<PAGE>   1

                                                                      EXHIBIT 13



                       1996 Annual Report to Shareholders





                                       1
<PAGE>   2
                             [DAVID WHITE LOGO]

                     PRECISION HAS NEVER BEEN SO SIMPLE.








































                                                              Annual Report 1996

<PAGE>   3


FINANCIAL HIGHLIGHTS


<TABLE>
<CAPTION>
                                               For Year Ended December 31
                                                -----------   -----------
                                                  1996           1995
<S>                                           <C>            <C>
OPERATIONS SUMMARY

     Net sales           ...................    $13,372,000   $15,278,000
     Earnings (loss) before income taxes ...        467,000      (999,000)
     Net earnings (loss) ...................        327,000      (852,000)
     Net earnings (loss) per common share ..    $       .72   $     (1.75)
-------------------------------------------------------------------------
QUARTERLY RESULTS

     Net sales 
                         First..............    $ 3,953,000   $ 4,827,000 
                         Second ............      3,318,000     4,272,000 
                         Third..............      3,014,000     3,160,000
                         Fourth.............      3,087,000     3,019,000
-------------------------------------------------------------------------
     Gross profit        First..............    $ 1,108,000   $ 1,282,000
                         Second.............        761,000     1,052,000 
                         Third..............        586,000       840,000
                         Fourth.............        682,000       385,000
-------------------------------------------------------------------------
     Net earnings        First..............    $   228,000    $  214,000
        (loss)           Second.............         29,000      (457,000)
                         Third..............        (23,000)      136,000
                         Fourth.............         93,000      (745,000)
-------------------------------------------------------------------------
     Net earnings        First..............    $       .50    $      .41
        (loss)           Second.............            .06           (91)
      per share          Third..............           (.05)          .30
                         Fourth.............            .21         (1.55)
-------------------------------------------------------------------------
</TABLE>


CONTENTS

1-2  To Our Shareholders

3-5  Financial Statements

6-8  Notes to Financial Statements

     INSIDE BACK COVER: Market Information, Independent Auditors' Report,
                        Management's Discussion and Analysis

     BACK COVER:  Directors, Officers, Executive Offices, Annual Meeting and
                  10-KSB Report

<PAGE>   4

                                                              [DAVID WHITE LOGO]

TO OUR SHAREHOLDERS:

For David White, 1996 represented a fresh start. With several lingering
problems behind us, we began leveraging our dominant industry position by
broadening our product line, expanding our distribution channels and initiating
strategic business alliances.

Even the normal fluctuations in the housing market did not detour our
improvement, which is reflected in our results:

   -    Net income climbed to $327,000, in contrast to a net loss of
        $852,000 in 1995 when we experienced charges associated with
        disposition of our unprofitable Swiss subsidiary, termination of a
        costly pension plan and an environmental issue.

   -    Earnings per share rebounded to $0.72 per share, versus a loss of
        $1.75 per share in 1995.

   -    Sales reached $13,372,000, down less than $2 million from 1995, a
        year that included $1.6 million in sales from our former Swiss
        subsidiary.

   -    David White's domestic market share grew a full two percentage
        points to 55.3%, clearly indicating that we are increasing our market
        advantage.

Conditions in the housing industry in 1996 were strong, but not spectacular.
Although we did see a mid-year build-up in the number of unsold homes, the
inventory gradually declined, setting the stage for additional new construction
in 1997.

STRONG FINANCIAL POSITION

We ended 1996 with a much stronger balance sheet and sales momentum. During the
year, we cut our long-term debt nearly in half and substantially reduced our
inventory.  This improved financial position gives us the ability to pursue
three key business initiatives, begun in 1996.

First, we intend to continue expansion of our distribution channels. Mass
merchandisers, which are rapidly replacing small dealers in our industry, now
form the foundation of our growing national accounts business. More and more of
our products are being offered through Sears Roebuck and major hardware chains,
not as store brands, but under the David White name. Clearly, we have quality
products and a recognizable name, which appeal to these giant retailers.

In addition to making our products available to small contractors, the national
and regional chains provide reach in the growing home-remodeling market. Small
and medium-sized remodeling contractors, as well as an army of cost-conscious
do-it-yourselfers, are becoming key parts of mass merchandisers' customer base.

