<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

/X/      Annual report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the fiscal year ended DECEMBER 31, 2000 or

/ /      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 For the transition period from __________ to
         __________

    Commission file number 0-25390

                                 SMC CORPORATION
             (Exact name of registrant as specified in its charter)

  Oregon                                               93-0939076
  (State or other jurisdiction of                     (I.R.S. Employer
  incorporation or organization)                      Identification No.)

  20545 Murray Road
  Bend, Oregon                                        97701
  (Address of principal executive offices)            (Zip Code)

                         Registrant's telephone number,
                       including area code: (541) 389-1144

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
                                             --   --
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.

         Aggregate market value of Common Stock held by nonaffiliates of the
Registrant at March 15, 2001: $5,019,347. For purposes of this calculation,
officers and directors are considered affiliates.

    Number of shares of Common Stock outstanding at March 15, 2001:  5,745,599.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                                  Part of Form 10-K into
DOCUMENT                                          WHICH INCORPORATED

Proxy Statement for 2001 Annual
  Meeting of Shareholders                             Part III


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                                TABLE OF CONTENTS

<TABLE>
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Item of Form 10-K                                                              Page
-----------------                                                              ----
<S>                                                                            <C>
PART I       ....................................................................1

Item 1            Business  .... ................................................1

Item 2            Properties....................................................15

Item 3            Legal Proceedings.............................................15

Item 4            Submission of Matters to a Vote of Security Holders...........16

PART II.........................................................................17

Item 5            Market for the Registrant's Common
                  Equity and Related Shareholder Matters........................17

Item 6            Selected Financial Data.......................................18

Item 7            Management's Discussion and Analysis
                  of Financial Condition and Results of Operations..............20

Item 7(a)         Quantitative and Qualitative Disclosures
                  About Market Risk.............................................26

Item 8            Financial Statements and Supplementary Data.................. 26

Item 9            Changes in and Disagreements with Accountants
                  on Accounting and Financial Disclosure........................26

PART III........................................................................27

Item 10           Directors and Executive Officers of
                  the Registrant................................................27

Item 11           Executive Compensation........................................28

Item 12           Security Ownership of Certain Beneficial
                  Owners and Management.........................................28

Item 13           Certain Relationships and Related Transactions................28

PART IV.........................................................................29

Item 14           Exhibits, Financial Statement Schedules,
                  and Reports on Form 8-K.......................................29

SIGNATURES        ..............................................................32

</TABLE>


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PART I

ITEM 1.  BUSINESS

INTRODUCTION

SMC Corporation (SMC or the Company) is one of the largest manufacturers of
high-line motor coaches in the United States. SMC was incorporated in Oregon
in 1986 and production operations began in 1987. In 1998, SMC relocated its
headquarters to Bend, Oregon from Harrisburg, Oregon and now has six
operating subsidiaries. The Company's executive offices are located at 20545
Murphy Road, Bend, Oregon, 97701, and its telephone number is (541) 389-1144.
The subsidiaries of the Company are Safari Motor Coaches, Inc. (Safari),
Magnum Manufacturing, Inc. (Magnum), Beaver Motor Coaches, Inc. (Beaver),
Electronic Design & Assembly, Inc. (ED&A), Composite Technologies, Inc.
(CTI), and Harney County Operations, Inc. (HCO). Safari and Magnum are
located in Harrisburg, Oregon; Beaver and ED&A are located in Bend, Oregon;
and CTI and HCO are located in Hines, Oregon.

GENERAL BACKGROUND

Within the multi-billion dollar recreational vehicle industry, the majority
of SMC's products are positioned among the most expensive. SMC predominately
builds luxury Class A motor coaches - motorized, fully self-contained
motorhomes with features such as solid hardwood cabinetry, powerful diesel
engines, and residential decor that separate these coaches from the rest of
the market.

This select segment was targeted from SMC's founding and the Company rapidly
grew to become a leader in the luxury market. Mathew Perlot, SMC's founder
and Chairman of the Board of Directors, considered this market particularly
attractive - anticipating the aging of the "baby boomers" and believing that
this maturing, affluent group would provide growing support for this product.
The initial product included coaches ranging from 30 to 34 feet and retailed
for about $100,000. Over the next several years SMC expanded its product
offerings to both higher and lower price points, to include coaches ranging
in length from 24 to 45 feet, and with retail prices ranging from $128,000 to
$757,000.

Magnum began production of chassis for Safari products in 1993 and has since
expanded operations to provide chassis for seven of the eight model lines of
Safari and Beaver products. By manufacturing chassis specially designed for
applications in the recreational vehicle (RV) industry, the Company believes
it has quality, ride and cost advantages over competitors that do not build
their own chassis. In 1997, a new chassis was developed for the Beaver
Marquis. Previously, the Marquis was constructed on a purchased Gillig brand
chassis. Gillig ceased production of the chassis in 1997. Magnum acquired the
rights to manufacture the chassis from Gillig and, after making some
modifications for the Marquis' specific requirements, now produces the
chassis at a lower overall cost to the Company. Magnum now produces the
chassis for all of the Company's Class A models except the Trek, resulting in
significant overall costs savings to the Company.


                                       1
<PAGE>

SMC acquired the Beaver brand names and production facilities in 1994. At
that time the Beaver product ranged in retail price from $180,000 to
$350,000. The line has since been broadened to include a lower-priced coach,
the Monterey. In 1999, Beaver introduced the Amethyst Marquis, a 42 foot tag
axle coach that retails for over $436,000. This expansion of product
offerings has enabled Beaver to expand distribution of its products.

In 1999, the Solitaire, a bus conversion product, was also introduced. Its
features are similar to those found in luxury buses and it carries a starting
retail price of $729,000.

In 1996, the Company began to seek product opportunities in the lower-priced
segment of the recreational vehicle industry when it entered the Class C
market through acquisition of a facility in the Midwest. The Company
continued its penetration into the upper range Class C market in 1997 through
its operations at HCO and the introduction of a Safari brand Class C motor
coach. In 1998 the Company introduced the Desperado, another Class C model.
As the Class C market grew, the Company determined that its emphasis on
quality and high end features versus high volume, low cost coaches created a
competitive disadvantage. Therefore, the Company discontinued this line in
2000 to more fully concentrate on the high line luxury models.

Also, at the HCO facility, the Renegade, a new Class A motor coach, was
introduced in 1998. With retail prices starting at $154,000, the Renegade is
targeted toward the entry-level of the Class A market -- buyers that are
value-oriented but still demanding features and quality. Products in this
segment of the market have become very popular. In 1999, the Company upgraded
the Renegade and introduced the Riata as the entry level product at HCO. The
Riata retails in the $128,000 to $143,000 range. The production facility is
located in Hines, Oregon and has ample production capacity to meet expected
demand for both the Renegade and Riata.

At the Beaver facility, the newly designed Contessa Class A model was
introduced in December 1997. The Contessa had been a Beaver product before
the Company acquired Beaver in 1994, but had been dormant since that time.
Priced below the existing Patriot model but above the Monterey, the Contessa
has been resurrected with a new design and feature set that has been widely
accepted. In 1999, the company introduced the Amethyst Marquis as the top
level Class A motorhome as well as the ultra luxurious Solitaire designed to
compete in the bus conversion market.

At the Safari facility, a new Class A model, the Zanzibar, was introduced in
June 1998. Additionally, the Cheetah was introduced in late 1999 as an entry
level diesel motorhome similar in concept to the Riata, but designed with the
distinction of a Safari brand product.

In 1998, the Company opened a service center facility in Tampa, Florida to
provide better, more timely, and cost effective customer service. This
service center operation is a branch of the existing service centers located
in Harrisburg and Bend, Oregon.


                                       2
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INDUSTRY BACKGROUND

Recreational vehicles encompass a wide range of mobile housing options,
including folding camping trailers, van conversions, truck campers, fifth
wheel trailers, Class A, B and C motor coaches, and bus conversions. The
retail prices of these vehicles range from under $3,000 for the simplest
folding camping trailer to over $1.2 million for the most expensive bus
conversion. The Recreational Vehicle Industry Association (RVIA) has reported
that one in ten households in the U.S. owns a recreational vehicle, resulting
in a total ownership of approximately nine million recreational vehicles.

Although retail sales of recreational vehicles and Class A motor coaches have
fluctuated over the last five years, retail sales of high-line motor coaches
have remained steady during this period according to Statistical Surveys,
Inc. The following table shows (i) unit shipments to dealers of all
recreational vehicles, all motor coaches, and Class A motor coaches in the
U.S., based on RVIA data, and (ii) unit retail sales of high-line motor
coaches in the U.S. and unit retail sales of Safari and Beaver coaches as a
percentage of the high-line market, based on data distributed by Statistical
Surveys, Inc.

<TABLE>
<CAPTION>

                                                  1996        1997        1998        1999      2000
                                                  ----        ----        ----        ----      ----
                                                        (In thousands, except percentage data)
<S>                                              <C>         <C>         <C>         <C>        <C>
UNIT SHIPMENTS FROM MANUFACTURERS TO DEALERS:
  All recreational vehicles                      466.8       438.8       441.3       473.8      418.3
  All motor coaches                               55.3        55.0        63.5        71.6       60.9
  Class A motor coaches                           36.5        37.6        42.9        49.4       41.0

UNIT RETAIL SALES AND MARKET SHARE DATA:
  High-line motor coaches                          4.2         4.4         4.1         4.5        3.1
  SMC percentage of high-line market:            29.1%       27.6%       25.3%       22.6%      23.1%
                                                 =====       =====       =====       =====      =====
</TABLE>

SMC focuses primarily on the high-line segment of the Class A motor coach
market. Class A motor coaches incorporate kitchen, sleeping and bathroom
facilities built on a self-powered chassis. For reasons of cooling and drive
train engineering, almost all motor coaches are powered either by a gasoline
engine mounted in the front or a diesel engine mounted in the rear. Diesel
pushers are more expensive, but can be built at greater lengths and are
generally more powerful. Most high-line coaches are diesel pushers - with
horse power ratings over 300, and at this time nearly all high-line diesel
pushers retail for approximately $200,000. Although the Trek shares many
high-line features of the Company's other models, its retail price ranges
from $92,000 to $117,000, and it is therefore excluded from market data
compiled for high-line products.

The high-line segment of the Class A RV market has seen consistent growth
since 1989, and in recent years this market has attracted many other
companies. Many "mainstream" RV builders, such as Fleetwood, Winnebago, and
Coachmen, have developed offerings in


                                       3
<PAGE>

this market. Meanwhile, some luxury builders, such as Monaco Coach and
Country Coach, have broadened their product lines. Others are merging into
larger conglomerates: Beaver Coaches was acquired by SMC in 1994; Holiday
Rambler was purchased by Monaco Coach in early 1996; and Country Coach was
acquired by National RV Holdings in late 1996.

Several long-term trends favor the luxury segment of the RV industry. The
most significant indicator of future growth potential is the change in
RV-owner demographics. Households between 45 and 64 years old form the
principal market for luxury RVs. As the "baby-boom" generation ages, this
demographic group is expected to increase to 27% of the U.S. population by
the year 2010. The Company believes that on average this generation is
expected to retire earlier and have more discretionary income than preceding
generations, which is expected to provide a growing base for RV sales.

This trend is also reflected in the substantial increase in the number and
quality of facilities available for RV use and in companies serving the RV
market. The increased availability of accessories and facilities will
continue to make the RV lifestyle more attractive.


                                       4
<PAGE>

Three other factors also have a lesser impact on the RV industry:

FUEL AVAILABILITY AND PRICE STABILITY

Diesel fuel has been relatively abundant and inexpensive since the beginning
of the 1980's. The Company believes the needs of the transportation industry
for diesel fuel may contribute to continued availability and pricing
stability. All of the Company's Class A motor coaches are powered by diesel
engines. Consequently, an interruption in the supply or a significant
increase in the price of or tax on the sale of diesel fuel on a regional or
national basis could have a material adverse effect on the Company's results
of operations. The Company believes that recent price increases in diesel
fuel in late 1999 and into 2000 have not had an impact on the highline
segment of the industry. There is no assurance that the supply of diesel fuel
will continue uninterrupted, that rationing of diesel fuel will not be
imposed, or that the price of or tax on diesel fuel will not significantly
increase in the future.

LOW INTEREST RATES

Interest rate levels affect the cost of a motor coach for consumers who
finance their purchase and, more significantly, the cost of inventory
maintenance for motor coach dealers. Recent periods of increasing interest
rates have caused some dealers to reduce their inventories, thus impacting
the Company's sales. However to date in 2001, interest rates have decreased
and the Company believes this should strengthen wholesale demand.

FAVORABLE TAX TREATMENT

U.S. tax laws generally allow individuals who itemize deductions to deduct
interest paid on loans used to finance the purchase of either a first or
second residence. The definition of "residence" has been interpreted to
include motor coaches of the type manufactured by the Company. The Company
believes the tax deductibility of interest paid on loans used to purchase a
Class A motor coach increases the attractiveness of ownership. These laws,
however, have historically been amended frequently, and it is likely that
further amendments and additional tax laws will be applicable to financing
the purchase of motor coaches in the future. There is no assurance that
favorable tax treatment for financing the purchase of motor coaches will not
be amended or repealed.


                                       5
<PAGE>

SALES AND MARKETING

SMC has three distinctive brands that are marketed through separate dealer
networks. (Sales of Class C motor coaches to date have not been a significant
part of the Company's business.) The Beaver, Safari, and Harney products are
differentiated to help increase total penetration of the high-line market.
The Beaver product is marketed as an upscale luxury RV. Its fiberglass wall
construction, air suspension, and "classic" RV styling places the Beaver
models near the top of high-line coaches. The Safari product is designed for
a midrange luxury customer. Its aluminum exterior is unique in this market,
and innovations such as the VR2-TM- Suspension and power disk brakes further
separate the Safari from the rest of the luxury RV market. The Harney product
is designed to attract entry level and first time buyers in the Class A
luxury market. While it incorporates several luxury features into its design,
the use of more economical materials and assembly methods allow a lower price.

