      $      0.14



                                                                       December 31,
                                        ------------------------------------------------------------------------------
                                               2000           1999              1998             1997             1996
Balance Sheet Data:                            ----           ----              ----             ----             ----
Working Capital 1                       $23,994,084    $23,531,588       $22,158,510      $19,168,410      $15,963,428
Property, Plant and Equipment            10,898,743     10,045,302         9,798,174        8,707,855        7,844,115
Investment Security Available
For Sale                                                                     500,000
Other Assets                              1,851,928      1,835,335         1,760,759        1,584,469        1,340,321
Total Assets                             41,913,198     39,688,056        39,471,045       35,545,608       31,137,030
Long Term Debt                                    0              0                 0                0                0


<FN>
(1)  Reflects  the excess of  current  assets  over  current  liabilities  as set forth in the  Consolidated  Financial
     Statements

RECLASSIFICATIONS  -  Certain  Reclassifications  have  been  made to 1998  and 1999  amounts  to  conform  to the 2000
Classifications.
</FN>
</TABLE>


                                                         - 1 -
<PAGE>

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

The following  discussion and analysis  should be read in  conjunction  with the
Selected Financial Data and the Company's  Consolidated Financial Statements and
notes  thereto  included  herein.  In  addition  to the  historical  information
contained  herein,  the  following   discussions  may  contain  forward  looking
statements that involve risks and  uncertainties.  The Company's  actual results
could differ materially from those discussed herein.

RESULTS OF OPERATIONS

The  following  table  sets  forth,  for  the  periods  indicated,  consolidated
statement of income data as a percentage of net sales.

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                        ---------------------------------------
                                          2000       1999       1998       1997
                                          ----       ----       ----       ----

<S>                                     <C>        <C>        <C>        <C>
Net Sales                               100.0%     100.0%     100.0%     100.0%
Cost of Sales                            78.4%      74.7%      72.3%      69.7%
Gross Profit                             21.6%      25.3%      27.7%      30.3%
Selling, General and Administrative      15.5%      14.8%      13.2%      15.0%
Operating Income                          6.1%      10.5%      14.5%      15.2%
Income Before Taxes                       6.1%      11.1%      15.2%      15.2%
Income Taxes                              2.5%       4.3%       5.8%       5.9%
Net Income                                3.6%       6.8%       9.4%       9.3%

<FN>
RECLASSIFICATIONS  - Certain  Reclassifications  have been made to 1998 and 1999
amounts to conform to the 2000 Classifications.
</FN>
</TABLE>

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

Net Sales.  The Company had an  approximate  0.6%  decrease in net sales in 2000
compared to 1999.  This was mostly due to an increase in returns and allowances;
which  increased  from 1.85% in 1999 to 3.53% in 2000.  Returns  and  allowances
increased  partially  due to quality  issues  related to employee  turnover  and
dealer response to a weakening economy.

Orders  received  in 2000 were down 14.2% from  1999,  partially  due to delayed
shipments  during the first six months and  partially  due to the cooling of the
economy the last two months of 2000.

Cost of Sales.  Cost of sales as a percent  of net sales  increased  to 78.4% in
2000  compared  to  74.7%  in  1999.   Actual  cost  of  sales   increased  from
approximately  $41.7 million in 1999 to approximately $43.4 million in 2000. The
employee  turnover  continued  throughout  the year.  This  required  additional
training and continued to result in inefficiencies in the manufacturing process.
The  inefficiencies  have resulted in higher cost of indirect labor,  parts loss
due to poor quality and higher  supervision  cost due to an added second  shift.
The employee  benefit  costs have also  continued  to  increase,  largely due to
increased health care costs and worker's  compensation costs. The Company agreed
to absorb  approximately  $.6 million more in increased health care costs rather
than raise employee premiums.  The worker's  compensation cost also increased by
approximately  $.2 million  compared  to 1999 due to an increase in claims.  The
material cost and direct labor cost remained  approximately  the same as that of
1999.

                                     - 2 -
<PAGE>

Selling,   General   and   Administrative   Expenses.   Selling,   general   and
administrative  expenses increased in 2000 by approximately  $0.4 million . As a
percent of net sales,  selling,  general and  administrative  expenses increased
from 14.8% in 1999 to 15.5% in 2000. Most of the increase was due to higher cost
of  bad  debts  and   professional   fees.  The  largest  bad  debt  was  Heilig
Meyer/Homemaker  at  approximately  $235,000.  The  professional fee increase is
mostly due to programming cost of the new Information System by Co-Venture.

Net  Income.  As a result  of the above  factors,  the net  income  for 2000 was
approximately  $2.0 million.  This is approximately  $1.8 million less than 1999
income of approximately $3.8 million.

RECLASSIFICATIONS  - Certain  Reclassifications  have been made to 1998 and 1999
amounts to conform to the 2000 Classifications.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Net Sales.  The Company had an  approximate  7.3%  decrease in net sales in 1999
compared  to 1998.  This  was  partially  due to  approximately  a $2.0  million
decrease  in  shipments  in  the  second  quarter,  caused  by  engineering  and
manufacturing  demands brought about by the  introduction of the new PGA TOUR(R)
group. Efficiencies dropped further in the second half of the year, as shipments
were down approximately $3.7 million compared to the same period in 1998. Partly
due to the tightening job market, employee turnover for the Company increased by
45% compared to 1998.  Training of a large  percentage  of new employees was the
primary  factor in the reduction in  efficiencies.  Actual orders  received were
down 4.3% from 1998,  partially due to not getting  follow-up  orders because of
the delayed shipments.

 Cost of Sales.  Cost of sales as a percent of net sales  increased  to 74.7% in
1999  compared  to 72.3% in 1998 due mainly to the cost of  materials.  Material
costs, as a percent of net sales, increased from 23.9% in 1998 to 26.4% in 1999.
Lumber costs recognized provided one of the reasons for the increase in material
costs.  Though lumber prices for oak have actually  decreased  from 1998 average
costs, it has taken approximately nine months for all of the lumber in inventory
from 1998 to cycle through. There has also been an increase in the purchasing of
dimension  stock for 1999.  Part of this is due to the  introduction  of the PGA
TOUR(R) group.  Also, some key parts are now being purchased in rough dimensions
to help  improve  yield.  Parts such as tops and items with  longer  lengths are
difficult to cut in certain packages in the cutting lines. The length mixes make
it  difficult  to  maintain   established   yield   standards.   Another  factor
contributing to the increase was cardboard packing materials which had two price
increases for 1999. There was a total price increase of approximately  11.0% for
the year.

