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

|(Mark One)
|----------
|[X]       
|[   ]     

## Commission
file number 000-01859

# KNAPE & VOGT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)

|Michigan  
(State or other jurisdiction of incorporation or organization) | 38-0722920
(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------- | -----------------------------------------------

2700 Oak Industrial Drive, N.E., Grand Rapids, MI 49505
                                (Address of principal executive offices) (Zip Code)
                                                  (616) 459-3311
                               (Registrant's telephone number, including area code)Securities registered pursuant to 12(b) of the Act:

|Title of each class 
None | Name of each exchange on which registered
None
|------------------------- | ----------------------------------------------

Securities Registered pursuant to Section 12(g) of the Act:
                                      Common Stock, par value $2.00 per share
                                                 (Title of class)

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by nonaffiliates of the registrant was $47,341,461 as of December 28, 2002.

Number of shares
outstanding of each class of common stock as of August 22, 2003: 2,314,294
shares of Common Stock, par value $2.00 per share, and 2,202,105 shares of Class
B Common Stock, par value $2.00 per share.

Documents incorporated
by reference. Certain portions of the Registrants Proxy Statement for
the Annual Meeting of Shareholders to be held on October 17, 2003, are
incorporated by reference into Part III of this Report.

1

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# PART I ITEM 1  BUSINESS

# Item 1(a)  General
Development of Business

The
Company is engaged primarily in the design, manufacture, and marketing of functional
hardware, storage-related components and ergonomic products, which serve the consumer,
contract builder, hardware, and original equipment manufacturer (OEM) markets.
The Company was incorporated in Michigan in 1906, reorganized in Delaware in 1961, and
reorganized in Michigan in 1985. Unless otherwise noted or indicated by the context, the
term Company includes Knape & Vogt Manufacturing Company, its predecessors
and its subsidiaries.

# Item 1(b) 
Financial Information About Industry Segments

The
Company was realigned in March 2002 into two reportable segments: Home and Commercial
Products, and Office Products. The Office Products segment develops, markets and
distributes its hardware and idea@WORK brand of ergonomic products primarily to
office furniture OEMs and office furniture dealers. The Home and Commercial Products
segment develops, markets and distributes hardware, kitchen and storage solutions
primarily to retailers, specialty distributors and kitchen OEMs. These products include
the Real Solutions for Real Life brand of storage products. KV substantially
completed this realignment of its structure during the fourth quarter of fiscal 2002. Due
to the realignment, presentation of certain prior year operating segment results is
impracticable.

Home and Commercial
Products Segment

The
Companys Home and Commercial Products segment consists of development, marketing and
distribution primarily in the United States and Canada. The segments storage
products include a complete line of decorative and wall-attached shelving systems and
drawer slides. Drawer slides manufactured by the Company include precision, Euro-style and
utility slides. Precision drawer slides use ball bearings, while Euro-style and utility
drawer slides use rollers. In addition, the segments many different hardware
products include closet rods, kitchen storage products and various fixtures. In fiscal
2003, approximately 22% of the segment sales were to the consumer market, 11% to original
equipment manufacturers, 51% to specialty distributors and 16% to Canada and other
international customers. The markets are highly competitive. The Company competes
primarily on the basis of product design, product quality, price, on-time delivery, and
customer service. The precision slide market consists of two large manufacturers, a number
of smaller domestic manufacturers, and an increasing number of foreign manufacturers that
compete primarily on the basis of price and quality.

Office Products Segment

The
Companys Office Products segment consists of development, marketing, and
distribution primarily in the United States and Canada. The segments ergonomic
products include adjustable keyboard trays, gel wrist rests, floating mousepads,
flat-screen monitor arms, office lights, and recently introduced height adjustable tables.
In fiscal 2003, approximately 24% of the segment sales were to office furniture dealers,
75% were to OEMs and 1% were to Canada and other international customers. The Company
competes in this segment with several large producers of ergonomic support systems, and
many smaller domestic and foreign manufacturers that compete primarily on the basis of
product quality, features, and price.

# Item 1(c) 
Narrative Description of Business

Products,
Services, Markets and Methods of Distribution. The Companys storage products
include a complete line of decorative and utility wall-attached shelving systems and
drawer slides. Drawer slides manufactured by the Company include precision, Euro-style and
utility slides. Precision drawer slides use ball bearings, while Euro-style and utility
drawer slides use rollers. In addition, the Companys many different hardware
products include closet rods, kitchen storage products and various fixtures. The
Companys ergonomic products include adjustable keyboard trays, gel wrist rests,
floating mousepads, flat-screen monitor arms, office lights and height adjustable tables.

During
fiscal 2003, the Company restructured most of its sales force from independent sales
representatives to a direct sales force. Now, the Companys sales force calls
directly on many of the customers in the consumer, distribution and OEM markets, while
most of the office furniture dealers are served through independent sales representatives.

New
Product and Capital Spending Information. Management believes that capital spending in
fiscal 2004 will remain at approximately the same level as fiscal 2003 or $4.0 million.
The fiscal 2004 spending will reflect investments made primarily to bring new products and
product enhancements to the Companys customers.

2

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Sources
and Availability of Raw Materials. Most of the Companys storage products are
produced primarily from steel or wood. Historically, the Company has not experienced
difficulty in obtaining these raw materials and does not anticipate any difficulty in the
future, as the raw materials used are not unique. During fiscal 2003, the Company did
experience an increase in its steel prices ranging from 10% to 15% depending on the grade
of steel as a result of the steel tariffs.

Patents,
Licenses, Etc. Patents, trademarks and licenses play a part in the Companys
business, but the Company as a whole is not dependent to any material extent upon any
single patent.

Seasonal
Nature of Business.  The Company's business is not seasonal.

Working
Capital Practices. The Company does not believe that it, or the industry in general,
has any special practices or special conditions affecting working capital items that are
significant for an understanding of the Companys business.

Importance
of Limited Number of Customers. The Company sells to the consumer, OEM and specialty
distributor markets, as well as direct sales to the dealer network. The consumer market is
comprised of a broad base of retail outlets. The specialty distributor market is more
concentrated with a fewer number of customers and is more closely tied to the construction
industry. The OEM market is comprised of sales to kitchen and bath cabinet manufacturers
and sales to the office furniture industry. The dealer network is also closely tied to the
office furniture industry. The Company estimates that at present it has over 1,500 active
customers with approximately 30,000 outlets, of which the five largest customers account
for approximately 24% of sales and only the Wurth Company, a group of specialty
distributors, accounts for 10% of sales.

Backlog
of Orders. As of June 28, 2003, the Companys backlog of unfilled orders was $4.0
million. At June 29, 2002, the companys backlog totaled $3.1 million. It is expected
that substantially all the orders forming the backlog at June 28, 2003, will be filled
during the current fiscal year. Accordingly, the amount of the backlog at any particular
time is not necessarily indicative of the level of net sales for a particular succeeding
period.

Government
Contracts. While the Company does have two contracts with the General Services
Administration (GSA) for certain of its ergonomic products, the sales volume
under these contracts does not result in a significant risk if the government were to
terminate these contracts. These contracts contain standard price reduction provisions.

Competition.
          All aspects of the business in which the Company is engaged are highly
          competitive. Competition is based upon price, service and quality. In the
          various markets served by the Company, it competes with a number of
          manufacturers that have significantly greater resources and sales, including
          several conglomerate corporations, and with numerous smaller companies. While
          the Company is not aware of any reliable statistics that are available to enable
          the Company to accurately determine its relative position in the industry,
          either overall or with respect to any particular product or market, the Company
          believes that it is one of the three leading manufacturers of drawer slides in
          North America.

Research,
Design and Development. Research, design and development efforts represent one of the
Companys core strengths. Through research, the Company seeks to define and clarify
customer needs and problems and to design innovative products, which solve these customer
needs and problems. Approximately $2,031,000 was spent in fiscal 2003 in the development
of new products and in the improvement of existing products; approximately $1,977,000 was
spent in fiscal 2002 and $2,281,000 in fiscal 2001 for the same purposes. In addition,
royalties paid to designers of the Companys products are variable based on sales
volumes and are not included in research and development costs.

Environmental
Matters. The Company does not believe, based on current facts known to management,
that existing environmental laws and regulations have had or will have any material
effects upon the capital expenditures, earnings, or competitive position of the Company.

Employees.
          The Company considers one of its major competitive strengths to be its human
          resources. There have been no work stoppages or labor disputes in the
          Companys history, and its relations with its employees are considered
          good. At June 28, 2003, the Company employed 766 persons. Collective bargaining
          agents represent none of the Companys employees. In addition to its
          employee work force, the Company uses purchased labor to meet uneven demand in
          its manufacturing operations.

3

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# Item 1(d) 
Information About Foreign Operations

The
Companys Canadian operations accounted for approximately 8% of consolidated net
sales. Approximately 4% of consolidated net sales were derived from export shipments from
the Companys United States operations to customers in other foreign countries. The
Company does not know of any particular risks attendant thereto, except that fluctuating
exchange rates between the United States and Canadian currencies and other factors beyond
the control of the Company, such as tariff and foreign economic policies, may affect
future results of such business. Reference is made to Note 14 of the Notes to the
Companys Consolidated Financial Statements contained herein for the fiscal year
ended June 28, 2003, for a presentation of additional information concerning the
Companys foreign operations.

# ITEM 2 
PROPERTIES

The Company owned or leased the following offices and manufacturing facilities as of June 28, 2003:

|Location               |  | Description                                                                |  | Interest | 
|---------------------- |  | -------------------------------------------------------------------------- |  | -------- | 
|                      
|Grand Rapids, Michigan |  | Executive offices and manufacturing facilities;444,000 sq. ft. on 41 acres |  | Owned    | 
|                      
|Sparks, Nevada         |  | Warehouse; 76,000 sq. ft.                                                  |  | Leased   | 
|                      
|Muncie, Indiana        |  | Manufacturing facilities and office;98,000 sq. ft. on 12 acres             |  | Owned    | 
|                      
|Mississauga, Ontario   |  | Office; 1,900 sq. ft.                                                      |  | Leased   | 

The facilities indicated as owned,
are owned in fee by the Company and are subject to no material encumbrances. The Company
believes that its facilities are generally adequate for its operations and are maintained
in a state of good repair. The Company believes it is in compliance with all applicable
state and federal air and water pollution control laws. During the five years ended June
28, 2003, the Company spent approximately $31,000,000 for expansion, modernization and
improvements of its facilities and equipment.

# ITEM 3  LEGAL
PROCEEDINGS

During the second quarter of fiscal
2003, the Company settled a claim for $300,000 related to a lease of which the Company was
a guarantor. The claim had been previously accrued on the balance sheet.

During the second quarter of fiscal
2003, the Company settled certain legal concerns involving potential royalty issues for
which an accrual had previously been recorded. As a result, the Company reported a pre-tax
gain of approximately $800,000 as an offset to selling and administrative expenses in the
statement of income.

The Canada Customs and Revenue Agency
(CCRA) has performed an audit of the Companys sales to its wholly-owned
subsidiary, Knape & Vogt Canada. Preliminary results from a joint review by the
Company and its customs broker indicate that the Company may be liable for certain customs
duties, however, the amount of any such potential liability is unknown at this time. The
Company is defending its position that Knape & Vogt Canada is the importer of record
for all Knape & Vogt goods shipped into Canada and management believes that, based on
the information available at this time, any liability owed to the CCRA will not have a
material adverse effect on the Companys earnings.

4

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The Company was sued in the Kent
County, Michigan Circuit Court in 1997 by a former employee seeking additional benefits
under an executive retirement plan. The Circuit Court ruled in favor of the plaintiff, but
in June 2002, the Circuit Court was reversed on the Companys appeal to the Michigan
Court of Appeals. The plaintiff filed a delayed request for leave to appeal to the
Michigan Supreme Court. In August 2002, the plaintiff filed a lawsuit seeking these
retirement benefits in the Federal District Court for the Western District of Michigan.
During the fourth quarter of fiscal 2003, the plaintiffs request for leave to appeal
to the Michigan Supreme Court was denied. The Company has moved to dismiss the federal
litigation based on the statute of limitations. The federal district judge has taken this
motion under advisement.

The Company is also subject to other
legal proceedings and claims, which arise in the ordinary course of business.

In the opinion of management, based
on the information presently known and taking into account established accruals of
approximately $719,000 at June 28, 2003, the ultimate liability for these matters will not
have a material adverse effect on the Companys financial position or the results of
its operations.

# ITEM 4 
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters
were submitted to a vote of security holders during the fourth quarter of the fiscal year
ended June 28, 2003.

# ADDITIONAL ITEM 
EXECUTIVE OFFICERS OF THE REGISTRANT

The executive
officers of the Company, at June 28, 2003, were as follows:

|Name                  | Age | Positions and Offices Held                                     | Year First Electedan Executive Officer
|--------------------- | --- | -------------------------------------------------------------- | --------------------------------------
|                     
|                     
|William R. Dutmers    | 47  | Chairman of the Board of Directors and Chief Executive Officer | 1998                                  
|                     
|Leslie J. Cummings    | 38  | Vice President of Finance and Treasurer                        | 2000                                  
|                     
|J. Scott Royal-Ferris | 48  | Vice President of Home and Commercial Products                 | 2002                                  
|                     
|David N. Smith        | 47  | Vice President of Office Products                              | 2002                                  
|                     
|Raymond N. Watson     | 50  | President of Operations                                        | 2002                                  

Mr.
          Dutmers was named Chairman of the Board of Directors in January 1998. Mr.
          Dutmers has been a member of the Board of Directors since April 1996. He was
          named Chief Executive Officer in May 1999. Mr. Dutmers was the President of G
          & L, Inc., a business consulting firm, from 1991 to 1997.

Ms.
          Cummings was named Vice President of Finance and Treasurer in July 2000. Ms.
          Cummings joined the Company in 1998 as the Assistant Treasurer. Prior to that
          she was employed at Knape & Manufacturing Company from 1992 to 1998.

Mr.
          Royal-Ferris was named Vice President of Home and Commercial Products in October
          2002. Mr. Royal-Ferris joined the Company in 2001 as the Director of Business
          Development  Consumer. Before joining the Company, Mr. Royal Ferris
          had been self-employed from September 2000 to July 2001. Prior to that, he
          served as the Vice President of Sales/Marketing for Keystone Manufacturing from
          April 2000 until August 2000; as the Vice President of Sales  Kitchen
          Division for Windmere Durable Holdings from January 1998 to March 2000; and as
          Vice President of Sales for The Rival Company from 1990 until January 1998.

Mr.
          Smith was named Vice President of Office Products in October 2002. Mr. Smith
          joined the Company in June 2002 as a Director of Sales in the Office Products
          division. Prior to that he had served on the sales management team at Herman
          Miller, Inc. from 1998 to 2002.

Mr.
          Watson was named President of Operations in March 2002. Before joining the
          Company, he had been employed at the Marmon Group from 1993 to 2002, most
          recently as the Vice President of Finance of Marmon Retail Services.

All
terms of office are on an annual basis and will expire on October 17, 2003.

