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

(Mark One)
[X]  Annual report  pursuant to section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 for the fiscal year ended June 30, 2001 or
[ ]  Transition  report  pursuant  to  section  13 or  15(d)  of the  Securities
     Exchange    Act    of    1934    for    the    transition    period    from
     _____________________ to _____________________


Commission file number 2-18868

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

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

            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       Name of each exchange on which registered

          None                                      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 $52,413,823 as of August 24, 2001.

Number of shares  outstanding  of each  class of common  stock as of August  24,
2001: 2,287,117 shares of Common Stock, par value $2.00 per share, and 2,330,841
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 12, 2001,
are incorporated by reference into Part III of this Report.

                                       1
<PAGE>
                                     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 ergo nomic  products,
which serve the consumer,  contract builder,  hardware,  and original  equipment
manufacturer  markets.  The  Company  was  incorporated  in  Michigan  in  1906,
reorganized  in  Delaware in 1961,  and  reorganized  in  Michigan in 1985.  The
Company's  main plant and corporate  offices are located at 2700 Oak  Industrial
Drive,  N.E.,  Grand Rapids,  Michigan 49505,  and its telephone number is (616)
459-3311. 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 believes that a dominant portion of the Company's operations is
in a single  industry  segment -- the  design,  manufacture,  and  marketing  of
storage  hardware and  ergonomic  products.  Accordingly,  no separate  industry
segment information is presented.

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 wrists rests,  floating  mousepads and
office lights.

     In  fiscal  2001,  approximately  23% of the  Company's  sales  were to the
consumer  market,  73%  of  the  Company's  sales  were  to  original  equipment
manufacturers and specialty distributors,  and 4% of the Company's sales were to
the office  furniture  dealer network.  Most sales are made through  independent
sales representatives.

     New Product and Capital  Spending  Information.  Management  believes  that
capital  spending in fiscal 2002 will  decrease  from the $9.3 million  spent in
fiscal 2001 to an amount,  which  approximates  the level of  depreciation.  The
fiscal 2002  spending  will  reflect  investments  made  primarily  to bring new
products and product enhancements to the Company's customers.

     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.

     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 both the
consumer market and to the OEM/specialty  distributor  market, as well as direct
sales to the dealer network. The consumer market is comprised of a broad base of
retail outlets. The OEM/specialty distributor market is more concentrated with a
fewer  number of  customers  and is more  closely  tied to the office  furniture
industry.  The dealer  network  is also  closely  tied to the  office  furniture
industry.  The Company does not believe that its business is dependent  upon any
single or small number of  customers,  the loss of which would have a materially
adverse  effect upon the Company.  The Company  estimates that at present it has
over 1,400 active customers with approximately 30,000 outlets, of which the five
largest  customers  account for  approximately  20% of sales and no one of which
accounts for more than 8% of sales.

     Backlog of Orders.  The  Company  typically  has a short  lead-time  on its
orders and therefore  does not believe that  information  concerning  backlog is
material to an understanding of its business.

     Government Contracts.  The Company does not believe that any portion of its
business is subject to  renegotiation  of profits or termination of contracts or
subcontracts at the election of the government.

     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

                                       2
<PAGE>
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.  Approximately  $2,489,000 was spent in
fiscal  2001  in the  development  of new  products  and in the  improvement  of
existing  products;  approximately  $1,835,000  was  spent  in  fiscal  2000 and
$1,543,000  in fiscal 1999 for the same  purposes.  The amount of  research  and
development expenditures was determined by specific identification of the costs,
which are expensed as incurred.

     Environmental   Matters.   The  Company  does  not  believe  that  existing
environmental  regulations  will  have any  material  effect  upon  the  capital
expenditures, earnings and competitive position of the Company.

     Employees.  At June 30, 2001, the Company employed 846 persons.  Collective
bargaining agents represent none of the Company's employees.

Item 1(d)--Information About Foreign Operations

     The  Company's  Canadian  operation   accounted  for  approximately  8%  of
consolidated 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  Notes 3 and 13 of the  Notes  to the
Company's Consolidated Financial Statements contained herein for the fiscal year
ended June 30, 2001, 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 30, 2001:
<TABLE>
        Location                                  Description                                   Interest
<S>                                 <C>                                                          <C>
Grand Rapids, Michigan              Executive offices and manufacturing facilities;              Owned
                                    444,000 sq. ft. on 41 acres.

Sparks, Nevada                      Warehouse; 76,000 sq. ft.                                    Leased

Muncie, Indiana                     Manufacturing facilities and office;                         Owned
                                    98,000 sq. ft. on 12 acres.

Mississauga, Ontario                Office; 1,900 sq. ft.                                        Leased
</TABLE>

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
30,  2001,   the  Company  spent   approximately   $32,000,000   for  expansion,
modernization and improvements of its facilities and equipment.

                                       3
<PAGE>
                            ITEM 3--LEGAL PROCEEDINGS

     In September  1998,  when the Company sold The Hirsh  Company the purchaser
assumed  the lease for the  facility  located in Skokie,  Illinois.  The Company
guaranteed all of the lease  obligations to the landlord  through the expiration
of the lease in August 2000. During fiscal 2000, the purchaser  defaulted on the
lease  agreement  and the  landlord  filed suit  against the  purchaser  and the
Company as the guarantor.  The claim is for unpaid rent,  unpaid property taxes,
building repairs and legal costs.

     A former  employee in  connection  with  benefits  paid under an  executive
retirement  plan has also sued the Company.  The initial  ruling was in favor of
the former employee; however, the Company has filed an appeal in the case.

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

     In the opinion of management, based on the information presently known, the
ultimate liability for these matters,  taking into account established  accruals
of  approximately  $947,000,  will not have a materially  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 30, 2001.

              ADDITIONAL ITEM--EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company were, at June 30, 2001, as follows:
<TABLE>
                                                                                                 Year First Elected
         Name                       Age              Positions and Offices Held                  an Executive Officer
<S>                                 <C>              <C>                                                  <C>
William R. Dutmers                  45               Chairman of the Board of Directors,
                                                     Chief Executive Officer and President                1998

Michael G. Van Rooy                 49               Senior Vice President of Manufacturing               1993

James S. Dahlke                     51               Vice President of Business Development               1999

Leslie J. Cummings                  36               Vice President of Finance and Treasurer              2000
</TABLE>
     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 and President in May 1999.  Mr.  Dutmers was the
President of G & L, Inc., a business consulting firm, from 1991 to 1997.

     Mr. Van Rooy has been the Senior  Vice  President  of  Manufacturing  since
December  1993.  Mr.  Van Rooy  joined the  Company  in 1985 in the  engineering
department and has held a variety of management positions.

     Mr. Dahlke was named the Vice President of Business  Development in October
1999.  Mr.  Dahlke  joined the Company in August 1999.  Mr. Dahlke served as the
President and Chief  Operating  Officer of Harrow  Industries from 1996 to 1999.
Prior to that he served as President and CEO of Medalist Industries.

     Ms.  Cummings was named the 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 Herman Miller, Inc. from 1992 to 1998.

     All terms of office are on an annual  basis and will  expire on October 12,
2001.

                                       4
<PAGE>
                                    PART II

            ITEM 5--MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
                COMMON STOCK AND RELATED SECURITY HOLDER 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 24, 2001, there were approximately  3,100 shareholders
of the Company's Common Stock and Class B Common Stock.
<TABLE>
                                                   Fiscal 2001                            Fiscal 2000
                                     -------------------------------------------------------------------------------
Quarter                                      High                Low               High                Low
--------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                 <C>                <C>                 <C>
First                                      $15.438             $14.00             $16.02              $11.93
Second                                     $15.00              $11.875            $15.80              $12.56
Third                                      $14.25              $12.375            $16.36              $12.44
Fourth                                     $13.875             $12.14             $16.00              $13.52
</TABLE>


     Dividends.  The  Company  paid per share  cash  dividends  on its shares of
Common Stock and Class B Common Stock in the following  amounts  during the last
two fiscal years.

<TABLE>
                                                                        Per Share Cash Dividends
Year Ended June 30, 2001                                      Common Stock               Class B Common Stock
------------------------                                      ------------               --------------------
<S>                                                               <C>                            <C>
First Quarter                                                     $.165                          $.15
Second Quarter                                                    $.165                          $.15
Third Quarter                                                     $.165                          $.15
Fourth Quarter                                                    $.165                          $.15
</TABLE>

<TABLE>
                                                                        Per Share Cash Dividends
Year Ended July 1, 2000                                       Common Stock               Class B Common Stock
-----------------------                                       ------------               --------------------
<S>                                                               <C>                            <C>
First Quarter                                                     $.15                           $.136
Second Quarter                                                    $.15                           $.136
Third Quarter                                                     $.15                           $.136
Fourth Quarter                                                    $.165                          $.15
</TABLE>



     On August 10, 2001, 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 7, 2001, to
shareholders of record on August 24, 2001.