Selling,   General   and   Administrative   Expenses.   Selling,   General   and
Administrative  Expenses  increased  from 13.2% of net sales in 1998 to 14.8% in
1999.  Administrative  expenses had the largest increase of  approximately  $0.4
million.  This was an  increase  as a percent  of net sales from 2.6% in 1998 to
3.5%  in  1999.   Professional  support  fees  for  implementation  of  the  EMS
Information  System  accounted  for half of the  increase.  Costs for making the
Company Year 2000 compliant ran higher than  originally  anticipated.  The other
major  administrative  expense  increase was for costs,  such as legal and audit
fees, related to the Company registering its stock under the Securities Exchange
Act of 1934 as required by SEC regulations.

Selling  expenses,  as a percent of net sales,  increased  from 10.6% in 1998 to
11.2% in 1999. Even though actual expenses were down  approximately $0.2 million
from 1998,  there were certain  costs locked in,  based on sales  forecasts  for
1999. There were marketing  programs put into place at the beginning of the year
as well as PGA  promotions  that were  incurred  before the Company  experienced
production problems and reduced shipments.

Net Income. As a result of the above factors,  the Company recognized net income
of approximately  $3.8 million in 1999 compared to approximately $5.7 million in
1998. Net income decreased 33.2% from 1998,  which had a 2.9% increase  compared
to 1997. This was the first decrease in net income for the Company since 1990.


                                     - 3 -
<PAGE>


YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Net Sales.  The Company had an approximate  2.4% increase in net sales from 1997
to 1998,  and a 2.9% increase in the  Company's net income for this period.  The
1998 increase in net sales is less than the 1997 increase of 8.4%.  This is due,
in part, to the decrease in Haverty's orders.

Cost of Sales.  Cost of sales as a percentage of net sales increased to 72.3% in
1998 from 69.7% in 1997 due mainly to  increases  in the cost of raw  materials.
Total material costs increased by  approximately  $1.7 million in 1998,  largely
due to a 15 % increase in the cost of lumber. Labor costs were relatively steady
with an annual raise approximately equal to the rate of inflation.

Selling,   General   and   Administrative   Expenses.   Selling,   General   and
Administrative  expenses  decreased  from 15.0% of net sales in 1997 to 13.2% in
1998.  There was a total  decrease of  approximately  $0.9  million from 1997 to
1998.  There was a  reduction  of  approximately  $0.3  million in  expenditures
involving  implementation of the EMS Information System. These expenses included
consulting fees and training of employees in using the new system. Other factors
contributing to the reduction in 1998 were the recognition of approximately $0.3
million flood loss in 1997, and a $70,000 reduction in bad debt expense.

Net Income. As a result of the above factors,  the Company recognized net income
for 1998 of approximately $5.7 million,  compared to net income of approximately
$5.5 million in 1997.


LIQUIDITY AND CAPITAL RESOURCES

The Company's  principal source of cash is income from  operations.  The Company
has no material  outstanding  debt and is not expecting to incur any significant
debt in the near  future.  The cash  account has  decreased  slightly  over $2.4
million  in  2000  compared  to  1999,  while  accounts   receivable   increased
approximately  $1.7 million and  increased  inventories  by  approximately  $1.9
million. Due to the problems in manufacturing,  certain bottlenecks continued to
occur  in key mill  departments.  This in turn  caused  an  increase  of work in
process.  Reducing inventory and accounts receivable will be a major priority in
2001.

 The  Company's  liquidity  ratio  (cash  and  cash  equivalents  plus  accounts
receivable  divided  by  current  liabilities)  decreased  to 1.7 in 2000.  This
compares  to 2.22 in 1999  and 1.95 in  1998.  The  other  factors  causing  the
decrease in liquidity ratio was a significant  increase of nearly $.9 million in
current liabilities.

Total capital expenditures for the Company were approximately $2.4 million, $1.9
million,  and $2.6  million  for 2000,  1999,  and 1998,  respectively.  Capital
expenditures include purchases of equipment, hardware or software, and expansion
of facilities.  All capital  expenditures for the Company are tracked separately
for each of the three locations. The largest single capital expenditure for 1998
was  the  purchases  of  Phase  II and III of the  dust  collection  system  for
approximately  $0.4 million at the Corydon  location.  Corydon also purchased an
Computer   Numerical   Control   Machine  Center  ("CNC  Machine   Center")  for
approximately $0.3 million,  and New Salisbury spent  approximately $0.3 million
on construction of a new kiln. There were no significant projects at Culpeper in
1998.

In 1999, the  largest capital  expenditure  was  approximately  $0.1 million for
a rough   planer at  Corydon.   Modifications  for the  sorter  line  are  being
implemented  as well but were not completed in 1999.  Corydon  purchased a paint
storage  building  for  $71,000.   This  was  a  proactive  measure  for  future
environmental  regulation  compliance.   At New  Salisbury,  $90,000  was  spent
on replacement  of  a  fire  reservoir  liner  for  the  sprinkler  system.   An
additional $76,000 was spent for a mezzanine in the shipping department for more


                                     - 4 -
<PAGE>

storage area. The tempering room was not expanded as originally planned, rather,
some adjustments  were made in the kilns.  This allowed dried lumber to still be
stored but at a much lower capital expense.  There were no significant  projects
completed at Culpeper in 1999.

In 2000, Corydon spent  approximately $1.0 million in capital  expenditures with
the Planer/Sander being the largest expenditure at an approximately cost of $0.3
million.  Corydon also  purchased a Newman Rough Planer for  approximately  $0.2
million.  At Culpeper,  a moulder and profiler grinder cost  approximately  $0.3
million which was the largest  expenditure out of the  approximate  $0.4 million
capital  expenditure.  The largest  capital  expenditure for the Company and New
Salisbury was a warehouse  with an  approximate  cost of $0.5 million,  this was
approximately $0.1 million less than budgeted. Another large capital expenditure
was the purchase of a Shoda CNC Machine Center for approximately $0.3 million.

The product turnover ratio (net sales divided by inventories) decreased from 3.2
in 1999 to 2.8 in 2000.  This was due to an 0.6 %  decrease  in net  sales and a
10.6% increase in inventory.  As mentioned previously,  there was a reduction in
productivity in 2000 due to a combination of inefficiencies  and the increase in
employee turnover for the Company.  The Company expects  efficiencies to improve
with the emphasis of getting new employees  trained better and faster.  The goal
is to improve the product turnover ratio compared to recent years prior to 2000.