STRATEGIC MARKETING ALLIANCES

A second initiative started in 1996, involved development of strategic
marketing alliances with other companies, enabling us to cross distribute
products. We expect one complementary alliance to bring us potentially hundreds
of new distributors throughout the world, expanding our presence in such
growing markets as Southeast Asia, Mexico and Latin America and giving us a
strong base of outlets in the rebounding markets of Europe. By the end of 1997,
we expect this new marketing alliance to give us far more international
visibility than we had with our divested Swiss subsidiary.


                                      -1-
<PAGE>   5
In our third major initiative, we laid plans in 1996 to expand our line of
domestically produced surveying instruments with products  manufactured for us
by foreign concerns. Our goal is to add imported products, which will enable us
to sell a full range of high-quality instruments and accessories at very
competitive prices.

LASER LINE EXPANDING

In terms of new product development, we continued in 1996 to turn out new
instruments and product-line enhancements designed to maintain our
industry-leading position. Looking ahead, we expect to introduce a new laser
package, which can be sold through mass merchandisers.  Included in the package
will be a low-cost, high-quality manually leveled laser and the industry's
first truly universal laser detector, that can be used with any brand of laser
now on the market.

These new offerings, along with our complete line of laser and optical
instruments and accessories, will be included in David White's new Spring 1997
catalog. By demonstrating our slogan, "Precision has never been so simple", our
new catalog is expected to heighten interest in all of our products, especially
when we combine it with the first Spring distributor stocking program in our
history.

It appears that David White will continue to benefit from a favorable economic
climate in 1997, with continuing low inflation and attractive mortgage interest
rates. But, we intend to do more than just reap the benefits of a favorable
environment. Through continued expansion of our product line and a proactive
marketing program, we intend to strengthen and broaden the base of our
business. We expect to increase our already dominant market share of the
optical instrument market. Similarly, we plan to solidify our hold on the
low-cost, high-quality segment of the laser instrument market and move forward
into the more sophisticated segments of the construction laser market.

In the years ahead, we expect that our reputation will be recognized
internationally, just as it already is domestically. Contractors throughout the
world are looking to the U.S. for high quality, yet affordable instruments.
Through our strategic marketing alliances, we are letting the world know of our
superior products and our 100-year tradition of excellence.

Clearly, this is one of my most upbeat reports. Unforeseen problems could
arise, but we are confident that major setbacks are behind us. We enter 1997
with a cost-efficient manufacturing program, an aggressive marketing program
and, most importantly, a dominant position in our markets. That combination
should enable us to maximize the benefits of a growing economy and withstand
the impact of inevitable slowdowns.

We appreciate the continuing support of our shareholders, employees and
suppliers that enables us to enter our second century in business with renewed
optimism.

Sincerely,


/s/ Tony L. Mihalovich

Tony L. Mihalovich
President, Chief Executive Officer


                                      -2-
<PAGE>   6
FINANCIAL STATEMENTS                                          [DAVID WHITE LOGO]

BALANCE SHEET                                                   December 31,1996


<TABLE>
<S>                                                               <C>
ASSETS
Current Assets:
  Cash and cash equivalents ...................................... $   47,000
  Trade accounts receivable, less allowance of $95,000 (Note 3) ..  1,315,000
  Inventories (Note 3) ...........................................  3,681,000
  Prepaid expenses and other current assets.......................    142,000
                                                                   ----------
    Total Current Assets .........................................  5,185,000

Other Assets:
   Technology and patents, less accumulated
     amortization of $71,000 .....................................    141,000
  Intangible pension asset (Note 5) ..............................    107,000
  Deferred income taxes (Note 6) .................................     31,000
  Other ..........................................................     23,000
                                                                   ----------
    Total Other Assets ...........................................    302,000

Property, plant and equipment at cost (Note 3):
  Land ...........................................................     36,000
  Buildings and improvements .....................................  1,524,000
  Machinery and equipment ........................................  6,011,000
                                                                   ----------
                                                                    7,571,000

  Less accumulated depreciation ..................................  5,755,000
                                                                   ----------
                                                                    1,816,000
                                                                   ----------

                                                                   $7,303,000
                                                                   ----------

LIABILITIES AND STOCKHOLDERS' INVESTMENT

Current Liabilities:

  Trade accounts payable ........................................  $  354,000
  Accrued wages and amounts withheld from employees .............     255,000
  Accrued retirement plan costs .................................     129,000
  Other accrued liabilities .....................................     246,000
  Current maturities of long-term debt (Note 3) .................     225,000
                                                                   ----------
    Total Current Liabilities ...................................   1,209,000

Long-term debt, less current maturities (Note 3) ................     958,000

Long-term pension liability (Note 5) ............................     133,000

Stockholders' Investment (Notes 3 and 4):
  Preferred stock, par value $1 a share: Authorized
      1,000,000 shares; none issued
  Common stock, par value $3 a share: Authorized
      5,000,000 shares; issued 692,240 shares ...................   2,077,000
  Additional paid-in capital ....................................   1,024,000
  Retained earnings .............................................   4,222,000
  Additional pension liability (Note 5) .........................     (26,000)
  Treasury stock at cost--234,917 shares ........................  (2,294,000)
                                                                   ----------
                                                                    5,003,000
                                                                   ----------
                                                                   $7,303,000
                                                                   ----------

</TABLE>

 The accompanying notes are an integral part of these Financial Statements.

                                      -3-


<PAGE>   7

FINANCIAL STATEMENTS

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                                 --------------------------
                                                         1996          1995
    <S>                                          <C>           <C>
    Revenues:
       Net sales ..............................   $13,372,000   $15,278,000
       Interest and other income ..............       185,000        38,000
                                                  -----------   -----------
                                                   13,557,000    15,316,000
    Cost and expenses:
       Cost of goods sold .....................    10,235,000    11,422,000
       Selling and administrative expenses ....     2,554,000     3,061,000
       Loss on sale of subsidiary .............                     722,000
       Loss on termination of pension plan ....                     523,000
       Environmental expenses .................        17,000       297,000
       Interest expense .......................       284,000       290,000
                                                  -----------   -----------
                                                   13,090,000    16,315,000

       Earnings (loss) before income taxes ....       467,000      (999,000)
       Income tax expense (benefit) (Note 6)...       140,000      (147,000)
                                                  -----------   -----------
       Net earnings (loss) ....................   $   327,000   $  (852,000)
                                                  -----------   -----------
       Net earnings (loss) per share (Note 7)..   $       .72   $     (1.75)
                                                  -----------   -----------
</TABLE>

STATEMENTS OF STOCKHOLDERS' INVESTMENT

<TABLE>
<CAPTION>
                                                          Years ended December 31,1996 and 1995
                            -------------------------------------------------------------------------------------------------
                                Common Stock         Additional     Retained       Additional    Cumulative    Treasury
                             ----------------------   Paid-In       Earnings        Pension      Translation     Stock
                              Shares      Amount      Capital                      Liability     Adjustment
<S>                         <C>         <C>           <C>           <C>           <C>            <C>          <C>
Balances at
  January 1, 1995 ........   692,240    $2,077,000    $1,024,000    $4,747,000    $ (362,000)    $ 83,000     $(1,537,000)
  Net loss .......................................................... (852,000)
  Currency translation
    adjustments ................................................................................. (83,000)
  Additional
    pension liability (Note 5)...................................................... 292,000
  Receipt of common stock
    from sale of subsidiary .................................................................................... (757,000)
--------------------------------------------------------------------------------------------------------------------------
Balances at
  December 31, 1995          692,240     2,077,000     1,024,000     3,895,000       (70,000)           0      (2,294,000)
  Net earnings ....................................................... 327,000

  Reduction of
    pension liability (Note 5) ...................................................... 44,000
                            --------    ----------    ----------    ----------     ---------     --------     -----------

Balances at
  December 31, 1996          692,240    $2,077,000    $1,024,000    $4,222,000     $ (26,000)    $      0     $(2,294,000)
                            --------    ----------    ----------    ----------     ---------     --------     -----------
</TABLE>


  The accompanying notes are an integral part of these Financial Statements.

