FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

(Mark  One)

[X]  ANNUAL  REPORT  PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT  OF  1934
     For  the  fiscal  year  ended  June  30,  2003

                                       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  1-8824

                              CLAYTON HOMES, INC.
             (Exact name of registrant as specified in its charter)

Delaware                                               62-1671360
--------                                               ------------
(State or other jurisdiction of incorporation          (I.R.S.  Employer
 or  organization)                                      Identification  Number)


5000  Clayton  Road
Maryville,  Tennessee                                  37804
---------------------                                  -------
(Address of principal executive offices)               (Zip  Code)

Registrant's  telephone  number,  including  area  code:  865-380-3000
Securities  registered  pursuant  to  Section  12(b)  of  the  Act:

                                                  Name of each exchange on
Title of each class                               which  registered
----------------------                            -----------------
COMMON STOCK, $.10 PAR VALUE PER SHARE            NEW YORK STOCK EXCHANGE*


Securities  registered  pursuant  to  section  12(g)  of  the  Act:  None

Indicate  by check mark whether registrant (1) has filed all reports required to
be  filed  by  Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.   Yes  X  No
                                             ---    ---

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

On  August  7,  2003, Clayton Homes, Inc. filed a certificate of merger with the
Secretary  of State of Delaware to make effective its merger with a wholly-owned
subsidiary  of  Berkshire Hathaway Inc. ("Berkshire Hathaway").  In addition, on
August  7,  2003,  The New York Stock Exchange (the "NYSE") suspended trading of
Clayton Homes, Inc. stock, and subsequently delisted Clayton Homes, Inc stock on
October  8,  2003  .  The  aggregate  market  value  of the voting stock held by
non-affiliates  of  the  registrant on August 6, 2003, the day before the merger
became  effective,  was  approximately  $1,218,765,707  (97,579,320  shares  at
closing  price  on  the  NYSE  of  $12.49).

Shares  of  common  stock,  $.10  par value (the "Common Stock"), outstanding on
August  6,  2003,  were  136,269,337.

Exhibit  index  appears  on  pages  55-56.

*The  New  York  Stock Exchange delisted Clayton Homes, Inc. stock on October 8,
2003.



                                        1
<PAGE>

                              CLAYTON HOMES, INC.

FORWARD  LOOKING  STATEMENTS

This  report  contains  "forward  looking  statements" within the meaning of the
federal  securities  laws  regarding the business and industry of Clayton Homes,
Inc. and its subsidiaries.  Such forward-looking statements can be identified by
the use of the words "believes," "estimates," "expects," "projects" and words of
similar  import and include, without limitation, statements regarding the growth
and  financing  strategies  of  the  Company,  projections  of revenues, income,
earnings per share or other financial items, the effective implementation of the
Company's  business  or  regarding  trends  relating  to  the  manufactured home
industry  and various other items.  Forward-looking statements involve known and
unknown  risks,  uncertainties  and  other  factors  that  may  cause the actual
financial  condition, results of operations, performance and achievements of the
Company  to  be  materially  different  from  any of the results, performance or
achievements  expressed  or  implied  by  such forward-looking statements.  Such
factors  include  general  economic  and  business  conditions; industry trends;
demographic changes; competition; raw material and labor costs and availability;
import  protection and regulation; relationships with customers, distributors or
dealers;  changes  in the business strategy or development plans of the Company;
the availability of other forms of housing; the availability of consumer credit;
general  inflationary  pressures; the availability and terms of capital; general
interest  rate  risk;  and  government  regulation.

Such forward looking statements are based on current expectations, estimates and
projections  about  the  industry  and markets in which the Company operates, as
well as management's beliefs and assumptions.  Although the Company believes its
current  expectations  to  be based upon reasonable assumptions, there can be no
assurance  that  such  expectations will be attained or that actual results will
not  differ materially.  The Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new information,
future  events  or  otherwise.

                                     PART I

ITEM  1.  BUSINESS.

GENERAL

Clayton  Homes,  Inc.  and  its  subsidiaries  produce, sell, finance and insure
primarily  low  to medium-priced manufactured homes. Throughout the remainder of
this  report, including exhibits and attachments, the term "Company" may be used
to  refer to Clayton Homes, Inc. or any of its subsidiaries, either individually
or  collectively  as a group. The term "Company-owned" will generally be used to
address  the  subsidiary  that  owns  a  particular  asset or group of assets or
performs  a  particular  function  being  discussed. Clayton Homes, Inc. and the
individual  subsidiaries may also be referred to by name or segment description.
The  Company's  20  manufacturing  plants  produce homes that are marketed in 32
states  through  976 retailers, of which 302 are Company-owned sales centers, 86
are  Company-owned  community  sales  offices and 588 are independent retailers.
Installment  financing  and insurance products are offered to its homebuyers and
those  buying  from  selected  independent retailers. Such financing is provided
through  its  wholly  owned finance subsidiary, Vanderbilt Mortgage and Finance,
Inc.  ("VMF").  The  Company acts as agent, earns commissions and reinsures 100%
of  the risks on physical damage insurance policies, family protection insurance
policies,  home  buyer  protection  insurance  policies,  and  extended  service
contracts  issued  by  a  non-related  insurance  company  (ceding  company)  in
connection  with  its  home sales.  The Company also develops, owns, and manages
manufactured  housing  communities.

The Company is a Delaware corporation whose predecessor was incorporated in 1968
in  Tennessee.  Its  principal  executive  offices  are  located near Knoxville,
Tennessee.

The  following  table  indicates the percentage of revenue derived from sales by
Company-owned  retail  centers,  sales  to  independent  retailers and financial
services  operations  and  other income for each of the last three fiscal years.

                                        2
<PAGE>

<TABLE>
<CAPTION>
                                                     Year  ended  June  30,
                                                       2003   2002   2001
                                                       -----  -----  -----
<S>                                                    <C>    <C>    <C>
Sales by Company-owned retail centers and communities    57%    55%    54%
Sales to independent retailers                           15%    18%    19%
Financial services and other                             28%    27%    27%
                                                       -----   -----  -----
Total                                                   100%   100%   100%
                                                       =====   =====  =====
</TABLE>

MANUFACTURED  HOMES

A  manufactured home made by the Company is a factory-built, completely finished
dwelling.  Constructed to be transported by truck, the home is mounted on wheels
attached  to  its  frame.  Manufactured  homes  are  designed  to  be permanent,
owner-occupied  residences  sited  and  attached  to  utilities.

The  Company  manufactures a variety of single and multi-section homes in a wide
price range.  Retail prices range from $10,000 to $97,000 with sizes from 500 to
2,400  square  feet.

The  Company  markets  the  homes it manufactures under the names of Clayton and
Norris. Included standard features are central heating, range, refrigerator, and
color-coordinated  window, wall and floor treatments.  Optional features include
central  air  conditioning,  wood-burning fireplaces, hardwood floors, whirlpool
tubs,  entertainment  systems,  microwaves,  dishwashers,  washers  and  dryers,
skylights  and  furniture.  When  combined with land and as a land-home package,
other  features  such  as  driveways,  carports  and  decks  are  common.

MANUFACTURING  OPERATIONS

The  Company manufactures homes in 20 facilities, ranging in size from 87,000 to
194,000  square feet.  See "Item 2. Properties" for a listing by location of the
Company's  facilities.  The Company's manufactured homes are built in its plants
using  assembly-line techniques. Completion of a home ordinarily takes two days.
Homes  are  generally  produced  to  fill  orders  received from independent and
Company-owned  retail centers; therefore, the Company does not normally maintain
a  significant inventory of homes at its plants.  Independent carriers transport
completed  homes  to  the  retail  centers.

The  Company's  plants  operate  on  a  one-shift-per-day  basis, normally for a
five-day week, with the capacity to produce approximately 35,000 homes per year.
During  the  fiscal year ended June 30, 2003, the Company produced 18,063 homes.

The  principal  materials  utilized in the production of the Company's homes are
steel, aluminum, wood, fiberglass, carpet, vinyl floor covering, hardware items,
appliances  and  electrical  items.  The Company purchases these and other items
from  a  number  of supply sources, and it believes that the materials and parts
necessary  for  the  construction  and assembly of its homes will remain readily
available  from  these  sources.  The Company is not dependent on any particular
manufacturer  or  supplier  as  a  source for these principal materials.  In the
event  that  any  of these items are not readily available or are available at a
higher  cost than could be passed on to consumers, the operations of the Company
could  be  adversely affected.  Construction of the Company's manufactured homes
and  the  plumbing, heating and electrical systems installed in them must comply
with  standards  set  by the Federal Department of Housing and Urban Development
under  the  National  Manufactured Home Construction and Safety Standards Act of
1974.  See  "Regulation."

The  Company  offers  one-year  limited warranty programs covering manufacturing
defects  in  materials or workmanship in a home.  Warranties covering appliances
and  equipment  installed  in  the  homes  generally  are  obligations  of  the
manufacturers  of  such  items  and  are not those of the Company.  Warranty and
service  costs during the years ended June 30, 2003, June 30, 2002, and June 30,
2001,  amounted  to  approximately  $11,157,000,  $13,522,000,  and $14,193,000,
respectively.

The  backlog  of  firm  orders  for homes manufactured by the Company, including
orders  from  Company-owned  retail  centers,  was approximately $21,500,000 and
$22,000,000  on  June  30,  2003,  and  2002,

                                        3
<PAGE>

respectively.  Based  on  the Company's production rate, approximately two weeks
would  be  required  to  fill  backlog  orders  at  June  30,  2003.

SALES  OF  HOMES  MANUFACTURED  BY  THE  COMPANY

The  following  table  sets  forth  manufacturing  sales  and other data for the
periods  indicated.

<TABLE>
<CAPTION>
                                                         Year  ended  June  30,
                                                          2003    2002    2001
                                                         ------  ------  ------
<S>                                                      <C>     <C>     <C>
Number of homes sold to independent retailers             6,575   8,240   9,119
Number of homes shipped to Company-owned retail centers  11,532  12,168  10,804
                                                         ------  ------  ------
Total                                                    18,107  20,408  19,923
                                                         ======  ======  ======

Number of plants operating                                   20      20      20
Number of independent retailers                             588     601     634
Number of Company-owned communities                          86      82      81
Number of Company-owned retail centers                      302     287     297
</TABLE>

COMPANY  RETAIL  OPERATIONS

As  of  June  30,  2003, the Company sold homes through 302 Company-owned retail
centers  in  25  states.  In  addition  to  selling  homes built by the Company,
virtually  all  of  these  retail  centers  sell new homes manufactured by other
companies  and  previously-owned  manufactured  homes.

The  following  table  indicates  the number of Company-owned retail centers and
certain  information  relating to homes sold during the last three fiscal years.

<TABLE>
<CAPTION>
                                                         Year  ended  June  30,
                                                          2003     2002     2001
                                                         -------  -------  -------
<S>                                                      <C>      <C>      <C>
Number of Company-owned retail centers                       302      287      297
Number of new homes sold (including homes built by the
   Company and by other manufacturers)                    12,548   12,772   12,346
Average retail price of new homes sold                   $47,348  $44,759  $43,643
Number of previously-owned homes sold                      2,078    3,105    3,556
</TABLE>

All  of  the  Company-owned  retail centers employ salespeople who are primarily
compensated  on  a  commission  basis.  The retail centers generally do not have
administrative  staffs  since most administrative functions are performed at the
Company's  corporate  headquarters.

To  provide  customers  a  wider price range of homes, the Company purchases and
acquires  on trade previously owned manufactured homes from individuals and from
other retailers.  It also purchases foreclosed homes from lenders throughout its
trade  territory.

Homes  sold  by  Company-owned  retail  centers are delivered to the homeowners'
sites  by  trucks  either  owned  by  the  Company  or leased for the particular
delivery.  The  purchase price of the home may include delivery and setup of the
home at the retail homeowner's site.  Electrical, water, and gas connections are
performed  by  licensed  technicians.

Generally, homes are sold at retail in one of three types of transactions.  In a
home-only  transaction,  which  is the most common, the home is placed on a site
that  the  homebuyer  either  owns  or  leases  and  the site is not part of the
collateral.  Additionally,  the  homebuyer  may  pledge  land  that  they own as
additional  collateral, or instead of a down payment.  This is commonly referred
to  as a "land-in-lieu" transaction and the home remains personal property.  The
third  type  of transaction is known as a "land-home" transaction. In this case,
the  land is purchased for the customer and the home and land may be recorded as
real  property,  or the home may retain its title as personal property, with the
land  being  recorded  as  real  property.

                                        4
<PAGE>

INDEPENDENT  RETAILERS

In the fiscal year ended June 30, 2003, 36% of homes manufactured by the Company
were  sold to its independent retailers, compared to 40% for the year ended June
30,  2002.  As  of June 30, 2003, the Company supplied its manufactured homes to
588  independent  retailers  in  32  states.  The Company's independent retailer
network enables it to distribute homes to more markets, more quickly, without as
large an investment in management resources and overhead expenses as is required
with  Company-owned  retail  centers.  Sales  to  independent retailers helps to
ensure that Company's homes are competitive with other manufacturers in terms of
consumer  acceptability,  product  design,  quality  and  price.

The  Company's  finance subsidiary, VMF, provides financing for retail customers
of  select  independent  retailers  with  terms  and conditions similar to those
provided  to  Company-owned locations.  In addition, VMF also provides inventory
financing  for  certain  independent  retailers.

The  Company  establishes  relationships  with its independent retailers through
sales  representatives  from  its  manufacturing  plants.  These representatives
visit  independent  retailers  in  assigned  areas  to  solicit  orders  for the
Company's  homes.  The  area is generally limited to a 500-mile radius from each
of  the Company's manufacturing plants due to the relatively significant cost of
transporting  a  home.  Depending  on the cost of the home and the manufacturing
competition  within  the  area, some homes may be shipped longer distances while
remaining  competitively priced.  During each of the Company's last three fiscal
years,  no  single  independent  retailer  accounted  for  more  than  2% of the
Company's  consolidated  revenues.

The  Company's  independent  retailers  generally  provide  their  own inventory
financing;  allowing  the  Company to receive payment for homes within two weeks
after the home is constructed.  The Company does not require agreements with its
independent  retailers,  and either party may terminate the relationship between
the  Company  and  each  of  its independent retailers at any time.  The Company
believes  its relationships with its independent retailers are good. The Company
generally  has  little  control  over  the  operations of independent retailers.

As  is  customary  in  the industry, lenders providing financing for independent
retailer  purchases  require that the Company execute repurchase agreements that
include  provisions  requiring  the  Company  to repurchase homes for the amount
remaining  unpaid  to  the  lender,  excluding  interest and repossession costs,
should  the  retailer  default  under  its  inventory  financing  arrangements.
Historically, any homes repurchased under such agreements are immediately resold
to other retailers, including Company-owned retail centers, at approximately the
repurchase  price.  During the prior five fiscal years, the Company has incurred
no significant losses resulting from these contingent obligations, but there can
be  no  assurance  that  losses  will  not  occur  in  the  future.

FINANCIAL  SERVICES

The  Company  maintains  that  the ability to make financing available to retail
purchasers  is a material factor affecting the market acceptance of its product.
The  Company  facilitates retail sales by offering various finance and insurance
programs.  The  following  table reflects the relative percentages of homes sold
by  Company-owned  retail centers that were financed through the Company, either
by  VMF  or  by  conventional  lenders,  and  those  sales made to customers who
arranged  their  own  financing  or  paid  cash.

<TABLE>
<CAPTION>
                                Year  ended  June  30,
                                 2003   2002   2001
                                -----  -----  -----
<S>                            <C>    <C>    <C>
VMF                               71%    71%    74%
Conventional lenders               6%     5%     2%
Customer arranged or cash         23%    24%    24%
                                -----  -----  -----
Total                            100%   100%   100%
                                =====  =====  =====
</TABLE>

VMF  also  purchases  and  originates  manufactured housing installment contract
receivables  (also  referred  to  as  manufactured  housing  contracts)  on  an
individual  basis from select independent retailers.  Retailers submit homebuyer
applications  to  VMF for approval and, provided that credit reports, employment
verification,  and  income  and  debt  analysis  meet VMF's criteria, a contract
purchase  commitment  is  issued  to  the  selling  retailer.

                                        5
<PAGE>

VMF  makes bulk purchases of manufactured housing contracts from banks and other
lenders.  It  also  performs,  on  behalf  of  other  institutions, servicing of
manufactured  housing  contracts  that  were not purchased or originated by VMF.
These purchases and servicing arrangements may relate to the portfolios of other
lenders  or  finance  companies,  governmental  agencies, or other entities that
purchase  and  hold  manufactured  housing  contracts.

UNDERWRITING  POLICIES.  Retail customers of the Company who express a desire to
obtain financing by or through the Company complete a credit application that is
initially  reviewed  by  the  manager  of  the retail center who then determines
whether  to  forward  the  application  to  VMF.

VMF's  underwriting  guidelines require that each applicant's credit, residence,
employment  history  and  income  to  debt  payment  ratios  meet  predetermined
guidelines. If, in the judgment of the VMF credit manager, an applicant does not
meet  minimum-underwriting criteria, there must be other determining criteria in
order  for an applicant to be approved.  Credit managers confirm that the credit
investigation  gives  a  complete  and  up-to-date accounting of the applicant's
creditworthiness  and  are  encouraged  to  obtain  second opinions on loans for
relatively  large  dollar  amounts or those which tend to rank lower in terms of
underwriting  criteria.  Generally,  the  sum of the monthly installment housing
obligation,  which  includes the manufactured home loan payment and monthly site
costs,  should  not  exceed  35%  of  the  applicant's  gross  monthly  income.

With  respect to those homebuyers that are approved, VMF requires a down payment
in the form of cash, the trade-in value of a previously owned manufactured home,
and/or  the  estimated  value  of  equity in real property pledged as additional
collateral.  For  previously owned homes, the trade-in allowance accepted by the
retailer  must  be  consistent  with  the  market  value of the home in light of
current  local  market  conditions.  The  value  of  real  property  pledged  as
additional  collateral  is  estimated  by  licensed  appraisers  or  by  retail
personnel,  who  are  not appraisers but are familiar with the area in which the
property is located.  The average down-payment, including cash, trade equity, or
land, for 2003 was 24% of the purchase price, while the minimum down-payment for
qualified  buyers was generally 5%.  The purchase price includes the stated cash
sale  price  of  the manufactured home, sales or other taxes and fees and set-up
costs.

The  balance  of  the purchase price is financed using various installment sales
contracts  or  mortgage  instruments  providing  for  a  purchase money security
interest in the manufactured home and a mortgage on any real property pledged as
additional  collateral.  Normally,  the  contracts  provide  for  equal  monthly
payments,  generally over a period of seven to thirty years at fixed or variable
rates  of  interest.

The Company offers a bi-weekly payment program that provides for 26 payments per
year,  allowing  homebuyers  the convenience of electronically drafting payments
from  their  checking  accounts while reducing the overall term of the loan. The
Company  maintains  that such financing options are attractive and beneficial to
the customer and improve market acceptance of its homes.  Because of the shorter
term,  the customer will increase the rate at which equity is built, translating
into  improved  delinquency  and  repossession  experience.

During  the  Company's last 15 fiscal years, VMF was the most significant source
of  financing  for purchasers of homes sold by the Company-owned retail centers.
In  fiscal  year 2003, VMF originated 23,248 contracts, as compared to 23,204 in
fiscal  year  2002.  At  June  30, 2003, VMF was servicing approximately 170,000
contracts  with  an  aggregate dollar amount of approximately $5.5 billion.  VMF
originated  or  purchased  approximately  162,000  of  these  contracts  with an
aggregate dollar amount of approximately $5.3 billion.  The Company expects that
VMF  will  continue  to  provide  a  significant  portion  of  the financing for
purchasers  of  its  homes.

The  volume  of manufactured housing contracts originated by VMF for the periods
indicated  below  and certain other information at the end of such periods is as
follows:

                                        6
<PAGE>

<TABLE>
<CAPTION>
                                                Contract  Originations
                                                  Year ended June 30,
                                              2003       2002       2001
                                            ---------  ---------  ---------
<S>                                         <C>        <C>        <C>
Principal balance of contracts originated
   (in thousands)                           $947,775   $912,508   $815,058
Number of contracts originated                23,248     23,204     21,720
Average contract size                       $ 40,558   $ 39,325   $ 37,526
Average interest rate                          9.62%     10.10%     11.67%
</TABLE>

The following table indicates the number of loans (in thousands) serviced by VMF
on  the  dates  indicated:

<TABLE>
<CAPTION>
                                    Loans  serviced  (in  thousands)
                                         Year  ended  June  30,
                                         2003     2002     2001
                                         ----     ----     ----
<S>                                      <C>      <C>      <C>
Originated and purchased loans serviced   163      153      138
Master servicing contracts                  7        9       10
                                         ----     ----     ----
Total                                     170      162      148
</TABLE>

VMF  FUNDING.  VMF draws on its short-term credit facilities with the Company to
fund  manufactured  home  loans,  while  long-term  financing  has been obtained
through  the  capital  markets.  In  fiscal  2003,  VMF  completed  three public
offerings  of  asset-backed  securities  totaling  approximately  $1.2  billion,
including  $15  million  in  mortgage-backed  securities  offered  through  the
Government  National  Mortgage  Association  (GNMA).

VMF's  capital  market  activity,  historically  the primary source of permanent
funding  for  its lending activities, was in the form of asset-backed securities
issued  through  its  special  purpose entity.  These securities, sold in public
markets, are collateralized by manufactured housing receivables that were either
originated or acquired by VMF.  Certain of these receivables were originated and
are  being  subserviced by other entities. With respect to the securitized pools
that  contain  receivables  originated  or  acquired  by  other entities, VMF is
servicer  for  all  loans in the pools, with a subservicing arrangement on those
receivables  that  are  originated  by  or  acquired  from  other  entities.

Loans insured by the Federal Housing Administration ("FHA") or guaranteed by the
Veterans  Administration  ("VA")  are  permanently funded through the Government
National  Mortgage  Association  ("GNMA")  pass-through program.  Under the GNMA
program,  installment  sales  contracts are warehoused by VMF and then pooled in
denominations  of  approximately $3,000,000 to collateralize the issuance by VMF
of  securities  guaranteed  by GNMA under the provisions of the National Housing
Act.  Under the GNMA program, VMF retains the servicing of the installment sales
contracts and is responsible for passing through payments under the contracts to
GNMA  security  holders.  During  the  fiscal  year  ended  June  30,  2003, VMF
originated  installment  sales  contracts  eligible for financing under the GNMA
program  having  aggregate  principal  balances  of $44,967,000.  As of June 30,
2003,  VMF  was  servicing  205  GNMA  pools  totaling  $70 million in principal
balances.  Use of FHA financing minimizes the Company's contingent liability for
these  installment  sales  contracts because of the government-insured nature of
the  loans.  Accordingly,  the  Company  maintains  that the use of this form of
financing,  for  customers  who  qualify,  increases  the  marketability  of its
manufactured  homes.

Certain  of  the agreements related to borrowings include covenants with respect
to  the  Company's  financial condition and corporate existence.  The Company is
contingently  liable  as guarantor on installment contract receivables sold with
recourse.  For  the  year  ending June 30, 2003, there were $15 million of these
receivables  sold.  No receivables were sold with recourse in 2002 and 2001.  At
June 30, 2003, and 2002, the outstanding principal balances of these receivables
totaled  approximately  $70  million  and  $68  million,  respectively.

ACQUIRED  CONTRACTS  AND SERVICING ARRANGEMENTS.  Certain acquired contracts are
originated  by  banks or commercial lenders, and acquired indirectly or directly
by  VMF.  The  acquired  contracts  are  purchased  on the basis of underwriting
criteria  that  may  be  different  from  and  may  not  be  as  strict as VMF's
underwriting  criteria.