The Company has had no material short term or long term debt since 1994 compared
to a 1999 16.5%  Industry average of long term debt in relation to net worth(2).
This has helped the Company maintain its cash flow and liquidity levels. Because
of Keller's financial  stability,  the Company does not currently anticipate the
need to issue any new stock  other than stock  bonus  awards or  pursuant to the
exercise of employee stock options.  The Company  anticipates funding its growth
strategy with cash generated from operations.  Construction of a new facility is
not currently part of the Company's  growth strategy.  As mentioned  previously,
there  was  an  expansion  to  the  New  Salisbury  warehouse  facilities  at an
approximate cost of $0.5 million.

The Company has available lines of credit totaling $5.0 million. This includes a
$3.0 million line of credit with Union  Planters Bank of Corydon,  Indiana which
expires  July 31,  2001.  Interest  is charged at the prime  lending  rate.  The
Company  also has a $2.0  million  line of  credit  available  with  Bank One of
Louisville,  Kentucky which expires July 31, 2001.  Interest is charged at LIBOR
plus 1.5%.  These lines are not  collateralized.  As of December 31, 2000, these
lines of credit were unused.

INFLATION

The Company  believes that it cannot afford to increase  prices by a margin much
more than the rate of inflation  and still  remain  competitive.  The  Company's
total price  increase for the years of 1997,  1998 and 1999 was 7.5% compared to
cumulative  inflation of 6.0% for the same three year period. The price increase
for 2000 was  approximately  2.4% and  inflation for the same period was 3.4% as
reported by the Consumer  Price Index.  The Company  believes  that this pricing
policy  has  not  had a  material  adverse  effect  on its  net  sales  and  has
contributed to the Company remaining a viable competitor.

 To date,  the Company  believes  that the effects of  inflation,  mostly in the
health-related  business,  have  had an  effect  on its  business.  The  Company
recognized  approximately  $.6  million  increase  in health  cost over 1999 and
another $.2 million in worker's compensation.

[FN]
______________

(2)  Dun & Bradstreet  Business Scope Report.  January 9, 2001. The  information
     regarding the furniture manufacturing industry contained in this report was
     as of December 31, 1999.
</FN>

                                     - 5 -
<PAGE>

Risk Factors

The business,  financial  condition,  results of operations and prospects of the
Company  are subject to a number of risks,  including  those  identified  below.
Reviewers of this report should read  carefully the  information on risk factors
set forth below as well as the other information set forth in this report and in
the Company's filings with the Securities and Exchange Commission, a copy of any
of which will be provided by the Company upon request.

1.   Competition

     The furniture industry is characterized by highly intense competition.  The
     Company competes with many nationally recognized and financially successful
     manufacturers  of high quality  furniture.  Many  companies  with which the
     Company  competes,  both domestic and foreign,  have  substantially  larger
     production   capacities,   distribution   networks  and  greater  financial
     resources than the Company.

     The furniture industry is a segmented industry whereby design,  quality and
     price place each manufacturer  into one or more competitive  market niches.
     The Company  competes in the middle to  upper-middle  price  market,  which
     normally  requires a larger  number of items in the product  line,  smaller
     production  lot sizes and  higher  inventory  requirements  to  maintain  a
     competitive delivery cycle.  Certain of the Company's  competitors may have
     greater  financial  and other  resources  than the  Company  in  particular
     industry  segments.  Competition  could  materially  adversely  affect  the
     Company's operating results by forcing it to reduce its sales prices, offer
     enhanced credit terms, increase customer discounts or incentives,  increase
     spending  for  co-operative  advertising  arrangements  with  customers  or
     provide other services.

2.   Industry Conditions.

     The furniture  industry  historically  has been  cyclical,  with  operating
     results  fluctuating  sharply  with  the  business  cycle  of the  national
     economy.  During  economic  downturns,  the  furniture  industry  tends  to
     experience  longer periods of recession and greater  declines than does the
     general  economy.  The Company  believes  that the  industry is  influenced
     significantly  by economic  conditions  generally and more  specifically by
     consumer  behavior  and  confidence,  the level of  personal  discretionary
     spending, housing activity,  interest rates and credit availability.  These
     factors  affect  not  only  the  ultimate  consumer,   but  also  furniture
     retailers,  the industry's primary direct customers. The cyclical nature of
     the industry has contributed  historically to fluctuations in the Company's
     results of operations,  and such  fluctuations  can be expected to occur in
     the future.

3.   Employee Turnover.

     The Company  experienced  unusually  high  employee  turnover in 1999 which
     continued into the third quarter of 2000. This caused inefficiencies in the
     manufacturing  process and  contributed to higher cost of sales.  While the
     Company  has  implemented  programs  to address  issues  raised by employee
     turnover  there can be no guarantee  that the Company  will not  experience
     significant   employee  turnover  in  the  future  which  could  materially
     adversely affect the Company's financial  condition,  results of operations
     and prospects. With the slowdown in the economy, we have noticed a decrease
     in employee turnover.



                                     - 6 -
<PAGE>

4.   Governmental Regulations and Environmental Considerations.

     The  Company's  operations  must meet  extensive  federal,  state and local
     regulatory  standards  in the areas of  safety,  health  and  environmental
     pollution controls.  Historically,  these standards have not had a material
     adverse effect on the Company's  sales or operations.  Under the provisions
     of the Clean Air Act Amendments of 1990 (the "CAA"),  in December 1995, the
     United States  Environmental  Protection Agency  promulgated  hazardous air
     emission  standards for the wood  furniture  industry.  These  regulations,
     known as the National  Emission  Standards  for  Hazardous  Air  Pollutants
     ("NESHAPs"),  require the Company to reduce  emissions of certain  volatile
     organic  compounds.  The Company has  received a notice of  violation  with
     regards to  allegations  of  violations of the Company's air permits at the
     two Indiana  facilities.  The Company  expects these  regulations to become
     even more  stringent in the future and cannot  predict the costs of effects
     on its  operations  which  will  result  from  its  compliance  with  these
     regulations.  The  settlement  negotiations  are  ongoing  in regard to the
     current notice of violation of the air permits.

5.   Fluctuations in Price and Supply of Raw Materials.

     The Company is dependent upon outside suppliers for all of its raw material
     needs and, therefore, is subject to price increases and delays in receiving
     supplies of such  materials.  An increase in demand for raw materials could
     increase delivery times for supplies and possibly further affect prices. No
     assurance  can be given that the Company  will  continue to have  available
     necessary raw materials at a reasonable  price or that any increases in raw
     material costs would not have a material adverse effect on the Company.

6.   Potential Stock Price Volatility.

     Currently  there  is  one  brokerage  firm,   Hilliard  &  Lyons,  Inc.  in
     Louisville, Kentucky, making a market in the Company's shares. There can be
     no guarantee that this firm will continue to make a market in the Company's
     shares,  nor can there be any assurances that an active trading market will
     develop or be sustained in its absence.