                                      -4-

<PAGE>   8

FINANCIAL STATEMENTS                                          [DAVID WHITE LOGO]

STATEMENTS
OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                                               -----------          ----------
                                                                      1996               1995
<S>                                                            <C>                 <C>
Cash flows from operating activities:                          
  Net earnings (loss) .......................................  $   327,000          $(852,000)
  Adjustments to reconcile net earnings (loss) to net cash                         
     provided by (used in) operating activities:                                   
       Depreciation..........................................      419,000            388,000
       Amortization of intangible assets.....................       55,000             75,000
       Gain on sale of building .............................     (153,000)        
       Loss on sale of subsidiary............................                         722,000
       Deferred income taxes.................................      116,000           (147,000)
                                                                                   
       Change in assets and liabilities:                                           
         (Increase) decrease in:                                                   
            Accounts receivable .............................      164,000            305,000
            Inventories .....................................      930,000           (701,000)
            Prepaid expenses and other assets ...............      (13,000)           137,000
         Increase (decrease) in:                                                   
            Accounts payable and accrued expenses ...........     (501,000)           (16,000)
            Income taxes ....................................                         (89,000)
                                                               -----------          ---------
                                                                                   
       Net cash provided by (used in) operating activities ..    1,344,000           (178,000)
                                                               -----------          ---------
Cash flows from investing activities:                                              
  Additions to property, plant and equipment ................     (292,000)          (733,000)
     Cash proceeds from sale of building ....................      675,000         
                                                               -----------          ---------
       Net cash provided by (used in) investing activities...      383,000           (733,000)
                                                               -----------          ---------
                                                                                   
Cash flows from financing activities:                                              
  Principal payments on long-term debt ......................     (966,000)          (283,000)
  Net (decrease) increase in notes payable to bank...........     (714,000)           297,000
                                                               -----------          ---------
                                                                                   
     Net cash (used in) provided by financing activities ....   (1,680,000)            14,000
                                                               -----------          ---------
                                                                                   
Effect of exchange rate changes on cash .....................            0              5,000
                                                               -----------          ---------
                                                                                   
Net increase (decrease) in cash and cash equivalents                47,000           (892,000)
                                                                                   
Cash and cash equivalents at beginning of year ..............            0            892,000
                                                               -----------          ---------
Cash and cash equivalents at end of year ....................  $    47,000          $       0
                                                               -----------          ---------
Supplemental disclosures of cash flow information:                                 
  Cash paid during the year for:                                                   
     Interest ...............................................  $   284,000          $ 290,000
     Income taxes, net of refunds............................       50,000            155,000
</TABLE>


  The accompanying notes are an integral part of these Financial Statements.

                                      -5-


<PAGE>   9

NOTES TO
FINANCIAL STATEMENTS

1: COMPANY BUSINESS AND ACCOUNTING POLICIES

David White, Inc. (the "Company") is engaged in the manufacture of surveying
instruments and lasers and is a distributor of certain other products. The
Company operates predominantly in the construction industry within the United
States and Europe. The Company's significant accounting policies are summarized
as follows:

     Cash Equivalents - The Company considers all highly liquid investments
with maturities of three months or less when acquired to be cash equivalents.

     Inventories - Inventories are stated on the basis of the lower of cost or
market, including material, labor and manufacturing overhead. Cost is
determined under the first-in, first-out method. It is not practical to
segregate the components of raw material, work-in-process and finished goods at
the balance sheet date, since this breakdown is possible only as a result of
physical inventory which is taken at a date different than the balance sheet.

     Property, Plant and Equipment - The Company provides depreciation over the
estimated useful lives (3 to 32 years) of the respective assets using the
straight-line method.

     Intangible Assets - Technology and patents are being amortized over their
estimated lives, which range from 5 to 8 years. Deferred financing costs are
being amortized on a straight-line method over the term of the related debt
agreement.

     Research and Development Costs - Research and development costs are
expensed as incurred and totaled $327,000 and $399,000 in 1996 and 1995,
respectively.

     Fair Value of Financial Instruments - The Company believes the
carrying amount of its financial instruments is a reasonable estimate of the
fair value of these instruments.

     Use of Estimates - The preparation of the 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.

2: SALE OF FOREIGN SUBSIDIARY

The Company sold its 90% interest in the outstanding capital stock of Ammann
Lasertechnik AG on May 31, 1995. The non-cash transaction was summarized as
follows:


<TABLE>
            <S>                                          <C>
             Net carrying value of assets sold            $(691,000)
             Write-off of goodwill                       (1,123,000)
             Fair market value of Company common
              stock received                                 757,000
             Other assets received, net                      335,000
                                                         -----------
            Loss on sale of subsidiary                      (722,000)
            Tax benefit                                      147,000
                                                         -----------
            Loss on sale of subsidiary, net of taxes       $(575,000)
                                                         -----------
</TABLE>


Net sales for the subsidiary to unrelated parties during 1995 were
approximately $1,601,000. Net losses incurred by the subsidiary for 1995 were
approximately $77,000.

