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, 1997 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 incorporation or organization)          (I.R.S. Employer Identification No.)

             2700 Oak Industrial Drive, N.E., Grand Rapids, MI 49505
               (Address of principal executive offices)     (Zip Code)

                                 (616) 459-3311
              (Registrant's telephone number, including area code)

               Securities registered pursuant to 12(b) of the Act:

    Title of each class              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 $94,771,723 as of September 5, 1997.

Number of shares  outstanding  of each class of common  stock as of September 5,
1997: 3,464,399 shares of Common Stock, par value $2.00 per share, and 2,437,180
shares of Class B Common Stock, par value $2.00 per share.

Documents incorporated by reference.  Certain portions of the Registrant's Proxy
Statement for the Annual Meeting of Shareholders to be held on October 17, 1997,
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 storage 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.

     During fiscal 1997, the Company completed the  restructuring  plan that was
announced in the fourth quarter of fiscal 1996.  Components of the restructuring
plan and their resolution included the following:

         The shift of wood production from Modar, in Benton Harbor, Michigan, to
         Hirsh, in Skokie, Illinois, was completed during January 1997.

         The Modar facility was sold on March 28, 1997.

         The transfer of redundant manufacturing  operations at KV Canada to the
         corporate  headquarters  in Grand Rapids,  was  accomplished  by May 1,
         1997.

         The early retirement  program to salaried employees at the Grand Rapids
         location was implemented in the first quarter of fiscal 1997.

     In August of 1996, the Company announced its decision to sell Roll-it,  the
Company's  store  fixture  operation  located in Quebec,  because it did not fit
within the  Company's  core business  strengths.  The Company has been seeking a
buyer  for  Roll-it  and,  in the  third  quarter  of fiscal  1997,  engaged  an
investment  banking  firm to act as a broker in the sale.  As of July 31,  1997,
several  groups have  expressed  an interest in acquiring  Roll-it,  have signed
confidentiality   agreements,   and  have  received  a  confidential  investment
memorandum.  Those  groups  continuing  to have an interest  visited  Roll-it in
August 1997.  Although it is difficult to predict,  the Company  expects to sell
Roll-it during fiscal 1998.

Item 1(b)--Financial Information About Industry Segments

     The Company  believes that a dominant  portion of the Company's  operations
(more than 95%) is in a single industry  segment--the design,  manufacture,  and
marketing  of  storage  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 shelving
systems and free-standing steel shelving systems.  Drawer slides manufactured by
the Company include precision,  Euro-style and utility slides.  Precision drawer
slides use ball bearings,  and Euro-style and utility drawer slides use rollers.
The Company  manufactures many different  hardware products such as closet rods,
kitchen storage products and various fixtures.

     Approximately  45% of the Company's  sales were to the consumer  market and
55%  of the  Company's  sales  were  to  original  equipment  manufacturers  and
specialty distributors.

     While the  Company  does not  maintain  precise  sales  records  by product
category,  management believes that the approximate sales of the Company's major
product groups during the last three fiscal years were as follows:


                                       -2-
<PAGE>
<TABLE>
                                                          Year Ended June 30
Class of Products                              1997             1996           1995
-----------------                           ---------------------------------------
                                                       (dollars in millions)
                                              Sales            Sales           Sales
<S>                                          <C>             <C>             <C>
Shelving Systems                             $ 82.0          $ 79.5          $ 80.8
Drawer Slides                                  62.3            52.4            52.0
Hardware                                       29.3            28.1            30.0
Furniture Components                            3.0             3.0             5.4
                                             -------         -------          ------
Total                                        $176.6          $163.0          $168.2
                                              =====           =====           =====
</TABLE>
     New  Product  and  Capital  Spending  Information.  Drawer  slide sales are
expected to increase in fiscal 1998 with the  introduction  of precision  slides
for the  metal  office  furniture  market.  Capital  spending  should  remain at
approximately  the same level as in fiscal 1997, when capital  spending was $7.8
million.

     Sources and  Availability of Raw Materials.  Most of the Company's  storage
products are produced primarily from steel or wood. During the past fiscal year,
the Company experienced no difficulty in obtaining these raw materials.

     Patents,  Licenses,  Etc. Patents,  trademarks,  licenses,  franchises,  or
concessions do not play an important part in the Company's business.

     Seasonal Nature of Business. The business of the Company 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  estimates that at
present it has over 5,000 active customers with approximately 35,000 outlets, of
which the five largest  customers  account for less than 16% of sales and no one
of which  accounts for more than 6% of sales.  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.

     Backlog of Orders. The Company 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
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 its  type of
shelving  systems  in  North  America  and  that it is one of the  four  leading
manufacturers of drawer slides in North America.

     Research, Design and Development. Approximately $1,373,000 was spent during
the last fiscal year in the  development of new products and in the  improvement
of  existing  products;  approximately  $1,223,000  was spent in fiscal 1996 and
$1,038,000  in fiscal 1995 for the same  purposes.  The amount of  research  and
development expenditures are 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.


                                       -3-
<PAGE>
     Employees.  At June 30,  1997,  the Company  employed  approximately  1,100
persons.   None  of  the  Company's  employees  are  represented  by  collective
bargaining  agents  except the hourly  employees at The Hirsh  Company,  who are
represented  by  the  International   Association  of  Bridge,   Structural  and
Ornamental Iron Workers.

Item 1(d)--Information About Foreign Operations

     The  Company's  Canadian  operation   accounted  for  approximately  9%  of
consolidated sales. Approximately 5% 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, 1997, 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, 1997:

        Location                          Description                   Interest

Grand Rapids,          Executive offices and manufacturing facilities;    Owned
 Michigan              444,000 sq. ft. on 41 acres.

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

Skokie, Illinois       Manufacturing facility and offices;                Leased
                       298,000 sq. ft. on 12 acres.
 
Muncie, Indiana        Manufacturing facilities and office;               Owned
                       98,000 sq. ft. on 12 acres.

Muncie, Indiana        Warehouse; 23,000 sq. ft.                          Leased

Etobicoke, Ontario     Manufacturing facility and office;                 Owned
                       78,000 sq. ft. on 3 acres

Lachine, Quebec        Manufacturing facility and office;                 Leased
                       151,000 sq. ft. on 9 acres

The  facilities  indicated 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, 1997 the
Company  spent  approximately  $35,200,000  for  expansion,   modernization  and
improvements of its facilities and equipment.

                            ITEM 3--LEGAL PROCEEDINGS

     As  of  the  date  hereof,  the  Company  has  no  material  pending  legal
proceedings other than ordinary routine  litigation  incidental to the Company's
business.

                                       -4-
<PAGE>
           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, 1997.

              ADDITIONAL ITEM--EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company were, at June 30, 1997, as follows:

                                                            Year First Elected
    Name             Age   Positions and Offices Held       an Executive Officer

Allan E. Perry       57    Director, President and Chief                   1978
                             Executive Officer

Richard C. Simkins   54    Director, Executive V.P., C.F.O.,               1985
                             Secretary and Treasurer

Michael G. Van Rooy  44    Vice President - Manufacturing                  1994

John W. Vogus        35    Vice President - Sales & Marketing              1997

Anthony R. Taylor    54    President of Knape & Vogt Canada                1978

Carman D. Hepburn    49    Vice President - Sales and Marketing            1985
                                           of Knape & Vogt Canada

     Mr. Perry was named  President and Chief  Executive  Officer in April 1996.
Mr. Perry joined the Company in 1978 as General  Manager of Modar,  Inc. and has
held a variety of senior level management positions.

     Mr. Simkins was named  Executive  Vice President and C.F.O.  in April 1996.
Mr.  Simkins has been  Secretary  of the Company  since July 1992 and  Treasurer
since  October  1987.  Mr.  Simkins  joined the  Company in 1970 in the  finance
department and has held a variety of management positions.