                                       5
<PAGE>
                         ITEM 6--SELECTED FINANCIAL DATA
<TABLE>
For the Year Ended                                      2001              2000             1999                1998           1997
------------------------------------------------------------------------------------------------------------------------------------


                                                                                     (a)                 (b)             (c)
<S>                                              <C>               <C>              <C>                 <C>             <C>
Summary of Operations
Net sales...................................     $140,509,875      $149,836,870     $150,259,355        $181,632,570    $176,630,294
  Sales growth %............................           (6.2)%            (0.3)%          (17.3)%                2.8%            8.4%
Gross profit................................       38,029,038        40,961,356       36,092,104          42,299,900      43,548,529
  Gross profit %............................            27.1%             27.3%            24.0%               23.3%           24.7%
Selling and administrative..................       27,258,034        26,400,042       25,721,924          29,152,388      28,436,330
  Selling and administrative %..............            19.4%             17.6%            17.1%               16.1%           16.1%
Operating income (loss).....................       10,471,004        14,456,314        9,770,180         (2,644,764)      14,738,964
  Operating income (loss) %.................             7.5%              9.6%             6.5%              (1.5)%            8.3%
Income (loss) from continuing operations....        5,615,065         8,423,730        6,161,769         (8,369,182)       8,325,228
Loss from discontinued operation............                -                 -                -         (1,368,278)       (471,624)
Net income (loss)...........................        5,615,065         8,423,730        6,161,769         (9,737,460)       7,853,604


Common Stock Data
Diluted earnings per share from continuing
operations..................................             1.22              1.80             1.13              (1.28)            1.28
Diluted earnings per share from discontinued
operation...................................                -                 -                -              (0.21)          (0.07)
Diluted earnings per share..................             1.22              1.80             1.13              (1.49)            1.21
Weighted-average shares outstanding-diluted.        4,618,250         4,684,125        5,445,009           6,550,184       6,493,561
Dividends per share--common.................             0.66             0.615            0.600               0.600           0.600
Dividends per share--Class B common.........             0.60             0.559            0.545               0.545           0.545
Year-end stock price........................            12.66             15.25            16.02               20.45           14.55


Year-end Financial Position
Total assets................................       89,803,393        88,287,652       75,059,989         104,033,087     125,741,698
Working capital.............................       18,465,603        16,378,393       18,135,700          38,276,167      39,266,034
Current ratio...............................              2.0               1.7              2.0                 2.5             4.2
Long-term debt..............................       23,750,000        20,050,000       17,700,000           9,700,000      29,000,000
Long-term debt as a % of total capital......            39.0%             36.6%            35.8%               13.6%           28.3%
Stockholders' equity........................       37,132,697        34,706,630       31,758,785          61,756,674      73,460,498


Other Data/Key Ratios
Cash flow from operating activities.........        8,788,239        17,269,946       13,471,459          23,234,772      16,186,397
Capital expenditures........................        9,282,239         9,112,810        4,786,263           4,228,552       7,763,482
Depreciation and amortization...............        6,340,647         5,862,588        5,914,739           7,966,383       7,728,603
Return on average assets....................             6.3%             10.3%             6.9%              (8.5)%            6.2%
Return on average equity....................            15.6%             25.3%            13.2%             (14.4)%           11.0%
Number of employees.........................              846               890              846                 944           1,061



------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


(a)  1999 figures include an impairment  charge of $600,000  pre-tax and an
     inventory  write-off of $400,000 pre-tax recorded for the discontinuance of
     certain  utility  slides.  This  resulted  in  an  after-tax  reduction  of
     $650,000, or $0.12 per diluted share.

(b)  1998 figures include 1) an adjustment to the inventory obsolescence reserve
     of $910,000  recorded in cost of sales; 2) a  restructuring  charge for the
     reorganization of KV Canada of $3,992,276  recorded in operating  expenses,
     and an  income  tax  benefit  of  $600,000,  for  an  after-tax  effect  of
     $3,392,276,  or $0.52 per diluted  share;  3) an impairment  charge for the
     sale of Hirsh of $11,800,000 recorded in operating expenses,  and an income
     tax expense of $1,000,000, for an after-tax effect of $12,800,000, or $1.96
     per diluted share;  4) a $448,284  write-off of idle  equipment;  and 5) an
     after-tax  charge of $937,268,  or $0.15 per diluted  share,  to record the
     sale of Roll-it, a discontinued operation.

(c)  1997 figures include an after-tax charge of $246,235,  or $0.04 per diluted
     share, to record the March 1997 sale of Modar.

                                       6
<PAGE>
       ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     The following discussion and analysis provides information which management
believes  is  relevant  to an  assessment  and  understanding  of the  Company's
financial condition and results of operations.  The discussion should be read in
conjunction with the consolidated financial statements and footnotes.

Overview

     The Company recorded  revenues of $140.5 million for fiscal 2001,  compared
to $149.8  million in the prior year. The overall  slowdown in the U.S.  economy
negatively  impacted the  Company's two key markets:  office  furniture and home
storage  products.  Net income was $5.6  million or $1.22 per  diluted  share in
fiscal 2001 compared to $8.4 million or $1.80 per diluted share in fiscal 2000.

     Despite the  downturn in the  Company's  key  markets in fiscal  2001,  the
Company  remains  committed to introducing  new and  innovative  products to the
market  along  with   containing  its  costs  through  the  principles  of  lean
manufacturing.  During fiscal 2001,  the Company  introduced 20 new products and
has several additional products, which will be introduced during fiscal 2002.

Results of Operations

     The table below  shows  certain  items in the  Consolidated  Statements  of
Operations as a percentage of net sales:
<TABLE>

                                                                 June 30,            July 1,           June 30,
Year ended                                                           2001               2000               1999
----------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                <C>                <C>
Net sales..................................                         100.0%             100.0%             100.0%
Cost of sales..............................                          72.9               72.7               76.0
                                                      ----------------------------------------------------------
  Gross margin.............................                          27.1               27.3               24.0
Selling and administrative expenses........                          19.4               17.6               17.1
Restructuring and impairment of assets.....                            .2                 .1                 .4
                                                      ----------------------------------------------------------
  Operating income.........................                           7.5                9.6                6.5
Interest expense...........................                           1.2                1.0                 .5
Other expense (income).....................                            .2                   -               (.2)
                                                      ----------------------------------------------------------
Income before income taxes.................                           6.1                8.6                6.2
Income taxes...............................                           2.1                3.1                2.1
                                                      ----------------------------------------------------------
Net income.................................                           4.0%               5.5%               4.1%
----------------------------------------------------------------------------------------------------------------
</TABLE>

Sales

     In accordance  with  Statement of Financial  Accounting  Standards No. 131,
Disclosure about Segments of an Enterprise and Related Information,  the Company
operates as a single reportable segment. While the Company does not maintain its
sales  records  by  product  category,   management  believes  the  table  below
(unaudited)  approximates  total net sales (in millions) for each of the product
categories:

<TABLE>
                                          June 30,                       July 1,                      June 30,
Year ended                                    2001             %            2000             %            1999             %
-----------------------------------------------------------------------------------------------------------------------------
<S>                                       <C>              <C>          <C>              <C>          <C>              <C>
Shelving systems                          $   38.6         27.5%        $   49.3         32.9%        $   55.5         37.0%
Drawer slides                                 64.7         46.0%            70.0         46.7%            70.8         47.1%
Hardware/Other                                37.2         26.5%            30.5         20.4%            24.0         15.9%
-----------------------------------------------------------------------------------------------------------------------------

Total                                     $  140.5          100%        $  149.8          100%        $  150.3          100%
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>


     Net sales in fiscal  2001 were  $140.5  million.  This  represented  a 6.2%
decline  from  the  prior  year.  The  overall  weakness  in the  U.S.  economy,
especially during the second half of the fiscal year, was the primary reason for
the  decline.   Despite  the  softness  in  the  overall  office  furniture  and
storage-related   markets,   the   Company's   ergonomic   product   line   grew
substantially,  more than  doubling  the sales  volume from the prior year.  The
Company  successfully  launched  several new  products,  including  an ergonomic
lighting  line and several  next-generation  products in both drawer  slides and
kitchen and bath  accessories.  Most of these  products  were  introduced to the
market during the fourth  quarter of fiscal 2001, so the impact on net sales was
modest.

                                       7
<PAGE>
     Net sales in fiscal 2000 were  $149.8  million.  This was a slight  decline
from fiscal 1999 and was due  exclusively to the impact of Hirsh sales in fiscal
1999.  Excluding  the impact of The Hirsh  Company,  which was sold in September
1998,  fiscal 1999 net sales were $142.8  million.  Accordingly,  on like sales,
fiscal 2000 net sales actually increased approximately $7.0 million or 4.9%. The
growth  resulted  from the  ergonomic  products  introduced  as a result  of the
acquisition  of Idea  Industries  and strong  sales of the  Company's  precision
drawer slides.

     Net  sales in fiscal  1999  declined  $31.4  million,  or 17.3%,  to $150.3
million.  The most significant decline was in shelving systems and was primarily
due to the sales  contribution  of Hirsh. In addition,  the Company  performed a
profitability review of its current product offerings and decided to discontinue
certain  product lines that were either  unprofitable or provided only a minimal
return.  Specifically,  the Company opted to redeploy  production assets,  which
were utilized to produce  certain  utility  slides to the production of the more
profitable  precision  drawer  slides.  While this decision  improved the bottom
line, it did result in lower net sales for fiscal 1999.

Gross Margin

     Gross  margin,  as a  percentage  of net sales,  was 27.1% in fiscal  2001,
compared to 27.3% in fiscal 2000 and 24.0% in fiscal 1999.  Despite the decrease
in sales volume in fiscal 2001,  the gross profit  margin only declined 20 basis
points.  The  increase  in gross  margins in fiscals  2001 and 2000  compared to
fiscal 1999 was  attributable  to cost  improvement  savings  realized  from the
ongoing lean  manufacturing  initiatives  in all of the Company's  locations and
from the higher mix of ergonomic products in the sales mix.

Selling and Administrative

     Selling and administrative  expenses, as a percent of net sales, were 19.4%
in fiscal 2001,  compared to 17.6% in fiscal 2000 and 17.1% in fiscal 1999.  The
increase  in 2001  from the prior  year  reflects  the fact  that the  ergonomic
product line has a higher  level of selling  costs  associated  with it than the
Company's other product lines. In addition, the Company incurred severance costs
of  approximately  $350,000 in the third quarter of fiscal 2001  associated with
the layoffs, which took place in January 2001.

     The  increase in fiscal  2000  compared  to fiscal  1999  represents  costs
incurred  to launch  several  new  products  and costs,  such as  royalties  and
goodwill, associated with the Idea acquisition.

Restructuring/Impairment

     In the third  quarter  of  fiscal  2001,  the  Company  recorded  a pre-tax
impairment  loss on the assets held for sale of $.3 million in  accordance  with
Financial Accounting Standard No. 121. The loss reflected new information, which
lowered the Company's estimate of the fair market value of the properties listed
for sale. In fiscal 2000, the Company had recorded a loss of $.1 million,  which
was its best estimate at that time of the loss to be incurred on the sale of the
Company's former powder coat facility

     In the  second  quarter  of fiscal  1999,  as a result of the  decision  to
redeploy  certain  utility  slide  production  assets,  the Company  recorded an
impairment  loss of $.6 million pre-tax to write down the related tooling assets
to their  estimated  fair value.  In addition,  excess  inventory of $.4 million
pre-tax related to the  discontinued  product lines was charged directly to cost
of sales.

Other Expenses/(Income) and Income Taxes

     Interest expense was $1.6 million in fiscal 2001,  compared to $1.4 million
and $.8 million,  respectively,  in fiscal years 2000 and 1999.  The increase in
interest expense during fiscal 2001 and fiscal 2000 reflects the higher level of
borrowings  needed to support the Idea  acquisition,  capital  expenditures  and
share repurchases.