3: BANK LINES OF CREDIT AND LONG-TERM DEBT

Long term debt consists of a term note with a domestic bank which is payable in
monthly installments of $26,500, including interest at 8.5%, through August,
2001. The term note is collateralized by a first mortgage on the Company's
manufacturing facilitiy and a second lien on the Company's accounts receivable,
inventory and equipment.  The loan agreement contains restrictions with respect
to levels of working capital ($1,000,000 on December 31, 1996) and net worth
($5,000,000 on December 31, 1996) and minimum debt-to-net worth and current
ratios.  In addition, capital expenditures are limited to a specified level
each year. The term note is 70% guaranteed by the Rural Economic and Community
Development Service.

The aggregate scheduled future maturities for the fiscal years ending December
31 are as follows:


<TABLE>
                   <S>                    <C>
                         1997             225,000
                         1998             245,000
                         1999             267,000
                         2000             291,000
                   Thereafter             155,000
                                       ----------
                                       $1,183,000
                                       ==========
</TABLE>


The Company currently has available a domestic bank revolving line of credit to
meet its short term borrowing needs. The amount available under the line of
credit is adjusted periodically according to seasonal requirements and ranges
from $1,750,000 to $2,000,000. Borrowings against the line are payable on
demand with interest payable monthly at the prime rate.  The Company had no
borrowings under the line at December 31, 1996. The line renews annually in
September. Borrowings under the line of credit are based on a percentage of
qualified accounts receivable and inventory (the borrowing base), which are
secured under the related agreement. The agreement contains the same
restrictions described above related to the term note.

4: STOCK RIGHTS PLAN AND EMPLOYEE STOCK OPTION PLAN

In 1988, the Company made a dividend distribution of one Common Stock Purchase
Right on each outstanding share of common stock. The Rights are exercisable     
only if a person or group acquires 20% or more of the Company's common stock or
announces a tender or exchange offer that would result in such a person or group
owning 20% or more of the common stock. When exercisable, each Right entitles
the holder thereof to purchase one share of common stock at an exercise price of
$35.00. Further, upon the occurrence of certain defined events, the Rights are
modified to entitle the holder to purchase common stock of the Company or common
stock of an "acquiring person" having a market value equivalent to two times the
exercise price of the Right. At no time do the Rights have any voting power. The
Rights expire on September 29, 1998. The Company is entitled to redeem the
Rights at $0.01 per Right until ten days (subject to extension) after a public
announcement that a 20% or more position has been acquired, at which time they
become nonredeemable. At December 31, 1996, 457,323 shares of common stock were
reserved for issuance upon exercise of the Rights.


                                      -6-


<PAGE>   10

                                                              [DAVID WHITE LOGO]

In 1992, the stockholders approved the issuance of up to 32,000 shares of
common stock under an incentive stock option plan. Options granted are
exercisable in varying increments and at various times as determined by the
Compensation Committee of the Board of Directors. The option period cannot
exceed ten years from the date of the grant and the options can be granted
until January, 2002,  under this plan. In 1995, the stockholders approved the
issuance of up to 50,000 shares of common stock under a new incentive stock
option plan with terms similar to the 1992 plan described above. The options
can be granted until February, 2005. The following table summarizes stock
option activity for the years ended December 31, 1996 and 1995.


<TABLE>
<CAPTION>
                                                         Shares
                                            Reserved   Outstanding  Available
                                                         Options
<S>                                         <C>         <C>          <C>

Balances, January 1, 1995
$6.50 - $10.44 per share ..............     33,200       33,200           0
Reserved ..............................     50,000                   50,000
Expired -$6.50-$10.44 per share .......     (1,200)      (7,950)      6,750
                                            ------       ------      ------

Balances, December 31, 1995
$6.50 -$6.88 per share ................     82,000       25,250      56,750
                                            ------       ------      ------

Granted ...............................         --           --          --
Exercised .............................         --           --          --
Expired ...............................         --           --          --

Balances, December 31, 1996
$6.50 - $6.88 per share ...............     82,000       25,250      56,750
                                            ------       ------      ------

Options exercisable
  at December 31,1996
  $6.50-$6.88 per share .................                25,250
                                                         ------
</TABLE>


In the event of a change in control of the Company, all options become
exercisable and those holding options shall have the right to require the
Company to purchase their options. The purchase price of the options will be
the excess of the greater of the market value of the Company stock or highest
tender offer price paid over the option price.