     Mr. Van Rooy has been the Vice  President -  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. Vogus was named Vice  President - Sales and  Marketing in June of 1997.
Mr. Vogus joined the Company in March 1993 as Director of Marketing.

     Mr.  Taylor has been  President of Knape & Vogt Canada since  January 1994.
Mr. Taylor joined the Company in 1974 in the finance  department  and has held a
variety of management positions.

     Mr.  Hepburn has been Vice  President - Sales and Marketing at Knape & Vogt
Canada since  November  1985.  Mr. Hepburn joined the Company in May 1969 in the
sales department and has held a variety of management positions.

     All terms of office are on an annual  basis and will  expire on October 17,
1997.

                                       -5-
<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 September 5, 1997, there were approximately 3,200 shareholders
of the Company's Common Stock and Class B Common Stock.

<TABLE>
                          1997 Bid Price                           1996 Bid Price
             ---------------------------------------- ----------------------------------------
Quarter             High                  Low                 High                 Low
-----------  -------------------  ------------------- -------------------- -------------------
<S>                <C>                  <C>                  <C>                 <C>
First              $16.88               $12.25               $18.25              $15.00
Second             $17.63               $14.25               $19.50              $12.75
Third              $18.50               $15.50               $17.88              $13.25
Fourth             $17.00               $14.75               $17.50              $13.25
</TABLE>
     Dividends.  The Company  paid per share  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 Dividends
Year Ended June 30, 1997                      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


                                                                   Per Share Dividends
Year Ended June 30, 1996                      Common Stock         Class B Common Stock
------------------------                      ------------         --------------------
First Quarter                                    $.165                     $.15
Second Quarter                                   $.165                     $.15
Third Quarter                                    $.165                     $.15
Fourth Quarter                                   $.165                     $.15
</TABLE>
     The  Company  expects to  continue to pay  dividends  quarterly  during the
fiscal year ending June 30, 1998.  The Board of  directors  has declared a $.165
per share  dividend on shares of the  Company's  Common Stock and $.15 per share
dividend on shares of its Class B Common Stock,  payable  September 12, 1997, to
shareholders of record on September 5, 1997.


                                       -6-
<PAGE>
<TABLE>
                         ITEM 6--SELECTED FINANCIAL DATA
For the Year Ended                                      1997            1996              1995            1994          1993
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>               <C>            <C>          <C>
Net sales.............................................$176,630,294   $163,012,030      $168,190,969   $145,504,536  $114,010,930
Cost of sales......................................... 133,081,765    124,408,648 (a)   127,296,470    107,701,337    81,483,000
Operating expenses (excluding interest expense).......  28,972,779     31,211,332 (a)    26,983,142     25,043,151    20,796,203
Interest expense......................................   1,986,522      2,253,992         2,471,652      1,426,328       771,012
Income from continuing operations before taxes........  12,589,228      5,138,058 (a)    11,439,705     11,333,720    10,960,715
Income taxes..........................................   4,264,000      2,035,000 (a)     3,849,000      4,020,000     3,871,000
Income from continuing operations.....................   8,325,228      3,103,058 (a)     7,590,705      7,313,720     7,089,715
Income (loss) from discontinued operation.............    (471,624)    (3,037,926)(a)       654,433        842,556    (1,571,583)(b)
Net income............................................   7,853,604         65,132 (a)     8,245,138      8,156,276     5,518,132
Earnings per share from continuing operations.........        1.41           0.53 (a)          1.29           1.24          1.21
Earnings per share from discontinued operation........       (0.08)         (0.52)(a)          0.11           0.15         (0.27)(b)
Earnings per share....................................        1.33           0.01 (a)          1.40           1.39          0.94
Dividends paid........................................   3,738,138      3,727,321         3,722,814      3,373,493     3,360,108
Dividend payout, percent of income from
    continuing operations.............................         45%           120%               49%            46%          47%
Dividends per share--common...........................        0.66           0.66              0.66           0.60         0.60
Dividends per share--Class B common ..................        0.60           0.60              0.60          0.545        0.545
Percentage of pre-tax income from continuing
    operations to sales...............................        7.1%           3.2%              6.8%           7.8%         9.6%
Capital expenditures..................................   7,763,482      8,032,779         4,181,472      3,837,249   11,366,533
Depreciation..........................................  $6,542,750     $6,190,031        $5,876,391     $5,250,453   $3,945,043
---------------------------------------------------------------------------------------------------------------------------------
  At Year-End

Working capital....................................... $39,266,034   $ 39,535,991      $ 45,796,753   $ 39,572,003  $33,264,343
Ratio of current assets to current liabilities........         4.2            4.0               5.8            3.4          5.0
Net property and equipment............................  48,586,802     50,381,608        48,698,785     50,395,355   45,325,109
Total assets.......................................... 125,741,698    129,225,159       131,433,714    133,655,919   95,173,490
Total debt............................................  29,000,000     35,000,000        35,800,000     40,000,000   12,750,000
Debt to equity, percent...............................         39%            51%               49%            59%          20%
Stockholders' equity..................................  73,460,498     69,173,750        72,713,836     67,973,890   63,875,962
Restated weighted average shares outstanding..........   5,894,709      5,883,227         5,890,931      5,877,959    5,856,952
Stockholders' equity per share........................      $12.46         $11.76            $12.34         $11.56       $10.91
Number of employees...................................       1,061          1,084             1,136          1,137          968
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>

    (a)    1996 figures include an inventory liquidation of $863,000 recorded in
           cost of sales,  a  restructuring  charge of  $3,496,000  recorded  in
           operating expenses,  and an income tax benefit of $1,534,000,  for an
           after-tax effect of $2,825,000,  or $0.48 per share. The 1996 figures
           also  include an after-tax  charge of  $2,700,000  to  recognize  the
           estimated  loss on the sale of Roll-it,  the  Company's  discontinued
           store fixture operation.

    (b)    1993  figures  include  the  expense  of  restructuring  the  Roll-it
           operation of $1,529,000  recorded in operating expenses and an income
           tax benefit of  $566,000,  for an after-tax  effect of  $963,000,  or
           $0.16 per share.

                                       -7-
<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.

Results of Operations

     The table below sets forth certain items in the Consolidated  Statements of
Income from continuing operations as a percentage of net sales:
<TABLE>
Year ended June 30,                                            1997                  1996                 1995
---------------------------------------------           -------------------  --------------------- -------------------
<S>                                                         <C>                    <C>                 <C>
Net sales....................................               100.0%                 100.0%              100.0%
Cost of sales................................                 75.3                   76.3                75.7
                                                        -------------------  --------------------- -------------------
  Gross profit...............................                 24.7                   23.7                24.3
Selling and administrative expenses..........                 16.1                   16.8                15.9
Restructuring and impairment of assets.......                   .3                    2.1                ----
                                                        -------------------  --------------------- -------------------
  Operating income...........................                  8.3                    4.8                 8.4
Interest expense.............................                  1.1                    1.4                 1.5
Other expense................................                   .1                     .2                  .1
                                                        -------------------  --------------------- -------------------
  Income from continuing operations before
    income taxes.............................                  7.1                    3.2                 6.8
Income taxes - continuing operations.........                  2.4                    1.3                 2.3
                                                        -------------------  --------------------- -------------------
  Income from continuing operations..........                 4.7%                   1.9%                4.5%
---------------------------------------------           -------------------  --------------------- -------------------
</TABLE>
Fiscal 1997 compared with fiscal 1996