5

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# PART II

# ITEM 5  MARKET
PRICE FOR REGISTRANTSCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market
Price.The Companys Common Stock is traded on the NASDAQ National Market
under the ticker symbol KNAP. Stock price quotations can be found in major daily
newspapers (listed KnapeV) and in the Wall Street Journal (listed KnapeVogt). As of August
22, 2003, there were approximately 3,000 shareholders of the Companys Common Stock
and Class B Common Stock.

|        | Fiscal 2003 | Fiscal 2003
|------- | ----------- | -----------
|        |            
|Quarter | High        | Low        
|       
|First   | $12.99      | $10.00     
|Second  | $11.25      | $8.04      
|Third   | $12.20      | $9.95      
|Fourth  | $12.10      | $9.26      

Dividends.       
          The Company paid quarterly per share cash dividends of $0.165 on its shares of
          Common Stock and $0.15 on its shares of Class B Common Stock during the last two
          fiscal years.

On
August 8, 2003, the Board of Directors declared a $.165 per share cash dividend on shares
of the Companys common stock and $.15 per share cash dividend on shares of its Class
B common stock, payable September 5, 2003, to shareholders of record on August 22,
2003.

Securities
Authorized for Issuance Under Equity Compensation Plans.The Company had the following
equity compensation plans at June 28, 2003:

# Equity Compensation
Plan Information

|Plan category                                              | Number of securities to be issued upon exercise of outstanding options
(1) | Weighted-average exercise price of outstanding options(2) | Number of securities remaining available for future issuance under
equity compensation plans (excluding securities reflected in column (1))(3)
|---------------------------------------------------------- | -------------------------------------------------------------------------- | --------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------
|                                                          
|                                                          
|Equity compensation plans approved by security holders     | 426,523                                                                    | $19.42                                                    | 240,657                                                                                                                                       
|Equity compensation plans not approved by security holders | 27,500                                                                     | $14.43                                                    | -                                                                                                                                             
|                                                           |                                                                           
|                                                          
|Total                                                      | 454,023                                                                    | $19.12                                                    | 240,657                                                                                                                                       
|                                                          

These equity compensation plans are
more fully described in Note 12 to the Consolidated Financial Statements.

6

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# ITEM 6  SELECTED
FINANCIAL DATA

|For the Year Ended                         | 2003         | 2002         | 2001         | 2000         | 1999        
|------------------------------------------ | ------------ | ------------ | ------------ | ------------ | ------------
|                                          
|                                          
|Summary of Operations                     
|Net sales                                  | $125,398,960 | $131,868,842 | $143,912,863 | $152,905,868 | $153,266,180
|Gross profit                               | 27,760,643   | 30,961,066   | 33,562,856   | 36,760,813   | 30,533,538  
|Gross profit %                             | 22.1%        | 23.5%        | 23.3%        | 24.0%        | 19.9%       
|Selling, general and administrative        | 23,669,193   | 22,663,719   | 23,135,501   | 22,228,025   | 20,448,833  
|Selling, general and administrative %      | 18.9%        | 17.2%        | 16.1%        | 14.5%        | 13.3%       
|Operating income                           | 3,820,125    | 7,362,347    | 10,127,355   | 14,427,788   | 9,484,705   
|Operating income %                         | 3.0%         | 5.6%         | 7.0%         | 9.4%         | 6.2%        
|                                          
|Net income                                 | 2,230,899    | 3,789,046    | 5,615,065    | 8,423,730    | 6,161,769   
|Common Stock Data                         
|Primary and diluted earnings per share     | 0.49         | 0.83         | 1.22         | 1.80         | 1.13        
|Weighted-average shares oustanding-       
|diluted                                    | 4,516,706    | 4,569,942    | 4,618,250    | 4,684,125    | 5,445,009   
|Dividends per share--common                | 0.66         | 0.66         | 0.66         | 0.615        | 0.600       
|Dividends per share--Class B common        | 0.60         | 0.60         | 0.60         | 0.559        | 0.545       
|Year-end stock price                       | 10.47        | 12.40        | 12.66        | 15.25        | 16.02       
|                                          
|Year-end Financial Position               
|Total assets                               | 91,864,322   | 87,891,418   | 89,803,393   | 88,287,652   | 75,059,989  
|Working capital                            | 20,457,268   | 17,185,811   | 18,465,603   | 16,378,393   | 18,135,700  
|Current ratio                              | 2.0          | 1.9          | 2.0          | 1.7          | 2.0         
|Long-term debt                             | 24,065,420   | 20,000,000   | 23,750,000   | 20,050,000   | 17,700,000  
|Long-term debt as a % of total capital (a) | 40.9%        | 35.6%        | 39.0%        | 36.6%        | 35.8%       
|Stockholders' equity                       | 34,761,860   | 36,213,219   | 37,132,697   | 34,706,630   | 31,758,785  
|                                          
|Other Data/Key Ratios                     
|Capital expenditures                       | 3,707,536    | 3,935,470    | 9,282,239    | 9,112,810    | 4,786,263   
|Depreciation and amortization              | 6,642,091    | 6,693,293    | 6,340,647    | 5,862,588    | 5,914,739   

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(a) Total capital is defined as the sum of long-term debt plus stockholders
          equity.

7

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# ITEM 7 
MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The
following discussion and analysis provides information which management believes is
relevant to an assessment and understanding of the Companys results of operations
and financial condition. The discussion should be read in conjunction with the
Consolidated Financial Statements and Notes.

# Overview

Knape
& Vogt is a leading manufacturer of functional hardware, storage-related components
and ergonomic products with a long history dating back to 1898. We complement our
manufacturing capabilities with our design and distribution expertise. In fiscal 2002, we
realigned our business to allow more focus on our two key segments; Office Products and
Home and Commercial Products.

Our
Office Products segment develops, markets and distributes its hardware and idea@WORK
brand of ergonomic products primarily to office furniture OEMs and office furniture
dealers.

Our
Home and Commercial Products segment develops, markets and distributes hardware, kitchen
and storage solutions primarily to retailers, specialty distributors and kitchen OEMs.
These products include the Real Solutions for Real Life brand of storage products.

# Critical Accounting
Policies

This discussion
and analysis of our financial condition and results of operations is based upon our
consolidated financial statements. The preparation of these financial statements requires
us to make estimates and assumptions that affect the reported amounts. On an ongoing
basis, we evaluate our estimates, which are based on historical experience and on various
other assumptions and factors that we believe to be reasonable under the circumstances.
Based on our ongoing review, we will make adjustments, as we consider appropriate under
the current facts and circumstances.

We
believe that the following represent the more critical estimates and assumptions used in
preparation of our consolidated statements.

| | Revenue recognition  We record revenue when title to the product and risk of
ownership passes to the buyer. Sales are shown net of returns, discounts and any other
form of sales incentive, including cooperative advertising and rebates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Allowance for uncollectible accounts receivable  We record allowances for
losses that we may incur from the inability of certain of our customers to pay for
products or services that they have purchased. In determining these allowances, we take
into consideration the financial condition of our customers, previous payment history and
the age of the outstanding balances. We monitor our customers balances on a monthly
basis and assess the adequacy of the allowances recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Inventory reserves  We provide reserves for inventory that we consider
obsolete or slow moving, utilizing assumptions about future demand for our products. We
monitor our inventory by type, age and usage on a monthly basis to determine the reserves
recorded.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | Impairment of long-lived assets  We periodically review the carrying value of
our long-lived assets held and used, including goodwill and other intangible assets. This
review is performed using estimated future cash flows. If the carrying value of a
long-lived asset is considered to be impaired, an impairment charge is recorded for the
amount that the carrying value of the long-lived asset exceeds its fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | Pension and Other Postretirement Benefits  Accounting for defined-benefit
pension plans involves estimating the cost of benefits to be provided in the future, based
on vested years of service, and attributing those costs over the time period each employee
works. The most significant factor affecting our pension costs is the fair value of the
plan assets and the selection of key assumptions, including the discount rate and the
expected return on plan assets. In fiscal 2003, we reduced our discount rate to 5.50% from
7.25%. We also lowered our expected return on plan assets to 8.00% from 8.50%. While we
believe the assumptions selected are reasonable, significant differences in our actual
experience or significant changes in our assumptions may materially affect our pension
obligations and our future expense. See Note 10 to the Consolidated Financial Statements
for more information regarding costs and assumptions for our employee retirement plans.

8

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# Results of Operations

The
table below shows certain items in our Consolidated Statements of Operations as a
percentage of net sales:

|Year Ended                                   |  | June 28,2003 |   | June 29,2002 |   | June 30,2001 |  
|-------------------------------------------- |  | ------------ | - | ------------ | - | ------------ | -
|                                            
|Net sales                                    |  | 100.0        | % | 100.0        | % | 100.0        | %
|Cost of sales                                |  | 77.9         |   | 76.5         |   | 76.7         |  
|                                             | 
|Gross profit                                 |  | 22.1         |   | 23.5         |   | 23.3         |  
|Selling, general and administrative expenses |  | 18.9         |   | 17.2         |   | 16.1         |  
|Other                                        |  | .2           |   | .7           |   | .2           |  
|                                             | 
|Operating income                             |  | 3.0          |   | 5.6          |   | 7.0          |  
|Other expense                                |  | .9           |   | 1.1          |   | 1.1          |  
|                                             | 
|Income before income taxes                   |  | 2.1          |   | 4.5          |   | 5.9          |  
|Income taxes                                 |  | .3           |   | 1.6          |   | 2.1          |  
|                                             | 
|Net income                                   |  | 1.8          | % | 2.9          |   | 3.8          | %
|                                            

# Sales

The
table below summarizes our sales by division for the past three fiscal years (in
millions):

|Year Ended                     | June 28,2003 | %     | June 29,2002 | %     | June 30,2001 | %    
|------------------------------ | ------------ | ----- | ------------ | ----- | ------------ | -----
|                              
|Office Products                | $35.9        | 28.5% | $39.5        | 29.9% | $47.6        | 33.1%
|Home and Commercial   Products | 89.5         | 71.5% | 92.4         | 70.1% | 96.3         | 66.9%
|                              
|Total Net Sales                | $125.4       | 100%  | $      131.9 | 100%  | $      143.9 | 100% 
|                              

Consolidated
net sales for fiscal 2003 declined 4.9% compared to fiscal 2002, which followed a decline
of 8.4% when comparing fiscal 2002 to fiscal 2001.

Our
Office Products division sales decreased 9.3% when compared to fiscal 2002, following a
decline of 17.0% in fiscal 2002 when compared to fiscal 2001. The office furniture
industry shipments, as a whole, have continued to decline as seen in the Business and
Institutional Furniture Manufacturers Association (BIFMA) results for fiscal 2003
and fiscal 2002, which showed decreases of 10.2% and 25.3%, respectively. Despite the
downturn in this industry, we have been able to maintain relatively stable sales to the
office furniture channel with our idea@WORK product line. We attribute our ability to
outperform the market in this channel, to sales of our new products, including the
Keynetix2 adjustable keyboard, the Mantis flat screen monitor arm and the
CaptorCPU holder. During June 2003, at the NEOCON show in Chicago, we launched our
line of height adjustable tables, ProLiftix, and have begun taking orders for this
line, which will begin shipping in early fiscal 2004.

Our
Home and Commercial Products division fiscal 2003 sales decreased by 3.0% when compared to
fiscal 2002. During the first quarter of fiscal 2003, we launched a consignment inventory
program for certain customers within this division. The program has expanded during the
year and the consignment inventory balance at June 28, 2003 was $3.1 million at cost. The
launch of this program effectively deferred sales from fiscal 2003; however, we have seen
sales increase during the fiscal year to those customers participating in the program. We
have also been successful in placing several of our new products into the retail channel,
including our new line of Shelf Made Instant shelves, our Real Solutions for Real
Life line of kitchen and bath accessories and our Work@Ease line of ergonomic
products. The only channel, which has consistently reported sales declines during fiscal
2003, was the kitchen and bath OEM channel. Near the end of the third quarter, we
realigned our sales force to better target this market. The decrease in our Home and
Commercial Products division sales in fiscal 2002 when compared to fiscal 2001 reflected
the overall downturn in the U.S. economy.

New
product sales (those products introduced within the last 18 months) were approximately
$11.7 million in fiscal 2003 and $8.0 million in fiscal 2002. New product introductions,
along with value-added services, such as vendor-managed inventory, remain a key component
of our strategy.

9

---



# Gross Profit

Gross
profit, as a percentage of net sales, was 22.1% in fiscal 2003, compared to 23.5% in
fiscal 2002 and 23.3% in fiscal 2001. Overall, we have a significant investment in our
manufacturing process, specifically machinery and tooling. With the decrease in sales
volumes during the past two fiscal years, it has been more difficult to effectively
leverage the fixed portion of these costs. In addition, we have seen significant increases
in our raw steel costs, ranging from 10% to 15% depending on the grade of steel, as a
result of the steel tariffs imposed during fiscal 2003.

We
have been partially successful in offsetting the impact of the sales volume decline and
the raw material price increases by utilizing lean manufacturing initiatives to minimize
manufacturing costs, along with identifying competitive alternative sourcing options, when
applicable, and by increasing sales of higher margin products such as the line of
ergonomic products and higher sales into our more profitable market channels.

# Selling, General and
Administrative

Selling,
general and administrative expenses, as a percent of net sales, were 18.9% in fiscal 2003,
compared to 17.2% in fiscal 2002 and 16.1% in fiscal 2001. During the second quarter of
fiscal 2003, we recognized a pre-tax gain of $0.8 million due to the successful resolution
of certain legal matters. Excluding this gain, selling and administrative expenses would
have been 19.5% of net sales in fiscal 2003. The increase from the prior year was due in
part to the higher selling costs associated with the ergonomic product line combined with
the advertising and marketing costs we incurred to launch new products in both of our
divisions. During the past two fiscal years, we have also incurred costs to reintroduce
our line of kitchen and bath accessories under the Real Solutions For Real Life
logo. Finally during fiscal 2003,we made significant investments in our selling efforts to
the distribution channel in an effort to aggressively grow sales in this key market.

# Restructuring/Impairment

During
the first quarter of fiscal 2003, we recorded $271,325 pre-tax of severance costs,
primarily related to the resignation of two of our executive officers in August 2002.

In
the fourth quarter of fiscal 2002, we recorded a pre-tax impairment charge of $690,000 in
accordance with Financial Accounting Standard No. 144 for certain precision drawer slide
tooling. While we continue to produce the drawer slides, the future cash flows associated
with the sales of this particular product line were less than the cost of the tooling
recorded. In addition, during the fourth quarter of fiscal 2002, we adopted a plan to
reduce our salaried workforce in the Grand Rapids, Michigan facility. We recorded $245,000
in severance costs for this workforce reduction.

In
the third quarter of fiscal 2001, we recorded a pre-tax impairment loss on assets held for
sale of $.3 million. The loss reflected new information, which lowered our estimate of the
fair market value of the properties listed for sale. In fiscal 2000, we had recorded a
loss of $.1 million pre-tax, which was our best estimate at that time of the loss to be
incurred on the sale of our former powder coat facility. The assets held for sale were
sold during fiscal 2002 at no additional loss.

# Interest Expense and
Income Taxes

Interest
expense was $1.5 million in fiscal 2003, compared to $1.5 million and $1.6 million,
respectively, in fiscal years 2002 and 2001. Overall, interest expense has remained
relatively stable over the past three fiscal years. Slight variations reflect the impact
of higher or lower balances outstanding on the revolving credit facility.