In 1990, the Company issued a nonqualified stock option to its former Chairman
of the Board of Directors, providing for the purchase of 16,000 shares of
common stock at $10 per share.  In January, 1994, the option became fully
vested and is exercisable in whole or in part until January, 1998. The option
expires upon the death of the optionee.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plans.
Because the Company did not grant any stock options during either 1995 or 1996,
there would be no impact on proforma net income or earnings per share under
SFAS No. 123.

5: EMPLOYEE BENEFIT PLANS

The Company has a certain defined benefit pension plan covering certain
non-union employees. The non-union plan contains provision for benefits
relating to past service based on an employee's compensation and years of
service at the time the plan became effective.                   

The Company's funding policy for the plan is consistent with the funding
requirements of federal law and regulations. 
The following table sets forth the non-union past service plan's funded status
as estimated by consulting actuaries as of October 1,1996 and the amounts
recognized in the Company's financial statements:
        

<TABLE>
<S>                                                    <C>
Actuarial present value of
 benefit obligations:
 Accumulated benefit
 obligation, entirely vested                          $ 574,000
                                                      ---------

Projected benefit obligation for
 service rendered to date                             $ 574,000
Plan assets at fair value
 (government obligations,
 mutual stock funds and
 money market funds)                                    369,000
                                                      ---------

Projected benefit obligations
 in excess of plan assets                              (205,000)
Unrecognized net loss                                    26,000
Unrecognized net obligation at January 1,1987
 being amortized over 15 years                          107,000
Additional minimum liability                           (133,000)
                                                      ---------

Pension liability recognized in
 the consolidated balance sheet                       $(205,000)
                                                      --------- 
</TABLE>



Net periodic pension cost for the Company's non-union plan included the 
following components:



<TABLE>
<CAPTION>
                                                                                                        1996           1995
<S>                                                                                                     <C>            <C>
Interest cost on projected benefit obligation ......................................................     $ 38,000       $ 43,000
Actual return on plan assets .......................................................................      (41,000)       (49,000)
Net amortization and deferral ......................................................................       33,000         45,000
                                                                                                         --------       --------  
Total pension expense ..............................................................................     $ 30,000       $ 39,000
                                                                                                         ========       ========
</TABLE>



The weighted average discount rate and expected long term rate of return used
to develop the periodic pension costs for the above plan was as follows:

<TABLE>
<CAPTION>
                           1996         1995
  <S>                     <C>          <C>      
  Discount rate           7.25%        6.25%
  Expected long-term
    return on assets      7.75%        7.75%
</TABLE>

The Company has reflected those provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," which require
recognition in the balance sheet of an additional minimum liability and
intangible asset for pension plans with accumulated benefits in excess of plan
assets. Because the asset recognized may not exceed the amount of unrecognized
prior service cost, the excess is reported as a separate reduction of
stockholders' investment.



                                      -7-
<PAGE>   11


NOTES TO
FINANCIAL STATEMENTS

In addition, the Company has contributory 401(k) savings plans covering
substantially all employees, under which eligible participants may elect to
contribute a specified percentage of their compensation, subject to certain
limitations. The Company makes contributions subject to certain limitations.
Company contributions vest over a five-year period at a rate of 20% per year.
Contributions charged to operations under the plans aggregated approximately
$81,000 and $45,000 for the years ended December 1996 and 1995, respectively.

In the fourth quarter of 1995, the accumulated benefit obligation of the
Company's defined benefit pension plan covering all union members was settled
by the purchase of a non-participating group annuity contract or a lump-sum
distribution for retired participants and lump sum distributions to active
participants. Active participants were given the option to transfer their
distributions into a 401(k) plan begun on January 1, 1996. The settlement was
accounted for in accordance with Statement of Financial Accounting Standards
No. 88, "Employers' Accounting for Settlements and Curtailments of Defined
Benefit Pension Plans and for Termination Benefits," and resulted in a pre-tax
loss to the Company of approximately $523,000. Pension expense related to this
plan for the years ended December 31, 1995 was $70,000.