                                        7
<PAGE>

In  fiscal  year  1998,  VMF  became the servicer of 10,013 manufactured housing
installment sales contracts with approximate principal balances of $267 million.
VMF  acts  solely  as servicer with respect to these contracts and, thus, has no
ownership  interest or contingent liability related to these portfolios. At June
30,  2003,  VMF  was  servicing  approximately  7,000 of these installment sales
contracts with an approximate principal balance of $134 million. In addition, in
2002,  VMF  acquired  22,996  contracts  with  an aggregate principal balance of
approximately $900 million. VMF has contracted with an affiliate finance company
to  sub-service  approximately  $450  million of these receivables. In 2003, VMF
acquired  contracts  with  an  aggregate  principal  balance  of  $732  million,
including  approximately  $286  million  from  an  affiliate  with the affiliate
retaining  the servicing.  For its own servicing portfolio, the Company acquired
9,256  contracts  with  an  aggregate  principal  balance  of approximately $446
million.

DELINQUENCY  AND  REPOSSESSION  EXPERIENCE.  VMF  performs  record  keeping,
collections  and  other  servicing activities on all loans that it originates or
purchases through portfolio acquisitions.  Although the terms of the installment
sales  contracts vary according to the financial institutions that purchased the
contracts,  most  contracts  provide  that  the  failure  to  make  a payment as
scheduled  is  an event of default that allows the lender to repossess the home.
Generally  the  Company  does  not  repossess  the home until payments are three
months  delinquent,  unless the borrower does not have apparent ability to bring
payments  current,  in  which  case  repossession may occur sooner.  The Company
generally  follows  the  same policy with respect to loans insured by the FHA or
guaranteed  by  the  VA,  although  the Company must also file a notice of claim
within  nine  months  after default with the agency to preserve its rights under
the  programs.

The  following  table  sets  forth  delinquent  installment sales contracts as a
percentage  of  the  total  number  of  installment sales contracts on which the
Company  provided  servicing  and  was  either contingently liable or owner.  An
account  is  considered delinquent if any payment is past due more that 30 days.

<TABLE>
<CAPTION>
                                             Delinquency  Percentage  at  June  30,
                                                2003        2002        2001
                                                -----       -----       -----
<S>                                             <C>         <C>          <C>
Total delinquencies as percentage of
 contracts outstanding
    All contracts                               2.99%       2.84%       2.59%
    Contracts originated by VMF                 2.67        2.29        2.12
    Contracts acquired from other institutions  4.17        4.96        4.89
</TABLE>

The  following  table  sets  forth information related to loan loss/repossession
experience  for  all  installment  contract  receivables on which the Company is
either  owner  or  contingently  liable:

<TABLE>
<CAPTION>
                                                Year  ended  June  30,
                                                2003         2002         2001
                                               ------       ------       ------
<S>                                            <C>          <C>          <C>
Net losses as percentage of average
   loans outstanding
   All contracts                                 2.6%         2.2%         1.8%
   Contracts originated by VMF                   2.3%         2.1%         1.7%
   Contracts acquired from other institutions    3.7%         2.5%         2.5%
Number of contracts in repossession
   All contracts                               3,029        2,790        2,652
   Contracts originated by VMF                 2,348        2,061        2,191
   Contracts acquired from other institutions    681          729          461
Total number of contracts in repossession as
   percentage of total contracts                1.86%        1.83%        1.93%
</TABLE>

With respect to repossessions of homes securing installment sales contracts that
are  included in securitized pools that it issued, the Company currently, at its
option,  remits  to the related trust, or other custodian, the unpaid balance of
an  installment sales contract it originated through its company owned stores or
communities,  upon  repossession  of  the  home.  For those contracts, including
contracts  acquired  from  other  institutions  and contracts originated through
other  channels  that  are  included in securitized pools issued by the Company,
remittance  of  the  unpaid  balance of the installment contract is made, at the
option  of  the  Company, to the related trust, or other custodian, upon sale of
the  repossessed  collateral.  The  Company

                                        8
<PAGE>

maintains  that  as  long  as  it  is able to sell repossessed homes promptly at
satisfactory  prices,  the  costs associated with remarketing these homes can be
mitigated.  There  can  be  no  assurance,  however,  that  the Company's future
results  with  respect  to  the  payoff  and resale of repossessed homes will be
consistent  with its past experience.  See Note 7, Item 8, within this document.

INSURANCE  OPERATIONS.  The  Company  acts as agent on physical damage insurance
policies,  family  protection  insurance  policies,  home  buyer protection plan
insurance  policies,  and  extended  service  contracts  written by unaffiliated
insurance companies (ceding companies) for purchasers of its manufactured homes.
During  the  fiscal  year ended June 30, 2003, the Company acted as the agent on
physical  damage,  family  protection,  and  homebuyer  protection  policies  on
approximately  62%,  42%,  and  78%,  respectively,  of  Company  retail  sales.

Physical  damage  and  home  buyer  protection  plan policies issued through the
Company's  agency  are  reinsured  through  Vanderbilt  Property  and  Casualty
Insurance  Co.,  LTD  ("VPAC"),  a  wholly-owned subsidiary of the Company.  The
family  protection  insurance  policies  issued through the Company's agency are
reinsured  through  Vanderbilt  Life  and Casualty Insurance Co., LTD, ("VLAC"),
Midland States Life Insurance Company ("MSLC") and Eastern States Life Insurance
Company  ("ESLC"),  which  are  majority-owned  subsidiaries  of  the  Company.

MANUFACTURED  HOUSING  COMMUNITIES

The  Company  owns  and  operates 86 manufactured home communities in 12 states.
These  communities  provide  attractive living environments to residents leasing
sites  for  manufactured homes, many of which are built and sold by the Company.
In  addition,  these  communities  also lease sites to residents who already own
their  homes.  Some  communities  also  lease or rent Company-owned manufactured
homes  and  the  sites.

In  fiscal  2003  the  Communities  group  developed  902  home  sites  in  four
communities  and  added  393  sites  at existing locations, bringing total sites
owned  to 22,677 at June 30, 2003, a 6% increase from the prior year.  See "Item
2.  Properties."  Communities'  overall  revenues  were  up 15% in 2003.  Rental
revenues  rose 5% and sales increased 27%.  The following table lists the number
of community sites owned and the aggregate occupancy rate at the end of the last
three  fiscal  years:

<TABLE>
<CAPTION>
                                            June  30,
                                2003          2002          2001
                              -------       -------       -------
<S>                          <C>           <C>           <C>
Homes sites owned              22,677        21,382        21,121
Occupancy rate                    74%           76%           75%
</TABLE>

REGULATION

The  Company's  manufactured homes are subject to a number of federal, state and
local  laws.  The  National Mobile Home Construction and Safety Standards Act of
1974  governs  construction  of manufactured housing. In 1976, the Department of
Housing  and  Urban  Development  ("HUD")  issued  regulations  under  this  Act
establishing comprehensive national construction standards.  The HUD regulations
cover  all  aspects  of  manufactured  home  construction,  including structural
integrity,  fire  safety,  wind  loads  and  thermal  protection.  The Company's
manufacturing  facilities  and the plans and specifications for its manufactured
homes  have been approved by a HUD-designated inspection agency.  A HUD-approved
organization  regularly inspects the Company's manufactured homes for compliance
during  construction.  Failure  to  comply with the HUD regulations could expose
the  Company  to  a  wide  variety of sanctions, including closing the Company's
plants.  The  Company believes the homes it manufactures comply with all present
HUD  requirements.  In  addition,  certain  components of manufactured homes are
subject  to  regulation  by  the  Consumer  Product  Safety  Commission which is
empowered,  in  certain  circumstances,  to  ban  the use of component materials
believed  to  be  hazardous  to health and to require the manufacturer to repair
defects  in  components  in  its  homes.  In  February  1983,  the Federal Trade
Commission  adopted  regulations  requiring  disclosure of a manufactured home's
insulation  specifications.

A  variety  of  laws  affect  the  sale  of  manufactured homes on credit by the
Company.  Regulation  Z (issued by the Board of Governors of the Federal Reserve
System)  requires  written  disclosure  of  information  relative to such credit
sales,  including  the  amount  of  the  annual  percentage rate and the finance
charge.  The  Federal  Fair  Credit  Reporting  Act  also requires disclosure of
certain  information  used  as  a  basis  to  deny

                                        9
<PAGE>

credit.  The  Federal  Equal  Credit Opportunity Act (Regulation B issued by the
Board  of  Governors  of  the  Federal  Reserve System) prohibits discrimination
against  any  credit  applicant  based  on  sex,  marital  status,  race, color,
religion,  national  origin,  age  (provided  the  applicant has the capacity to
contract),  receipt  of  income  from  any public assistance program or the good
faith  exercise  by  the  applicant  of  any  right  under  the  Consumer Credit
Protection  Act.  Regulation  B  establishes  administrative  requirements  for
compliance  with  the  Equal  Credit  Opportunity  Act  and, among other things,
requires  the Company to provide a customer whose credit request has been denied
with  a  statement  of  reasons  for  the  denial.  Installment  sales contracts
eligible  for  inclusion  in the GNMA Program are subject to credit underwriting
requirements  of  the  FHA or the VA. The Company is subject to the Federal Fair
Debt  Collection  Practices Act, which regulates the manner in which the Company
collects  payments  on  its  installment  sales  contracts.

The  transportation  and  use of the Company's manufactured homes are subject to
highway use laws, ordinances and regulations of various federal, state and local
authorities.  Such  regulations  may prescribe size and road use limitations and
impose  lower  than  normal  speed  limits  and  various other requirements. The
Company's  manufactured  homes  and  its  development  of  manufactured  housing
communities  are  also  subject  to  local  zoning  and  housing  regulations.

The  Magnuson-Moss  Warranty  Improvement  Act  regulates  the  descriptions  of
warranties  on  products.  The  description  and  substance  of  the  Company's
warranties  are  also  subject  to  a  variety  of  state  laws and regulations.
Insurance  agency activities are subject to state insurance laws and regulations
as  determined  by  the  particular  insurance  commissioner  for  each state in
accordance with the McCarran-Ferguson Act.  Sales practices are governed at both
the  federal and state level through various consumer protection trade practices
and  public  accommodation  laws  and  regulations.

VPAC  and  VLAC  are  subject  to insurance and other regulations of the British
Virgin Islands.  MSLC and ESLC are subject to insurance and other regulations of
the Turks and Caicos Islands.  The Company's operations are subject to a variety
of  other  statutes  and  regulations.

COMPETITION

The  manufactured  housing  industry is highly competitive at the manufacturing,
retail  and finance levels in terms of price, service, delivery capabilities and
product  performance.  There  are  many  firms  in  direct  competition with the
Company.  The  Company believes it has a competitive advantage over firms in the
industry  that  do not have manufacturing, retailing and financing capabilities.
Since  the  Company's  homes  are  a form of low-cost housing, they compete with
other  forms  of  such  housing  including  apartments  and  site  built  homes.
Historically,  so  long  as  the spread between mortgage interest rates for site
built homes and those for manufactured housing remain within 3%, the Company has
been  able to remain competitive with site built homes. However, the combination
of  mortgage  interest rates nearing a 40-year low, and the deterioration of the
market  for  manufactured  housing  asset-backed  securities causing the cost of
funds  for the asset-backed securities issued by the Company to rise, the spread
between  site  built  mortgage interest rates and manufactured housing rates are
above  5%  on  some  products.  The resulting relatively smaller payment for the
site built home, which is a product of both the lower rate and longer term, will
generally  attract the more qualified homebuyers and places manufactured housing
at  a  competitive disadvantage.    The capital requirements for entry into both
the manufacturing and retail segments are relatively small.  A major factor that
limits  entry  into  the sector is the scarcity of financing available to retail
dealers,  both  for  consumer  sales financing and inventory purchases.  Several
national  lenders,  in  the  retail  and wholesale sectors of the industry, have
filed  for  bankruptcy  protection  or  exited  the industry leaving a financing
vacuum.  The  scarcity  of  inventory financing availability creates pressure on
manufacturing  shipments,  stifling  any potential new entrants into the sector.
The  Company  is  not  able  to  estimate the total number of competitors in its
marketing  area.

FINANCIAL  INFORMATION  ABOUT  INDUSTRY  SEGMENTS

Financial  information  with  respect  to  the  Company's  operating segments is
incorporated  herewith  by  reference  to item 8, Note 12, within this document.

                                       10
<PAGE>

EMPLOYEES

As  of  June 30, 2003, the Company employed 6,661 persons.  Of these, 2,041 were
employed  in  retail,  3,368 in manufacturing, 708 in financial services, 443 in
communities and 101 in corporate and administrative positions.  The Company does
not  have  any  collective  bargaining  agreements  and  considers  its employee
relations  to  be  good.

OTHER

The  Company's  website address is www.clayton.net.  Any Securities and Exchange
                                   ---------------
Commission  (SEC) filing through the SEC's EDGAR database for the Company may be
obtained  free  of  charge  via the Company's website.  Copies of any Form 10-K,
Form 10-Q, or Form 8-K filed with the SEC may also be obtained free of charge by
written  request  to:
                         Investor  Relations,  Clayton  Homes,  Inc.
                         P.O.  Box  15169,  Knoxville,  TN  37901

ITEM  2.  PROPERTIES.

The  Company's  Financial  Services operations and executive offices are located
near  Knoxville,  Tennessee  in  a wholly owned, two-story building with 135,000
square  feet  of  space.  The following table sets forth the properties that the
Company  uses for its manufacturing operations and locations of its manufactured
housing communities.  All of the buildings used for manufacturing operations are
constructed  of  fabricated  metal  on  a  concrete  slab.

<TABLE>
<CAPTION>

LOCATION  OF  PROPERTY

                               APPROXIMATE                                      APPROXIMATE
MANUFACTURING OPERATIONS       SQUARE FEET            MANUFACTURING OPERATIONS  SQUARE FEET
<S>                         <C>                      <C>                       <C>
Owned by Company:                                     Owned by Company:
  Arizona                                               Tennessee (continued)
    El Mirage                      123,000                Ardmore                 100,000
  Georgia                                                 Rutledge                 87,000
    Waycross                       100,000                Bean Station #1         114,000
  Kentucky                                                Bean Station #2         137,000
    Hodgenville                    130,000                Andersonville           128,000
  North Carolina                                          White Pine              137,000
    Henderson                      112,000              Texas
    Oxford                          92,000                Waco #1                 148,000
    Richfield                      194,000                Waco #2                  99,000
  Tennessee                                               Bonham                  117,000
    Maynardville                   110,000                Sulphur Springs         113,000
    Savannah #1                    104,000            Leased:
    Savannah #2                    109,000                Halls, Tennessee        129,000
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                               APPROXIMATE                                      APPROXIMATE
COMMUNITIES                       ACRES               COMMUNITIES                  ACRES
<S>                          <C>                     <C>                       <C>
Owned by Company:                                     Owned by Company:
  Arizona                                               Tennessee
    El Mirage                           35                Antioch                      66
    Glendale                            14                Chattanooga                  34
    Phoenix                             47                Knoxville (4)               202
  Florida                                                 LaVergne                     76
    Gainesville (2)                    132                Louisville                   41
    Jacksonville (5)                   330                Millington                   29
    Kissimmee                           41                Morristown                   12
    Mulberry (2)                       162                Maryville (2)                34
    Plant City                          38                Powell (2)                   69
    Princeton                           37                Sevierville                 115
    Tallahassee                         39                Smyrna                       26
  Georgia                                                 Tullahoma                    18
    Douglasville (2)                    97              Texas
    Rossville                           78                Arlington                    39
  Iowa                                                    Dallas (3)                  140
    Carter Lake                         41                Denton (3)                  201
  Michigan                                                Fort Worth (4)              154
    Kalamazoo                          126                Flower Mound                 18
  Missouri                                                Greenville                   40
    Independence                        90                Houston (3)                 158
  North Carolina                                          Humble                       55
    Greensboro                          83                Little Elm                   86
    Kannapolis                          85                Pearland                     50
    Winston-Salem                       80                Princeton                    69
  Oklahoma                                                San Angelo                   90
    Edmond                              37                San Antonio (7)             360
    Enid                                20                Schertz                      71
    Lawton                              38                Wilmer                       69
    Midwest City                        25                Wylie (2)                   209
    Norman                              44              Virginia
    Oklahoma City (2)                  116                Evington                     70
  South Carolina                                          Blacksburg                   38
    Columbia                            97
    Florence (2)                        97
</TABLE>

The  Company-owned  retail  centers  are three to four acre sites with a special
manufactured  office  unit  serving  as  the sales office.  The remainder of the
retail  center  site  is  devoted  to  the  display of homes.  Of the 302 retail
centers,  the  Company  owns  164 and leases 138.   The Company does not believe
that  any  individual  retail  sales  center property is material to its overall
business.

All  of  the properties described above are well maintained and suitable for the
purposes  for  which  they  are  being  used.  The  Company  believes  that  its
properties  are  adequate  for  its  near-term  needs.

ITEM  3.  LEGAL  PROCEEDINGS.

The  Company and/or its former directors are currently engaged in merger-related
litigation  in  state  courts  in  both  Delaware  and  Tennessee.

On  May  16, 2003, a putative class action lawsuit was filed by Mark Blosser, an
alleged  shareholder  of  Clayton  Homes,  in the Delaware Chancery Court in New
Castle  County.  The  defendants  named  in  the complaint are Clayton Homes and
directors  James  L.  Clayton,  B.  Joe Clayton, Kevin T. Clayton, Dan W. Evins,
Wilma  H.  Jordan,  Thomas N. McAdams and C. Warren Neel.  The complaint alleges
that  the  individual  defendants  breached  their  fiduciary  duties  to  the
shareholders  of  Clayton  Homes by agreeing to

                                       12
<PAGE>

the  merger.  The  complaint seeks (a) a declaration that the action is properly
maintainable  as a class action, (b) an injunction prohibiting the completion of
the  merger,  (c) if the merger is completed, rescission of the merger agreement
or  damages,  (d)  a declaration that the merger agreement is null and void, and
(e)  costs.

On  July  25, 2003, a putative class action and shareholders' derivative lawsuit
was  filed by Denver Area Meat Cutters and Employers Pension Plan in the Circuit
Court  for  Blount  County, Tennessee. The defendants named in the complaint are
Clayton  Homes and directors James L. Clayton, Kevin T. Clayton, C. Warren Neel,
B.  Joe  Clayton,  Steven  G. Davis, Dan W. Evins, Wilma H. Jordan and Thomas N.
McAdams.  The  complaint  alleges  that the individual defendants breached their
fiduciary duties to the shareholders of Clayton Homes by agreeing to the merger.
The  complaint  seeks (a) a declaration that the action is properly maintainable
as  a  class  action,  (b) a declaration that the individual defendants breached
their  fiduciary  duties  by  agreeing to the merger; (c) a declaration that the
individual  defendants  bear  the  burden  of showing the entire fairness of the
merger,  and that they cannot meet that burden, (d) damages, (e) disgorgement of
any  benefits  improperly  received by the individual defendants, and (f) costs.

Otherwise,  no  material  legal  proceedings  are  pending  other  than  routine
non-material  litigation  incidental  to  the  business  of  the  Company.

ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SHAREHOLDERS.
No  matters  were submitted to a vote to shareholders during the last quarter of
the  Company's  fiscal  year  ended  June 30, 2003.  On July 30, 2003, a special
shareholders'  meeting  was  held  to consider the merger between Clayton Homes,
Inc.  and  a  subsidiary  of Berkshire Hathaway Inc.  The majority of the shares
outstanding,  52.4%,  voted  for  the  proposed  merger.

                                       13
<PAGE>

                                     PART II

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

(a)  On  August  7,  2003,  the  Company  filed  a  certificate of merger with a
subsidiary  of  Berkshire Hathaway Inc. with the Secretary of State of Delaware.
In  addition,  on  August  7,  2003, the NYSE suspended trading of the Company's
common  stock  and subsequently delisted Clayton Homes, Inc. stock on October 8,
2003.  However,  for the entirety of the Company's Fiscal 2003, the Common Stock
was  traded  on the NYSE.  The following table sets forth, for fiscal years 2003
and  2002,  respectively,  the  range  of  high  and  low closing sale prices as
reported  by  the  NYSE.

<TABLE>
<CAPTION>
                                        FISCAL       FISCAL
                                         2003         2002
                                        ------       ------
QUARTER ENDED                       HIGH    LOW     HIGH    LOW
                                    ----   ----     ----   ----
<S>                              <C>      <C>      <C>     <C>
   September 30                   $15.66  $10.84  $16.50  $10.75
   December 31                     13.80    9.40   17.41   12.60
   March 31                        12.85   10.10   17.21   14.49
   June 30                         13.16   11.13   19.28   15.10
</TABLE>

(b)  On August 6, 2003, there were 8,541 holders of record (approximately 21,000
beneficial  holders)  of  the  Company's  Common  Stock.

(c)  Through  the  fiscal  year ended on June 30, 2003, it was the policy of the
Board  of Directors of the Company to reinvest substantially all earnings in the
business.  At its April 2001 meeting, the Board of Directors changed the Company
dividend  policy  from quarterly payments to an annual payment. The first annual
dividend of 6.4 cents per share was paid in January 2002.  The Company also paid
an  annual  dividend  of  6.4  cents  per  share  in  January  2003.

                                       14
<PAGE>

ITEM  6.  SELECTED  FINANCIAL  DATA.