     Other  miscellaneous  expense was $.3 million in fiscal  2001,  compared to
$2,345  in fiscal  2000 and other  income of $.4  million  in fiscal  1999.  The
increase in fiscal 2001 compared to fiscal 2000 reflects  losses incurred on the
disposal of fixed  assets.  Fiscal 1999 included  interest  received on Michigan
Single Business Tax refunds and two patent infringement  settlements,  partially
offset by losses incurred on the disposal of fixed assets.

     The  effective  tax rate was 34.6% in  fiscal  2001,  compared  to 35.4% in
fiscal 2000 and 33.9% in fiscal 1999. See Note 10 to the Consolidated  Financial
Statements for a reconciliation of the effective tax rate.

Net Income

     Net income was $5.6  million,  or $1.22 per diluted  share,  in fiscal 2001
compared to $8.4 million,  or $1.80 per diluted  share,  in fiscal 2000 and $6.2
million,  or $1.13 per diluted share in fiscal 1999.  The decline in fiscal 2001
was  primarily  due to the  decrease in overall  sales  volume.  The fiscal 2000
increase over fiscal 1999 reflected the gross profit improvement achieved during
fiscal 2000.

                                       8
<PAGE>
Liquidity And Capital Resources

     Cash flows from operating activities generated $8.8 million in fiscal 2001,
compared to $17.3 million in fiscal 2000 and $13.5  million in fiscal 1999.  The
decline in fiscal 2001  resulted  in part from a decrease  in net income,  lower
accounts payable levels due to a decrease in overall purchases and a decrease in
payroll-related  accruals,  which were variable with the Company's  performance.
The  improvement in fiscal 2000 compared to fiscal 1999 reflected the higher net
income earned during the year and improved working capital performance.

     Cash flows used in investing  activities  were $9.8 million in fiscal 2001.
During fiscal 2001, the Company  incurred $9.3 million of capital  expenditures,
compared to $9.1  million  and $4.8  million,  respectively,  in fiscal 2000 and
1999.  The  expenditures  in fiscal  2001 and  fiscal  2000 were  primarily  for
improvements  in the  Company's  manufacturing  processes  and  tooling  for new
products.  Management  believes that capital  expenditures  will approximate the
level of depreciation in fiscal 2002, as investments will be focused on bringing
new products and product  enhancements to the Company's  customers.  The cost to
complete the items  classified as  construction in progress at June 30, 2001 was
estimated to be approximately $2.1 million. Investing activities in fiscals 2001
and 2000 also included the net cash paid for the acquisition of Idea Industries,
Inc (Idea).

     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 has been recorded as goodwill and is being amortized on a straight-line
basis over 15 years.

     The  terms  of the  Idea  acquisition  agreement  provided  for  additional
consideration to be paid if Idea' s sales exceeded certain targeted levels.  The
maximum amount of contingent consideration was $550,000 payable through 2001. In
calendar year 1999, the  additional  consideration  payment was $44,255,  and in
calendar year 2000, the remaining contingent  consideration was earned and paid.
All additional consideration paid was recorded as goodwill.

     The results of the Idea  acquisition  were not  material  to the  Company's
consolidated  operating results,  therefore pro forma financial  statements have
not been prepared.

     Following  the  financial  strategy  announced in fiscal 1998,  the Company
completed  a Dutch  Auction  early in the second  quarter of fiscal  1999.  This
resulted in the repurchase of 1,353,862 shares of the Company's stock at a price
of $19.09 per share.  In addition,  the Board also  approved the purchase in the
open market or in privately negotiated transactions, following the completion of
the Dutch Auction,  of shares of common stock in an amount which,  when added to
the number of shares of common stock purchased in the Dutch Auction, would equal
1,485,000.  At each of the January 22, 1999 and the August 20, 1999, meetings of
the Board of Directors,  the Board approved an additional 440,000 shares for the
stock repurchase program. Utilizing these Board authorizations,  the Company has
purchased an additional  635,150  shares through the end of the fiscal 2001 with
the price per share ranging from approximately $12 to $17. In total, the Company
spent  approximately  $35.7 million on share repurchases.  At June 30, 2001, the
Company has remaining authorization to repurchase an additional 375,988 shares.

     On April 14, 2000, the Board of Directors  declared a 10% stock dividend of
the  Company's  common  stock  and  Class  B  common  stock.  On May  19,  2000,
shareholders received one additional share of stock for each 10 shares held. All
per share data and weighted  average  shares  outstanding  have been restated to
reflect the 10% stock dividend.

     During fiscal 1999, the Company renegotiated its revolving credit facility.
The new facility allows for borrowings up to $45 million and expires on November
1, 2004. In addition,  the Company  entered into an interest rate swap agreement
in order to fix the  interest  rate on a  portion  of the  borrowings  under the
revolving  credit facility.  The swap agreement,  which expires on June 1, 2006,
fixed the interest on $17 million of  borrowings  through  August 31, 1999,  and
increased to $20 million on September 1, 1999. The swap agreement fixed the rate
at 6.25% plus the Company's credit spread on the revolving credit agreement.

     On October 29, 1999,  the revolving  credit  facility was amended to modify
certain  covenants.  At June 30, 2001, the Company was in compliance with all of
the covenants.

     The  Company's  outstanding  debt at June  30,  2001,  was  $23.8  million,
compared  to $20.1  million  in fiscal  2000.  The debt to total  capital  ratio
increased  to 39.0% at June 30,  2001,  from 36.6% at July 1, 2000.  The Company
continues to manage its debt levels in an effort to reach its  targeted  capital
structure.  The  Company  believes  that cash  flows from  operations  and funds
available  under the credit  facility will be sufficient to fund working capital
requirements and capital expenditures in fiscal 2002.

                                       9
<PAGE>
Legal Contingencies

     In September  1998 when the Company sold The Hirsh  Company,  the purchaser
assumed  the lease for the  facility  located in Skokie,  Illinois.  The Company
guaranteed all of the lease  obligations to the landlord  through the expiration
of the lease in August 2000. During fiscal 2000, the purchaser  defaulted on the
lease  agreement  and the  landlord  filed suit  against the  purchaser  and the
Company as the guarantor.  The claim is for unpaid rent,  unpaid property taxes,
building repairs and legal costs.

     A former  employee,  in  connection  with  benefits paid under an executive
retirement  plan, has also sued the Company.  The initial ruling was in favor of
the former employee; however, the Company has filed an appeal in the case.

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

     In the opinion of management, based on the information presently known, the
ultimate liability for these matters,  taking into account established  accruals
of  approximately  $947,000  will not have a  materially  adverse  effect on the
Company's financial position or the results of its operations.

Inflation

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

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.

                                       10
<PAGE>
                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 6 - Long-Term Debt and Note 8
-  Derivative  Financial  Instruments.   Quantitative  disclosures  relating  to
financial instruments and debt are included in the tables below.

     The following  table provides  information on the Company's  fixed maturity
investments  as of June 30,  2001,  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.
<TABLE>
Liability                                           Amount                     Maturity Date
-----------------------------------------------------------------------------------------------------
<S>                                                 <C>                        <C>
Variable rate revolving credit
 agreement                                          $45 million                November 1, 2004
 First $20,000,000 at an interest rate of 4.00%
    plus weighted average credit spread of .625%
 Amounts in excess of $20,000,000 had an interest rate
    ranging from 4.455% to 7.68% in 2001

Interest Rate Swaps
Notional amount                                     $17 million                August 31, 1999
 Increased to                                       $20 million                June 1, 2006
 Pay fixed/Receive variable - 4.00%
    Pay fixed interest rate - 6.25%
</TABLE>
     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 margins 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.

                                       11
<PAGE>
               ITEM 8--FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Immediately  following are the  consolidated  balance sheets of the Company
and its  subsidiaries  as of June 30,  2001 and July 1,  2000,  and the  related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three years in the period ended June 30, 2001, the notes thereto, summary
of accounting policies, and the independent auditors' report.

                                       12
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                      Consolidated Statements of Operations
<TABLE>
---------------------------------------------------------------------------------------------------------------------------
   Year ended                                                   June 30, 2001         July 1, 2000        June 30, 1999
   ------------------------------------------------------------------------------------------------------------------------
   <S>                                                          <C>                  <C>                  <C>
   Net Sales                                                    $ 140,509,875        $ 149,836,870        $ 150,259,355

   Cost of Sales                                                  102,480,837          108,875,514          114,167,251
   ------------------------------------------------------------------------------------------------------------------------

   Gross Profit                                                    38,029,038           40,961,356           36,092,104
   ------------------------------------------------------------------------------------------------------------------------

   Expenses
            Selling and shipping                                   22,199,834           20,891,588           19,953,864
            Administrative and general                              5,058,200            5,508,454            5,768,060
            Restructuring and impairment of assets                    300,000              105,000              600,000
   ------------------------------------------------------------------------------------------------------------------------

   Total Expenses                                                  27,558,034           26,505,042           26,321,924
   ------------------------------------------------------------------------------------------------------------------------

   Operating Income                                                10,471,004           14,456,314            9,770,180
   ------------------------------------------------------------------------------------------------------------------------

   Other Expenses (Income)
            Interest                                                1,611,942            1,407,239              802,202
            Other, net                                                276,997                2,345             (355,791)
   ------------------------------------------------------------------------------------------------------------------------

   Total Other Expenses                                             1,888,939            1,409,584              446,411
   ------------------------------------------------------------------------------------------------------------------------

   Income Before Income Taxes                                       8,582,065           13,046,730            9,323,769

   Income Taxes                                                     2,967,000            4,623,000            3,162,000
   ------------------------------------------------------------------------------------------------------------------------

   Net Income                                                   $   5,615,065        $   8,423,730        $   6,161,769
   ------------------------------------------------------------------------------------------------------------------------

   Basic Earnings Per Share                                     $        1.22        $        1.80        $        1.13
   ------------------------------------------------------------------------------------------------------------------------
   Basic Weighted Average Shares Outstanding                        4,616,881            4,679,918            5,432,192
   ------------------------------------------------------------------------------------------------------------------------

   Diluted Earnings  Per Share                                  $        1.22        $        1.80        $        1.13
   ------------------------------------------------------------------------------------------------------------------------
   Diluted Weighted Average Shares Outstanding                      4,618,250            4,684,125            5,445,009
   ------------------------------------------------------------------------------------------------------------------------