During
fiscal 2003, we amended our income tax returns previously filed for fiscal years 1997 and
1999. A change in the federal tax law allowed us to utilize a portion of our capital loss
from fiscal 1999 that had been previously disallowed. As a result of this change, we
recognized an income tax benefit of $607,000 in fiscal 2003.

Excluding
the impact of the amended returns, the effective tax rate would have been 38.0% in fiscal
2003, compared to 35.9% in fiscal 2002 and 34.6% in fiscal 2001. Overall, rates have
increased due to the ratio of foreign versus domestic income and expanded state exposure.
See Note 11 to the Consolidated Financial Statements for a reconciliation of the effective
tax rate.

# Net Income

Net
income was $2.2 million, or $0.49 per diluted share, in fiscal 2003 compared to $3.8
million, or $0.83 per diluted share, in fiscal 2002 and $5.6 million, or $1.22 per diluted
share in fiscal 2001. The declines in both fiscal 2003 and fiscal 2002 were primarily due
to the decrease in overall sales volume.

10

---



# Liquidity and Capital
Resources

Cash
flows from operating activities generated $.5 million in fiscal 2003, compared to $13.4
million in fiscal 2002 and $8.8 million in fiscal 2001. The lower cash flow from operating
activities in fiscal 2003 reflects lower earnings, a significant contribution to our
defined benefit pension plans, combined with higher inventory levels needed to support the
launch of the new products and the consignment inventory program. In addition, the payment
of the legal settlements during fiscal 2003 also reduced the cash generated by operating
activities. The increase in fiscal 2002 represented an improvement in the change in
accounts payable and other accrued liabilities when compared to the prior year.

Cash
flows used in investing activities were $3.5 million in fiscal 2003, compared to $2.3
million in fiscal 2002 and $9.8 million in fiscal 2001. We spent $3.7 million on capital
expenditures in fiscal 2003, compared to $3.9 million and $9.3 million, respectively, in
fiscal 2002 and 2001. The fiscal 2003 capital expenditures represented investments in
tooling for new products, including the Hopper and certain precision drawer slides,
along with investment in our web-based customer service application and our new office
showroom. Capital spending has declined in fiscal 2003 and 2002, due to the fact that we
believe that our investments made in earlier years in the manufacturing process have been
sufficient to meet the anticipated capacity needs for at least the next three to five
years. We believe that capital expenditures will approximate $4.0 million in fiscal 2004,
as investments will be focused on bringing new products and product enhancements to our
customers. The cost to complete the items classified as construction in progress at June
28, 2003 was estimated to be approximately $422,000, which will be derived from cash flows
from operations or from the revolving credit facility. Investing activities in fiscal 2001
also included the net cash paid for the acquisition of Idea Industries, Inc. (Idea).

On
October 1, 1999, we acquired substantially all of the assets of Idea. Idea designed,
manufactured and marketed ergonomic products, including adjustable keyboard mechanisms,
keyboard and computer mouse platforms, wrist rests and CPU holders. The acquisition was
recorded using the purchase method of accounting. Accordingly, the purchase price was
allocated to the assets acquired and liabilities assumed, based on their estimated fair
values at the date of the acquisition. The cost of the acquisition in excess of net
identifiable assets acquired, including contingent consideration paid in fiscals 2000 and
2001, was recorded as goodwill and has been amortized using the straight-line method based
on a 15-year life. We discontinued the amortization of goodwill in fiscal 2003, when we
adopted the provisions of SFAS No. 142 (see the discussion in Note 2).

Cash
flows generated from financing activities were $1.1 million in fiscal 2003, compared to
$7.8 million of cash flow used in fiscal 2002 and $.8 million generated in fiscal 2001.
The generation of funds in fiscal 2003 reflects borrowings under the revolving credit
facility. The use of funds in fiscal 2002 reflects the repayment of $3.8 million of debt
under the revolving credit facility along with the repurchase of $1.2 million of our
common stock.

We
have a stock repurchase program, under which we purchased 2,280 shares during fiscal 2003
with the price per share ranging from approximately $9 to $11. At June 28, 2003, we are
authorized to repurchase an additional 272,202 shares.

We
have a revolving credit agreement that provides for borrowings up to $45 million and
expires on November 1, 2004. In addition, we have an interest rate swap agreement, which
expires on June 1, 2006, in order to fix the interest rate on $20 million of borrowings
under the revolving credit facility. The swap agreement fixed the rate at 6.25% plus our
credit spread on the revolving credit agreement.

At
June 28, 2003, we were in compliance with all of the covenants of the revolving credit
agreement.

Our
outstanding debt at June 28, 2003 was $24.1 million, compared to $20.0 million at fiscal
2002 year-end. The debt to total capital ratio increased to 40.9% at June 28, 2003, from
35.6% at June 29,2002. Note that we define total capital as the sum of long-term debt plus
total stockholders equity. We continue to manage our debt levels in an effort to
maintain our debt to total capital in a range of 35 to 45%. We believe that cash flows
from operations and funds available under the credit facility will be sufficient to fund
working capital requirements, stock repurchases and capital expenditures in fiscal 2004.

11

---



On
August 8, 2003, the Companys Board of Directors approved a resolution to refinance
our revolving bank loan with a new lending institution. A commitment has been signed with
the lender. The agreement calls for a $35 million unsecured revolving credit facility
(including a $2.5 million sub limit for letters of credit) and matures on November 1,
2006. Interest on the revolving credit facility will be payable at prime or LIBOR rates
plus a spread of up to .25% or 1.25%, respectively, based upon certain ratios.

# Legal Contingencies

During
the second quarter of fiscal 2003, the Company settled a claim for $300,000 related to a
lease of which the Company was a guarantor. The claim had been previously accrued on the
balance sheet.

During
the second quarter of fiscal 2003, we settled certain legal concerns involving potential
royalty issues for which an accrual had been previously recorded. As a result, we reported
a pre-tax gain of approximately $800,000 as an offset to selling and administrative
expenses in the statement of income.

The
Canada Customs and Revenue Agency (CCRA) has performed an audit of our sales
to our wholly-owned subsidiary, Knape & Vogt Canada. Preliminary results from a joint
review by KV and our customs broker indicate that we may be liable for certain customs
duties, however, the amount of any such potential liability is unknown at this time. We
are defending our position that Knape & Vogt Canada is the importer of record for all
Knape & Vogt goods shipped into Canada and we believe, that based on the information
available at this time, any liability owed to the CCRA will not have a material adverse
effect on our earnings.

We
were sued in the Kent County, Michigan Circuit Court in 1997 by a former employee seeking
additional benefits under an executive retirement plan. The Circuit Court ruled in favor
of the plaintiff, but in June 2002, the Circuit Court was reversed on our appeal to the
Michigan Court of Appeals. The plaintiff filed a delayed request for leave to appeal to
the Michigan Supreme Court. In August 2002, the plaintiff filed a lawsuit seeking these
retirement benefits in the Federal District Court for the Western District of Michigan.
During the fourth quarter of fiscal 2003, the plaintiffs request for leave to appeal
to the Michigan Supreme Court was denied. The Company has moved to dismiss the federal
litigation based on the statute of limitations. The federal district judge has taken this
motion under advisement.

We
are also subject to other legal proceedings and claims, which arise in the ordinary course
of business.

In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $719,000 at June 28, 2003, the ultimate
liability for these matters will not have a material adverse effect on our financial
position or the results of our operations.

# Contractual Obligations

As
more fully described in the Notes to the Consolidated Financial Statements, we are
obligated to make future payments under certain debt and lease agreements, and are a party
to other commitments. The following table summarizes these obligations as of June 28,
2003.

|                                   | Payments due by period
|---------------------------------- | ----------------------
|                                   |                       
|                                   | Total                 
|                                   |                       
|Long-term debt                     | $24,000,000           
|Capital lease                      | 76,446                
|Operating leases                   | 333,335               
|Purchase obligations               | 422,000               
|                                   |                       
|Total contractual cash obligations | $24,831,781           
|                                   |                       

In
addition, we are a party to certain other agreements that contractually and
unconditionally commit us to pay certain amounts in the future. While we believe it is
probable that amounts will be spent in the future under such contracts, the amount and/or
the timing of such future payments will vary depending on certain provisions of the
applicable contract. The agreements to which we are a party that fall into this category
include certain royalty agreements under which we pay a royalty based on the sales volume
of certain products that we manufacture and sell.

12

---



# Inflation

Inflation
has not had a significant effect on KV over the past three years, nor is it expected to
have a significant effect in the foreseeable future. We continuously attempt to minimize
the effect of inflation through cost reductions and improved productivity.

# Recently Issued
Accounting Standards

In
June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142,
Goodwill and Other Intangible Assets, effective for KV in fiscal 2003. Under the
new rules, goodwill and intangible assets deemed to have indefinite lives are no longer
amortized but are subject to impairment tests at least annually in accordance with SFAS
142. Other intangible assets will continue to be amortized over their contractual lives.

We
adopted SFAS No. 142 in the first quarter of fiscal 2003. Application of the
nonamortization provisions of SFAS No. 142 resulted in an increase in net earnings of
approximately $237,000 ($0.05 per diluted share) for fiscal 2003. We performed the
required impairment tests of goodwill as of the first day of fiscal 2003 and determined
that the recorded goodwill was not impaired.

In
July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. SFAS 146 requires that costs associated with exit or
disposal activities be recognized when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Costs covered by this standard include lease
termination costs and certain employee severance costs that are associated with a
restructuring, discontinued operation, plant closing or other exit or disposal activity.
SFAS 146 is to be applied prospectively to exit or disposal activities initiated after
December 31, 2002 and is not expected to have a material impact on the results of
operations or financial position.

In
November 2002, the FASB issued FASB Interpretation No. 45, Guarantors Accounting
And Disclosure Requirements For Guarantees, Including Indirect Guarantees Of Indebtedness
Of Others (FIN 45). FIN 45 clarifies the requirements for a guarantors
accounting for and disclosure of certain guarantees issued and outstanding. The initial
recognition and initial measurement provisions of FIN 45 are applicable to guarantees
issued or modified after December 31, 2002. The disclosure requirements of FIN 45 are
effective for financial statements of interim or annual periods ending after December 15,
2002 and have been made in the financial statements.

In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure,which amends SFAS No. 123, Accounting For
Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirement of SFAS No. 123
to require more prominent and more frequent disclosures in financial statements of the
effects of stock-based compensation. The transition guidance and annual disclosure
provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002.
The interim disclosure provisions are effective for financial reports containing condensed
financial statements for interim periods beginning after December 15, 2002. We have
elected to continue to apply Accounting Principles Board (APB) Opinion No. 25 and related
interpretations in accounting for our stock option plans, as permitted under SFAS No. 123
and SFAS No. 148. Accordingly, no compensation cost has been recognized for our stock
option plans.

# Forward-Looking
Statements

This
report contains certain forward-looking statements, which involve risks and uncertainties.
When used in this report, the words believe, anticipate,
think, intend, goal, forecast,
expect and similar expressions identify forward-looking statements.
Forward-looking statements include, but are not limited to, statements concerning new
product introductions, future revenue growth and gross margin improvement. Such statements
are subject to certain risks and uncertainties, which could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. Readers are
cautioned not to place undue reliance on those forward-looking statements, which speak
only as of the date of this report.

Risk
Factors include, but are not limited to, uncertainties relating to changes in demand for
our products; the cost and availability of inventories; changes in trading policies or
import and export regulations; changes in duties, tariffs, quotas or applicable
assessments; the ability to secure and protect patents and other intellectual property;
foreign competition; loss of significant customers; and a continued slowdown in the U.S.
economy. These matters are representative of the Risk Factors that could cause a
difference between an ultimate actual outcome and a forward-looking statement.

13

---



# ITEM 7A 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company
is exposed to market risks, which include changes in foreign currency exchange rates as
measured against the U.S. dollar and changes in U.S. interest rates. The Company holds a
derivative instrument in the form of an interest rate swap, which is viewed as a risk
management tool and is not used for trading or speculative purposes. The intent of the
interest rate swap is to effectively fix the interest rate on part of the borrowings on
the Companys variable rate revolving credit agreement.

A
discussion of the Companys accounting policies for derivative financial instruments
is included in the Summary of Significant Accounting Policies in the Notes to Consolidated
Financial Statements. Additional information relating to financial instruments and debt is
included in Note 7  Long-Term Debt, Note 8  Derivative Financial Instruments
and Note 17  Subsequent Events. Quantitative disclosures relating to financial
instruments and debt are included in the table below.

The
following table provides information on the Companys fixed maturity investments as
of June 28, 2003 and June 29, 2002 that are sensitive to changes in interest rates. The
table also presents the corresponding interest rate swap on this debt. Since the interest
rate swap effectively fixes the interest rate on the notional amount of debt, changes in
interest rates have no current effect on the interest expense recorded by the Company on
the portion of the debt covered by the interest rate swap.

|Fiscal 2003:                                          |              |                 
|----------------------------------------------------- | ------------ | ----------------
|Liability                                             | Amount       | Maturity Date   
|Variable rate revolving credit                       
|agreement                                             | $24,000,000  | November 1, 2004
|First $20,000,000 at an interest rate of 1.28%       
|plus weighted average credit spread of .75%          
|Amounts in excess of $20,000,000 had an interest rate
|ranging from 2.00% to 2.22%                          
|                                                     
|Interest Rate Swaps                                  
|Notional amount                                       | $20,000,000  | June 1, 2006    
|Pay fixed/Receive variable - 1.28%                   
|Pay fixed interest rate - 6.25%                      
|Fair value                                            | $  2,554,980
|                                                     
|Fiscal 2002:                                         
|Liability                                            
|Variable rate revolving credit                       
|agreement                                             | $20,000,000  | November 1, 2004
|First $20,000,000 at an interest rate of 1.9050%     
|plus weighted average credit spread of .625%         
|Amounts in excess of $20,000,000 had an interest rate
|ranging from 2.295% to 2.655%                        
|                                                     
|Interest Rate Swaps                                  
|Notional amount                                       | $20,000,000  | June 1, 2006    
|Pay fixed/Receive variable - 1.8975%%                
|Pay fixed interest rate - 6.25%                      
|Fair value                                            | $  1,602,158

The
Company has a sales office located in Canada. Sales are typically denominated in Canadian
dollars, thereby creating exposures to changes in exchange rates. The changes in the
Canadian/U.S. exchange rate may positively or negatively affect the Companys sales,
gross profits and retained earnings. The Company attempts to minimize currency exposure
risk through working capital management. The Company does not hedge its exposure to
translation gains and losses relating to foreign currency net asset exposures.

14

---



# ITEM 8 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Immediately
following are the consolidated balance sheets of the Company and its subsidiaries as of
June 28, 2003 and June 29, 2002, and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three years in the period ended
June 28, 2003, the notes thereto, and the independent auditors report.

15

---



# Knape & Vogt Manufacturing Company and Subsidiaries
                                          Consolidated Statements of Operations

|                                           
|-------------------------------------------
|Year Ended                                 
|                                           
|Net Sales                                  
|                                           
|Cost of Sales                              
|                                           
|Gross Profit                               
|                                           
|Expenses                                   
|Selling                                    
|Administrative and general                 
|Other                                      
|                                           
|Total Expenses                             
|                                           
|Operating Income                           
|                                           
|Other Expenses (Income)                    
|Interest                                   
|Other, net                                 
|                                           
|Total Other Expenses                       
|                                           
|Income Before Income Taxes                 
|                                           
|Income Taxes                               
|                                           
|Net Income                                 
|                                           
|Basic Earnings Per Share                   
|                                           
|Basic Weighted-Average Shares Outstanding  
|                                           
|Diluted Earnings Per Share                 
|                                           
|Diluted Weighted-Average Shares Outstanding
|                                           
|Dividends Per Share                        
|Common stock                               
|Class B common stock                       
|                                           

See accompanying notes to consolidated
financial statements.