<TABLE>
<CAPTION>
                                          TEN YEAR REVIEW
(in thousands except
 per share and other
 data)                     2003         2002         2001         2000        1999
                       -----------  -----------  -----------  -----------  -----------
<S>                    <C>          <C>          <C>          <C>          <C>
INCOME STATEMENT DATA
Revenues
  Net sales            $  850,010   $  871,108   $  849,157   $  993,916   $1,040,668
  Financial services
    and other income      338,401      327,740      301,799      299,429      303,615
                       -----------  -----------  -----------  -----------  -----------
                        1,188,411    1,198,848    1,150,956    1,293,345    1,344,283
                       -----------  -----------  -----------  -----------  -----------
Costs and expenses
  Cost of sales           551,055      565,322      562,267      660,429      705,128
  SG&A                    327,810      323,814      306,699      319,581      305,931
  Financial services
    operating expenses     84,978       83,245       68,635       65,518       69,480
  Provision for credit
    losses                 43,700       25,100       42,500       20,800       12,459
                       -----------  -----------  -----------  -----------  -----------
                        1,007,543      997,481      980,101    1,066,328    1,092,998
                       -----------  -----------  -----------  -----------  -----------
Operating income          180,868      201,367      170,855      227,017      251,285
Interest income
  (expense), net/other     (1,386)      (4,321)      (1,504)       1,608       (5,317)
                       -----------  -----------  -----------  -----------  -----------
Income before
  income taxes            179,482      197,046      169,351      228,625      245,968
Provision for
  income taxes            (66,400)     (72,900)     (62,700)     (84,600)     (91,000)
                       -----------  -----------  -----------  -----------  -----------
Income before
  accounting change       113,082      124,146      106,651      144,025      154,968
Cumulative effect of
  accounting change             -            -            -            -            -
                       -----------  -----------  -----------  -----------  -----------
Net income             $  113,082   $  124,146   $  106,651   $  144,025   $  154,968
                       -----------  -----------  -----------  -----------  -----------
Net income per share
  Basic                     $0.83        $0.90        $0.77        $1.03        $1.07
  Diluted                   $0.83        $0.89        $0.77        $1.03        $1.06
Average shares
  outstanding
  Basic                   136,237      137,726      137,702      139,474      145,211
  Diluted                 136,707      138,872      138,340      139,815      145,931
Dividends per common
  share                    $0.064       $0.064       $0.064       $0.064       $0.064
                       -----------  -----------  -----------  -----------  -----------
BALANCE SHEET DATA
  Total assets         $2,241,314   $1,828,403   $1,654,170   $1,506,378   $1,417,245
  Debt obligations        459,047       92,912      141,862       99,216       96,477
  Shareholders' equity $1,339,698   $1,261,957   $1,147,478   $1,036,375   $  947,768

KEY FINANCIAL RATIOS
As a % of revenue
  Operating income          15.2%        16.8%        14.8%        17.6%        18.7%
  Net income                 9.5%        10.4%         9.3%        11.1%        11.5%
Debt as a % of
  total capital             25.5%         6.9%        11.0%         8.7%         9.2%

OTHER DATA
  Company-owned
    retail centers            302          287          297          318          306
  Independent retailers       588          601          634          707          671
  Manufacturing plants         20           20           20           20           19
  Communities                  86           82           81           76           75



                             1998         1997         1996         1995         1994
                       -----------  -----------  -----------  -----------  -----------
INCOME STATEMENT DATA
Revenues
  Net sales            $  880,856   $  822,906   $  762,396   $  621,351   $  510,153
  Financial services
    and other income      246,923      198,797      166,345      136,741      118,083
                       -----------  -----------  -----------  -----------  -----------
                        1,127,779    1,021,703      928,741      758,092      628,236
                       -----------  -----------  -----------  -----------  -----------
Costs and expenses
  Cost of sales           598,589      559,274      521,200      431,826      357,698
  SG&A                    253,792      229,826      203,685      163,119      135,672
  Financial services
    operating expenses     50,821       44,055       36,152       31,249       26,222
  Provision for credit
    Losses                  7,976        1,000            -            -            -
                       -----------  -----------  -----------  -----------  -----------
                          911,178      834,155      761,037      626,194      519,592
                       -----------  -----------  -----------  -----------  -----------
Operating income          216,601      187,548      167,704      131,898      108,644
Interest income
  (expense), net/other      5,499        5,152        4,596        3,902         (359)
                       -----------  -----------  -----------  -----------  -----------
Income before
  income taxes            222,100      192,700      172,300      135,800      108,285
Provision for
  income taxes            (84,400)     (73,200)     (65,500)     (48,800)     (39,000)
                       -----------  -----------  -----------  -----------  -----------
Income before
  accounting change       137,700      119,500      106,800       87,000       69,285
Cumulative effect of
  accounting change             -            -            -            -        3,000
                       -----------  -----------  -----------  -----------  -----------
Net income             $  137,700   $  119,500   $  106,800   $   87,000   $   72,285
                       -----------  -----------  -----------  -----------  -----------
Net income per share
  Basic                     $0.93        $0.81        $0.72        $0.59        $0.51
  Diluted                   $0.92        $0.80        $0.72        $0.59        $0.49
Average shares
  outstanding
  Basic                   148,463      148,324      148,253      147,020      141,046
  Diluted                 149,504      149,346      149,183      148,285      149,875
Dividends per common
  share                    $0.064       $0.061       $0.049       $0.030            -
                       -----------  -----------  -----------  -----------  -----------
BALANCE SHEET DATA
  Total assets         $1,457,757   $1,045,761   $  886,350   $  761,151   $  701,148
  Debt obligations        247,591       22,806       30,290       48,737       70,680
  Shareholders' equity $  881,019   $  754,526   $  650,189   $  544,187   $  462,154

KEY FINANCIAL RATIOS
As a % of revenue
  Operating income          19.2%        18.4%        18.1%        17.4%        17.3%
  Net income                12.2%        11.7%        11.5%        11.5%        11.5%
Debt as a % of
  total capital             21.9%         2.9%         4.5%         8.2%        13.3%

OTHER DATA
  Company-owned
    retail centers            273          245          216          192          165
  Independent retailers       702          663          580          421          372
  Manufacturing plants         18           17           17           16           13
  Communities                  71           67           64           55           46
</TABLE>

                                       15
<PAGE>

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

CRITICAL  ACCOUNTING  POLICIES
The  Company believes the following represents its critical accounting policies:

REVENUE  RECOGNITION.  Retail  sales  are  recognized  when:  1) cash payment is
received, or the approved down payment, either in the form of cash, trade equity
or  land,  is  received for credit sales and, subsequent to credit approval, the
home  buyer enters into an installment sales contract, and 2) the home buyer has
inspected and accepted the completed home at the home buyer's site, and 3) title
has  passed  to  the  home  buyer.

Sales  of  homes produced by the Company to independent retailers are recognized
as  revenue  upon  shipment  if:  1)  a)  payment  has  been  received;  or b) a
commitment  is received from an approved wholesale lender that they will provide
financing  for  the  unit,  and  2)  title  has  passed  to  the  retailer.

Revenue  from  rental of home sites and homes is accrued and recognized based on
the  terms  of  the  resident's  lease  agreement  with  the  Company.

Premiums  from  insurance policies represent short-duration contracts with terms
of  one to 10 years and are deferred and recognized as revenue over the terms of
the  policies.

Vanderbilt Mortgage and Finance, Inc. (VMF), the Company's financing subsidiary,
originates  and  sells  installment  contract  and  mortgage  loan  receivables
(receivables),  retaining the servicing thereon.  It also provides servicing for
investors  in  receivables  on  a contract basis. Interest income on receivables
held,  either for sale or as an investment, is recognized in accordance with the
terms  of  the  underlying  installment  contracts.  For  receivables  sold with
servicing  retained and receivables serviced under servicing agreements, service
fee  income  is  recognized  as  the  service  is performed.  Interest income on
interest-only  residual interests is recognized in accordance with the consensus
of  the  Emerging  Issues  Task  Force  in  its  Issue  No.  99-20 (EITF 99-20),
Recognition  of  Interest  Income  and  Impairment  on  Purchased  and  Retained
Beneficial  Interests  in  Securitized  Assets.  Accordingly, interest income is
recognized  through  an  effective  yield  method,  with  the  yield  computed
prospectively  over  the life of the residual interests after adjustments in the
estimated  cash  flows  are  made  to  reflect  prepayments,  defaults and other
factors.

VALUATION  OF  RESIDUAL  INTERESTS.  The  Company  engages  in  securitization
activities  in connection with certain of its businesses.  Gains and losses from
securitizations are recognized in the consolidated statements of income when the
Company  relinquishes  control of the transferred financial assets in accordance
with  SFAS  No.  140, Accounting for Transfers and Servicing of Financial Assets
and  Extinguishments  of Liabilities.  The gain or loss on the sale of financial
assets depends in part on the previous carrying amount of the assets involved in
the transfer, allocated between the assets sold and the retained interests based
upon  their  respective  fair  values  at  the  date  of  the  sale.

Interest-only  securities  are  periodically valued using a discounted cash flow
model.  The  future  cash  flows for the estimated life of each securitized pool
are  projected  as the excess interest received from borrowers over the interest
paid  to  the  security  holders,  less contractual servicing fees and estimated
credit  losses,  after  giving  effect  to  estimated prepayments. Estimates for
prepayments,  defaults,  and losses are determined based on a model developed by
the Company that considers both Company-specific experience and current economic
conditions.

The  residual  interests  in  the installment receivables sold are classified as
available-for-sale  securities.  Accordingly,  changes  in fair market value are
recorded  as  other  comprehensive  income (loss) unless an other-than-temporary
adverse change is determined.  Any permanent impairment charges are reflected in
net  income.  In September 2002, March 2003, and June 2003, other-than-temporary
charges  of  $0.6  million,  $2.1  million and $13.2 million, respectively, were
recorded  as  a  reduction  of  financial  services  revenues in relation to the
Company's  residual  interests.  The  valuation  of  residual interests requires
various  assumptions  and  estimates.  Any  actual  significant  change in those
original assumptions and estimates could have a material impact on the Company's
reported  financial  position  and  cash  flows.

RESERVES  FOR  CREDIT  LOSSES  AND  CONTINGENT LIABILITIES.  Reserves for credit
losses  and contingent liabilities are established for receivables held for sale
or  investment  and  certain  inventory. Actual credit losses are charged to the
reserves  when incurred. The reserves established for such losses are determined
based  on

                                       16
<PAGE>

the  Company's  historical  loss experience after adjusting for current economic
conditions.  Management,  in  assessing  the  loss  experience  and  economic
conditions,  adjusts  reserves  through  periodic  provisions.  The Company also
maintains  a  reserve  for  contingent  liabilities  related  to  guarantees  of
installment  contract  receivables  sold  with  recourse.

WARRANTY COSTS.  The Company offers a limited one-year warranty for the homes it
manufactures.  Generally, the independent or Company-owned retailer performs the
warranty  repairs,  with  the costs being billed back to the originating Company
manufacturing  plant.  Costs  associated  with  any  installed  equipment  or
appliances  are subsequently billed back to the original equipment manufacturer.
For the years ended June 30, 2003, 2002, and 2001, net warranty costs were 2.4%,
2.6%,  and  2.9%,  respectively,  of  manufacturing  sales.

                              RESULTS OF OPERATIONS

FISCAL  2003  COMPARED  TO  FISCAL  2002
Total  revenues  of $1.2 billion in 2003 were down 1% from 2002.  Although sales
of homes through retail and communities increased 2.7% to $674 million from $656
million,  manufacturing  sales  to  independent dealers decreased 18%, from $215
million  to  $175  million.  This  decrease  is  a  result  of negative economic
conditions coupled with scarcity of consumer financing available to customers of
independent  dealers  and  the  continuing  overhang  of  foreclosed  units
cannibalizing sales of new and used homes due to the bankruptcy of certain large
lenders.  Total  financial services revenues in 2003 were up 4% over 2002, while
rental  and  other  revenue  remained  flat.

Total units sold declined 11% to 22,644 from 25,322 last year further reflecting
the  industry  downturn.  The  shift toward multi section sales mitigated the 9%
decline  in  total floors shipped to 34,201, down from 37,789 in the prior year.
Of  the 2,678 decline in units sold in 2003, 905 were used units, reflecting the
cannibalization  of sales and shelf space by the excessive foreclosed inventory.
In  the  Manufacturing  segment, total units shipped declined 20% in 2003.  This
decrease  was  primarily  a  result of negative economic conditions coupled with
both  the  scarcity  of consumer financing available to customers of independent
dealers,  and  the  continuing  overhang of foreclosed units attributable to the
bankruptcy  of  certain large lenders in the industry cannibalizing sales of new
homes.  A 20% decline in manufacturing shipments to independent retailers and an
8%  decline  in  retail  unit shipments was somewhat offset by a 20% increase in
units  sold  within  the  communities  segment.

Gross  profit  margins  on retail, manufacturing and communities sales increased
slightly  to 35.2% from 35.1%, primarily due to a higher rate of internalization
of  retail sales, improved efficiencies, and higher average retail and wholesale
selling  prices.  Selling,  general  and  administrative expenses were 27.6% and
27.0%  of  revenues  for  the years ended June 30, 2003, and 2002, respectively.
The  $4.1  million increase in selling, general, and administrative expenses was
partially  attributable to additional volume-related selling costs in the retail
and  communities  segment.  In  addition,  approximately  $1.4  million  of  the
increase  was due to fees and expenses related to the merger of the Company with
a  subsidiary  of  Berkshire Hathaway Inc.  See "Subsequent Events".   Operating
income  decreased  to  15.2%  of  total  revenues  from  16.8%  last  year.

Financial  services  operating  expenses  increased $1.6 million to $85 million.
This  increase  can be primarily attributable to rising insurance-related costs.
Additional costs associated with portfolio acquisitions were also a contributing
factor.  Provision  for  credit losses increased $18.6 million to $43.7 million,
as  compared to $25.1 million last year. The increase is due to the higher level
of  sell-through  of  foreclosed  units in the acquired portfolios, coupled with
lower  recovery  rates.  The  total  number  of  contracts  in  foreclosure as a
percentage  of  total  contracts increased slightly to 1.9% from 1.8% last year.

Interest expense (net of interest income) decreased $2.9 million to $1.4 million
as  compared  to $4.3 million in the same period last year.  The net decrease in
expense  was partially attributable to declining interest rates during the year,
which  had  a negative impact on the value of the Company's interest rate swaps,
offset  by  a $4.1 million gain recognized from the sale of investments.  During
the  fiscal  year  ended  June 30, 2003, there was an unfavorable mark-to-market
adjustment  of $5.0 million relating to the swaps, as compared to a $3.3 million
unfavorable  adjustment  in  the same period last year.  Income tax for the year
ended  June  30, 2003, was $66.4 million, which represents an effective tax rate
of  37%.

                                       17
<PAGE>

RETAIL.  Within  the  Retail  segment revenues, the average number of homes sold
per  sales center decreased 9% and the total number of homes sold declined 8% to
14,626.  Despite  the decline in units sold, the group experienced a 1% increase
in net sales to $623 million due to the larger proportion of new units sold this
year  over  last  year as well as a slightly greater mix of multi-section homes.
The proportion of new units sold was 86% of the total number of units versus 80%
new units sold last year.  Same store dollar sales remained constant as compared
to  the  prior  year.

<TABLE>
<CAPTION>
                                                          Year ended June 30,           %
                                                          2003           2002         Change
                                                        --------       --------       -------
<S>                                                     <C>            <C>            <C>
Sales of new homes (in thousands)                       $594,124       $571,656          3.9%
Sales of previously-owned (in thousands)                $ 29,041       $ 44,568        -34.8%
Average number of retail centers                             295            292          0.9%
Dollar sales per retail center (in thousands)           $  2,116       $  2,110          0.3%
Average price of home                                   $ 42,607       $ 38,812          9.8%
New homes sold                                            12,548         12,772         -1.8%
Previously-owned homes sold                                2,078          3,105        -33.1%
Percentage single-section/multi-section mix (new only)     46/54          47/53
</TABLE>

During  the  year,  the  Company  opened  20  retail  centers  and  closed  five
under-performing  retail  centers.  The  Company  continually evaluates specific
markets and opens, acquires or closes retail centers as conditions warrant.  All
of  the  20  new  openings  were  acquired.  Four of the new retail centers were
opened  in  the  fourth  quarter.

MANUFACTURING.  Within the Manufacturing segment revenues, the group experienced
an  18%  decline to $176 million in net sales to independent retailers and a 20%
decrease in the number of homes sold to 6,575.  This decline is primarily due to
the  lack  of  dependable  financing  for  customers of our independent retailer
network  and  the  continuing  presence  of  excess foreclosure inventory in the
marketplace.  The  average  number of independent retailers decreased 4% to 595.
Manufacturing  segment operating income decreased $9 million to $38 million from
$47  million  in  the  prior  year.  Capacity  utilization  decreased to 54%, as
compared  to  60%  last  year.  On  June  30,  2003,  the  order backlog for the
Manufacturing  group  (consisting  of  Company-owned  and  independent  retailer
orders)  decreased  3%  to  $22  million  as  compared  to  last  year.

<TABLE>
<CAPTION>
                                                         Year ended June 30,          %
                                                        2003           2002         Change
                                                      --------       --------       -------
<S>                                                   <C>            <C>            <C>
Wholesale dollar sales (in thousands)                 $175,973       $214,769        -18.1%
Number of plants operating                                  20             20           --
Number of independent retailers (average)                  595            618         -3.7%
Dollar sales per independent retailer (in thousands)  $    296       $    348        -14.9%
Average price of home                                 $ 26,764       $ 26,064          2.7%
New homes sold to independent retailers                  6,575          8,240        -20.2%
Percentage single-section/multi-section mix              38/62          39/61
</TABLE>

FINANCIAL  SERVICES.  Financial  Services  revenues decreased $2 million to $204
million,  as  insurance  related  revenues  increased  $7  million,  primarily
attributable  to  the  impact of multi-year policies generated in prior periods.
Non-insurance  related revenues in 2003 declined $8 million despite the increase
in  the  aggregate  balance  of  loans  serviced of 8%. The deterioration of the
asset-backed  securities  (ABS) market for manufactured housing contributed to a
reduced  gain on sale amount as the increased retention of securitized bonds and
wider spreads required by ABS investors combined to reduce the residual interest
of  new  securitized  pools.  Receivable  originations  of  $948  million  and
acquisitions  with  aggregate  principal  balances of approximately $732 million
were  completed  during  the year, bringing the total serviced portfolio to $5.5
billion. Inventory finance receivables increased $95 million to $139 million, as
compared  to  $44  million  in  June 2002. This increase was due to acquisitions
relating  to  the  fact  that  competing lenders exited the manufactured housing
finance sector. Loans sold through asset-backed security transactions (including
those  sold through the GNMA-sponsored program) totaled $1.2 billion in 2003. Of
these,  $90  million in securities were retained at the point of the transaction
with  $12.1  million sold later in the year. In 2002, $1.9 billion in loans were
sold  through  asset-backed  security  transactions.  Of  these,

                                       18
<PAGE>

$19.1  million  were  retained at the point of the transaction with $9.1 million
subsequently  sold.  Delinquency  on the originated portfolio increased 38 basis
points  to 2.67%.  Overall delinquency, including the serviced portfolio and the
recent portfolio purchases, increased 15 basis points to 2.99%.  Total Financial
Services  operating  income decreased 6% to $117 million.  Net credit losses for
all  contracts owned or purchased, including losses on securitized mortgages, as
a  percentage  of loans outstanding for fiscal 2003 increased to 2.6% from 2.2%.
This  is  principally  the  result  of losses on portfolios acquired in 2002 and
2003.  Many  of  these  portfolios were purchased in anticipation of higher than
normal  losses,  and were priced accordingly.  For originated loans, losses as a
percent  of  originated  loan  balances  outstanding increased .2% from 2.1% for
fiscal  2002  to  2.3%  for  fiscal  2003,  which is reflective of the depressed
recoveries  due  to  the  continuing  presence  of excess foreclosure inventory.

The average outstanding balance of installment contract and mortgage receivables
increased  27%  to  $663 million with a weighted average interest rate of 8.90%,
down  slightly  from  9.03%. The average outstanding balance of receivables sold
rose  10%  to  $4.5  billion.

COMMUNITIES.  Within  the  Communities segment revenues, net sales increased 27%
to  $51 million, the average home selling price increased 6%, and 20% more homes
were  sold  as  a result of certain promotional programs.  Rental income for the
group  rose 5%.  Segment operating income increased 2%.  The Company added 1,295
sites  during  the  year  bringing  the  total to 22,677 sites at June 30, 2003.

<TABLE>
<CAPTION>
                                                 Year ended June 30,          %
                                                 2003          2002         Change
                                                -------       -------       -------
<S>                                             <C>           <C>           <C>
Sales of new homes (in thousands)               $34,098       $27,801         22.7%
Sales of previously-owned homes (in thousands)  $16,774       $12,314         36.2%
Number of communities (average)                      84            82          3.1%
Dollar sales per community (in thousands)       $   606       $   492         23.0%
Average price of home                           $35,254       $33,290          5.9%
New homes sold                                      840           724         16.0%
Previously-owned homes sold                         603           481         25.4%
</TABLE>

FISCAL  2002  COMPARED  TO  FISCAL  2001
Total  revenues  increased  4%  to  $1.2  billion, as manufactured housing sales
increased  3%  to  $871 million, financial services income increased 11% to $252
million  and  rental  and  other  income  increased  2%  to  $75  million.

Total  units  sold  declined  3% to 25,322 from 26,215 last year as total floors
shipped  declined  1% to 37,789 from 38,171 in the prior year.  A 10% decline in
manufacturing  shipments to independent retailers and a slight decline in retail
unit  shipments  was, to a certain extent, offset by a 1% increase in units sold
within  the  communities  segment.

Gross profit margins on retail, manufacturing and communities sales increased to
35.1%  from  33.8%,  primarily due to a higher rate of internalization of retail
sales,  improved  efficiencies,  and higher average retail and wholesale selling
prices.  Selling,  general  and  administrative expenses were 27.0% and 26.6% of
revenues  for the years ended June 30, 2002, and 2001, respectively.  Additional
costs  associated  with  portfolio  acquisitions  contributed  to  the increase.

Financial  services  operating expenses increased $14.6 million primarily due to
costs  associated with portfolio acquisitions.  Operating income as a percentage
of  revenues  increased  to  16.8%  from  14.8%  last  year.

Provision  for credit losses was $25.1 million (excluding $40.2 million that has
been  included  in  Financial Services revenue for 2002 related to the losses on
securitized  mortgages),  as compared to $42.5 million last year.  This combined
increase  was  primarily due to the additional contracts in foreclosure from the
same  period  for  2001.  The  total  number  of  contracts  in foreclosure as a
percentage  of  total  contracts  decreased  to  1.8%  from  1.9%  for  2001.

Interest  and  other  expense  increased  to  $4.3  million.  This  increase was
partially  due  to  an  overall  declining interest rate outlook which adversely
impacted  the  value  of  the  Company's  interest  rate  swaps.  During  the

                                       19
<PAGE>

fiscal  year  ended  June  30,  2002,  there  was  an unfavorable mark-to-market
adjustment  of $3.3 million relating to the swaps, as compared to a $2.1 million
unfavorable  adjustment  in  the  same period for 2001.  Income tax for the year
ended  June  30, 2002, was $72.9 million, which represents an effective tax rate
of  37%.

Conditions  in  the  manufactured  housing  industry  continued  to  be  highly
competitive  at  both  the  retail  and  wholesale levels.  For fiscal 2002, the
industry was faced with manufacturing over-capacity and too many retail centers.
This  competitive  environment,  as well as an increase in industry foreclosures
and  aging  retail  inventory,  contributed  to  the  idling  and  closing  of
manufacturing plants, and declining wholesale shipments resulting in significant
closings  of  retail  centers.

RETAIL.  Within  the  Retail segment, the group experienced a 5% increase in net
sales  to  $616  million as the total number of homes sold decreased slightly to
15,877  and  the  average  home price increased 5%.  The average number of homes
sold  per  sales  center increased 5% as same store sales dollars increased 12%.
The  average number of Company-owned retail centers declined 5%.  Retail segment
operating  income  increased  12%  to  $32  million  from $29 million last year.


<TABLE>
<CAPTION>
                                                           Year ended June 30,          %
                                                          2003           2002         Change
                                                        --------       --------       -------
<S>                                                     <C>            <C>            <C>
Sales of new homes (in thousands)                       $571,656       $538,812          6.1%
Sales of previously-owned homes (in thousands)          $ 44,568       $ 47,449         -6.1%
Average number of retail centers                             292            308         -5.0%
Dollar sales per retail center (in thousands)           $  2,110       $  1,907         10.7%
Average price of home                                   $ 38,812       $ 36,867          5.3%
New homes sold                                            12,772         12,346          3.5%
Previously-owned homes sold                                3,105          3,556        -12.7%
Percentage single-section/multi-section mix (new only)     47/53          50/50
</TABLE>

During  the  year,  the  Company  opened  seven  retail  centers  and  closed 17
under-performing  retail  centers.  The  Company  continually evaluates specific
markets  and opens, acquires or closes retail centers as conditions warrant.  Of
the  seven  new  openings, six were acquired and one was a startup.  Four of the
new  retail  centers  were  opened  in  the  fourth  quarter.

MANUFACTURING.  Within  the  Manufacturing  segment,  the group experienced a 4%
decline  in net sales to independent retailers to $215 million, while the number
of  homes  sold  decreased  10%  to  8,240.  The  average  number of independent
retailers decreased 8%.  Manufacturing segment operating income increased 28% to
$47  million from $37 million in the prior year.  Capacity utilization increased
to  60%,  as compared to 57% last year.  On June 30, 2002, the order backlog for
the  Manufacturing  group  (consisting of Company-owned and independent retailer
orders)  decreased  36%  to  $22  million,  compared  to  $35 million last year.

