<PAGE>   1
                                                                    EXHIBIT 13.1
1999 STRATTEC ANNUAL REPORT

COMPANY DESCRIPTION


BASIC BUSINESS

     STRATTEC SECURITY CORPORATION designs, develops, manufactures and
markets mechanical locks, electro-mechanical locks and related security
products for major automotive manufacturers.  Our
products are shipped to customer locations in the                         [LOGO]
United States, Canada, Mexico, Europe and South America, and we provide
full service and aftermarket support.  We also supply products for the
heavy truck, recreational vehicle, marine and industrial markets, as well
as precision die castings for the transportation, security and recreational
products industries.

HISTORY

     STRATTEC formerly was a division of Briggs & Stratton Corporation.  On
February 27, 1995, STRATTEC was spun-off from Briggs & Stratton through a
tax-free distribution to the then existing Briggs shareholders.
STRATTEC received substantially all of the assets related to the lock and
key business owned by Briggs & Stratton.

     Starting as a division of Briggs & Stratton, and continuing today as a
totally separate and independent company, we have a history in the automotive
lock manufacturing business spanning more than 80 years.  We have
also been in the zinc die casting business for approximately 70 years.
STRATTEC has been the world's largest producer of automotive locks       [PHOTO]
and keys since the late 1920s, and we currently maintain a dominant
share of the North American markets for these products.

PRODUCTS

     Our principal products are locks and keys for cars and trucks.  A
          typical automobile contains a set of five locks: a steering
               column/ignition lock, a glove box lock, two front door locks
[PHOTO]        and a deck lid (trunk) lock.  Pickup trucks typically use three
               to four locks, while sport utility vehicles and vans use five to
               seven locks.  Some vehicles have additional locks for under-floor
                 compartments or folding rear seat latches.  T-top locks, spare
                    tire locks, burglar alarm



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1999 STRATTEC ANNUAL REPORT

locks and door locks with illuminated faces are also offered as options.
Usually two keys are provided with each vehicle lockset.

[PHOTO]       STRATTEC produces locks with simple electrical switch devices and
          more sophisticated devices, such as resistive elements, radio
frequency identification (RFID) elements and Hall Effect sensors.  The primary
focus of these added electronics is increased security and reliability.
Electronics will play an important and ever-increasing role in the       [PHOTO]
future of our security-related products.

MARKETS

      We are a direct supplier of OEM auto and light truck manufacturers,
over-the-road heavy truck manufacturers and recreational vehicle manufacturers,
as well as other transportation-related manufacturers.  For the 1999 model year,
we enjoyed a 66.4% market share in the North American automotive industry,
supplying locks and keys for approximately 90% of General Motor's production,
65% of Ford's, and 99% of DaimlerChrysler's production.  We also are an OEM
components supplier to a wide array of smaller industrial manufacturers.

      Direct sales to various OEMs represent approximately 82% of
our total sales.  The remainder of the company's revenue is received     [PHOTO]
primarily through sales to the OEM service channels, and the
locksmith aftermarket.

      Sales to General Motors, Ford and DaimlerChrysler are coordinated through
our direct sales personnel located in our Detroit-area office.  Sales are also
partially facilitated through daily interaction between our application
engineers located in Detroit and customer engineering departments. Sales to
other OEM customers are accomplished through a combination of our own sales
personnel and manufacturer representative agencies.

      STRATTEC's products are supported by an extensive staff of experienced
lock engineers.  This staff, which includes product design, quality and
manufacturing engineers, is capable of providing complete


                                                                              5
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1999 STRATTEC ANNUAL REPORT


COMPANY DESCRIPTION

design, development and testing services of new products
for our customers. This staff is also available for customer
problem solving, warranty analysis and other activities     [PHOTO]
that arise during a product's life cycle. Our customers
receive after-sales support in the form of special field
service kits, service manuals, and specific in-plant
production repair programs.

    The majority of our OEM products are sold in North
America. However, our dominance in the North American
market translates into a world market share of around
21%, making STRATTEC the largest producer of automotive
locks and keys in the world. While a modest amount of
exporting is done to automotive assembly plants in
Europe and South America, we are in the process of
expanding our presence in these markets through
collaborative agreements with lock manufacturers in
those regions.

[PHOTO]

     OEM service and replacement parts are sold to the
OEM's own service operations. In addition, we distribute
our components and security products to the automotive
aftermarket through approximately 75 authorized wholesale
distributors, as well as other marketers and users of component
parts, including export customers. These aftermarket activities
are serviced through a new warehousing operation integral to
our Milwaukee headquarters and manufacturing facility.

CUSTOMER FOCUS

     Since the majority of the company's sales are to the "Big Three"
North American automotive manufacturers, STRATTEC is organized to assure
that our activities are focused on these major customers and their
associated entities. We have customer-focused teams for General Motors/Delphi,
for Ford, and for Daimler Chrysler/Mitsubishi. A fourth team handles our
industrial and service customers, including such heavy truck manufacturers as
Peterbilt, Kenworth, Mack, Freightliner, Navistar, and GM Volvo.

     Each of the four teams possesses all of the necessary disciplines
required to meet their customers'




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1999 STRATTEC ANNUAL REPORT

[PHOTO]

needs.  Leading each team's efforts are Product Business
Managers who handle the overall coordination of various product
programs.  The Product Business Managers work closely with
their team's quality engineers, cost engineers, purchasing
agents, internal and external customer service representatives,  [GRAPHIC]
service manager, and engineering manager.  The engineering
manager in turn helps coordinate the efforts of design
engineers, product and process engineers, component engineers,
and electrical engineers.

     STRATTEC uses a formalized product development process to identify and
meet customer needs in the shortest possible time.  By creating and following
this streamlined development system, we shorten product lead times, tighten
our response to market changes, and provide our customers with the optimum
value solution to their security requirements.  STRATTEC is also QS-9000/ISO
9001 certified.  This means we embrace the philosophy that quality should exist
not only in the finished product, but in every step of our process as well.

OPERATIONS

     The majority of the components that go into our lock
products are manufactured at our main facility and headquarters
in Milwaukee, Wisconsin.  This facility also makes zinc die
cast components for other manufacturers.  Lock                   [PHOTO]
assembly is performed at the Milwaukee location and
at our primary assembly facility, located in Juarez, Mexico.

                    ADVANCED DEVELOPMENT

                         Research and development activities are centered
                    around a dedicated research engineering staff we call
[PHOTO]             our Advanced Development Group.







                                                                               7
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1999 STRATTEC ANNUAL REPORT

COMPANY DESCRIPTION


This Group has the responsibility for developing future
products and processes that will keep us in the forefront
of the markets we serve. Among other things, we are
pursuing mechanical as well as electronic products to                [PHOTO]
increase security, modularization of related components,
and new manufacturing processes to reduce costs for
ourselves and our customers.

CYCLICAL NATURE OF THE BUSINESS

    The manufacturing of components used in automobiles is driven by the normal
peaks and valleys associated with the automotive industry. Typically, the months
of July and August are relatively slow while summer vacation shut-downs and
model year changeover occur at the automotive assembly plants. September volumes
increase rapidly as the new model year begins. This volume strength continues
through October and into early November. As the holiday and winter seasons
approach, the demand for automobiles slows. March usually brings a major sales
and production increase, which then continues through most of June. This results
in our first fiscal quarter (ending in September) sales and operating results
typically being our weakest, with the remaining quarters being more consistent.