The Company markets its products through independent dealers throughout the
United States and Canada. Few dealers carry both the Safari and Beaver brand
products. Total Class A dealer locations were 94, 104, and 86 as of December
31, 1998, 1999 and 2000 respectively. The Company grants exclusive
distribution rights to a dealer within a geographic region. Dealers are
selected based on location, financial stability, marketing expertise, sales
history, integrity and repair and service capability. The Company provides a
variety of support services to its dealers, including promptly supplied
product literature, display materials and space rental subsidies at trade
shows and exhibitions, and a dealer newsletter with updates on product
development and other product information. The Company offers training and
technical support to dealer salespeople through its in-house "university"
programs. The Company representatives visit dealers on a regular basis for
sales training and assistance.

The Company focuses its advertising on consumer publications which emphasize
the RV lifestyle. In 1995, the Company consolidated its media production
in-house to control costs and quality. In-house media development has also
added flexibility and responsiveness to the process, which frequently
involves "rush" jobs to take advantage of market opportunities.

A key part of the Company's marketing effort is the sponsorship and active
promotion of the Safari International and the Beaver Ambassador Club, both of
which are active clubs for owners of Safari and Beaver products, respectively.
Members of these groups socialize, discuss common experiences and enjoy motor
coaching activities together, thus helping to build customer loyalty and
enthusiasm. The Company publishes quarterly newsletters for members of the
owners' clubs, as well as a quarterly magazine, the "Rendezvous," which is
circulated to owners, prospective purchasers, suppliers, dealers and employees.
In addition, the Company annually sponsors "homecoming" rallies at the Safari
and Beaver factories, open to all Safari and Beaver coach owners.

Dealers typically finance their inventory through revolving credit facilities
established with asset-based lending institutions, including specialized
finance companies and banks. It is industry practice for these "floor plan"
financiers to require motor coach manufacturers to


                                      6
<PAGE>

repurchase motor coaches previously sold to the dealer if the dealer defaults
on its financing agreements or if the lender otherwise has a reasonable basis
to be concerned about the ability of the dealer to meet its obligations to
the lender. This agreement typically applies for a period of 12 to 18 months
from the date of the dealer's purchase from the manufacturer. See "Item 7 --
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

The Company takes several steps to reduce its exposure to coach repurchase
risk. A dealer is typically required to make periodic payments of principal,
referred to as a "curtailment," to the flooring financing institution
commencing in the seventh month after purchase of the coach. A coach
manufacturer may waive these curtailment payments at the request of a dealer
under certain circumstances, but the Company generally will not do so unless
the dealer owes no more than 90% of the wholesale price of the coach. The
Company also monitors the inventory levels and financial circumstances of its
dealers through reports generated by the flooring institutions and through
frequent contact by its sales personnel with the dealers. The Company
believes, however, that its most fundamental protection against significant
loss due to repurchase obligations is the production and marketing of motor
coaches that are sufficiently popular to enable the Company quickly to
resell, at satisfactory prices, any coaches it may be required to repurchase.
In 1998, 1999, and 2000, the Company repurchased a total of 8, 3, and 7 motor
homes respectively under the requirements of the repurchase obligations. No
significant losses were incurred upon the subsequent resale of the motor
homes.

One significant dealer defaulted on its obligations in 2000 resulting in a
potential repurchase of 44 units. Details of this event were disclosed in the
Company's Form 8-K report filed on January 10, 2001. Although the Company was
not required to repurchase the coaches at December 31, 2000, a provision for
sales returns of $3.3 million with a gross profit impact of $800,000 was
recorded for specific coaches estimated to be repurchased. In 2001, additional
buyers, both dealers and retail customers, were found for the coaches comprising
the provision and consequently the provision was reversed in the first quarter
of 2001. Thus, there was no materially adverse impact of this event.

In 2000, one dealer accounted for 19% of sales. Another dealer accounted for
13% in the year 2000, and 12% and 14% in the years 1999 and 1998,
respectively. (This dealer ceased operations in late 2000 and has been
replaced by two new dealers.) A third dealer accounted for 11% of the sales
in the year 2000.


                                      7
<PAGE>

PRODUCT INFORMATION BY SUBSIDIARY

SOLITAIRE

The Solitaire was introduced in the third quarter of 1999. It is built on Magnum
monocoque chassis and has a tag axle design. The coach measures forty-five feet
in length and is by far the most luxurious product produced by SMC. With a
retail price ranging from $729,000 to $757,000, it is designed to compete with
luxury bus conversions. The amenities of the Solitaire are similar to those
found in luxury buses retailing in excess of $1 million. This product is a
limited production model and is manufactured at the Beaver facility.

BEAVER

MARQUIS

The Marquis is positioned at the top of the Beaver product line. With retail
prices of over $436,000, it is one of the most expensive and luxurious motor
coaches in production today. The Marquis has traditionally been the most
visible and best recognized of the Beaver models. The Marquis motor coach was
further upgraded in 1997 to its current ultra-luxury position. As part of
this strategy, production of the Marquis was slowed and a craftsman-intensive
team production program was developed to produce each vehicle. New cabinet
technologies were introduced, allowing the use of exotic veneers and richer
lacquers. The Marquis is now positioned as a prestige product. Previously
built on a chassis supplied by an outside supplier, in 1997 the Company began
building the Marquis on a chassis developed by Magnum at an overall cost
savings for the Company. In 1999, the Company introduced the Amethyst Marquis
which is a forty-two foot, tag axle model carrying the most features and
highest price of any Marquis.

PATRIOT

In July 1995, SMC introduced the 1996 Patriot on the all-new Magnum B-Series
chassis. This new Magnum chassis replaced a chassis from an outside chassis
vendor used since the Patriot model was introduced in 1992. The Patriot model
has a retail price ranging from $247,000 to $346,000, depending upon options,
including the upgraded Thunder option which features a powerful
425-horsepower engine and a heavy-duty transmission. Since the Marquis
upgrade in 1997, the Patriot has successfully filled the niche of the
original Marquis product.

CONTESSA

In 1997, the Company introduced the completely redesigned Contessa, which had
been a Beaver model prior to the acquisition of Beaver in 1994. The Contessa
is a high-end coach powered by a 330-horsepower engine that retails from
$216,000 to $275,000, depending upon options.


                                       8
<PAGE>


MONTEREY

The Monterey was the first all-new Beaver product since the acquisition of
Beaver in 1994. Retailing from $180,000 to $223,000, depending upon options,
the Monterey provides Beaver with a product priced for broader appeal. An
air-ride option has been developed to provide the traditional RV owner an
alternative which is typically seen in high-line motor coaches.

SAFARI

CONTINENTAL

The Continental is the flagship product from Safari. Its design and
technology features include disk brakes, Magnum Intellidrive computerized
monitoring display, and Magnum Air Chassis all as standard equipment. The
coach is driven by a 330hp Caterpillar engine and features an Allison MD3030
transmission with six forward speeds and two overdrives. The Continental
retails from $304,000 to $330,000, depending upon options, including the
Panther option which features a powerful 425-horsepower engine and a
heavy-duty transmission.

SERENGETI

As the oldest of the Safari brand names, the Serengeti has been a core Safari
product since its introduction in 1988. The Serengeti retails from $221,000
to $288,000, depending upon options, and its sibling, the Ivory model,
occupies the higher end of that price range.

ZANZIBAR

The Zanzibar was introduced in 1998. The standard equipment offers an array
of features found on higher priced models, but at an entry level price. It is
constructed on the Magnum `R' chassis. The Zanzibar model retails from
$164,000 to $202,000, depending on the options. This model has quickly become
one of Safari's best sellers.

CHEETAH

In late 1999, this new Class A diesel pusher model was introduced to compete as
an entry level product retailing in the $128,000 to $149,000 range. Market
analysis indicates that a strong demand exists for an entry level diesel pusher
as more consumers enter the RV market and those already owning gas RVs seek the
enhanced performance of a diesel pusher product. The Cheetah is built on BF
Goodrich's Torsilastic suspension system that is otherwise available on bus
conversions in the $1 million retail price range.

TREK

The Trek is constructed on a Workhorse chassis powered by a gasoline engine.
As the lowest priced SMC Class A motor coach, it is intended to acquaint new
customers with SMC's products and attract them to the RV lifestyle. Equipped
with SMC's patented Electro-Majic bed, the Trek occupies a niche in the
otherwise competitive gas coach market. The Trek retails from $92,000 to
$117,000, depending upon options.


                                       9

<PAGE>

HARNEY COUNTY OPERATIONS (DBA HARNEY COACH WORKS)

RENEGADE CLASS A

The Renegade is constructed on Magnum `R' series chassis with a Cat 330hp
engine. Shipments began in January 1998. In 1999, the Renegade was upgraded
and now retails from $154,000 to $172,000. The Renegade is still targeted to
the expanding entry level Class A market which offers many features of the
higher-line models, but at a more affordable pricing structure.

RIATA

In late 1999, this new Class A diesel pusher model was introduced to compete as
an entry level product retailing in the $128,000 to $143,000 range. Similar to
the Cheetah, the Riata's design is distinct to the products made at the Harney
facility. Market analysis indicates that a strong demand exists for an entry
level diesel pusher as more consumers enter the RV market and those already
owning gas RVs seek the enhanced performance of a diesel pusher product. The
Riata's 300hp engine and six speed transmission are significant features not
available in competitive coaches.

BACKLOG

Motor coach dealers, particularly those with a relatively large sales volume,
from time to time indicate to motor coach manufacturers the number of coaches
they expect to purchase in the following months. While the Company regularly
receives such indications, the Company includes in its backlog only purchase
orders it has received that are sufficiently complete as to specifications
(color, floor plan, options, etc.) to permit the Company to schedule production
of the coach. Consequently, backlog generally represents orders for coaches
scheduled to be manufactured and shipped in the following 45 to 90 days. The
Company's backlog at December 31, 2000 was $20.3 million, compared to backlog of
$24.4 million at December 31, 1999. Backlog can fluctuate substantially as the
result of the receipt of purchase orders in connection with various major motor
coach shows and rallies, which are not held at even intervals throughout the
year. Consequently, and because orders are generally cancelable without penalty,
the amount of backlog at any date is not necessarily indicative of sales in
future periods. To date, order cancellations have not been material.

CUSTOMER SERVICE

The Company believes one of the most important elements in the success of its
business is understanding its customers and their preferences and providing
excellent customer service. Customer service is important because many of the
Company's customers are repeat purchasers and because a high level of service
is expected by purchasers of high quality coaches. In addition, because motor
coach purchasers tend to communicate freely their views on the quality of
various coaches and business reputations of motor coach manufacturers, the
quality of post-sale customer service provided by a motor coach manufacturer
is a key factor in establishing a manufacturer's reputation among this group.

The Company offers a one-year or 12,000-mile warranty, whichever occurs
first, on all coaches. Customers have the option to purchase extended
warranties, written by others, from


                                       10

<PAGE>

Company dealers. The Company's warranty covers all manufacturing-related
problems and parts and system failures. Repairs are made at a Company owned
service facility or by one of the Company's dealers or authorized service
centers. In addition to the Company's warranty, the chassis, drive train,
engine and transmission are covered by separate warranties offered by the
manufacturers of those components, or by the Company on the chassis
manufactured by its Magnum Manufacturing subsidiary. The Company's warranty
on the Magnum chassis and drive train is for three years or 36,000 miles,
whichever occurs first. Appliances in the coaches are covered by the
warranties of manufacturers of those items.

The Company maintains toll-free telephone lines for customers to call with
repair or operating questions or problems. Although many questions can be
resolved by telephone, the Company often refers the customer to a local
dealer or repair facility for additional assistance.

The Company opened a 24-bay service center in Harrisburg in November 1995 to
better serve its customers. In late 1998, the Company purchased a service
center in Tampa, Florida and moved its service activities from a smaller
leased facility in that area. The Company also operates a service center
adjacent to its Beaver manufacturing facility in Bend, Oregon.

To ensure customer satisfaction, enhance dealer relations and increase positive
word of mouth advertising, the Company embarked on a significant upgrade of its
entire customer service process. Changes include:

-    A strict process for handling incoming letters and calls, whether positive
     or negative, was put in place. Every contact is tabled, with an assigned
     party with appropriate authority responsible for resolving any issues at
     hand. Contacts are not removed from the table until the customer has
     indicated satisfaction.

-    A corporate manager was assigned to monitor the overall process.

-    Very experienced National Service Director hired.

-    Each individual issue is reviewed for fundamental cause, and assignments
     are made to resolve the underlying problem for this and future customers
     including direct communication with manufacturing or others as necessary.

-    Any potential legal issues are reviewed and resolved in the most
     cost-effective basis after determining the Company's expected liability.
     In-house counsel was hired and legal case management began in earnest.

-    Service processes were reviewed to find methods to proactively recognize
     and resolve manufacturing issues that could lead to customer
     dissatisfaction or culminate in future legal issues. Op-code reporting by
     division and repetitive repair initiated. CSI survey reporting and claim
     analysis began for all service facilities including our own.

-    Our then existing two technician call centers are split by brand to improve
     technical competence, the computer systems are improved, and service
     history filing systems are modified to provide improved information flow.

-    Company wide bulletin process initiated providing manufacturing operations
     with immediate notice of customer concerns, and to insure that all
     technicians have access to most current information.

-    Service Procedures and Policies manual written outlining dealer
     responsibilities that assist in the prevention of legal claims.
     Dissemination is in process.


                                      11

<PAGE>

MANUFACTURING

The Company uses current production techniques in its coach manufacturing
process. These techniques emphasize teamwork, include significant input from
worker teams and employ just-in-time inventory controls to improve product
quality and manufacturing efficiencies.

The Company believes its coach manufacturing operations are vertically
integrated to a substantial degree compared to most other high-line motor
coach builders. Components of the Company's motor coaches produced by the
Company include the chassis constructed by the Magnum subsidiary, the end
caps, side walls and fiberglass components manufactured by the CTI
subsidiary, and the electronics and electrical harnesses for both the chassis
and house portion manufactured by the ED&A subsidiary. The Company also
produces its own hardwood cabinets, countertops, and portions of the interior
upholstery. The Company believes this in-house production of certain
components results in cost savings to the Company and greater control over
quality and inventory.