16

---



# Knape & Vogt
Manufacturing Company and SubsidiariesConsolidated Balance Sheets

---

|                                                                            | June 28, 2003 | June 29, 2002
|--------------------------------------------------------------------------- | ------------- | -------------
|                                                                           
|Assets                                                                     
|Current Assets                                                             
|Cash                                                                        | $  3,846,611  | $  5,430,543 
|Accounts receivable, less allowances of $803,000 and $755,000, respectively | 16,820,601    | 17,025,929   
|Inventories                                                                 | 18,979,056    | 13,162,145   
|Prepaid expenses                                                            | 635,244       | 1,530,967    
|                                                                           
|Total Current Assets                                                        | 40,281,512    | 37,149,584   
|                                                                           
|Property and Equipment                                                     
|Land and improvements                                                       | 1,175,615     | 1,175,615    
|Buildings                                                                   | 16,630,343    | 16,095,973   
|Machinery and equipment                                                     | 65,368,886    | 62,930,700   
|Construction in progress                                                    | 485,520       | 537,677      
|                                                                           
|                                                                            | 83,660,364    | 80,739,965   
|Less accumulated depreciation                                               | 49,671,256    | 43,479,535   
|                                                                           
|Net Property and Equipment                                                  | 33,989,108    | 37,260,430   
|                                                                           
|Goodwill, net of accumulated amortization of $1,099,000                     | 4,772,837     | 4,772,837    
|                                                                           
|Prepaid Pension Cost                                                        | 12,503,491    | 8,416,900    
|                                                                           
|Other Assets                                                                | 317,374       | 291,667      
|                                                                           
|                                                                            | $91,864,322   | $87,891,418  
|                                                                           

See accompanying notes to consolidated
financial statements.

17

---



# Knape & Vogt Manufacturing
Company and SubsidiariesConsolidated Balance Sheets

|                                    
|------------------------------------
|                                    
|                                    
|Liabilities and Stockholders' Equity
|                                    
|Current Liabilities                 
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|Total Current Liabilities           
|                                    
|Other Retirement Benefits           
|                                    
|Long-Term Debt                      
|                                    
|Deferred Income Taxes               
|                                    
|Interest Rate Swap Agreement        
|                                    
|Total Liabilities                   
|                                    
|Stockholders' Equity                
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|                                    
|Total Stockholders' Equity          
|                                    
|                                    
|                                    

See accompanying notes to consolidated
financial statements.

18

---



# Knape & Vogt
Manufacturing Company and SubsidiariesConsolidated Statements of Stockholders
Equity

|                                       
|---------------------------------------
|                                       
|                                       
|Balance, July 1, 2000                  
|Comprehensive income:                  
|Net income                             
|Foreign currency translation adjustment
|Minimum SERP adjustment, net of tax    
|benefit of $53,000                     
|Loss on derivative instrument, net     
|of tax benefit of $190,000             
|Other comprehensive loss               
|Comprehensive income                   
|Cash dividends                         
|Restricted stock issued                
|Stock issued under stock option plan   
|Tax benefit from exercise              
|of stock options                       
|Repurchase and retirement of           
|shares of common stock                 
|                                       
|Balance, June 30, 2001                 
|Comprehensive income:                  
|Net income                             
|Foreign currency translation           
|adjustment                             
|Minimum SERP adjustment, net of tax    
|benefit of $4,000                      
|Loss on derivative instrument, net     
|of tax benefit of $371,000             
|Other comprehensive loss               
|Comprehensive income                   
|Cash dividends                         
|Restricted stock issued                
|Repurchase and retirement of           
|shares of common stock                 
|                                       
|Balance, June 29, 2002                 
|Comprehensive income:                  
|Net income                             
|Foreign currency translation           
|adjustment                             
|Minimum SERP adjustment, net of tax    
|benefit of $152,000                    
|Minimum pension adjustment, net of     
|tax benefit of $302,000                
|Loss on derivative instrument, net     
|of tax benefit of $333,000             
|Other comprehensive loss               
|Comprehensive income                   
|Cash dividends                         
|Restricted stock forfeited             
|Restricted stock issued                
|Repurchase and retirement of           
|shares of common stock                 
|                                       
|Balance, June 28, 2003                 
|                                       

See accompanying notes to consolidated
financial statements.

19

---



# Knape & Vogt
Manufacturing Company and SubsidiariesConsolidated Statements of Cash Flows

---

|Year Ended                                                        | June 28,2003    | June 29,2002    | June 30,2001   
|----------------------------------------------------------------- | --------------- | --------------- | ---------------
|                                                                 
|Operating Activities                                             
|Net income                                                        | $     2,230,899 | $     3,789,046 | $     5,615,065
|Adjustments to reconcile net income to net cash provided by      
|operating activities:                                            
|Depreciation of fixed assets                                      | 6,605,516       | 6,260,983       | 5,758,085      
|Amortization of other assets                                      | 36,575          | 432,310         | 582,562        
|Increase in deferred income taxes                                 | 480,000         | 1,153,000       | 700,000        
|Increase (decrease) in supplemental retirement benefits           | 13,284          | (8,311)         | 224,150        
|Increase in prepaid pensions                                      | (4,276,691)     | (2,519,499)     | (2,629,211)    
|Loss on disposal of property and equipment                        | 136,746         | 305,279         | 352,978        
|Other                                                             | 50,000          | 935,000         | 300,000        
|Changes in operating assets and liabilities (net of acquisition):
|Accounts receivable                                               | 439,638         | 1,030,341       | 2,773,260      
|Inventories                                                       | (5,816,911)     | 1,127,951       | 802,297        
|Other current assets                                              | 898,337         | 141,012         | (222,605)      
|Accounts payable                                                  | 943,130         | (495,865)       | (2,182,455)    
|Accruals                                                          | (1,229,205)     | 1,203,046       | (3,285,887)    
|                                                                 
|Net cash provided by operating activities                         | 511,318         | 13,354,293      | 8,788,239      
|                                                                 
|Investing Activities                                             
|Additions to property and equipment                               | (3,707,536)     | (3,935,470)     | (9,282,239)    
|Proceeds from sales of property and equipment                     | 243,527         | 1,784,925       | 7,301          
|Net cash paid for acquisition                                     | -               | -               | (505,745)      
|Other, net                                                        | (62,282)        | (112,532)       | (11,228)       
|                                                                 
|Net cash used for investing activities                            | (3,526,291)     | (2,263,077)     | (9,791,911)    
|                                                                 
|Financing Activities                                             
|Proceeds from issuance of common stock                            | -               | -               | 15,922         
|Repurchase and retirement of common stock                         | (23,949)        | (1,164,656)     | (20,537)       
|Dividends paid                                                    | (2,847,316)     | (2,876,113)     | (2,906,574)    
|Principal payments on capital lease obligations                   | (6,080)         | --              | --             
|Borrowings/(repayments) on long-term debt                         | 4,000,000       | (3,750,000)     | 3,700,000      
|                                                                 
|Net cash provided by (used for) financing activities              | 1,122,655       | (7,790,769)     | 788,811        
|                                                                 
|Effect of Exchange Rate Changes on Cash                           | 308,386         | 16,156          | (22,821)       
|                                                                 
|Net Increase (Decrease) in Cash                                   | (1,583,932)     | 3,316,603       | (237,682)      
|                                                                 
|Cash, beginning of year                                           | 5,430,543       | 2,113,940       | 2,351,622      
|                                                                 
|Cash, end of year                                                 | $     3,846,611 | $     5,430,543 | $     2,113,940
|                                                                 
|Supplemental Information:                                        
|Interest paid                                                     | $     1,448,663 | $     1,512,746 | $     1,598,162
|Income taxes paid                                                 | 316,000         | 2,015,000       | 3,757,130      
|                                                                 

See accompanying notes to consolidated
financial statements.

20

---



# Knape & Vogt Manufacturing
Company and SubsidiariesNotes to Consolidated Financial Statements

|1. | Nature of Operations | Knape & Vogt Manufacturing Company and its
               wholly owned subsidiaries (the Company) design, manufacture and distribute
               kitchen and bath storage solutions and office products for original equipment
               manufacturers, specialty distributors, hardware chains and major home centers.
               During fiscal 2002, the Company aligned itself into two sales segments: Office
               Products and Home and Commercial Products. Products are sold worldwide through
               the Companys own sales personnel and through independent sales
               representatives. The Company is headquartered in Grand Rapids, Michigan.
|-- | -------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Summary of Significant
Accounting Policies | Principles of Consolidation
The
consolidated financial statements include the accounts of Knape & Vogt Manufacturing
Company and its wholly owned domestic and foreign subsidiaries. All material intercompany
balances, transactions and stockholdings have been eliminated in consolidation.
|-- | ------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end
of June. The fiscal years ended June 28, 2003, June 29, 2002 and June 30, 2001 each
contained 52 weeks.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Revenue Recognition and Concentration of Credit Risk
| | ----------------------------------------------------

| | The
Company records revenue when title to the product and risk of ownership passes to the
buyer. Sales are shown net of returns, discounts and any other form of sales incentive,
including cooperative advertising and rebates. No single customer accounts for more than
10% of consolidated sales. The Company performs ongoing credit evaluations and maintains
reserves for potential credit losses.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Shipping and Handling Costs
| | ---------------------------

| | Shipping
and handling costs that are charged to and reimbursed by the customer are recognized as
revenue, while the related expenses incurred by the Company are recorded as cost of sales
in the consolidated statements of operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Foreign Currency Translation
| | ----------------------------

| | The
accounts of the foreign subsidiary are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards (SFAS) No. 52. Assets and liabilities are
translated at year-end exchange rates. Income and expense accounts are translated at
average exchange rates in effect during the year. Translation adjustments resulting from
fluctuations in the exchange rates are recorded in accumulated other comprehensive income,
a separate component of stockholders equity. Foreign currency exchange gains were
$6,432 in fiscal 2003, $30,335 in fiscal 2002 and $40,291 in fiscal 2001.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Financial Instruments
| | ---------------------

| | The
carrying amounts of the Companys financial instruments, which consist of cash,
receivables, bank revolving credit agreement and accounts payable, approximate their fair
values.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | Derivative Financial Instruments
| | --------------------------------

| | The
Company uses an interest rate swap agreement to modify a portion of the variable rate
revolving line of credit to a fixed rate obligation, thereby reducing the exposure to
market rate fluctuations. The interest rate swap agreement is designated as a hedge, and
effectiveness is determined by matching the principal balance and terms with that specific
obligation. Amounts currently due to or from interest rate swap counter parties are
recorded in interest expense in the period in which they accrue. The derivative was
recognized as a liability on the balance sheet at its fair value of $2,554,980 at June 28,
2003 and $1,602,158 at June 29, 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Inventories
| | -----------

| | Inventories
are stated at the lower of FIFO (first-in, first-out) cost or market.
| | ---------------------------------------------------------------------------------

| | Property, Equipment and Depreciation
| | ------------------------------------

| | Property
and equipment are stated at cost and depreciated, for financial reporting purposes, using
the straight-line method over the estimated useful lives of the assets. For income tax
purposes, accelerated depreciation methods and shorter useful lives are used. Management
estimates that the cost to complete the items classified in construction in progress at
June 28, 2003 was approximately $422,000. Estimated depreciable lives are as follows: land
and improvements, 3 to 20 years; buildings, 3 to 40 years; machinery and equipment, 3 to
20 years.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Leased Property Under Capital Leases
| | ------------------------------------

| | Property
under capital leases is amortized over the shorter of the lives of the respective leases
or the estimated useful lives of the assets.
| | ----------------------------------------------------------------------------------------------------------------------------------------------

| | Stock Based Compensation
| | ------------------------

| | The
Company accounts for its stock option plans in accordance with APB Opinion 25,
Accounting for Stock Issued to Employees. Since the exercise price of the
Companys employee stock options equals or exceeds the market price of the underlying
stock on the date of the grant, no compensation cost is recognized under APB Opinion 25.
In accordance with SFAS No. 123, Accounting for Stock-Based Compensation,
the Company is required to provide pro forma information regarding net income and earnings
per share as if compensation costs for the Companys stock option plan had been
determined using a fair value based estimate.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Under
the accounting provisions of SFAS No. 123, the Companys net income and earnings per
share would have been reduced to the pro forma amounts indicated below:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| |                     | 2003            | 2002            | 2001           
| | ------------------- | --------------- | --------------- | ---------------
| |                    
| | Net income:        
| | As reported         | $     2,230,899 | $     3,789,046 | $     5,615,065
| | Pro forma           | 2,230,899       | 3,789,046       | 5,064,021      
| | Earnings per share:
| | As reported         | $0.49           | $0.83           | $1.22          
| | Pro forma           | 0.49            | 0.83            | 1.10           
| |                    

| |  | Goodwill and Intangible AssetsGoodwill
represents the excess of the purchase price over the fair value of net tangible and
identifiable intangible assets of acquired businesses and effective June 30, 2002, is not
amortized, however, in prior years it was amortized using the straight-line method over
periods ranging from 15 to 40 years. The recorded goodwill primarily relates to the
acquisition of Idea Industries and is included in the Office Products division. Other
intangibles consist primarily of trademarks, brand names and patents that are being
amortized using the straight-line method over periods up to 15 years.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Self-InsuranceThe
Company is partially self-insured for workers compensation and certain employee
health benefits. The Company is self-insured for environmental issues. The Company
purchases stop-loss coverage in order to limit its exposure to any significant levels of
workers compensation or employee health benefit claims. Self-insured losses are
accrued based upon estimates of the aggregate liability for uninsured claims incurred
using certain actuarial assumptions followed in the insurance industry and the
Companys own historical experience.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Income TaxesThe
Company accounts for certain income and expense items in different periods for financial
reporting and income tax purposes. The Company utilizes the liability method to account
for deferred income taxes by applying statutory tax rates in effect at the balance sheet
date to differences between the financial reporting and tax basis of assets and
liabilities. The resulting deferred tax liabilities or assets are adjusted to reflect
changes in tax laws or rates by means of charges or credits to income tax expense.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Advertising and Customer RebatesIn
2001, the Emerging Issues Task Force (EITF) released its consensus on Issue No. 00-22,
Accounting for Certain Points and Other Time-Based Sales Incentive
Offers, and Offers for Free Products or Services to be Delivered in the Future
and Issue No. 00-25, Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendors Products. These consensuses provided guidance
on the classification of expenses related to customer rebate, cooperative advertising and
buydown programs. Adoption of these consensuses by the Company resulted in reclassifying
the expenses for these programs to a component of net sales. Costs incurred for
advertising, including costs incurred under cooperative advertising programs with
customers, are expensed as incurred. Cooperative advertising costs are recorded as a
reduction of gross sales. Advertising expense was $976,000 in 2003, $1,889,000 in 2002 and
$684,000 in 2001.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | Earnings Per ShareBasic
earnings per share (EPS) is computed by dividing net income by the weighted-average number
of common shares outstanding in each year. Diluted EPS is computed by dividing net income
by the weighted-average number of common shares outstanding, plus all shares that would
have been outstanding if every potentially dilutive common share had been issued. The
following table reconciles the numerators and denominators used in the calculations of
basic and diluted EPS for each of the last three years:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                              |            |           
| | ---------------------------- | ---------- | ----------
| |                              | 2003       | 2002      
| |                             
| | Numerators:                 
| | Numerator for both basic and
| | diluted EPS, net income      | $2,230,899 | $3,789,046
| |                             
| | Denominators:               
| | Denominator for basic EPS,  
| | weighted-average common     
| | shares outstanding           | 4,516,706  | 4,569,942 
| | Potentially dilutive shares 
| | resulting from stock option 
| | plans                        | -          | -         
| |                             
| | Denominator for diluted EPS  | 4,516,706  | 4,569,942 
| |                             