<TABLE>
<CAPTION>
                                                         Year ended June 30,          %
                                                        2003           2002         Change
                                                      --------       --------       -------
<S>                                                   <C>            <C>             <C>
Wholesale dollar sales (in thousands)                 $214,769       $223,476         -3.9%
Number of plants operating                                  20             20           --
Number of independent retailers (average)                  618            671         -7.9%
Dollar sales per independent retailer (in thousands)  $    348       $    333          4.4%
Average price of home                                 $ 26,064       $ 24,507          6.4%
Homes sold to independent retailers                      8,240          9,119         -9.6%
Percentage single-section/multi-section mix              39/61          45/55
</TABLE>

FINANCIAL  SERVICES.  Revenues  for the Financial Services segment increased $22
million  to  $206  million,  primarily  due  to a larger servicing portfolio and
improved  spreads  over  last  year.  Insurance  related  revenues  increased $4
million,  primarily  attributable to the impact of multi-year policies generated
in  prior  periods.  Receivable originations of $913 million and acquisitions of
$1.2  billion  were  completed  during  the  year,  bringing  the total serviced
portfolio  to  $5.0  billion, an increase of 15% over the prior year.  Inventory

                                       20
<PAGE>

finance  receivables  increased  $37  million  to $44 million, as compared to $7
million  in  June 2001.  Loans sold through asset-backed securities totaled $1.9
billion,  as  compared to $886 million last year.  Delinquency on the originated
portfolio increased 17 basis points to 2.29%. Overall delinquency, including the
serviced  portfolio,  increased  25  basis  points  to  2.84%.  Total  Financial
Services  operating  income  increased  31%  to  $125  million.

The average outstanding balance of installment contract and mortgage receivables
increased  19%  to  $520  million with a weighted average interest rate of 9.0%,
down  from 9.8%. The average outstanding balance of receivables sold rose 12% to
$4.1  billion,  and  the  weighted average loan service spread increased to 3.5%
from  3.4%.  Net  credit losses, including losses on securitized mortgages, as a
percentage  of  loans  outstanding  for fiscal 2002 increased to 2.2% from 1.8%.

COMMUNITIES.  Within the Communities segment revenues, net sales increased 2% to
$40  million  as  the  number  of  homes  sold increased 1% and the average home
selling  price  increased  1%.  Communities  rental  income  rose  2%.  Segment
operating  income  declined  1%.  The  Company  added  261 sites during the year
bringing  the  total  to  21,382  sites  at  June  30,  2002.

<TABLE>
<CAPTION>
                                                Year ended June 30,          %
                                                2002          2001         Change
                                               -------       -------       -------
<S>                                            <C>           <C>           <C>
Sales of new homes (in thousands)              $27,801       $28,689         -3.1%
Sales of previously-used homes (in thousands)  $12,314       $10,731         14.8%
Number of communities (average)                     82            79          3.8%
Dollar sales per community (in thousands)      $   492       $   502         -2.0%
Average price of home                          $33,290       $33,015          0.8%
New homes sold                                     724           755         -4.1%
Previously-owned homes sold                        481           439          9.6%
</TABLE>

                         LIQUIDITY AND CAPITAL RESOURCES

Historically,  the  Company anticipated meeting cash requirements with cash flow
from  operations,  revolving  credit  lines,  a commercial paper sales facility,
senior  notes,  and  sales of installment contract and mortgage loan receivables
and  GNMA  certificates.  A concern of the Company is its ability to efficiently
access  global  capital  markets.  In  the past year the market for asset-backed
certificates  backed  by  manufactured home installment loans, such as those the
Company  has  historically  issued,  has  deteriorated  such that the Company is
unable to sell all of the certificates it creates.  This inefficiency has forced
the Company to retain unsold certificates with a cost basis of approximately $96
million  at  the  end  of 2003.  At June 30, 2002, the Company held certificates
costing  approximately  $21  million.  During  the year ended June 30, 2003, the
Company  raised  $1.2  billion through asset securitizations as compared to $1.8
billion in fiscal 2002.  The origination and acquisition of installment contract
receivables  resulted  in  a  net  cash requirement of $1.68 billion in 2003 and
$1.96  billion  in  2002.

Cash  and cash equivalents at June 30, 2003, were $37 million as compared to $84
million at June 30, 2002. Cash used in operating activities was $102 million for
the  year ending June 30, 2003, as compared to $97 million provided by operating
activities last year. The overall decline was primarily due to an additional $58
million being used for inventory finance receivables, an increase of $35 million
in  originations, a $20 million increase in income taxes paid, and an additional
$74  million  being retained from asset-backed securitization transactions. Cash
used  for  investing activities was $266 million, as compared to $8 million last
year. This change was largely due to a decline in the securitization of acquired
contracts  during  the  year. In 2002, contracts acquired exceeded the amount of
acquired  contracts  that  were included in securitizations by $105 million. For
fiscal  2003,  the  amount  that  contracts acquired exceeded acquired contracts
securitized  increased  to  $429  million. In addition, $321 million in cash was
provided  by  financing  activities as compared to $53 million used in financing
activities  in  the  same  period  last  year.  The  Company had restricted cash
balances  of  $139  million  at June 30, 2003, which includes trust account cash
balances  required  by  certain VMF servicing agreements, and insurance reserves
required  by  ceding  companies.  The  majority  of  the restricted cash balance
represents  funds held in accordance with certain servicing agreements that will
be  disbursed  within  15  days  of  the  end  of  the  accounting  period.

                                       21
<PAGE>

At June 30, 2003, and at June 30, 2002, the Company had debt outstanding of $459
million  and $93 million, respectively. Debt outstanding principally consists of
$368  million  of long and short-term promissory notes, $75 million of privately
issued  senior notes, and $15 million of tax-exempt bonds. The Company's debt to
total  capital  ratio  increased  to  25%  as compared to 7% last year. A $1.875
billion  line  of credit is available with Berkshire Hathaway, with $368 million
being  utilized  on  June  30, 2003.  Of the amount due Berkshire Hathaway, $318
million  was  secured  by  manufactured housing contracts with the remaining $50
million being unsecured.  The notes to Berkshire Hathaway are due in March 2004.
Short-term  debt  available  consists  of  $90  million committed (including the
aforementioned  $50 million from Berkshire Hathaway) and $36 million uncommitted
lines  of credit. These lines of credit do not require collateral and are priced
in  relation  to  LIBOR.  The  committed  credit  lines  are  guaranteed  by all
significant  subsidiaries  of  the Company and are governed by various financial
covenants  that  require  maintenance  of  certain  financial  ratios.

The  Company  has $75 million of 6.25% Senior Notes due December 30, 2003, which
are  primarily  to  facilitate the purchase, origination and warehousing of loan
portfolios.  The  Senior Notes are guaranteed by all significant subsidiaries of
the  Company  and  are  governed  by  various  financial  covenants that require
maintenance  of  certain financial ratios.  At June 20, 2003, the Company was in
compliance  with  all  financial  covenants with the exception of a pledged debt
covenant  that,  upon  the  effectiveness  of  the  merger,  was  resolved.

A  $300  million  one-year  sales facility is available of which $150 million is
committed.  This facility was not utilized at June 30, 2003.  Approximately $175
million  in  installment  contract  receivables  were  sold through the facility
during  the  year.  In addition, a committed one-year $150 million participation
facility  was  also  available  to  facilitate  the  future sale of manufactured
housing  contracts.  This  participation  facility  was not utilized at June 30,
2003, and expired in August 2003. In accordance with the agreements of the sales
facility  and  participation facility, utilization of any unfunded commitment is
permitted  as  long  as  certain  criteria  are met.  The criteria for the sales
facility  include  maintenance  of  minimum  credit  ratings,  various financial
covenants  that  require  maintenance  of certain ratios, and certain collateral
characteristics. The minimum credit ratings required for funding under the sales
facility  are:  S&P (BBB-), Moody's (Baa3) and Fitch (BB+). The criteria for the
participation  facility  contain no minimum ratings criteria, but have financial
covenants  that  require  maintenance  of  certain ratios and certain collateral
characteristics.  At  June  30,  2003,  the  Company  was  in  compliance  with
requirements requisite to accessing the sales and participation facilities.  The
current  credit ratings for the company are: S&P (BBB), Moody's (Baa2) and Fitch
(BB+).  The Company owns its inventory; therefore, no floorplanning arrangements
are  necessary.

The  Company  is  the  provider  of  limited  guarantees  in connection with its
securitizations.  The  guarantees,  totaling  $425 million at June 30, 2003, are
for  payment  of principal and interest due on certain subordinated certificates
issued through securitizations for which the Company is also subservicer.  These
guarantees are limited to principal and/or interest payments due the subordinate
bondholders.  Other  guarantees, totaling $70 million at June 30, 2003, are with
respect  to  the Company's servicing obligations for those GNMA certificates for
which  it  is servicer.  The Company believes that the probability of its having
to perform under these guarantees is remote.  The following table summarizes the
Company's significant contractual obligations and other contingencies as of June
30,  2003:

                                       22
<PAGE>

<TABLE>
<CAPTION>

(in  thousands)

Contractual Obligations (1)                             Payments due by period
---------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>         <C>         <C>        <C>        <C>
                           Total          FY04         FY05        FY06        FY07     FY08      Thereafter
                           ------------------------------------------------------------------------------------
Debt obligations           $459,047     $443,568     $   134     $    35     $     -     $ 4,030    $11,280
Capital leases             $    216     $    216     $     -     $     -     $     -     $     -    $     -
Operating leases           $  8,434     $  3,063     $ 2,123     $ 1,473     $   860     $   198    $   717

Other Contingencies (2)                         Amount of contingency expiration per period
---------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>         <C>         <C>        <C>        <C>
                           Total          FY04         FY05        FY06        FY07     FY08      Thereafter
                           ------------------------------------------------------------------------------------
Letters of credit          $144,686     $128,847     $     -     $15,839     $     -     $     -    $      -
Guarantees                 $494,806     $  2,033     $ 5,201     $14,152     $45,869     $ 83,892   $343,659
Repurchase agreements      $ 55,704     $ 44,563     $11,141     $     -     $     -     $     -    $      -


<FN>
(1)  Debt  obligations  consist  primarily  of  $368  million Berkshire Hathaway borrowings, $75 million Senior Notes due
December  2003,  and  $15  million  tax-exempt  bonds  due  through  2030.  Capital  leases  represent  amounts  due  on
computer-related equipment.  Operating leases represent minimum rental commitments primarily for retail centers in effect
on  June  30,  2003.
(2)  Letters of credit primarily relate to insurance reserves and guarantees relate to asset-backed securitizations.  The
Company  believes  the probability of having to make guarantee payments under the terms of the guarantees is remote.  The
repurchase  agreements represent the maximum potential repurchase obligations in the event of a default by an independent
retailer  to the institution providing its floorplan lending.  These agreements are customary in the manufactured housing
industry,  and  the  Company's losses  in  the  past  have  not  been  significant.
</TABLE>

In fiscal 2003, the Company repurchased 2,441,900 shares of Company common stock
for  $30.9  million.  The  most  recent repurchase was made on October 23, 2002.

Acquisitions  of  property,  plant  and equipment consisted of approximately $16
million  to  expand,  develop,  or  improve manufactured housing communities, $5
million  for  opening and upgrading Company-owned retail centers, $7 million for
construction  and  improvement  of  manufacturing facilities, and $3 million for
other  fixed  assets.

For  the next twelve months, the Company expects to originate approximately $900
million  of  installment  contract and mortgage loan receivables and $35 million
for  inventory  finance  receivables.  It also expects to purchase approximately
$200  million  in  manufactured housing installment contract receivables from an
affiliate  and  acquire  loan receivables in bulk from banks or other commercial
lenders  with  aggregate  principal  balances of approximately $300 million.  It
expects  to  invest approximately $16 million in acquisitions or construction of
manufactured  housing  communities,  $11  million  for  opening  and  upgrading
Company-owned  retail  centers,  $5  million for construction and improvement of
manufacturing  facilities,  and  $5  million  for  other  fixed  assets.


                                   MARKET RISK

The Company is exposed to market risks related to fluctuations in interest rates
on  certain  of  its  assets and liabilities.  These instruments include certain
installment  contract  receivables,  residual  interests  in  asset-backed
securitizations  and variable rate debt, which principally consists of revolving
credit  lines.  The  Company  utilizes  interest rate swaps to minimize interest
rate  risk  on  certain credit lines, effectively converting these to fixed rate
debt.  Foreign  currency  and  commodity price risk are not considered to have a
material  impact  on  the  Company.

The  Company  had  variable  interest  rate  installment contract receivables of
approximately  $3.3 million at June 30, 2003.  Holding the outstanding principal
amount  constant, each one percentage point increase in interest rates occurring
on  the  first  day of the year would result in an increase in cash flow for the
coming  year  of  approximately  $19,000.

Certain of the coupon rates on certificates payable to investors in asset-backed
securities  are based on variable interest rates.  These certificates total $853
million  at June 30, 2003.  The balance of installment contract receivables with
variable  interest  rate  terms  collateralizing  these  certificates  was  $642
million,

                                       23
<PAGE>

with  the  remainder  having  fixed interest rate terms.  Holding the receivable
balances  constant,  each  one  percentage  point  increase  in  interest  rates
occurring  on  the  first day of the year would result in a net decrease in cash
flow  for  the  coming  year  of  approximately  $4.9  million.

Of the $459 million outstanding debt as of June 30, 2003,  $65 million had terms
that  included  variable  interest  rates that reset weekly.  The remaining $394
million of outstanding debt had fixed interest rate terms.  Holding the variable
rate  debt  constant,  each  one  percentage  point  increase  in interest rates
occurring  on  the first day of the year would result in an increase in interest
expense  for  the  coming  year  of  approximately  $357,000,  net  of  tax.

                          NEW ACCOUNTING PRONOUNCEMENTS

In  June  2002, the Financial Accounting Standards Board (FASB) issued Statement
No.  146  (SFAS  146),  Accounting  for  Costs  Associated with Exit or Disposal
Activities.  This  Statement  addresses  financial  accounting and reporting for
costs  associated with exit or disposal activities and nullifies Emerging Issues
Task  Force  (EITF)  Issue  No. 94-3, Liability Recognition for Certain Employee
Termination  Benefits  and  Other  Costs  to  Exit  an  Activity. This Statement
requires  that  a  liability  for  a  cost  associated  with an exit or disposal
activity  be  recognized  and  measured  initially  at  fair value only when the
liability  is  incurred.  SFAS  146 is effective for exit or disposal activities
that  are  initiated  after  December  31, 2002.  The Company does not presently
anticipate  any  of  the  exit  or disposal activities so the provisions of this
statement  will  not have a material impact on the Company's reported results of
operations,  financial  positions,  or  cash  flows.

In  November  2002,  the FASB issued Interpretation No. 45 (FIN 45), Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness of Others.  FIN 45 elaborates on the disclosures to
be  made by a guarantor in its interim and annual financial statements about its
obligations  under  certain guarantees that it has issued.  It also requires the
guarantor  to  recognize, at the inception of the guarantee, a liability for the
fair  value  of  obligations undertaken in issuing the guarantee. The disclosure
requirements  are effective for quarters ending after December 15, 2002, and the
liability  recognition  is  in  effect  for guarantees issued after December 31,
2002.  The  Company  has  historically  provided  limited  guarantees on certain
certificates  offered  in  conjunction  with  installment  contract  receivable
securitization  transactions for which it is issuer.  These securitizations have
been  accounted  for  in  accordance  with  SFAS 140, and to the extent that the
guarantee  was  issued,  the  fair value of that guarantee was considered in the
calculation  of the residual interest.  The Company does not anticipate that the
provisions  of  this interpretation will have a material impact on the Company's
reported results of operations, financial positions, or cash flows.  The Company
issued  no  guarantees  during  the  six  months  ended  June  30,  2003.

In  November  2002, the EITF reached a consensus regarding EITF Issue No. 02-16,
Accounting  by  a  Customer  (including  a  Reseller)  for Certain Consideration
Received  from a Vendor. Issue No. 02-16 addresses the timing of recognition and
classification  of  consideration  received  from vendors, including rebates and
allowances.  Issue  No. 02-16 is effective for certain of our vendor rebates and
allowances  commencing  in January 2003. The adoption of Issue No. 02-16 did not
have  a  material  impact  on  the  reported  results  of  operations, financial
positions,  or  cash  flows.

In  December  2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for
Stock-Based  Compensation-Transition  and  Disclosure-an  amendment  of  FASB
Statement  No. 123. This Statement amends FASB Statement No. 123, Accounting for
Stock-Based  Compensation,  to  provide  alternative methods of transition for a
voluntary  change  to  the fair value based method of accounting for stock-based
employee  compensation.  In  addition,  this  Statement  amends  the  disclosure
requirements  of  Statement  123 to require prominent disclosures in both annual
and  interim financial statements about the method of accounting for stock-based
employee  compensation  and  the  effect of the method used on reported results.
Subsequent  to  June 30, 2003, the Company cancelled all stock option plans (See
note 18 to the accompanying financial statements). Accordingly, the Company does
not anticipate that the provisions of this statement will have a material impact
on  the  reported  results  of  operations,  financial positions, or cash flows.

In  January  2003, the FASB issued Interpretation No. 46 (FIN 46), Consolidation
of  Variable  Interest  Entities. FIN 46 requires an investor with a majority of
the  variable  interests  in a variable interest entity (VIE) to consolidate the
entity and also requires majority and significant variable interest investors to

                                       24
<PAGE>

provide  certain  disclosures.  A  VIE is an entity in which the equity investor
does  not  have  a  controlling  interest,  or  the equity investment at risk is
insufficient  to  finance  the  entity's activities without receiving additional
subordinated  financial support from the other parties. For arrangements entered
into  with  VIEs created prior to January 31, 2003, the provisions of FIN 46 are
required  to  be  adopted at the beginning of the first interim or annual period
beginning  after  December  15,  2003.  The  Company  is currently reviewing its
investments  and  other  arrangements  to  determine whether any of its investee
entities are VIEs. The company's maximum exposure related to any investment that
may  be  determined  to  be  in  a  VIE  is  limited to the amount invested. The
provisions of FIN 46 are effective immediately for all arrangements entered into
with  new  VIEs  created after January 31, 2003. The Company has not invested in
any new VIEs created after January 31, 2003. The Company is presently evaluating
any  significant  VIEs  that  would  be  consolidated.

In  April 2003, FASB issued Statement of Financial Accounting Standards No. 149,
Amendment  of  Statement  133  on Derivative Instruments and Hedging Activities.
FASB  Statements  No.  133,  Accounting  for  Derivative Instruments and Hedging
Activities  and  No.  138,  Accounting  for  Certain  Derivative Instruments and
Certain  Hedging  Activities,  establish  accounting and reporting standards for
derivative  instruments  including  derivatives  embedded  in  other  contracts
(collectively  referred  to  as  derivatives)  and  for hedging activities. This
Statement  149  amends  Statement 133 for certain decisions made by the Board as
part  of  the  Derivatives  Implementation  Group  (DIG) process. This Statement
contains  amendments  relating to FASB Concepts Statement No. 7, Using Cash Flow
Information  and  Present  Value in Accounting Measurements, and FASB Statements
No.  65,  Accounting  for Certain Mortgage Banking Activities, No. 91 Accounting
for  Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
and  Initial  Direct  Costs  of Leases, No. 95, Statement of Cash Flows, and No.
126, Exemption from Certain Required Disclosures about Financial Instruments for
Certain Nonpublic Entities.  The Company does not anticipate that the provisions
of  this  statement  will  have  a  material  impact  on the reported results of
operations,  financial  positions,  or  cash  flows.


                              EFFECTS OF INFLATION

Inflation has had an insignificant impact on the Company during the past several
years.



                           FORWARD LOOKING STATEMENTS

This  report  contains  "forward  looking  statements" within the meaning of the
federal  securities  laws  regarding the business and industry of Clayton Homes,
Inc. and its subsidiaries.  Such forward-looking statements can be identified by
the use of the words "believes," "estimates," "expects," "projects" and words of
similar  import and include, without limitation, statements regarding the growth
and  financing  strategies  of  the  Company,  projections  of revenues, income,
earnings per share or other financial items, the effective implementation of the
Company's  business  or  regarding  trends  relating  to  the  manufactured home
industry  and various other items.  Forward-looking statements involve known and
unknown  risks,  uncertainties  and  other  factors  that  may  cause the actual
financial  condition, results of operations, performance and achievements of the
Company  to  be  materially  different  from  any of the results, performance or
achievements  expressed  or  implied  by  such forward-looking statements.  Such
factors  include  general  economic  and  business  conditions; industry trends;
demographic changes; competition; raw material and labor costs and availability;
import  protection and regulation; relationships with customers, distributors or
dealers;  changes  in the business strategy or development plans of the Company;
the availability of other forms of housing; the availability of consumer credit;
general  inflationary  pressures; the availability and terms of capital; general
interest  rate  risk;  and  government  regulation.

Such forward looking statements are based on current expectations, estimates and
projections  about  the  industry  and markets in which the Company operates, as
well as management's beliefs and assumptions.  Although the Company believes its
current  expectations  to  be based upon reasonable assumptions, there can be no
assurance  that  such  expectations will be attained or that actual results will
not  differ materially.  The Company undertakes no obligation to publicly update
or revise any forward-looking statement, whether as a result of new information,
future  events  or  otherwise.

                                       25
<PAGE>

                                SUBSEQUENT EVENTS

On  April 1, 2003, the Company entered into an agreement and plan of merger with
Berkshire  Hathaway  and  its  subsidiary pursuant to which the Company would be
acquired  by Berkshire Hathaway at a price of $12.50 per share, payable in cash.
The  agreement and plan of merger and the stockholders agreement relating to the
merger  of  a  subsidiary  of  Berkshire Hathaway with and into the Company were
filed  with  the  Securities  and  Exchange Commission (SEC) on April 2, 2003 as
exhibits  to  Form  8-K.  On April 18, 2003, the preliminary proxy statement was
filed  with  the  SEC,  and the definitive proxy statement was filed on June 12,
2003.

At  a  special  meeting  of  stockholders  held on July 30, 2003 for purposes of
voting  on  the  proposed  merger,  a majority of the shares outstanding, 52.4%,
voted  in  favor  of  the proposed merger.  On August 7, 2003, the merger became
effective  with  the  filing  of the certificate of merger with the Secretary of
State  of  Delaware.

As  of  the  date  of  this  filing, the Company has incurred approximately $9.2
million of merger related expenses. In addition, on August 15, 2003, the Company
paid  approximately  $19.1 million to purchase for cancellation those options to
purchase  common  stock  of  the  Company  from  all  eligible option holders as
described  in Form SC-TO-I/A, Schedule to Tender Offer Statement, filed with the
SEC  on  June 16, 2003.  As a result of the purchase on that date, those options
available  to  eligible  option  holders  were  cancelled.

The  Company  is  presently  involved in litigation pertaining to merger related
activities.  See  Item 3 "Legal Proceedings" on pages 12-13 for further details.

ITEM  7A.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK.
See "Market Risk" contained in Item 7.  "Management's Discussion and Analysis of
Financial  Condition  and  Results  of  Operations."

                                       26
<PAGE>

ITEM  8.  FINANCIAL  STATEMENTS  AND  SUPPLEMENTARY  DATA.