     Net  sales in  fiscal  1997  increased  $13.6  million  to a record  $176.6
million,  or 8.4%,  over fiscal 1996 sales of $163.0  million.  The  increase in
sales  was due to an  increase  in unit  volumes.  Drawer  slide  sales led this
increase with a $9.9 million improvement.  The majority of this increase was due
to precision drawer slide sales  continuing  their rapid growth.  Euro-style and
utility slide sales were also improved over fiscal 1996.  Drawer slide sales are
expected  to  continue  to  increase  in fiscal  1998 with the  introduction  of
precision  slides for the metal office furniture  market.  Shelving system sales
increased  by  $2.5  million  primarily  due  to an  increase  in  wall-attached
shelving. The increase in wall-attached shelving sales is primarily attributable
to the addition of two significant  customers in the middle of fiscal 1997. With
a full year of sales to these customers, the Company anticipates that sales from
the wall-  attached  shelving  portion of the shelving  system product line will
continue to grow in fiscal 1998. Sales from the  free-standing  shelving portion
of the  shelving  system  product  line may  decline  in fiscal  1998 due to the
announcement  that  two  major  home  centers  will  merge  and  the  subsequent
consolidation of some store  locations.  Hardware sales increased in fiscal 1997
by $1.2  million  over  fiscal  1996  levels led by the Feeny  kitchen  and bath
product line.  Hardware  sales are forecasted to have a small increase in fiscal
1998 due to the continued  expansion of the Feeny retail  program.  There was no
change in furniture  component sales in fiscal 1997, and with the sale of Modar,
this product line has been eliminated.

     Gross  profit as a  percentage  of net  sales  was  24.7% in  fiscal  1997,
compared  to 23.7% in fiscal  1996.  Gross  profit in fiscal  1996  included  an
$863,000   charge  for   liquidation  of   inventories   to  create   additional
manufacturing  and  warehousing  space.  Without this charge,  gross profit as a
percentage of net sales would have been 24.2 % in fiscal 1996.  The  improvement
in gross  profit  during  fiscal  1997 was due to  successful  cost  containment
efforts and higher sales levels which absorbed fixed overhead costs.

     Selling and  administrative  expenses in fiscal 1997  decreased to 16.1% of
net sales from 16.8% in fiscal 1996.  The  decrease was due to expense  controls
put into place during the fiscal year and the increase in sales.


                                       -8-
<PAGE>
     During  fiscal  1997,  the sale of Modar was  completed  and resulted in an
additional  restructuring  and  impairment  of assets  charge of $373,235  which
represents the difference between the original estimate and the actual loss from
the sale.

     Other expenses in fiscal 1997 decreased by $381,571 compared to fiscal 1996
mainly due to a reduction in interest expense caused by lower debt levels.

     The effective income tax rate was 33.9% in fiscal 1997 compared to 39.6% in
fiscal  1996.  See  note  9 to  the  consolidated  financial  statements  for an
explanation of the effective income tax rate.

     Income from continuing operations in fiscal 1997 was $8.3 million, or $1.41
per share,  compared to $3.1 million, or $0.53 per share in fiscal 1996. Without
the $2.8 million  charge for  restructuring,  impairment of assets and inventory
liquidations,  the  income  from  continuing  operations  would  have  been $5.9
million, or $1.01 per share in fiscal 1996.

     The results of operations of Roll-it, net of income taxes, are presented as
a discontinued  operation.  In fiscal 1997, the after-tax loss from discontinued
operation  was $0.5 million  compared to $3.0 million in fiscal 1996.  The final
1996 loss  includes an estimated  after-tax  loss on the sale of Roll-it of $2.7
million.

     The Company has been seeking a buyer for Roll-it and, in the third  quarter
of fiscal  1997,  engaged an  investment  banking firm to act as a broker in the
sale.  As of July 31,  1997,  several  groups  have  expressed  an  interest  in
acquiring Roll-it,  have signed  confidentiality  agreements and have received a
confidential investment memorandum.  Those groups continuing to have an interest
will visit  Roll-it in August,  1997.  Although it is difficult to predict,  the
Company expects to sell Roll-it during fiscal 1998.

Fiscal 1996 compared with fiscal 1995

     Net sales in fiscal 1996 decreased $5.2 million to $163.0 million,  or 3.1%
less than fiscal 1995 sales of $168.2 million. Drawer slide sales increased $0.4
million with strong sales of precision  drawer  slides being offset by decreased
sales of utility  drawer  slides.  Sales growth of precision  slides came mostly
from new  customers and increased  unit sales with existing  customers.  Utility
slides  decreased  due to the  discontinuation  of the "Value Line" drawer slide
products. Shelving system sales decreased $1.3 million mainly due to lower sales
of the wall-attached  shelving line, with relatively flat sales of free-standing
shelving  systems.  Hardware sales decreased $1.9 million primarily due to fewer
promotions of the Iron Horse product line by large retail  customers.  Furniture
component  sales  decreased  $2.4  million as the Modar  operation  had  reduced
volumes  with  the  furniture   component   customers  as  it  mainly   produced
intercompany wood products.

     Gross profit as a percentage  of sales in fiscal 1996 was 23.7%,  down from
24.3% in fiscal 1995. Without the $863,000 charge for liquidation of inventories
in fiscal  1996,  gross  profit as a  percentage  of sales would have been 24.2%
which is comparable to fiscal 1995.

     Selling and administrative  expenses as a percentage of sales were 16.8% in
fiscal 1996 up from 15.9% in fiscal 1995. The increase was due to promotions for
new  product  introductions  and the  initiation  of a retail  program for Feeny
storage  products.  Co-op advertising and consumer product sales promotions also
contributed to higher selling expenses.

     Income from continuing operations in fiscal 1996 was $3.1 million, or $0.53
per  share,  compared  to $7.6  million,  or $1.29 per share in fiscal  1995.  A
significant amount of the reduction in income in fiscal 1996 was attributable to
a restructuring and impairment charge of $2.8 million. This charge resulted from
an  announced  restructuring  plan in the fourth  quarter  of fiscal  1996 which
involved  the shift of wood  production  from Modar to Hirsh and the  subsequent
sale or closure of the Modar facility,  the transfer of redundant  manufacturing
operations performed at KV Canada to the corporate headquarters in Grand Rapids,
and an early  retirement  program  to  salaried  employees  at the Grand  Rapids
location.  As an additional part of the plan, the board of directors  authorized
the liquidation of

                                       -9-
<PAGE>
slow moving  inventory (as noted above) which created  additional  manufacturing
and warehousing  space and enabled  management to focus its energy and attention
on higher-margin, new and existing products.

     Also, the Company announced in August of 1996 its decision to sell Roll-it,
the  Company's  store  fixture  operation,  because  it did not fall  within the
Company's core business  strengths.  The Company recorded an after-tax charge of
$2.7  million  in  fiscal  1996 to cover  the  estimated  loss from the sale and
reported  Roll-it as a discontinued  operation by segregating the net assets and
the operating  results of the business.  The  after-tax  loss from  discontinued
operation in fiscal 1996 was $3.0 million which includes the $2.7 million charge
for the anticipated sale.

Liquidity And Capital Resources

     The Company  maintained a sound financial  position during fiscal 1997. The
Company's  ability to generate cash resulted in a reduction of long-term debt by
$6.0  million to $29.0  million at the end of fiscal 1997 from $35.0  million at
the end of fiscal  1996.  The debt to equity ratio at the end of fiscal 1997 was
39% compared to 51% at the end of fiscal 1996.  Net cash provided from operating
activities  was the  largest  in three  years in fiscal  1997 at $16.2  million.
Financial  resources,  including  borrowing  capacity and anticipated funds from
operations,  are expected to be adequate to satisfy all  short-term  obligations
and the internal growth objectives of the Company.

     Cash flows from operating activities generated $16.2 million in fiscal 1997
compared  to $13.5  million  in fiscal  1996.  Cash  flows in  fiscal  1997 were
positively  impacted by a decrease in inventories and an increase in net income.
Inventories  decreased  by $4.4  million  in  fiscal  1997 due to the  Company's
continuing focus on increasing  inventory turns.  Inventory turns in fiscal 1997
were  increased  to 6.4  from  5.3 in  fiscal  1996.  An  increase  to  accounts
receivable and a decrease to accrued  restructuring  charges offset a portion of
the  positive  cash flows.  Accounts  receivable  increased  by $2.2 million due
primarily  to the  increase  in sales  volume.  The  restructuring  program  was
completed in fiscal 1997 and the  restructuring  accrual  established  in fiscal
1996 was fully utilized.