     The market price of the Company's  shares has experienced  some significant
     fluctuations in response to variations in operating results from quarter to
     quarter,  changes in earnings  estimates by analysts,  market conditions in
     the industry and general economic conditions. Furthermore, the stock market
     has experienced  significant price and volume fluctuations unrelated to the
     operating  performance of particular  companies.  These market fluctuations
     may have a  material  adverse  effect  on the  market  price of the  Common
     Shares.

7.   Dividend Policy.

     The Board of Directors has  established,  in 2000,  four (4) cash dividends
     per year to holders of its common shares. The amount of these dividends for
     1999 and 2000 is reflected in Market Price and Dividends on the Registrants
     Common  Equity  and  Related  Stockholder  Matters,  herein.  The  Board of
     Directors,  however is not bound in any manner to continue such  dividends.
     Any future determination as to the payment of dividends will be made at the
     discretion  of the Board of  Directors  and will depend upon the  Company's
     operating  results,  financial  condition,  capital  requirements,  general
     business  conditions and such other factors as the Board of Directors deems
     relevant.

                                     - 7 -
<PAGE>


MARKET  PRICE  AND  DIVIDENDS  ON THE  REGISTRANTS  COMMON  EQUITY  AND  RELATED
STOCKHOLDER MATTERS

The Company's Common Stock has been traded  over-the-counter  through Hilliard &
Lyons, Inc. in Louisville,  Kentucky. The following prices have been provided by
Hilliard & Lyons,  Inc.  based upon  actual  trades  (selling  price  during the
applicable period).

               1st Qtr           2nd Qtr.         3rd Qtr.           4th Qtr.
             High    Low        High  Low        High  Low          High  Low
           --------------     -------------     -------------     -------------
   2000     6.125   4.438     6.000   4.375     4.130   3.380     3.750   3.060
   1999    13.563   9.375     9.875   8.625     9.000   8.000     8.125   5.250


     As of  December  31,  2000,  there were 494 record  shareholders  of Keller
Common Stock.

                           Quarterly Dividends Per Share
            1st Qtr      2nd Qtr.     3rd Qtr.     4th Qtr.     Total
            --------     -------      --------     --------     -----
   2000      .035         .035         .035         .035         .14
   1999      .035         .035         .035         .035         .14


                                     - 8 -
<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors
The Keller Manufacturing Company, Inc. and Subsidiary
Corydon, Indiana

We have  audited  the  accompanying  consolidated  balance  sheets of The Keller
Manufacturing Company, Inc. and subsidiary (the Company) as of December 31, 2000
and 1999,  and the  related  consolidated  statements  of income,  stockholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2000.  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 auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material  respects,  the  consolidated  financial  position  of the  The  Keller
Manufacturing Company, Inc. and subsidiary as of December 31, 2000 and 1999, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2000 in conformity with  accounting  principles
generally accepted in the United States of America.


/s/ Deloitte & Touche LLP


February 21, 2001
Louisville, Kentucky



                                     - 9 -
<PAGE>

<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
-----------------------------------------------------------------------------------------


ASSETS                                                            2000               1999
------                                                            ----               ----

<S>                                                        <C>                <C>
CURRENT ASSETS:
  Cash and cash equivalents                                $   406,186        $ 2,840,242
  Accounts receivable, less allowance for doubtful
    accounts of $221,000 (2000) and $257,000 (1999)          8,396,438          6,659,480
  Inventories                                               19,575,157         17,693,432
  Current deferred tax asset                                   621,146            101,932
  Income taxes receivable                                                         430,445
  Other current assets                                         163,600             81,888
                                                           -----------        -----------

           Total                                            29,162,527         27,807,419
                                                           -----------        -----------

PROPERTY, PLANT AND EQUIPMENT - net                         10,898,743         10,045,302

PREPAID PENSION COSTS                                        1,851,928          1,835,335
                                                           -----------        -----------

TOTAL                                                      $41,913,198        $39,688,056
                                                           ===========        ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                         $ 1,575,979        $ 1,670,349
  Commissions, salaries and withholdings                       926,208          1,184,562
  Accrued vacation                                             486,881            383,824
  Income taxes payable                                         259,051
  Allowance for sales returns                                  956,903
  Other current liabilities                                    963,421          1,037,096
                                                           -----------        -----------

           Total                                             5,168,443          4,275,831

LONG-TERM LIABILITIES -
  Deferred tax liability                                     1,337,312          1,196,217
                                                           -----------        -----------

           Total                                             6,505,755          5,472,048
                                                           -----------        -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock - no par value, authorized,
    40,000,000 shares                                        1,728,513          1,712,638
  Retained earnings                                         33,678,930         32,503,370

           Total                                            35,407,443         34,216,008
                                                           -----------        -----------

TOTAL                                                      $41,913,198        $39,688,056
                                                           ===========        ===========

<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>


                                          - 10 -
<PAGE>

<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-----------------------------------------------------------------------------------------------


                                                        2000              1999             1998
                                                        ----              ----             ----

<S>                                              <C>               <C>              <C>
NET SALES                                        $55,391,644       $55,751,215      $60,144,243

COST OF SALES                                     43,406,132        41,670,927       43,459,950
                                                 -----------       -----------      -----------
GROSS PROFIT                                      11,985,512        14,080,288       16,684,293

SELLING, GENERAL AND ADMINISTRATIVE                8,724,051         8,282,022        7,965,041
                                                 -----------       -----------      -----------
OPERATING INCOME                                   3,261,461         5,798,266        8,719,252

OTHER INCOME (EXPENSE):
 Interest income                                      92,593           153,692          206,118
 Interest expense                                    (52,956)             (571)          (9,059)
 Other                                               103,037           206,876          254,444
                                                 -----------       -----------      -----------

    Other income, net                                142,674           359,997          451,503
                                                 -----------       -----------      -----------

INCOME BEFORE INCOME TAXES                         3,404,135         6,158,263        9,170,755

INCOME TAXES                                       1,382,046         2,377,494        3,514,750
                                                 -----------       -----------      -----------

NET INCOME                                       $ 2,022,089       $ 3,780,769      $ 5,656,005
                                                 ===========       ===========      ===========

NET INCOME  PER SHARE OF COMMON  STOCK,
  basic and  dilutive - based on  weighted
  average number of shares outstanding of
  5,611,354 (2000), 5,753,211 (1999), and
  5,853,954 (1998)                               $      0.36       $      0.66      $      0.97
                                                 ===========       ===========      ===========

<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>


                                              - 11 -
<PAGE>

<TABLE>
<CAPTION>

THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-----------------------------------------------------------------------------------------------------------------------