The Company purchases raw materials, parts, subcomponents, electric systems
and appliances from approximately 1,000 suppliers. These items are either
placed directly into the coach or are incorporated into subassemblies by the
Company. All components, subassemblies and finished products are inspected
for compliance with the Company's specifications. The Company attempts to
minimize its inventory costs by ordering inventory only on an as-needed, or
just-in-time, basis. Some supplies, such as fiberglass, are ordered and
delivered to the Company's plant on a daily basis, while other items,
particularly engines and transmissions, are ordered as much as four months in
advance of the expected use date. While the Company generally commences
construction on a coach only after receipt of an order from a dealer, it must
nonetheless order certain parts or components, some of which represent a
significant expenditure, in advance of orders.

Certain components and subassemblies included in the Company's motor coaches
are obtained from a single or limited number of suppliers. Transmissions of
the type used in the Company's coaches and those of most of its competitors
are manufactured solely by Allison Transmission. Although the Company
believes it would be able to develop alternate sources for any of the
components, other than transmissions, used in its products, significant
delays or interruptions in the delivery of certain components from suppliers
or difficulties or delays in shifting to new suppliers could have a material
adverse effect on the Company. Presently the Company is not experiencing any
interruptions or supply limitations from its major suppliers.

Upon completion of the manufacturing process, each coach undergoes a thorough
inspection and test drive. Any problems discovered are corrected prior to
shipment.


                                       12

<PAGE>

COMPETITION

The market for manufacture of mid- to high-line motor coaches is very
competitive, and the Company has significant competition in each of its
product lines. Other manufacturers of high-line coaches include Blue Bird
Corporation, Country Coach, Inc. (acquired in late 1996 by National RV
Holdings, Inc.), Fleetwood Enterprises, Inc., Foretravel Inc., Gulf Stream
Coach, Inc., Monaco Coach Corporation, and Holiday Rambler Corporation
(acquired in early 1996 by Monaco Coach Corporation). The Company competes
with a number of other manufacturers, some of which are much larger than the
Company and have greater financial and other resources than the Company.
Certain of these larger manufacturers have also identified value-oriented
high-line motor coaches as an attractive market and have recently developed
coaches more directly competitive with the Company's coaches.

The Company believes the principal competitive factors in the manufacture and
sale of high-line motor coaches are product quality and design, price,
customer service, performance and reliability. The Company believes it is
competitive with respect to each of these factors and believes its customer
service and the performance and reliability of its products compare favorably
to those of its competitors.

PRODUCT DESIGN AND PATENTS

The Company strives to be a design innovator in motor coach floor plans,
interior features, coach amenities and mechanical systems and believes it is
generally recognized in the industry as a design leader. Among the
innovations introduced by the Company are the first use of a side aisle floor
plan, the Electro-Majic bed, a rear-mounted cooling system, 110 volt
residential-style lighting, the successful use of Torsilastic suspension on a
high-line motor coach, and the "jackless" automatic leveling system. The
Company updates the fabrics, carpets, fixtures and floor plans of its coaches
each year and plans for a complete redesign of each model every three to four
years.

The Company began development of its Electro-Majic bed in 1988 and in 1992
obtained a patent for this electric powered bed system. Using a hidden
electric motor, the system uses small gear tracks attached to the living room
walls to lower a double-size bed from the ceiling down to a desired sleeping
level. The Electro-Majic bed is used in most Trek models. In two of the
Company's best-selling Trek floor plans, the Electro-Majic bed is the primary
sleeping space, which allows the entire coach to be used for living, kitchen
and bathroom areas. The Company believes there is no comparable motor coach
floor plan on the market.

The Company designed and patented an all new air ride suspension system
in 1996 for use in its Beaver Patriot and Marquis models. The suspension system
is designed to optimize the stability of the moving coach, while at the same
time maximizing ride comfort.

In addition, the Company was the first RV manufacturer to use BF Goodrich's
patented "Velvet Ride" torsilastic suspension in its Safari brand coaches. Now
called VR2, these systems include special links that stabilize the suspension
and provide the highest roll centers on the market.

SMC was the first RV manufacturer to use 110 VOH residential style lighting as
well as the leading edge Vehicle Monitoring Systems (VMS) to communicate
directly with the engine and


                                       13

<PAGE>

transmission and monitors engine output, temperatures and other critical
elements on an easy to view screen.

SMC also developed specially angled slide roofs that eliminate the need for
unsightly slide awnings.

Recently, SMC has designed and has a patent pending on an automatic jackless
leveling system for its coaches that use air bag suspension. This device, when
actuated, will automatically level the coach using the suspension rather than
jacks that lift the coach off the ground.

GOVERNMENT REGULATION

Motor coach manufacturers, such as the Company, are subject to federal,
state, and local regulations governing the manufacture and sale of their
products, including the provisions of the Motor Vehicle Act. The Motor
Vehicle Act provides for, among other things, the recall for modification,
repair or replacement of vehicles that contain defects which are potentially
dangerous, or which fail to comply with applicable standards. The Company's
motor coaches also may be subject to recall by chassis manufacturers in the
event the chassis fail to comply with applicable standards. The Company
relies upon certifications from its engine suppliers and chassis
manufacturers that the Company's motor coaches comply with all applicable
emission control standards. Although motor coaches manufactured by the
Company have been voluntarily recalled for repair from time to time in the
past, the Company has not incurred significant expenses in connection with
recalls. There is no assurance that future recalls of the Company's products
will not occur or that any such recalls will not adversely affect the
Company's operations or financial condition.

The Company is also subject to regulations promulgated by the Occupational
Safety and Health Administration ("OSHA") concerning workplace health and
safety. The Company's plants are periodically inspected by OSHA.

The business and operations of the Company are affected by federal, state,
and local environmental regulations relating to air and water pollution,
hazardous wastes, and noise. These regulations control the Company's use,
storage, and disposal of production chemicals and other wastes. The
regulations also restrict the Company's air contaminant emissions and waste
water discharges and prohibit noise in excess of certain levels.

The Company holds a federal operating permit as required by Title V of the
federal Clean Air Act Amendments of 1990 (a "Title V Permit") for its Safari
and Beaver motor coach manufacturing facilities. The combined CTI and HCO
facility holds an air contaminant discharge permit ("ACDP"), issued by the
Oregon Department of Environmental Quality and has applied for a Title V
permit. The Company believes it will be issued the permits necessary to allow
it to operate these facilities. The ACDPs and the Title V permits, however,
are issued for operations at specified levels, and any increase in emissions
beyond those levels, including increases resulting from expanded operations
or process modifications, will require permit amendments.

To date, the Company has not been required to make significant expenditures
for environmental compliance. The promulgation of additional safety or
environmental regulations, or the need to acquire permit amendments, in the
future, however, could require the Company to incur additional expense which
could adversely impact the Company's results

                                       14

<PAGE>

of operations. There is no assurance that the Company will not be required to
make significant expenditures in the future with respect to such safety or
environmental regulations.

The Company believes it is in compliance with applicable laws relating to the
manufacture and operation of motor coaches and operations of its
manufacturing facilities. There is no assurance, however, that future
governmental regulations will not be more stringent, and that compliance with
those regulations will not require the Company to incur additional cost.

EMPLOYEES

At December 31, 2000 the Company had 1,310 full-time employees. None of the
Company's employees are represented by a labor union, and the Company has
never experienced a work stoppage, slowdown or strike. The Company believes
it maintains good employee relations.

ITEM 2.  PROPERTIES

The Company's Safari and Magnum manufacturing facilities are located in
Harrisburg, Oregon on property owned by the Company. The Safari manufacturing
facility consists of buildings totaling 163,000 square feet on 16 acres, with
11,300 square feet of office space and 151,700 square feet of manufacturing
space. The Magnum manufacturing facility consists of four buildings with a
combined size of approximately 93,000 square feet on 14 acres. The Company's
Beaver manufacturing facility and corporate headquarters are located in Bend,
Oregon and consist of buildings totaling 141,000 square feet on 11 acres that
are leased on a long-term basis. In January 1996, the Company purchased a
176,000 square foot building on 16 acres in Hines, Oregon to meet future
production requirements. The Company leases a 13,000 square foot facility in
Bend, Oregon where ED&A operates. The present lease has an option to renew
through December of 2005.

The Company also owns a 39,000 square foot facility on 5 acres in Tampa, Florida
where it operates a service center and leases about 12,000 feet of this facility
to an RV dealer. The Company also leases a facility in Bend, Oregon as a service
center. Its service center in Harrisburg, Oregon is located on the Magnum
Manufacturing property.

The Company believes its existing office and service facilities are sufficient
to meet company needs.

ITEM 3.  LEGAL PROCEEDINGS

The Company is involved from time to time in litigation arising out of its
operations in the normal course of business, including claims under the
"lemon laws" of various states. In 1998, 1999, and 2000, the costs of all
claims including legal fees were $2.9 million, $2.8 million, and $2.9 million
respectively. The Company establishes a reserve for a case when a judgement
has been entered and the company appeals that judgement. Due to the
inconsistencies of state laws and judicial interpretations of these laws, the
Company can not anticipate in which cases it will prevail. As a result, the
Company often seeks to resolve these matters before litigation takes place.


                                       15

<PAGE>


On March 7, 2001, a case involving certain employment practices was heard in
the Federal District court in Eugene, Oregon. The case involved an alleged
incidence of harassment by co-workers in 1997. Of the three counts filed by
the plaintiff, the jury found in favor of the Company on two of the counts.
On the third count that alleged the Company allowed a hostile environment to
exist, the jury found for the plaintiff and awarded $100,000 and $1.0 million
in punitive damages. The court, however, has not entered judgment for the
plaintiff and the judge has undertaken a quite unusual action and invited the
filing of motions for a new trial and for a reduction in the amount of the
judgment. The Company has filed such motions, but, although it is optimistic
that the court will grant it some relief, there is no assurance the court
will do so, and any relief granted by the court will likely be immediately
appealable by the plaintiff.

As a manufacturer and seller of motor coaches, the Company is subject to a
risk of loss resulting from claims that its products or components of its
products caused or contributed to damage or injury. The Company has obtained
product liability insurance under terms it considers acceptable. In the past,
the Company has not incurred material expenses for product liability;
however, such liabilities, if incurred in the future, could have a material
adverse effect on the Company's operations if they exceed the insurance
coverage maintained. Furthermore, there can be no assurance that the Company
will be able to obtain insurance coverage in the future at adequate levels or
for a reasonable cost.

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

Not applicable.


                                       16

<PAGE>


                                   PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
         SHAREHOLDER MATTERS

The Company's Common Stock has been traded on the Nasdaq National Market System
since January 20, 1995 under the symbol SMCC. Information with respect to the
high and low sales prices for the Common Stock is set forth on page F-19.

At March 15, 2001 there were 83 shareholders of record of the Company's Common
Stock and 5,745,599 shares were outstanding. The Company believes the number of
beneficial owners is substantially greater than the number of record holders
because a large portion of the Company's outstanding Common Stock is held of
record in broker "street names" for the benefit of individual investors.

The Company has not paid any dividends in 2000 or 2001. The Company intends to
retain future earnings for use in its business and therefore does not anticipate
paying cash dividends in the foreseeable future.


                                       17

<PAGE>



ITEM 6.  SELECTED FINANCIAL DATA
The selected financial data presented below for, and as of the end of, each of
the years in the five-year period ended December 31, 2000 have been derived from
the audited financial statements of the Company. This data should be read in
conjunction with the financial statements, related notes and other financial
information included elsewhere in this report.


<TABLE>
<CAPTION>


                                                                       YEAR ENDED DECEMBER 31
                                        ------------------------------------------------------------------------
                                              1996           1997            1998            1999        2000
                                        ------------   ------------  -------------  ---------------  -----------
                                               (In thousands, except per share and other operating data)
<S>                                     <C>            <C>           <C>            <C>              <C>
STATEMENT OF INCOME DATA:
Sales                                    $200,835       $203,019       $217,485         $215,540       $190,701
Cost of sales                             174,457        175,809        195,405          194,127        175,720
                                        ------------   ------------  -------------  ---------------  -----------
Gross profit                               26,378         27,210         22,080           21,413         14,981
Selling, general and administrative
expenses                                   16,668         17,968         17,610           18,099         18,175
Restructuring expense                       2,392             --             --               --             --
Litigation and settlement costs               933          1,385          2,849            2,808          2,845
                                        ------------   ------------  -------------  ---------------  -----------
Income (loss) from operations               6,385          7,857          1,621              506        (6,039)
Interest/other expense                        418            813            940              155          2,897
                                        ------------   ------------  -------------  ---------------  -----------
Income (loss) before provision for
   income taxes                             5,967          7,044            681              351        (8,936)
Provision (benefit) for income              2,384          2,798            272              110        (3,573)
   taxes
                                        ------------   ------------  -------------  ---------------  -----------
Net income (loss)                        $  3,583       $  4,246       $    409         $    241       $(5,363)
                                        ============   ============  =============  ===============  ===========
Net income (loss) per share - basic      $    .55       $    .65       $    .06         $   .04        $  (.93)
                                        ============   ============  =============  ===============  ===========
Net income (loss) per share - diluted    $    .54       $    .65       $    .06         $    .04       $  (.93)
                                        ============   ============  =============  ===============  ===========
Weighted average shares outstanding
    basic                                   6,563          6,506          6,429            5,825          5,767
                                        ============   ============  =============  ===============  ===========
Weighted average shares outstanding
   diluted                                  6,661          6,507          6,429            5,825          5,767
                                        ============   ============  =============  ===============  ===========

OTHER OPERATING DATA:
Coaches sold                                1,859          1,765          1,706            1,584          1,330
</TABLE>


                                       18
<PAGE>

<TABLE>
<CAPTION>

                                                                      DECEMBER 31,
                                      -----------------------------------------------------------------------------
                                             1996           1997           1998             1999           2000
                                      ---------------   -----------     ----------       ----------    ------------
                                                                     (In thousands)
<S>                                   <C>                <C>            <C>              <C>           <C>
BALANCE SHEET DATA:
Current assets                            $39,740        $39,081        $45,453          $59,704        $49,671
Property and equipment                     19,584         18,585         20,551           13,978         12,827
Total assets                               61,920         59,842         68,020           75,669         64,641
Current liabilities                        34,225         29,335         36,492           44,127         38,631
Long-term debt                              6,626          5,376          7,353            8,646          8,613
Shareholders' equity                       20,994         24,293         23,209           22,879         17,397
----------------

</TABLE>


                                       19


<PAGE>



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

This analysis of the Company's financial condition and operating results
should be viewed in conjunction with the accompanying financial statements,
including the notes thereof.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, selected statement
of operations data, expressed as a percentage of sales, and the percentage
change in such data from the comparable prior period.