ECONOMIC VALUE COMMITMENT

    The underlying philosophy of our business, and the means by which we measure
our performance, is Economic Value Added (EVA(R)). Simply stated, economic value
is created when our business enterprise yields a return greater than the cost of
capital we and our shareholders have invested in STRATTEC. The amount by which
our return exceeds the cost of our capital is EVA(R). In line with this
philosophy, EVA(R) bonus plans are in effect for our associates and our outside
directors as an incentive to help positively drive the business.

    STRATTEC's significant market share is the result of an eight-decade-long
commitment to creating quality products and systems that are responsive to
changing needs. As technologies advance and markets grow, STRATTEC retains that
commitment to meeting and exceeding the expectations of our customers, and
providing economic value to our shareholders.


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1999 STRATTEC ANNUAL REPORT

VEHICLE LIST

2000 VEHICLES

     We're proud of the quality vehicles that use STRATTEC components.  They
include over-the-road trucks like Peterbilt, Kenworth, Mack, Freightliner,
Navistar and GM Volvo.  Recreational vehicles like Winnebago, Coachmen, Jayco
and Fleetwood.  And the following model year 2000 cars and light trucks:

[PHOTO]

<TABLE>
<CAPTION>
CARS

<S>                          <C>                              <C>
Buick Century                 Chrysler LHS                     Mitsubishi Galant
Buick Regal                   Chrysler Sebring Convertible     Oldsmobile Alero
Cadillac Eldorado             Dodge Intrepid                   Oldsmobile Intrigue
Chevrolet Camaro              Dodge Neon                       Plymouth Breeze
Chevrolet Cavalier            Dodge Stratus                    Plymouth Neon
Chevrolet Corvette            Dodge Viper                      Plymouth Prowler
Chevrolet Impala              Ford Taurus                      Pontiac Firebird
Chevrolet Lumina              General Motors EV1               Pontiac Grand Am
Chevrolet Malibu              Jaguar S-Type                    Pontiac Grand Prix
Chevrolet Monte Carlo         Lincoln Continental              Pontiac Sunfire
Chrysler Cirrus               Lincoln LS                       Saturn LS
Chrysler Concorde             Mercury Sable
Chrysler 300M                 Mitsubishi Eclipse


LIGHT TRUCKS, VANS AND SPORT UTILITY VEHICLES

Cadillac Escalade             Dodge Ram Van/Wagon              Isuzu Hombre Pickup
Chevrolet Astro               Ford Excursion                   Jeep Cherokee
Chevrolet Blazer              Ford Expedition                  Jeep Grand Cherokee
Chevrolet Silverado Pickup    Ford Explorer                    Jeep Wrangler
Chevrolet Express             Ford F-Series Pickup             Lincoln Navigator
Chevrolet S-10 Pickup         Ford Ranger Pickup               Mazda B-Series Pickup
Chevrolet Suburban            GMC Envoy                        Mercury Mountaineer
Chevrolet Tahoe               GMC Denali                       Mercury Villager
Chevrolet Venture             GMC Jimmy                        Nissan Quest
Chrysler Town & Country       GMC Safari                       Oldsmobile Bravada
Dodge Caravan/Grand Caravan   GMC Savana                       Oldsmobile Silhouette
Dodge Dakota Pickup           GMC Sierra Pickup                Plymouth Voyager/
Dodge Durango                 GMC Sonoma Pickup                   Grand Voyager
Dodge Ramcharger              GMC Yukon                        Pontiac Montana
Dodge Ram Pickup              GMC Yukon XL
</TABLE>



                                                                               9
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1999 STRATTEC ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS

          The following Discussion and Analysis should be read in conjunction
with the Company's Financial Statements and Notes thereto. Unless otherwise
indicated, all references to years refer to fiscal years.


RESULTS OF OPERATIONS
1999 COMPARED TO 1998

          Net sales were $202.6 million in 1999, an increase of 8 percent
compared to net sales of $186.8 million in 1998. Sales to DaimlerChrysler
Corporation increased $5.0 million or 19 percent. Sales to the Ford Motor
Company increased $6.1 million or 13 percent. Sales to these customers increased
primarily due to increased unit production by these customers and a more
favorable product mix. Sales to General Motors Corporation were relatively
consistent with the prior year levels. Labor disruptions at General Motors
Corporation reduced sales to this customer by an estimated $3 million during
both fiscal 1999 (first quarter) and 1998 (fourth quarter). General Motors
Corporation completed its spin-off of Delphi Automotive Systems in May 1999.
Sales to Delphi Automotive Systems totaled $2.8 million in the month of June
1999 and were previously reported as sales to General Motors Corporation. The
Company also began production volume shipments totaling approximately $2.2
million to Mitsubishi Motor Manufacturing of America early in the current fiscal
year in support of the launch of the 1999 Gallant. This is the Company's initial
program with Mitsubishi.
          Gross profit as a percentage of net sales was 23.1 percent in 1999
compared to 21.4 percent in 1998. Several factors contributed to the improvement
in gross profit margins, including increased production volumes resulting in
more favorable absorption of fixed overhead costs and a favorable mix of higher
margin products. The prior year included a charge of $750,000 related to cash
payments to the Company's represented employees upon ratification of a new
collective bargaining agreement. Additional improvement in gross profit margins
resulted from the cost of zinc, which the Company uses at a rate of
approximately 1 million pounds per month, being substantially lower in the
current year as compared to the prior year. The average price per pound was
approximately $.52 in fiscal 1999 compared to approximately $.68 in fiscal 1998.
Also contributing to the improved gross profit margin was the devaluation of the
Mexican peso during the first quarter of the current fiscal year which resulted
in lower U.S. dollar costs for the Mexican assembly operation. The rate of
inflation in Mexico during the 12 months ended September 1998 was approximately
14 percent. However, the average U.S. dollar/Mexican peso exchange rate
increased to approximately 9.50 in the first quarter of the current fiscal year
from approximately 7.85 in the first quarter of the prior year.
          Engineering, selling and administrative expenses were $20.2 million,
or 10.0 percent of net sales in 1999, compared to $18.9 million, or 10.1 percent
of net sales in 1998. The increase was primarily related to the addition of
associates to support current and future programs and the related recruiting and
relocation costs.
          Income from operations was $26.6 million in 1999, compared to $21.0
million in 1998, reflecting the increased sales volume and improved gross margin
as previously discussed above.
          The effective income tax rate in fiscal 1999 was 38.1 percent compared
to 37.0 percent in fiscal 1998. The increase is due to an increase in the
federal statutory tax rate resulting from higher net income levels as well as an
increase in the state effective tax rate. The overall effective rate differs
from the federal statutory tax rate primarily due to the effects of state income
taxes.