REPORT  OF  INDEPENDENT  AUDITORS
---------------------------------

In  our  opinion,  the  accompanying  consolidated  balance  sheets  and related
consolidated  statements  of  income,  of shareholders' equity and of cash flows
present  fairly,  in  all  material  respects, the financial position of Clayton
Homes,  Inc.  and  its  subsidiaries at June 30, 2003 and June 30, 2002, and the
results  of their operations and their cash flows for each of the three years in
the  period  ended  June  30,  2003  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
Knoxville,  Tennessee
September  5,  2003

                                       27
<PAGE>

<TABLE>
<CAPTION>

                                      CLAYTON HOMES, INC. AND SUBSIDIARIES
                                           CONSOLIDATED BALANCE SHEETS
                                 (dollars in thousands except per share amounts)

                                                                                                 June 30,
                                                                                             2003        2002
----------------------------------------------------------------------------------------------------------------
<S>                                                                                       <C>         <C>
ASSETS
  Cash and cash equivalents                                                               $   37,027  $   83,729
  Trade receivables                                                                            8,467       9,308
  Other receivables, principally installment contracts, net of reserves for
    credit losses of $23,309 in 2003 and $18,876 in 2002                                   1,012,555     744,074
  Inventory finance receivables                                                              138,907      43,859
  Residual interests in installment contract and mortgage receivables sold                   106,441     129,348
  Servicing assets from installment contract and mortgage receivables sold                    49,037      51,996
  Inventories, net                                                                           193,104     189,976
  Securities available-for-sale                                                               89,535      25,729
  Restricted cash                                                                            139,464     126,155
  Property, plant and equipment, net                                                         321,450     310,764
  Deferred income taxes                                                                       41,058      19,793
  Other assets                                                                               104,269      93,672
----------------------------------------------------------------------------------------------------------------
Total assets                                                                              $2,241,314  $1,828,403
----------------------------------------------------------------------------------------------------------------


LIABILITIES AND SHAREHOLDERS' EQUITY
  Accounts payable and accrued liabilities                                                $  123,123  $  139,308
  Debt obligations                                                                           459,047      92,912
  Other liabilities                                                                          319,446     334,226
----------------------------------------------------------------------------------------------------------------
Total liabilities                                                                            901,616     566,446
----------------------------------------------------------------------------------------------------------------
Commitments and Contingencies (Notes 2, 6, 7, 11 & 16)
Shareholders' equity
  Common stock, $.10 par value, authorized 200,000 shares, issued 136,253
    at June 30, 2003, and 138,002 at June 30, 2002                                            13,625      13,800
  Additional paid-in capital                                                                  20,998      44,193
  Retained earnings                                                                        1,300,183   1,196,146
  Accumulated other comprehensive income                                                       4,892       7,818
----------------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                                 1,339,698   1,261,957
----------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                                $2,241,314  $1,828,403
----------------------------------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       28
<PAGE>

<TABLE>
<CAPTION>

                          CLAYTON HOMES, INC. AND SUBSIDIARIES
                             CONSOLIDATED INCOME STATEMENT
                    (dollars in thousands except per share amounts)


                                                         Year ended June 30,
(in thousands except per share data)            2003          2002            2001
-----------------------------------------------------------------------------------------
<S>                                     <C>                    <C>          <C>
Revenues
  Net sales                                $  850,010      $  871,108      $  849,157
  Financial services                          262,985         252,499         227,916
  Rental and other income                      75,416          75,241          73,883
-----------------------------------------------------------------------------------------
                                            1,188,411       1,198,848       1,150,956
-----------------------------------------------------------------------------------------
Costs and expenses
  Cost of sales                               551,055         565,322         562,267
  Selling, general and administrative         327,810         323,814         306,699
  Financial services operating expenses        84,978          83,245          68,635
  Provision for credit losses                  43,700          25,100          42,500
-----------------------------------------------------------------------------------------
                                            1,007,543         997,481         980,101
-----------------------------------------------------------------------------------------
Operating income                              180,868         201,367         170,855
  Interest expense                            (10,492)         (8,975)         (5,561)
  Interest revenue/ other                       9,106           4,654           4,057
-----------------------------------------------------------------------------------------
Income before income taxes                    179,482         197,046         169,351
Provision for income taxes                    (66,400)        (72,900)        (62,700)
-----------------------------------------------------------------------------------------
Net income                                 $  113,082      $  124,146      $  106,651
-----------------------------------------------------------------------------------------
Net income per common share
  Basic                                         $0.83           $0.90           $0.77
  Diluted                                       $0.83           $0.89           $0.77
Average shares outstanding
  Basic                                       136,237         137,726         137,702
  Diluted                                     136,707         138,872         138,340
-----------------------------------------------------------------------------------------
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       29
<PAGE>

<TABLE>
<CAPTION>

                                         CLAYTON HOMES, INC. AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                    (dollars in thousands except per share amounts)

                                                                                                        Accumulated
                                                        Total                 Additional                    Other
                                                     Shareholders'    Common    Paid-in    Retained     Comprehensive
(in thousands except share data)                        Equity        Stock     Capital    Earnings     Income (Loss)
----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>              <C>       <C>        <C>          <C>
Balance at June 30, 2000                               $1,036,375     $13,750   $ 39,500   $  983,806         ($681)
Net income                                                106,651           -          -      106,651             -
  Other comprehensive income, net of tax of $5,656
    Unrealized gain on residual interests                   7,591           -          -            -          7,591
    Unrealized gain on securities available-for-sale
      during the year                                       1,732           -          -            -          1,732
    Realized  loss on securities available-for-sale
      included in net income                                  307           -          -            -            307
                                                    ---------------
  Comprehensive income                                    116,281
  Purchase of 60,000 shares of common stock                  (482)         (6)      (476)           -              -
  Dividends declared ($.064 per common share)              (8,814)          -          -       (8,814)             -
  Issuances related to stock incentive,
    employee benefit plans and other                        4,118          55      4,569         (506)             -
----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2001                                1,147,478      13,799     43,593    1,081,137          8,949
Net income                                                124,146           -          -      124,146              -
  Other comprehensive income, net of tax of ($665)
    Unrealized loss on residual interests                  (2,134)          -          -            -         (2,134)
    Unrealized gain on securities available-for-sale
      during the year                                       1,350           -          -            -          1,350
    Realized gain on securities available-for-sale
      included in net income                                 (347)          -          -            -           (347)
                                                    ---------------
  Comprehensive income                                    123,015
  Purchase of 827,400 shares of common stock               (9,637)        (83)    (9,554)           -              -
  Dividends paid ($.064 per common share)                  (8,800)          -          -       (8,800)             -
  Issuances related to stock incentive,
    employee benefit plans and other                        9,901          84     10,154         (337)             -
----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 2002                                1,261,957      13,800     44,193    1,196,146          7,818
NET INCOME                                                113,082           -          -      113,082              -
  OTHER COMPREHENSIVE INCOME, NET OF TAX OF ($1,718)
    UNREALIZED GAIN ON RESIDUAL INTERESTS                   4,044           -          -            -          4,044
    UNREALIZED LOSS ON SECURITIES AVAILABLE-FOR-SALE
      DURING THE YEAR                                      (4,557)          -          -            -         (4,557)
    REALIZED GAIN ON SECURITIES AVAILABLE-FOR-SALE
      INCLUDED IN NET INCOME                               (2,413)          -          -            -         (2,413)
                                                    ---------------
  COMPREHENSIVE INCOME                                    110,156
  PURCHASE OF 2,441,900 SHARES OF COMMON STOCK            (30,864)       (244)   (30,620)           -              -
  DIVIDENDS PAID ($.064 PER COMMON SHARE)                  (8,707)          -          -       (8,707)             -
  ISSUANCES RELATED TO STOCK INCENTIVE,
  EMPLOYEE BENEFIT PLANS AND OTHER                          7,156          69      7,425         (338)             -
----------------------------------------------------------------------------------------------------------------------
BALANCE AT JUNE 30, 2003                               $1,339,698     $13,625   $ 20,998   $1,300,183         $4,892
----------------------------------------------------------------------------------------------------------------------
<FN>
The  accompanying  notes  are  an  integral  part  of  these  consolidated  financial  statements.
</TABLE>

                                       30
<PAGE>

<TABLE>
<CAPTION>

                                       CLAYTON HOMES, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (dollars in thousands)

                                           Year ended June 30,

(in thousands)                                                                      2003         2002         2001
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>         <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                        $ 113,082   $   124,146   $ 106,651
  Adjustments to reconcile net income to net cash provided
    by (used in) operating activities
    Depreciation and amortization                                                    20,504        19,161      20,600
    Amortization associated with sale of installment contract receivables            13,854        13,201      39,798
    Gain on sale of installment contract receivables                                (17,957)      (39,875)    (25,593)
    Income accretion from residual interests in installment contract receivables   (108,118)      (75,543)          -
    Impairments on residual interests                                                15,899             -           -
    Provision for credit losses                                                      43,700        25,100      42,500
    Realized loss (gain) on securities available-for-sale                            (4,115)         (550)        488
    Deferred income taxes                                                           (19,547)        3,582      (4,082)
    Increase in inventory finance receivables                                       (95,048)      (36,559)          -
    Decrease (increase) in other receivables, net                                    57,430       (18,289)      1,200
    Decrease (increase) in inventories                                               (3,128)       (4,281)     36,736
    Increase (decrease) in accounts payable, accrued
      liabilities, and increase in other assets                                    (114,914)       87,070     (54,074)
-----------------------------------------------------------------------------------------------------------------------
  Cash provided by (used in) operations                                             (98,358)       97,163     164,224
    Origination of installment contract receivables                                (947,755)     (912,536)   (815,546)
    Proceeds from sales of originated installment contract receivables              893,804       871,619     660,802
    Principal collected on originated installment contract receivables               50,404        40,725      40,686
-----------------------------------------------------------------------------------------------------------------------
  Net cash provided (used in) by operating activities                              (101,905)       96,971      50,166

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of installment contract receivables                                  (732,281)   (1,049,851)   (321,711)
  Proceeds from sales of acquired installment contract receivables                  303,180       944,253     225,654
  Principal collected on acquired installment contract receivables                   88,874        54,530      23,154
  Proceeds from sales of securities available-for-sale                               18,304        25,312      29,527
  Proceeds from residual interests in installment contract receivables              100,375        52,972           -
  Acquisition of property, plant and equipment                                      (31,190)      (20,487)    (24,559)
  Increase in restricted cash                                                       (13,309)      (15,095)    (14,156)
-----------------------------------------------------------------------------------------------------------------------
  Net cash provided by (used in) investing activities                              (266,047)       (8,366)    (82,091)

CASH FLOWS FROM FINANCING ACTIVITIES
  Dividends                                                                          (8,707)       (8,800)     (8,814)
  Net borrowings (repayment) on credit facilities                                         -       (45,800)     45,800
  Proceeds from debt obligations                                                    366,255             -           -
  Repayment of debt obligations                                                        (120)       (3,150)     (3,154)
  Increase (decrease) of cash in excess of bank balances                            (12,470)        4,847      (1,692)
  Issuance of stock for incentive plans and other                                     7,156         9,901       4,118
  Purchase of common stock                                                          (30,864)       (9,637)       (482)
-----------------------------------------------------------------------------------------------------------------------
  Net cash provided by (used in) financing activities                               321,250       (52,639)     35,776
-----------------------------------------------------------------------------------------------------------------------
  Net increase in cash and cash equivalents                                         (46,702)       35,966       3,851
  Cash and cash equivalents at beginning of year                                     83,729        47,763      43,912
-----------------------------------------------------------------------------------------------------------------------
  Cash and cash equivalents at end of year                                        $  37,027   $    83,729   $  47,763
-----------------------------------------------------------------------------------------------------------------------
Supplemental disclosures for cash flow information
  Cash paid during the year for
    Interest                                                                      $  10,605   $     9,379   $   6,267
    Income taxes                                                                  $  81,296   $    60,421   $  76,723
-----------------------------------------------------------------------------------------------------------------------
<FN>
The  accompanying  notes  are  an  integral  part  of  these  consolidated  financial  statements.
</TABLE>

                                       31
<PAGE>

                      CLAYTON HOMES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  JUNE 30, 2003


NOTE  1  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Consolidated  Financial  Statements

The  consolidated  financial  statements  include the accounts of Clayton Homes,
Inc.  and  its  wholly-  and  majority-owned  subsidiaries.  The  Company  is  a
vertically integrated manufactured housing company headquartered near Knoxville,
Tennessee.  Employing approximately 6,700 people and operating in 32 states, the
Company  builds,  sells,  finances and insures manufactured homes.  It also owns
and  operates  residential  manufactured  housing  communities.  Significant
intercompany  accounts  and  transactions  have been eliminated in the financial
statements.  See  Note  12, Business Segment Information, for further details of
intercompany  activity.

Revenue  Recognition

Sales  of  homes produced by the Company to independent retailers are recognized
as  revenue  upon  shipment  if:  1)  a)  payment  has  been  received;  or b) a
commitment  is received from an approved wholesale lender that they will provide
financing  for  the  unit,  and  2)  title  has  passed  to  the  retailer.

Retail  sales  are recognized when: 1) cash payment is received, or the approved
down  payment, either in the form of cash, trade equity or land, is received for
credit  sales  and, subsequent to credit approval, the home buyer enters into an
installment sales contract, and 2) the home buyer has inspected and accepted the
completed  home  at  the  home buyer's site, and 3) title has passed to the home
buyer.  Most  of  these  installment sales contracts, which are normally payable
over  84  to  360  months, are financed by Vanderbilt Mortgage and Finance, Inc.
(VMF),  the  Company's  financing  subsidiary.  In the case of retail customers,
title  passes  at the point of acceptance of the delivered and installed product
by  the customer at their site.  The site may be, and often is, a rental site in
a  manufactured  housing  community.  Revenue  from rental of Company-owned home
sites  and  homes is accrued and recognized based on the terms of the resident's
lease  agreement  with  the  Company.

The  Company  acts  as agent on physical damage, family protection and homebuyer
protection  plan  insurance policies written by unaffiliated insurance companies
(ceding  companies)  for  the  purchasers  of manufactured homes.  The insurance
policies are in turn reinsured by certain subsidiaries of the Company.  Premiums
from  policies  represent short-duration contracts with terms of one to 10 years
and  are  deferred  and  recognized  as  revenue over the terms of the policies.
Claims  expenses  are recorded as insured events occur.  Expenses are matched to
revenue  over the terms of the policies by means of deferral and amortization of
policy  acquisition  costs;  such  costs  include commissions, premium taxes and
ceding  fees,  which  vary  with  and  are directly related to the production of
insurance  policies.

Installment  Contract  and  Mortgage  Receivables

Installment  contract  and mortgage loan receivables (receivables) originated or
purchased  by VMF are generally sold into asset-backed security vehicles, which,
in  turn,  issue  certificates  to  investors. VMF retains the servicing and the
residual  interest  associated  with  these  instruments.

Receivables  held  for sale are included in other receivables and are carried at
the  lower of aggregate cost or market. Certain of the receivables are purchased
in bulk at a discount. The purchase discounts are allocated between discount and
reserves  for  credit  losses  and  contingent liabilities based on management's
assessment  of risks existing in the portfolio.  Discounts are accreted over the
life  of  the  related  portfolio  using  the  interest  method  after  giving
consideration  to  anticipated  prepayments.  In  the event such receivables are
sold,  discounts  attributable  to  the  sold  receivables  are  recognized.

Most  of  the  receivables  are  with borrowers in the east, south and southwest
portions  of  the  United  States  and are collateralized by manufactured homes.
Interest  income  on  receivables  held,  either  for  sale  or  as  an

                                       32
<PAGE>

investment,  is  recognized  in  accordance  with  the  terms  of the underlying
installment  contracts.  For  receivables  sold  with  servicing  retained  and
receivables  serviced  under  servicing  agreements,  service  fee  income  is
recognized  as  the  service  is  performed.  Interest  income  on interest-only
residual  interests  is  recognized  in  accordance  with  the  consensus of the
Emerging Issues Task Force in its Issue No. 99-20 Recognition of Interest Income
and  Impairment  on  Purchased  and Retained Beneficial Interests in Securitized
Assets  (EITF  99-20).  Accordingly,  interest  income  is recognized through an
effective  yield  method, with the yield computed prospectively over the life of
the residual interests after adjustments in the estimated cash flows are made to
reflect  prepayments,  defaults  and  other  factors.

The Company accrues for obligations related to cash collections arising from its
own  securitized  receivables and receivables serviced under contract and remits
these  collections  to  the  paying  agent  or  trustee  in  accordance with the
provisions  of  the  servicing  agreements.  See  Note  13,  Other  Assets  and
Liabilities.

Retained  Interests

The  Company  follows  the  provisions of SFAS 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities, which utilizes
a  financial components approach to transfers and servicing of financial assets,
requiring  that the carrying amount of the receivables sold be allocated between
the  assets  sold and the assets (liabilities) created, if any, based upon their
estimated fair value at the date of sale.  The assets (liabilities) created are:
1)  an  interest-only  security or a residual liability valued as the discounted
present  value  of  the  excess  (deficiency) interest due the residual interest
owner  (VMF)  during  the  expected  life  of  the contracts over: i) the stated
investor  yield;  ii)  the  contractual servicing fee; and iii) estimated credit
losses;  and 2) servicing asset (liability), representing the discounted present
value  of the excess of the contractual servicing fee over the cost of servicing
the  contracts plus a normal profit margin.  Gain (loss) recorded at the time of
the  sale is computed as the difference between the allocated carrying amount of
the  receivables  sold  and  the  proceeds  realized  from  the  sale.

Servicing  assets  are  periodically  evaluated  on  a  transaction  basis  for
impairment  based on the fair value of those assets.  The estimate of fair value
assumes: 1) discount rates which, at the time the asset was created, approximate
current  market rates; and 2) expected prepayment rates based on loan prepayment
experience  for  similar  transactions.  The  servicing  asset  or  liability is
amortized in proportion to and over the period of estimated net servicing income
or  net  servicing  loss.

Interest-only  securities  represent the right to receive future cash flows from
securitization  transactions.  Such  cash flows generally are equal to the value
of  the  excess  of the principal and interest to be collected on the underlying
receivables  collateralizing  each transaction over the sum of the principal and
interest  to  be  paid  to  the  holders of the securities sold net of estimated
credit  losses and contractual servicing fee.  The Company carries interest-only
securities  at  estimated  fair  value.  As  market  quotes  are  generally  not
available, fair value is determined by discounting the projected cash flows over
the  expected  remaining  life  of  the securities outstanding, on a transaction
basis,  using  current  prepayment, default, loss and interest rate assumptions.
Estimates  for prepayments, defaults, and losses are determined based on a model
developed  by the Company and refined to reflect Company-specific experience and
trends  as  well  as  current  market  conditions.  See Note 2, Securitizations.

The  residual  interests  in  the installment receivables sold are classified as
available-for-sale  securities  as  defined by Statement of Financial Accounting
Standards  No.  115,  Accounting  for  Certain  Investments  in  Debt and Equity
Securities (SFAS 115). In accordance with EITF 99-20, declines in fair value are
to  be  considered  other  than  temporary  when:  (i) the carrying value of the
beneficial  interests  exceeds the fair value of such beneficial interests using
current assumptions, and (ii) the timing and/or extent of cash flows expected to
be  received  on  the  beneficial interests has adversely changed - as defined -
from  the  previous valuation date.  During the period ending June 30, 2003, the
Company  recognized $15.9 million of other than temporary charges as a reduction
of  financial  services  revenues  in the income statement.  The Company did not
determine  any  declines in fair value to be permanent for the three-year period
ending  June  30,  2002.

The  Company  follows  SFAS  No.  134, Accounting for Mortgage-Backed Securities
Retained  after the Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking  Enterprise,  which  requires  that the Company classify mortgage-backed
securities  retained  after  a  securitization  in  accordance  with  SFAS  115.
Accordingly,  these  securities, aggregating at $89.5 million, are classified as
available-for-sale,  are stated at fair value, and can be reasonably expected to
mature  in  3-11  years.  Net  unrealized  holding  gains  and  losses,

                                       33
<PAGE>

determined  using  a  specific  identification  cost  basis,  are  reported as a
separate  component of accumulated other comprehensive income, net of tax, until
realized.  See  Note  4,  Securities  Available-For-Sale.

Cash  Equivalents

For  purposes  of  the  statements of cash flows, all unrestricted highly liquid
debt instruments purchased with an original maturity of three months or less are
considered  to  be  cash  equivalents.

Inventories

New  homes  and  raw materials are carried at the lower of cost or market, using
the  last-in,  first-out (LIFO) method of inventory valuation.  Previously owned
manufactured  homes  are recorded at estimated wholesale value (cost) but not in
excess  of  net  realizable  value.  The  retail  store  manager,  based  on his
experience  in  the  local  market, determines the value of the previously owned
manufactured  homes.

Property,  Plant  and  Equipment

Land  and  improvements,  buildings, and furniture and equipment are recorded at
cost.  Major  renewals  and  improvements  are  capitalized  while replacements,
maintenance and repairs that do not improve or extend the life of the respective
assets, are expensed currently. When depreciable assets are sold or retired, the
cost and related accumulated depreciation are removed from the accounts, and any
gain  or  loss  is included in earnings for the period. Depreciation is computed
primarily  by  the  straight-line  method over the estimated useful lives of the
respective  assets.  Those  assets'  estimated  useful  lives  are summarized as
follows:  Land  and  improvements,  8 to 20 years; Buildings, 7 to 20 years; and
Furniture  and  all  other  equipment,  3  to  7  years.

The  Company  follows SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived  Assets, which superceded SFAS No. 121, Accounting for the Impairment
of  Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.  SFAS No. 144
requires  recognition of impairment losses for long-lived assets whenever events
or  changes  in  circumstances  result  in  the  carrying  amount  of the assets
exceeding the sum of the expected future undiscounted cash flows associated with
such  assets.  The  measurement  of the impairment losses recognized is based on
the  difference  between the fair values and the carrying amounts of the assets.
SFAS  144  also requires that long-lived assets held for sale be reported at the
lower  of  carrying amount or fair value less cost to sell.  The Company has not
experienced  any  impairment  losses.

Accounts  Payable

Accounts  payable  includes  checks  written  in  excess  of  bank  balances  of
$12,456,000  and  $19,693,000 at June 30, 2003, and June 30, 2002, respectively.

Reserves  for  Credit  Losses  and  Contingent  Liabilities

Reserves for credit losses and contingent liabilities are established related to
receivables  held,  either  for  sale  or  investment.  Actual credit losses are
charged  to the reserves when incurred. The reserves established for such losses
are determined based on the Company's historical loss experience after adjusting
for  current  economic  conditions. Management, in assessing the loss experience
and  economic  conditions,  adjusts  reserves  through  periodic provisions. The
Company  also  maintains  a  reserve  for  contingent  liabilities  related  to
guarantees  of  installment  contract  receivables  sold  with  recourse.

Interest  Rate  Swaps

The  Company  uses interest rate swaps to assist in minimizing interest incurred
on  its  short-term variable rate debt.  The difference between amounts received
and  amounts  paid  under  such  agreements  is  recorded  as a reduction of, or
addition  to,  interest  expense  as  incurred  over  the  life  of  the  swap.

The  Company  follows  SFAS  No.  133, Accounting for Derivative Instruments and
Hedging  Activities,  which was subsequently amended by SFAS No. 138, Accounting
for Certain Derivative Instruments and Certain Hedging Activities.  SFAS No. 133
establishes  accounting  and  reporting  standards  for  derivative  instruments
embedded  in  other  contracts  and  for  hedging  activities.  See Note 6, Debt
Obligations.

                                       34
<PAGE>

Restricted  Cash

Restricted cash primarily represents: 1) trust account cash balances required by
certain  VMF  servicing agreements, and 2) insurance reserves required by ceding
companies.  The majority of the restricted cash balance represents funds held in
accordance  with  certain  servicing agreements that will be disbursed within 15
days  of  the  end  of  the  accounting  period.

Income  Taxes

Deferred  income  taxes  are recorded to reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting  purposes  and  the  amounts  used  for  income  tax  purposes.

Accumulated  Other  Comprehensive  Income

Accumulated  other  comprehensive income is presented net of income taxes and is
comprised  of  unrealized  gains  and  temporary  losses  on  securities
available-for-sale,  as  described  under  Retained  Interests.

Shipping  and  Handling  Costs

The  estimated  shipping  and  handling costs for the transportation of the home
from  the manufacturing facility to either a Company-owned or independent retail
center  are included as an item on the invoice to the retailer and are reflected
as  part  of net sales revenues.  The actual costs incurred are included as cost
of  sales.