                                                                Common Stock
                                                          ---------------------------        Retained
                                                           Shares            Amount          Earnings          Total
                                                           ------            ------          --------          -----

<S>                                                       <C>             <C>              <C>              <C>
BALANCE, JANUARY 1, 1998                                  5,841,935       $ 1,126,849      $27,315,202      $28,442,051

  Net income                                                                                 5,656,005        5,656,005
  Cash dividends declared ($.18 per share)                                                  (1,053,555)      (1,053,555)
  Stock issued as awards                                      3,111            38,369                            38,369
  Stock issued under employee
    incentive plan                                           22,219           273,960                           273,960
  Redemptions of common stock                               (15,498)           (1,902)        (222,539)        (224,441)
                                                          ---------       -----------      -----------      -----------
BALANCE, DECEMBER 31, 1998                                5,851,767         1,437,276       31,695,113       33,132,389

  Net income                                                                                 3,780,769        3,780,769
  Cash dividends declared ($.14 per share)                                                    (802,045)        (802,045)
  Stock issued as awards                                      2,600            26,000                            26,000
  Stock issued under employee
    incentive plan                                           28,166           281,660                           281,660
  Redemptions of common stock                              (263,170)          (32,298)      (2,170,467)      (2,202,765)
                                                          ---------       -----------      -----------      -----------

BALANCE, DECEMBER 31, 1999                                5,619,363         1,712,638       32,503,370       34,216,008

  Net income                                                                                 2,022,089        2,022,089
  Cash dividends declared ($.14 per share)                                                    (787,030)        (787,030)
  Stock issued under employee
    incentive plan                                            2,863            17,357                            17,357
  Redemptions of common stock                               (12,069)           (1,482)         (59,499)         (60,981)
                                                          ---------       -----------      -----------      -----------
BALANCE, DECEMBER 31, 2000                                5,610,157       $ 1,728,513      $33,678,930      $35,407,443
                  === ====                                =========       ===========      ===========      ===========

<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

                                                          - 12 -
<PAGE>

<TABLE>
<CAPTION>
THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
-------------------------------------------------------------------------------------------------------------------------

                                                                         2000            1999           1998
                                                                         ----            ----           ----

<S>                                                               <C>             <C>            <C>
OPERATING ACTIVITIES:
  Net income                                                      $ 2,022,089     $ 3,780,769    $ 5,656,005
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Gain on sale of property, plant, and equipment                       (600)
    Depreciation                                                    1,589,293       1,655,277      1,539,708
    Deferred income taxes                                            (378,119)        268,764         28,550
    Common stock awards                                                17,357         307,660        312,329
    Changes in assets and liabilities:
      Accounts receivable                                          (1,736,958)       (374,963)      (469,193)
      Inventories                                                  (1,881,725)     (1,626,942)      (887,879)
      Income taxes receivable/payable                                 689,496        (151,583)      (185,278)
      Other current assets                                            (81,712)        455,036       (495,160)
      Prepaid pension costs                                           (16,593)        (74,576)      (176,290)
      Accounts payable                                                (94,370)       (154,994)      (384,755)
      Commissions, salaries and withholdings
        and accrued vacation                                         (155,297)       (449,532)      (195,052)
      Allowance for sales returns                                     956,903             ---            ---
      Other current liabilities                                       (73,675)       (373,245)      (251,465)
                                                                  -----------     -----------    -----------

           Net cash provided by operating activities                  856,089       3,261,671      4,491,520
                                                                  -----------     -----------    -----------

INVESTING ACTIVITIES:
  Purchases of property, plant and equipment                       (2,442,734)     (1,902,405)    (2,630,027)
  Proceeds from sale of property, plant, and equipment                    600             ---            ---
  Sale (purchase) of investment security available-for-sale               ---         500,000       (500,000)
                                                                  -----------     -----------    -----------
          Net cash used in investing activities                    (2,442,134)     (1,402,405)    (3,130,027)
                                                                  -----------     -----------    -----------

FINANCING ACTIVITIES:
  Redemptions of common stock                                         (60,981)     (2,202,765)      (224,441)
  Dividends paid                                                     (787,030)       (802,045)    (1,053,555)
                                                                  -----------     -----------    -----------

           Net cash used in financing activities                     (848,011)     (3,004,810)    (1,277,996)
                                                                  -----------     -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS               (2,434,056)     (1,145,544)        83,497

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                        2,840,242       3,985,786      3,902,289
                                                                  -----------     -----------    -----------

CASH AND CASH EQUIVALENTS, END OF YEAR                            $   406,186     $ 2,840,242    $ 3,985,786
                                                                  ===========     ===========    ===========

CASH PAID DURING THE YEAR FOR:
  Interest                                                        $    52,000     $              $     9,000
                                                                  ===========     ===========    ===========
  Income taxes                                                    $ 1,131,000     $ 2,241,000    $ 3,602,000
                                                                  ===========     ===========    ===========

<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>

                                                    - 13 -
<PAGE>

THE KELLER MANUFACTURING COMPANY, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
--------------------------------------------------------------------------------

1.   BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     Business - The  Company  operates  in one  business  segment,  which is the
     manufacturing  of  dining  room and  bedroom  furniture.  Sales are made to
     retailers located in approximately 30 states across the United States on an
     unsecured basis.

     Basis of Presentation - The consolidated  financial  statements include the
     accounts of The Keller  Manufacturing  Company,  Inc. and its  wholly-owned
     subsidiary,   Keller  Dedicated  Transportation  Company.  All  significant
     intercompany transactions and balances have been eliminated.

     Significant  Customers - The Company had one  significant  customer,  which
     accounted for $8,591,664  (16%),  $8,850,701 (16%), and $7,727,102 (13%) of
     net  sales  and  percentage  of total  net  sales in 2000,  1999 and  1998,
     respectively. At December 31, 2000, 1999 and 1998, accounts receivable from
     the significant customer totaled approximately  $1,355,000,  $1,070,000 and
     $830,000, respectively.

     Cash and Cash Equivalents - Cash and cash equivalents is defined as cash in
     banks and investment  instruments having maturities of three months or less
     from their acquisition date.

     Inventories  -  Inventories  are  stated  at the  lower of cost  (first-in,
     first-out method) or market.

     Property,  Plant,  and  Equipment  - Property,  plant,  and  equipment  are
     recorded at cost. Depreciation is provided by the straight-line method over
     the estimated useful lives of the depreciable  assets.  Estimated lives are
     10-45 years for buildings and leasehold improvements,  3 -20 years for land
     improvements and 3-15 years for machinery and equipment.