     Investing  activities  used $5.9  million in fiscal  1997  compared to $9.3
million in fiscal 1996.  Capital  expenditures  were $7.8 million in fiscal 1997
including  approximately  $3.3 million for  additional  equipment to manufacture
precision  drawer  slides  for the wood  furniture  and metal  office  furniture
markets.  Capital  expenditures  in  fiscal  1998  are  expected  to  remain  at
approximately  the same  levels as in fiscal  1997.  The sale of Modar in fiscal
1997 was the  primary  reason for the $3.0  million of cash  generated  from the
sales of property, plant and equipment.

     Financing  activities  used $9.4 million in fiscal  1997,  compared to $4.5
million in fiscal 1996. The Company  reduced debt by $6.0 million in fiscal 1997
and declared  cash  dividends of $3.7  million.  The Company  believes that cash
flows from  operations and funds available under an existing credit facility are
sufficient  to fund  working  capital  requirements,  capital  expenditures  and
dividend  payments in fiscal 1998.  The Company will use  long-term  debt to the
point where  financial  flexibility is preserved and undue financial risk is not
incurred.

     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.  Such  statements  are subject to certain risks and
uncertainties  which would 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.

                ITEM 7A--QUANTITATIVE AND QUALITATIVE DISCLOSURES
                                ABOUT MARKET RISK

     The Company is not required to include disclosure with respect to this item
for the fiscal year ended June 30, 1997.

                                      -10-
<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,  1997,  and  the  related  consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years  in the  period  ended  June 30,  1997,  the  notes  thereto,  summary  of
accounting policies, and the independent auditors' report.



                                      -11-
<PAGE>
<TABLE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                        Consolidated Statements of Income
------------------------------------------------------------------------------------------------------
Year ended June 30,                                        1997               1996               1995
------------------------------------------------------------------------------------------------------
<S>                                                    <C>              <C>              <C>
Net Sales ..........................................   $ 176,630,294    $ 163,012,030    $ 168,190,969
Cost of Sales ......................................     133,081,765      124,408,648      127,296,470
                                                                                        
Gross Profit .......................................      43,548,529       38,603,382       40,894,499
                                                                                        
Expenses:
    Selling and shipping ...........................      21,545,425       21,044,004       19,882,242
    Administrative and general .....................       6,890,905        6,394,013        6,922,412
    Restructuring and impairment of assets  (Note 2)         373,235        3,496,000             --
                                                                                       
Total Expenses .....................................      28,809,565       30,934,017       26,804,654
                                                                                        
Operating Income ...................................      14,738,964        7,669,365       14,089,845
                                                                                         
Other Expenses:
    Interest .......................................       1,986,522        2,253,992        2,471,652
    Other, net .....................................         163,214          277,315          178,488
                                                                                       
Total Other Expenses ...............................       2,149,736        2,531,307        2,650,140
                                                                                       
Income From Continuing Operations Before Income
    Taxes ..........................................      12,589,228        5,138,058       11,439,705
Income Taxes-Continuing Operations  (Note 9) .......       4,264,000        2,035,000        3,849,000
                                                                                        
Income From Continuing Operations ..................       8,325,228        3,103,058        7,590,705
                                                                                     
Discontinued Operation, Net of Income
    Taxes (Note 3)
    Income (loss) from operations ..................        (471,624         (337,926)         654,433
    Estimated loss on sale .........................            --         (2,700,000)            --
                                                                                       
Total Discontinued Operation, Net of Income Taxes ..        (471,624)      (3,037,926)         654,433
                                                                                       
Net Income .........................................      $7,853,604          $65,132       $8,245,138
                                                                                        
Net Income Per Share (Notes 2, 3 and 11)
    From continuing operations .....................           $1.41             $.53            $1.29
    From discontinued operation ....................           $(.08)           $(.52)            $.11
                                                                                       
Total Net Income Per Share .........................           $1.33             $.01            $1.40
                                                                                     
Dividends Per Share
    Common stock ...................................            $.66             $.66             $.66
    Class B common stock ...........................            $.60             $.60             $.60
                                                                                       
                                                           5,894,709        5,883,227        5,890,931
Weighted Average Shares Outstanding (Note 11)
</TABLE>
See accompanying notes to consolidated financial statements.

                                      -12-
<PAGE>
<TABLE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
-------------------------------------------------------------------------------------------------
Year Ended June 30,                                                     1997             1996
Assets:
<S>                                                                   <C>            <C>
Current Assets:
    Cash and equivalents ..........................................   $  1,146,546   $    244,271
    Accounts receivable, less allowances of $525,000
        and $563,000, respectively ................................     24,991,341     22,763,645
    Refundable income taxes .......................................      1,578,681      1,860,191
    Inventories (Note 4) ..........................................     18,629,454     23,016,541
    Prepaid expenses ..............................................      3,686,042      3,058,021
    Net current assets of discontinued operation (Note 3) .........      1,462,089      1,790,740
                                                                                                                                 
Total Current Assets ..............................................     51,494,153     52,733,409
                                                                                                                                  
Property and Equipment:
    Land and improvements .........................................      1,874,420      1,981,144
    Buildings .....................................................     16,573,882     18,194,668
    Machinery and equipment .......................................     62,322,944     61,953,623
                                                                        80,771,246     82,129,435
    Less accumulated depreciation .................................     32,184,444     31,747,827
                                                                                                                                  
Net Property and Equipment ........................................     48,586,802     50,381,608
                                                                                                                                   
Net Property and Equipment of Discontinued Operation
    (Note 3) ......................................................      1,440,740      1,775,225
                                                                                                                                    
Goodwill, net .....................................................     18,409,767     18,916,360
                                                                    
Other Assets ......................................................      5,810,236      5,418,557
                                                                      $125,741,698   $129,225,159
</TABLE>                                                     
See accompanying notes to consolidated financial statements

                                      -13-
<PAGE>
<TABLE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                           Consolidated Balance Sheets
-----------------------------------------------------------------------------------------------
Year Ended June 30,                                                    1997               1996
Liabilities and Stockholders' Equity:
<S>                                                               <C>              <C>
Current Liabilities:
    Accounts payable ..........................................   $   5,976,683    $   4,825,372
    Accruals:
        Income taxes ..........................................         382,273             --
        Taxes other than income ...............................       1,551,686        1,381,324
        Compensation ..........................................       2,460,426        1,867,277
        Retirement plan contributions .........................         740,666          581,126
        Restructuring costs (Note 2) ..........................            --          3,440,184
        Miscellaneous .........................................       1,116,385        1,102,135
                                                                             
Total Current Liabilities .....................................      12,228,119       13,197,418
Supplemental Retirement Benefits (Notes 6 and 7) ..............       1,579,653        1,504,067
Long-Term Debt (Note 5) .......................................      29,000,000       35,000,000
Deferred Lease Costs ..........................................       1,818,428        2,360,124
Deferred Income Taxes (Note 9) ................................       7,655,000        7,989,800
                                                                                  
Total Liabilities .............................................      52,281,200       60,051,409
                                                                                  
Commitments (Notes 6, 7 and 8)
Stockholders' Equity (Notes 10 and 11)
    Stock:
        Common, $2 par - 6,000,000 shares authorized; 3,465,664
            and 3,327,918 issued ..............................       6,931,328        6,655,836
        Class B common, $2 par - 4,000,000 shares authorized;
             2,438,165 and 2,553,151 issued ...................       4,876,330        5,106,302
        Preferred, 2,000,000 shares authorized and unissued ...            --               --
    Additional paid-in capital ................................      33,340,541       33,080,087
    Retained earnings .........................................      29,658,277       25,542,811
    Cumulative foreign currency translation adjustment ........      (1,345,978)      (1,211,286)
                                                                                  
Total Stockholders' Equity ....................................      73,460,498       69,173,750
                                                                                  
                                                                  $ 125,741,698    $ 129,225,159
                                                                                  
</TABLE>
See accompanying notes to consolidated financial statements.