Warranty  Costs

The  Company  offers  a limited one-year warranty for the homes it manufactures.
Generally,  the  independent  or  Company-owned  retailer  performs the warranty
repairs,  with  the  costs  being  billed  back  to  the  originating  Company
manufacturing  plant.  Costs  associated  with  any  installed  equipment  or
appliances  are subsequently billed back to the original equipment manufacturer.
For the years ended June 30, 2003, 2002, and 2001, net warranty costs were 2.4%,
2.6%,  and  2.9%,  respectively,  of  manufacturing  sales.

Management  Estimates

The  preparation  of  financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of  assets  and  liabilities  and disclosures of
contingent  assets  and  liabilities at the date of the financial statements and
the  reported  amounts  of  revenues  and  expenses during the reporting period.
Material  estimates  may  include,  but  are not limited to, certain revenue and
expense  accruals,  timing  and  frequency of foreclosures, rates of recovery on
foreclosures,  the  timing and rate of voluntary prepayments and interest rates.
Actual  results  could  differ  from  those  estimates.

Other

Certain  reclassifications  have  been  made  to the 2001 and the 2002 financial
statements  to  conform  to  the  2003  presentation.

New  Accounting  Pronouncements

In June 2002, the FASB issued Statement No. 146 (SFAS 146), Accounting for Costs
Associated  with Exit or Disposal Activities. This Statement addresses financial
accounting  and  reporting for costs associated with exit or disposal activities
and  nullifies  Emerging  Issues  Task  Force  (EITF)  Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity. This Statement requires that a liability for a cost associated with an
exit  or  disposal  activity  be recognized and measured initially at fair value
only when the liability is incurred.  SFAS 146 is effective for exit or disposal
activities  that  are  initiated  after December 31, 2002.  The Company does not
presently anticipate any of the exit or disposal activities so the provisions of
this statement will not have a material impact on the Company's reported results
of  operations,  financial  positions,  or  cash  flows.

                                       35
<PAGE>

In  November  2002,  the FASB issued Interpretation No. 45 (FIN 45), Guarantor's
Accounting  and  Disclosure  requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness of Others.  FIN 45 elaborates on the disclosures to
be  made by a guarantor in its interim and annual financial statements about its
obligations  under  certain guarantees that it has issued.  It also requires the
guarantor  to  recognize, at the inception of the guarantee, a liability for the
fair  value  of  obligations undertaken in issuing the guarantee. The disclosure
requirements  are effective for quarters ending after December 15, 2002, and the
liability  recognition  is  in  effect  for guarantees issued after December 31,
2002.  The  Company  has  historically  provided  limited  guarantees on certain
certificates  offered  in  conjunction  with  installment  contract  receivable
securitization  transactions for which it is issuer.  These securitizations have
been  accounted  for  in  accordance  with  SFAS 140, and to the extent that the
guarantee  was  issued,  the  fair value of that guarantee was considered in the
calculation  of the residual interest.  The Company does not anticipate that the
provisions  of  this interpretation will have a material impact on the Company's
reported  results of operations, financial positions, or cash flows. The Company
issued  no  guarantees  during  the quarters ending March 31, 2003, and June 30,
2003.

In  November  2002,  the Emerging Issues Task Force ("EITF") reached a consensus
regarding  EITF Issue No. 02-16, Accounting by a Customer (including a Reseller)
for  Certain Consideration Received from a Vendor. Issue No. 02-16 addresses the
timing of recognition and classification of consideration received from vendors,
including  rebates  and  allowances. Issue No. 02-16 is effective for certain of
our  vendor  rebates  and allowances commencing in January 2003. The adoption of
Issue  No.  02-16  did  not  have  a  material impact on the reported results of
operations,  financial  positions,  or  cash  flows.

In  December  2002, the FASB issued Statement No. 148 (SFAS 148), Accounting for
Stock-Based  Compensation-Transition  and  Disclosure-an  amendment  of  FASB
Statement  No. 123. This Statement amends FASB Statement No. 123, Accounting for
Stock-Based  Compensation,  to  provide  alternative methods of transition for a
voluntary  change  to  the fair value based method of accounting for stock-based
employee  compensation.  In  addition,  this  Statement  amends  the  disclosure
requirements  of  Statement  123 to require prominent disclosures in both annual
and  interim financial statements about the method of accounting for stock-based
employee  compensation  and  the  effect of the method used on reported results.
Subsequent  to  June 30, 2003, the company cancelled all stock option plans (see
note  18  to  these  financial statements).    Accordingly, the Company does not
anticipate  that the provisions of this statement will have a material impact on
the  reported  results  of  operations,  financial  positions,  or  cash  flows.

In  January  2003,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN
46  requires an investor with a majority of the variable interests in a variable
interest  entity  (VIE) to consolidate the entity and also requires majority and
significant variable interest investors to provide certain disclosures. A VIE is
an  entity in which the equity investor does not have a controlling interest, or
the equity investment at risk is insufficient to finance the entity's activities
without  receiving  additional  subordinated  financial  support  from the other
parties.  For  arrangements  entered into with VIEs created prior to January 31,
2003,  the  provisions  of FIN 46 are required to be adopted at the beginning of
the  first  interim  or  annual  period  beginning  after December 15, 2003. The
Company  is  currently  reviewing  its  investments  and  other  arrangements to
determine  whether  any of its investee entities are VIEs. The company's maximum
exposure  related  to  any  investment  that may be determined to be in a VIE is
limited  to  the  amount invested. Other risks include balance sheet effect. The
provisions of FIN 46 are effective immediately for all arrangements entered into
with  new  VIEs  created after January 31, 2003. The Company has not invested in
any new VIEs created after January 31, 2003. The Company is presently evaluating
any  significant  VIEs  that  would  be  consolidated.

In  April 2003, FASB issued Statement of Financial Accounting Standards No. 149,
Amendment  of  Statement  133  on Derivative Instruments and Hedging Activities.
FASB  Statements  No.  133,  Accounting  for  Derivative Instruments and Hedging
Activities  and  No.  138,  Accounting  for  Certain  Derivative Instruments and
Certain  Hedging  Activities,  establish  accounting and reporting standards for
derivative  instruments  including  derivatives  embedded  in  other  contracts
(collectively  referred  to  as  derivatives)  and  for hedging activities. This
Statement  149  amends  Statement 133 for certain decisions made by the Board as
part  of  the  Derivatives  Implementation  Group  (DIG) process. This Statement
contains  amendments  relating to FASB Concepts Statement No. 7, Using Cash Flow
Information  and  Present  Value in Accounting Measurements, and FASB Statements
No.  65,  Accounting for Certain Mortgage Banking Activities, No. 91, Accounting
for  Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans
and  Initial  Direct  Costs  of Leases, No. 95, Statement of Cash Flows, and No.
126, Exemption from Certain Required Disclosures about Financial Instruments for
Certain Nonpublic Entities.  The Company does not anticipate that the provisions
of

                                       36
<PAGE>

this  statement  will  have  a  material  impact  on  the  reported  results  of
operations,  financial  positions,  or  cash  flows.

NOTE  2  -  SECURITIZATIONS

The  Company  accessed capital through asset-backed securitization activities in
connection  with certain of its businesses.  Subsequent to the securitization of
receivables, the Company continues to maintain account relationships and provide
servicing for those receivables transferred. As Seller and Servicer, the Company
retains  residual  interests that were created as a result of its securitization
activity.  The  Company  estimates  the  fair value of the retained interests by
using  discounted  expected  future  cash flows that incorporate key assumptions
including  prepayment  speed  and  credit  losses.  The  valuation  of  retained
interests  is  affected  by  the  projected  level  and timing of prepayments of
principal and net credit losses.  Should actual timing or level of losses differ
materially  from  the  Company's projections, it could have a material effect on
the  valuation  of  the  Company's  retained  interests.

There  were  three  securitization  transactions completed during 2003, and four
transactions  during  2002.  Each  transaction establishes a trust, which issues
certificates  representing  ownership  in  that  trust.  Although there are some
differences,  structure  provisions  are  generally the same for each issue. The
structures call for time tranched senior and subordinated classes of securities.
Additional  credit support is provided by excess spread and, in some cases, over
collateralization.  The  Company  also  provides  additional  credit  support by
placing  a  limited  guarantee  on certain of the subordinated certificates. See
Note  11,  Commitment  and  Contingencies.

The  Company  accounts  for  the  transactions as sales and records any gains or
losses  in  accordance with the provisions of SFAS 140.  Certain data pertaining
to  securitizations  completed  during  2003,  2002, and 2001, including the key
economic  assumptions  used  to  measure  the retained interests created, are as
follows:

<TABLE>
<CAPTION>


($  in  millions)                                                    2003     2002     2001
-----------------------------------------------------------------------------------------------
<S>                                                                <C>       <C>      <C>
Number of transactions completed                                          3        4        3
Aggregate balance of certificates issued                             $1,105   $1,825   $  886
Aggregate principal balance of contracts sold                        $1,182   $1,875   $  896
Average balance of securitized contracts outstanding at June 30      $5,150   $4,453   $3,702
Weighted average interest rate of contracts sold                     10.05%   10.41%   11.31%
Aggregate amount of net gain (loss) recognized*                      $ 18.0   $ 39.9   $ 25.6

ORIGINAL KEY ECONOMIC ASSUMPTIONS
Approximate assumed weighted average constant prepayment
  rate as a percentage of unpaid principal balance                   17.13%   20.01%   18.25%
Weighted average life (in years)                                       4.46     4.52     4.66
Weighted average expected credit losses                               2.33%    4.08%    2.48%
Weighted average residual cash flow discount rate**                  15.75%   11.44%   15.75%
-----------------------------------------------------------------------------------------------
<FN>
*   Net  of  issuance  costs
**  Residual  liability  discounted  at  4.38%
-----------------------------------------------------------------------------------------------
</TABLE>

                                       37
<PAGE>

Key  economic  assumptions  used  to  determine  the estimated fair value of the
retained  interests  in  securitizations and the sensitivity of the current fair
value  of  residual  cash  flows  to immediate 10 percent and 20 percent adverse
changes  in  those  assumptions  are  as  follows:


<TABLE>
<CAPTION>

                                                        2003             2002
-------------------------------------------------------------------------------------
($ in thousands)
<S>                                                 <C>              <C>
Interest-Only (I/O) securities                              $69,445          $93,673
Servicing assets                                             49,037           51,996
Residual liability                                          (11,950)         (52,161)
Retained certificates                                        89,535           20,136
                                                    ---------------------------------
Carrying value (fair value) of retained interests.         $196,067         $113,644
                                                    ---------------------------------

($ in millions)
Weighted average life (in years)                               4.29             4.27
Prepayment speed (constant prepayment rate)           10.7% - 24.10%   10.7% - 24.10%
  Impact of 10% adverse change                              ($12.5)          ($11.7)
  Impact of 20% adverse change                              ($23.2)          ($22.6)
Expected credit losses                                        4.09%            2.43%
  Impact of 10% adverse change                              ($24.0)          ($21.6)
  Impact of 20% adverse change                              ($46.7)          ($43.5)
Residual cash flow discount rate                             12.71%           13.70%
  Impact of 10% adverse change                               ($3.5)           ($6.2)
  Impact of 20% adverse change                               ($6.8)          ($11.9)
-------------------------------------------------------------------------------------
</TABLE>

The  sensitivity  analysis is hypothetical and should be used with caution.  For
instance,  changes  in fair value based on a 10 percent variation in assumptions
generally  cannot  be  extrapolated  because the relationship of the change in a
particular  assumption  to  the  change  in  fair  value  may not be linear.  In
addition, the effect of a variation in a particular assumption on the fair value
of  the  retained  interest is calculated without changing any other assumption,
when  in  reality,  changes  in  any one factor may result in changes in another
factor.

The  following  table  summarizes  certain  cash  flow  activity with respect to
securitizations  in  2003,  2002,  and  2001:

<TABLE>
<CAPTION>

(in  millions)                               2003       2002      2001
-------------------------------------------------------------------------
<S>                                         <C>        <C>        <C>
CASH FLOW ACTIVITY
Proceeds from new securitizations           $1,197     $1,816     $ 887
Servicing fees received                     $   52     $   54     $  49
Cash flow received from retained interests  $  100     $   53     $  71
-------------------------------------------------------------------------
</TABLE>

Total  contracts  serviced  at June 30, 2003, and 2002, including contracts held
for  investment,  had aggregate principal balances of approximately $5.5 billion
and  $5.0  billion, respectively.  Managed receivables at June 30, 2003, and the
related  receivables  past  due  at  least  90  days  are  as  follows:

<TABLE>
<CAPTION>

                                        Principal Amount
                    Total Principal     90 Days or More
(in millions)           Amount           Past Due (a)
-------------------------------------------------------
<S>                   <C>               <C>
Held in portfolio       $ 1,086           $   46
Securitized               4,384               84
-------------------------------------------------------
                        $ 5,470           $  130
-------------------------------------------------------
<FN>
(a)  Includes  bankruptcies  and  foreclosures.
</TABLE>

                                       38
<PAGE>

Changes  related  to  the servicing assets during the years ended June 30, 2003,
2002,  and  2001,  are  as  follows:

<TABLE>
<CAPTION>


(in  thousands)                2003       2002       2001
-------------------------------------------------------------
<S>                          <C>        <C>        <C>
Beginning balance             $ 51,996   $ 45,128   $ 40,704
Servicing assets recognized     10,895     19,605     15,994
Amortization                   (13,854)   (12,737)   (11,570)
-------------------------------------------------------------
                              $ 49,037   $ 51,996   $ 45,128
-------------------------------------------------------------
</TABLE>

NOTE  3  -  INVENTORIES
Inventories  at  June  30,  2003,  and  2002,  are  as  follows:

<TABLE>
<CAPTION>

(in  thousands)          2003      2002
------------------------------------------
<S>                 <C>       <C>
Manufactured homes
  New                  $120,685  $123,482
  Previously-owned       55,026    49,644
Raw materials            17,393    16,850
------------------------------------------
                       $193,104  $189,976
------------------------------------------
</TABLE>

If  the  first-in, first-out (FIFO) method of inventory valuation had been used,
inventories  would  have  been higher by $23,800,000 and $20,500,000 at June 30,
2003,  and  2002,  respectively.

NOTE  4  -  SECURITIES  AVAILABLE-FOR-SALE
Securities  available-for-sale  at  June  30,  2003,  and  2002, are as follows:

<TABLE>
<CAPTION>

                                                                       GROSS        GROSS     REALIZED OTHER  ESTIMATED
                                                                    UNREALIZED    UNREALIZED  THAN TEMPORARY     FAIR
                                                          COST        GAINS        LOSSES         LOSSES         VALUE
(in thousands)                                          --------     -------      --------      ---------      --------
<S>                                                     <C>       <C>      <C>       <C>        <C>
Residual interests in installment contract receivables  $ 70,263      $15,081      $     -       $(15,899)      $ 69,445
Retained securities held-for-sale                         96,851            1       (7,317)             -         89,535
                                                        --------      -------      --------      ---------      --------
  Total June 30, 2003                                   $167,114      $15,082      $(7,317)      $(15,899)      $158,980
                                                        ========      =======      ========      =========      ========

Residual interests in installment contract receivables  $ 85,012      $13,850      $(5,189)      $      -       $ 93,673
Retained securities held-for-sale                         20,691          147         (702)             -         20,136
Other securities held-for-sale                             1,291        4,302            -              -          5,593
                                                        --------      -------      --------      ---------      --------
  Total June 30, 2002                                   $106,994      $18,299      $(5,891)      $      -       $119,402
                                                        ========      =======      ========      =========      ========
</TABLE>

The  unrealized  gain  and  loss,  net  of  tax,  are  recorded as an element of
accumulated  other  comprehensive income.  The residual interests in installment
contract  receivables does not include over collateralization of $36,996,000 and
$35,675,000  as  of  June  30,  2003,  and  2002,  respectively.

NOTE  5  -  PROPERTY,  PLANT  AND  EQUIPMENT
Property,  plant  and  equipment  at  June  30,  2003, and 2002, are as follows:

<TABLE>
<CAPTION>

(in  thousands)                       2003        2002
------------------------------------------------------------
<S>                                <C>         <C>
Land and improvements                $ 249,767   $ 226,953
Buildings                              152,763     152,353
Furniture and all other equipment       55,870      53,008
------------------------------------------------------------
                                       458,400     432,314
Less: accumulated depreciation
   and amortization                   (136,950)   (121,550)
------------------------------------------------------------
                                     $ 321,450   $ 310,764
------------------------------------------------------------
</TABLE>

The  Company entered into capital lease arrangements in fiscal 2002 for computer
related  equipment  valued at $568,000.  The remaining contractual obligation as
of  June  30,  2003,  was  $216,000,  all  due  in  fiscal  2004.

                                       39
<PAGE>

NOTE  6  -  DEBT  OBLIGATIONS
Debt  obligations  at  June  30,  2003,  and  2002,  are  summarized as follows:

<TABLE>
<CAPTION>

(in  thousands)                                                  2003       2002
------------------------------------------------------------------------------------
<S>                                                           <C>       <C>
Senior notes, 6.25%, due December 2003                        $ 75,000    $75,000
Debt collateralized by installment contract receivables,
  effective rate of 6.15% at June 30, 2003, due March 2004     318,243          -
Promissory note, effective rate of 2.165% at
  June 30, 2003, due March 2004                                 50,000          -
Debt collateralized by installment contract
  receivables, average effective rate 9.92% at
  June 30, 2003, due through 2004                                  199      2,176
Tax-exempt bonds, effective rate of 1.10% at
  June 30, 2003, due through 2030                               15,230     15,230
Lines of credit                                                      -          -
Other notes payable                                                375         506
------------------------------------------------------------------------------------
                                                              $459,047     $92,912
------------------------------------------------------------------------------------
</TABLE>

Annual maturities of debt as of June 30, 2003, are:  2004 - $443,568,000; 2005 -
$134,000;  2006  -  $35,000;  2008  -  $4,030,000;  $11,280,000  after  2008.

The  Company  has $75 million of 6.25% Senior Notes due December 30, 2003, which
are  primarily  to  facilitate the purchase, origination and warehousing of loan
portfolios.  The  Senior Notes are guaranteed by all significant subsidiaries of
the  Company  and  are  governed  by  various  financial  covenants that require
maintenance  of  certain financial ratios.  At June 30, 2003, the Company was in
compliance  with  all  financial  covenants with the exception of a pledged debt
covenant  that,  upon  the  effectiveness  of  the  merger,  was  resolved.

A  $300  million  one-year  sales facility is available of which $150 million is
committed.  This facility was not utilized at June 30, 2003.  Approximately $175
million  in  installment  contract  receivables  were  sold through the facility
during  the  year.  In addition, a committed one-year $150 million participation
facility is also available to facilitate the future sale of manufactured housing
contracts.  This  participation  facility was not utilized at June 30, 2003, and
expired in August 2003.  In accordance with the agreements of the sales facility
and  participation facility, utilization of any unfunded commitment is permitted
as  long  as  certain  criteria  are  met.  The  criteria for the sales facility
include  maintenance of minimum credit ratings, various financial covenants that
require  maintenance  of certain ratios, and certain collateral characteristics.
The  minimum  credit  ratings required for funding under the sales facility are:
S&P (BBB-), Moody's (Baa3) and Fitch (BB+).   The criteria for the participation
facility  contain no minimum ratings criteria, but have financial covenants that
require  maintenance  of  certain ratios and certain collateral characteristics.
At  June  30, 2003, the Company was in compliance with requirements requisite to
accessing the sales and participation facilities. The current credit ratings for
the  company  are:  S&P (BBB), Moody's (Baa2) and Fitch (BB+).  The Company owns
its  inventory;  therefore,  no  floorplanning  arrangements  are  necessary.

In addition, the Company has committed and uncommitted lines of credit amounting
to  $76  million  with  several banks, which bear interest in relation to LIBOR.
These  lines  were unused at June 30, 2003.  These lines are subject to periodic
review  by  each  bank  and  may  be  canceled  by  the  Company  at  any  time.

A  $1.875 billion line of credit is available with Berkshire Hathaway, with $368
million  being utilized on June 30, 2003.  Of the amount due Berkshire Hathaway,
$318  million  was  secured by manufactured housing contracts with the remaining
$50  million  being unsecured.  Effective rates of interest range from 2.165% to
6.15%.  The  notes  are  due  March  2004.

Under  certain  interest  rate  swap  agreements,  the Company agrees with other
parties to exchange the difference between fixed rate and variable rate interest
amounts calculated by reference to an agreed upon notional principal amount.  At
June  30,  2003,  the  Company's interest rate swap agreements have an aggregate
notional  amount  of  $75  million.  The  interest rates on the notional amounts
range  from  5.44%  to  5.62%.  At  June  30,  2003,  the fair value of the swap
agreement  was  $10.7  million  as  compared  to  $5.7

                                       40
<PAGE>

million  in  the  prior  year.  As  a  result, there was a $5.0 million negative
adjustment  recorded  for  the  swaps  in  the  period  ending  June  30,  2003.

NOTE  7  -  RESERVES  FOR  CREDIT  LOSSES  AND  CONTINGENT  LIABILITIES
Analysis  of  the reserves for credit losses on installment contract receivables
and contingent liabilities for the years ended June 30, 2003, 2002, and 2001, is
as  follows:

<TABLE>
<CAPTION>

(in  thousands)                                                                2003       2002       2001
------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>        <C>        <C>
Balance, beginning of year                                                   $ 24,540   $ 30,536   $ 35,725
  Additions to reserves                                                        43,700     25,100     42,500
  Charges, net of recoveries applicable to installment contract receivables
    Purchased                                                                 (18,595)   (14,880)   (13,105)
    Other                                                                     (19,720)   (21,884)   (37,974)
  Reserves transferred to unamortized discounts                                     -          -     (1,000)
  Reserves associated with receivables purchased                                    -      5,668      4,390
------------------------------------------------------------------------------------------------------------
Balance, end of year                                                           29,925     24,540     30,536
------------------------------------------------------------------------------------------------------------
</TABLE>

The  reserves  for  credit losses are netted against receivables and the reserve
for  contingent liabilities is included in other liabilities on the consolidated
balance  sheets.  The Company is contingently liable as guarantor on installment
contract  receivables  sold  with  recourse.  At  June  30,  2003, and 2002, the
outstanding  principal  balances  of these receivables totaled approximately $70
million  and  $68  million,  respectively. There were $15 million of receivables
sold  with  recourse  in  2003.  There were no receivables sold with recourse in
2002  and  2001.

NOTE  8  -  SHAREHOLDERS'  EQUITY
Stock  Option  Plan
In  1983, 1985, 1991, and 1997, the Company established Stock Option Plans for a
total  of  17,021,036  shares  of  common  stock,  which  provide  for  granting
"incentive  stock  options"  or  "non-qualified  options" and stock appreciation
rights  to  officers  and  key  employees  of  the  Company.  In  addition,
non-management members of the Board of Directors were, with shareholder approval
of  prices  and  provisions  for exercise, granted options to purchase shares of
common  stock.  The  option  prices  were  established at not less than the fair
market value as of the date of grant. Options were exercisable after one or more
years  and  expired no later than 10 years from the date of grant.  Activity and
price  information  regarding  the  plans  are  as  follows:

                                       41
<PAGE>

<TABLE>
<CAPTION>
                                                    Weighted                Weighted
                                                      Avg         Stock        Avg
                                 Stock Option       Exercise     Options     Exercise
                 Shares           Price Range        Price     Exercisable    Price
--------------------------------------------------------------------------------------
<S>            <C>         <C>       <C> <C>      <C>        <C>           <C>
Balance
June 30, 2000    5,105,456      $ 2.16 -  $15.75     $10.36     1,655,984     $ 9.18
  Granted          875,825      $ 8.38 -  $ 9.31     $ 9.10
  Exercised       (278,401)     $ 2.16 -  $13.70     $ 5.88
  Canceled        (242,418)     $ 7.22 -  $15.75     $10.24
--------------------------------------------------------------------------------------
Balance
June 30, 2001    5,460,462      $ 3.83 -  $15.75     $10.40     1,901,452     $ 9.84
  Granted        1,121,390      $ 8.19 -  $15.75     $13.82
  Exercised       (582,957)     $ 3.83 -  $13.70     $ 8.40
  Canceled        (268,941)     $ 7.22 -  $15.75     $11.29
--------------------------------------------------------------------------------------
Balance
June 30, 2002    5,729,954      $ 7.22 -  $15.75     $11.23     1,835,540     $10.29
  GRANTED          963,250      $11.19 -  $15.65     $11.93
  EXERCISED       (309,424)     $ 7.22 -  $12.60     $ 7.92
  CANCELED        (517,744)     $ 7.54 -  $15.75     $12.65
--------------------------------------------------------------------------------------
BALANCE
JUNE 30, 2003    5,866,036      $ 7.22 -  $15.75     $11.39     2,342,482     $10.62
--------------------------------------------------------------------------------------
</TABLE>

Options  available  for  future grant at June 30, 2003, and 2002, were 2,786,594
and  3,317,696,  respectively.  1,010  persons  held  options  at June 30, 2003.