   Dividends Per Share
            Common stock                                        $        .660        $        .615        $        .600
            Class B common stock                                $        .600        $        .559        $        .545
   ------------------------------------------------------------------------------------------------------------------------
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       13
<PAGE>
              Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
--------------------------------------------------------------------------------------------------------------------




                                                                                June 30, 2001        July 1, 2000
--------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
Assets

Current Assets
         Cash                                                                $      2,113,940    $      2,351,622
         Accounts receivable, less allowances of $561,000 and $556,000,
          respectively                                                             17,822,214          20,631,951
         Refundable income taxes                                                      136,832             140,086
         Inventories                                                               14,290,096          15,092,393
         Prepaid expenses                                                           1,436,107           1,213,607
         Net assets held for sale                                                   1,698,521           1,779,405
--------------------------------------------------------------------------------------------------------------------

Total Current Assets                                                               37,497,710          41,209,064
--------------------------------------------------------------------------------------------------------------------

Property and Equipment
         Land and improvements                                                      1,175,115           1,156,531
         Buildings                                                                 16,041,892          14,489,756
         Machinery and equipment                                                   60,288,479          53,349,222
         Construction in progress                                                   2,044,247           4,636,979
--------------------------------------------------------------------------------------------------------------------

                                                                                   79,549,733          73,632,488
         Less accumulated depreciation                                             38,524,582          35,270,625
--------------------------------------------------------------------------------------------------------------------

Net Property and Equipment                                                         41,025,151          38,361,863
--------------------------------------------------------------------------------------------------------------------

Goodwill, net                                                                       5,137,697           4,978,420
--------------------------------------------------------------------------------------------------------------------

Other Assets                                                                        6,142,835           3,738,305
--------------------------------------------------------------------------------------------------------------------

                                                                             $     89,803,393    $     88,287,652
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       14
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
--------------------------------------------------------------------------------------------------------------------




                                                                                June 30, 2001        July 1, 2000
--------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
Liabilities and Stockholders' Equity

Current Liabilities
         Accounts payable                                                    $     10,366,596    $     12,833,665
         Accruals:
                  Income taxes                                                              -           1,317,297
                  Taxes other than income                                             600,814             560,809
                  Compensation                                                      2,063,900           4,689,373
                  Restructuring costs                                                 225,713             252,241
                  Miscellaneous                                                     5,775,084           5,177,286
--------------------------------------------------------------------------------------------------------------------

Total Current Liabilities                                                          19,032,107          24,830,671

Supplemental Retirement Benefits                                                    4,560,288           4,488,351

Long-Term Debt                                                                     23,750,000          20,050,000

Deferred Income Taxes                                                               4,785,000           4,212,000

Other Long-Term Liabilities                                                           543,301                   -
--------------------------------------------------------------------------------------------------------------------

Total Liabilities                                                                  52,670,696          53,581,022
--------------------------------------------------------------------------------------------------------------------

Stockholders' Equity
         Stock:
              Common, $2 par - 6,000,000 shares authorized; 2,272,921
                 and 2,222,852 issued                                               4,545,842           4,445,704
              Class B common, $2 par - 4,000,000 shares authorized;
                 2,339,920 and 2,392,853 issued                                     4,679,840           4,785,706
              Preferred - 2,000,000 shares authorized and unissued                          -                   -
        Additional paid-in capital                                                  8,502,727           8,482,908
        Unearned stock grant                                                          (94,500)            (94,500)
        Accumulated other comprehensive loss                                       (1,476,092)         (1,169,577)
        Retained earnings                                                          20,964,880          18,256,389
--------------------------------------------------------------------------------------------------------------------

Total Stockholders' Equity                                                         37,132,697          34,706,630
--------------------------------------------------------------------------------------------------------------------

                                                                             $     89,803,393    $     88,287,652
--------------------------------------------------------------------------------------------------------------------
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       15
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------




                                                                                       Accumulated
                                                        Additional    Restricted             other
                                            Common         paid-in         stock     comprehensive      Retained
                                             stock         capital        grants     income (loss)      earnings           Total
---------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>           <C>             <C>           <C>              <C>           <C>
Balance, June 30, 1998                 $11,871,250   $  33,724,990   $         -   $             -  $ 16,160,434  $   61,756,674
Net income for 1999                              -               -             -                 -     6,161,769       6,161,769
Cash dividends                                   -               -             -                 -    (3,116,977)     (3,116,977)
Stock issued under stock option plan        75,986         472,431             -                 -             -         548,417
Tax benefit from exercise
      of stock options                           -          69,133             -                 -             -          69,133
Stock grants issued                         21,000         215,250      (236,250)                -             -               -
Stock grants earned                              -               -       236,250                 -             -         236,250
Repurchase and retirement of
      shares of common stock            (3,345,486)    (30,072,389)            -                 -             -     (33,417,875)
Foreign currency translation
      adjustment                                 -               -             -           (29,983)            -         (29,983)
Minimum SERP adjustment, net of tax
      benefit of $263,901                        -               -             -          (448,623)            -        (448,623)
---------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1999                   8,622,750       4,409,415             -          (478,606)   19,205,226      31,758,785
Net income for 2000                              -               -             -                 -     8,423,730       8,423,730
Cash dividends                                   -               -             -                 -    (2,741,146)     (2,741,146)
10% stock dividend                         841,308       5,783,992             -                 -    (6,631,421)         (6,121)
Stock issued under stock option plan        26,610         173,623             -                 -             -         200,233
Tax benefit from exercise
      of stock options                           -           8,671             -                 -             -           8,671
Stock grants issued                         12,000          82,500       (94,500)                -             -               -
Repurchase and retirement of
      shares of common stock              (271,258)     (1,975,293)            -                 -             -      (2,246,551)
Foreign currency translation
      adjustment                                 -               -             -            (9,019)            -          (9,019)
Minimum SERP adjustment, net of tax
      benefit of $353,000                        -               -             -          (681,952)            -        (681,952)
---------------------------------------------------------------------------------------------------------------------------------

Balance, July 1, 2000                    9,231,410       8,482,908       (94,500)       (1,169,577)   18,256,389      34,706,630
Net income for 2001                                                                                    5,615,065       5,615,065
Cash dividends                                                                                        (2,906,574)     (2,906,574)
Restricted stock issued                      3,296          21,787                                                        25,083
Stock issued under stock option plan         3,656          12,266                                                        15,922
Tax benefit from exercise
      of stock options                                       3,623                                                         3,623
Repurchase and retirement of
      shares of common stock                (2,680)        (17,857)                                                      (20,537)
Foreign currency translation
      adjustment                                                                           (47,557)                      (47,557)
Derivative adjustment, net of tax
      benefit of $190,000                                                                 (353,301)                     (353,301)
Minimum SERP adjustment, net of tax
      benefit of $53,000                                                                    94,343                        94,343
---------------------------------------------------------------------------------------------------------------------------------

Balance, June 30, 2001                 $ 9,235,682   $   8,502,727   $   (94,500)  $    (1,476,092) $ 20,964,880  $   37,132,697
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       16
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                      Consolidated Statements of Cash Flows
<TABLE>
-------------------------------------------------------------------------------------------------------------------------



                                                                            June 30,          July 1,          June 30,
Year ended                                                                      2001             2000              1999
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>             <C>               <C>
Operating Activities
    Net income                                                         $   5,615,065   $    8,423,730    $    6,161,769
    Adjustments to reconcile net income to net cash provided by
        operating activities:
        Depreciation of fixed assets                                       5,758,085        5,027,282         5,123,290
        Amortization of other assets                                         582,562          835,306           791,449
        Increase (decrease) in deferred income taxes                         700,000         (308,000)         (810,856)
        Increase in supplemental retirement benefits                         224,150          299,101           605,313
        Increase in prepaid pensions                                      (2,629,211)      (1,175,341)                -
        Decrease in deferred lease costs                                           -                -           (93,248)
        Impairment loss                                                      300,000          105,000           600,000
        Loss on disposal of property and equipment                           352,978           37,855           593,431
        Stock grants earned                                                        -                -           236,250
        Changes in operating assets and liabilities (net
          of acquisition):
            Decrease (increase) in:
                Accounts receivable                                        2,773,260       (1,045,595)        6,717,542
                Refundable income taxes                                            -                -            33,961
                Inventories                                                  802,297       (1,692,041)         (341,117)
                Net assets held for sale                                           -                -           490,116
                Prepaid expenses                                            (222,605)         683,326           882,696
            Increase (decrease) in:
                Accounts payable                                          (2,182,455)       2,515,619        (8,631,246)
                Accrued restructuring costs                                  (16,761)        (123,512)         (436,172)
                Accruals                                                  (3,269,126)       3,687,216         1,548,281
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by operating activities                              8,788,239       17,269,946        13,471,459
-------------------------------------------------------------------------------------------------------------------------

Investing Activities
    Additions to property and equipment                                   (9,282,239)      (9,112,810)       (4,786,263)
    Proceeds from sales of property and equipment                              7,301            4,330            20,250
    Net cash paid for acquisition                                           (505,745)      (5,309,674)                -
    Proceeds from the sale of The Hirsh Company                                    -                -        18,157,884
    Other, net                                                               (11,228)         328,332          (312,330)
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) investing activities                  (9,791,911)     (14,089,822 )      13,079,541
-------------------------------------------------------------------------------------------------------------------------

Financing Activities
    Proceeds from issuance of common stock                                    15,922          200,233           548,417
    Repurchase and retirement of common stock                                (20,537)      (2,246,551)      (33,417,875)
    Cash dividends declared                                               (2,906,574)      (2,747,267)       (3,116,977)
    Borrowings on long-term debt                                           3,700,000        2,350,000         8,000,000
-------------------------------------------------------------------------------------------------------------------------

    Net cash provided by (used for) financing activities                     788,811       (2,443,585)      (27,986,435)
-------------------------------------------------------------------------------------------------------------------------

Effect of Exchange Rate Changes on Cash                                      (22,821)          (5,919)             (721)
-------------------------------------------------------------------------------------------------------------------------

Net Increase (Decrease) in Cash                                             (237,682)         730,620        (1,436,156)

Cash , beginning of year                                                   2,351,622        1,621,002         3,057,158
-------------------------------------------------------------------------------------------------------------------------

Cash, end of year                                                      $   2,113,940   $    2,351,622    $    1,621,002
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
                  See accompanying notes to consolidated financial statements.