     Revenue  Recognition  - Sales are recorded  when goods are delivered to the
     customer.   The  Company  provides  for  estimated   customer  returns  and
     allowances by reducing sales in the period of the sale.

     Shipping Costs - Shipping costs are recorded in cost of sales.

     Research,   Development,  and  Engineering  -  Research,  development,  and
     engineering  expenditures  for  the  creation  and  application  of new and
     improved products and manufacturing  processes were approximately  $370,000
     in 2000, $670,000 in 1999 and $150,000 in 1998.  Research,  development and
     engineering costs are charged to operations as incurred.

     Investment - The investment security was an industrial revenue bond and was
     classified  as  available-for-sale.  The  investment  was reported at cost,
     which approximates its fair value. The bond was sold in 1999.



                                     - 14 -
<PAGE>


     Income  Taxes - The  Company  follows  Statement  of  Financial  Accounting
     Standards  (SFAS) No. 109 "Accounting for Income Taxes," which requires the
     recognition of deferred tax assets and  liabilities for the expected future
     tax  consequences of events that have been  recognized in the  consolidated
     financial statements or income tax return.

     Fair Value of  Financial  Instruments  - The fair  values of the  Company's
     current assets and current liabilities  approximate their reported carrying
     values, due to their short-term maturities.

     Recent Accounting Pronouncements - SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities,"  establishes  accounting and reporting
     standards for hedging activities and for derivative instruments,  including
     certain derivative  instruments  embedded in other contracts  (collectively
     referred to as derivatives).  Under SFAS 133,  certain  contracts that were
     not  formerly  considered  derivatives  may now  meet the  definition  of a
     derivative.  The Company has adopted  SFAS 133  effective  January 1, 2001.
     Management  has  concluded  that the  adoption  of SFAS 133 will not have a
     material effect on the Company's financial position,  results of operations
     or cash flows.  The  Security  and  Exchange  Commission  Staff  Accounting
     Bulletin  No.  101,  "Revenue  Recognition"   establishes   accounting  and
     reporting  standards for the  recognition of revenues.  The Company adopted
     this new bulletin in 2000. The Company determined that with the adoption of
     the new bulletin, there was no material impact on its financial position or
     results of operations.

     Disclosure of Certain Significant Risks and Uncertainties - The preparation
     of financial statements in conformity with accounting  principles generally
     accepted  in the  United  States of  America  requires  management  to make
     certain  estimates  and  assumptions  that affect the  reported  amounts of
     assets and liabilities and disclosure of contingent  assets and liabilities
     at the date of the  consolidated  financial  statements,  and the  reported
     amounts of  revenues  and  expenses  during the  reporting  period.  Actual
     results could differ from these estimates.  The Company's  periodic filings
     with the  Securities and Exchange  Commission  include,  where  applicable,
     disclosures of estimates, assumptions,  uncertainties and concentrations in
     products,  sources of supply and markets that could affect the consolidated
     financial statements and future operations of the Company.

     Reclassifications  - Certain  reclassifications  have been made to 1998 and
     1999 amounts to conform to the 2000 classifications.

2.   INVENTORIES
                                                2000               1999
                                                ----               ----

     Raw Materials                          $  6,869,777       $  6,211,692
     Work in process                           8,901,915          8,971,693
     Finished goods                            3,803,465          2,510,047
                                            ------------       ------------

     Total                                  $ 19,575,157       $ 17,693,432
                                            ============       ============



                                     - 15 -
<PAGE>


3.   PROPERTY, PLANT AND EQUIPMENT
                                                2000               1999
                                                ----               ----

     Land                                   $    337,535       $    337,535
     Land improvements                           792,663            627,808
     Buildings and leasehole improvements      7,923,514          7,322,681
     Machinery and equipment                  14,708,617         13,144,207
     Construction in progress                     29,998             26,130

     Total                                    23,792,327         21,458,361
     Less accumulated depreciation           (12,893,584)       (11,413,059)
                                            ------------       ------------

     Net                                    $ 10,898,743       $ 10,045,302
                                            ============       ============

4.   LINES OF CREDIT

     At December 31, 2000, the Company had unsecured  line of credit  agreements
     that provide for borrowings up to an aggregate of $5,000,000, with variable
     interest  rates based on prime rate of 8% at  December  31, 2000 or 1.5% in
     excess of the LIBOR  rate of 6.6 % at  December  31,  2000.  There  were no
     borrowings on the line of credit agreements at December 31, 2000 and 1999.

5.   INCOME TAXES

<TABLE>
<CAPTION>
     Income tax expense (benefit) consists of:

                                                 2000              1999             1998
                                                 ----              ----             ----

<S>                                         <C>                <C>             <C>
     Currently payable:
       Federal                              $ 1,569,882        $ 2,016,918     $ 2,963,270
       State                                    190,283             91,812         522,930
                                            -----------       ------------     -----------
           Total currently payable            1,760,165          2,108,730       3,486,200
                                            -----------       ------------     -----------

     Deferred:
       Federal                                 (471,910)           249,950          24,268
       State                                     93,791             18,814           4,282
                                            -----------       ------------     -----------
          Total deferred                       (378,119)           268,764          28,550
                                            -----------       ------------     -----------

     Total                                  $ 1,382,046       $  2,377,494     $ 3,514,750
                                            ===========       ============     ===========
</TABLE>




                                     - 16 -
<PAGE>

<TABLE>
<CAPTION>
     The state income tax expense for 1999 includes refunds of prior years state
     taxes  paid.  The tax  effect of  temporary  differences  that give rise to
     significant  portions of the net deferred tax  liability at December 31 are
     as follows:

                                                             2000               1999
                                                             ----               ----

<S>                                                     <C>                <C>
     Deferred tax current assets:
       Allowance for sales returns                      $    371,987
       Accrued vacation                                      150,397
       Allowance for doubtful accounts                        85,961       $   101,932
       Other                                                  12,801
                                                        ------------       -----------

     Total deferred tax current assets                  $    621,146       $   101,932
                                                        ============       ===========

     Deferred tax noncurrent assets -
       Other                                            $     31,889
                                                        ------------

     Deferred tax long-term liabilities:
       Pension costs                                    $    719,920       $   734,134
       Depreciation                                          457,018           304,869
       Other                                                 192,263           157,214
                                                        ------------       -----------

     Total deferred tax long-term liabilities              1,369,201         1,196,217
                                                        ------------       -----------
     Net deferred tax noncurrent liabilities            $  1,337,312       $ 1,196,217
                                                        ============       ===========
</TABLE>

<TABLE>
<CAPTION>
     The difference between taxes computed at the federal statutory tax rate and
     the Company's effective tax rate are as follows:

                                                           2000     1999     1998
                                                           ----     ----     ----

<S>                                                        <C>      <C>      <C>
     Statutory federal income tax rate                     34.0%    34.0%    34.0%
     State taxes, net of federal income tax benefit         5.6      5.0      5.0
     Other                                                  1.0     (0.4)    (0.7)
                                                            ---     ----     ----

     Effective income tax rate                             40.6%    38.6%    38.3%
                                                           ====     ====     ====
</TABLE>

6.   PENSION PLANS

<TABLE>
<CAPTION>
     The Company has a defined  benefit plan that provides  retirement  benefits
     for  substantially  all  employees.  Annual  contributions  to the plan are
     sufficient to satisfy legal  funding  requirements.  The changes in benefit
     obligations  and plan assets,  as well as the funded  status of the plan at
     December 31, 2000 and 1999 were as follows:

                                                                      2000               1999
                                                                      ----               ----

<S>                                                              <C>                <C>
     Change in benefit obligation:
       Benefit obligation at beginning of year                   $ 11,076,425       $ 12,036,137
       Service cost                                                   395,226            442,270
       Interest cost                                                  809,897            812,440
       Benefits paid                                                 (556,891)          (682,455)
       Actuarial gain                                                (265,282)        (1,531,967)
                                                                 ------------       ------------
          Benefit obligation at end of year                      $ 11,459,375       $ 11,076,425
                                                                 ============       ============



                                     - 17 -
<PAGE>

     Change in plan assets:
       Fair value of plan assets at the beginning of year         $10,988,323       $ 11,771,910
       Actual return on plan assets                                   132,033           (541,924)
       Employer contributions                                         428,774            440,792
       Benefits paid                                                 (556,891)          (682,455)
                                                                 ------------       ------------
          Fair value of plan assets at the end of year           $ 10,992,239       $ 10,988,323
                                                                 ============       ============

     Funded status                                               $   (467,136)      $    (88,102)
     Unrecognized net actuarial loss                                2,370,856          2,044,442
     Unrecognized prior service cost                                  (37,881)           (54,530)
     Unrecognized net asset                                           (13,911)           (66,475)
                                                                 ------------       ------------
          Prepaid pension cost                                   $  1,851,928       $  1,835,335
                                                                 ============       ============
</TABLE>

     The  following  weighted-average  assumptions  were used to  determine  the
     Company's obligations under the plan:

        Weighted-average assumption as of December 31:
        Discount rate                                    7.50%   7.50%
        Expected retun on plan assets                    7.50%   7.50%
        Rate of compensation increase                    3.50%   3.50%

<TABLE>
<CAPTION>
     The components of net pension expense are as follows:

                                                               2000           1999           1998
                                                               ----           ----           ----

<S>                                                       <C>            <C>            <C>
    Components of net periodic benefit cost:
      Service cost - benefits earned during the year      $ 395,226      $ 442,270      $ 395,693
      Interest cost on projected benefit obligation         809,897        794,068        729,347
      Expected return on plan assets                       (799,399)      (882,312)      (845,054)
      Net amortization and deferral                           6,457         12,190        (67,233)
      Net pension expense                                 $ 412,181      $ 366,216      $ 212,753
</TABLE>

     The Company has implemented a defined  contribution  savings plan under the
     provisions  of Section  401(k) of the Internal  Revenue Code that  provides
     retirement   benefits  to  substantially   all  employees.   The  Company's
     contribution,  which is based upon the salary redirection  contributions of
     the eligible employees,  totaled approximately $30,000, $38,000 and $35,000
     in 2000, 1999 and 1998, respectively.


                                     - 18 -
<PAGE>

7.   LEASE COMMITMENTS

     The Company has  operating  lease  agreements  for  marketing  showroom and
     trucking  equipment.  The equipment lease requires additional rentals based
     upon miles driven at varying  fixed rates per mile and requires the Company
     to pay for maintenance, tires, taxes, licenses and permits.

     Minimum annual rental payments are as follows:

                  Year Ended
                  December 31
                  -----------
                   2001                            $   834,472
                   2002                                809,689
                   2003                                760,887
                   2004                                635,681
                   2005                                386,786
                   2006 and thereafter                  85,805
                                                   -----------

                   Total                           $ 3,513,320
                                                   ===========


     Total rental  expense was  approximately  $843,000  (including  $127,000 of
     contingent  rentals) for 2000,  $851,000  (including $136,000 of contingent
     rentals) for 1999 and $950,000  (including  $98,000 of contingent  rentals)
     for 1998.

8.   EMPLOYEE INCENTIVE AND AWARD PROGRAMS

     The Company has incentive programs for executives and key middle management
     personnel.  The programs  provide for payment of profit sharing in cash and
     common stock in amounts not to exceed 12% of the annual pre-tax  profits of
     the Company  before  interest  expense and  incentive  expense.  The profit
     sharing  accrued  for  2000,  1999  and 1998  was  approximately  $457,000,
     $815,000 and $1,216,000,  respectively,  which represents the fair value of
     35,063  (2000),  31,139 (1999) and 28,166 (1998) shares of common stock and
     the cash incentive.

     Additionally, the Company has award programs which involve the distribution
     of common stock to employees based on outstanding  service.  No such awards
     were  given  in  2000.  The  cost of  these  awards  for  1999 and 1998 was
     approximately $26,000 and $38,000, respectively,  which represents the fair
     value of 2,600 (1999) and 3,111 (1998) shares of common stock issued.

9.   EMPLOYEE HEALTH PLAN

     The Company has a medical  indemnity  plan  providing  comprehensive  major
     medical  benefits for  eligible  employees  and members of their  immediate
     families  (participants)  and is subject to the  provisions of the Employee
     Retirement Income Security Act of 1974. The Company's  contribution,  which
     is based upon the contributions of currently employed  participants and any
     additional  amounts  required to pay  benefits  for  participants,  totaled
     approximately  $1,322,000,  $756,000 and  $818,000 in 2000,  1999 and 1998,
     respectively.

10.  STOCK OPTION PLAN

     In January 1999, a stock option plan for eligible employees was approved by
     the  Company.  Under the terms of the plan,  the Company is  authorized  to
     grant options of common shares,  not to exceed 200,000 shares,  to eligible
     employees and members of the Board of Directors.  Options  outstanding  are
     generally exercisable  immediately upon grant date. All options expire four
     years after the date of the grant.