 RESULTS OF OPERATIONS
 1998 COMPARED TO 1997

         Net sales were $186.8 million in 1998, an increase of 17 percent
compared to net sales of $159.1 million in 1997. The sales increase is primarily
due to increased sales to all three of the Company's largest customers in the
current year compared to prior year levels, with General Motors Corporation
increasing $16.4 million or 23 percent, DaimlerChrysler Corporation increasing
$5.0 million or 24 percent, and Ford Motor Company increasing $2.5 million or 6
percent. Sales growth was primarily due to higher value mechanical and
electro-mechanical content. Increased sales to DaimlerChrysler Corporation also
reflect that company's higher vehicle production schedule in the last six months
of fiscal 1998 compared to the prior year period. Labor disruptions at General
Motors Corporation operations reduced sales to this customer by an estimated $3
million during the current year fourth quarter and by an estimated $2 million
during the second quarter of fiscal 1997.
          Gross profit as a percentage of net sales was 21.4 percent in 1998
compared to 20.9 percent in 1997. Gross profit margins improved compared to the
prior year due to


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1999 STRATTEC ANNUAL REPORT

decreased scrap and premium freight costs. The gross profit margin was
negatively impacted by a $750,000 charge during the current year as a result of
cash payments to the Company's represented employees upon ratification of a new
collective bargaining agreement. During the first six months of 1998, the cost
of zinc, which the Company uses at a rate of approximately 1 million to 1.2
million pounds per month, remained significantly above prior year levels,
increasing to an average of approximately $.74 per pound in the six months ended
December 28, 1997, from an average of $.53 per pound in the six months ended
December 29, 1996, resulting in a negative impact on gross profit margins. The
cost of zinc declined in the second quarter of fiscal 1998 after increasing
dramatically over the previous 12 months.
          Gross profit margins were also negatively impacted as inflationary
cost pressures in Mexico over the past 30 months have resulted in higher U.S.
dollar costs. The rate of inflation in Mexico during the six months ended June
28, 1998, and during calendar 1997 and 1996 was approximately 8, 16 and 28
percent, respectively. The U.S. dollar/Mexican peso exchange rate remained
relatively stable during this period with devaluation during the period
September 1997 through June 1998. The exchange rate ranged from approximately
7.40 to 7.90 pesos to the dollar during the period January 1996 through
September 1997, and from approximately 7.80 to 9.00 pesos to the dollar during
the period October 1997 through June 28, 1998.
           Engineering, selling and administrative expenses were $18.9 million,
or 10.1 percent of net sales in 1998, compared to $17.7 million, or 11.1 percent
of net sales in 1997. Engineering expenses increased approximately $700,000
primarily in support of new programs. Selling and marketing expenses increased
approximately $200,000 primarily due to increased costs for commissions and
promotional items. Administrative expenses increased approximately $300,000,
primarily due to increased costs to recruit salaried employees.
          Income from operations was $21.0 million in 1998, compared to $15.6
million in 1997, reflecting the increased sales volume and improved gross margin
as previously discussed above.


LIQUIDITY AND CAPITAL RESOURCES

          The Company generated cash from operating activities of $27.5 million
in 1999 compared to $26.0 million in 1998. The increased generation of cash is
due to several factors, including increased sales and operating profit levels as
previously discussed and increases in accounts payable and accrued liabilities
in support of increased production activities. In addition, the Company's
investment in accounts receivable increased by approximately $10.8 million at
June 27, 1999, as compared to June 28, 1998, primarily due to an increase in
outstanding billings for customer tooling and higher sales levels in the current
quarter as compared to the fourth quarter of fiscal 1998. During June 1998,
labor disruptions at General Motors Corporation reduced sales by approximately
$3 million. Inventories decreased by approximately $1.2 million at June 27,
1999, as compared to June 28, 1998, due to decreased sales during June 1998
resulting from the labor disruptions at General Motors Corporation.
          Capital expenditures in 1999 were $8.8 million, compared to $7.5
million in 1998. Expenditures were primarily in support of requirements for new
product programs and the upgrade and replacement of equipment. The Company
anticipates that capital expenditures will be approximately $9 million to $10
million in fiscal 2000, primarily in support of requirements for new product
programs and the upgrade and replacement of equipment.
          The Board of Directors of the Company has authorized a stock
repurchase program to buy back up to 889,395 outstanding shares. A total of
383,000 shares have been repurchased as of June 27,1999, at a cost of
approximately $9.2 million. Additional repurchases may occur from time to time.
Funding for the repurchases was provided by cash flow from operations and
borrowings under existing credit facilities.
          The Company has a $25.0 million unsecured, revolving credit facility
(the "Credit Facility"). There were no outstanding borrowings under the Credit
Facility at June 27, 1999. Interest on borrowings under the Credit Facility are
at varying rates based, at the Company's option, on the London Interbank
offering rate, the Federal Funds Rate, or the bank's prime rate. The Credit
Facility contains various restrictive covenants including covenants that require
the Company to maintain minimum levels for certain financial ratios such as
tangible net worth, ratio of indebtedness to tangible net worth and fixed charge
coverage. The Company believes that the Credit Facility will be adequate, along
with cash flow from operations, to meet its anticipated capital expenditure,
working capital and operating expenditure requirements.
          The Company has not been significantly impacted by inflationary
pressures over the


                                                                              11
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1999 STRATTEC ANNUAL REPORT

MANAGEMENT'S DISCUSSION AND ANALYSIS


last several years, except for zinc and Mexican assembly operations as noted
elsewhere in this Management's Discussion and Analysis.

OTHER

          The Company's Year 2000 readiness project has been ongoing since late
1997. The project addresses operating systems, the manufacturing operations,
customers and suppliers. As of June 27, 1999, the Company's operating systems
have been fully updated to Year 2000 compliant versions. The Year 2000 compliant
versions are currently in use throughout the Company. Tests have been performed
in which transaction dates were set forward past January 1, 2000. These test
transactions were accurately processed. The Company plans to continue testing
and retesting throughout the remainder of the calendar year. Verification that
all equipment used in the manufacturing operations is Year 2000 compliant has
been completed. A Year 2000 readiness questionnaire has been distributed to all
suppliers and a risk analysis has been prepared for each supplier based on the
completed questionnaires. On-site assessments have been and continue to be
performed for all high risk suppliers. Based on the results on on-site
assessments, alternate sources will be identified as necessary.
          The Company is instituting contingency planning. The Company will
limit employee vacations during late 1999 and early 2000, and the information
systems department will be staffed over the millennium weekend. A chain of
command is being established to respond to unforeseen events and to ensure that
personnel will be available to handle issues that may arise. Despite the
Company's efforts, there is no guarantee or assurance that all Year 2000
problems will be uncovered.
          The Company is participating in a program coordinated by the
Automotive Industries Action Group ("AIAG"), a group sponsored and supported by
General Motors Corporation, DaimlerChrysler Corporation and the Ford Motor
Company. Based upon the guidelines of a Year 2000 Readiness Self-Assessment,
developed by the AIAG, the Company is classified as a low risk supplier in
relation to Year 2000 compliance.
          The Company implemented a new business information system in February
1997. No significant modifications to the software to be compliant with the
requirements to process transactions in the Year 2000 were required. Therefore,
the Company's cost to become Year 2000 compliant was not material to its
financial condition or results of operations.

MEXICAN OPERATIONS

          The Company has assembly operations in Juarez, Mexico. Since December
28, 1998, and prior to December 30, 1996, the functional currency of the Mexican
operation has been the Mexican peso. The effects of currency fluctuations result
in adjustments to the U.S. dollar value of the Company's net assets and to the
equity accounts in accordance with Statement of Financial Accounting Standard
(SFAS) No. 52, "Foreign Currency Translation." During the period December 30,
1996, to December 27, 1998, the functional currency of the Mexican operation was
the U.S. dollar, as Mexico was then considered to be a highly inflationary
economy in accordance with SFAS No. 52. The effect of currency fluctuations in
the remeasurement process was included in the determination of income. The
effect of the December 28, 1998 functional currency change was not material to
the financial results of the company.