<TABLE>
<CAPTION>

                                                                                    PERCENTAGE CHANGE IN
                                       YEAR ENDED DECEMBER 31,                      DOLLAR AMOUNTS FROM
                               ---------------------------------------            ---------------------------
                                                                                     1998          1999
                                     1998           1999        2000               TO 1999       TO 2000
                               ----------     ----------  ------------            ----------     ------------
<S>                            <C>            <C>         <C>                     <C>            <C>
Sales                               100.0%         100.0%      100.0%                 (0.9)%        (11.5)%
Cost of sales                        89.8           90.1        92.1                  (0.7)          (9.5)
                               -----------    -----------  ----------
Gross profit                         10.2            9.9         7.9                  (3.0)         (30.0)
Selling, general and
 administrative expenses              8.1            8.4         9.5                   2.8             .4
Litigation and
 settlement costs                     1.3            1.3         1.5                  (1.4)           1.3
                               -----------    -----------  ----------
Income (loss) from operations         0.8            0.2        (3.1)                (68.8)      (1,293.5)
Interest expense                      0.4            0.7         1.0                  89.2           26.7
Other (income) expense                0.1           (0.6)        0.5              (1,189.0)        (168.6)
                               -----------    -----------  ----------

Pretax income (loss)                  0.3            0.1        (4.6)                (48.5)      (2,645.9)
Provision (benefit) for
 income taxes                         0.1            0.0        (1.9)                (59.6)      (3,348.2)
                               -----------    -----------  ----------
Net income (loss)                     0.2%           0.1%       (2.7)%               (41.1)      (2,325.3)
                               ===========    ===========  ==========

</TABLE>


                                       20

<PAGE>



2000 COMPARED TO 1999

Consolidated sales decreased by $24.8 million, or 11.5%, to $190.7 million in
2000 from $215.5 million for 1999. Safari sales decreased from 1999 levels by
$21.2 million, or 22.2%, to $74.6 million in 2000. Beaver sales decreased from
1999 levels by $2.2 million, or 2.6%, to $85.7 million in 2000. Sales at the HCO
division decreased by $878,000, or 3.2%, to $26.7 million for 2000 from $27.6
million for 1999.

Consolidated unit coach sales decreased by 254 units, or 16.0%, to 1,330 units
in 2000 from 1,584 units in 1999. Safari unit coach sales decreased by 167
units, or 20.8%, to 634 units in 2000 from 801 units in 1999. Beaver unit coach
sales decreased by 67 units, or 14.5%, to 394 units in 2000 from 461 in 1999.
HCO unit sales decreased by 20, or 6.2%, to 302 units in 2000 from 322 units in
1999. These decreases are consistent with industry performance at the wholesale
level. The Company's retail market share, however, increased in 2000 by 2.2%.

Even though wholesale unit sales decreased by approximately 16.0% in 2000 from
1999, the average revenue per coach increased by 5.4%. The impact of product mix
was not significant. The increase in revenue per coach is a function of consumer
preferences for more optional features on the coaches.

Consolidated gross profit margins decreased $6 million, or 30.0%, and decreased
as a percentage of sales to 7.9% from 9.9% in 1999. The impact of lower sales
volumes account for approximately $3.2 million of the decline in gross profit.
In addition, the Company incurred a nonrecurring loss in certain metal
fabrication operations that impacted gross profit by approximately $730,000.
These operations ceased in September 2000. Fixed costs, primarily at Beaver,
Harney and CTI, increased by approximately $640,000. Other production related
costs associated with model change and the switch to a "build to order" versus
"build to forecast" increased by approximately $700,000 and were incurred
primarily at the Safari facility. Warranty costs increased by $900,000. This was
primarily attributable to a $1.5 million increase in "goodwill" repair costs.
These goodwill costs represent repairs that were not required to be performed
under the Company's warranty policy but were completed nonetheless to maintain
and bolster the Company's excellent customer service record. Repair costs
required under the warranty policy actually decreased by $600,000.

Selling, general, and administrative expenses increased by $76,000, or .4%, to
$18.2 million in 2000 from $18.1 million in 1999. As a percentage of sales,
selling, general and administrative expenses increased to 9.5% from 8.4% of
sales for 2000 and 1999, respectively. Selling costs for the year increased by
approximately $800,000 primarily at Beaver and Harney primarily as the result of
increased sales commissions and spiffs of $250,000 and increased dealer support
programs of $490,000. Administrative costs declined by $721,000 due to
reductions in accounting and administrative staff.

Interest expense increased 26.7% to $1.9 million in 2000 from $1.5 million in
1999 as the result of a higher utilization of the operating credit line and
higher interest rates. Other expenses were higher in 2000 as the result of the
losses on assets sold from certain metal


                                       21

<PAGE>

fabricating operations and a one-time gain recorded in 1999 from the sale of
the Company's aircraft.

The Company's effective tax rate was 39.9%, resulting in an income tax benefit
of $3.6 million compared to an effective rate of 31.3% and an income tax
provision of $110,000 for 1999. The primary impact creating the lower rates in
1999 was a state energy credit received from its HCO and CTI operations. The
1999 provision also includes some energy credit carryforwards received in 1999
that relate to a prior period.

Net income after tax decreased $5.6 million to a net loss of $5.4 million from
1999's net income after tax of $241,000. This is a result from the factors
affecting gross margin, as discussed earlier.

1999 COMPARED TO 1998

Consolidated sales decreased by $1.9 million, or 0.9%, to $215.5 million in 1999
from $217.5 million for 1998. Safari sales decreased from 1998 levels by $3.0
million, or 3.1%, to $95.8 million in 1999. Beaver sales decreased from 1998
levels by $2.1 million, or 2.4%, to $87.9 million in 1999. Sales at the HCO
division increased by $3.8 million, or 16.1%, to $27.6 million for 1999 from
$23.8 million for 1998.

Consolidated unit coach sales decreased by 122 units, or 7.2%, to 1,584 units in
1999 from 1,706 units in 1998. Safari unit coach sales decreased by 100 units,
or 11.1%, to 801 units in 1999 from 901 units in 1998. Beaver unit coach sales
decreased by 38 units, or 7.6%, to 461 units in 1999 from 499 in 1998. HCO unit
sales increased by 16, or 5.2%, to 322 units in 1999 from 306 units in 1998.

Even though unit sales decreased by approximately 7% in 1999 from 1998, the
average revenue per coach increased by 6.7%. The impact of product mix was not
significant. The increase in revenue per coach was a function of consumer
preferences for more optional features on the coaches.

Consolidated gross profit margins decreased $667,000 or 3.0% and decreased as a
percentage of sales to 9.9% from 10.2% in 1998. The impact of lower sales
volumes account for approximately $200,000 of the decline in gross profit. The
remainder of the variance was a function of a $3.8 million improvement in
material costs that was offset by increases of $1.3 million in direct labor and
$2.4 million in factory overheads. These increases were incurred primarily in
the first half of the year. Warranty costs were also higher by approximately
$500,000.

Selling, general, and administrative expenses increased by $489,000 or 2.8% to
$18.1 million in 1999 from $17.6 million in 1998. As a percentage of sales,
selling, general and administrative expenses increased to 8.4% from 8.1% of
sales for 1999 and 1998, respectively. Selling costs for the year increased by
$1.3 million as a result of new product introductions of the Solitaire, Marquis
Amethyst, Cheetah, and Riata models as well as increased promotional costs.
Promotional costs were higher due to a year end special promotion and increasing
our dealer base in the second half of the year.


                                       22

<PAGE>


Administrative costs declined by $800,000 due to reductions in accounting and
administrative staff.

Interest expense increased 89.2% to $1.5 million in 1999 from $813,000 in 1998
as the result of a higher utilization of the operating credit line and the
financing of the Florida service center property acquired at the beginning of
the year.

The Company's effective tax rate was 31.3%, resulting in an income tax provision
of $110,000 compared to an effective rate of 40.0% and an income tax provision
of $272,000 for 1998. The primary impact creating the lower rates in 1999 was a
state energy credit received from its HCO and CTI operations. The 1999 provision
also includes some unanticipated energy credits received in 1999 that relate to
a prior period.

Net income after tax decreased $168,000 or 41.1% to $241,000 from 1998's net
income after tax of $409,000. This is a result from the factors affecting gross
margin, as discussed earlier.


INFLATION

The Company does not believe inflation has had a material impact on its results
of operations for the periods presented.

FACTORS AFFECTING FUTURE OPERATING RESULTS

The Company's operating results have fluctuated in the past and may fluctuate
significantly in the future. Short-term fluctuations in operating results may be
caused by a variety of factors, including the relatively high unit cost of the
Company's motor coaches, the timing of orders from dealers, dealer cancellations
of orders, the repurchase of coaches from dealers, new product introductions,
production delays and the timing of trade shows and rallies. Because the
Company's gross profit is generally greater with respect to its more expensive
coaches, changes in the product mix of coaches sold can affect the Company's
operating results. Over longer periods, the cyclical nature of the recreational
vehicle industry, changes in interest rates and changes in the level of
discretionary consumer spending may also adversely affect the Company's results
of operations. The impact of these and other factors on the Company's sales and
operating results in any future period cannot be predicted with certainty, and
the results for any prior period may not be indicative of results for any future
period.

The Company believes that the high-line motor coach market is much less volatile
than the RV industry as a whole, and believes buyers purchasing high-line
products are making lifestyle decisions largely independent of factors such as
the state of the economy or interest rates. High-line coach sales increased
every year beginning in 1989 until 1998, where there have been some fluctuations
from year to year through 2000. The sale of all Class A motor coaches have seen
both increases and decreases during this period.


                                       23

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

During 2000, net cash provided by operating activities was $4.3 million.
Inventories decreased by approximately $6.6 million and receivables decreased
by $7.2 million. This was offset primarily by a net loss of $5.4 million and
an increase in deferred tax assets of $2.5 million. The Company utilized $1.1
million in cash from investing activities.

The Company maintains an operating line of credit of $8 million and a real
estate term facility of $8 million. At December 31, 2000, the Company utilized
$6.2 million of the operating line. There was approximately $7.3 million
utilized of the real estate facility at December 31, 2000. Amounts outstanding
under these lines of credit bear interest at a prime based rate (9.5% at
December 31, 2000) and are secured by all assets not specifically identified in
other financing obligations. At February 1, 2001, the operating line of credit
increased to $10 million. The terms of the revolving credit and equipment
financing agreements require compliance with certain financial and other
covenants unless the Company receives consent from the lender. The covenants
include restrictions relating to (1) mergers, consolidations and sale of assets,
(2) guarantees by the Company of debts or obligations of other persons or
entities, (3) acquisition of the Company's own stock, and (4) declaring or
paying dividends in cash, stock, or other property. The Company was in
compliance with all covenants and agreements at December 31, 2000. The Company
does not believe any of these covenants will have a material impact on the
Company's ability to meet its cash obligations. See Notes 4 and 5 of Notes to
Consolidated Financial Statements.

The Company experienced a net loss of $5,363 in 2000 and cash flows from
operations of $4,281. Despite the net loss for the year ended December 31, 2000,
the Company has been able to fulfill its capital expenditure and working capital
needs due in part to its ability to maintain adequate financing arrangements.
The Company's revolving line of credit expires on December 31, 2001. The Company
estimates that cash flows generated from operations and borrowings pursuant to
its revolving and real estate lines of credit will be sufficient to fund
operations at the current and projected levels into 2002. If operations are not
consistent with management's plan, there can be no assurance that the amounts
available from such sources will be sufficient for the purposes described above.
In that event, or for other reasons, the Company may seek alternative financing
arrangements. There can be no assurance that such sources of financing will be
available if required or, if available, will be on terms satisfactory to the
Company.

Most dealer purchases of motor coaches from the Company are financed under
flooring financing arrangements between the dealer and a bank or finance
company. Under these flooring arrangements, the financing institution lends the
dealer all or substantially all of the wholesale purchase price of a motor coach
and retains a security interest in the coach purchased. These financing
arrangements provide that, for a period of time after a coach is financed
(generally 12 to 18 months), if the dealer defaults on its payment or other
obligations to the lender, the Company is obligated to repurchase the dealer's
inventory for the amount then due from the dealer plus, in certain
circumstances, costs incurred by the lender in connection with repossession of
the inventory. The repurchase price may be more than the resale value of the
coach. The Company's contingent liability under its


                                       24

<PAGE>

repurchase obligations varies from time to time. As of December 31, 2000, the
Company estimates its total contingent liability under repurchase obligations
to be approximately $98.9 million. Included in this amount is approximately
$2.0 million that is guaranteed by SMC in the event one particular dealer
fails to repay the finance company from sales proceeds. To date, losses
incurred by the Company pursuant to repurchase obligations have not been
material. The Company cannot predict with certainty its future losses, if
any, pursuant to repurchase obligations, and these amounts may vary
materially from the expenditures historically made by the Company.
Furthermore, even in circumstances where losses in connection with repurchase
obligations are not material, a repurchase obligation can represent a
significant cash requirement for the Company. See "Business -- Sales and
Marketing" and Note 9 of Notes to Consolidated Financial Statements.