The Company has Key Executive Employee and Severance Agreements with certain
officers and key employees which provide for severance pay of up to two years
salary in the event of a change in control of the Company, as defined, and
subsequent termination of employment.


6: INCOME TAXES

Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
                 Year ended December 31,
                      1996          1995
<S>              <C>         <C>
Current ......   $  24,000    $        0
Deferred .....     116,000      (147,000) 
                 ---------    ----------
                 $ 140,000    $ (147,000)
                 =========    ==========
</TABLE>

A reconciliation of statutory federal tax rate and effective rates is as
follows:

<TABLE>
<CAPTION>
                                    Year ended December 31, 
                                       1996            1995
<S>                                  <C>          <C>
Statutory federal rate                34.0%         (34.0)%
Net operating loss and tax credit
 carryforward adjustment              (4.0)          26.6
Nondeductible amortization              --           (2.6)
Other                                   --           (4.7)
                                      ----          -----
                                      30.0%         (14.7)%
                                      ====          =====
</TABLE>

The tax effects of temporary differences, tax credit carryforwards and net
operating loss carryforwards that give rise to significant portions of deferred
tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
                                                                         December 31,
                                                                  1996           1995
<S>                                                           <C>            <C> 
Deferred tax assets
  Inventory ................................................  $168,000       $233,000
  Liabilities and reserves .................................   198,000        292,000
  Tax credits and net operating loss carryforwards .........   465,000        539,000
                                                              --------       --------

                                                                  1996           1995
  Gross deferred tax assets ................................   831,000      1,064,000
  Valuation allowance ......................................  (559,000)      (648,000)
                                                              --------       --------
                                                               272,000        416,000
Deferred tax liabilities
  Property, plant and equipment ............................   215,000        207,000
  Other ....................................................    26,000         62,000
                                                              --------       --------
                                                               241,000        269,000
                                                              --------       --------

  Net deferred tax asset ...................................  $31,000        $147,000
                                                              =======        ========
</TABLE>

At December 31, 1996, the Company had alternative minimum tax credit
carryforwards totaling $196,000, which expire in various years through 2008.
The Company has state net operating carryforwards of $352,000 which expire
through 2007, and capital loss carryforwards of $520,000 which expire in 2010.

7.  RELATED PARTY TRANSACTIONS - FOURTH QUARTER EVENT

During the fourth quarter of 1996, the Company sold the building which housed
its office headquarters to the Company President.  The building had a net book
value of $522,000 and was sold for cash of $675,000 resulting in a gain of
$153,000.  The purchase price was determined based on negotiations between the
Company President and the Board of Directors and included an independent
appraisal of the building's value.

The Company then entered into a short term lease with the Company President for
the facility. The monthly rental related to this lease is $10,600.

8: EARNINGS (LOSS) PER SHARE

Net  earnings (loss) per share of common stock is based upon net (loss)
earnings divided by the weighted average shares outstanding. Weighted average
shares outstanding for the years ended December 31, 1996 and 1995 were 457,323
and 486,698 shares, respectively.



                                      -8-
<PAGE>   12
                                                              [DAVID WHITE LOGO]

INDEPENDENT AUDITORS' REPORT

To the Stockholders and Directors of David White, Inc.:

We have audited the accompanying balance sheet of David White, Inc. and
subsidiary as of December 31, 1996, and the related statements of operations,
stockholders' investment, and cash flows for the years ended December 31, 1996
and 1995.  These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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, such financial statements present fairly, in all material
respects, the financial position of David White, Inc. at December 31, 1996, and
the results of its operations and its cash flows for the years ended December
31, 1996 and 1995 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Milwaukee, Wisconsin
January 31, 1997



MARKET INFORMATION

David White's common stock is traded in the over-the-counter market and is
quoted on NASDAQ under the symbol DAWH. The high and low bid prices occurring
during each quarter for 1996 and 1995 are set forth in the table below. The
prices represent inter-dealer quotations and do not include adjustments for
retail markups, markdowns or commissions and do not necessarily represent
actual transactions. As of December 31, 1996, there were approximately 273
stockholders of record of David White, Inc. common stock.