                                      -14-
<PAGE>
<TABLE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                 Consolidated Statements of Stockholders' Equity
-------------------------------------------------------------------------------------------------------------------
                                                                                                         Cumulative
                                                                                                            foreign
                                                                     Additional                            currency
                                                         Common         paid-in          Retained       translation
                                                          stock         capital          earnings        adjustment
<S>                                                <C>             <C>            <C>                <C>
Balance, July 1, 1994                              $ 10,676,654    $ 23,899,422   $    34,826,969    $   (1,429,155)
    Net income for 1995                                       -               -         8,245,138                 -
    Cash dividends                                            -               -        (3,722,814)                -
    10% stock dividend (Note 11)                      1,066,710       9,067,035       (10,144,293)                -
    Stock issued under stock option
        plan (Note 10)                                   16,464          99,316                 -                 -
    Foreign currency
        translation adjustment                                -               -                 -           112,390
-------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1995                               11,759,828      33,065,773        29,205,000        (1,316,765)
    Net income for 1996                                       -               -            65,132                 -
    Cash dividends                                            -               -        (3,727,321)                -
    Stock issued under stock option
        plan (Note 10)                                    2,310          14,314                 -                 -
    Foreign currency
        translation adjustment                                -               -                 -           105,479
-------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1996                               11,762,138      33,080,087        25,542,811        (1,211,286)
    Net income for 1997                                       -               -         7,853,604                 -
    Cash dividends                                            -               -        (3,738,138)                -
    Stock issued under stock option
        plan (Note 10)                                   45,520         260,454                 -                 -
    Foreign currency
        translation adjustment                                -               -                 -          (134,692)
-------------------------------------------------------------------------------------------------------------------

Balance, June 30, 1997                             $ 11,807,658    $ 33,340,541   $    29,658,277    $   (1,345,978)
===================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.

                                      -15-
<PAGE>
<TABLE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                      Consolidated Statements of Cash Flows
---------------------------------------------------------------------------------------------------
Year ended June 30,                                         1997             1996             1995
<S>                                                    <C>             <C>             <C>
Operating Activities
    Net income .....................................   $  7,853,604    $     65,132    $  8,245,138
    Adjustments to reconcile net income to net cash
        provided by operating activities:
        Depreciation of fixed assets ...............      6,542,750       6,190,031       5,876,391
        Amortization of other assets ...............      1,185,853       1,155,322       1,022,047
        Increase (decrease) in deferred income taxes       (334,800)     (1,060,000)      1,339,000
        Increase in supplemental retirement benefits         76,740          64,612         112,089
        Decrease in deferred lease costs ...........       (541,696)       (524,966)       (509,234)
        Loss on sale of the discontinued operation .           --         3,866,000            --
        Changes in operating assets and liabilities:
           Decrease (increase) in:
               Accounts receivable .................     (2,248,856)        515,079         (40,221)
               Refundable income taxes .............        272,579      (1,627,737)       (502,295)
               Inventories .........................      4,372,415         720,025       1,909,457
               Net assets of discontinued operation         592,226         636,106         184,722
               Prepaid expenses ....................       (629,600)       (160,535)     (1,410,260)
           Increase (decrease) in:
               Accounts payable ....................      1,158,861         289,679      (1,465,580)
               Accrued restructuring costs .........     (3,440,184       3,440,184            --
               Accruals ............................      1,326,505)        (83,555)     (1,981,633)
                                                                                    
    Net cash provided by operating activities ......     16,186,397      13,485,377      12,779,621
                                                                                      
Investing Activities
    Additions to property, plant and equipment .....     (7,763,482)     (8,032,779)     (4,181,472)
    Sales of property, plant and equipment .........      2,985,833         175,651          20,015
    Payments for other assets ......................     (1,079,168)     (1,471,438)       (913,762)
                                                                                      
    Net cash used for investing activities .........     (5,856,817)     (9,328,566)     (5,075,219)
                                                                                      
Financing Activities
    Purchase of fractional shares ..................           --              --           (10,548)
    Cash dividends declared ........................     (3,738,138)     (3,727,321)     (3,722,814)
    Proceeds from issuance of common stock .........        305,974          16,624         115,780
    Payments on long-term debt .....................     (6,000,000)       (800,000)     (4,200,000)
                                                                                    
    Net cash used for financing activities .........     (9,432,164)     (4,510,697)     (7,817,582)
                                                                                      
Effect of Exchange Rate Changes on Cash ............          4,859          63,877          80,380
                                                                                      
Net Increase (Decrease) in Cash and Equivalents ....        902,275        (290,009)        (32,800)
Cash and Equivalents, beginning of year ............        244,271         534,280         567,080
                                                                                      
Cash and Equivalents, end of year ..................   $  1,146,546    $    244,271    $    534,280
                                                                                      
</TABLE>
See accompanying notes to consolidated financial statements.

                                      -16-
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

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



1.  Summary of
    Significant
    Accounting
    Policies


Principles of Consolidation

The  consolidated  financial  statements  include  the  accounts of Knape & Vogt
Manufacturing Company and its wholly-owned  subsidiaries (Company). All material
intercompany  balances,  transactions and stockholdings  have been eliminated in
consolidation.

Description of Business, Revenue Recognition and Concentration of Credit Risk

The Company  designs,  manufactures and distributes  storage products  including
decorative and utility  shelving  systems,  drawer slides,  home workshop items,
kitchen and closet storage  products and cabinet  hardware.  On August 20, 1996,
the Company  announced its decision to sell its store fixture operation and this
portion  of the  business  is shown as a  discontinued  operation.  The  Company
primarily  sells its  products  to  hardware  chains,  home  centers,  specialty
distributors and original  equipment  manufacturers and recognizes  revenue upon
shipment of products to customers. No single customer accounts for more than 10%
of  consolidated  sales.  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.  Adjustments  relating  to the  translation  process are  accumulated  and
reported in the  stockholders'  equity section as a Cumulative  Foreign Currency
Translation Adjustment.

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.


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

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


Cash Equivalents

All highly liquid debt  instruments with a maturity of three months or less when
purchased are classified as cash equivalents.

Inventories

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

Property, Equipment and Depreciation

Property and equipment are stated at cost after elimination of fully depreciated
items.  For  financial  reporting  purposes,  depreciation  is computed over the
estimated useful lives of the assets by the straight-line method. For income tax
purposes, accelerated depreciation methods and shorter useful lives are used.

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 a period
of 40 years using the straight-line method. Accumulated amortization of goodwill
was  $1,853,951  and  $1,347,358  at June 30, 1997 and 1996,  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 1997 SFAS No. 121 analysis.

Deferred Lease Costs

Deferred lease costs arising from an acquisition  represent the excess of actual
rent  payments  on an  operating  lease  over  the  market  rental  rate  at the
acquisition date. The deferred lease cost is being amortized over 38 months, the
remaining life of the lease.


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

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



Employee Retirement Plans

The Company has pension and  profit-sharing  plans  covering  substantially  all
employees. The Company's policy is to fund pension costs for the plan in amounts
which equal or exceed the ERISA minimum requirements.

The Company has a supplemental  retirement program for officers. The cost of the
supplemental program is actuarially determined and is accrued but not funded.

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.