RECENT ACCOUNTING PRONOUNCEMENTS

In September 2000, the FASB issued SFAS No. 140, ACCOUNTING FOR TRANSFERS AND
SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, A REPLACEMENT
OF FASB STATEMENT NO. 125. This Statement replaces FASB Statement No. 125,
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES. It revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires certain
disclosures, but it carries over most of Statement 125's provisions without
reconsideration. The Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
Those standards are based on consistent application of a FINANCIAL-COMPONENTS
APPROACH that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
This Statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.

SFAS No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after March 31, 2001. It is effective
for recognition and reclassification of collateral and for disclosures relating
to securitization transactions and collateral for fiscal years ending after
December 15, 2000. Disclosures about securitization and collateral accepted need
not be reported for periods ending on or before December 15, 2000, for which
financial statements are presented for comparative purposes. The Company
believes that the adoption of this statement will not have a material impact on
the Company's consolidated financial statements.

In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101).
SAB101 provides guidance on the recognition, presentation and disclosure of
revenues in financial statements. The Company adopted SAB 101 as of December 31,
2000. The adoption did not have an effect on the previously reported quarterly
financial results or the annual financial results, as the Company's revenue
recognition policies were already consistent with SAB 101.


                                       25

<PAGE>


In March 2000, the FASB issued FASB Interpretation No. 44, (FIN 44)
"Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB Opinion No. 25" which provides interpretive guidance on
several implementation issues related to Accounting Principles Board Opinion
No. 25 "Accounting for Stock Issued to Employees." FIN 44 is effective July
1, 2000, but certain conclusions must be applied earlier. The adoption of FIN
44 did not have a material impact on the Company's consolidated financial
statements.

The FASB has issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133."
This statement amends SFAS No. 133, "Accounting for fiscal quarters of all
fiscal years beginning after June 15, 2000. SFAS No. 133 requires that every
derivative instrument be recorded in the balance sheet as either an asset or
liability measured at its fair value. The statement requires that changes in the
derivative's fair value be recognized in earnings unless specific hedge
accounting criteria are met. The Company does not currently use derivative
instruments and thus adoption of SFAS No. 133 did not have a material effect on
the Company's consolidated financial statements.

The FASB has issued SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities - an Amendment of FASB Statement No. 133." This
statement amends SFAS No. 133 for specified transactions. SFAS No. 138 is
effective concurrently with SFAS No. 133 if SFAS No. 133 is not adopted prior to
June 15, 2000. If SFAS No. 133 is adopted prior to June 15, 2000, SFAS No. 138
is effective for quarters beginning after June 15, 2000. The Company believes
that the effect of adoption of SFAS No. 138 will not have a material effect on
the Company's consolidated financial statements.

ITEM 7(a). QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements and supplementary data required by this item are
included on pages F-1 to F-18 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Not applicable.


                                       26

<PAGE>



                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information with respect to the executive
officers of the Company as of March 15, 2001:

<TABLE>
<CAPTION>

NAME                          AGE       POSITION
----                          ---       --------
<S>                           <C>       <C>
Mathew M. Perlot              64        Chairman of the Board

Curtis W. Lawler              79        Chief Executive Officer

Michael R. Jacque             43        President and Chief Operating Officer

William L. Rich               46        Vice President of Finance and
                                        Chief Financial Officer

Steven D. Bettis              37        Vice President of Operations - East

L. Michael Cary               58        Vice President of Operations - West

</TABLE>

MATHEW M. PERLOT co-founded the Company in November 1986 and has served as Chief
Executive Officer and Chairman of the Board since that time. In early 2001, Mr.
Perlot retired as Chief Executive Officer. Mr. Perlot also served as President
until May of 1997. Mr. Perlot served as Director of Sales and Marketing for
Monaco Coach Corporation from 1982 to 1985 and for Beaver Coaches, Inc. from
1985 to 1987. Mr. Perlot also served as President of RV Marketing, Inc. from
1980 to 1987. Mr. Perlot is married to Connie M. Perlot, a director and
Secretary-Treasurer of the Company.

CURTIS W. LAWLER began to serve as the Chief Executive Officer upon Mr. Perlot's
retirement, in addition to being a director of the Company. Mr. Lawler's most
recent positions with the Company were Vice President of the Company and General
Manager - Beaver Motor Coaches, Inc. Mr. Lawler co-founded the Company in 1986
and has been employed by the Company in various capacities since 1987.

MICHAEL R. JACQUE joined the Company as President in June 1999. Prior to joining
the Company, Mr. Jacque served, concurrently, as the President and a major
shareholder of Marathon Coach, Incorporated, the largest bus converter in the
U.S., from 1988-1993 and as General Manager at Guaranty RV, one of the largest
single point RV dealers in the United States between 1980 and 1995. Mr. Jacque
graduated summa cum laude with a B.A. in Psychology from the University of
Oregon. He completed the requirements for a law degree from the University of
Oregon Law school and received his J.D. in May 2000.

WILLIAM L. RICH joined the Company as Vice President of Finance and Chief
Financial Officer in November 1998. Prior to joining the Company, Mr. Rich
served as Vice President of Finance and Administration at Marus Dental
International, a subsidiary of the Henry Schein Corporation. Prior to that, Mr.
Rich held senior financial positions at manufacturing companies


                                       27

<PAGE>

in the Midwest. Mr. Rich obtained his B.S. degree in Business from Miami
University (Ohio) and MBA from the University of North Texas. Mr. Rich is a
CPA and CMA.

STEVEN D. BETTIS joined the company in October 1992. Prior to his current
position as Vice President of Operations - East, Mr. Bettis served as General
Manager of Beaver from September 1997 to February 2001. In addition, Mr. Bettis
served as General Manager of Electronic Design and Assembly from its startup in
January 1996 to September 1997. Prior to ED&A, Mr. Bettis served as Engineering
Manager for Beaver Motor Coaches and in engineering positions for Safari Motor
Coaches. Before joining SMC, Mr. Bettis served as an electronics technician and
supervisor in the US Air Force from 1984 to 1992.

L. MICHAEL CARY joined the company in August 1988. He became Vice President
- Operations and Chief Operating Officer in January 1989. He separated from SMC
in 1997 and rejoined the Company in February, 2001 to serve as Vice President of
Operations-West. From 1976 to 1988, Mr. Cary served as Controller of
Nicolai/Morgan Products, Inc., a door and wood products manufacturing firm.
Prior to 1976, he served in the Air Force as a Logistics Auditor and Finance
Officer. Mr. Cary holds a Bachelors degree in Business Administration from the
University of Portland and a Masters degree in Logistics Management from the Air
Force Institute of Technology. He currently serves on the National Alumni Board
for the University of Portland.

Information with respect to directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement for its 2001
annual meeting of shareholders (the "2001 Proxy Statement") to be filed not
later than 120 days after the end of the fiscal year covered by this Report and
is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information with respect to executive compensation will be included under
"Executive Compensation" in the Company's 2001 Proxy Statement and is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information with respect to security ownership of certain beneficial owners and
management will be included under "Security Ownership of Certain Beneficial
Owners and Management" in the Company's 2001 Proxy Statement and is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information with respect to certain relationships and related transactions with
management will be included under "Certain Transactions" in the Company's 2001
Proxy Statement and is incorporated herein by reference.


                                        28
<PAGE>



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>

(a)(1)   FINANCIAL STATEMENTS                                              PAGE IN THIS REPORT
                                                                           -------------------
<S>                                                                        <C>
             Report of Independent Accountants                                     F-1

             Consolidated Balance Sheet at December 31, 1999
                and 2000                                                           F-2

             Consolidated Statement of Operations for the Years
             Ended December 31, 1998, 1999 and 2000                                F-3

             Consolidated Statement of Changes in Shareholders'
             Equity for the Years Ended December 31, 1998, 1999
                and 2000                                                           F-4

             Consolidated Statement of Cash Flows for the Years
             Ended December 31, 1998, 1999 and 2000                                F-5

             Notes to Consolidated Financial Statements                            F-6
</TABLE>

(a)(2)       FINANCIAL STATEMENT SCHEDULES - NONE

(a)(3)       EXHIBITS

<TABLE>
<S>                        <C>

                  3.1      Restated Articles of Incorporation; incorporated by
                           reference to Exhibit 3.1 to the 1995 Form S-1

                  3.2      Restated Bylaws; incorporated by reference to Exhibit
                           3.2 to the Registrant's Annual Report on Form 10-K
                           for the year ended December 31, 1994

                  4.1      See Articles II and V of Exhibit 3.1 and Articles I
                           and VI of Exhibit 3.2

                  *10.1    1994 Stock Incentive Plan, as amended; incorporated
                           by reference to Exhibit 10.1 to the Registrant's
                           Annual Report on Form 10-K for the year ended
                           December 31, 1994

                  10.2     Stock Purchase Agreement dated March 28, 1988 among
                           Curtis Lawler and Sandra Lawler, Mathew M. Perlot and
                           the Registrant; incorporated by reference to Exhibit
                           10.2 to the 1995 Form S-1


                                       29

<PAGE>

                  10.3     Manufacturer Agreement dated June 24, 1987 between
                           General Electric Credit Corporation and the
                           Registrant; incorporated by reference to Exhibit 10.7
                           to the 1995 Form S-1

                  10.4     Repurchase Agreement dated November 30, 1993 between
                           the Registrant and General Motors Acceptance
                           Corporation; incorporated by reference to Exhibit
                           10.9 to the 1995 Form S-1

                  +10.5    Floorplan Agreement dated April 14, 1994 between ITT
                           Commercial Finance Corp. and the Registrant, and
                           amendment and amendment letters thereto; incorporated
                           by reference to Exhibit 10.10 to the 1995 Form S-1

                  10.6     Lease Assignment and Assumption Agreement dated June
                           1994 between Beaver Coaches, Inc. and Beaver Motor
                           Coaches, L.L.C., with Lease dated May 15, 1989 by and
                           between Frank Storch and James Hogue, dba S&H
                           Associates, and Beaver Coaches, Inc., and amendments
                           thereto; incorporated by reference to Exhibit 10.11
                           to the 1995 Form S-1

                  *10.7    Retirement Agreement and Mutual Release of Claims
                           between the Registrant and Mathew M. Perlot dated
                           February 23, 2001

                  *10.8    Retirement Agreement between the Registrant and
                           Curtis Lawler dated February 23, 2001

                   21.1    Subsidiaries of the Company

                   23.1    Consent of PricewaterhouseCoopers LLP
</TABLE>
----------------
*  This exhibit constitutes a management contract or compensatory plan or
   arrangement.

+  Confidential treatment has been granted by the Commission for certain
   portions of this agreement.


                                       30


<PAGE>


(b)REPORTS ON FORM 8-K.

The Company filed a report under Item 5 on Form 8-K on January 10, 2001.



                                       31


<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders of
SMC Corporation


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
SMC Corporation and its subsidiaries at 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. 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 of these statements in accordance with auditing standards
generally accepted in the United States of America which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.


PRICEWATERHOUSECOOPERS LLP


Portland, Oregon
March 2, 2001



                                      F-1

<PAGE>



SMC CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                   DECEMBER 31,
                                                                                 1999             2000
                                                                                 ----             ----
<S>                                                                      <C>               <C>
ASSETS

Current assets:
   Cash and cash equivalents                                             $          26     $         119
   Accounts receivable, net (Note 1)                                            15,056             7,832
   Tax refund receivable                                                             -             1,169
   Inventories (Notes 1 and 2)                                                  41,703            35,151
   Prepaid expenses and other                                                      292               666
   Deferred tax asset (Note 6)                                                   2,627             4,734
                                                                         -------------     -------------

      Total current assets                                                      59,704            49,671

Property, plant and equipment, net (Notes 1 and 3)                              13,978            12,827
Intangible assets, net                                                           1,756             1,569
Deferred tax asset (Note 6)                                                         43               405
Other assets                                                                       188               169
                                                                         -------------     -------------
      Total assets                                                       $      75,669     $      64,641
                                                                         =============     =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Notes payable (Note 4)                                                $       9,464     $       6,511
   Current portion of long-term debt (Note 5)                                      364               407
   Accounts payable                                                             22,969            22,253
   Income taxes payable (Note 6)                                                   700                 -
   Product warranty liabilities                                                  3,481             4,026
   Current portion of capital lease obligation (Note 8)                             21                17
   Accrued liabilities                                                           7,128             5,417
                                                                         -------------     -------------
      Total current liabilities                                                 44,127            38,631

Long-term debt, net of current portion (Note 5)                                  8,646             8,613
Capital lease obligation, less current portion (Note 8)                             17                 -
                                                                         -------------     -------------
      Total liabilities                                                         52,790            47,244
                                                                         -------------     -------------

Commitments and contingencies (Notes 7 and 9)

Shareholders' equity:
   Preferred stock, 5,000 shares authorized, none issued or
     outstanding (Note 11)                                                           -                 -
   Common stock, 30,000 shares authorized, 5,780 and 5,745 shares
     issued and outstanding, respectively (Note 10)                              9,033             8,914
   Additional paid-in capital (Note 10)                                          1,472             1,472
   Retained earnings (Note 10)                                                  12,374             7,011
                                                                         -------------     -------------
      Total shareholders' equity                                                22,879            17,397
                                                                         -------------     -------------
   Total liabilities and shareholders' equity                             $     75,669     $      64,641
                                                                          ============     =============
</TABLE>


                                      F-2

   The accompanying notes are an integral part of this financial statement.


<PAGE>


SMC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31,
                                                            1998               1999           2000
                                                            ----               ----           ----
<S>                                                     <C>             <C>              <C>
Sales                                                   $     217,485   $     215,540    $     190,701

Cost of sales                                                 195,405         194,127          175,720
                                                        -------------   -------------     ------------
    Gross profit                                               22,080          21,413           14,981

Selling, general and administrative expenses                   17,610          18,099           18,175
Litigation and settlement costs                                 2,849           2,808            2,845
                                                        -------------     -----------      -----------
Income (loss) from operations                                   1,621             506           (6,039)
Interest expense                                                  813           1,538            1,948
Other (income) expense, net                                       127          (1,383)             949
                                                        -------------   --------------   -------------

Income (loss) before taxes                                        681             351           (8,936)

Provision (benefit) for income taxes (Note 6)                     272             110           (3,573)
                                                        -------------   -------------    --------------
Net income (loss)                                       $         409   $         241    $      (5,363)
                                                        =============   =============    ==============
Net income (loss) per share - basic                     $         .06   $         .04    $        (.93)
                                                        =============   =============    ==============
Net income (loss) per share - diluted                   $         .06   $         .04    $        (.93)
                                                        =============   =============    ==============
Weighted average number of shares - basic                       6,429           5,825            5,767
                                                        =============   =============    ================
Weighted average number of shares - diluted                     6,429           5,825            5,767
                                                        =============   =============    ================
</TABLE>


                                      F-3

   The accompanying notes are an integral part of this financial statement.