BID PRICES OF COMMON SHARES


<TABLE>
<CAPTION>
                             1996               1995
                        High      Low       High    Low
<S>                    <C>      <C>       <C>      <C>
First Quarter          $12 7/8  $11 1/2   $11 3/4  $8 3/4
Second Quarter          11 5/8   11 1/2    11 3/4   9 1/2
Third Quarter           11 1/2   10        11       9 3/4
Fourth Quarter          11 1/4    7 1/2    12       9 3/4
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS - 1996 COMPARED TO 1995

Sales for 1996 of $13.4 million were down $1.9 million from 1995's sales of
$15.3 million. Most of the decrease, or $1.6 million is attributed to the
inclusion of the former Swiss subsidiary, Ammann Lasertechnik, AG, for the first
five months of 1995. The subsidiary was sold in May, 1995. David White, Inc.'s
sales, exclusive of Ammann, are down 2% for 1996.  Shipments of laser products
at David White increased 22% while sales of optical products declined 9%. Gross
margins increased slightly in 1996 to 23.5% from 23.3% in 1995. The Company
reduced inventories by $930,000 in 1996. Reducing inventories decreases profits
temporarily by reducing the Company's ability to absorb normal manufacturing
overhead into inventory. Selling and administrative expenses declined 27%,
primarily due to the inclusion of Ammann's selling and administrative expenses
in 1995 and a one-time charge in 1995 of $523,000 for converting a costly
defined benefit pension plan into a much less expensive 401(k) program.
Other income of $185,000 included a $153,000 gain resulting from the sale of the
Company's corporate office. The Company intends to lease a smaller facility for
its executive offices beginning in late fall of 1997. Interest expense declined
slightly as the Company reduced its debt levels with the cash generated from the
sale of the corporate office and reduction of inventories.

Working capital increased to $4.0 million at the end of 1996 from $3.7 million
at the end of 1995. The Company's current ratio at the end of 1996 was 4:3:1
versus 2:5:1 at the end of 1995.

The Company did not have any significant outstanding capital commitments at 
year-end.


<PAGE>   13

DIRECTORS

MICHAEL S. ARIENS 1,2
PRESIDENT, ARIENS COMPANY
MANUFACTURER OF OUTDOOR POWER EQUIPMENT

R. RON HEILIGENSTEIN 2
BUSINESS CONSULTANT

CHARLES D. JACOBUS 1, 2
PRESIDENT, JACOBUS COMPANY
DIVERSIFIED COMPNAY WITH INTERESTS IN PETROLEUM AND HOME SECURITY SYSTEMS

MARSHALL A. LOEWI 1
CHAIRMAN, DAVID WHITE, INC.
PRESIDENT AND CHIEF EXECUTIVE, MILWAUKEE RESISTOR CORPORATION
MANUFACTURER OF POWER RESISTORS AND SPECIALIZED RESISTANCE PRODUCTS

Tony L. Mihalovich
President, Chief Executive Officer, David White, Inc.

1 Executive Committee, 2 Audit Committee

OFFICERS

Tony L. Mihalovich
President
Chief Executive Officer

James L. Younk
Vice President - Finance

Larry P. Hutzler
Vice President - Manufacturing

Stephen M. Smith
Vice President - Sales and Marketing


EXECUTIVE OFFICES

11711 River Lane
P.O. Box 1007
Germantown, WI 53022-8207
(414) 251-8100

Manufacturing Plant
Berlin, Wisconsin

Transfer Agent
Firstar Trust Company
Milwaukee,  Wisconsin

10-KSB REPORT

A copy of the 1996 10-KSB Report, without exhibits, as submitted to the
Securities and Exchange Commission, may be obtained without charge by writing 
to the Vice President-Finance, David White, Inc., P.O. Box 1007, Germantown, WI
53022-8207.
        

ANNUAL MEETING

The annual stockholders' meeting of David White, Inc., will be held at the time
and place indicated in the proxy statements to be sent to shareholders.





                               [DAVID WHITE LOGO]
David White, Inc., 11711 River Lane, P.O. Box 1007, Germantown, WI 53022-8207,
(414) 251-8100