Accounting for the Impairment of Long-Lived Assets

Effective  July 1, 1996,  the Company  adopted SFAS No. 121,  Accounting for the
Impairment  of  Long-Lived  Assets.  The new  statement  requires the Company to
review  long-lived   assets  for  impairment   whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  The Company's  adoption of this  statement did not have a material
impact

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


on its financial  position or results of operations  for the year ended June 30,
1997.

Advertising

The Company expenses the costs of advertising as incurred.  Advertising  expense
was $422,000 in 1997, $553,000 in 1996, and $622,000 in 1995.

Earnings Per Share

Earnings per share are computed on the weighted  average  number of the combined
common and Class B common  shares  outstanding  during each year.  Earnings  per
share is computed  using the treasury  stock  method,  under which the number of
shares  outstanding  reflects the assumed  repurchase of shares of the Company's
common stock with the proceeds from the assumed  exercise of  outstanding  stock
options.

In February 1997, the Financial  Accounting  Standards  Board (FASB) issued SFAS
No.  128,  Earnings  Per Share.  The  statement  simplifies  the  standards  for
computing  earnings per share (EPS),  and makes them comparable to international
EPS  standards.  The  statement  requires the  presentation  of both "basic" and
"diluted"  EPS on  the  face  of  the  income  statement  with  a  supplementary
reconciliation of the numerators and denominators used in the calculations.  The
statement is effective for financial  statements issued for periods ending after
December  15,  1997,  including  interim  periods;  earlier  application  is not
permitted.  Had the statement  been required to be  implemented  for the periods
presented, the effect on EPS would have been insignificant.

New Accounting Standards Not Yet Adopted

In  June  1997,  the  FASB  issued  two new  disclosure  standards.  Results  of
operations and financial  position for the years presented will be unaffected by
implementation of these new standards.

SFAS  No.  130,  Reporting  Comprehensive  Income,   establishes  standards  for
reporting and display of  comprehensive  income,  its components and accumulated
balances.  Comprehensive  income is  defined to  include  all  changes in equity
except those resulting from

                                      -20-
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

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


investments by owners and distributions to owners. Among other disclosures, SFAS
No. 130 requires that all items that are required to be recognized under current
accounting  standards as  components  of  comprehensive  income be reported in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.

SFAS  No.  131,   Disclosures  About  Segments  of  an  Enterprise  and  Related
Information, which supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise,  establishes  standards for the way that public enterprises
report information about operating  segments in annual financial  statements and
requires  reporting of selected  information about operating segments in interim
financial  statements  issued to the public.  It also establishes  standards for
disclosures   regarding  products  and  servicing  geographic  areas  and  major
customers.  SFAS  No.  131  defines  operating  segments  as  components  of  an
enterprise  about which  separate  financial  information  is available  that is
evaluated  regularly by the chief  operating  decision  maker in deciding how to
allocate resources and in assessing performance.

Both of these new standards are effective for financial  statements  for periods
beginning  after  December 15, 1997,  and require  comparative  information  for
earlier  years to be restated.  Due to the recent  issuance of these  standards,
management has been unable to fully  evaluate the impact,  if any, they may have
on future financial statement disclosures. 


2. Restructuring and
   Impairment of
   Assets

On June 24, 1996, the board of directors of the Company approved a restructuring
plan designed to improve operating efficiencies.  The plan involved the shift of
wood  production  from Modar to Hirsh and the subsequent  sale or closure of the
Modar facility, the transfer of redundant manufacturing  operations performed at
Knape & Vogt Canada to the corporate  headquarters in Grand Rapids, and an early
retirement  program to salaried  employees  at the Grand  Rapids  location.  The
restructuring and impairment charge of $3,496,000 primarily related to severance
and employee benefit costs ($1,635,000), the write-down of assets to be disposed
of to their fair market value  ($1,509,000)  and other costs  ($352,000).  As an
additional part of the plan,  which was reported as part of costs of sales,  the
board of  directors  authorized  the  liquidation  of  $863,000  of slow  moving
inventories in order to create additional manufacturing

                                      -21-
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

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


and warehousing space. After an income tax benefit of $1,534,000,  these actions
reduced  fiscal  year  1996  earnings  by  $2,825,000  or $.48  per  share.  The
restructuring  accrual  established  in fiscal  1996 was fully  utilized  in the
current year.

During  1997,  the sale of Modar was  completed  and  resulted in an  additional
impairment  charge of  $373,235  which  represents  the  difference  between the
original  estimate and the actual loss from the sale. After a related income tax
benefit of $127,000,  fiscal year 1997 earnings were reduced by $246,235 or $.04
per share. 


3.  Discontinued
    Operation 

On August 20,  1996,  the  Company  announced  its  decision to sell the Roll-it
division of Knape & Vogt Canada Inc.  (Roll-it),  the  Company's  store  fixture
operation.  The Company has been  seeking a buyer for Roll-it and has engaged in
the firm of J.J.B. Hilliard,  W.L. Lyons, Inc. to assist in the sale. At the end
of July 1997, several interested buyers have signed  confidentiality  agreements
with the Company.  Although it is difficult to predict,  the Company  expects to
sell  Roll-it  during  fiscal year 1998.  Roll-it is reported as a  discontinued
operation,  and the consolidated  financial statements have been reclassified to
segregate the net assets and operating results of the business.

The estimated  loss recorded  during fiscal 1996 on the sale of Roll-it was $3.9
million,  which  included a  reduction  in asset  values of $3.6  million  and a
provision for anticipated  closing costs and operating  losses until disposal of
$.3 million. The loss was reported net of an income tax benefit of $1.2 million,
for an after-tax loss of $2.7 million.

During the third quarter of fiscal year 1997, the Company recorded an additional
loss  of  $714,582,  which  is an  adjustment  to the  estimated  provision  for
operating losses of Roll-it through fiscal year 1997. The loss has been reported
net of an income tax benefit of $242,958,  for an after-tax  loss of $471,624 or
$.08 per share from discontinued  operation.  The adjustment was necessary as it
became evident in the third quarter that  Roll-it's  sales for the year would be
less than the level forecasted in recording the original estimated provision for
operating  losses  through  fiscal year 1997.  The lower than expected  sales is
primarily  attributable  to less than  forecasted  orders  from Roll- it's major
customer. Income or loss attributable to Roll-it's operations

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

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



beyond  fiscal  year  1997  through  the date of the sale will be  reflected  as
incurred in each reporting period.

The loss on the sale of Roll-it of $3.9  million was based on  estimates  of the
proceeds expected to be realized on the sale of the store fixture operation. The
amounts the Company will ultimately  realize could differ materially in the near
term  from the  amounts  assumed  in  arriving  at the loss on  disposal  of the
discontinued operation.  Summary operating results of the discontinued operation
(in thousands) are as follows:
<TABLE>
Year ended June 30,                       1997               1996          1995
------------------------------------  ------------- -------------- -------------
<S>                                   <C>                 <C>            <C>
Revenues............................  $     10,531        $ 13,540       $14,851
Costs and expenses..................        11,237          13,990        13,823
                                      ------------- -------------- -------------
Income (loss) before taxes..........          (706)          (450)         1,028
Income tax expense (benefit)                  (234)          (112)           374
                                      ------------- -------------- -------------
Net income (loss)...................  $       (472)      $   (338)     $     654
====================================  ============= ============== =============
</TABLE>
At June 30, 1997, net assets of the discontinued operation of approximately $2.9
million consisted of $1.5 million of current assets, deductions for an allowance
for the  estimated  loss on disposal,  current  liabilities  and $1.4 million of
equipment. 