<PAGE>


SMC CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                         ADDITIONAL
                                            COMMON STOCK                   PAID-IN       RETAINED
                                        SHARES         AMOUNT              CAPITAL       EARNINGS        TOTAL
                                       --------        ------            -----------     --------     -----------
<S>                                    <C>             <C>              <C>           <C>             <C>

Balance, December 31, 1997                6,343         $   10,810      $    1,488    $   11,995      $     24,293
Net Income                                    -                 -                 -          409               409
Common stock issued upon
  exercise of options                       252              1,954               -             -             1,954
Stock repurchase (Note 10)                 (705)            (3,160)            (16)         (271)          (3,447)
                                      ----------       ------------     -----------   -----------   --------------
Balance, December 31, 1998                5,890             9,604            1,472        12,133           23,209
                                      ----------       ------------     -----------   -----------   --------------
Net Income                                     -                -                -           241              241
Stock repurchase (Note 10)                 (110)             (571)               -             -             (571)
                                      ----------       ------------     -----------   -----------   --------------
Balance, December 31, 1999                5,780              9,033           1,472        12,374            22,879
                                      ----------       ------------     -----------   -----------   --------------
Net Loss                                                                                  (5,363)          (5,363)
Stock repurchase (Note 10)                 (35)              (119)              -             -              (119)
                                      ----------       ------------     -----------   -----------   --------------
Balance, December 31, 2000                5,745         $    8,914      $     1,472   $    7,011      $    17,397
                                      ==========       ============     ===========   ===========   ==============
</TABLE>

                                      F-4

   The accompanying notes are an integral part of this financial statement.



<PAGE>

SMC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>


                                                                                         YEAR ENDED DECEMBER 31,
                                                                                  1998              1999            2000
                                                                              ------------      ------------    -----------
<S>                                                                           <C>               <C>             <C>
Cash flows from operating activities:
 Net income (loss)                                                            $     409         $     241       $  (5,363)
 Adjustments to reconcile net income (loss) to net cash provided
   by (used in) operating activities:
    Depreciation and amortization                                                 2,133            2,081           2,094
    Deferred taxes                                                                 (163)            (454)         (2,469)
    (Gain) loss on asset dispositions                                                 2           (1,450)            349
    Litigation and settlement costs                                               1,070             (191)             73
    Changes in certain assets and liabilities
       Accounts receivable                                                         (460)          (2,199)          7,224
       Tax refund receivable                                                          -                -          (1,169)
       Inventories                                                               (3,677)         (14,988)          6,552
       Prepaid expenses and other                                                  (718)           1,135            (374)
       Other assets                                                                 (27)            (114)             19
       Accounts payable                                                           7,447           (1,820)           (716)
       Income taxes payable                                                        (405)             700            (700)
       Accrued liabilities and other obligations                                  1,167               69          (1,239)
                                                                          -------------    -------------   --------------
Net cash provided by (used in) operating activities                               6,778          (16,990)          4,281
                                                                          -------------    --------------  -------------

Cash flows from investing activities:
    Capital expenditures                                                         (3,952)            (734)         (2,260)
    Proceeds from disposal of equipment                                              38            5,758           1,155
    Lease abatement                                                                   -            1,104               -
                                                                          -------------    -------------   -------------
Net cash provided by (used in) investing activities                              (3,914)           6,128          (1,105)
                                                                          -------------    -------------   --------------

Cash flows from financing activities:
    Net borrowings (repayments) on notes payable                                 (1,695)           9,464          (2,953)
    Proceeds from long-term debt                                                  4,522            3,216           1,370
    Repayments of long-term debt                                                 (2,973)          (2,512)         (1,360)
    Principal payments on capital lease obligation                                  (18)             (19)            (21)
    Repurchase of capital stock (Note 10)                                        (3,447)            (571)           (119)
    Proceeds from issuance of common stock                                        1,954                -               -
                                                                          -------------    -------------   -------------
Net cash provided by (used in) financing activities                              (1,657)           9,578          (3,083)
                                                                          --------------   -------------   --------------
Net increase (decrease) in cash and cash equivalents                              1,207           (1,284)             93
Cash and cash equivalents, beginning of year                                        103            1,310              26
                                                                          -------------    -------------   -------------
Cash and cash equivalents, end of year                                    $       1,310    $          26   $         119
                                                                          =============    =============   =============
Supplemental disclosure of cash flow information:
 Cash paid during the period for:
    Interest                                                              $         687    $       1,504   $       1,850
    Income taxes                                                          $       1,725    $      (1,033)  $         660
</TABLE>

                                      F-5

   The accompanying notes are an integral part of this financial statement.



<PAGE>


SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF BUSINESS

     SMC Corporation, an Oregon corporation, and its wholly owned subsidiaries
     (collectively, the "Company") design, manufacture, and market Class A and
     Class C motor coaches sold primarily to dealers which are independent of
     the Company throughout the United States and Canada.

     BASIS OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
     SMC Corporation and the following seven wholly owned subsidiaries which
     operate under the control of SMC Corporation: Safari Motor Coaches, Inc.
     ("Safari"), Beaver Motor Coaches, Inc. ("Beaver"), Magnum Manufacturing,
     Inc. ("Magnum"), Electronic Design and Assembly, Inc. ("ED&A"), Composite
     Technologies, Inc. ("CTI"), Safari FSC Ltd., and Harney County Operations,
     Inc. ("HCO"). Safari, Beaver, and HCO purchase motor coach chassis and
     other components used in the manufacture of finished motor coaches from the
     other subsidiaries. All significant intercompany transactions have been
     eliminated for purposes of presentation of the consolidated financial
     statements of SMC Corporation.

     REPORTING PERIODS

     The Company reports its annual results of operations on the basis of
     52-week periods ending December 31 and its quarterly results of operations
     on the basis of 13-week periods ending on the Saturday nearest the calendar
     month end. For presentation purposes, the Company has indicated its
     quarters as ending March 31, June 30, September 30, and December 31.

     CASH AND CASH EQUIVALENTS

     Cash and cash equivalents consist of demand deposits with financial
     institutions. The Company considers all highly liquid short-term
     investments with original maturities of three months or less to be cash
     equivalents for purposes of the consolidated balance sheet and consolidated
     statement of cash flows. Noncash transactions have been excluded from the
     consolidated statement of cash flows.

     ACCOUNTS RECEIVABLE

     Accounts receivable are net of an allowance for doubtful accounts of
     $55,000 and $89,000 at December 31, 1999 and 2000, respectively.

     INVENTORIES

     Inventories are stated at the lower of cost or market, with cost determined
     by the first-in, first-out method for raw materials, work-in-progress and
     finished goods and by the specific cost method for chassis. Cost includes
     the purchase price of raw materials, direct labor and an allocation of
     overhead costs. Raw materials inventory consists of component parts and
     motor coach chassis.

     PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment are stated at cost. Additions, renewals and
     betterments are capitalized. Expenditures for maintenance, repairs, and
     minor renewals and betterments are charged to expense. Gains or losses
     realized from sales or retirements are reflected in earnings. Gains of
     $2,000 and $1,450,000 were recorded during the years ended December 31,
     1998, and 1999 respectively, and losses of $349,000 were recorded during
     the year 2000. Depreciation and amortization are provided using the
     straight-line method over the estimated useful lives of 15 years for land
     improvements, 20 to 30 years for buildings and improvements, and 5 to 12
     years for machinery and equipment.

     INTANGIBLE ASSETS

     Costs in excess of the fair value of the assets of Beaver acquired in 1994
     consists primarily of product trade names, which are amortized using the
     straight-line method over 15 years. Amortization expense for the years
     ended December 31, 1998, 1999 and 2000 was $186,000 in each year.
     Accumulated amortization was $1,227,000 and $1,041,000 at December 31, 2000
     and 1999, respectively.


                                      F-6


<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     IMPAIRMENT OF LONG-LIVED ASSETS

     Periodically, the Company reviews the recoverability of its long-lived
     assets based on estimated undiscounted future cash flows from operating
     activities compared with the carrying value of the assets. If the aggregate
     future cash flows are less than the carrying value, a write-down would be
     required, measured by the difference between the discounted future cash
     flows and the carrying value of the assets.

     FINANCIAL INSTRUMENTS

     The Company estimates the fair value of its monetary assets and liabilities
     based upon the existing interest rates related to such assets and
     liabilities compared to the current market rates of interest for
     instruments of a similar nature and degree of risk. Cash and cash
     equivalents, and notes payable to banks approximate fair value as reported
     in the consolidated balance sheet due to the short-term nature of these
     instruments. The fair value of long-term debt is estimated using discounted
     cash flow analyses, based on the Company's incremental borrowing rates for
     similar types of borrowing arrangements. The fair value of the Company's
     long-term debt at December 31, 1999 and 2000 approximates the carrying
     value. The Company records all other financial instruments, including
     accounts receivable and accounts payable, at cost, which approximates
     market value because of the short maturity of these instruments.

     REVENUE RECOGNITION

     The Company recognizes revenue from the sale of motor coaches when title
     and risk of ownership are transferred to the dealer, which is upon shipment
     or dealer pick-up. Motor coaches are shipped to dealers only upon
     verification of dealer financing from the finance company providing the
     motor coach financing. Finance companies remit funds directly to the
     Company upon receipt of the manufacturer's certificate of origin, generally
     within 10 days after shipment. A dealer may be invoiced for and receive
     title to motor coaches prior to taking physical possession when the dealer
     has made a fixed, written commitment to purchase, the motor coaches have
     been completed and are available for pick-up or delivery, and the dealer
     has requested in writing the Company to hold the motor coaches until the
     dealer determines the most economical means of taking physical possession.
     Upon such a request, the Company has no further obligation except to
     segregate the motor coaches, invoice them under normal billing and credit
     terms and hold them for a short period of time as is customary in the
     industry, generally less than two weeks, until pick-up or delivery. Motor
     coaches are built to dealer specification and no right of return or
     exchange privileges are generally granted. Where circumstances warrant, a
     provision for sales allowances or returns is recorded.

     Sales and the percentage of total sales made to dealers representing more
     than 10% of consolidated sales in any of the following periods were as
     follows (dollar amounts in thousands); (n/a means sales did not meet levels
     requiring disclosure):

<TABLE>
<CAPTION>

                                             YEAR ENDED DECEMBER 31,
                                         1998                    1999                2000
                                         ----                    ----                ----
<S>                                <C>                    <C>                    <C>
       Dealer 1                          n/a                     n/a             $36,567  19%
       Dealer 2 (See Note 9)       $29,546  14%           $26,242  12%           $25,211  13%
       Dealer 3                          n/a                     n/a             $21,866  11%
</TABLE>


                                       F-7

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     CERTAIN RISKS, UNCERTAINTIES AND CONCENTRATION OF CREDIT RISK
     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of financial
     statements and the reported amounts of revenues and expenses during the
     reporting period. Actual results could differ from these estimates.

     The Company has a concentration of credit risk in the recreational vehicle
     industry, and specifically related to amounts outstanding at any point in
     time in accounts receivable and/or under repurchase agreements (see Note 9)
     with any specific dealership to which it has sold motor coaches. The
     Company requires no collateral from its dealers upon sale of a motor coach,
     and most dealer financing arrangements provide for repurchase agreements
     which require the Company to repurchase previously sold motor coaches in
     the event of the dealer's default on its financing arrangement.

     PRODUCT WARRANTY

     The Company provides a one year warranty against defects in material and
     workmanship to dealers and purchasers of motor coaches and a similar three
     year warranty for chassis manufactured by the Company. Certain components
     used in the manufacture of the Company's motor coaches carry warranties of
     other manufacturers. Estimated warranty costs are reserved at the time of
     sale of the warranted products.

     INCOME TAXES

     The Company accounts for income taxes under the liability method, as set
     forth in Statement of Financial Accounting Standards No. 109, "Accounting
     for Income Taxes," (SFAS No. 109). Under the liability method, deferred
     taxes are determined based upon the difference between the financial
     statement and tax bases of assets and liabilities at enacted tax rates in
     effect in the years in which the differences are expected to reverse.
     Deferred tax expense represents the change in the deferred tax
     asset/liability balance. A valuation allowance is established for net
     deferred tax assets if their realization is not likely.

     COMPREHENSIVE INCOME

     The Company adopted SFAS No. 130, "Reporting Comprehensive Income" as of
     January 1, 1998. Comprehensive income is equal to net income for all
     periods presented.

     RECLASSIFICATIONS

     Certain prior year amounts have been reclassified to conform to the current
     year presentation. These changes had no impact on previously reported
     results of operations or shareholders' equity.

     SEGMENT DISCLOSURE

     The Company complies with segment reporting as set forth in Statement of
     Financial Accounting Standards No.131,"Disclosures about Segments of an
     Enterprise and Related Information," (SFAS No. 131) effective December
     1998. Under this statement, the Company employs the aggregation criteria of
     this standard.


