To the Shareholders of Knape & Vogt Manufacturing Company

Our 1999 earnings have increased over 1998 by approximately $15.9 million, but that's no reason to jump for joy over the 1999 results. We believe that we can do much better than that and I'll explain why in the following paragraphs. Please don't be offended by my candor; I believe in telling you when we strike out as well as when we hit singles and even home runs. And, we'll strive to improve our batting average each and every day.

In 1998, our after-tax loss was approximately $9.7 million. This year we had net income of approximately $6.2 million which was a total improvement of $15.9 million. But that's not the whole story. Last year the only reason that the bottom line was negative was due to the fact that we had recorded charges totaling $17.1 million on the sales of The Hirsh Company ("Hirsh") and Roll-it, and the restructuring of KV Canada. Excluding those unusual charges, fiscal 1998 would have had earnings per diluted share of $1.25, compared to $1.24 in fiscal 1999.

We believed that with these key strategic decisions behind us, we would see significant growth in sales and profits for fiscal 1999. In some aspects, we did.