                                       17
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements



1. Nature of        Knape & Vogt  Manufacturing  Company  and its  wholly  owned
   Operations       subsidiaries   (the   Company)   design,   manufacture   and
                    distribute functional hardware,  storage-related components,
                    and ergonomic products for original equipment manufacturers,
                    specialty  distributors,  hardware  chains  and  major  home
                    centers.  Based on the nature of its  products,  the Company
                    considers  its  business to be a single  operating  segment.
                    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       Principles of Consolidation
   Significant
   Accounting       The consolidated  financial  statements include the accounts
   Policies         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.

                    Effective July 1, 1999, the Company adopted a 52- or 53-week
                    fiscal year,  changing the year-end date from June 30 to the
                    Saturday  nearest  the end of June.  The fiscal  years ended
                    June 30, 2001 and July 1, 200 each contained 52 weeks.

                    Revenue Recognition and Concentration of Credit Risk

                    The Company  recognizes revenue upon shipment of products to
                    customers.  No single customer accounts for more than 10% of
                    consolidated sales.  Freight costs are invoiced to customers
                    and the  associated  expenses are netted  against  revenues.
                    Freight costs  approximated  $5.8 million,  $6.2 million and
                    $7.0 million for fiscal 2001,  2000 and 1999,  respectively.
                    The  Company   performs   ongoing  credit   evaluations  and
                    maintains reserves for potential credit losses.

                    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.

                    Fair Value of 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.

                    Cash Equivalents

                    The Company  considers  all highly liquid  investments  with
                    maturity of three  months or less when  purchased to be cash
                    equivalents.

                    Inventories

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

                                       18
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    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 30, 2001 was approximately $2.1 million.

                    Accounting for the Impairment of Long-Lived Assets

                    In  accordance  with  SFAS  No.  121,   Accounting  for  the
                    Impairment  of  Long-Lived   Assets,   the  Company  reviews
                    long-lived assets for impairment  whenever events or changes
                    in  circumstances  indicate  that the carrying  amount of an
                    asset may not be recoverable.

                    Goodwill

                    Goodwill   represents  the  amount  by  which  the  cost  of
                    businesses  purchased  exceeds  the  fair  value  of the net
                    assets acquired. Goodwill is amortized over periods of 15 to
                    40  years  using  the  straight-line   method.   Accumulated
                    amortization  of goodwill  was $734,563 and $388,095 at June
                    30,  2001  and  July  1,  2000,  respectively.  The  Company
                    periodically  reviews  goodwill  for  impairment  based upon
                    undiscounted operating income over the remaining life of the
                    goodwill.  While the  estimates  are  based on  management's
                    historical   experience  and  assumptions  regarding  future
                    operations,  the amounts the Company will ultimately realize
                    could differ from those used in the fiscal 2001 SFAS No. 121
                    analysis.

                    Income Taxes

                    The  Company  accounts  for certain  income and  expenses 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 bases 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.

                    Use of Estimates in Preparation of Financial Statements

                    The  preparation of financial  statements in accordance with
                    generally accepted accounting principles 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.

                    Advertising

                    Costs  incurred for  advertising,  including  costs incurred
                    under cooperative  advertising programs with customers,  are
                    expensed as  incurred.  Advertising  expense was $684,000 in
                    2001, $1,038,000 in 2000, and $799,000 in 1999.

                                       19
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


                    Earnings Per Share

                    Basic  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:
<TABLE>

                                                                 2001            2000           1999
                   ----------------------------------------------------------------------------------
                    <S>                                    <C>             <C>            <C>
                    Numerators:
                     Numerator for both basic and
                     diluted EPS, net income               $5,615,065      $8,423,730     $6,161,769
                   ----------------------------------------------------------------------------------
                    Denominators:
                     Denominator for basic EPS,
                     weighted-average common
                     shares outstanding                     4,616,881       4,679,918      5,432,192
                     Potentially dilutive shares
                     resulting from stock option
                     plans                                      1,369           4,207         12,817
                   ----------------------------------------------------------------------------------
                     Denominator for diluted EPS            4,618,250       4,684,125      5,445,009
                   ----------------------------------------------------------------------------------
</TABLE>

                    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.
<TABLE>
                                                                  2001            2000           1999
                   ----------------------------------------------------------------------------------
                    <S>                                         <C>             <C>            <C>
                    Exercise Price
                    $13.64                                      20,410               -              -
                    $14.09                                      20,350               -              -
                    $16.74                                      10,594          11,192         15,125
                    $18.18                                       9,625          10,725         14,850
</TABLE>

                    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.

                    New Accounting Standards

                    During  fiscal  2001,  the  Company  adopted  SFAS No.  133,
                    Accounting   for   Derivative    Instruments   and   Hedging
                    Activities,  as  amended  by SFAS  Nos.  137 and 138.  These
                    statements  establish  accounting  and  reporting  standards
                    requiring  that every  derivative  instrument be recorded in
                    the balance  sheet as an asset or liability  measured at its
                    current fair value and that changes in a  derivative's  fair
                    value be recognized  currently in the  determination  of net
                    income unless  specific hedge  accounting  criteria are met.
                    Adoption of these  statements is described in detail in Note
                    8.

                                       20
<PAGE>
              Knape & Vogt Manufacturing Company an d Subsidiaries
                   Notes to Consolidated Financial Statements

                    In June  2001,  the  Financial  Accounting  Standards  Board
                    finalized  FASB  Statements No. 141,  Business  Combinations
                    (SFAS  141),  and No.  142,  Goodwill  and Other  Intangible
                    Assets (SFAS 142). SFAS 141 requires the use of the purchase
                    method  of   accounting   and   prohibits  the  use  of  the
                    pooling-of-interest   method  of  accounting   for  business
                    combinations  initiated  after June 30, 2001.  SFAS 141 also
                    requires  that the  Company  recognize  acquired  intangible
                    assets apart from goodwill if the acquired intangible assets
                    meet  certain  criteria.  SFAS 141  applies to all  business
                    combinations  initiated after June 30, 2001 and for purchase
                    business combinations completed on or after July 1, 2001. It
                    also  requires,  upon adoption of SFAS 142, that the Company
                    reclassify  the carrying  amounts of  intangible  assets and
                    goodwill based on the criteria in SFAS 141.

                    SFAS 142  requires,  among other things,  that  companies no
                    longer  amortize  goodwill,  but instead  test  goodwill for
                    impairment at least annually. In addition, SFAS 142 requires
                    that the Company  identify  reporting units for the purposes
                    of  assessing  potential  future  impairments  of  goodwill,
                    reassess  the  useful  lives  of other  existing  recognized
                    intangible  assets,  and cease  amortization  of  intangible
                    assets with an indefinite  useful life. An intangible  asset
                    with  an  indefinite   useful  life  should  be  tested  for
                    impairment in accordance with the guidance in SFAS 142. SFAS
                    142 is  required  to be  applied in fiscal  years  beginning
                    after December 15, 2001 to all goodwill and other intangible
                    assets  recognized  at that date,  regardless  of when those
                    assets were  initially  recognized.  SFAS 142  requires  the
                    Company to complete a transitional  goodwill impairment test
                    six months  from the date of  adoption.  The Company is also
                    required to reassess  the useful  lives of other  intangible
                    assets  within the first interim  quarter after  adoption of
                    SFAS 142.

                    The Company's previous business  combinations were accounted
                    for using the purchase method.  As of June 30, 2001, the net
                    carrying  amount of goodwill is $5,137,697.  Currently,  the
                    Company  is  assessing  but has not yet  determined  how the
                    adoption of SFAS 141 and SFAS 142 will impact its  financial
                    position and results of operation.

                    Reclassifications

                    Certain  prior year  information  has been  reclassified  to
                    conform to the current year presentation.

3. Restructuring    In May 1998, the Company reorganized its Canadian operation,
   and Impairment   including the sale of the Company's  manufacturing  facility
   of Assets        and equipment in the Toronto area. The Company  continues to
                    sell and  distribute  its  products in Canada and maintain a
                    sales office in the Toronto area.

                    In 1998, the Company sold The Hirsh Company,  a wholly owned
                    subsidiary,  which manufactured free-standing shelving, wood
                    storage products and workshop accessories.

                    In connection with its restructuring activities, the Company
                    recorded reserves for various costs to be incurred.  Amounts
                    paid or charged against these reserves were as follows:

<TABLE>
                                        June 30,    Costs Paid   June 30,  Costs Paid    July 1,  Costs Paid  June 30,
                                            1998    or Charged       1999  or Charged       2000  or Charged      2001
                   --------------------------------------------------------------------------------------------------
                    <S>                 <C>         <C>          <C>       <C>          <C>        <C>        <C>
                    Facilities and
                    equipment           $ 13,221    $ (13,221)   $      -  $        -   $      -   $       -  $      -
                    Severance            419,429     (358,095)     61,334    (61,334)          -                     -
                    Settlement cost      378,263      (80,101)    298,162    (45,921)    252,241    (26,528)   225,713
                    Other exit costs      18,019             -     18,019    (18,019)          -                     -
                   --------------------------------------------------------------------------------------------------
                    Total               $828,932    $(451,417)   $377,515  $(125,274)   $252,241   $(26,528)  $225,713
                   --------------------------------------------------------------------------------------------------
</TABLE>
                                       21
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    During  the  second  quarter  of fiscal  1999,  the  Company
                    decided to redeploy certain drawer slide  production  assets
                    to product lines considered to have higher growth potential.
                    This resulted in the  write-down of the tooling ($.6 million
                    pre-tax) and excess inventory ($.4 million pre-tax,  charged
                    directly  to  cost of  sales)  related  to the  discontinued
                    product lines.

                    During  fiscal 2000,  the Company  offered its former powder
                    coat  facility for sale. As a result of this  decision,  the
                    related assets were  transferred to the category "Net Assets
                    Held for Sale" and a loss of $.1 million was recorded  based
                    upon a buy/sell agreement. The purchaser was unable to close
                    the transaction and the building  remains listed with a real
                    estate broker. In addition,  the Company has listed a former
                    facility  in  Muncie,  Indiana  for  sale.  Based  upon  new
                    information,  the Company recorded an additional  impairment
                    loss of $.3  million  pre-tax  during  the third  quarter of
                    fiscal 2001.