                                      F-8

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     EARNINGS PER SHARE

     Diluted EPS is calculated by dividing net income by the total of the
     weighted average actual shares outstanding for each period plus the number
     of shares calculated as having a dilutive impact, if any, related to the
     stock options under the Company's Stock Incentive Plan, and the warrants
     issued in conjunction with the Company's initial public offering.
     Previously reported amounts for primary EPS are the same as the diluted EPS
     amounts now reported. Basic EPS is computed by dividing the net income by
     the weighted average actual shares outstanding for each period presented
     with no consideration as to the dilutive impact of the Company's
     outstanding stock options or warrants. Diluted net loss per common share
     for 2000 has been computed by dividing net loss by the weighted-average
     number of common shares outstanding without an assumed increase in common
     shares outstanding for common stock equivalents as they are antidilutive.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In September 2000, the FASB issued SFAS No. 140, ACCOUNTING FOR TRANSFERS
     AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF LIABILITIES, A
     REPLACEMENT OF FASB STATEMENT NO. 125. This Statement replaces FASB
     Statement No. 125, ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL
     ASSETS AND EXTINGUISHMENTS OF LIABILITIES. It revises the standards for
     accounting for securitizations and other transfers of financial assets and
     collateral and requires certain disclosures, but it carries over most of
     Statement 125's provisions without reconsideration. The Statement provides
     accounting and reporting standards for transfers and servicing of financial
     assets and extinguishments of liabilities. Those standards are based on
     consistent application of a FINANCIAL-COMPONENTS APPROACH that focuses on
     control. Under that approach, after a transfer of financial assets, an
     entity recognizes the financial and servicing assets it controls and the
     liabilities it has incurred, derecognizes financial assets when control has
     been surrendered, and derecognizes liabilities when extinguished. This
     Statement provides consistent standards for distinguishing transfers of
     financial assets that are sales from transfers that are secured borrowings.

     SFAS No. 140 is effective for transfers and servicing of financial assets
     and extinguishments of liabilities occurring after March 31, 2001. It is
     effective for recognition and reclassification of collateral and for
     disclosures relating to securitization transactions and collateral for
     fiscal years ending after December 15, 2000. Disclosures about
     securitization and collateral accepted need not be reported for periods
     ending on or before December 15, 2000, for which financial statements are
     presented for comparative purposes. The Company believes that the adoption
     of this statement will not have a material impact on the Company's
     consolidated financial statements.

     In December 1999, the Securities and Exchange Commission issued Staff
     Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
     (SAB 101). SAB101 provides guidance on the recognition, presentation and
     disclosure of revenues in financial statements. The Company adopted SAB 101
     as of December 31, 2000. The adoption did not have an effect on the
     previously reported quarterly financial results or the annual financial
     results, as the Company's revenue recognition policies were already
     consistent with SAB 101.


                                      F-9


<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     (Continued)

     RECENT ACCOUNTING PRONOUNCEMENTS (continued)

     In March 2000, the FASB issued FASB Interpretation No. 44, (FIN 44)
     "Accounting for Certain Transactions Involving Stock Compensation - an
     Interpretation of APB Opinion No. 25" which provides interpretive guidance
     on several implementation issues related to Accounting Principles Board
     Opinion No. 25 "Accounting for Stock Issued to Employees." FIN 44 is
     effective July 1, 2000, but certain conclusions must be applied earlier.
     The adoption of FIN 44 did not have a material impact on the Company's
     consolidated financial statements.

     The FASB has issued SFAS No. 137, "Accounting for Derivative Instruments
     and Hedging Activities - Deferral of the Effective Date of FASB Statement
     No. 133." This statement amends SFAS No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" to be effective for all fiscal quarters
     of all fiscal years beginning after June 15, 2000. SFAS No. 133 requires
     that every derivative instrument be recorded in the balance sheet as either
     an asset or liability measured at its fair value. The statement requires
     that changes in the derivative's fair value be recognized in earnings
     unless specific hedge accounting criteria are met. The Company does not
     currently use derivative instruments and thus adoption of SFAS No. 133 did
     not have a material effect on the Company's consolidated financial
     statements.

     The FASB has issued SFAS No. 138, "Accounting for Certain Derivative
     Instruments and Certain Hedging Activities - an Amendment of FASB Statement
     No. 133." This statement amends SFAS No. 133 for specified transactions.
     SFAS No. 138 is effective concurrently with SFAS No. 133 if SFAS No. 133 is
     not adopted prior to June 15, 2000. If SFAS No. 133 is adopted prior to
     June 15, 2000, SFAS No. 138 is effective for quarters beginning after June
     15, 2000. The Company believes that the effect of adoption of SFAS No. 138
     will not have a material effect on the Company's consolidated financial
     statements.

2.   INVENTORIES

     Inventories by major classification are as follows (in thousands):

<TABLE>
<CAPTION>

                                                 DECEMBER 31,
                                                1999             2000
                                        ----------------   ----------
<S>                                     <C>               <C>
        Raw materials                   $      15,506     $     11,916
        Work-in-progress                       10,080            9,984
        Finished goods                         16,117           13,251
                                        -------------     ------------
        Total                           $      41,703     $     35,151
                                        =============     ============
</TABLE>


                                     F-10

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.    PROPERTY, PLANT AND EQUIPMENT

        The components of property, plant and equipment are as follows (in
    thousands):

<TABLE>
<CAPTION>

                                                     DECEMBER 31,
                                                1999              2000
                                           ------------- ------------------
<S>                                        <C>           <C>
    Land and improvements                     $  3,624      $  3,642
    Buildings and improvements                  10,597        11,086
    Machinery and equipment                      7,787         8,312
    Construction in progress                       522           110
                                              --------      --------
                                                22,530        23,150

    Less accumulated depreciation               (8,552)      (10,323)
                                              --------      --------
    Property, plant and equipment, net        $ 13,978      $ 12,827
                                              ========      ========
</TABLE>

4.   NOTES PAYABLE

     At December 31, 2000 the Company had a $8.0 million revolving line of
     credit for working capital requirements. At February 1, 2001, this line
     increased to $10.0 million. The available borrowings under the line of
     credit are limited to 80% of eligible accounts receivable plus 90% of
     eligible finished goods inventory and 50% of eligible raw and work-in
     progress inventory. As of December 31, 2000, the available amount was $1.8
     million. Outstanding borrowings under the line of credit are due on demand.
     The line of credit is collateralized by accounts receivable, inventory
     (excluding chassis inventory purchased from third parties), and equipment.
     Further, the line of credit is cross-collateralized among the companies.

     The terms of the respective credit agreements require compliance with
     certain financial covenants, including working capital requirements. As of
     December 31, 2000, the Company was in compliance with all of its financial
     covenants associated with its line of credit facilities and other bank
     loans.


                                     F-11


<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.   LONG-TERM DEBT

          Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                                                            DECEMBER 31,
                                                                                         1999           2000
                                                                                         ----           ----
                                                                                           (IN THOUSANDS)
<S>                                                                                      <C>          <C>
        Bank loan collateralized by equipment, with monthly payments of $35,000
        including interest at 7.625%, with the balance due
        December 31, 2002                                                                $ 1,131      $   813

        Promissory note collateralized by a mortgage on the related property,
        with annual payments of $24,000 including interest at 6%, with the
        balance due no later than
        January 15, 2007                                                                     142          111

        Real estate term debt, with a maximum amount of $8 million. Interest is
        prime (9.5%) as of December 31, 2000. This debt is amortized on a 10
        year term with a balloon payment of approximately $2.7 million payable
        on Oct 1,2009                                                                      7,737        7,289

        Capital lease collateralized by equipment, with monthly payments of
        $17,000, including interest at 9.5%. This lease was paid in full on
        January 4, 2001                                                                       -          807
                                                                                         -------      -------
                                                                                           9,010        9,020
       Less current portion of long-term debt                                              (364)         (407)
                                                                                         -------      -------
       Long-term debt less current portion                                               $ 8,646      $ 8,613
                                                                                         =======      =======
</TABLE>


      The aggregate maturities of long-term debt for the next five years and
      thereafter as of December 31, 2000 are $407,000, $625,000, $221,000,
      $218,000, $21,000 and $7,528,000, respectively.

      Certain of the borrowings are subject to restrictive covenants, including
      working capital requirements, with which the Company is in compliance at
      December 31, 2000. Other terms of the borrowings require the lending
      bank's written consent prior to the issuance of any dividends.


                                       F-12

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   PROVISION FOR INCOME TAXES

     The provision for income taxes for the years ended December 31, 1998, 1999
     and 2000 is as follows (in thousands):

<TABLE>
<CAPTION>


                                   YEAR ENDED DECEMBER 31,
                             1998                 1999             2000
                         ------------         ------------     ------------
<S>                      <C>                  <C>              <C>
        Current:
           Federal       $      390           $      582       $      (931)
           State                 45                  (18)             (173)
                         ------------         ------------     ------------
                                435                  564            (1,104)
                         ------------         ------------     ------------
        Deferred:
           Federal             (144)                (402)           (1,999)
           State                (19)                 (52)             (470)
                         ------------         ------------     ------------
                               (163)                (454)           (2,469)
                         ------------         ------------     ------------
                         $      272           $      110       $    (3,573)
                         ============         ============     ============
</TABLE>


      Deferred tax assets are comprised of the following components (in
thousands):

<TABLE>
<CAPTION>


                                                                              DECEMBER 31,
                                                                         1999             2000
                                                                     ------------     ------------
<S>                                                                  <C>              <C>
        Current:
           Vacation reserve                                          $       345      $      206
           Accrued workers' compensation claim liabilities                    77               -
           Warranty reserves                                               1,648           2,077
           Inventory reserves                                                 32              56
           Other liabilities                                                 504             590
           Accrued Bonus                                                       -              58
           Net operating loss generated in 2000                                -           1,713
           Allowance for doubtful accounts                                    21              34
                                                                     -----------      ----------
                                                                        $  2,627        $  4,734
                                                                     ===========      ==========
        Noncurrent:
           Tax depreciation in excess of book depreciation              $     23        $    238
           AMT credit                                                          -              80
           Energy credit                                                       -              68
           Other                                                              20              19
                                                                     -----------      ----------
                                                                        $     43        $    405
                                                                     ===========      ==========
</TABLE>


                                     F-13

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.   PROVISION FOR INCOME TAXES (Continued)

     The effective tax rate differs from the U.S. statutory federal tax rate
     due to the following:

<TABLE>
<CAPTION>

                                                      YEAR ENDED DECEMBER 31,
                                               1998            1999               2000
                                              -------         ------             -------
<S>                                           <C>             <C>                <C>

     Statutory federal tax rate                34.0 %           34.0 %              34.0 %
     State taxes, net of federal benefit        4.0              3.0                 6.4
     Nondeductible expenses                     5.0              8.9                (0.4)
     Other, net                                (3.0)           (14.6)               (0.1)
                                              -----            -----                ----
                                               40.0 %           31.3 %              39.9 %
                                              =====            =====                ====
</TABLE>


      The primary impact creating the lower rate in 1999 was a state energy
      credit received from its HCO and CTI operations. The 1999 provision also
      includes some unanticipated energy credits received in 1999 that relate to
      a prior period.

7.    RELATED PARTIES

      In 1998, the Company began purchasing electronic parts from a supplier
      company that is owned by a principal related to an officer. The total
      amount of purchases for the years ended December 31, 1998, 1999 and 2000
      was $449,000, $946,000 and $710,000 respectively.

      In 1998, as part of the Company's program to repurchase 800,000 shares of
      stock, the Company repurchased 100,000 shares from an officer of the
      Company for $4.2375 per share. In 1999, another 100,000 shares of stock
      were repurchased from an officer for $5.25 per share as part of this
      program. There were no further stock repurchases from an officer in 2000.
      See Note 10 for further details.

8.    LEASES

      The Company is obligated under a capital lease for computer software that
      expires in September of 2001. At December 31, 1999 and 2000, the equipment
      under capital leases was $95,000 respectively. At December 31, 1999 and
      2000, accumulated amortization on this lease equipement was $76,000 and
      $95,000 respectively.

      The Company also has noncancelable operating leases, primarily for
      facilities space, manufacturing equipment, telecommunications,
      transportation equipment, and computer software and hardware, which expire
      over the next five years and thereafter. Rental expense under operating
      leases was $944,000, $1,080,000, and $1,334,000 for the years ended
      December 31, 1998, 1999, and 2000, respectively.


                                      F-14

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.    LEASES (Continued)

      Future minimum lease payments under noncancelable operating leases and
      future minimum capital lease payments as of December 31, 2000 are:

<TABLE>
<CAPTION>

           Year ending December 31:                    Capital Lease             Operating Leases
           ------------------------                    -------------             ----------------
<S>                                                    <C>                       <C>
           2001                                          $    18,000                $   1,257,000
           2002                                                   --                    1,120,000
           2003                                                   --                      954,000
           2004                                                   --                      858,000
           2005                                                   --                      505,000
           Thereafter                                             --                    4,346,000
                                                         -----------                -------------
           Total minimum lease payments                       18,000                $   9,040,000
                                                                                    =============
           Less amount representing interest
              (at 8.52%)                                       1,000
                                                         -----------
           Minimum lease payments,
              excluding interest                              17,000
           Current installments of obligation
              under capital lease                             17,000
                                                         -----------
           Obligation under capital lease
              excluding current installments             $         -
                                                         ===========
</TABLE>

9.   COMMITMENTS AND CONTINGENCIES

     As is customary in the recreational vehicle industry, the Company is
     contingently liable under the terms of repurchase agreements with finance
     companies which provide secured inventory financing for dealers of the
     Company's products. These agreements require the Company to repurchase its
     products from the finance company in the event of a dealer's default. The
     contingent liability under these agreements approximates the sales price of
     the motor coaches, less principal payments made by the dealer. The Company
     expects to resell any products repurchased to reduce any liabilities
     incurred. One significant dealer defaulted on its obligations in 2000
     resulting in a potential repurchase of 44 units. Details of this event were
     disclosed in the Company's Form 8-K report filed on January 10, 2001.
     Although the Company was not required to repurchase the coaches at December
     31, 2000, a provision for sales returns of $3.3 million with a gross profit
     impact of $800,000 was recorded for specific coaches estimated to be
     repurchased. In 2001, additional buyers, both dealers and retail customers,
     were found for the coaches comprising the provision and consequently the
     provision was reversed in the first quarter of 2001. Thus, there was no
     materially adverse impact of this event.

     The risk of loss is spread over various dealers and finance companies.
     Total secured inventory financing obligations of the Company's dealers,
     for which the Company was contingently liable, were approximately $104.0
     million and $98.9 million at December 31, 1999 and 2000, respectively.