PROSPECTIVE INFORMATION

          A number of the matters and subject areas discussed in this Annual
Report that are not historical or current facts deal with potential future
circumstances and developments. These include expected future financial results,
product offerings, global expansion, liquidity needs, financing ability, planned
capital expenditures, management's or the Company's expectations and beliefs,
and similar matters discussed in the Company's Management's Discussion and
Analysis and Letter to Our Shareholders. The discussions of such matters and
subject areas are qualified by the inherent risk and uncertainties surrounding
future expectations generally, and also may materially differ from the Company's
actual future experience.
          The Company's business, operations and financial performance are
subject to certain risks and uncertainties which could result in material
differences in actual results from the Company's current expectations. These
risks and uncertainties include, but are not limited to, general economic
conditions, in particular, relating to the automotive industry, consumer demand
for the Company's and its customers products, competitive and technological
developments, foreign currency fluctuations, Year 2000 compliance issues and
costs of operations.
          Shareholders, potential investors and other readers are urged to
consider these factors carefully in evaluating the forward-looking statements
and are cautioned not to place undue reliance on such forward-looking
statements. The forward-looking statements made herein are only made as of the
date of this Annual Report and the Company undertakes no obligation to
publically update such forward-looking statements to reflect subsequent events
or circumstances.


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1999 STRATTEC ANNUAL REPORT







                CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS)
<TABLE>
<CAPTION>



                                                                                               Years Ended
                                                                     ---------------------------------------------------------------

                                                                      June 27, 1999            June 28, 1998           June 29, 1997
                                                                     ---------------           -------------          --------------
<S>                                                                    <C>                      <C>                      <C>
NET SALES                                                               $ 202,625                $ 186,805                $ 159,054
Cost of goods sold                                                        155,821                  146,865                  125,735
                                                                        ---------                ---------                ---------
  GROSS PROFIT                                                             46,804                   39,940                   33,319
Engineering, selling, and
   administrative expenses                                                 20,191                   18,925                   17,684
                                                                        ---------                ---------                ---------

  INCOME FROM OPERATIONS                                                   26,613                   21,015                   15,635
Interest income                                                             1,132                      351                        4
Interest expense                                                                -                      (19)                    (214)
Other income (expense), net                                                  (239)                      73                      125
                                                                        ---------                ---------                ---------
  INCOME BEFORE PROVISION FOR
  INCOME TAXES                                                             27,506                   21,420                   15,550
Provision for income taxes                                                 10,491                    7,931                    5,730
                                                                        ---------                ---------                ---------

NET INCOME                                                              $  17,015                $  13,489                $   9,820
                                                                        =========                =========                =========
EARNINGS PER SHARE:
    BASIC                                                               $    3.02                $    2.36                $    1.72
                                                                        =========                =========                =========
    DILUTED                                                             $    2.94                $    2.30                $    1.70
                                                                        =========                =========                =========
</TABLE>



  The accompanying notes are an integral part of these consolidated statements.

                                                                              13
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1999 STRATTEC ANNUAL REPORT



                   CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)


<TABLE>
<CAPTION>



                                                                                                     June 27, 1999     June 28, 1998
                                                                                                   -----------------  --------------
<S>                                                                                               <C>                <C>
ASSETS
CURRENT ASSETS
         Cash and cash equivalents                                                                     $  28,611          $  14,754
         Receivables, less allowance for doubtful
               accounts of $250 at June 27, 1999,
               and June 28, 1998                                                                          36,063             25,301
         Inventories                                                                                      13,804             14,962
         Customer tooling in progress                                                                      3,758              8,692
         Future income tax benefits                                                                        2,525              2,218
         Other current assets                                                                              2,522              2,131
                                                                                                       ---------          ---------
               Total current assets                                                                       87,283             68,058
PROPERTY, PLANT, AND EQUIPMENT, NET                                                                       40,911             39,940
                                                                                                       ---------          ---------
                                                                                                       $ 128,194          $ 107,998
                                                                                                       =========          =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
         Accounts payable                                                                              $  17,386          $  12,457
         Accrued liabilities:
            Payroll and benefits                                                                           9,961              8,170
            Environmental                                                                                  2,820              2,873
            Income taxes                                                                                     201                307
            Other                                                                                          2,054              1,298
                                                                                                       ---------          ---------
               Total current liabilities                                                                  32,422             25,105
DEFERRED INCOME TAXES                                                                                        512                357
BORROWINGS UNDER REVOLVING CREDIT FACILITY                                                                     -                  -
ACCRUED PENSION OBLIGATIONS                                                                                8,669              8,289
ACCRUED POSTRETIREMENT OBLIGATIONS                                                                         4,246              3,849
SHAREHOLDERS' EQUITY
         Common stock, authorized 12,000,000 shares $.01 par value, issued
             5,945,298 shares at June 27, 1999, and 5,877,150 shares at
              June 28, 1998                                                                                   59                 59
         Capital in excess of par value                                                                   43,999             42,489
         Retained earnings                                                                                49,451             32,436
         Accumulated other comprehensive loss                                                             (2,081)            (1,863)
         Less: Treasury stock, at cost (378,788 shares at
              June 27, 1999 and 152,307 shares at June 28, 1998)                                          (9,083)            (2,723)
                                                                                                       ---------          ---------
               Total shareholders' equity                                                                 82,345             70,398
                                                                                                       ---------          ---------
                                                                                                       $ 128,194          $ 107,998
                                                                                                       =========          =========
</TABLE>
                   The accompanying notes are an integral part
                      of these consolidated balance sheets.



14
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1999 STRATTEC ANNUAL REPORT

           CONSOLIDATED STATEMENTS OF CHANGE IN EQUITY (IN THOUSANDS)


<TABLE>
<CAPTION>


                                                                   Accumulated
                                            Capital in                Other
                                   Common   Excess of   Retained  Comprehensive Treasury Comprehensive
                                    Stock   Par Value   Earnings      Loss       Stock      Income
                                ---------- ----------  ---------  ------------- -------- ------------
<S>                              <C>        <C>        <C>        <C>           <C>      <C>
BALANCE,
JUNE 30, 1996                    $     58   $ 40,909   $  9,127   $ (1,796)          -
Net income                              -          -      9,820          -           -    $  9,820
Translation adjustments                 -          -          -        (67)          -         (67)
                                                                                          --------
Comprehensive income                                                                      $  9,753
                                                                                          ========
Purchase of common stock                -          -          -          -      (2,143)
Exercise of stock options,
         including tax benefit          -        185          -          -           -
                                 --------   --------   --------   --------    --------
BALANCE,
JUNE 29, 1997                          58     41,094     18,947     (1,863)     (2,143)
Net income                              -          -     13,489          -           -    $ 13,489
Translation adjustments                 -          -          -          -           -           -
                                                                                          --------
Comprehensive income                                                                      $ 13,489
                                                                                          ========
Purchase of common stock                -          -          -          -        (591)
Exercise of stock options,
         including tax benefit          1      1,395          -          -          11
                                 --------   --------   --------   --------    --------
BALANCE,
JUNE 28, 1998                          59     42,489     32,436     (1,863)     (2,723)
Net income                              -          -     17,015          -           -    $ 17,015
Translation adjustments                 -          -          -       (218)          -        (218)
                                                                                          --------
Comprehensive income                                                                      $ 16,797
                                                                                          ========

Purchase of common stock                -          -          -          -      (6,416)
Exercise of stock options,
         including tax benefit          -      1,510          -          -          56
                                 --------   --------   --------   --------    --------
BALANCE,
JUNE 27, 1999                    $     59   $ 43,999   $ 49,451   $ (2,081)   $ (9,083)
                                 ========   ========   ========   ========    ========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.