| | The
following exercisable stock options were not included in the computation of diluted EPS
because the option prices were greater than average quarterly market prices.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                            | 2003    | 2002   | 2001  
| | -------------------------- | ------- | ------ | ------
| |                           
| | Exercise Price
     $13.64 | 6,875   | 19,254 | 20,410
| | $14.09                     | 8,525   | 19,800 | 20,350
| | $16.74                     | 6,962   | 9,988  | 10,594
| | $18.18                     | 6,325   | 9,075  | 9,625 
| | $18.41                     | 130,240 | -      | -     
| | $26.54                     | 61,413  | 61,413 | --    

| | Comprehensive IncomeComprehensive
income represents net income and other revenues, expenses, gains and losses that are
excluded from net income and recognized directly as a component of stockholders
equity.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | New Accounting StandardsIn
June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 142,
Goodwill and Other Intangible Assets, effective for the Company in fiscal 2003.
Under the new rules, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized but are subject to impairment tests at least annually. Other intangible
assets will continue to be amortized over their contractual lives.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | The
Company adopted SFAS No. 142 in the first quarter of fiscal 2003. The Companys
reported net income and earnings per share information, exclusive of goodwill amortization
required under previous accounting standards on an after tax basis is as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                              | Fiscal 2003 | Fiscal 2002 | Fiscal 2001
| | ---------------------------- | ----------- | ----------- | -----------
| |                             
| | Reported net income          | $2,230,899  | $3,789,046  | $5,615,065 
| | Add:  Goodwill amortization,
| | net of income taxes          | -           | 237,159     | 225,204    
| |                             
| | Adjusted net income          | $2,230,899  | $4,026,205  | $5,840,269 
| | Adjusted EPS                 | $0.49       | $0.88       | $1.26      
| |                             

| | The
Company performed the required impairment tests of goodwill as of the first day of fiscal
2003 and determined that the recorded goodwill was not impaired.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with Exit
or Disposal Activities. SFAS 146 requires that costs associated with exit or
disposal activities be recognized when they are incurred rather than at the date of a
commitment to an exit or disposal plan. Costs covered by this standard include lease
termination costs and certain employee severance costs that are associated with a
restructuring, discontinued operation, plant closing or other exit or disposal activity.
SFAS 146 is to be applied prospectively to exit or disposal activities initiated after
December 31, 2002 and has not had a material impact on the results of operations or
financial position.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
November 2002, the FASB issued FASB Interpretation No. 45, Guarantors
Accounting And Disclosure Requirements For Guarantees, Including Indirect
Guarantees Of Indebtedness Of Others (FIN 45). FIN 45 clarifies the requirements
for a guarantors accounting for and disclosure of certain guarantees issued and
outstanding. The initial recognition and initial measurement provisions of FIN 45 are
applicable to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN 45 are effective for financial statements of interim or annual periods
ending after December 15, 2002 and have been disclosed in the financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure,which amends SFAS No. 123, Accounting For Stock-Based Compensation. SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure
requirement of SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements of the effects of stock-based compensation. The transition guidance
and annual disclosure provisions of SFAS No. 148 are effective for fiscal years ending
after December 15, 2002. The interim disclosure provisions are effective for financial
reports containing condensed financial statements for interim periods beginning after
December 15, 2002. The Company has elected to continue to apply Accounting Principles
Board (APB) Opinion No. 25 and related interpretations in accounting for its stock option
plans, as permitted under SFAS No. 123 and SFAS No. 148. Accordingly, no compensation cost
has been recognized for its stock option plans.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

25

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | Use of Estimates in Preparation of Financial StatementsThe
preparation of financial statements in accordance with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ from those
estimates.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | ReclassificationsCertain
prior year information has been reclassified to conform to the current year presentation.
| | ------------------------------------------------------------------------------------------------------------------

|3. | Restructuring and Impairment
of Assets/Severance | During fiscal 2001, the Company recorded a loss of $300,000 pre-tax for the
sale of idle facilities in other expense on the consolidated
statement of operations.
|-- | ------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
fiscal 2002, the Company recorded an impairment charge of $690,000 in accordance with SFAS
144 for certain precision drawer slide tooling. While the Company will continue to produce
the drawer slides, the estimated future cash flows associated with sales of this
particular product line were less than the cost of the tooling recorded.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
fiscal 2002, the Company also decided to reduce its workforce in its Grand Rapids,
Michigan facility. Those reductions were committed to by top management prior to the
fiscal year end and occurred during the month of July 2002. The Company recorded $245,000
in severance costs at June 29, 2002 in other expense on the consolidated statement of
operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
2003, the Company recorded $271,325 pre-tax of severance costs in other expense on the
consolidated statement of operations, primarily related to the resignation of two of its executive officers in August 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | Acquisition | On
October 1, 1999, the Company acquired substantially all of the assets of Idea. Idea
designed, manufactured and marketed ergonomic products, including adjustable keyboard
mechanisms, keyboard and computer mouse platforms, wrist rests and CPU holders. The
acquisition was recorded using the purchase method of accounting. Accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed, based on
their estimated fair values at the date of the acquisition. The cost of the acquisition in
excess of net identifiable assets acquired, including contingent consideration paid in
fiscals 2000 and 2001, was recorded as goodwill and has been amortized using the
straight-line method based on a 15-year life. The Company discontinued the amortization of
goodwill in fiscal 2003, when it adopted the provisions of SFAS No. 142 (see the
discussion in Note 2).
|-- | ----------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

26

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

|5. | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | Inventories are summarized as follows:                                                                                                                                                                                                                                                                                                                                                         | June 28, 2003    | June 29, 2002
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | -------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Finished products                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | $     13,918,677                                                                                                                                                                                                                                                                                                                                                                               | $      8,767,282
|   | Work in process                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | 1,746,149                                                                                                                                                                                                                                                                                                                                                                                      | 1,728,418       
|   | Raw materials                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 3,314,230                                                                                                                                                                                                                                                                                                                                                                                      | 2,666,445       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $     18,979,056                                                                                                                                                                                                                                                                                                                                                                               | $     13,162,145
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|6. | Warranty Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | The Company estimates the amount of warranty claims
               on sold product that may be incurred based on current and historical data. The
               actual warranty expense could differ from the estimates made by the Company
               based on product performance. The following table presents the changes in the
               Companys product warranty liability:
|   | For the fiscal year ended:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | June 28, 2003                                                                                                                                                                                                                                                                                                                                                                                  | June 29, 2002   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   | Accrued warranty costs at the beginning of the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          | $        234,615                                                                                                                                                                                                                                                                                                                                                                               | $             - 
|   | Payments made for warranty costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | (197,555)                                                                                                                                                                                                                                                                                                                                                                                      | (383,665)       
|   | Accrual for product warranty                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 238,135                                                                                                                                                                                                                                                                                                                                                                                        | 618,280         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Accrued warranty costs at the end of the year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | $        275,195                                                                                                                                                                                                                                                                                                                                                                               | $        234,615
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|7. | Long Term Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | Long-term debt obligations are
                summarized as follows:                                                                                                                                                                                                                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | June 28, 2003                                                                                                                                                                                                                                                                                                                                                                                  | June 29, 2002   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Capital lease obligations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | $         65,420                                                                                                                                                                                                                                                                                                                                                                               | $              -
|   | Revolving credit agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 24,000,000                                                                                                                                                                                                                                                                                                                                                                                     | 20,000,000      
|   | Less: Current portion of capital lease obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | (12,815)                                                                                                                                                                                                                                                                                                                                                                                       | -               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              | $ 24,052,605                                                                                                                                                                                                                                                                                                                                                                                   | $20,000,000     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company has a revolving credit
agreement that provides for up to $45,000,000 in borrowings through November 1, 2004. At
June 28, 2003, there was a $24,000,000 balance outstanding under this agreement. The
interest rate on the outstanding balance was 7.0%, which was the fixed rate under the
interest rate swap agreement, discussed in Note 8, plus an additional 75 basis points
credit spread. The interest rate is adjusted to market rates at the end of each interest
period and is based on the 90 day LIBOR rate or, at the Companys option, several
other common indices. The agreement requires the Company to pay a non-use fee on amounts
not outstanding under the credit facility. At June 28, 2003, the non-use fee was .175%.
Both the interest rate and the non-use fees on this agreement fluctuate according to the
ratio of the Companys funded debt to EBITDA (earnings before interest, income taxes,
depreciation and amortization). Compensating balances are not required by this agreement.
The Company is required under this agreement, as amended, to maintain certain financial
ratios and, at June 28, 2003, was in compliance with these covenants. See Note 17 for
discussion of refinancing of the revolving credit agreement.

27

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated
Financial Statements

|8. | Derivative Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                  | The Company has entered into an interest rate swap
               agreement designated as a  partial hedge of the Companys
               variable rate revolving credit agreement. The purpose
of this swap is to fix the interest rate on the variable rate debt and reduce the exposure
to interest rate fluctuations. At June 28, 2003, the notional amount of the swap was
$20,000,000. Under this agreement, the Company pays the counterparty interest at a fixed
rate of 6.25%, and the counterparty pays the Company interest at a variable rate equal to
LIBOR. The LIBOR rate on this agreement was 1.28% at June 28, 2003. The notional amount
does not represent an amount exchanged by the parties, and thus is not a measure of
exposure of the Company. The variable rate is subject to change over time as LIBOR
fluctuates.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Neither
the Company nor the counterparty, which is a major U.S. bank, is required to collateralize
its obligation under the swap. The Company is exposed to loss if the counterparty should
default. At June 28, 2003, the Company had no exposure to credit loss on the interest rate
swap. The Company does not believe that any reasonably likely change in interest rates
would have a material adverse effect on the financial position, results of operations or
cash flows of the Company.
|   | The
Company has recognized an after-tax loss of $619,822 in fiscal 2003 and $687,857 in fiscal
2002 in other comprehensive income. The loss is made up of the following components:                                                                                                                                                                                                                                                                                                              

| | June 28, 2003                                                             | June 29, 2002 | June 30,2001 
| | ------------------------------------------------------------------------- | ------------- | -------------
| |                                                                           | Pre-Tax       | After-Tax    
| |                                                                          
| | Cumulative effect of a change in accounting principle, as of July 1, 2000 | $          -  | $          - 
| | Change in fair value of interest rate swap                                | (15,938)      | (10,360)     
| | Settlement to interest expense                                            | (936,884)     | (609,462)    
| |                                                                          
| |                                                                          
| | Other comprehensive income                                                | $   (952,822) | $   (619,822)
| |                                                                          

|9. | Lease Commitments                                                                                                                        | The Company leases certain real property and equipment
               under various lease agreements. Future minimum lease payments under operating
               and capital leases that have initial or remaining noncancelable lease terms in
               excess of one year are summarized as follows:
|-- | ---------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   | Fiscal Year                                                                                                                              | Operating                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                         
|   | 2004                                                                                                                                     | $     249,762                                                                                                                                                                                                                                                                                                 
|   | 2005                                                                                                                                     | 57,331                                                                                                                                                                                                                                                                                                        
|   | 2006                                                                                                                                     | 23,507                                                                                                                                                                                                                                                                                                        
|   | 2007                                                                                                                                     | 2,735                                                                                                                                                                                                                                                                                                         
|   | 2008                                                                                                                                     | -                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                         
|   | Total minimum payments                                                                                                                   | $    333,335                                                                                                                                                                                                                                                                                                  
|   | Less - interest on capital leases                                                                                                        |                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                         
|   | Total principal payable on capital leases (included in Note 7)                                                                           |                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                         
|   | Rent expense under all operating leases was approximately $1,017,000,
$868,000 and $749,000 in fiscal 2003, 2002 and 2001, respectively.

28

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

|10. | Retirement Plans | The Company has several noncontributory defined benefit
               pension plans and defined contribution plans covering substantially all of its
               employees. The defined benefit plans provide benefits based on the
               participants years of service. The Companys funding policy for
               defined benefit plans is to make annual contributions, which equal or exceed
               regulatory requirements. The assets of the defined benefit plans consist
               primarily of equity securities, debt securities and cash equivalents. The
               pension and profit-sharing plans at June 28, 2003 and June 29, 2002 held a
               combined total of 284,637 shares of the Companys Class B common stock.
|--- | ---------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company also has a nonqualified supplemental retirement program for designated officers of
the Company, which includes death and disability benefits. The plan is funded from the
general assets of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
postretirement health-care plan covers substantially all employees. The plan is unfunded
and contributory. During fiscal 2002, the Company amended the plan to place a cap on the
Company paid portion of health-care premiums for retirees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Penison Benefits                               | SERP Benefits | PostretirementHealth-Care Benefits
| | ---------------------------------------------- | ------------- | ----------------------------------
| |                                                | 2003          | 2002                              
| |                                               
| | Change in benefit obligations                 
| | Benefit obligations at beginning of year       | $ 15,790,925  | $ 14,559,092                      
| | Service cost                                   | 348,632       | 330,579                           
| | Interest cost                                  | 1,111,277     | 1,056,040                         
| | Actuarial losses                               | 3,829,278     | 641,073                           
| | Benefits paid                                  | (807,430)     | (798,263)                         
| | Plan amendment                                 | -             | -                                 
| | Other                                          | 51,870        | 2,404                             
| |                                               
| | Benefit obligation at end of year              | $ 20,324,552  | $ 15,790,925                      
| |                                               
| | Change in plan assets                         
| | Fair value of plan assets at beginning of year | $ 15,945,339  | $ 14,702,734                      
| | Actual return on plan assets                   | 439,211       | (520,320)                         
| | Employer contributions                         | 4,451,141     | 2,665,670                         
| | Benefits paid                                  | (807,430)     | (798,263)                         
| | Other                                          | -             | (104,482)                         
| |                                               
| | Fair value of plan assets at end of year       | $ 20,028,261  | $ 15,945,339                      
| |                                               