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  has  been  recorded  as
                    goodwill  and is being  amortized on a  straight-line  basis
                    over 15 years.

                    The terms of the Idea  acquisition  agreement  provided  for
                    additional consideration to be paid if Idea's sales exceeded
                    certain  targeted  levels.  The maximum amount of contingent
                    consideration was $550,000 payable through 2001. In calendar
                    year 1999, the additional  consideration payment was $44,255
                    and  in  calendar  year  2000,   the  remaining   contingent
                    consideration   was   earned   and  paid.   All   additional
                    consideration paid was recorded as goodwill.

                    The  results of the  acquisition  were not  material  to the
                    Company's  consolidated  operating  results,  therefore  pro
                    forma financial statements have not been prepared.

5. Inventories      Inventories are summarized as follows:
<TABLE>
                                                                  June 30, 2001      July 1, 2000
                    --------------------------------------------------------------------------------
                    <S>                                         <C>                <C>
                    Finished products                           $     9,916,080    $    8,778,556
                    Work in process                                   1,608,544         2,339,958
                    Raw materials and supplies                        2,765,472         3,973,879
                    --------------------------------------------------------------------------------

                                                                $    14,290,096    $   15,092,393
                    --------------------------------------------------------------------------------
</TABLE>

6. Long-Term        On June 1,  1999,  the  Company  replaced  its prior  credit
   Debt             facility with a new revolving credit agreement that provides
                    for up to  $45,000,000  in  borrowings  through  November 1,
                    2004.  At June 30,  2001,  there was a  $23,750,000  balance
                    outstanding  under this agreement.  The interest rate on the
                    first  $20,000,000  of the  outstanding  balance was 4.615%,
                    which was the  90-day  LIBOR  rate plus an  additional  62.5
                    basis  points  credit  spread.  The  interest  rate  on  the
                    remaining $3,750,000 was based on the federal funds rate and
                    averaged 4.7% for the month of June 2001.  The interest rate
                    is  adjusted  to  market  rates at the end of each  interest
                    period and is based on the 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 30, 2001, the non-use fee
                    was .150%.  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

                                       22
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    under  this   agreement  as  amended  to  maintain   certain
                    financial  ratios and,  at June 30,  2001 was in  compliance
                    with these covenants.

                    The Company  entered  into a seven-year  interest  rate swap
                    agreement with a fixed amount of $17,000,000  through August
                    31, 1999, and increasing to  $20,000,000  thereafter,  which
                    converts  a  corresponding  amount of the  revolving  credit
                    agreement  into a  fixed-rate  obligation  with an effective
                    interest rate of 6.25% plus the  Company's  credit spread on
                    the revolving  credit  agreement.  The swap  agreement  will
                    terminate on June 1, 2006.

7. Lease            The Company leases certain real property and equipment under
   Commitments      operating  lease  agreements,  which expire at various dates
                    through fiscal 2006.

                    Annual   minimum   rental   payments   required   under  all
                    noncancelable-operating     leases    are    as     follows:
                    2002-$421,000;  2003-$424,000;  2004-$247,000; 2005-$60,000;
                    2006-$15,000.  Rent expense under all  operating  leases was
                    approximately  $749,000,  $629,000,  and  $553,000 in fiscal
                    2001, 2000 and 1999, respectively.

8. Derivative       The Company has entered into an interest rate swap agreement
   Financial        designated as a partial hedge of the Company's variable rate
   Instruments      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 30,
                    2001,  the Company had an interest rate swap with a notional
                    amount of  $20,000,000.  Under this  agreement,  the Company
                    will pay the counterparty interest at a fixed rate of 6.25%,
                    and the  counterparty  will pay the  Company  interest  at a
                    variable  rate  equal  to  LIBOR.  The  LIBOR  rate  on this
                    agreement  was 4.0% at June 30, 2001.  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  30,  2001,  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 materially  adverse effect on
                    the  financial  position,  the results of operations or cash
                    flows of the Company.

                    The Company has  recognized an after-tax loss of $353,301 in
                    other  comprehensive  income.  The  loss  is  made up of the
                    following components:


<TABLE>
                                                                     Pre-tax                  After-tax
                     <S>                                              <C>                       <C>
                     Cumulative effect of a change in
                      accounting principle, as of July 1, 2000         $  797,871               $  518,616
                     Change in fair value of interest rate swap       (1,311,839)                (852,851)
                     Settlement to interest expense                      (29,333)                 (19,066)

                     Other Comprehensive loss                          $(543,301)               $(353,301)

</TABLE>

                    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 Company's  Board of Directors
                    annually approves  contributions to the defined contribution
                    plans.  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
                    30,  2001 and July 1, 2000 held a combined  total of 284,637
                    shares   of   the   Company's    Class   B   common   stock.

                                       23
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    The   defined   postretirement   health-care   plan   covers
                    substantially  all  employees.  The  plan  is  unfunded  and
                    contributory.
<TABLE>

                                                                              Postretirement
                                                         Pension Benefits     Health-Care Benefits
                   ------------------------------------------------------------------------------------
                                                        2001         2000          2001         2000
                   ------------------------------------------------------------------------------------
                   <S>                           <C>          <C>            <C>          <C>
                   Change in benefit obligations
                   Benefit obligations at
                      beginning of year          $13,569,998  $13,149,390    $2,893,226   $2,106,167
                   Service cost                      318,999      298,385       184,055      127,919
                   Interest cost                   1,005,090      908,750       211,427      189,623
                   Actuarial losses                  471,253      502,596       192,192      598,931
                   Benefits paid                    (777,180)  (1,290,191)     (281,954)    (129,414)
                   Other                             (29,068)       1,068             -            -
                   ------------------------------------------------------------------------------------
                   Benefit obligation at end of
                   year                          $14,559,092  $13,569,998    $3,198,946   $2,893,226
                   ------------------------------------------------------------------------------------
                   Change in plan assets
                   Fair value of plan assets
                   at beginning of year          $14,199,763  $13,833,561    $        -   $        -
                   Actual return on plan assets   (1,341,126)     253,090             -            -
                   Employer contributions          2,867,811    1,340,651       281,954      129,414
                   Benefits paid                    (777,180)  (1,290,191)     (281,954)    (129,414)
                   Other                            (246,534)      62,652             -            -
                   ------------------------------------------------------------------------------------
                   Fair value of plan assets at
                   end of year                   $14,702,734  $14,199,763   $         -  $         -
                   ------------------------------------------------------------------------------------
                   Funded status                 $   143,642  $   415,310   $(3,198,946) $(2,893,226)
                   Unrecognized transition amount   (144,977)    (184,900)      528,413      576,450
                   Unrecognized net actuarial
                     loss                          4,946,945    2,017,212     1,279,527    1,146,629
                   Unrecognized prior service
                     cost                            954,049    1,019,232             -            -
                   ------------------------------------------------------------------------------------
                   Prepaid (accrued) benefit cost $5,899,659  $ 3,266,854   $(1,391,006) $(1,170,147)
                   ------------------------------------------------------------------------------------
                   Weighted -average assumptions
                   Discount rate                        7.5%         7.5%          7.5%         7.5%
                   Expected return on plan assets       8.5%         8.5%           N/A          N/A
                   ------------------------------------------------------------------------------------
</TABLE>
                    The net periodic benefit cost related to the defined benefit
                    pension plans is made up of the following components:


<TABLE>
                                                                                   Post retirement
                                                           Pension Benefits        Health-Care Benefits
                    -----------------------------------------------------------------------------------------------
                                                    2001       2000        1999      2001        2000       1999
                    -----------------------------------------------------------------------------------------------
                    <S>                       <C>        <C>           <C>       <C>         <C>        <C>
                    Service cost                $318,999   $298,385    $307,112  $184,055    $127,919   $ 97,320
                    Interest cost              1,005,090    908,750     915,727   211,427     189,623    146,127
                    Expected return on
                    plan assets               (1,193,512)(1,080,874)   (841,093)        -           -          -
                    Net amortization             104,630    189,155     276,217   107,331     102,610     68,497
                    -----------------------------------------------------------------------------------------------

                    Net periodic pension
                    cost                        $235,207   $315,416    $657,963  $502,813     $420,152   $311,944
                    -----------------------------------------------------------------------------------------------
</TABLE>

                    The  health  care  cost  trend  rate used to  determine  the
                    postretirement  health-care benefit obligation was 5.78% for
                    2001.  This rate  decreases  gradually to 5.25% in 2002, and
                    remains  at  that  level  thereafter.  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:

                                       24
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements
<TABLE>
                    One-Percentage Point                               Increase          Decrease
                    --------------------------------------------------------------------------------
                    <S>                                         <C>                <C>
                    Effect on total of service and interest
                        cost components                         $        64,248    $      (52,813)
                    Effect on postretirement health-care
                        benefit obligation                              422,612          (355,583)
</TABLE>
                    The Company also has a non-qualified 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 pension benefit
                    obligation  and  pension  expense  under  this  plan  are as
                    follows:
<TABLE>
                                                                2001           2000          1999
                    ------------------------------------------------------------------------------
                    <S>                                   <C>            <C>           <C>
                    Pension benefit obligation            $3,167,304     $3,318,204    $2,275,996
                    Pension expense                          328,027        343,131       435,226
</TABLE>
                    Expense for the discretionary  profit-sharing  plan amounted
                    to $768,590,  $673,344 and $744,511 in fiscal 2001, 2000 and
                    1999, 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 $274,798, $143,791 and $195,483 in
                    fiscal 2001, 2000 and 1999, respectively.


