<PAGE>   1
To Our Shareholders:

  The comparative results of operations of Chicago Rivet & Machine Co. for the
third quarter and first nine months of 1999 and 1998 are summarized below.

  Sales and lease revenues during the third quarter of 1999 totaled $11,721,458,
which represents an increase of approximately 13.5% compared with the third
quarter of 1998. On a year to date basis, sales and lease revenues for the first
nine months of 1999 total $37,172,628 which is an increase of approximately
13.2% over the first nine months of 1998. During 1999, revenues from the sale of
fasteners have increased approximately 16% when compared with both the third
quarter and the first nine months of 1998. Revenues within the assembly
equipment segment have also increased when compared to both the third quarter
and the first nine months of 1998, although the increase has been more modest,
averaging approximately 4%.

  Net income improved to $816,774, or $.71 per share on 1,152,139 average shares
outstanding during the third quarter of 1999, compared with $718,506, or $.62
per share on 1,155,535 average shares outstanding during the third quarter of
1998. The increase in net income, compared with the third quarter of 1998, is
primarily attributable to increased sales volumes, offset, in part, by increases
in depreciation and certain administrative costs, including higher consulting
costs associated with implementation of new data processing systems. Year to
date earnings for 1999 total $2,450,346, or $2.13 per share on 1,152,792 average
shares outstanding. Year to date earnings reflect a second quarter after tax
charge, related to a product recall, of $623,000, or $.54 per share as well as
increases in administrative expenses related to data processing and increases in
depreciation expense resulting from the relatively high level of investments in
data processing equipment and software, as well as new manufacturing equipment.

  As previously reported, the Company is in the process of installing new data
processing systems that are Y2K compliant. This project is ongoing and as of
this date, one facility has successfully upgraded and the new software is fully
operational. At our other facilities, new software has been installed, and we
are currently processing data on both our new software and our older software,
in order to be certain that the new software is functioning properly. This
testing has been successfully underway for some time, and we expect a
change-over to the new software at the beginning of November. The completion of
this phase of our new management information system initiative will eliminate
all critical Y2K deficiencies in our current information systems. The second
phase of this project, which relates to manufacturing, is planned to be fully
implemented after the year-end. While this second phase is expected to yield
improvements over the manufacturing systems currently in place, it should be
recognized that these current systems are not expected to be significantly
affected by any Y2K issues. Further, our customers and suppliers report that
they are, or will be, positioned to minimize any disruptions related to the
change of the century.

  Overall, the first nine months of 1999 have been successful for the Company.
Revenues have increased substantially. Earnings have improved measurably despite
significant costs incurred in connection with data processing initiatives and a
product recall. The Company's financial condition continues to be sound and we
expect the fourth quarter will be another successful quarter.

                              Respectfully yours,

<TABLE>
<S>                                   <C>
      John A. Morrissey               John C. Osterman
      John A. Morrissey               John C. Osterman
           Chairman                      President
</TABLE>

October 29, 1999

  The foregoing discussion is only intended to provide highlights of operations
for the periods covered. Additional information is contained in our Form 10-Q
which will be filed with the SEC and is available to shareholders upon request
from the Company, or via the internet through the SEC's EDGAR database. This
discussion contains certain "forward-looking statements" which are inherently
subject to risks and uncertainties that may cause actual events to differ
materially from those discussed herein. Factors which may cause such differences
in events include, among other things, fluctuations in general economic
conditions, consumer demand, the gain or loss of a key customer, the price and
availability of the Company's primary raw materials, or Y2K issues that may
affect the Company or its key suppliers or customers. Therefore, readers are
cautioned not to place undue reliance upon such forward-looking statements.

--------------------------------------------------------------------------------

                          CHICAGO RIVET & MACHINE CO.
                 SUMMARY OF CONSOLIDATED RESULTS OF OPERATIONS
                FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
                                                       THIRD QUARTER             FIRST NINE MONTHS
                                                 -------------------------   -------------------------
                                                    1999          1998          1999          1998
                                                 -----------   -----------   -----------   -----------
<S>                                              <C>           <C>           <C>           <C>
Net sales and lease revenue....................  $11,721,458   $10,331,367   $37,172,628   $32,826,847
Income before taxes............................    1,274,774     1,209,506     3,735,346     3,937,250
Income after taxes.............................      816,774       718,506     2,450,346     2,417,250
Net income per share...........................          .71           .62          2.13          2.08
Average shares outstanding.....................    1,152,139     1,155,535     1,152,792     1,161,426
</TABLE>

--------------------------------------------------------------------------------

                    (All figures subject to year end audit)