                                                                              15
<PAGE>   13

1999 STRATTEC ANNUAL REPORT


              CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                   Years Ended
                                                                 ------------------------------------------------
                                                                 June 27, 1999     June 28, 1998    June 29, 1997
                                                                 -------------     -------------    -------------
<S>                                                                 <C>                <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                        $17,015            $13,489       $  9,820
  Adjustments to reconcile net income to
    net cash provided by operating activities:
    Depreciation                                                      7,107              6,776          5,639
    Loss on disposition of property,
       plant and equipment                                              463                168            171
    Change in operating assets and liabilities:
      (Increase) decrease in receivables                            (10,788)             4,330        (10,897)
      (Increase) decrease in inventories                              1,158                (83)        (1,473)
      (Increase) decrease in other assets                             4,203             (1,891)         1,421
      Increase in accounts payable
         and accrued liabilities                                      8,311              3,216          1,459
      Other, net                                                         54                (54)           (50)
                                                                    -------            -------       --------
      Net cash provided by
         operating activities                                        27,523             25,951          6,090
                                                                    -------            -------       --------
CASH FLOWS FROM INVESTING ACTIVITIES
  Additions to property, plant and equipment                         (8,831)            (7,450)        (7,972)
  Proceeds received on sale of property,
      plant and equipment                                                15                 70            196
                                                                    -------            -------       --------
         Net cash used in investing activities                       (8,816)            (7,380)        (7,776)
                                                                    -------            -------       --------
CASH FLOWS FROM FINANCING ACTIVITIES
  Net proceeds from (payments of) borrowings under
      revolving credit facility                                           -             (5,037)         3,607
  Purchase of common stock                                           (6,416)              (591)        (2,143)
  Exercise of stock options                                           1,566              1,407            185
                                                                    -------            -------       --------
      Net cash provided by (used in)
      financing activities                                           (4,850)            (4,221)         1,649
                                                                    -------            -------       --------
NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                               13,857             14,350            (37)

CASH AND CASH EQUIVALENTS
  Beginning of year                                                  14,754                404            441
                                                                    -------            -------       --------
  End of year                                                       $28,611            $14,754       $    404
                                                                    =======            =======       ========
SUPPLEMENTAL DISCLOSURE OF
  CASH FLOW INFORMATION
  Income taxes paid                                                 $ 9,882            $ 7,482       $  4,984
  Interest paid                                                           -                 19            227
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

16

<PAGE>   14
1999 STRATTEC ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         STRATTEC SECURITY CORPORATION (the "Company") designs, develops,
manufactures and markets mechanical locks, electro-mechanical locks and related
security products for automotive manufacturers.
         The significant accounting policies followed by the Company in the
preparation of these financial statements, as summarized in the following
paragraphs, are in conformity with generally accepted accounting principles.
         PRINCIPLES OF CONSOLIDATION AND PRESENTATION: The accompanying
financial statements reflect the consolidated results of the company, its wholly
owned Mexican subsidiary, and its foreign sales corporation.
         Certain amounts previously reported have been reclassified to conform
to the June 27, 1999, presentation. These reclassifications have no effect on
previously reported net income or retained earnings.
         FISCAL YEAR: The Company's fiscal year ends on the Sunday nearest June
30.
         USE OF 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, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
         FAIR VALUE OF FINANCIAL INSTRUMENTS: The fair value of financial
instruments does not materially differ from their carrying values.
         CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all
short-term investments with an original maturity of three months or less.
         INVENTORIES: Inventories are stated at cost, which does not exceed
market. The last-in, first-out (LIFO) method was used for determining the cost
of the inventories at the end of each period.
         Inventories consist of the following
(thousands of dollars):

<TABLE>
<CAPTION>

                                        June 27,     June 28,
                                          1999         1998
                                        --------     --------
<S>                                     <C>          <C>
Finished products                       $  4,439     $  5,114
Work in process                           11,145       11,204
Raw materials                                774        1,179
LIFO adjustment                           (2,554)      (2,535)
                                        --------     --------
                                        $ 13,804     $ 14,962
                                        ========     ========
</TABLE>

         CUSTOMER TOOLING IN PROGRESS: The Company accumulates its costs for
development of certain tooling used in component production and assembly. The
costs, which are primarily from third-party tool vendors, are accumulated on the
Company's balance sheet. These amounts then are billed to the customer upon
formal acceptance by the customer of products produced with the individual tool.
         PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment are
stated at cost, and depreciation is computed using the straight-line method over
the following estimated useful lives:

<TABLE>
<CAPTION>
                                       Expected
        Classification               Useful Lives
--------------------------      ---------------------
<S>                                   <C>
Land improvements                     20 years

Buildings and improvements            20 to 35 years

Machinery and equipment               3 to 10 years
</TABLE>

         Property, plant, and equipment consist of the following (thousands of
dollars):

<TABLE>
<CAPTION>

                                   June 27,            June 28,
                                     1999                1998
                                   --------            --------
<S>                                <C>                 <C>
Land                               $  1,236            $    855
Buildings and improvements           10,836               9,819
Machinery and equipment              69,447              64,523
                                   --------            --------
                                     81,519              75,197
Less: accumulated
  depreciation                      (40,608)            (35,257)
                                   --------            --------
                                    $40,911            $ 39,940
                                   ========            ========
</TABLE>

         Expenditures for repairs and maintenance are charged to expense as
incurred. Expenditures for major renewals and betterments, which significantly
extend the useful lives of existing plant and equipment, are capitalized and
depreciated. Upon retirement or disposition of plant and equipment, the cost and
related accumulated depreciation are removed from the accounts and any resulting
gain or loss is recognized in income.
         RESEARCH AND DEVELOPMENT COSTS: Expenditures relating to the
development of new products and processes, including significant improvements
and refinements to existing products, are expensed as incurred.
         FOREIGN CURRENCY TRANSLATION: Since December 28, 1998, and prior to
December 30, 1996, the functional currency of the Mexican operation has been the
Mexican peso. The effects of currency fluctuations result in adjustments to the
U.S. dollar value of the Company's net assets and to the equity accounts in
accordance with Statement of Financial Accounting Standard (SFAS) No. 52,
"Foreign Currency Translation." During the period December 30 1996, to December
27, 1998, the functional currency of the Mexican operation was the U.S. dollar,
as Mexico then was considered to be a highly inflationary economy in accordance
with SFAS No. 52. The effect of currency fluctuations in the remeasurement
process was included in the determination of net income during this period.


                                                                              17

<PAGE>   15
1999 STRATTEC ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS

The effect of the December 28, 1998 functional currency change was not material
to the financial results of the company.

         ACCUMULATED OTHER COMPREHENSIVE LOSS: The only component of accumulated
other comprehensive loss is cumulative translation adjustments. Deferred taxes
have not been provided for the translation adjustments in accordance with SFAS
No. 109, "Accounting for Income Taxes."
         REVENUE RECOGNITION: Revenue is recognized upon the shipment of
products, net of estimated costs of returns and allowances.
         SEGMENT REPORTING: SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," was issued in 1997. This statement
establishes standards for the manner in which public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. Since the
Company operates in a single business segment, this Statement has no impact on
reporting requirements of the Company.
         DERIVATIVE INSTRUMENTS: SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," was issued in 1998. The statement
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 is effective for financial statements
for fiscal years beginning after June 15, 2000. The Company currently does not
hold any such derivative instruments and does not expect this statement to have
an impact on future financial statements.