29

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| |                                                                                                                    | 2003             | 2002          | 2003                               | 2002            | 2003            | 2002           
| | ------------------------------------------------------------------------------------------------------------------ | ---------------- | ------------- | ---------------------------------- | --------------- | --------------- | ---------------
| |                                                                                                                   
| | Funded status                                                                                                      | $    (296,291)   | $    154,414  | $(3,511,333)                       | $(3,153,183)    | $(2,346,600)    | $(1,869,855)   
| | Unrecognized transition amount                                                                                     | (34,368)         | (88,950)      | -                                  | -               | 432,339         | 480,376        
| | Unrecognized net actuarial loss                                                                                    | 12,371,129       | 7,536,151     | 2,077,436                          | 1,724,279       | 3,067,335       | 2,787,251      
| | Unrecognized prior service cost                                                                                    | 676,522          | 815,285       | (132,190)                          | (140,800)       | (2,561,877)     | (2,783,857)    
| |                                                                                                                   
| | Net amount recognized                                                                                              | $ 12,716,992     | $ 8,416,900   | $(1,566,087)                       | $(1,569,704)    | ($1,408,803)    | $(1,386,085)   
| |                                                                                                                   
| | Amounts recognized in the statement of financial position consist of:                                             
| | Prepaid pension  cost                                                                                              | $ 12,503,491     | $ 8,416,900   | $             -                    | $             - | $             - | $             -
| | Other retirement benefits                                                                                          | (473,496)        | -             | (3,511,333)                        | (3,153,183)     | (1,408,803)     | (1,386,085)    
| | Accumulated other comprehensive income                                                                             | 686,997          | -             | 1,945,246                          | 1,583,479       | -               | -              
| |                                                                                                                   
| | Net amount recognized                                                                                              | $ 12,716,992     | $ 8,416,900   | $(1,566,087)                       | $(1,569,704)    | $(1,408,803)    | $(1,386,085)   
| |                                                                                                                   
| |                                                                                                                    | Penison Benefits | SERP Benefits | PostretirementHealth-Care Benefits
| |                                                                                                                   
| | Weighted-average assumptions                                                                                      
| |                                                                                                                   
| | Discount rate                                                                                                      | 5.5%             | 7.25%         | 5.5%                               | 7.25%           | 5.5%            | 7.25%          
| | Expected return on plan assets                                                                                     | 8.0%             | 8.5%          | N/A                                | N/A             | N/A             | N/A            
| |                                                                                                                   
| | The net periodic benefit cost related to the defined benefit pension plans is made up of the
following components:
| |                                                                                                                    | Penison Benefits | SERPBenefits 
| |                                                                                                                    | 2003             | 2002          | 2001                               | 2003            | 2002            | 2001           
| |                                                                                                                   
| | Service cost                                                                                                       | $    348,632     | $    330,579  | $    318,999                       | $    1,850      | $    1,747      | $    1,883     
| | Interest cost                                                                                                      | 1,111,277        | 1,056,040     | 1,005,090                          | 191,440         | 225,298         | 234,642        
| | Expected return on plan assets                                                                                     | (1,561,435)      | (1,389,192)   | (1,193,512)                        | -               | -               | -              
| | Net amortization                                                                                                   | 275,976          | 152,033       | 104,630                            | 123,876         | 99,708          | 91,502         
| |                                                                                                                   
| |                                                                                                                   
| | Net periodic pension cost                                                                                          | $    174,450     | $    149,460  | $    235,207                       | $    317,166    | $    326,753    | $    328,027   
| |                                                                                                                   

30

---



# Knape & Vogt Manufacturing
Company and SubsidiariesNotes to Consolidated Financial Statements

| | PostretirementHealth-Care Benefits
| | ----------------------------------
| |                                   
| |                                   
| |                                   
| | Service cost                      
| | Interest cost                     
| | Expected return on plan assets    
| | Net amortization                  
| |                                   
| | Net periodic pension cost         
| |                                   

| | The
health care cost trend rate used to determine the postretirement health-care benefit
obligation was 9.0% for 2003 and gradually decreases to 5.0% in 2008. The trend rate is a
significant factor in determining the amounts reported. A one-percentage-point change in
these assumed health-care cost trend rates would have the following effect:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | One-Percentage Point                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Increase    | Decrease    
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ------------
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | Effect on total of service and interest cost components                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $   201,904 | $  (198,325)
| | Effect on postretirement health-care benefit obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | $2,381,662  | $(2,314,281)
| | The
Companys Board of Directors annually approves contributions to the defined
contribution plans. Expense for the discretionary profit-sharing plan amounted to
$667,192, $750,261 and $768,590 in fiscal 2003, 2002 and 2001, respectively.

The Company also provides a 401(k) plan for all of its employees. Employees may contribute up
to 15 percent of their pay. For all hourly employees, the Company will match 50 percent of
the first 4 percent that an employee contributes. The amount expensed for the Company
match provision of the plan was $225,473, $246,229 and $274,798 in fiscal 2003, 2002 and
2001, respectively.

|11. | Income Taxes | Income tax expense (benefit) consists of:
|--- | ------------ | -----------------------------------------

| | Year Ended         | June 28,2003 | June 29,2002 | June 30,2001
| | ------------------ | ------------ | ------------ | ------------
| |                   
| | Current:          
| | United States      | $  (581,000) | $   716,000  | $2,208,000  
| | State and local    | (53,000)     | 12,000       | 59,000      
| |                   
| |                   
| | Total current      | (634,000)    | 728,000      | 2,267,000   
| |                   
| | Deferred:         
| | United States      | 508,000      | 1,266,000    | 403,000     
| | Foreign            | 499,000      | 83,000       | 278,000     
| | State and local    | 14,000       | 46,000       | 19,000      
| |                   
|
| | Total deferred     | 1,021,000    | 1,395,000    | 700,000     
| |                   
|
| | Income tax expense | $    387,000 | $2,123,000   | $2,967,000  
| |                   

31

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | The
difference between the federal statutory tax rate and the effective tax rate on continuing
operations was as follows:                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Year Ended                                                                                                                                                                                                                                                                                                                                                                                                                      
| |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | Federal income taxes at the statutory rate                                                                                                                                                                                                                                                                                                                                                                                      
| | Foreign earnings taxed at foreign statutory rate                                                                                                                                                                                                                                                                                                                                                                                
| | State and local income taxes                                                                                                                                                                                                                                                                                                                                                                                                    
| | Utilization of previously disallowed loss                                                                                                                                                                                                                                                                                                                                                                                       
| | Other                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| | Income tax expense                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | During
fiscal 2003, the Company amended its income tax returns previously filed for fiscal years
1997 and 1999. A change in the federal tax law allowed the Company to utilize a portion of
its capital loss from fiscal 1999 that had been previously disallowed. As a result of this
change, the Company recognized an income tax benefit of $607,000. 

The sources of the net deferred income tax liability were as follows:

| |                                          | June 28, 2003 | June 29, 2002
| | ---------------------------------------- | ------------- | -------------
| |                                         
| | Property and equipment                   | $ 7,097,000   | $ 7,544,000  
| | Pension accrual                          | 4,533,000     | 3,022,000    
| | Supplemental retirement plan             | (1,208,000)   | (1,058,000)  
| | Benefit related accruals                 | (1,445,000)   | (983,000)    
| | Inventory reserves                       | (1,607,000)   | (883,000)    
| | Rebates, advertising and royalty accrual | (186,000)     | (704,000)    
| | Derivative instrument                    | (894,000)     | (561,000)    
| | Net operating loss carryforward          | 92,000        | 565,000      
| | Valuation allowance                      | (92,000)      | (565,000)    
| | Other                                    | (1,013,000)   | (804,000)    
| |                                         
| |                                          | $   5,277,000 | $   5,573,000
| |                                         
| |                                         

| | For
Canadian tax purposes, the Company has net operating losses expiring through 2005 totaling
approximately $92,000, which has been fully reserved through a valuation allowance.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|12. | Stock Option Plans | The 1987 Stock Option Plan provided for the grant of
               options to key employees of the Company, which provided the ability to purchase
               shares of common stock. Options were granted at or above the market price of the
               Companys common stock on the date of the grant, were exercisable from that
               date and terminated 10 years from the grant date. The plan, as amended in
               October 1991 and in October 1994, authorized a total of 300,000 shares to be
               available for issuance under the plan. Grants can no longer be made under the
               1987 Stock Option Plan.
|--- | ------------------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

32

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | Under
the Companys 1997 Stock Incentive plan, up to 660,000 shares of the Companys
common stock are available for issuance. Issuance can be in the form of stock options or
restricted stock; however, no more than 55,000 shares can be issued as restricted stock.
Stock options can be granted as incentive stock options or nonqualified stock options. The
number of shares of common stock subject to an option granted to a participant under this
plan is determined based on the amount of the participants election under the
Companys bonus plan. Each participant may elect to receive options by electing to
forego a portion of the cash bonus that may be earned by the participant, with the option
price determined in accordance with the plan. The exercise price per share of common stock
purchasable under an option is a single fixed exercise price equal to 100% of the fair
market value of the common stock at the award date increased by a fixed percentage (based
on U.S. Treasury Securities plus 2% less a projected dividend yield) compounded annually
over the term of the option. In general, the options vest three years after the date the
option was granted and expire five years after the grant date. During fiscal 2003 and
2002, no options were granted to participants. In fiscal 2001, 281,145 options were
granted to participants at an exercise price of $18.48 per share. Transactions
under the plans are as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year Ended                                                     | June 28,2003 | Weighted-AverageExercisePrice | June 29,2002 | Weighted-AverageExercisePrice | June 30,2001 | Weighted-AverageExercisePrice
| | -------------------------------------------------------------- | ------------ | ----------------------------- | ------------ | ----------------------------- | ------------ | -----------------------------
| |                                                               
| | Options outstanding, beginning of year                         | 548,848      | $     18.80                   | 563,214      | $     18.73                   | 305,151      | $     18.64                  
| | Granted                                                        | -            | -                             | -            | -                             | 281,145      | 18.48                        
| | Exercised                                                      | -            | -                             | -            | -                             | (1,828)      | 14.45                        
| | Forfeited                                                      | (94,825)     | $     17.26                   | (14,366)     | $     16.34                   | (21,254)     | 18.92                        
| |                                                               
|
| | Options outstanding at end of year                             | 454,023      | $     19.12                   | 548,848      | $     18.80                   | 563,214      | $              18.73         
| |                                                               
|
| | Options exercisable at end of year                             | 220,340      | $     20.30                   | 119,530      | $     20.94                   | 65,974       | $     14.83                  
| | Options available for grant, end of year                       | 240,657      |                               | 175,262      |                               | 169,570      |                              
| |                                                               
|
| | Weighted-average fair value of options granted during the year | -            |                               | -            |                               | $1.96        |                              
| |                                                               

33

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | A summary of stock options outstanding at June 28, 2003 follows:
| | ----------------------------------------------------------------
| |                                                                 
| | Price Ranges                                                    
| |                                                                 
|
| | $12.50 - $14.50                                                 
| | $16.50 - $18.50                                                 
| | $26.50 - $28.50                                                 
| |                                                                 
| |                                                                 
| |                                                                 

| | The
Company uses the Black-Scholes option-pricing model to determine the fair value of each
option at the grant date with the following weighted average assumptions:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                         | 2001        | 
| | ----------------------- | ----------- | 
| |                        
| | Dividends per share     | $      0.66 | 
| | Expected volatility     | 0.2707      | 
| | Risk-free interest rate | 6.25%       | 
| | Expected lives          | 4.0         | 
| |                         |            

| | Of
the 660,000 shares available for issuance under the 1997 Stock Incentive Plan, no more
than 55,000 shares may be issued as restricted stock. The Executive Compensation
Committee, subject to the approval of the Board of Directors, determines the eligible
persons to whom restricted shares are granted and the price (if any) to be paid by the
participant, the conditions under which the participants interest in the stock may
be forfeited and the period of time during which the participant is not permitted to sell,
transfer, pledge, or assign the shares of the restricted stock awarded under this Plan.
Except as provided above, upon issuance of the restricted stock, the participant will have
all the rights of a shareholder with respect to the shares, including the right to vote
them and to receive all dividends and other related distributions. If termination of
employment occurs within the restricted period, all shares of stock still subject to
restriction will vest or be forfeited in accordance with the terms and conditions
established by the Committee.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys CEO has 6,600 shares of restricted common stock and the option to purchase
an additional 27,500 shares of the Companys common stock at a price of $14.43 per
share. The grant and the options will vest if the Company achieves specific financial
objectives within a five-year performance period. During the performance period, the CEO
may vote and receive dividends on the restricted shares, but the shares are subject to
transfer restrictions and are forfeited if the CEO terminates employment or the Company
does not achieve its financial objectives.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

34

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

|13. | Stockholders Equity | The Company has three classes of stock: common
               stock, Class B common stock and unissued preferred stock. Each share of common
               stock entitles the holder thereof to one vote on all matters submitted to the
               shareholders. Each share of Class B common stock entitles the holder to 10 votes
               on all such matters, except that the holders of common stock are entitled to
               elect, voting separately as a class, at least one-quarter of the Companys
               directors to be elected at each meeting held for the election of directors. In
               all other instances, holders of common stock and Class B common stock vote
               together, except for matters affecting the powers, preferences or rights of the
               respective classes or as otherwise required under the Michigan Business
               Corporation Act. With respect to dividend rights, each share of common stock is
               entitled to cash dividends at least 10% higher than those payable on each share
               of Class B common stock. Class B common stock is subject to certain restrictions
               on transfer, but is convertible into common stock on a share-for-share basis at
               any time.
|--- | -------------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company has a stock repurchase program under which it purchased 2,280 shares during fiscal
2003 with the price per share ranging from approximately $9 to $11. At June 28, 2003, the
Company has remaining authorization to
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14. | Business Segments | During
the third quarter of fiscal 2002, the Company announced its decision to realign its sales,
marketing and new product development efforts around two business segments: Office
Products and Home and Commercial Products. The Office Products segment develops, markets
and distributes its hardware and idea@WORK brand of ergonomic products primarily to
office furniture OEMs and office furniture dealers. The Home and Commercial Products
segment develops, markets and distributes hardware, kitchen and storage solutions
primarily to retailers, specialty distributors and kitchen OEMs. These products
include the Real Solutions for Real Life brand of storage products. The Company
substantially completed this realignment of its structure during the fourth quarter of
fiscal 2002.
|--- | ----------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following segment information is a summary of the Companys operations by operating
segment for the past three fiscal years. Segment revenue has been provided on a
comparative basis. Due to the reorganization of the Company, restatement of prior
years remaining operating segment results is impracticable. The accounting policies
of the business segments are the same as those described in the summary of significant
accounting policies. 
Consolidated Industry Segment Information:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                                 | Office Products | Home and Commercial Products | Corporate and Other | Consolidated Total
| | ------------------------------- | --------------- | ---------------------------- | ------------------- | ------------------
| |                                
| | Year Ended June 28, 2003:       |                 |                              |                     |                   
| | Net sales to external customers | $ 35,786,300    | $ 89,612,660                 | $               -   | $125,398,960      
| | Income tax expense (benefit)    | (37,000)        | 4,751,000                    | (4,327,000)         | 387,000           
| | Net income (loss)               | (76,048)        | 7,964,928                    | (5,657,981)         | 2,230,899         
| | Total assets                    | 12,065,395      | 25,340,431                   | 54,458,496          | 91,864,322        
| | Goodwill                        | 4,250,936       | 521,901                      | -                   | 4,772,837         
| | Depreciation and amortization   | 41,265          | 178,797                      | 6,422,029           | 6,642,091         
| | Capital expenditures            | 124,043         | 205,254                      | 3,378,239           | 3,707,536         