The  following  table  summarizes  information about the plans' stock options at
June  30,  2003,  including  weighted average remaining life (Life) and weighted
average  exercise  price  (Price):

<TABLE>
<CAPTION>

                      Options Outstanding             Options Exercisable
                -----------------------------------   ------------------------
 Range             Number           Life     Price      Number      Price
------------------------------------------------------------------------------
<S>              <C>        <C>        <C>     <C>      <C>
$ 6.30 - $ 7.88      423,544      1.0 year   $ 7.24     400,364     $ 7.23
$ 7.88 - $ 9.45    1,392,853     5.7 years   $ 9.08     610,028     $ 9.07
$ 9.45 - $11.03      247,787     3.4 years   $10.32     233,729     $10.32
$11.03 - $12.60    2,003,106     6.7 years   $11.75     696,297     $12.26
$12.60 - $14.18    1,524,871     6.6 years   $13.62     402,064     $13.65
$14.18 - $15.75      273,875     7.7 years   $15.51           -     $    -
------------------------------------------------------------------------------
</TABLE>

In accordance with the guidance provided by SFAS 123, Accounting for Stock-Based
Compensation  (SFAS  123),  the  Company  has  elected to continue following the
intrinsic  value  based  method  as  prescribed  by  Accounting Principles Board
Opinion  No.  25 (APB 25), Accounting for Stock Issued to Employees, and related
interpretations  in  accounting for its stock option plans.  Under the intrinsic
value  based method, compensation cost is computed as the excess, if any, of the
quoted  market price of the stock at grant date over the amount the grantee must
pay  to  acquire  the  stock.  Because  all  option plans provided for grants at
market  price,  there  is  no  intrinsic value in the stock options on the grant
date,  therefore  no  compensation  cost is recognized.   SFAS 123 describes the
fair value method of measuring and recording compensation cost as an alternative
to  the intrinsic value based method.  Under the fair value method, compensation
cost is measured at the grant date based on the computed fair value of the grant
and  is  recognized  over  the  vesting  period  of  the options.  SFAS 123 also
requires  that companies using the intrinsic value based method must present pro
forma  disclosure  of  net  income  and  earnings per share as if the fair value
method  had  been applied.  The pro forma results do not purport to indicate the
effects  on  reported  net  income  for recognizing compensation expense that is
expected  to  occur  in  future  years.  If the options had been expensed in the
current  year,  the  pro  forma  results  would  have  been:

                                       42
<PAGE>

<TABLE>
<CAPTION>
                                                       Year ended June 30,
(in thousands except per share data)                  2003      2002      2001
---------------------------------------------------------------------------------
<S>                                                 <C>       <C>       <C>
Net income - as reported                            $113,082  $124,146  $106,651
Net income - pro forma                               109,990   120,640   104,352
Net  income per diluted common share - as reported     $0.83     $0.89     $0.77
Net income per diluted common share - pro forma         0.80      0.87      0.75
---------------------------------------------------------------------------------
</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 issued from 2001 to 2003: dividend yields ranging
from  0.43% to 0.84% with a weighted average yield of 0.65%; expected volatility
of  45.69%; risk-free interest rates ranging from 3.63% to 5.40% with a weighted
average  rate of 4.49%; and expected lives ranging from 9.86 to 10.00 years with
a  weighted  average  life  of 9.95 years.  The weighted average grant date fair
value  of  options granted in fiscal years 2003, 2002 and 2001 was $6.85, $7.15,
and  $4.53  per  share,  respectively.

As required by the Securities and Exchange Commission final release no. 33-8048,
the  table  provided below represents the equity compensation plan disclosure in
aggregate.  All  information  presented  below  is  reported  at  June 30, 2003.

<TABLE>
<CAPTION>

                                                                                          NUMBER OF SECURITIES
                                            (A)                                          REMAINING AVAILABLE FOR
                                 NUMBER OF SECURITIES TO BE      WEIGHTED-AVERAGE       FUTURE ISSUANCE UNDER EQUITY
                                   ISSUED UPON EXERCISE OF       EXERCISE PRICE OF         COMPENSATION PLANS
                                     OUTSTANDING OPTIONS,       OUTSTANDING OPTIONS,      (EXCLUDING SECURITIES
 PLAN CATEGORY                       WARRANTS AND RIGHTS        WARRANTS AND RIGHTS      REFLECTED IN COLUMN (A))
-----------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                  <C>                            <C>
Equity compensation plans
  approved by security holders            5,866,036                      $11.39                      2,786,594
Equity compensation plans not
  approved by security holders                    -                           -                              -
-----------------------------------------------------------------------------------------------------------------------
Total                                     5,866,036                      $11.39                       2,786,594
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

Subsequent  to June 30, 2003, the Company cancelled all stock option plans.  See
note  18  to  these  financial  statements.

NOTE  9  -  INCOME  TAXES
The  components  of  deferred  tax  assets and liabilities at June 30, 2003, and
2002,  are  as  follows:

<TABLE>
<CAPTION>

(in  thousands)                                               2003       2002
----------------------------------------------------------------------------------
<S>                                                         <C>        <C>
Reserves for credit losses and contingencies and discounts  $ 18,870   $  6,981
Insurance reserves                                            12,737     12,086
Unearned insurance premiums                                   10,463     10,038
Residual interest in installment contract receivables         21,978     12,005
----------------------------------------------------------------------------------
  Total deferred tax assets                                   64,048     41,110
----------------------------------------------------------------------------------
Deferred costs                                                (7,330)    (7,088)
Other comprehensive income                                    (2,873)    (4,591)
Other                                                        (12,787)    (9,638)
----------------------------------------------------------------------------------
  Total deferred tax liabilities                             (22,990)   (21,317)
----------------------------------------------------------------------------------
  Net deferred tax asset                                    $ 41,058   $ 19,793
----------------------------------------------------------------------------------
</TABLE>


The  provisions  for  income  taxes  for each of the years ending June 30, 2003,
2002,  and  2001  are  composed  of  the  following:

                                       43
<PAGE>

<TABLE>
<CAPTION>

(in  thousands)                      2003      2002      2001
---------------------------------------------------------------
<S>                               <C>        <C>      <C>
Current tax provisions
  Federal                           $80,689   $65,232  $64,010
  State                               5,258     4,086    2,772
---------------------------------------------------------------
Total current                        85,947    69,318   66,782
Deferred tax provision (benefit)    (19,547)    3,582   (4,082)
---------------------------------------------------------------
                                    $66,400   $72,900  $62,700
---------------------------------------------------------------
</TABLE>

At  June  30,  2003,  2002,  and  2001,  a  deferred  tax provision (benefit) of
($1,718,000),  ($665,000),  and $5,656,000, respectively, was allocated directly
to shareholders' equity for the unrealized gain (loss) on residual interests and
securities  available-for-sale.  The  provision  for income tax reflected in the
financial  statements  differs  from  income  taxes  calculated at the statutory
federal  income  tax  rate  of  35%  in  2003,  2002  and  2001,  as  follows:

<TABLE>
<CAPTION>

(in  thousands)                              2003     2002     2001
----------------------------------------------------------------------
<S>                                         <C>      <C>      <C>
Income taxes at the statutory rate          $62,818  $68,966  $59,273
State income taxes, net of federal benefit    3,418    2,656    1,802
Other, net                                      164    1,278    1,625
----------------------------------------------------------------------
                                            $66,400  $72,900  $62,700
----------------------------------------------------------------------
</TABLE>

NOTE  10  -  EMPLOYEE  BENEFIT  PLANS
The  Company  has  a 401(k) defined contribution plan covering all employees who
meet  participation  requirements.  The  amount of the Company's contribution is
discretionary  as  determined  by  the  Board  of  Directors,  up to the maximum
deduction allowed for federal income tax purposes. Company contributions accrued
and  paid  were  $4,042,000, $4,708,000, and $2,938,000 for the years ended June
30,  2003,  2002  and  2001,  respectively.

NOTE  11  -  COMMITMENTS  AND  CONTINGENCIES
Certain  operating  properties  are rented under non-cancelable operating leases
that  expire at various dates through 2010. Total rental expense under operating
leases  was  $5,360,000  in  2003,  $5,080,000  in 2002, and $5,280,000 in 2001.
Minimum  rental  commitments under non-cancelable operating leases primarily for
retail  centers,  in  effect  at  June  30,  2003,  were:

<TABLE>
<CAPTION>

(in  thousands)
Contractual Obligations                                 Payments due by period
---------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>         <C>         <C>        <C>        <C>
                           Total          FY04         FY05        FY06        FY07     FY08      Thereafter
                           ------------------------------------------------------------------------------------
Operating leases           $  8,434     $  3,063     $ 2,123     $ 1,473     $   860     $   198    $   717

</TABLE>

The  following table summarizes the Company's other contingencies as of June 30,
2003:

<TABLE>
<CAPTION>

(in  thousands)
Other Contingencies                             Amount of contingency expiration per period
---------------------------------------------------------------------------------------------------------------
<S>                        <C>         <C>          <C>         <C>         <C>        <C>        <C>
                           Total          FY04         FY05        FY06        FY07     FY08      Thereafter
                           ------------------------------------------------------------------------------------
Letters of credit          $144,686     $128,847     $     -     $15,839     $     -     $     -    $      -
Guarantees                 $494,806     $  2,033     $ 5,201     $14,152     $45,869     $ 83,892   $343,659
Repurchase agreements      $ 55,704     $ 44,563     $11,141     $     -     $     -     $     -    $      -
</TABLE>

At  June  30,  2003,  the  Company  has  letters of credit, primarily related to
insurance  reserves  and  performance  guarantees  related  to  asset-backed
securitizations  outstanding for which the Company provides a limited guarantee.
The  Company believes a significant loss from any such guarantee is remote.  See
Note  7  for  discussion  of  guarantees  on  installment  contract receivables.

Institutions  financing  independent  retailer purchases require the Company to
execute  repurchase agreements.  As a result of these agreements, the Company is
contingently  liable  for  repurchasing  homes  in the event of a default by the
dealer  to  the  lending  institution.  These  agreements  are  customary in the
manufactured  housing  industry,  and  the Company's losses in the past have not
been  significant.

                                       44
<PAGE>

NOTE  12  -  BUSINESS  SEGMENT  INFORMATION
The  Company has identified four major business segments: Retail, Manufacturing,
Financial  Services,  and Communities. The Retail group purchases homes from the
Company's  manufacturing  operations  and  third  party manufacturers to sell to
retail  customers.  The  Manufacturing  group builds homes for Company-owned and
independent  retailers.  Financial  Services  provides  retail  financing  of
manufactured  homes,  reinsures  risk on family protection, physical damage, and
homebuyer  protection  plan  insurance  policies,  and  offers certain specialty
finance  products.  The Communities group owns and operates manufactured housing
communities.  Income  from  operations  consists  of total revenues less cost of
sales  and operating expenses.  Identifiable assets are used in the operation of
each  business  segment.

The  sales  of  units shipped to the Retail sales centers from the Manufacturing
facilities  are  eliminated  in  the  intersegment  sales  line  of the Revenues
section.  The  Eliminations/other  line  as  represented  below  includes  other
intercompany  eliminations  required  in  accordance  with  generally  accepted
accounting  principles.  Information  concerning  operations by business segment
follows:

                                       45
<PAGE>

<TABLE>
<CAPTION>

(in  thousands)                                2003         2002         2001
---------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>
REVENUES
  NET SALES
    Retail                                 $  623,165   $  616,224   $  586,261
    Manufacturing                             489,304      535,508      495,610
    Communities                                50,872       40,115       39,420
    Intersegment sales                       (313,331)    (320,739)    (272,134)
---------------------------------------------------------------------------------
      Total Net Sales                      $  850,010   $  871,108   $  849,157
---------------------------------------------------------------------------------

  FINANCIAL SERVICES
    Retail                                 $   54,772   $   43,375   $   40,870
    Financial Services                        204,306      206,061      184,250
    Communities                                 3,907        3,063        2,796
---------------------------------------------------------------------------------
      Total Financial Services             $  262,985   $  252,499   $  227,916
---------------------------------------------------------------------------------

  RENTAL AND OTHER INCOME
    Retail                                 $   25,768   $   26,352   $   24,003
    Manufacturing                                 606          497          545
    Communities                                51,255       48,993       47,484
    Intersegment sales                         (2,213)        (601)       1,851
---------------------------------------------------------------------------------
      Total Rental and other income        $   75,416   $   75,241   $   73,883
---------------------------------------------------------------------------------
        Total Revenue                      $1,188,411   $1,198,848   $1,150,956
---------------------------------------------------------------------------------

OPERATING INCOME
  Retail                                   $   28,677   $   32,177   $   28,712
  Manufacturing                                37,706       46,761       36,637
  Financial Services                          116,083      124,909       95,469
  Communities                                  14,276       13,938       14,022
  Eliminations/other                          (15,874)     (16,418)      (3,985)
---------------------------------------------------------------------------------
      Total income from operations         $  180,868   $  201,367   $  170,855
---------------------------------------------------------------------------------

INTEREST
  Interest expense                            (10,492)      (8,975)      (5,561)
  Interest revenue/other income                 9,106        4,654        4,057
---------------------------------------------------------------------------------
INCOME BEFORE TAXES                        $  179,482   $  197,046   $  169,351
---------------------------------------------------------------------------------

IDENTIFIABLE ASSETS
  Retail                                   $  272,000   $  271,421   $  255,793
  Manufacturing                                77,913       79,102       82,616
  Financial Services                        1,625,966    1,210,460    1,080,416
  Communities                                 201,267      191,147      191,802
  Eliminations/other                           64,168       76,273       43,543
---------------------------------------------------------------------------------
      Total identifiable assets            $2,241,314   $1,828,403   $1,654,170
---------------------------------------------------------------------------------

DEPRECIATION AND AMORTIZATION
  Retail                                   $    4,714   $    4,753   $    6,161
  Manufacturing                                 6,158        5,781        5,767
  Financial Services                              541          283          512
  Communities                                   7,237        7,071        7,030
  Eliminations/other                            1,854        1,273        1,130
---------------------------------------------------------------------------------
      Total depreciation and amortization  $   20,504   $   19,161   $   20,600
---------------------------------------------------------------------------------

CAPITAL EXPENDITURES
  Retail                                   $    5,206   $    5,797   $    5,211
  Manufacturing                                 6,844        5,834        4,346
  Financial Services                              459           87           88
  Communities                                  16,193        7,033       13,920
  Eliminations/other                            2,488        1,736          994
---------------------------------------------------------------------------------
      Total capital expenditures           $   31,190   $   20,487   $   24,559
---------------------------------------------------------------------------------
</TABLE>

                                       46
<PAGE>

NOTE  13  -  OTHER  ASSETS,  ACCOUNTS  PAYABLE  AND  OTHER  LIABILITIES
At  June  30,  2003,  and  2002,  other  assets  and  liabilities  consisted of:

<TABLE>
<CAPTION>

(in  thousands)                                  2003      2002
------------------------------------------------------------------
<S>                                          <C>       <C>
Other assets
  Interest and other receivables               $ 53,998  $ 48,233
  Deferred insurance policy acquisition costs    21,344    20,529
  Prepaid expenses and other                     28,927    24,910
------------------------------------------------------------------
                                               $104,269  $ 93,672
------------------------------------------------------------------

Accounts payable and accrued liabilities
  Accounts payable                             $ 74,851  $ 79,648
  Accrued liabilities and other                  48,272    59,660
------------------------------------------------------------------
                                               $123,123  $139,308
------------------------------------------------------------------

Other liabilities
  Investors payable                            $147,607  $131,720
  Reserve for contingent liabilities              6,615     5,664
  Escrow deposits                                19,538    15,747
  Unearned insurance premiums                   106,093   100,712
  Residual liability                             11,950    52,161
  Other                                          27,643    28,222
------------------------------------------------------------------
                                               $319,446  $334,226
------------------------------------------------------------------
</TABLE>

NOTE  14  -  FAIR  VALUE  DISCLOSURE  OF  FINANCIAL  INSTRUMENTS
SFAS  No.  107,  Disclosures About Fair Value of Financial Instruments, requires
that  the  Company  disclose  the  estimated  fair  values  of  its  financial
instruments.  The  following  methodologies  and  assumptions  were  used by the
Company  to  estimate  its  fair  value  disclosures  for financial instruments.

Fair  value  estimates  are  made at a specific point in time, based on relevant
market data and information about the financial instrument. The estimates do not
reflect  any  premium  or discount that could result from offering for sale in a
single  transaction  the  Company's  entire  holdings  of a particular financial
instrument.  The  lack  of  uniform valuation methodologies introduces a greater
degree  of  subjectivity  to  these  estimated  fair  values.  Comparability  to
financial instruments between similar companies may not be reasonable because of
varying  assumptions  concerning  the  estimates  of  fair  value.

Cash  and  Cash  Equivalents
The carrying values for cash and cash equivalents, including those restricted by
agreement,  approximate  the  fair  value  of  the  assets.

Contracts  Held  For  Sale  and  as  Collateral
Contracts  held  for  sale  are  generally  recent  originations  or  purchased
portfolios.  The Company estimates the fair value of the contracts held for sale
using  expected  future  cash  flows  of the portfolio discounted at the current
origination  rate.

The  carrying values of contracts pledged as collateral to long-term lenders are
estimated  using  discounted cash flow analyses and interest rates being offered
for  similar contracts. The carrying amount of contracts with a variable rate of
interest  is  estimated to be fair value. The carrying value of accrued interest
adjusted  for  credit  risk  equals  its  fair  value.

Debt  Collateralized  by  Installment  Contract  Receivables
Debt  collateralized  by  installment contract receivables consists primarily of
notes due in March 2004.  The fair value of these financial instruments is based
on the current rates offered to the Company for debt of similar maturities using
a  discounted  cash  flow  calculation.

The carrying amounts and estimated fair values of the Company's financial assets
and  liabilities  are  as  follows:

                                       47
<PAGE>

<TABLE>
<CAPTION>

                                                                     JUNE 30, 2003            June 30, 2002
                                                                 CARRYING     ESTIMATED   Carrying    Estimated
(in thousands)                                                     AMOUNT     FAIR VALUE   Amount     Fair Value
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>       <C>          <C>       <C>
Financial assets
  Cash and cash equivalents, including restricted cash           $  176,491  $   176,491  $209,884  $   209,884
  Contracts held for sale and as collateral, including accrued
    interest receivable                                           1,055,920    1,056,042   718,265      716,400
  Residual interests in installment contract receivables            106,441      106,441   129,348      129,348
  Servicing asset                                                    49,037       52,000    51,966       53,000
  Securities available-for-sale                                      89,535       89,535    25,729       25,729
Financial liabilities
  Senior notes, 6.25%                                                75,000       76,522    75,000       74,705
  Debt collateralized by installment contract receivables, 6.15%    318,243      318,005         -            -
  Promissory notes, 2.165%                                           50,000       50,000         -            -
  Debt collateralized by installment contract receivables, 10.12%       199          215     2,176        2,462
  Tax exempt bonds                                                   15,230       15,230    15,230       15,230
  Residual liability                                                 11,950       11,950    52,161       52,161
-------------------------------------------------------------------------------------------------------------------
</TABLE>

NOTE  15  -  EARNINGS  PER  SHARE
The  following  reconciliation  details  the numerators and denominators used to
calculate  basic  and  diluted  earnings  per  share for the respective periods:

<TABLE>
<CAPTION>

(in  thousands  except  per  share  data)     2003      2002      2001
-------------------------------------------------------------------------
<S>                                      <C>       <C>       <C>
Net income                                  $113,082  $124,146  $106,651
Average shares outstanding
  Basic                                      136,237   137,726   137,702
  Add: common stock equivalents (1)              470     1,146       638
  Diluted                                    136,707   138,872   138,340
Earnings per share - Basic                     $0.83     $0.90     $0.77
                   - Diluted.                  $0.83     $0.89     $0.77
--------------------------------------------------------------------------
<FN>
(1)  Common  stock  equivalents are principally stock options.  Stock options to
purchase  2,181,247,  69,000  and 2,414,826 shares of common stock for the years
ended  June  30,  2003,  2002,  and 2001, respectively, were not included in the
computation  of  diluted  earnings  per share because their inclusion would have
been  antidilutive.
</TABLE>

NOTE  16  -  RELATED  PARTY  TRANSACTIONS
The  Company  maintains  an  agreement  to purchase certain installment contract
receivables  originated  or  acquired by an affiliate, 21st Mortgage Corporation
("21st"),  in  which  the  Company  maintains  a 50% ownership interest. 21st, a
Delaware Corporation headquartered in Knoxville, Tennessee, acts as servicer for
those  receivables  it  originates  or  acquires.  Certain  of  the  receivables
originated  or  acquired  by  21st were securitized along with other receivables
originated  and  acquired  by  the  Company.  The  Company  is servicer for such
receivables  and  maintains  a  subservicing  agreement with 21st to sub-service
those  receivables  it  sold to the Company. The amount paid to the affiliate in
fiscal  2003  to  sub-service  those  receivables  was  $37,600,000. The Company
acquired  approximately  $286,000,000,  $190,000,000,  and  $110,000,000  in
installment  contract  receivables  from the affiliate and received interest and
other  related  fees  from  the  affiliate  totaling  approximately  $3,419,000,
$2,232,000,  and  $1,880,000  during  fiscal  2003, 2002 and 2001, respectively.

On  December  21,  2001,  the  Company  acquired  approximately  $900 million of
installment  contract  receivables. 21st was contracted to service approximately
$450  million  of these installment contract receivables. At June 30, 2003, 2002
and  2001,  the affiliate was servicing installment contract receivables for the
Company  totaling approximately $1,144,035,000, $1,016,088,000 and $444,495,000,
respectively.

One of the Company's counsel is Bernstein, Stair, and McAdams, LLP, of which one
of  the  Company's  former  directors,  Thomas N. McAdams, is a partner.  During
fiscal  year  2003,  payments  to  Bernstein,  Stair, and McAdams, LLP for legal
services  rendered  were  $61,947.  In addition, the Company's primary insurance
carrier  made  payments  to  Bernstein,  Stair,  and  McAdams,  LLP  of $99,658.