REVOLVING CREDIT FACILITY

         The Company has a $25 million unsecured, revolving credit facility (the
"Credit Facility"), which expires October 31, 2001. Interest on borrowings under
the Credit Facility are at varying rates based, at the Company's option, on the
London Interbank Offering Rate, the Federal Funds Rate, or the bank's prime
rate. There were no outstanding borrowings at June 27, 1999, or June 28, 1998.
The weighted average interest rate on the revolving credit borrowings was 6.2
percent for the year ended June 28, 1998. There were no borrowings under the
credit facility during the year ended June 27, 1999.
         The Credit Facility contains various restrictive covenants that require
the Company to maintain minimum levels for certain financial ratios, including
tangible net worth, ratio of indebtedness to tangible net worth and fixed charge
coverage.

ENVIRONMENTAL MATTER

         In 1995, the Company recorded a provision of $3.0 million for estimated
costs to remediate a site at the Company's Milwaukee facility contaminated by a
solvent spill, which occurred in 1985. The Company continues to monitor and
evaluate the site and believes, based upon findings-to-date and known
environmental regulations, that the environmental reserve at June 27, 1999, is
adequate.

INCOME TAXES

         The provision for income taxes consists of the following (thousands of
dollars):

<TABLE>
<CAPTION>

                                         1999      1998       1997
                                         ----      ----       ----
<S>                                    <C>        <C>        <C>
Currently payable:
  Federal                              $ 8,106    $5,576     $4,469
  State                                  1,976     1,323      1,037
  Foreign                                  416       471         43
                                       -------    ------     ------
                                        10,498     7,370      5,549
Deferred taxes                              (7)      561        181
                                       -------    ------     ------
                                       $10,491    $7,931     $5,730
                                       =======    ======     ======
</TABLE>

         A reconciliation of the U.S. statutory tax rates to the effective tax
rates follows:

<TABLE>
<CAPTION>

                                        1999        1998       1997
                                        ----        ----       ----
<S>                                     <C>         <C>        <C>
U.S. statutory rate                     35.0%       34.8%      34.4%
State taxes, net of
  federal tax benefit                    4.7         4.4        4.4
Foreign rate differential                 .3          .4        (.8)
Other                                   (1.9)       (2.6)      (1.2)
                                        ----        ----       ----
                                        38.1%       37.0%      36.8%
                                        ====        ====       ====
</TABLE>

         The components of deferred tax assets and (liabilities) are as follows
(thousands of dollars):

<TABLE>
<CAPTION>

                                      June 27,           June 28,
                                        1999               1998
                                      -------            --------
<S>                                  <C>                 <C>
Future income tax benefits:
Customer tooling                      $   195            $   156
Payroll-related accruals                  499                410
Environmental reserve                   1,100              1,121
Other                                     731                531
                                      -------            -------
                                      $ 2,525            $ 2,218
                                      =======            =======
Deferred income taxes:
Accrued pension obligations           $ 3,381            $ 3,233
Accumulated depreciation               (5,549)            (5,091)
Postretirement obligations              1,656              1,501
                                      -------            -------
                                     ($   512)          ($   357)
                                      =======            =======
</TABLE>

         Foreign income before the provision for income taxes was not
significant for each of the years indicated.

18

<PAGE>   16

NOTES TO FINANCIAL STATEMENTS

1999 STRATTEC ANNUAL REPORT

RETIREMENT PLANS AND POSTRETIREMENT COSTS

         The Company has a noncontributory defined benefit pension plan covering
substantially all U.S. associates. Benefits are based on years of service and
final average compensation. The Company's policy is to fund at least the minimum
actuarially computed annual contribution required under the Employee Retirement
Income Security Act of 1974 (ERISA). Plan assets consist primarily of listed
equity and fixed income securities. The Company recognizes the expected cost of
retiree health care and life insurance benefits during the years that the
associates render service. The postretirement health care and life insurance
plans are unfunded.

         The following tables summarize the pension and postretirement plans'
income and expense, actuarial assumptions, and funded status for the years
indicated (thousands of dollars):

<TABLE>
<CAPTION>

                                          Pension         Postretirement
                                          Benefits           Benefits
                                       -------------      --------------
                                       1999     1998      1999     1998
                                       ----     ----      ----     ----
<S>                                   <C>      <C>       <C>     <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation
  at beginning
  of year                             $26,189  $21,624   $ 3,882 $ 3,092
Service cost                            1,380    1,206       206     169
Interest cost                           1,948    1,664       289     238
Amendments                                  -       75         -       -
Actuarial loss                            226    2,058       238     383
Benefits paid                            (556)    (438)     (115)      -
                                      -------  -------   ------- -------
Benefit obligation
  at end of year                      $29,187  $26,189   $ 4,500 $ 3,882
                                      =======  =======   ======= =======

CHANGE IN PLAN ASSETS:
Fair value of plan
  assets at
  beginning of year                   $26,364  $22,194        -        -
Actual return on
  plan assets                           2,551    4,585        -        -
Employer contributions                    818       23      115       53
Benefits paid                            (556)    (438)    (115)     (53)
                                      -------  -------   ------  -------
Fair value of plan
  assets at end of year                29,177   26,364        -        -
                                      =======  =======   ======  =======
Funded status                             (10)     175   (4,500)  (3,882)
Unrecognized net gain                  (7,869)  (7,535)     (13)    (250)
Unrecognized prior
service cost                                7       18      260      275
Unrecognized net
transition asset                         (797)    (947)       7        8
                                      -------  -------  -------  -------
Accrued benefit cost                  $(8,669) $(8,289) $(4,246) $(3,849)
                                      =======  =======  =======  =======
</TABLE>

<TABLE>
<CAPTION>

                                         Pension           Postretirement
                                         Benefits             Benefits
                                     -----------------    -----------------
                                     June 27, June 28,    June 27, June 28,
                                       1999     1998        1999     1998
                                     -----------------    -----------------
<S>                                    <C>      <C>        <C>       <C>
WEIGHTED-AVERAGE ASSUMPTIONS
Discount rate                          7.25%    7.5%       7.25%     7.5%
Expected return on
plan assets                             8.5%    8.5%        n/a      n/a
Rate of compensation
increases                               4.0%    4.0%        n/a      n/a
</TABLE>

         For measurement purposes, a 6 percent annual rate of increase in the
per capita cost of covered health care benefits was assumed for 1999; the rate
was assumed to remain at that level thereafter.

<TABLE>
<CAPTION>

                                               Pension           Postretirement
                                               Benefits             Benefits
                                            -------------        --------------
                                            1999     1998        1999     1998
                                            ----     ----        ----     ----
<S>                                      <C>      <C>          <C>     <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost                             $ 1,380  $ 1,206      $  206  $  169
Interest cost                              1,948    1,664         289     238
Expected return
  on plan assets                          (1,905)  (1,705)          -       -
Amortization of
  prior service cost                          12        7          16       -
Amortization of
  unrecognized
  net gain                                   (86)     (171)         -      (9)
Amortization of
  unrecognized
  net asset                                 (150)     (150)         1       1
                                         -------  --------     ------  ------
Net periodic
  benefit cost                           $ 1,199  $    851     $  512  $  399
                                         =======  ========     ======  ======
</TABLE>

         The health care cost trend assumption has a significant effect on the
amounts reported. A 1% change in the health care cost trend rates would have the
following effects (thousands of dollars):

<TABLE>
<CAPTION>

                                            1% Increase       1% Decrease
                                            -----------       -----------
<S>                                         <C>               <C>
Effect on total of
  service and interest
  cost components                               $ 82             ($ 68)
Effect on Postretirement
  benefit obligation                            $632             ($404)
</TABLE>

         All U.S. associates of the Company may participate in a 401(k) Plan.
The Company contributes a fixed percentage of up to the first 6 percent of
eligible compensation that a participant contributes to the plan. The Company's
contributions totaled approximately $635,000 in 1999, $548,000 in 1998 and
$487,000 in 1997.