10. Income Taxes    The components of income before income taxes consists of:
<TABLE>
                                                       June 30,           July 1,        June 30,
                    Year ended                             2001              2000            1999
                    --------------------------------------------------------------------------------
                    <S>                            <C>              <C>              <C>
                    United States                  $  7,950,175     $  12,056,990    $  9,098,594
                    Foreign                             631,890           989,740         225,175
                    --------------------------------------------------------------------------------

                    Income before income taxes     $  8,582,065     $  13,046,730    $  9,323,769
                    --------------------------------------------------------------------------------
</TABLE>

                    Income tax expense consists of:

<TABLE>
                                                      June 30,          July 1,          June 30,
                    Year ended                            2001             2000              1999
                    --------------------------------------------------------------------------------
                    <S>                          <C>              <C>              <C>
                    Current:
                             United States       $   2,208,000    $   4,600,000    $    3,950,000
                             State and local            59,000          331,000           326,000
                    --------------------------------------------------------------------------------

                    Total current                    2,267,000        4,931,000         4,276,000
                    --------------------------------------------------------------------------------
                    Deferred:
                             United States             403,000         (723,000)       (1,133,000)
                             Foreign                   278,000          427,000            97,000
                             State and local            19,000          (12,000)          (78,000)
                    --------------------------------------------------------------------------------

                    Total deferred                     700,000         (308,000)       (1,114,000)
                    --------------------------------------------------------------------------------

                    Income tax expense           $   2,967,000    $   4,623,000    $    3,162,000
                    --------------------------------------------------------------------------------
</TABLE>

                                       25
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    The  difference  between the federal  statutory tax rate and
                    the  effective  tax  rate on  continuing  operations  was as
                    follows:
<TABLE>
                                                        June 30,         July 1,       June 30,
                    Year ended                              2001            2000           1999
                    ----------------------------------------------------------------------------
                    <S>                            <C>             <C>             <C>
                    Federal income taxes at the
                       statutory rate              $   2,918,000   $   4,436,000   $   3,170,000
                    Foreign earnings taxed at
                       different rate                     57,000          99,000          20,000
                    State and local income taxes          25,000         104,000         102,000
                    Tax credits and other                (33,000)        (16,000)       (130,000)
                    -------------------------------------------------------------------------------

                    Income tax expense             $   2,967,000   $   4,623,000   $   3,162,000
                    -------------------------------------------------------------------------------
</TABLE>
                    The sources of the net deferred income tax liability were as
                    follows:
<TABLE>
                                                                  June 30, 2001      July 1, 2000
                    --------------------------------------------------------------------------------
                    <S>                                         <C>                <C>
                    Property and equipment                      $     6,971,000    $    7,108,000
                    Pension accrual                                   1,990,000         1,111,000
                    Net operating loss carryforward                     (72,000)         (369,000)
                    Supplemental retirement plan                       (999,000)       (1,044,000)
                    Benefit related accruals                           (989,000)         (996,000)
                    Stock basis of Canadian subsidiary               (1,436,000)       (1,436,000)
                    Other                                              (680,000)         (162,000)

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

                                                                $     4,785,000    $    4,212,000
                    --------------------------------------------------------------------------------
</TABLE>
                    For Canadian  tax  purposes,  the Company has net  operating
                    losses   expiring   through  2005   totaling   approximately
                    $1,400,000.  The tax benefit  reflected above for these loss
                    carryforwards is net of a valuation allowance of $665,000.

11. Stock Option    The 1987 Stock  Option  Plan  granted key  employees  of the
    Plans           Company options 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 ten 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.

                    Shareholders  at  the  1997  annual  meeting   approved  the
                    Company's 1997 Stock Incentive Plan.  Under this 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 will be determined
                    based on the amount of the participant's  election under the
                    EVA  bonus  plan.  Each  participant  may  elect to  receive
                    options  by  electing  to forego a portion of the cash bonus
                    that may be earned by them, with the option price determined
                    in accordance with the plan. The exercise price per share of
                    common stock purchasable

                                       26
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    under an option shall be 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  increase (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 2001 and 2000, 281,145 and 198,206
                    options were granted to participants at an exercise price of
                    $18.48  per  share  and  $19.04  per  share,   respectively.
                    Included  in the 198,206  options  issued in 2000 are 27,500
                    options granted to William Dutmers, Chairman,  President and
                    CEO, which are not part of the 1997 Stock Incentive Plan (as
                    explained below).

                    Transactions under the plans are as follows:


<TABLE>
                                                                  Weighted                  Weighted                    Weighted
                                                                   average                   average                     average
                                                   June 30,       exercise     July 1,      exercise      June 30,      exercise
                  Year ended                           2001          price        2000         price          1999         price
                  ---------------------------------------------------------------------------------------------------------------
                  <S>                              <C>              <C>       <C>             <C>        <C>              <C>
                  Options outstanding,
                      beginning of year             305,151         $18.64     176,931        $18.41       147,455        $13.91
                  Granted                           281,145          18.48     198,206         19.04       195,635         26.54
                  Exercised                         (1,828)          14.45    (14,637)         13.78      (38,416)         17.75
                  Forfeited                        (21,254)          18.92    (55,349)         20.32     (127,733)         26.54
                  ---------------------------------------------------------------------------------------------------------------

                  Options outstanding at end
                      of year                       563,214         $18.73     305,151        $18.64       176,931        $17.92
                  ---------------------------------------------------------------------------------------------------------------

                  Options exercisable at end
                      of year                        65,974         $14.83      72,574        $14.73        96,219        $14.77
                  Options available for
                      grant, end of year            169,570                    214,639                     136,373
                  ---------------------------------------------------------------------------------------------------------------

                  Weighted average fair
                     value of options
                     granted during the year          $1.96                      $2.84                       $1.99
                  ---------------------------------------------------------------------------------------------------------------
</TABLE>


                    A summary  of stock  options  outstanding  at June 30,  2001
                    follows:
<TABLE>
                                                          Outstanding                               Exercisable
                                                                                         Weighted
                                                                                          Average
                                                                            Weighted     Remaining
                                                                             Average    Contractual                 Weighted
                                                                            Exercise       Life                      Average
                                        Price Ranges            Shares        Price       (Years)      Shares    Exercise Price
                                   ---------------------------------------------------------------------------------------------
                                   <S>                           <C>           <C>             <C>       <C>             <C>
                                   $12.50 - $14.50                73,255       $13.99          3.1       45,755          $13.72
                                   $16.50 - $18.50               427,527       $18.41          3.8       20,219          $17.42
                                   $26.50 - $28.50                62,432       $26.54            2            -               -
                                                          ---------------                         --------------
                                                                 563,214       $18.73          3.5       65,974          $14.83
                                                          ---------------                         --------------
</TABLE>

                                       27
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    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.  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:
<TABLE>
                                                                                2001         2000       1999
                    ------------------------------------------------------------------------------------------
                    <S>                                                    <C>          <C>           <C>
                    Dividends per share                                    $    0.66    $   0.615     $0.600
                    Expected volatility                                        .2707       0.3241     0.3251
                    Risk-free interest rate                                    6.25%        5.81%      5.45%
                    Expected lives                                               4.0          4.1        5.4
                    ------------------------------------------------------------------------------------------
</TABLE>
                    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:
<TABLE>
                                                                      2001          2000         1999
                    -----------------------------------------------------------------------------------------
                    <S>                                       <C>           <C>           <C>
                    Net income:
                        As reported                           $  5,615,065  $  8,423,730  $ 6,161,769
                        Pro forma                                5,064,021     7,670,547    5,772,277
                    Earnings per share:
                        As reported                           $       1.22  $       1.80  $      1.13
                        Pro forma                                     1.10          1.64         1.06
                    -----------------------------------------------------------------------------------------
</TABLE>
                    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  shall,  subject to the  approval  of the Board of
                    Directors,  determine  the eligible  persons to whom and the
                    price  (if  any)  to  be  paid  by  the   participant.   The
                    participant  shall  not  be  permitted  to  sell,  transfer,
                    pledge, or assign the shares of the restricted stock awarded
                    under this Plan.  Subject to these limits, the Committee has
                    sole discretion to set, accelerate or waive the restrictions
                    of the stock. 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.

                    On July 1, 1998,  Mr.  Dutmers was granted  11,550 shares of
                    common  stock.  The stock was  subject  to  restrictions  on
                    transfer  for  one  year.   The  stock  was  the   principal
                    compensation  for one year's  service by Mr.  Dutmers to the
                    Company as Chairman of the Board of Directors.  In addition,
                    under  the EVA bonus  plan,  Mr.  Dutmers  was  eligible  to
                    receive  a  target  bonus  of 65%  times  the  value  of the
                    above-awarded  shares,  which were  determined  by using the
                    average stock price in the 30-day period  preceding the date
                    of grant.  Mr.  Dutmers  elected to receive up to 50% of his
                    fiscal  1999 target  bonus in stock  options.  The  deferred
                    compensation  expense related to the restricted stock grants
                    was amortized to expense on a  straight-line  basis over the
                    one-year period.

                                       28
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


                    On February 1, 2000, Mr. Dutmers was granted 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  grantee  may  vote  and  receive
                    dividends  on the  restricted  shares,  but the  shares  are
                    subject to transfer  restrictions  and are  forfeited if the
                    grantee  terminates  employment  or  the  Company  does  not
                    achieve its financial objectives.

12. Stockholders'   The Company has three classes of stock:  common stock, Class
    Equity          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.


                    On April 14,  2000,  the Board of  Directors  declared a 10%
                    stock  dividend of the  Company's  common  stock and Class B
                    common  stock.  On May 19, 2000,  shareholders  received one
                    additional  share of stock for each 10 sh ares held. All per
                    share data and weighted average shares outstanding have been
                    restated to reflect the 10% stock dividend.

                    On September 1, 1998, the Company announced its intention to
                    purchase  up to  1,320,000  shares of the  Company's  common
                    stock  pursuant to a Dutch  Auction  self-tender  offer at a
                    price  range  of  $17.27  to $20 per  share.  The  Board  of
                    Directors  also  approved the purchase in the open market or
                    in  privately   negotiated   transactions,   following   the
                    completion of the Dutch  Auction,  of shares of common stock
                    in an amount  that,  when  added to the  number of shares of
                    common  stock  purchased in the Dutch  Auction,  would equal
                    1,485,000.  The Dutch  Auction was  concluded  on October 7,
                    1998 with the  purchase  of  1,353,862  shares at a price of
                    $19.09 per share.  At each of the  January  22, 1999 and the
                    August 20,  1999  meetings  of the Board of  Directors,  the
                    Board  approved an additional  440,000  shares for the stock
                    repurchase   program.    Utilizing   both   of   the   Board
                    authorizations,  the Company  has  purchased  an  additional
                    635,150  shares  through the end of the fiscal 2001 with the
                    price per share  ranging from  approximately  $12 to $17. In
                    total,  the Company  spent  approximately  $35.7  million on
                    share  repurchases.  At  June  30,  2001,  the  Company  has
                    remaining  authorization to repurchase an additional 375,988
                    shares.