                                       48
<PAGE>

NOTE  17  -  QUARTERLY  DATA

<TABLE>
<CAPTION>
                                                                          2003
--------------------------------------------------------------------------------------------------------
                                                      FIRST     SECOND    THIRD     FOURTH
(in thousands except per share data)                SEPT. 30   DEC. 31   MAR. 31   JUNE 30     TOTAL
--------------------------------------------------------------------------------------------------------
<S>                                                 <C>        <C>       <C>       <C>       <C>
NET SALES FROM MANUFACTURED HOUSING OPERATIONS      $ 221,221  $214,924  $190,304  $223,561  $  850,010
REVENUES                                              306,934   299,952   277,125   304,400  $1,188,411
GROSS PROFIT FROM MANUFACTURED HOUSING OPERATIONS      76,488    74,198    66,512    81,757  $  298,955
OPERATING INCOME                                       51,163    49,500    40,127    40,078  $  180,868
INCOME BEFORE INCOME TAXES                             47,021    48,589    41,564    42,308  $  179,482
NET INCOME                                             29,621    30,589    26,164    26,708  $  113,082
EARNINGS PER SHARE - BASIC                              $0.22     $0.22     $0.19     $0.20       $0.83
                   - DILUTED                            $0.22     $0.22     $0.19     $0.20       $0.83
PRICE RANGE OF STOCK - HIGH                            $15.66    $13.80    $12.85    $13.16      $15.66
                     - LOW                             $10.84     $9.40    $10.10    $11.13       $9.40
DIVIDENDS PER COMMON SHARE                                  -         -    $0.064         -      $0.064
--------------------------------------------------------------------------------------------------------

                                                                          2002
--------------------------------------------------------------------------------------------------------
                                                      First     Second    Third     Fourth
(in thousands except per share data)                Sept. 30   Dec. 31   Mar. 31   June 30     Total
--------------------------------------------------------------------------------------------------------
Net sales from manufactured housing operations      $ 227,503  $207,753  $187,174  $248,678  $  871,108
Revenues (1)                                          296,370   296,820   269,908   335,750  $1,198,848
Gross profit from manufactured housing operations      78,404    72,328    64,753    90,301  $  305,786
Operating income                                       47,122    53,408    43,823    57,014  $  201,367
Income before income taxes                             42,120    53,408    46,381    55,137  $  197,046
Net income                                             26,520    33,708    29,181    34,737  $  124,146
Earnings per share - Basic                              $0.19     $0.25     $0.21     $0.25       $0.90
                   - Diluted                            $0.19     $0.24     $0.21     $0.25       $0.89
Price range of stock - High                            $16.50    $17.41    $17.21    $19.28      $19.28
                     - Low                             $10.75    $12.60    $14.49    $15.10      $10.75
Dividends per common share                                  -         -    $0.064         -      $0.064
--------------------------------------------------------------------------------------------------------
<FN>
(1)  Revenues  for  2002  reflect  losses related to securitized mortgages of approximately $9,700,000,
$10,000,000, $10,800,000, and $9,700,000 for the quarters ending September 30, 2001, December 31, 2001,
March  31,  2002,  and  June  30,  2002,  respectively.
</TABLE>

NOTE  18  -  SUBSEQUENT  EVENTS

On  April 1, 2003, the Company entered into an agreement and plan of merger with
Berkshire  Hathaway  and  its  subsidiary pursuant to which the Company would be
acquired  by Berkshire Hathaway at a price of $12.50 per share, payable in cash.
The  agreement and plan of merger and the stockholders agreement relating to the
merger  of  a  subsidiary  of  Berkshire Hathaway with and into the Company were
filed  with  the  Securities  and  Exchange Commission (SEC) on April 2, 2003 as
exhibits  to  Form  8-K.  On April 18, 2003, the preliminary proxy statement was
filed  with  the  SEC,  and the definitive proxy statement was filed on June 12,
2003.

At  a  special  meeting  of  stockholders  held on July 30, 2003 for purposes of
voting  on  the  proposed  merger,  a majority of the shares outstanding, 52.4%,
voted  in  favor  of  the proposed merger.  On August 7, 2003, the merger became
effective  with  the  filing  of the certificate of merger with the Secretary of
State  of  Delaware.

As  of  the  date  of  this  filing, the Company has incurred approximately $9.2
million of merger related expenses. In addition, on August 15, 2003, the Company
paid  approximately  $19.1 million to purchase for cancellation those options to
purchase  common  stock  of  the  Company  from  all  eligible option holders as
described  in Form SC-TO-I/A, Schedule to Tender Offer Statement, filed with the
SEC  on  June 16, 2003.  As a result of the purchase on that date, those options
available  to  eligible  option  holders  were  cancelled.

ITEM  9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING AND
FINANCIAL  DISCLOSURE.
Not applicable during the Company's fiscal year ended June 30, 2003, and through
the  date  of  this  report.

                                       49
<PAGE>

ITEM  10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT.

DIRECTORS  OF  THE  COMPANY
On  August 7, 2003, the Company filed a certificate of merger with the Secretary
of State of Delaware to make effective its merger with a wholly-owned subsidiary
of  Berkshire  Hathaway.  In  addition,  on  August  7, 2003, The New York Stock
Exchange  (the  "NYSE")  suspended  trading  of  Company stock, and subsequently
delisted the Company stock on October 8, 2003.  Prior to the merger on August 7,
2003,  the  Board  of  Directors  consisted  of:

<TABLE>
<CAPTION>

NAME                     AGE       POSITION/ BIOGRAPHY
<S>                    <C>        <C>
James L. Clayton         69        Director since 1967: Founder and Chairman of the Board of Clayton
                                   Homes, Inc; Chief Legal Officer of Clayton Homes, Inc.; Retired as Chief
                                   Executive Officer of Clayton Homes; Inc. in 1999; and Member of the
                                   Boards of: Dollar General Corporation and, Branch Banking & Trust Co.
                                   of North Carolina.

B. Joe Clayton           67        Director since 1967: Chief Executive Officer of Clayton Automotive
                                   Group since its inception in 1961; Member of the Regional Board of
                                   First Tennessee Bank.

Kevin T. Clayton (1)     40        Director since 1998. See Executive Officers of the Company for biography.

Dan W. Evins             67        Director since 1991, member of audit committee: Co-founder and
                                   Chairman of the Board of CBRL Group, since its inception in 1970.

Wilma H. Jordan          55        Director since 1994, chairperson of compensation committee, member
                                   of audit committee:  Co-founder and Chief Executive Officer, Jordan
                                   Edmiston Group, Inc. since its inception in 1988; Member of the Board
                                   of LIN TV Corp.

Thomas N. McAdams        50        Director since 1997, member of the compensation committee:
                                   Partner, Bernstein, Stair & McAdams LLP since 1982; Member of the
                                   Board of RaffertyInc.

C. Warren Neel           66        Director since 1993, chairperson of audit committee, member of
                                   compensation committee: Executive Director, Corporate Governance
                                   Center, The University of Tennessee, since 2003, Commissioner,
                                   Finance and Administration, State of Tennessee 2000-2003; Dean of
                                   the College of Business Administration of the University of Tennessee
                                   from 1977 to 2000; Member of the Boards of: SakInc.,
                                   and American Healthways, Inc.

Steven Davis             52        Director since 2003, member of the audit committee: General Partner of
                                   M&D Pacific, Member of Board of Advisors, Arlen Capital since 1998,
                                   Member of the Board of Chateau Communities, Inc., 1993 to 2002,
                                   CFO and Executive Vice President of ROC 1993 to 1996.

<FN>

(1)  Son  of  James  L.  Clayton  and  nephew  of  B.  Joe  Clayton
</TABLE>

In  connection  with  the  merger,  all directors with the exception of Kevin T.
Clayton  have  resigned  from  the  Board  of  Directors  of  the  Company.

                                       50
<PAGE>

Executive  Officers  of  the  Company

<TABLE>
<CAPTION>

NAME                 AGE     POSITION
<S>                  <C>    <C>
Kevin T. Clayton      40     Chief Executive Officer and President (a)

David M. Booth        51     Executive Vice President and President, Retail (b)

Richard D. Strachan   62     Executive Vice President and President, Manufacturing (c)

John J. Kalec         53     Executive Vice President and Chief Financial Officer (d)

Allen Morgan          56     Vice President and General Manager, Communities (e)
</TABLE>

(a)  Mr.  Clayton has been President of Financial Services since 1995. Prior to
that  time,  he  served  in  various  management positions with the Company.  In
August  1997, he was named President and Chief Operating Officer of the Company.
In  July  1999,  he  was  named  Chief  Executive  Officer.
(b)  Mr.  Booth  has been Executive Vice President of the Company since 1997 and
President of Retail since 1995.  Prior to that time, he served as Executive Vice
President  of  Retail  and  in  other  management  positions  with  the Company.
(c)  Mr. Strachan has been Executive Vice President of the Company and President
of Manufacturing since 1998 and President of Manufacturing since 1997.  Prior to
that  time,  he served as Vice President and General Manager of Manufacturing as
well  as  other significant management positions with the Company and within the
industry.
(d)  Mr.  Kalec  rejoined the Company in 2001 as Senior Vice President and Chief
Financial  Officer.  From  January  2000  to August 2001, he was Chief Financial
Officer and Executive Vice President of iPIX.  From August 1998 to January 2000,
he served as Vice President and Chief Financial Officer of Interactive Pictures.
Prior to that time, he served as Senior Vice President, Chief Financial Officer,
and  Secretary  of Clayton Homes, Inc. from 1996 to 1998.  In 2002, he was named
Executive  Vice  President  and  Chief  Financial  Officer.
(e)  Mr.  Morgan  joined  the  Company  in  1998,  as  General  Manager  of  the
Communities  Group.  In  September  1999,  he  was  named  Vice President of the
Company.  From  1992  to  1998  he  was Superintendent of Knox County, Tennessee
Schools.

ITEM  11.  EXECUTIVE  COMPENSATION.

<TABLE>
<CAPTION>
                                 COMPENSATION OF MANAGEMENT

                                     ANNUAL COMPENSATION          LONG-TERM COMPENSATION AWARDS
---------------------------------------------------------------------------------------------------
                             FISCAL                                OPTIONS         OTHER ANNUAL
NAME AND POSITION             YEAR      SALARY        BONUS     (# OF SHARES) (1)  COMPENSATION (2)
---------------------------------------------------------------------------------------------------
<S>                         <C>   <C>           <C>            <C>                <C>
Kevin T. Clayton              2003     $330,000     $  954,000        60,000           $ 8,764
  Chief Executive Officer     2002     $330,000     $1,670,000        60,000           $13,121
  and President               2001     $300,000     $  325,000        50,000           $ 8,399
---------------------------------------------------------------------------------------------------
David M. Booth                2003     $300,000     $  868,000        60,000           $ 8,774
  Executive Vice President    2002     $300,000     $1,518,000        60,000           $13,253
  President, Retail           2001     $275,000     $  325,000        50,000           $ 8,424
------------------------------------------------------------------ ---------------------------------
Richard D. Strachan           2003     $300,000     $  868,000        60,000           $ 8,775
  Executive Vice President    2002     $300,000     $1,518,000        60,000           $13,163
  President, Manufacturing    2001     $275,000     $  325,000        50,000           $ 8,364
---------------------------------------------------------------------------------------------------
John J. Kalec                 2003     $185,000     $  180,000        40,000           $ 9,371
  Executive Vice President,   2002     $156,500     $  180,000        80,000           $10,697
  Chief Financial Officer     2001          ---            ---           ---               ---
---------------------------------------------------------------------------------------------------
Allen Morgan                  2003     $159,000     $  123,000         20,000          $ 9,610
  Vice President and General  2002     $158,000     $  194,000         40,000          $11,497
  Manager, Communities        2001     $150,000     $   25,000         15,000          $ 6,921
---------------------------------------------------------------------------------------------------
<FN>
1.  Represents  Company  contributions  and  reallocated forfeitures in the Company's 401(k)
plan,  health,  life  and  disability  insurance  premiums.
</TABLE>

                                       51
<PAGE>

<TABLE>
<CAPTION>

                        OPTION GRANTS IN LAST FISCAL YEAR

                        NUMBER OF
                       SECURITIES   PERCENT OF TOTAL
                       UNDERLYING  OPTIONS GRANTED TO     EXERCISE OR
                         OPTIONS       EMPLOYEES          BASE PRICE         EXPIRATION
NAME                     GRANTED    IN FISCAL YEAR        ($/ SHARE)            DATE
-----------------------------------------------------------------------------------------
<S>                     <C>           <C>              <C>          <C>
Kevin T. Clayton          60,000         6.23%              $11.19            10/31/2012
David M. Booth            60,000         6.23%              $11.19            10/31/2012
Richard D. Strachan       60,000         6.23%              $11.19            10/31/2012
John Kalec                40,000         4.15%              $11.19            10/31/2012
Allen Morgan              20,000         2.08%              $11.19            10/31/2012
-----------------------------------------------------------------------------------------
<FN>
*  All  such  options  were  granted  on October 30, 2002, but were subsequently
cancelled  on  August  15, 2003 in connection with the Company's tender offer to
purchase  for cancellation all of the options held by eligible option holders as
described  in Form SC-TO-1/A, Schedule to Tender Offer Statement, filed with the
SEC  on  June  16,  2003.
</TABLE>

<TABLE>
<CAPTION>
                 AGGREGATED OPTION EXERCISES IN THE LAST FISCAL
                     YEAR AND FISCAL YEAR-END OPTION VALUES

                                                 NUMBER OF SECURITIES           VALUE OF UNEXERCISED
                       SHARES                   UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS
                     ACQUIRED ON    VALUE        OPTIONS AT FISCAL              AT FISCAL YEAR END (1)
                      EXERCISE     REALIZED           YEAR END
NAME                     (#)          ($)     EXERCISABLE   UNEXERCISABLE     EXERCISABLE    UNEXERCISABLE
------------------------------------------------------------------------------------------------------------
<S>                  <C>     <C>      <C>      <C>      <C>       <C>
Kevin T. Clayton         5,718     $28,958        265,679        235,500        $542,053        $247,175
David M. Booth          57,211     $38,197        296,194        235,500        $704,722        $247,175
Richard D. Strachan        ---         ---        110,438        265,500        $ 83,650        $343,075
John J. Kalec              ---         ---          6,000        114,000             ---        $ 54,400
Allen Morgan               ---         ---        28,000         74,500        $ 54,515         $ 77,035
------------------------------------------------------------------------------------------------------------
<FN>
1.  Market  value  of  underlying  securities at our fiscal year end of June 30,
2003,  minus  exercise  price.
</TABLE>

ITEM  12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS  AND MANAGEMENT +.

<TABLE>
<CAPTION>
                  SECURITY OWNERSHIP OF DIRECTORS AND OFFICERS

NAME OF                               NUMBER OF SHARES         RIGHT TO       PERCENT
BENEFICIAL OWNER                    BENEFICIALLY OWNED (1)     ACQUIRE (2)   OF CLASS
---------------------------------------------------------------------------------------
<S>                               <C>                     <C>          <C>
James L. Clayton (3)                    37,718,282            208,302         27.8%
B. Joe Clayton                             139,284              9,404           *
Kevin T. Clayton (4)                       661,644            265,679           *
Dan W. Evins                                69,520              9,404           *
Wilma H. Jordan                             14,167             31,377           *
John J. Kalec                                5,251              6,000           *
Thomas N. McAdams                            3,481              8,450           *
C. Warren Neel                               4,587             39,920           *
Steven G. Davis                                  -                  -           *
David M. Booth                              66,240            296,194           *
Richard D. Strachan                          5,640            110,438           *
Allen Morgan                                 1,921             28,000           *
All Directors and Executive
Officers as a Group (12 persons)        36,690,017          1,051,728         29.1%
---------------------------------------------------------------------------------------
</TABLE>
+As of fiscal year end, June 30, 2003.
*Less  than  1%
(1)  These amounts include shares for which the named person has sole voting and
     investment  power  or  shares such powers with his or her spouse. They also
     include  shares  credited  to  the  named person's account under the 401(k)
     Plan,  in  the  following  amounts:
          -     James L. Clayton -                            13,568
          -     David Booth -                                  7,779
          -     Kevin T. Clayton -                             7,643
          -     Richard D. Strachan -                          4,127
          -     Allen Morgan -                                 1,796
          -     All  executive  officers  as  a  group  (6)-  36,008
(2)  These  amounts  reflect shares that could be purchased on exercise of stock
     options  as  of  August 6,  2003  under  stock  incentive  plans.


                                       52
<PAGE>

(3)  Includes  9,175,411  shares  held  by  the  Clayton  Family  Foundation, a
     non-profit  corporation,  of  which  James  L.  Clayton  is  director  and
     president.
(4)  Includes  400,923  shares  held  in  trust  in  which Kevin T. Clayton is a
     trustee,  but  not  a  beneficiary;  includes 6,100 shares held in trust of
     which  Kevin  T.  Clayton  is  a  trustee and beneficiary; does not include
     9,175,411  shares  held  by the Clayton Family Foundation of which Kevin T.
     Clayton  is  a  director.

<TABLE>
<CAPTION>

                               PRINCIPAL STOCKHOLDERS +

NAME AND ADDRESS OF                         AMOUNT OF
BENEFICIAL OWNER                      BENEFICIAL OWNERSHIP   PERCENT OF CLASS
------------------------------------  ---------------------  -----------------
<S>                                   <C>                    <C>
Berkshire Hathaway, Inc.                136,269,337              100.0%
  1440 Kiewit Plaza
  Omaha, NE  68131
<FN>
+  As of the effective date of the above described merger of the Company and the
Berkshire  Hathaway  subsidiary  on  August  7,  2003.
</TABLE>


ITEM  13.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.
Incorporated  by  reference  to  Item  8, Note 16, "Related Party Transactions".

                                       53
<PAGE>

                                     PART IV

ITEM  14.  CONTROLS  AND  PROCEDURES

Within  the 45 days prior to the filing date of this report, the Company carried
out  an  evaluation,  under  the  supervision  and with the participation of the
Company's  management, including the Company's Chief Executive Officer and Chief
Financial  Officer,  of  the  effectiveness  of  the design and operation of the
Company's  disclosure  controls  and  procedures  pursuant  to Exchange Act Rule
13a-14.  Based  upon  that  evaluation,  the  Chief  Executive Officer and Chief
Financial Officer concluded the Company's disclosure controls and procedures are
effective.  There were no significant changes in the company's internal controls
or in other factors that could significantly affect these controls subsequent to
the  date  of  their  evaluation.

ITEM  15.  PRINCIPAL  ACCOUNTANTS  FEES  AND  SERVICES

PricewaterhouseCoopers,  LLC (PwC) serves as the Company's principal accountant.
PwC's  fees  paid  relating  to the fiscal year 2003 audit, including reviews of
financial  statements  included  in Forms 10-Q, totaled $300,000.  There were no
fees  incurred  related  to  financial  information  systems  design  and
implementation.  All other fees of PwC, principally securitization, tax planning
and  other services, totaled $127,348.  The Company's Audit Committee determined
that  PwC's  provision for services of all non-audit fees in 2003 was compatible
with  maintaining  PwC's  independence.

ITEM  16.  EXHIBITS,  FINANCIAL  STATEMENT  SCHEDULES,  AND REPORTS ON FORM 8-K.

(a)     1.  Financial  Statements

The  following  consolidated  financial  statements,  as  well  as the Report of
Independent  Accountants,  are  included  in  Part  II  Item  8  of this report:

                                                                PAGE
                                                                ----

     Report of Independent Accountants                            27

     Consolidated Balance Sheets - June 30, 2003, and 2002        28

     Consolidated Statements of Income - years ended
       June 30, 2003, 2002 and 2001.                              29

     Consolidated Statements of Shareholders' Equity - years
       ended June  30,  2003,  2002  and  2001                    30

     Consolidated Statements of Cash Flows - years ended
       June 30, 2003, 2002 and 2001                               31

     Notes to the Consolidated Financial Statements              32-49

        3.  Exhibits:

            3.  (a)  Restated  charter  as  amended.  (D)

                (b)  Bylaws.  (D)

            4.  (a)  Specimen  stock  certificates.  (E)

                (b)  The Company agrees to furnish to the Commission, upon
                     request, instruments relating to the long term debt of
                     the Company or its subsidiaries.

                                       54
<PAGE>

           10.  (a)  Lease Agreement, dated June 29, 1972, as amended, between
                     Clayton Homes, Inc. and Dean Planters Warehouse, Inc. (A)
                    (subsequently assigned to CLF, a limited partnership which
                     includes a related party).

               *(b)  Clayton Homes, Inc. 1997 Employees Stock Incentive
                     Plan.  (C)

               *(c)  1996 Outside Directors Equity Plan.  (B)

           21. List of Subsidiaries of the Registrant (filed herewith).

           23. Consent of independent auditors (filed herewith).

           31. Certifications required by 302 of the Sarbanes-Oxley Act of 2002
               (filed herewith).

           32. Certifications required by 906 of the Sarbanes-Oxley Act of 2002
               (filed herewith).
________________________________________________________________


(A)     Filed  as  Exhibits  to Registration Statement on Form S-1 (SEC File No.
        2-83705)  and  incorporated  by  reference  thereto.

(B)     Filed  with  Registration Statement on Form S-8 (SEC File No. 333-83543)
        and  incorporated  by  reference  thereto.

(C)     Filed  with  the  Company's  Proxy  Statement  for the Annual Meeting of
        Shareholders  held  November  12,  1997,  and incorporated by reference
        thereto.

(D)     Filed in electronic format only.  The Company will provide copies of the
        exhibits  to  any  eligible  shareholder  who  requests them.  Request
        of copies should  be  mailed  to  Clayton  Homes, Inc., Attn. Investor
        Relations, P.O. Box 15169,  Knoxville,  TN  37901.

(E)     Filed with the Company's Form 10K for the fiscal year ended June 30,
        1998, and incorporated by reference thereto.

*   Management  and  Director's  Compensation  plans.

________________________________________________________________

(b)     Reports  on  Form  8-K:

(i)     Clayton  Homes,  Inc.,  Berkshire  Hathaway  Inc.,  B  Merger  Sub Inc.,
        Agreement  and  Plan  of  Merger,  dated  as  of  April 1, 2003.  Filed
        with the Commission  on  April  2,  2003.
(ii)    Clayton  Homes,  Inc.,  press  release  reporting  the earnings for the
        quarter ended March 31, 2003, dated April 16, 2003. Filed with the
        Commission on April  17,  2003.
(iii)   Clayton  Homes,  Inc.,  press  release reporting preliminary operating
        results for the month of April 2003. Filed with the Commission on
        May 9, 2003.
(iv)    Clayton  Homes,  Inc.  Certification  pursuant  to  18  U.S.C. 1350, as
        adopted  pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002.
        Filed with the  Commission  on  May  13,  2003.
(v)     Clayton  Homes,  Inc,  press  release  reporting  preliminary  operating
        results  for  the month of May 2003.  Filed with the Commission on
        June 9, 2003.
(vi)    Clayton  Homes,  Inc., press release announcing the date of the special
        shareholders'  meeting,  dated June 10, 2003.  Filed with the Commission
        on June 11,  2003.
(vii)   Clayton  Homes, Inc., notice to Directors and Officers with respect to
        a  blackout  period,  dated  June  12, 2003.  Filed with the Commission
        June 12, 2003.
(viii)  Clayton  Homes,  Inc.,  press  release regarding decision by Delaware
        Chancery  Court,  dated  June  27,  2003.  Filed with the Commission on
        June 30, 2003.

                                       55
<PAGE>

                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly authorized, in the City of Alcoa,
State  of  Tennessee,  on  October 14,  2003.

                                 CLAYTON  HOMES,  INC.

                                 By:     /s/  Kevin  T.  Clayton
                                         -----------------------
                                         Kevin T. Clayton
                                         Chief Executive Officer and President

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

<TABLE>
<CAPTION>
<S>                                    <C>                                <C>


/s/ Kevin T. Clayton                          October 14, 2003          Chief Executive Officer, President
-------------------------------------                                   and President, Financial Services
Kevin T. Clayton                                                        (Principal Executive Officer)


/s/ John J. Kalec                             October 14, 2003          Executive Vice President and
-------------------------------------                                   Chief Financial Officer
John J. Kalec                                                           (Principal Financial Officer &
                                                                        Principal Accounting Officer)

</TABLE>

                                       56
<PAGE>