                                                                              19

<PAGE>   17
1999 STRATTEC ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS

SHAREHOLDERS' EQUITY
         The Company has 12,000,000 shares of authorized common stock, par value
$.01 per share, with 5,566,510 and 5,724,843 shares issued and outstanding at
June 27, 1999, and June 28, 1998, respectively. Holders of Company common stock
are entitled to one vote for each share on all matters voted on by shareholders.
         On February 27, 1995, one common stock purchase right (a "right") was
distributed for each share of the Company's common stock outstanding. The rights
are not currently exercisable, but would entitle shareholders to buy one-half of
one share of the Company's common stock at an exercise price of $30 per share if
certain events occurred relating to the acquisition or attempted acquisition of
20 percent or more of the outstanding shares. The rights expire in the year
2005, unless redeemed or exchanged by the Company earlier.
         The Board of Directors of the Company authorized a stock repurchase
program to buy back up to 889,395 outstanding shares. As of June 27, 1999,
383,000 shares have been repurchased at a cost of $9,150,000.


EARNINGS PER SHARE (EPS)

         A reconciliation of the components of the basic and diluted per share
computations follows (thousands of dollars, except per share amounts):

<TABLE>
<CAPTION>

                                           1999
                           ------------------------------------
                               Net                    Per-Share
                             Income      Shares         Amount
                             ------      ------       ---------
<S>                         <C>          <C>           <C>
Basic EPS                   $17,015      5,639         $3.02
                                                       =====
Stock Options                              152
                                         -----
Diluted EPS                 $17,015      5,791         $2.94
                                         =====         =====

<CAPTION>
                                           1998
                           ------------------------------------
                               Net                    Per-Share
                             Income       Shares        Amount
                             ------       ------      ---------
<S>                         <C>          <C>           <C>
Basic EPS                   $13,489       5,708         $2.36
                                                        =====
Stock Options                               155
                                          -----
Diluted EPS                 $13,489       5,863         $2.30
                                          =====         =====

<CAPTION>
                                           1997
                           ------------------------------------
                             Net                      Per-Share
                           Income        Shares         Amount
                           ------        ------       ---------
<S>                        <C>          <C>           <C>
Basic EPS                  $9,820        5,716         $1.72
                                                       =====
Stock Options                               69
                                         -----
Diluted EPS                $9,820        5,785         $1.70
                                         =====         =====
</TABLE>

         Options to purchase the following shares of common stock were
outstanding as of each date indicated but were not included in the computation
of diluted EPS because the options' exercise prices were greater than the
average market price of the common shares:

<TABLE>
<CAPTION>

                                Shares            Exercise Price
                                ------            --------------
<S>                             <C>               <C>
June 27, 1999                   80,000               $37.88
                                 5,000               $32.13
                                80,000               $31.98
                                 5,000               $30.81

June 28, 1998                   80,000               $31.98
                                 5,000               $31.63

June 29, 1997                   77,135               $19.68
                                76,393               $19.28
</TABLE>


STOCK OPTION
AND PURCHASE PLANS
         The Company maintains an omnibus stock incentive plan, which provides
for the granting of stock options. The Board of Directors has designated
1,200,000 shares of the Company's common stock available for grant under the
plan at a price not less than the fair market value on the date the option is
granted. Options become exercisable as determined at the date of grant by a
committee of the Board of Directors and expire 5 to 10 years after the date of
grant unless an earlier expiration date is set at the time of grant.

<TABLE>
<CAPTION>

                                                         Weighted
                                                         Average
                                                         Exercise
                                      Shares              Price
                                      ------             --------
<S>                                 <C>                  <C>
Balance as of
  June 30, 1996                      471,393              $13.15
Granted                              157,135              $18.17
Exercised                             13,750              $11.75
Terminated                            15,889              $15.01
                                     -------
Balance
  June 29, 1997                      598,889              $14.45
                                     -------
Granted                               95,000              $31.06
Exercised                             78,000              $12.67
                                     -------
Balance at
  June 28, 1998                      615,889              $17.23
                                     -------
Granted                              110,070              $35.44
Exercised                             68,148              $15.40
Terminated                            20,303              $25.76
                                     -------
Balance at
  June 27, 1999                      637,508              $20.30
                                     =======
Exercisable as of
  June 27, 1999                      378,106              $13.16
Available for grant as
  of June 27, 1999                   402,594
</TABLE>


20
<PAGE>   18

1999 STRATTEC ANNUAL REPORT

NOTES TO FINANCIAL STATEMENTS


         During 1997, the Company adopted SFAS No. 123, "Accounting for
Stock-Based Compensation." As permitted by the statement, the Company will
continue to account for its stock-based compensation plans in accordance with
APB Opinion No. 25 and related Interpretations. Accordingly, no compensation
cost related to these plans was charged against earnings in 1999, 1998, and
1997. Had compensation cost for these plans been determined consistent with SFAS
No. 123, the pro forma impact on earnings per share would have been as follows
(thousands of dollars):

<TABLE>
<CAPTION>

                             June 27,       June 28,        June 29,
                               1999          1998             1997
                             --------       --------        --------
<S>                           <C>           <C>              <C>
Net income
 As reported                  $17,015       $13,489          $9,820
 Pro forma                    $16,464       $13,057          $9,655
Basic earnings
  per share
  As reported                 $  3.02       $  2.36          $ 1.72
  Pro forma                   $  2.92       $  2.29          $ 1.69
Diluted earnings
  per share
  As reported                 $  2.94       $  2.30          $ 1.70
  Pro forma                   $  2.85       $  2.24          $ 1.69
</TABLE>

         The fair value of each option grant was estimated as of the date of
grant using the Black-Scholes pricing model. The resulting compensation cost was
amortized over the vesting period.
         The grant date fair values and assumptions used to determine such
impact are as follows:

<TABLE>
<CAPTION>

Options Granted During      1999     1998    1997
                            ----     ----    ----
<S>                        <C>      <C>     <C>
Weighted average grant
  date fair value          $35.44   $31.06  $18.17
Assumptions:
Risk free interest rates     5.33%    6.07%   6.54%
Expected volatility         29.09%   30.10%  32.11%
Expected term (in years)     5.75     5.75     5.5
</TABLE>

         The range of options outstanding as of June 27, 1999, is as follows:

<TABLE>
<CAPTION>

                                                                Weighted
                                                Weighted        Average
                              Number of          Average       Remaining
                               Options        Exercise Price   Contractual
          Price Range        Outstanding/      Outstanding/       Life
           per Share         Exercisable       Exercisable     (in years)
         -------------     ---------------    --------------   -----------
<S>                        <C>                <C>              <C>
         $11.75-$17.05     310,900/310,900    $12.40/$12.40       5.9
         $19.28-$23.63     142,251/ 67,206    $19.77/$19.60       2.2
           Over $27.63     184,357/     -     $34.04/     -       4.4
                           ---------------    --------------   -----------
                           637,508/378,106    $20.30/$13.68       4.7
                           ===============    ==============   ===========
</TABLE>


         The Company has an Employee Stock Purchase plan to provide
substantially all U. S. full-time associates an opportunity to purchase shares
of its common stock through payroll deductions. A participant may contribute a
maximum of $5,200 per calendar year to the plan. On the last day of each month,
participant account balances are used to purchase shares of stock at the average
of the highest and lowest reported sales prices of a share of the Company's
common stock on the NASDAQ National Market. A total of 100,000 shares may be
issued under the plan. A total of 3,519 shares were issued from treasury stock
under the plan at an average price of $28.79 during fiscal 1999. A total of
95,788 shares are available for purchase under the plan as of June 27, 1999.