35

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated
Financial Statements

| |                                   | Office Products | Home and Commercial Products | Corporate and Other | Consolidated Total
| | --------------------------------- | --------------- | ---------------------------- | ------------------- | ------------------
| |                                  
| | Year Ended June 28, 2003:         |                 |                              |                     |                   
| | Net sales to external customers   | $ 39,476,390    | $ 92,392,452                 | $              -    | $131,868,842      
| | Total assets                      | 11,000,598      | 20,712,535                   | 56,178,285          | 87,891,418        
| | Goodwill                          | 4,250,936       | 521,901                      | -                   | 4,772,837         
| | Capital expenditures              | 56,295          | 164,466                      | 3,714,709           | 3,935,470         
| | Year ended June 30, 2001:        
| | Gross sales to external customers | $ 48,101,846    | $100,632,666                 | $              --   | $148,734,512      
| | Goodwill                          | 4,597,952       | 539,745                      | -                   | 5,137,697         

| | Geographic
information related to net sales, based on location of our customers, and long-lived
assets are summarized between domestic and foreign locations as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Year Ended    | June 28, 2003 | June 29, 2002 | June 30, 2001
| | ------------- | ------------- | ------------- | -------------
| |              
| | Net sales:   
| | United States | $110,403,941  | $116,336,049  | $126,940,678 
| | Canada        | 10,048,356    | 9,552,947     | 10,106,340   
| | Other foreign | 4,946,063     | 5,979,846     | 6,865,845    
| | Fixed assets:
| | United States | 33,989,108    | 37,260,430    | 41,025,151   
| | Canada        | -             | -             | -            
| | Other foreign | -             | -             | -            

| | The
Company does not believe that it is dependent upon any single customer, since none
accounts for more than 10% of consolidated net sales or operating income.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|15. | Quarterly Results (Unaudited) | The table below sets forth summary unaudited
               information on a quarterly basis for the Company.
|--- | ----------------------------- | -------------------------------------------------------------------------------------------------------------

| | Year Ended June 28, 2003           | 1st Quarter        | 2nd Quarter        | 3rd Quarter        | 4th Quarter       
| | ---------------------------------- | ------------------ | ------------------ | ------------------ | ------------------
| |                                   
| | Net sales                          | $       30,998,190 | $       30,219,890 | $       32,091,118 | $       32,089,762
| | Gross profit                       | 7,053,931          | 6,580,653          | 6,746,323          | 7,379,736         
| | Operating income                   | 632,163            | 1,659,205          | 322,582            | 1,206,175         
| | Net income                         | 194,963            | 851,728            | 395,389            | 788,819           
| | Earnings per share-basic           | $0.04              | $0.19              | $0.09              | $0.17             
| | Earnings per share-diluted         | $0.04              | $0.19              | $0.09              | $0.17             
| | Cash dividend-common stock         | $     0.165        | $     0.165        | $     0.165        | $     0.165       
| | Cash dividend-Class B common stock | $      0.15        | $      0.15        | $      0.15        | $      0.15       
| |                                   

36

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

| | Year Ended June 28, 2003           | 1st Quarter        | 2nd Quarter        | 3rd Quarter        | 4th Quarter       
| | ---------------------------------- | ------------------ | ------------------ | ------------------ | ------------------
| |                                   
| | Net sales                          | $       33,089,191 | $       31,153,768 | $       33,142,872 | $       34,483,011
| | Gross profit                       | 7,230,081          | 6,865,265          | 7,688,136          | 9,177,584         
| | Operating income                   | 1,770,698          | 1,471,015          | 1,714,276          | 2,406,358         
| | Net income                         | 905,628            | 744,500            | 844,627            | 1,294,291         
| | Earnings per share-basic           | $0.20              | $0.16              | $0.19              | $0.29             
| | Earnings per share-diluted         | $0.20              | $0.16              | $0.19              | 0.29              
| | Cash dividend-common stock         | $0.165             | $0.165             | $0.165             | $0.165            
| | Cash dividend-Class B common stock | $0.15              | $0.15              | $0.15              | $0.15             
| |                                   

|16. | Commitments and Contingencies | During the second quarter of fiscal 2003, the Company
               settled a claim for $300,000 related to a lease of which
               the Company was a guarantor. The claim had
been previously accrued on the balance sheet.
|--- | ----------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the second quarter of fiscal 2003, the Company settled certain legal concerns involving
potential royalty issues for which an accrual had been previously recorded. As a result,
the Company reported a pre-tax gain of approximately $800,000 as an offset to selling and
administrative expenses in the statement of income.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Canada Customs and Revenue Agency (CCRA) has performed an audit of the
Companys sales to its wholly-owned subsidiary, Knape & Vogt Canada. Preliminary
results from a joint review by the Company and its customs broker indicate that the
Company may be liable for certain customs duties, however, the amount of any such
potential liability is unknown at this time. The Company is defending its position that
Knape & Vogt Canada is the importer of record for all Knape & Vogt goods shipped
into Canada and management believes that, based on the information available at this time,
any liability owed to the CCRA will not have a material adverse effect on the
Companys earnings. The Company was sued in the Kent County, Michigan Circuit Court
in 1997 by a former employee seeking additional benefits under an executive retirement
plan. The Circuit Court ruled in favor of the plaintiff, but in June 2002, the Circuit
Court was reversed on the Companys appeal to the Michigan Court of Appeals. The
plaintiff has filed a delayed request for leave to appeal to the Michigan Supreme Court.
In August 2002, the plaintiff filed a lawsuit seeking these retirement benefits in the
Federal District Court for the Western District of Michigan. During the fourth quarter of
fiscal 2003, the plaintiffs request for leave to appeal to the Michigan Supreme
Court was denied. The Company has moved to dismiss the federal litigation based on the
statute of limitations. The federal district judge has taken this motion under advisement.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Company is also subject to other legal proceedings and claims, which arise in the ordinary
course of business.
| | ------------------------------------------------------------------------------------------------------------------

| | In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $719,000 at June 28, 2003, the ultimate
liability for these matters will not have a material adverse effect on the Companys
financial position or the results of its operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

37

---



# Knape & Vogt
Manufacturing Company and SubsidiariesNotes to Consolidated Financial Statements

|17. | Subsequent Events | In August 2003, the Companys Board of Directors
               approved a resolution to refinance the Companys revolving bank loan with a
               new lending institution. A commitment has been signed with the lender. The
               agreement calls for a $35 million unsecured revolving credit facility (including
               a $2.5 million sub limit for letters of credit) and matures on November 1, 2006.
               Interest on the revolving credit facility will be payable at prime or LIBOR
               rates plus a spread of up to .25 or 1.25%, respectively, based upon certain
               ratios.
|--- | ----------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

38

---



# Independent
Auditors Report

Board of DirectorsKnape &
Vogt Manufacturing CompanyGrand Rapids, Michigan

We have audited the accompanying
consolidated balance sheets of Knape & Vogt Manufacturing Company and subsidiaries as
of June 28, 2003 and June 29, 2002, and the related consolidated statements of operations,
stockholders equity and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated financial statements based
on our audits.

We conducted our audits in accordance
with auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial position of
Knape & Vogt Manufacturing Company and subsidiaries at June 28, 2003 and June 29, 2002
and the results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the
consolidated financial statements, the Company changed its method of accounting for
goodwill amortization in 2003.

Deloitte & Touche LLPGrand
Rapids, Michigan July 25, 2003

August 8, 2003 as to Note
17

39

---



# Independent
Auditors Report

Board of DirectorsKnape &
Vogt Manufacturing CompanyGrand Rapids, Michigan

We have audited the accompanying
consolidated balance sheet of Knape & Vogt Manufacturing Company and subsidiaries as
of June 30, 2001, and the related consolidated statements of operations,
stockholders equity and cash flows for the year ended June 30, 2001. These
consolidated financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these consolidated financial statements
based on our audits.

We conducted our audit in accordance
with auditing standards generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.

In our opinion, the consolidated
financial statements referred to above present fairly, in all material respects, the
financial position of Knape & Vogt Manufacturing Company and subsidiaries at June 30,
2001, and the results of their operations and their cash flows for the year ended June 30,
2001 in conformity with accounting principles generally accepted in the United States.

BDO Seidman, LLPGrand Rapids,
Michigan July 26, 2001

40

---



# PART III

# ITEM 9  CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTSON ACCOUNTING AND FINANCIAL DISCLOSURES

On
March 8, 2002, the Companys Board of Directors approved of a change in its
independent accountant from BDO Seidman LLP (BDO) to Deloitte & Touche LLP
(Deloitte) based upon the recommendation of the Audit Committee. BDOs
report on the Companys financial statements for the past two fiscal years did not
contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as
to uncertainty, audit scope, or accounting principles. During 2000, 2001, and a portion of
2002, preceding the Boards decision to change independent accountants, there were no
disagreements with BDO on any matter of accounting principles or practices, financial
statement disclosure, auditing scope or procedure, which disagreement(s), if not resolved,
would have caused BDO to refer to the matter of the disagreement(s) in connection with its
reports. During that same period of time, there were no reportable events as described in
item 304(a)(1)(b) of the Securities and Exchange Commissions Regulation S-K.

# ITEM 9(a) 
CONTROLS AND PROCEDURES

a)
        Evaluations of Disclosure Controls and Procedures

In
order to ensure that the information that we must disclose in our filings with the
Securities and Exchange Commission is recorded, processed, summarized and reported on a
timely basis, we have adopted disclosure controls and procedures. Our Chief Executive
Officer, William R. Dutmers, and our Vice President of Finance and Treasurer, Leslie J.
Cummings, have reviewed and evaluated the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c) as of the end of the
period covered by the Annual Report on Form 10-K (the Evaluation Date)), and
have concluded that as of the Evaluation Date, the Companys disclosure controls and
procedures are appropriate and that no changes are required at this time.

(b)
        Changes in Internal Controls

There
were no significant changes in the Companys internal controls over financial
reporting or in other factors that could significantly affect internal controls subsequent
to the date of the most recent evaluation, nor any significant deficiencies or material
weaknesses in such internal controls requiring corrective actions. As a result, no
corrective actions were taken.

# ITEM 10 
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors
of Registrant. Information relating to directors and director nominees of the Company,
contained in the Companys definitive Proxy Statement for its Annual Meeting of
Shareholders to be held October 17, 2003, and filed pursuant to Regulation 14A, is
incorporated herein by reference.

Executive
Officers of Registrant. Information relating to the executive officers of the Company
is included in Part I of this Form 10-K.

# ITEM 11 
EXECUTIVE COMPENSATION

The information
under the captions Summary Compensation Table, Option Grants in Last
Fiscal Year, and Aggregated Stock Option Exercises in Fiscal 2002 and Year End
Option Values, is incorporated herein by reference from the Companys
definitive Proxy Statement for the Companys Annual Meeting of Shareholders to be
held October 17, 2003, filed pursuant to Regulation 14A.

41

---



# ITEM 12 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS

The
information under the captions Voting Securities and Principal Shareholders
and Directors and Nominees is incorporated herein by reference from the
Companys definitive Proxy Statement for the Companys Annual Meeting of
Shareholders to be held October 17, 2003, filed pursuant to Regulation 14A.

# ITEM 13  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS

The
information under the caption Directors and Nominees is incorporated herein by
reference from the Companys definitive Proxy Statement for the Companys Annual
Meeting of Shareholders to be held October 17, 2003, filed pursuant to Regulation
14A.

# ITEM 14 
PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information
under the caption Independent Public Accountants is incorporated herein by
reference from the Companys definitive Proxy Statement for the Companys Annual
Meeting of Shareholders to be held October 17, 2003, filed pursuant to Regulation 14A.

42

---



# PART IV

# ITEM 15 
EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)
        (1)        Financial
Statements

The
following financial statements, all of which are set forth in Item 8, are filed as part of
this report.

| |                                                 | Page Number inForm 10-K Report
| | ----------------------------------------------- | ------------------------------
| | Consolidated Statements of Operations           | 16                            
| | Consolidated Balance Sheets                     | 17-18                         
| | Consolidated Statements of Stockholders' Equity | 19                            
| | Consolidated Statements of Cash Flows           | 20                            
| | Notes to Consolidated Financial Statements      | 21-38                         
| | Independent Auditors' Reports                   | 39-40                         

(2)        Financial
Statement Schedule

The
following financial statement schedule and related Independent Auditors Report on
such schedule are included in this Form 10-K on the pages noted.

| |                                                | Page Number inForm 10-K Report
| | ---------------------------------------------- | ------------------------------
| | Schedule II - Independent Auditors' Reports    | 45-46                         
| | Valuation and Qualifying Accounts and Reserves | 47                            

All
other schedules are not submitted because they are not applicable or not required, or
because the required information is included in the financial statements or notes thereto.

(3)        Exhibits

Reference
is made to the Exhibit Index, which is found on page 49 of this Form 10-K Annual Report.

43

---



(b)        Reports on Form 8-K

Knape & Vogt furnished the following Form 8-K during the quarter ended June 28, 2003.

| | Date of Report | Filing Date    | Item Reported                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -------------- | -------------- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | April 28, 2003 | April 28, 2003 | Under Item 9, this Form 8-K included a press release that reported
Knape & Vogts financial results for the third quarter of fiscal 2003, which
ended March 29, 2003. The
press release included summary consolidated financial data for the quarters ended March
29, 2003 and March 30, 2002 and the year-to-date periods ended March 29, 2003 and March
30, 2002. The press release also contained balance sheet information as of March 29, 2003
and March 30, 2002.

44

---



# Independent
Auditors Report on Schedule

Knape & Vogt
Manufacturing CompanyGrand Rapids, Michigan

We have audited the financial
statements of Knape & Vogt Manufacturing Company as of June 28, 2003 and June 29,
2002, and for the years then ended, and have issued our report thereon dated July 25, 2003
(August 8, 2003 as to Note 17), which is contained in Item 8 of this Form 10-K. Our audits
also included the financial statement schedule of Knape & Vogt Manufacturing Company
listed in Item 14. This financial statement schedule is the responsibility of the
Companys management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

Deloitte & Touche LLPGrand
Rapids, MichiganJuly 25, 2003

45

---



# Independent
Auditors Report on Schedule

Knape & Vogt
Manufacturing CompanyGrand Rapids, Michigan

We have audited the financial
statements of Knape & Vogt Manufacturing Company as of June 30, 2001 and for the year
then ended, and have issued our report thereon dated July 26, 2001, which is contained in
Item 8 of this Form 10-K. Our audits also included the financial statement schedule of
Knape & Vogt Manufacturing Company listed in Item 14. This financial statement
schedule is the responsibility of the Companys management. Our responsibility is to
express an opinion based on our audits. In our opinion, the financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.