                                     F-15


<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.   COMMITMENTS AND CONTINGENCIES (Continued)

      From time to time, the Company is involved in various customer complaints
      which arise in the ordinary course of business. The Company has vigorously
      defended itself against these complaints. For the years ended December 31,
      1998, 1999 and 2000, the Company recorded litigation and settlement costs
      of $2,849,000, $2,808,000 and $2,845,000 respectively.

      On March 7, 2001, a case involving certain employment practices was heard
      in the Federal District court in Eugene, Oregon. The case involved an
      alleged incidence of harassment by co-workers in 1997. Of the three counts
      filed by the plaintiff, the jury found in favor of the Company on two of
      the counts. On the third count that alleged the Company allowed a hostile
      environment to exist, the jury found for the plaintiff and awarded
      $100,000 and $1.0 million in punitive damages. The court, however, has
      not entered judgment for the plaintiff and the judge has undertaken a
      quite unusual action and invited the filing of motions for a new trial
      and for the reduction in the amount of the judgment. The Company has
      filed such motions, but, although it is optimistic that the court will
      grant it some relief, there is no assurance the court will do so, and
      any relief granted by the court will likely be immediately appealable by
      the plaintiff.

10.   COMMON STOCK MATTERS

      In conjunction with the Company's initial public offering on January 20,
      1995, a total of 125,000 warrants were issued to the Underwriters of the
      Offering. Such warrants entitle the holder to purchase an equal amount of
      shares of common stock of the Company anytime after January 20, 1996 until
      their expiration on January 20, 2000 at a price of $9.30 per share. No
      stock was purchased related to the warrants as of the date of this report
      and these warrants expired in 2000.

      STOCK INCENTIVE PLAN
      Effective October 20, 1994, the Company adopted a stock incentive plan for
      key employees and directors of the Company. In 1997, the shareholders of
      the Company voted to increase the number of shares authorized under the
      plan from 1.1 million to 1.4 million shares of common stock; accordingly,
      these shares have been reserved by the Company. The stock options
      generally become exercisable ratably over a period of three years from the
      date of grant at prices equal to the fair market value at the date of
      grant. The maximum option term is 10 years. The following table summarizes
      option transactions under the plan:

<TABLE>
<CAPTION>

                                      1998             1999             2000
                                  -----------      -----------      ------------
<S>                               <C>              <C>              <C>
SHARES SUBJECT TO OPTION:
Balance at January 1               937,785           928,500           823,500
Options granted                    333,000           222,000           377,000
Options exercised                 (252,285)                -                 -
Options terminated                 (90,000)         (327,000)         (125,000)
                                  -----------      -----------      ------------
Balance at December 31             928,500           823,500         1,075,500
                                  ===========      ===========      ============
WEIGHTED AVERAGE OPTION
  PRICE IN DOLLARS:
At January 1                      $   7.84          $   8.23        $     7.18
Options granted                       9.05              4.77              4.99
Options exercised                     7.75                 -                 -
Options terminated                    8.49              8.52              6.16
At December 31                        8.23              7.18              6.53

SHARES AVAILABLE FOR
GRANT AT DECEMBER 31:              208,651           313,651            61,651

</TABLE>

                                     F-16

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   COMMON STOCK MATTERS (Continued)

      STOCK INCENTIVE PLAN (Continued)

      The exercise prices of the 1,075,500 options granted as of December 31,
      2000 range between $3.813 and $9.375 and have a weighted average remaining
      contractual life of 6.8 years; 755,767 of the total options granted are
      fully vested, and therefore may be exercised, as of December 31, 2000 at a
      weighted average exercise price of $7.25.

      The Company applies ABP Opinion 25 and related Interpretations in
      accounting for the stock incentive plan. Had compensation cost for the
      stock incentive plan been determined based on the fair value at the grant
      dates for awards under the plan consistent with the method of FASB
      Statement 123, "Accounting for Stock-Based Compensation," the Company's
      net income (loss) and income (loss) per share would have been as indicated
      below:

                           PRO FORMA INFORMATION
                  (in thousands, except per share amounts)

<TABLE>
<CAPTION>

                                                                                   YEAR ENDED DECEMBER 31,
                                                                              1998          1999            2000
                                                                          ----------     --------         --------
<S>                                                  <C>                  <C>            <C>              <C>
        Net Income (Loss)                            As reported            $  409       $    241         $   (5,363)
                                                     Pro Forma              $   14       $   (130)        $   (5,915)

        Income (loss) per share - basic              As reported            $  .06       $    .04         $     (.93)
                                                     Pro Forma              $    -       $   (.02)        $    (1.03)

        Income (loss) per share - diluted            As reported            $  .06       $    .04         $     (.93)
                                                     Pro Forma              $   -        $   (.02)        $    (1.03)
        Weighted average fair value
         at date of grant                                                   $ 7.56       $   3.89         $     3.55
</TABLE>


      The fair value of each option grant is estimated on the date of grant
      using the Black-Scholes option pricing model with the following
      weighted-average assumptions used for grants in 1998, 1999, and 2000:
      expected dividend yield 0.0% and expected life: 10 years. The expected
      volatility was 72.11%, 71.23% and 76.59% for 1998, 1999 and 2000,
      respectively. The risk-free interest rate used was 5.5%, 6.48% and 5.09%
      for 1998, 1999 and 2000, respectively. Results may not be representative
      of future years because options are generally granted on an annual basis
      and vest over time.

      STOCK REPURCHASE

      During 1998, the Company repurchased 50,000 of its common shares from a
      director of the Company. The shares were purchased subject to the terms of
      Stock Purchase Agreement between the Company and the director. Under the
      terms of the agreement, the Company had first option to purchase the
      subject shares for two-thirds of the current market value. The shares were
      purchased for a price per share of $6.00, resulting in an overall purchase
      price of $300,000. The shares have been returned and canceled.

                                     F-17

<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   COMMON STOCK MATTERS AND EARNINGS PER SHARE (Continued)

      STOCK REPURCHASE (Continued)

      Pursuant to a board resolution, the Company authorized 800,000 shares of
      stock to be repurchased by the Company for the year ended December 31,
      1998. Under this program, 655,000 shares were repurchased at the average
      price of $4.80, for an overall amount of $3,147,000. Continuing this
      program in 1999, the Company repurchased 109,500 shares at the average
      price of $5.22, for an overall amount of $571,000. In the year 2000, the
      Company repurchased 35,000 shares at the average price of $3.375 for an
      overall amount of $119,000. These shares have been returned and canceled.

11.   PREFERRED STOCK

      The Company has authorized 5,000,000 shares of Preferred Stock which may
      be issued from time to time in one or more series as authorized by the
      Company's Board of Directors. The Board of Directors, without any further
      approval by the shareholders of the Company is authorized to fix the
      dividend rights and terms, dividend rates, voting rights, terms of
      redemption price, conversion rights and liquidation preferences related to
      the Preferred Stock. There have been no shares of Preferred Stock issued.

12.   INCENTIVE AND DEFERRED COMPENSATION PLANS

      The Company has an incentive compensation plan for its key officers. The
      amounts charged to expense for the years ended December 31, 1998, 1999,
      and 2000 were $326,000, $15,000, and $150,000 respectively. The amount for
      the year 2000 was accrued at December 31,2000 and is payable approximately
      two weeks after the filing of the Form 10K.

      The Company has established a joint 401(k) and Profit Sharing Plan which
      allows eligible employees to contribute up to 15% of their compensation
      annually. The plan allows for a Company matching percentage based upon the
      discretion of management. However, there were no contributions for 1998,
      1999 and 2000. To date there have been no amounts contributed by the
      Company or its subsidiaries to the profit sharing element of the plan.

13.   LIQUIDITY AND FINANCING REQUIREMENTS

      The Company experienced a net loss of $5,363 in 2000 and cash flows from
      operations of $4,281. Despite the net loss for the year ended December 31,
      2000, the Company has been able to fulfill its capital expenditure and
      working capital needs due in part to its ability to maintain adequate
      financing arrangements. The Company's revolving line of credit expires on
      December 31, 2001. The Company estimates that cash flows generated from
      operations and borrowings pursuant to its revolving and real estate lines
      of credit will be sufficient to fund operations at the current and
      projected levels into 2002. If operations are not consistent with
      management's plan, there can be no assurance that the amounts available
      from such sources will be sufficient for the purposes described above. In
      that event, or for other reasons, the Company may seek alternative
      financing arrangements. There can be no assurance that such sources of
      financing will be available if required or, if available, will be on terms
      satisfactory to the Company.


                                     F-18


<PAGE>

SMC CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.   QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>


                                                 FIRST            SECOND            THIRD        FOURTH
                                                QUARTER           QUARTER          QUARTER       QUARTER
                                                --------------------------------------------------------
                                                   (In thousands, except per share amounts)
<S>                                            <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 31, 1999:
   Revenue                                     $ 56,822        $ 53,794        $ 46,711        $ 58,213
   Gross profit                                   6,209           4,143           5,012           6,049
   Net income (loss)                                108            (149)            130             152
   Net income (loss) per share - basic              .02            (.03)            .02             .03
   Net income (loss) per share - diluted            .02            (.03)            .02             .03

YEAR ENDED DECEMBER 31, 2000:
   Revenue                                     $ 53,052        $ 45,425        $ 49,515        $ 42,709
   Gross profit                                   5,456             203           2,851           6,471
   Net income (loss)                               (260)         (3,146)         (2,090)            133
   Net income (loss) per share - basic             (.05)           (.54)           (.36)            .02
   Net income (loss) per share - diluted           (.05)           (.54)           (.36)            .02
</TABLE>


15.   MARKET INFORMATION (UNAUDITED)
      The Company's common stock is traded on the Nasdaq National Market System
      under the symbol SMCC. The following table sets forth the high and low
      daily closing prices of the stock for each quarter of 1999 and 2000:

<TABLE>
<CAPTION>

                                                           1999                       2000
                                                   HIGH          LOW          HIGH          LOW
                                                 --------      -------       -------       -------
<S>                                              <C>           <C>           <C>           <C>
     First Quarter                                $ 6.750       $ 4.250      $ 4.625       $ 3.750

     Second quarter                                 5.375         4.250        4.688         3.000


     Third quarter                                  5.750         3.563        3.750         2.531

     Fourth quarter                                 4.500         3.750        4.438         1.625
</TABLE>

                                      F-19


<PAGE>


                                   SIGNATURES

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

         Date:  March 29, 2001              SMC CORPORATION


                                            By: WILLIAM L. RICH
                                                --------------------------
          William L. Rich
                                                  Chief Financial Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the following capacities on March 29, 2001.

<TABLE>
<CAPTION>

                  Signature                                             Title
                  ---------                                             -----
<S>                                                                <C>
MATHEW M. PERLOT                                                   Chairman of the Board
--------------------------------------------
Mathew M. Perlot

CURTIS W. LAWLER                                                   Chief Executive Officer
--------------------------------------------
Curtis W. Lawler                                                   (Principal Executive Officer)

MICHAEL R. JACQUE                                                  President and Director
--------------------------------------------
Michael R. Jacque

WILLIAM L. RICH                                                    Chief Financial Officer
--------------------------------------------
William L. Rich                                                    (Principal Financial and Accounting Officer)

CONNIE M. PERLOT                                                    Director
--------------------------------------------
Connie M. Perlot

LAWRENCE S. BLACK                                                   Director
--------------------------------------------
Lawrence S. Black

JIM L. TRAUGHBER                                                    Director
--------------------------------------------
Jim L. Traughber

ALLAN L. CRISLER                                                    Director
--------------------------------------------
Alan L. Crisler
</TABLE>


                                       32


<PAGE>


                                EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit
No.            Description
---            -----------
<S>            <C>
      3.1      Restated Articles of Incorporation; incorporated by reference
               to Exhibit 3.1 to the 1995 Form S-1

      3.2      Restated Bylaws; incorporated by reference to Exhibit 3.2 to
               the Registrant's Annual Report on Form 10-K for the year ended
               December 31, 1994

      4.1      See Articles II and V of Exhibit 3.1 and Articles I and VI of
               Exhibit 3.2

      *10.1    1994 Stock Incentive Plan, as amended; incorporated by
               reference to Exhibit 10.1 to the Registrant's Annual Report on
               Form 10-K for the year ended December 31, 1994

      10.2     Stock Purchase Agreement dated March 28, 1988 among Curtis
               Lawler and Sandra Lawler, Mathew M. Perlot and the Registrant;
               incorporated by reference to Exhibit 10.2 to the 1995 Form S-1

      10.3     Manufacturer Agreement dated June 24, 1987 between General
               Electric Credit Corporation and the Registrant; incorporated
               by reference to Exhibit 10.7 to the 1995 Form S-1

      10.4     Repurchase Agreement dated November 30, 1993 between the
               Registrant and General Motors Acceptance Corporation;
               incorporated by reference to Exhibit 10.9 to the 1995 Form S-1

      +10.5    Floorplan Agreement dated April 14, 1994 between ITT
               Commercial Finance Corp. and the Registrant, and amendment and
               amendment letters thereto; incorporated by reference to
               Exhibit 10.10 to the 1995 Form S-1

      10.6     Lease Assignment and Assumption Agreement dated June 1994
               between Beaver Coaches, Inc. and Beaver Motor Coaches, L.L.C.,
               with Lease dated May 15, 1989 by and between Frank Storch and
               James Hogue, dba S&H Associates, and Beaver Coaches, Inc., and
               amendments thereto; incorporated by reference to Exhibit 10.11
               to the 1995 Form S-1

      *10.7    Retirement Agreement and Mutual Release of Claims between the
               Registrant and Mathew M. Perlot dated February 23, 2001

      *10.8    Retirement Agreement between the Registrant and Curtis Lawler
               dated February 23, 2001


                                      33

<PAGE>

      21.1     Subsidiaries of the Registrant

      23.1     Consent of PricewaterhouseCoopers LLP

----------------
</TABLE>


*    This exhibit constitutes a management contract or compensatory plan or
     arrangement.

+    Confidential treatment has been granted by the Commission for certain
     portions of this agreement.


                                     34