EXPORT SALES

         Export sales are summarized below (thousands of dollars):

<TABLE>
<CAPTION>

                              Export Sales           Percent of Net Sales
                              ------------           --------------------
<S>                             <C>                          <C>
1999                            $27,233                      13%
1998                            $22,330                      12%
1997                            $17,179                      11%
</TABLE>

         These sales were primarily to vehicle manufacturing plants in Canada
and Mexico.


SALES TO LARGEST CUSTOMERS
         Sales to the Company's largest customers were as follows (thousands of
dollars and percent of total net sales):

<TABLE>
<CAPTION>

                             1999          1998            1997
                          Sales     %   Sales     %     Sales     %
                          -----------   -----------     -----------
<S>                      <C>      <C>  <C>      <C>     <C>      <C>
General Motors
  Corporation            $ 88,938 44%  $ 86,721 46%     $ 70,347 44%
Ford Motor
  Company                  52,241 26%    46,136 25%       43,617 27%
DaimlerChrysler
  Corporation              30,757 15%    25,966 14%       21,000 13%
                         -----------   -----------      -----------
                         $171,936 85%  $158,823 85%     $134,964 85%
                         ======== ==   ======== ==      ======== ==
</TABLE>

                                                                              21

<PAGE>   19

1999 STRATTEC ANNUAL REPORT

ACCOUNTANTS AND MANAGEMENT REPORTS

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF STRATTEC SECURITY CORPORATION:

         We have audited the accompanying consolidated balance sheets of
STRATTEC SECURITY CORPORATION and subsidiaries, as of June 27, 1999, and June
28, 1998, and the related consolidated statements of income, changes in equity
and cash flows for each of the three years in the period ended June 27, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of STRATTEC SECURITY
CORPORATION and subsidiaries as of June 27, 1999, and June 28, 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended June 27, 1999, in conformity with generally accepted accounting
principles.


/s/ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
July 29, 1999


REPORT OF MANAGEMENT

         The management of STRATTEC SECURITY CORPORATION is responsible for the
fair presentation and integrity of the financial statements and other
information contained in this Annual Report. We rely on a system of internal
financial controls to meet the responsibility of providing financial statements.
The system provides reasonable assurances that assets are safeguarded, that
transactions are executed in accordance with management's authorization and that
the financial statements are prepared in accordance with generally accepted
accounting principles, including amounts based upon management's best estimates
and judgments.
         The financial statements for each of the years covered in this Annual
Report have been audited by independent auditors, who have provided an
independent assessment as to the fairness of the financial statements.
         The Audit Committee of the Board of Directors meets with management and
the independent auditors to review the results of their work and to satisfy
itself that their responsibilities are being properly discharged. The
independent auditors have full and free access to the Audit Committee and have
discussions with the committee regarding appropriate matters, with and without
management present.


/s/Harold M. Stratton II     /s/ John Cahill             /s/Patrick J. Hansen
Harold M. Stratton II        John G. Cahill              Patrick J. Hansen
Chairman and                 President and               Vice President and
Chief Executive Officer      Chief Operating Officer     Chief Financial Officer


22

<PAGE>   20

1999 STRATTEC ANNUAL REPORT

FINANCIAL SUMMARY


FIVE-YEAR FINANCIAL SUMMARY

         For all periods after February 26, 1995, the financial data reflect the
consolidated results of the Company and its wholly owned subsidiaries. For all
periods prior to February 27, 1995, the financial data reflect the combined
results of the Technologies Business of Briggs & Stratton Corporation
("Briggs"). On February 27, 1995 Briggs transferred substantially all of the
assets, related debt and liabilities of its Technologies Business to the
Company, which was previously formed as a wholly owned subsidiary of Briggs in
order to receive the distribution (the "Distribution"). The information below
should be read in conjunction with "Management's Discussion and Analysis," and
the Financial Statements and Notes thereto included elsewhere herein. The
following data are in thousands of dollars except per share amounts.

<TABLE>
<CAPTION>

                                                  Fiscal Years
                               ------------------------------------------------
                                 1999      1998      1997      1996      1995
                               --------  --------  --------  --------  --------
<S>                            <C>       <C>       <C>       <C>       <C>
INCOME STATEMENT DATA
Net sales                      $202,625  $186,805  $159,054  $139,745  $110,372
Gross profit                     46,804    39,940    33,319    29,231    27,893
Engineering, selling, and
 administrative expenses         20,191    18,925    17,684    16,632    13,847
Environmental charges                 -         -         -         -     3,000
                               --------  --------  --------  --------  --------
Income from operations           26,613    21,015    15,635    12,599    11,046
Interest income                   1,132       351         4        22        16
Interest expense                      -       (19)     (214)     (363)      (12)
Other income (expense), net        (239)       73       125       286        83
                               --------  --------  --------  --------  --------
Income before taxes              27,506    21,420    15,550    12,544    11,133
Provision for income taxes       10,491     7,931     5,730     4,830     4,657
                               --------  --------  --------  --------  --------
Net income                     $ 17,015  $ 13,489  $  9,820  $  7,714  $  6,476
                               ========  ========  ========  ========  ========
Earnings per share (a):
 Basic                         $   3.02  $   2.36  $   1.72  $   1.33         -
 Diluted                       $   2.94  $   2.30  $   1.70  $   1.32         -
BALANCE SHEET DATA
Net working capital            $ 54,861  $ 42,953  $ 32,399  $ 21,181  $ 18,978
Total assets                    128,194   107,998    95,669    82,818    70,103
Long-term liabilities            12,915    12,138    16,000    10,937     8,198
Equity                           82,345    70,398    56,093    48,298    40,943
</TABLE>

(a)Earnings per share is presented for fiscal years subsequent to the
Distribution.


QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>

                                                               Earnings          Market Price
                                                               Per Share          Per Share
                                                                               ---------------
         Quarter   Net Sales   Gross Profit   Net Income   Basic    Diluted     High      Low
         -------   ---------   ------------   ----------   ----------------    ------    -----

<S>               <C>          <C>           <C>           <C>      <C>         <C>      <C>
1999     First     $ 40,362    $  8,835       $ 2,813       $ .49    $ .48      32 1/4   25 3/4
         Second      54,529      12,373         4,662         .83      .81      31 3/4   20
         Third       51,220      12,071         4,471         .79      .77      33 7/8   27 3/4
         Fourth      56,514      13,525         5,069         .91      .88      37 3/8   26
                   --------    --------       -------       -----    -----
         TOTAL     $202,625    $ 46,804       $17,015       $3.02    $2.94
                   ========    ========       =======       =====    =====

1998     First     $ 42,868    $  8,488       $ 2,398       $ .42    $ .41      28 1/4   19 1/2
         Second      49,722      10,142         3,433         .60      .59      30 1/4   23
         Third       47,420      10,623         3,835         .67      .65      29 1/4   25
         Fourth      46,795      10,687         3,823         .67      .65      33 1/4   27
                   --------    --------       -------       -----    -----
         TOTAL     $186,805    $ 39,940       $13,489       $2.36    $2.30
                   ========    ========       =======       =====    =====
</TABLE>


Shareholders of record at June 27, 1999, were 4,654.

23