4. Inventories 

Inventories are summarized as follows:
<TABLE>
June 30,                                          1997              1996
<S>                                            <C>               <C>
Finished products                             $ 11,219,379      $ 13,189,032
Work in process                                  1,950,391         2,665,754
Raw materials and supplies                       5,459,684         7,161,755
----------------------------------------------------------------------------
                                            $   18,629,454    $   23,016,541
============================================================================
</TABLE>


5.  Long-Term Debt

At June 30, 1997 and 1996,  long-term  debt  consisted  of  borrowings  under an
unsecured  revolving credit agreement which provides for loans up to $47,500,000
with  interest  between  40 and 50 basis  points  above the  federal  funds rate
depending on the Company's  interest  coverage ratio (averaging 6% for the month
ended June 30, 1997).  There was a  $29,000,000  balance  outstanding  under the
revolving  credit  agreement at June 30, 1997.  The agreement  contains  certain
covenants  which  the  Company  is in  compliance  with at June  30,  1997.  The
revolving credit agreement is required to be repaid by November

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

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



1, 1999.  Annually,  the Company may request that the maturity of the  revolving
credit agreement be extended by another year.


6.  Retirement Plans

The  Company has  several  noncontributory  defined  benefit  pension  plans and
defined  contribution  plans covering  substantially  all of its employees.  The
defined  benefit  plans provide  benefits  based on the  participants'  years of
service.  The  Company's  funding  policy for defined  benefit  plans is to make
annual  contributions  which  equal  or  exceed  regulatory  requirements.   The
Company's  board  of  directors  annually  approves   contributions  to  defined
contribution  plans. The pension and profit-sharing  plans hold a combined total
of 304,425  shares of the Company's  class B common stock with a market value of
$4,870,800  and  $4,794,694 at June 30, 1997 and 1996,  respectively.  Dividends
paid to the plans totaled $182,655 for the years ended June 30, 1997 and 1996.

The Company also has a supplemental  retirement program for designated  officers
of the Company which also includes death and disability benefits.

The cost of retirement benefits is as follows:
<TABLE>
Year ended June 30,                         1997           1996         1995
<S>                                    <C>             <C>         <C>      
Discretionary profit-sharing          $  685,564     $  585,965   $  576,558
Pension                                  309,415        261,781      301,349
Supplemental retirement                  199,700        193,960      158,442
----------------------------------------------------------------------------
                                      $1,194,679     $1,041,706   $1,036,349
============================================================================
</TABLE>
Net periodic cost for the pension plans included the following components:
<TABLE>
Year ended June 30,                         1997           1996         1995
<S>                                   <C>           <C>           <C>
Service cost - benefits earned
    during the period                $   276,718    $   280,075    $ 251,503
Interest cost on projected
benefit
    obligation                           847,333        737,433      726,789
Actual return on plan assets          (1,504,890)    (1,208,193)    (930,192)
Net deferral and amortization of
    unrecognized amounts                 715,578        452,466      253,249
----------------------------------------------------------------------------
Net periodic pension cost            $   334,739    $   261,781    $ 301,349
============================================================================
</TABLE>
                                      -24-
<PAGE>
               Knape & Vogt Manufacturing Company and Subsidiaries
                   Notes to Consolidated Financial Statements

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



The weighted  average  discount rate used in determining  the actuarial  present
value of the projected benefit  obligation of the pension plans was 8.5% at June
30,  1997 and 1996.  The  expected  long-term  rate of return on plan assets was
8.5%.

The funded status of the pension plans is as follows:
<TABLE>
June 30,                                         1997           1996
--------------------------------------------------------------------------
<S>                                           <C>            <C>
Actuarial present value of benefit
    obligations:
    Accumulated and projected benefit
        obligation, vested benefits of
        $10,280,087 and $9,149,228            $  10,681,208  $   9,248,880
Plan assets at fair value, primarily equity
    securities and fixed income funds            11,794,363    10,183,1055
--------------------------------------------------------------------------
Plan assets in excess of projected benefit
    obligations                                   1,113,155        934,225
--------------------------------------------------------------------------
Unrecognized net obligations:
    Unrecognized net (gain) loss                   (248,149)       292,637
    Unrecognized prior service cost               1,421,142        910,955
    Unrecognized transition net assets,
        being recognized over 13.4 years           (348,100)      (402,500)
--------------------------------------------------------------------------
Unrecognized net obligations                        824,893        801,092
--------------------------------------------------------------------------
Prepaid pension cost included in other
    assets                                    $   1,938,048  $   1,735,317
==========================================================================
</TABLE>

7.  Postretirement
    Health
    Care Benefits


The Company  maintains a defined benefit  postretirement  plan for substantially
all employees  which  provides  certain health care  benefits.  Eligibility  and
benefits  are based on age and years of  service.  On July 1, 1992,  the Company
adopted SFAS No. 106,  Employers'  Accounting for Postretirement  Benefits Other
Than Pensions,  on a prospective basis. The transition obligation represents the
difference  between the Company's July 1, 1992, accrued  postretirement  benefit
costs prior to the adoption of SFAS No. 106 and the Plan's unfunded liability as
of that date and is being amortized over 20 years.  During fiscal year 1994, the
Company  revised the  eligibility  definition  for  benefits.  This  reduced the
liability as of July 1, 1993,  by $916,457.  This  decrease in the  liability is
being  amortized  over 17 years,  the average  remaining  service  period of the
active employees.


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

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


The components of net periodic postretirement benefit cost are as follows:
<TABLE>
Year ended June 30,                            1997        1996         1995
<S>                                       <C>         <C>          <C>
Service cost - benefits earned during
    the year                             $   86,588  $   82,461   $  107,493
Interest cost on projected benefit
    obligation                              138,498     126,329      144,266
Amortization of transition
    liability over 20 years                  93,861      93,861       93,861
Amortization of prior service costs         (57,279)    (57,279)     (57,279)
Amortization of unrecognized net loss        24,412      18,415       37,162
----------------------------------------------------------------------------
Net postretirement health care cost      $  286,080  $  263,787   $  325,503
============================================================================
</TABLE>

A reconciliation  of the accumulated  postretirement  benefit  obligation to the
liability recognized in the consolidated balance sheets is as follows:
<TABLE>
June 30,                                               1997             1996
<S>                                              <C>             <C>
Accumulated postretirement benefit
    obligation:
    Active participants                      $      931,487   $      828,891
    Retirees                                        769,823          704,498
----------------------------------------------------------------------------
                                                  1,701,310        1,533,389
Unrecognized transition obligation               (1,407,902)      (1,501,763)
----------------------------------------------------------------------------
                                                    293,408           31,626
Unrecognized net loss                              (467,660)        (443,795)
Unrecognized prior service cost                     687,341          744,620
----------------------------------------------------------------------------
Postretirement health care liability         $      513,089   $      332,451
============================================================================
</TABLE>

The actuarial  calculation assumes a health care inflation rate of 9.25% in 1997
and grades down  uniformly  to 6.5% in 2002 and remains  level  thereafter.  The
health  care cost trend rate has an effect on the amounts  reported.  Increasing
the  health  care  inflation  rate by 1%  would  increase  the  June  30,  1997,
accumulated  postretirement  benefit  obligation  by $158,392,  and the 1997 net
postretirement   health  care  cost  by  $25,502.  The  discount  rate  used  in
determining  the  accumulated  postretirement  benefit  obligation was 8.5%. The
Company's  postretirement  health care plans are not funded.  Prior to 1993, the
cost of providing postretirement benefits was expensed as incurred.