13. Business        Effective  for the year ended  June 30,  1999,  the  Company
    Segments        adopted  SFAS  No.  131,  Disclosure  about  Segments  of an
                    Enterprise and Related Information.  In accordance with SFAS
                    No. 131, the Company  operates on a worldwide basis within a
                    single  reportable  segment.  The  nature  of the  products,
                    production  processes,  types of  customers  and  methods of
                    distribution  are  consistent  across  the  Company  and its
                    subsidiaries  and therefore  have been  aggregated  into one
                    reported segment.  The Company's primary product  categories
                    include shelving systems, drawer slides,  builder's hardware
                    and ergonomic products.

                                       29
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

                    Geographic  information  related to net sales and long-lived
                    assets are summarized between domestic and foreign locations
                    as follows:
<TABLE>
                    Year ended                       June 30, 2001    July 1, 2000     June 30, 1999
                   ----------------------------------------------------------------------------------
                    <S>                               <C>             <C>               <C>
                    Net sales:
                     United States                    $123,737,818    $132,432,934      $133,805,266
                     Canada                             10,558,130      10,881,653         9,919,229
                     Other foreign                       6,213,927       6,522,283         6,534,860
                    Long-lived assets:
                     United States                      41,025,151      38,361,863        35,298,940
                     Canada                                      -               -                 -
                     Other foreign                               -               -                 -
</TABLE>
                    The Company does not believe  that it is dependent  upon any
                    single  customer,  since none  account  for more than 10% of
                    consolidated   net   sales   and   operating   income.

14. Supplemental    Total  interest  paid during the years ended June 30,  2001,
    Cash Flow       July 1, 2000 and June 30,  1999 was  $1,598,162,  $1,383,957
    Information     and $754,166, respectively.

                    Total  income  taxes paid  during  the years  ended June 30,
                    2001,  July 1,  2000  and  June 30,  1999  were  $3,757,130,
                    $4,345,000 and $3,912,773, respectively.


15. Quarterly       The table below sets forth summary unaudited  information on
    Results         a quarterly basis for the Company.
    (Unaudited)
<TABLE>
                    Year ended June 30, 2001    1st Quarter   2nd Quarter    3rd Quarter   4th Quarter
                    -----------------------------------------------------------------------------------
                    <S>                         <C>           <C>            <C>           <C>
                    Net sales                   $36,957,550   $35,702,652    $33,569,582   $34,280,091
                    Gross profit                 10,573,726     9,602,074      8,426,158     9,427,080
                    Operating income              3,807,580     2,899,316      1,316,959     2,447,149
                    Net income                    2,180,895     1,615,572        562,791     1,255,807
                    Earnings per share-basis       $   0.47      $   0.35       $   0.12      $   0.27
                    Earnings per share-diluted     $   0.47      $   0.35       $   0.12      $   0.27
                    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
                    -----------------------------------------------------------------------------------

                    Year ended July 1, 2000     1st Quarter   2nd Quarter    3rd Quarter   4th Quarter
                    -----------------------------------------------------------------------------------
                    Net sales                   $35,687,624   $35,798,890    $38,704,961   $39,645,395
                    Gross profit                  9,393,510     9,923,657     10,509,283    11,134,906
                    Operating income              3,495,761     3,655,265      3,736,712     3,568,576
                    Net income                    2,044,812     2,130,343      2,176,589     2,071,986
                    Earnings per share-basic       $   0.43      $   0.45       $   0.47      $   0.45
                    Earnings per share-diluted     $   0.43      $   0.45       $   0.47      $   0.45
                    Cash dividend-common
                    stock                          $   0.15      $   0.15       $   0.15      $  0.165
                    Cash dividend-Class B
                    common stock                   $  0.136     $   0.136      $   0.136      $   0.15
                    -----------------------------------------------------------------------------------
</TABLE>

                                       30
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements


16. Commitments     In September  1998 when the Company sold The Hirsh  Company,
    and             the purchaser  assumed the lease for the facility located in
    Contingencies   Skokie,  Illinois.  The Company  guaranteed all of the lease
                    obligations  to the landlord  through the  expiration of the
                    lease in August  2000.  During  fiscal 2000,  the  purchaser
                    defaulted on the lease agreement and the landlord filed suit
                    against the purchaser and the Company as the guarantor.  The
                    claim is for unpaid rent,  unpaid property  taxes,  building
                    repairs and legal costs.

                    A former  employee in connection with benefits paid under an
                    executive  retirement  plan has also sued the  Company.  The
                    initial ruling was in favor of the former employee; however,
                    the Company has filed an appeal in the case.

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

                    In the  opinion  of  management,  based  on the  information
                    presently known,  the ultimate  liability for these matters,
                    taking into account  established  accruals of  approximately
                    $947,000  will not have a materially  adverse  effect on the
                    Company's   financial   position   or  the  results  of  its
                    operations.

                                       31
<PAGE>





Independent Auditors' Report


Board of Directors
Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

We have audited the  accompanying  consolidated  balance  sheets of Knape & Vogt
Manufacturing Company and subsidiaries as of June 30, 2001 and July 1, 2000, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three  years in the  period  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 audits 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 July 1, 2000, and
the results of their operations and their cash flows for each of the three years
in the period  ended June 30,  2001 in  conformity  with  accounting  principles
generally accepted in the United States.


/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
July 26, 2001

                                       32
<PAGE>
          ITEM 9--DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     No changes in, or disagreements with, the Company's  accountants  occurred,
requiring disclosure under Item 304 of Regulation S-K.

                                    PART III

           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 12, 2001, 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
2001 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 12, 2001, filed pursuant to Regulation 14A.

     ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     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 12, 2001, 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 12, 2001,  filed
pursuant to Regulation 14A.

                                       33
<PAGE>
                                     PART IV

    ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)  (1) Financial Statements

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

                                                                  Page Number in
                                                                     10-K Report

     Consolidated Statements of Operations                               13
     Consolidated Balance Sheets                                         14-15
     Consolidated Statements of Stockholders' Equity                     16
     Consolidated Statements of Cash Flows                               17
     Notes to Consolidated Financial Statements                          18-31
     Independent Auditors' Report                                        32


          (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 in
                                                                     10-K Report

     Independent Auditors' Report on Schedule                            35
     Schedule II -- Valuation and Qualifying Accounts and Reserves       36


     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 38 of
     this Form 10-K Annual Report.

     (b) Reports on Form 8-K

     No  reports on Form 8-K were  filed  during the fourth  quarter of the year
ended June 30, 2001 .

                                       34
<PAGE>


                    Independent Auditors' Report on Schedule






Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

The audits  referred  to in our  report  dated July 26,  2001,  relating  to the
consolidated  financial statements of Knape & Vogt Manufacturing  Company, which
is  contained in Item 8 of this Form 10-K,  included the audit of the  financial
statement schedule listed in the accompanying table of contents.  This financial
statement  schedule  is the  responsibility  of the  Company's  management.  Our
responsibility  is to express an opinion on this  financial  statement  schedule
based upon our audits.

In our  opinion,  the  financial  statement  schedule  presents  fairly,  in all
material respects, the information set forth therein.



/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
July 26, 2001

                                       35
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
          Schedule II - Valuation and Qualifying Accounts and Reserves


<TABLE>
             Column A                 Column B        Column C           Column D         Column E
------------------------------------------------------------------------------------------------------
                                      Balance        Charged to                           Balance
                                     beginning        costs and                            end of
Description                          of period       expenses(1)      Deductions(1)        period
------------------------------------------------------------------------------------------------------
<S>                                   <C>              <C>                 <C>           <C>
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




Year ended July 1, 2000:
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts               $242,000         $187,000            $ 20,000      $409,000
      Cash discounts                   147,000                -                   -       147,000
----------------------------------------------------------------------------------------------------
                                      $389,000         $187,000            $ 20,000      $556,000




Year ended June 30, 1999:
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts               $177,000         $336,000            $271,000      $242,000
      Cash discounts                   175,000                -              28,000       147,000
----------------------------------------------------------------------------------------------------
                                      $352,000         $336,000            $299,000      $389,000
</TABLE>



     (1)  Write-off of doubtful accounts and collections on accounts  previously
          written off, including reduction in allowance balance.

                                       36
<PAGE>

                                   SIGNATURES


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



                                KNAPE & VOGT MANUFACTURING COMPANY


                                By /s/ William R. Dutmers
                                   ----------------------------------------
                                   William R. Dutmers, Chairman of the Board,
                                   President and Chief Executive Officer


                                By /s/ Leslie J. Cummings
                                   -----------------------------------------
                                   Leslie J. Cummings, Vice President of Finance


Date: September 14, 2001


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below on September 14, 2001, by the following  persons on
behalf of the registrant in the capacities indicated.

/s/ William R. Dutmers                      /s/ John E. Fallon
----------------------------------          ------------------------------------
William R. Dutmers, Chairman of             John E. Fallon, Director
the Board, Chief Executive Officer
and President


/s/ Thomas A. Hilborn                       /s/ Michael J. Kregor
----------------------------------          ------------------------------------
Thomas A. Hilborn, Director                 Michael J. Kregor, Director


/s/ Raymond E. Knape                        /s/ Richard S. Knape
----------------------------------          ------------------------------------
Raymond E. Knape, Director                  Richard S. Knape, Director


/s/ Robert J. Knape                         /s/ Gregory Lambert
----------------------------------          ------------------------------------
Robert J. Knape, Director                   Gregory Lambert, Director


                                       37
<PAGE>

                       KNAPE & VOGT MANUFACTURING COMPANY
                            ANNUAL 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 for the fiscal year July 1, 2000, is  incorporated  by
          reference.

10(f)     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(g)     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(h)     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 for the fiscal
          year July 1, 2000, is incorporated by reference.

10(i)     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.

                                       38
<PAGE>
23        Consent of BDO Seidman, LLP, independent public accountants.

                                       39
<PAGE>
                                   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)

                                       40
<PAGE>
                                   EXHIBIT 23


     Consent of Independent Certified Public Accountants



We hereby  consent to the  incorporation  by reference of our reports dated July
26, 2001,  relating to the  consolidated  financial  statements  and schedule of
Knape & Vogt  Manufacturing  Company,  appearing  in that  Corporation's  annual
report on Form 10-K for the year  ended  June 30,  2001,  in that  corporation's
previously  filed  Form S-8  Registration  Statements  (file  numbers  33-20227,
33-43704, 33-88206 and 33-88212).





/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
September 14, 2001

                                       41