                                     - 19 -
<PAGE>

<TABLE>
<CAPTION>
     The following is a summary of the option transactions under the plan:

                                                                             Weighted average
                                                                               option price
                      2000                                     Shares           per share
                      ----                                     ------           ---------

<S>                                                            <C>             <C>
         Shares under option at beginning of year              33,850          $ 8.00
           Granted                                             32,800            3.50
           Forfeited                                           (2,700)           7.50
                                                               ------
         Shares under option at end of year                    63,950            5.72
                                                               ======

                                                                             Weighted average
                                                                               option price
                      1999                                     Shares           per share
                      ----                                     ------           ---------

         Shares under option at beginning of year                   0
         Granted                                               34,700          $ 8.00
         Forfeited                                               (850)           8.00
                                                               ------
         Shares under option at end of year                    33,850            8.00
                                                               ======

<FN>
     A total of 58,450 and 28,350 shares at an average option price per share of
     $5.93 and $8.00 were  exercisable  and  136,050  and  166,150  shares  were
     available for future grants at December 31, 2000 and 1999, respectively.
</FN>
</TABLE>

<TABLE>
<CAPTION>
     The following table summarizes  information about stock options outstanding
     at December 31, 2000:

                    Options outstanding                               Options Exercisable
      -------------------------------------------------          ----------------------------
                         Number            Remaining                               Number
      Exercise        Outstanding      Contractual Life          Exercise        Exercisable
       Price         at 12/31/2000         (Years)                 Price        at 12/31/2000
       -----         -------------         -------                 -----        -------------

<S>   <C>                <C>                 <C>                 <C>                <C>
      $ 8.00             31,600              2.70                $ 8.00             31,600
      $ 3.50             32,350              3.71                $ 3.50             26,850
</TABLE>

     The weighted average fair value of options granted during 2000 and 1999 was
     $ 1.95 and $ 3.75, respectively.

     The fair value of each stock option grant in 2000 and 1999 was estimated as
     of the date of the grant using the Black-Scholes  option-pricing model with
     the  following  assumptions  for 2000  and  1999,  respectively:  quarterly
     dividend yield of 1% and .44%;  volatility factor of 68% and 43%; risk-free
     interest  rate of 6.0% and  6.6%;  and  expected  life of 4 years  for both
     years.

     In accordance with Accounting Principle Board No. 25, "Accounting for Stock
     Issued to Employees",  the Company has not recognized any compensation cost
     for the stock option plan. Had  compensation  cost for the Company's  stock
     option plan been  determined  based on the fair value at the grant date for
     awards  under  the  plan  consistent  with  the  method  of SFAS  No.  123,
     "Accounting  for  Stock-Based  Compensation,"  the Company's net income and


                                     - 20 -
<PAGE>

     earnings  per share  would  have  been  reduced  to the pro  forma  amounts
     indicated below:

<TABLE>
<CAPTION>
                                                         2000            1999
                                                         ----            ----

<S>                                <C>                <C>             <C>
      Net income                   As reported        $2,022,089      $3,780,769
                                   Pro forma          $1,958,005      $3,653,864

      Earnings per share           As reported        $     0.36     $      0.66
                                   Pro forma          $     0.35     $      0.64

<FN>
     The  effects  of  applying  SFAS 123 in this pro forma  disclosure  are not
     indicative of future amounts.
</FN>
</TABLE>

11.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>


                                                                   Three months ended
                                          ----------------------------------------------------------------------
For the year ended December 31, 2000      Mar. 31, 2000 June 30, 2000 Sept. 30, 2000 Dec. 31, 2000     Total
                                          ------------- ------------- -------------- -------------     -----
<S>                                         <C>           <C>           <C>           <C>           <C>
Net sales                                   $14,682,577   $14,941,529   $13,147,371   $12,620,167   $55,391,644
Gross profit                                  3,453,310     3,699,866     3,299,261     1,533,075    11,985,512
Net income (loss)                               821,536       884,801       616,411      (300,659)    2,022,089
Net income (loss) per common share
 basic and dilutive                                0.15          0.16          0.11         (0.06)         0.36
Dividends per common share                        0.035         0.035         0.035         0.035          0.14

                                                                   Three months ended
                                          ----------------------------------------------------------------------
For the year ended December 31, 1999      Mar. 31, 1999 June 30, 1999 Sept. 30, 1999 Dec. 31, 1999     Total
                                          ------------- ------------- -------------- -------------     -----
Net sales                                   $13,994,542   $15,683,326   $13,138,745   $12,934,602   $55,751,215
Gross profit                                  3,774,328     4,488,222     3,417,094     2,400,644    14,080,288
Net income                                    1,045,285     1,293,727       865,870       575,887     3,780,769
Net income per common share
 basic and dilutive                                0.18          0.22          0.15          0.11          0.66
Dividends per common share                        0.035         0.035         0.035         0.035          0.14
</TABLE>

                                     - 21 -
<PAGE>

                     THE KELLER MANUFACTURING COMPANY, INC.


BOARD OF DIRECTORS
   AND OFFICERS              EXECUTIVE OFFICERS            BOARD OF DIRECTORS
------------------           ------------------            ------------------

Robert W. Byrd                John Heishman              John C. Schenkenfelder
Chairman of the Board         Vice President of          First Vice President of
                                Manufacturing              Investments
Steven W. Robertson                                      Paine-Webber
President and Chief           Dan Conway
  Executive Officer           Vice President of          Bradford T. Ray
                                Personnel                Vice Chairman and Chief
Marvin C. Miller                                           Executive Officer
Chief Operating Officer       Chris Brown                Steel Technologies
                              Vice President of
Danny L. Utz                    Engineering              Ronald W. Humin
Vice President of Finance,                               President
  Secretary and Treasurer     Keith R. Meriwether        Flexible Materials
                              Vice President of
Scott A. Armstrong              Sales and Marketing      Philip L. Jacobs
Sr. Vice President of                                    President
  Sales and Marketing                                    Evans Furniture


                                    FORM 10-K
         A copy of the Company's Form 10-K Annual Report, filed with the
         Securities and Exchange Commission, is available upon request.

                                     - 22 -
<PAGE>

CORPORATE DATA
--------------


CORPORATE HEADQUARTERS
  Keller Mfg. Co., Inc.
  701 N. Water St.
  Corydon, IN 47112

PRODUCTION FACILITIES
  701 North Water St., Corydon, IN 47112
  1010 Keller Dr., New Salisbury, IN 46161
  601 Germanna Hwy., Culpeper, VA 22701

GENERAL COUNSEL
  Ice Miller Legal & Business Advisors
  Indianapolis, IN

TRANSFER AGENT
  Fifth Third Bank
  Corporate Trust Services
  38 Fountain Sq. Plaza
  Cincinnati, OH 45263
  (800) 837-2755

AUDITORS
  Deloitte & Touche LLP
  Louisville,  KY