BDO Seidman LLPGrand Rapids,
Michigan July 26, 2001

46

---



# Knape & Vogt
Manufacturing Company and SubsidiariesSchedule II  Valuation and Qualifying
Accounts and Reserves

|Column A                  | Column B                    | Column C                         | Column D      | Column E             
|------------------------- | --------------------------- | -------------------------------- | ------------- | ---------------------
|                         
|Description               | Balance beginning of period | Charged to costs and expenses(1) | Deductions(1) | Balance end of period
|                         
|Year ended June 28, 2003:
|Allowances deducted from 
|Assets:                  
|Accounts receivable for: 
|Doubtful accounts         | $  633,000                  | $   80,000                       | $   55,000    | $  658,000           
|Cash discounts            | 122,000                     | 23,000                           | --            | 145,000              
|                          |                            
|                          | $  755,000                  | $  103,000                       | $   55,000    | $  803,000           
|Warranty reserve          | $  235,000                  | $  238,000                       | $  198,000    | $  275,000           
|Inventory obsolescence    | $1,439,000                  | $  213,000                       | $  508,000    | $1,144,000           
|                         
|Year ended June 29, 2002:
|Allowances deducted from 
|Assets:                  
|Accounts receivable for: 
|Doubtful accounts         | $  447,000                  | $  489,000                       | $  303,000    | $  633,000           
|Cash discounts            | 114,000                     | 8,000                            | -             | 122,000              
|                          |                            
|                          | $  561,000                  | $  497,000                       | $  303,000    | $  755,000           
|Warranty reserve          | $            --             | $  618,000                       | $  383,000    | $  235,000           
|Inventory obsolescence    | $1,015,000                  | $  949,000                       | $  525,000    | $1,439,000           
|                         
|Year ended June 30, 2001:
|Allowances deducted from 
|Assets:                  
|Accounts receivable for: 
|Doubtful accounts         | $  409,000                  | $  438,000                       | $  400,000    | $  447,000           
|Cash discounts            | 147,000                     | -                                | 33,000        | 114,000              
|                          |                            
|                          | $  556,000                  | $  438,000                       | $  433,000    | $  561,000           
|Inventory obsolescence    | $  910,000                  | $  422,000                       | $  317,000    | $1,015,000           

47

---



# SIGNATURES

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

| | KNAPE & VOGT MANUFACTURING COMPANY
| | ----------------------------------
| | By                                
| | By                                

## Date:  August 27, 2003

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
on August 27, 2003, by the following persons on behalf of the registrant in the capacities indicated.

|/s/ William R. Dutmers
William R. Dutmers, Chairman of the Board and Chief Executive Officer |  | /s/ John E. Fallon
John E. Fallon, Director        
|-------------------------------------------------------------------------------------------- |  | ---------------------------------------------------
|/s/ Thomas A. Hilborn
Thomas A. Hilborn, Director                                            |  | /s/ Michael J. Kregor
Michael J. Kregor, Director  
|/s/ Richard S. Knape
Richard S. Knape, Director                                              |  | /s/ Robert J. Knape
Robert J. Knape, Director      
|/s/ Gregory Lambert
Gregory Lambert, Director                                                |  | /s/ Christopher Norman
Christopher Norman, Director

48

---



# KNAPE & VOGT
MANUFACTURING COMPANYANNUAL REPORT  FORM 10-K

# EXHIBIT INDEX

|3(a) |  | Certificate of Amendment to the Articles of Incorporation, and the Restated
               Articles of Incorporation of the Company, which were filed as Exhibit 3(a) of
               the Registrants Form 10-K Annual Report for the fiscal year ended June 30,
               1987, are incorporated by reference.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3(b) |  | Bylaws as amended April 23, 1999, filed as Exhibit 3.1 of the Registrants
               Form 10-Q Third Quarter Report for the fiscal year June 30, 1999, are
               incorporated by reference.
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(a) |  | Supplemental Executive Retirement Plan, which was filed as Exhibit 10 of the
               Registrants Form 10-K Annual Report for the fiscal year ended June 30,
               1981, is incorporated by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(b) |  | Knape & Vogt Manufacturing Company 1987 Stock Option Plan, effective October
               16, 1987, which was filed as Exhibit I to Registrants definitive Proxy
               Statement dated September 23, 1987, is incorporated by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(c) |  | Knape & Vogt Manufacturing Company Employees Retirement Savings Plan
               (July 1, 1989 Restatement), as amended, which was filed as Exhibit 99 to
               Registrants Registration Statement on Form S-8 (Reg. No. 33-88212), is
               incorporated by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(d) |  | Loan agreement with Old Kent Bank dated June 1, 1999, which was filed as Exhibit
               10(d) of the Registrants Form 10-K Annual Report for the fiscal year ended
               June 30, 1999, is incorporated by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(e) |  | First amendment dated October 29, 1999, to Loan agreement with Old Kent Bank,
               filed as Exhibit 10.1 of the Registrants Form 10-Q Second Quarter Report
               of the fiscal year ended July 1, 2000, is incorporated by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(f) |  | Second amendment dated May 31, 2002, to Loan agreement with Fifth Third Bank,
               filed as Exhibit 10(f) of the Registrants Form 10-K Annual Report for the
               fiscal year June 29, 2002, is incorporated by reference.
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(g) |  | Third amendment dated June 26, 2003, to Loan agreement with Fifth Third Bank,
               filed herewith.
|----- |  | ------------------------------------------------------------------------------------------------------------

|10(h) |  | Interest swap agreement with Bank One dated June 1, 1999, which was filed as
               Exhibit 10(e) of the Registrants Form 10-K Annual Report for the fiscal
               year ended June 30, 1999, is incorporated by reference.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(i) |  | Knape & Vogt Manufacturing Company 1997 Stock Incentive Plan, which was
               filed as Appendix A to the Registrants proxy statement dated September 17,
               1997, is incorporated by reference.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10(j) |  | Restricted Share Grant Agreement dated February 1, 2000, between Knape &
               Vogt Manufacturing Company and William R. Dutmers, filed as Exhibit 10.1 of the
               Registrants Form 10-Q Third Quarter Report of the fiscal year ended July
               1, 2000, is incorporated by reference.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

49

---



|10(k) |  | Stock Option Agreement for Nonqualified Stock Option dated February 1, 2000,
               between Knape & Vogt Manufacturing Company and William R. Dutmers, filed as
               Exhibit 10.2 of the Registrants Form 10-Q Third Quarter Report for the
               fiscal year July 1, 2000, is incorporated by reference.
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|21    |  | Subsidiaries of
Registrant.                                                                                                                                                                                                                                                                                                          
|23(a) |  | Consent of Deloitte & Touche LLP, independent public accountants.                                                                                                                                                                                                                                                                    
|23(b) |  | Consent of BDO Seidman LLP, independent public accountants.                                                                                                                                                                                                                                                                          
|31(a) |  | Certificate of the Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant
to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                           
|31(b) |  | Certificate of theExecutive Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company pursuant
to 15 U.S.C. Section 7241, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                  
|32(a) |  | Certificate of the Chairman of the Board and Chief Executive Officer of Knape & Vogt Manufacturing Company pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                 
|32(b) |  | Certificate of the Vice President of Finance and Treasurer of Knape & Vogt Manufacturing Company pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                           

50

---



# EXHIBIT 21

# SCHEDULE OF
SUBSIDIARIES OF KNAPE & VOGT MANUFACTURING COMPANY

Knape & Vogt Canada, Inc.
(organized under the laws of Ontario, Canada)

Feeny Manufacturing Company
(organized under the laws of Michigan)

51

---



# EXHIBIT 23 (a)

# INDEPENDENT
AUDITORS CONSENT

We consent to the incorporation by
reference in Registration Statement Nos. 33-20227, 33-43794, 33-88206 and 33-88212 of
Knape & Vogt Manufacturing Company on Form S-8 of our reports dated July 25, 2003
(August 8, 2003 as to Note 17), appearing in this Annual Report on Form 10-K of Knape
& Vogt Manufacturing Company for the year ended June 28, 2003.

Deloitte & Touche LLPGrand Rapids, Michigan

August 27, 2003

52

---



# EXHIBIT 23 (b)

# Consent of Independent
Certified Public Accountants

We consent to the incorporation by
reference in Registration Statement Nos. 33-20227, 33-43794, 33-88206, and 33-88212 of
Knape & Vogt Manufacturing Company on Form S-8 of our report dated July 26, 2001,
appearing in the Annual Report on Form 10-K of Knape & Vogt Manufacturing Company for
the year ended June 30, 2001.

BDO Seidman, LLP Grand Rapids,
Michigan

August 27, 2003

53

---



# EXHIBIT 10(g)

# THIRD AMENDMENT TO
LOAN AGREEMENT

THIS
THIRD AMENDMENT TO LOAN AGREEMENT (the Amendment), is made as of June
26, 2003, by and between KNAPE & VOGT MANUFACTURING COMPANY, a Michigan
corporation (the Borrower), and FIFTH THIRD BANK (formerly OLD KENT
BANK), a Michigan banking corporation (the Bank).

R
E C I T A L S:

A.       
          Borrower and Bank have signed a Loan Agreement, dated as of June 1, 1999, as
          amended on October 29, 1999, and on May 31, 2002 (the Loan
          Agreement), providing for Bank to extend to Borrower a revolving bank
          credit of up to $45,000,000.

B.       
          Borrower and Bank wish to amend the Loan Agreement on the terms and conditions
          set forth in this Amendment.

NOW,
THEREFORE, THE PARTIES AGREE AS FOLLOWS:

1.    
          Restatement of Warranties and Representations. Borrower hereby confirms
          to Bank that the warranties and representations set forth in the Loan Agreement
          were true, accurate and complete when made and remain true, accurate and
          complete as of the date of this Amendment.

2.    
          No Events of Default; Compliance with Covenants. Borrower hereby confirms
          and acknowledges to Bank that no event of default has occurred under the Loan
          Agreement as of the date of this Amendment, and that as of the date of this
          Amendment, Borrower has complied with all of the affirmative and negative
          covenants set forth in the Loan Agreement.

3.    
          Covenants. Section 4.9 of the Loan Agreement is amended in its entirety
          to read as follows:

| | 4.9
Maintain consolidated Stockholders Equity of not less than $27,500,000 on and after
June 30, 1999, increasing on each June 30 thereafter by 50% of Borrowers
consolidated net income, computed in accordance with GAAP for Borrowers fiscal year
ending on that June 30.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4.    
          Other Provisions Not Affected. Except as hereby amended, no other
          provisions of the Loan Agreement shall be amended, and all provisions of the
          Loan Agreement, as amended, shall hereafter remain in full force and effect.

5.    
          Undefined Terms. All capitalized terms that are not defined in this
          Amendment shall have the meanings provided in the Loan Agreement.

6.    
          Fees and Expenses. Upon its execution and delivery of this Amendment,
          Borrower shall pay Bank an amendment fee of $4,000. Borrower shall also pay all
          reasonable costs, fees, and out-of-pocket expenses (including, without
          limitation, reasonable attorney fees) incurred by Bank in connection with the
          preparation, arrangement, execution, and enforcement of this Amendment.

54

---



IN WITNESS WHEREOF, the parties have signed and delivered this Amendment on the date set
forth in the first paragraph of this Amendment.

| | KNAPE & VOGT MANUFACTURING COMPANY
| | ----------------------------------
| | By                                
| | Its                               

| | FIFTH THIRD BANK
| | ----------------
| | By              

55

---



Exhibit 31(a)

CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
                                      OF KNAPE AND & MANUFACTURING COMPANY (THE "COMPANY")

I, William R. Dutmers, certify that:

|1. | I have reviewed this annual report on Form 10-K of Knape & Manufacturing Company;
|-- | ---------------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this annual report is being prepared;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter (the registrants fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrants auditors and the audit committee of the registrants
          board of directors (or persons performing the equivalent functions):
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated:  August 27, 2003 | /s/ William R. Dutmers
Chairman of the Board and
Chief Executive Officer
|----------------------- | ------------------------------------------------------------------------

56

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Exhibit 31(b)

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
                                      OF KNAPE & MANUFACTURING COMPANY (THE "COMPANY")

I, Leslie J. Cummings, certify that:

|1. | I have reviewed this annual report on Form 10-K of Knape & Manufacturing Company;
|-- | ---------------------------------------------------------------------------------

|2. | Based on my knowledge, this annual report does not contain any untrue statement
          of a material fact or omit to state a material fact necessary to make the
          statements made, in light of the circumstances under which such statements were
          made, not misleading with respect to the period covered by this report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | Based on my knowledge, the financial statements, and other financial information
          included in this annual report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this annual report;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | designed such disclosure controls and procedures, or caused such disclosure
               controls and procedures to be designed under our supervision, to ensure that
               material information relating to the registrant, including its consolidated
               subsidiaries, is made known to us by others within those entities, particularly
               during the period in which this annual report is being prepared;
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | evaluated the effectiveness of the registrants disclosure controls and
               procedures and presented in this report our conclusions about the effectiveness
               of the disclosure controls and procedures, as of the end of the period covered
               by this report based on such evaluation; and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | disclosed in this report any change in the registrants internal control
               over financial reporting that occurred during the registrants most recent
               fiscal quarter (the registrants fourth fiscal quarter in the case of an
               annual report) that has materially affected, or is reasonably likely to
               materially affect, the registrants internal control over financial
               reporting; and
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation of internal control over financial reporting, to the
          registrants auditors and the audit committee of the registrants
          board of directors (or persons performing the equivalent functions):
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | all significant deficiencies and material weaknesses in the design or operation
               of internal control over financial reporting which are reasonably likely to
               adversely affect the registrants ability to record, process, summarize and
               report financial information; and
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | any fraud, whether or not material, that involves management or other employees
               who have a significant role in the registrants internal control over
               financial reporting.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dated:  August 27, 2003 | /s/ Leslie J. Cummings
Vice President of Finance and Treasurer
|----------------------- | --------------------------------------------------------------

57

---



Exhibit 32(a)

CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER
                                      OF KNAPE & VOGT MANUFACTURING COMPANY (THE "COMPANY")

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

I, William R. Dutmers,
Chairman of the Board and Chief Executive Officer of the Company, certify to the best of my knowledge and belief
pursuant to Section 906 of Sarbanes-Oxley Act of 2002 that:

(1)        
The Annual Report on Form 10-K for the period ended June 28, 2003, which this statement accompanies, fully
complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        
The information contained in the Annual Report on Form 10-K for the fiscal year ended June 28, 2003 fairly presents, in all material respects, the
financial condition and result of operations of Knape & Manufacturing Company.

|Dated:  August 27, 2003 | /s/ William R. Dutmers
Chairman of the Board and
Chief Executive Officer
|----------------------- | ------------------------------------------------------------------------

The signed original of this written statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of
this written statement required by Section 906, has been provided to Knape & Manufacturing Company and will be retained by
Knape & Manufacturing Company and furnished to the Securities and Exchange Commission or its staff upon request.

58

---



Exhibit 32(b)

CERTIFICATE OF THE CHIEF FINANCIAL OFFICER
                                      OF KNAPE & VOGT MANUFACTURING COMPANY (THE "COMPANY")

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002:

I, Leslie J. Cummings, Vice President of Finance and Treasurer of the Company, certify to the best of my knowledge and belief
pursuant to Section 906 of Sarbanes-Oxley Act of 2002 that:

(1)        
The Annual Report on Form 10-K for the period ended June 28, 2003, which this statement accompanies, fully
complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)        
The information contained in the Annual Report on Form 10-K for the fiscal year ended June 28, 2003 fairly presents, in all material respects, the
financial condition and result of operations of Knape & Manufacturing Company.

|Dated:  August 27, 2003 | /s/ Leslie J. Cummings
Vice President of Finance and Treasurer
|----------------------- | --------------------------------------------------------------

The signed original of this written statement required by Section 906, or other document authenticating,
acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of
this written statement required by Section 906, has been provided to Knape & Manufacturing Company and will be retained by
Knape & Manufacturing Company and furnished to the Securities and Exchange Commission or its staff upon request.

59