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

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



8.  Lease Commitments


The Company is leasing certain real property and equipment  under  noncancelable
agreements  which expire at various dates through 2001.  Annual  minimum  rental
payments required under operating leases are as follows:
<TABLE>
Year ending June 30,
<S>                                     <C>                      
1998                                    $ 1,508,670
1999                                      1,518,319
2000                                      1,425,038
2001                                        217,462
---------------------------------------------------
                                        $ 4,669,489
===================================================
</TABLE>
Rent  expense  under  all  operating   leases  was   approximately   $1,991,000,
$2,076,000,  and  $2,070,000 in 1997,  1996, and 1995,  respectively.  9. Income
Taxes The components of income (loss) from  continuing  operations  before taxes
consist of:
<TABLE>
Year ended June 30,                      1997            1996           1995
<S>                               <C>             <C>            <C>
United States                     $12,028,340     $ 5,603,192   $ 10,708,095
Foreign                               560,888        (465,134)       731,610
----------------------------------------------------------------------------
Income from continuing
    operations before
    income taxes                  $12,589,228     $ 5,138,058   $ 11,439,705
----------------------------------------------------------------------------
</TABLE>
Income tax expense (benefit) from continuing operations consists of:
<TABLE>      
Year ended June 30,                      1997            1996           1995
----------------------------------------------------------------------------
<S>                            <C>              <C>              <C>
Current:
    United States              $    4,558,800   $   3,189,000   $  2,298,000
    Foreign                          (115,000)       (152,000)       129,000
    State and local                   155,000          58,000         83,000
----------------------------------------------------------------------------
Total current                       4,598,800       3,095,000      2,510,000
----------------------------------------------------------------------------
Deferred:
    United States                    (546,800)     (1,159,000)     1,208,000
    Foreign                           287,000          14,000        121,000
    State and local                   (75,000)         85,000         10,000
----------------------------------------------------------------------------
Total deferred                       (334,800)     (1,060,000)     1,339,000
----------------------------------------------------------------------------
Income tax expense             $    4,264,000   $   2,035,000   $  3,849,000
============================================================================
</TABLE>

                                      -27-
<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 is as follows:
<TABLE>
Year ended June 30                          1997          1996          1995
--------------------------------------- ------------  ------------- ------------
<S>                                        <C>            <C>           <C>
Income from continuing operations            34%           34%           34%
Foreign earnings taxed at different
 rates                                        1            (3)            2
State and local income taxes                  1             3             1
Tax credits and other                        (2)           (1)           (3)
Tax bracket change                           --             7            --
                                        ------------  ------------- ------------
Income tax expense                           34%           40%           34%
======================================= ============  ============= ============
</TABLE>
The sources of the net deferred income tax liability are as follows:
<TABLE>
June 30,                                                1996            1995
<S>                                             <C>              <C>          
Property and equipment                        $    9,475,000   $   9,742,000
Pension accrual                                      756,000         569,000
Net operating loss carryforward expiring
    through 2008                                  (1,308,000)     (1,228,000)
Stock basis of Canadian subsidiary                (1,105,000)       (717,000)
Other                                               (163,000)       (376,200)
----------------------------------------------------------------------------
                                              $    7,655,000   $   7,989,800
============================================================================
</TABLE>

The Company has not provided  for United  States  income taxes on  undistributed
earnings of foreign subsidiaries.  Earnings are being reinvested, the remittance
of which has been  indefinitely  postponed.  In the event  these  earnings  were
remitted  to the  Company,  foreign  tax  credits  would  be  used to  offset  a
substantial portion of the United States income taxes.


10.     Stock Option
        Plan

The 1987 Stock  Option  Plan  grants key  employees  of the  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,  are  exercisable
from that date and terminate ten years from the grant date. The plan, as amended
in October 1994 and in October 1991,  authorized a total of 300,000 shares to be
available for issuance under the plan.


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

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



Transactions are as follows:
<TABLE>
                                          Weighted                     Weighted
                                           average                      average
                                          exercise                     exercise
June 30                       1997          price          1996          price
------------------------  ------------ --------------- ------------  -----------
<S>                           <C>        <C>             <C>           <C>
Options outstanding,
 beginning of year            172,740    $  15.57        129,945       $  15.75
Granted                        50,000       15.50         45,000          15.00
Exercised                     (22,760)      15.50         (1,155)         15.00
Forfeited                     (29,643)      15.50         (1,050)         15.00
                          ------------ ---------------   ------------  ---------
Options outstanding
 and exercisable, end
 of year                      170,337    $  15.55        172,740        $ 15.57
                          ------------ ---------------   ------------  ---------
Options available for
 grant, end of year            26,610                     46,967
Weighted average
 fair value of options
 granted during the
 year                         $  4.92                    $  5.24
========================  ============ =============== ============  ===========
</TABLE>
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 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>
                                                       1997             1996
---------------------------------------------  ---------------  ---------------
<S>                                                 <C>               <C>
Dividend per share                                   $0.66             $0.66
Expected Volatility                                 0.3592            0.3939
Rick-free interest rate                               6.5%              5.5%
Expected lives                                        9.3               9.6
=============================================  ===============  ===============
</TABLE>

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

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




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>
                                                        1997            1996
-----------------------------------------------  --------------  --------------
<S>                                                  <C>              <C>
Net income:
    As reported                                      $7,853,604       $65,132
    Pro forma                                         7,680,684       (80,992)
Earnings per share:
    As reported                                            1.33           .01
    Pro forma                                              1.30          (.01)
===============================================  ==============  ==============
</TABLE>


11.  Stockholders'
      Equity

On August 19, 1994, the board of directors  declared a 10% stock dividend of the
Company's common stock and Class B common stock.  Applicable share and per share
data have been restated to reflect the 10% stock dividend.

The Company has three classes of stock,  common stock,  Class B common stock and
unissued preferred stock. Each share of common stock entitles the holder thereof
to one vote on all matters submitted to the shareholders.  Each share of Class B
common stock  entitles the holder to ten 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 ten percent
(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 anytime.


12. Supplemental Cash
    Flow Information

Total  interest paid during the years ended June 30, 1997,  1996,  and 1995, was
$2,025,599, $2,245,136, and $2,452,649, respectively.

Total income taxes paid during the years ended June 30,  1997,  1996,  and 1995,
were $4,324,000, $2,540,139, and $3,375,972, respectively.


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

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



13. Foreign Operations

The Company has operations in the United States and Canada as follows:
<TABLE>
Year ended June 30,             1997               1996              1995
<S>                      <C>               <C>               <C>
Net sales:
    United States        $  160,771,052    $   147,691,899   $   151,261,132
    Canada                   15,859,242         15,320,131        16,929,837
----------------------------------------------------------------------------
                         $  176,630,294    $   163,012,030   $   168,190,969
============================================================================
Operating income:
    United States        $   14,216,340    $     8,178,485   $    13,412,124
    Canada                      522,624           (509,120)          677,721
----------------------------------------------------------------------------
                         $   14,738,964    $     7,669,365   $    14,089,845
============================================================================
Total assets:
    United States        $  114,615,831    $   116,460,936   $   115,120,879
    Canada                   11,125,867         12,764,223        16,312,835
----------------------------------------------------------------------------
                         $  125,741,698    $   129,225,159   $   131,433,714
============================================================================
</TABLE>

                                      -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, 1997 and 1996,  and the
related consolidated  statements of income,  stockholders' equity and cash flows
for  each  of  the  three  years  in the  period  ended  June  30,  1997.  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  generally   accepted  auditing
standards.  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,  1997 and  1996,  and the
results of their  operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles.





/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
August 8, 1997


                                      -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 17, 1997, 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
1997 and Year End Option Values," is  incorporated  herein by reference from the
Company's  definitive  Proxy  Statement  for the  Company's  Annual  Meeting  of
Shareholders to be held October 17, 1997, 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 17, 1997, filed pursuant to Regulation 14A.

             ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information under the caption  "Directors and Nominees" is incorporated
herein by  reference  from the  Company's  definitive  Proxy  Statement  for the
Company's  Annual  Meeting of  Shareholders  to be held October 17, 1997,  filed
pursuant to Regulation 14A.

                                     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 Income........................................12
Consolidated Balance Sheets..............................................13
Consolidated Statements of Stockholders' Equity..........................15
Consolidated Statements of Cash Flows....................................16
Notes to Consolidated Financial Statements...............................17
Independent Auditors' Report.............................................32


                                      -33-
<PAGE>
     (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 such 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 39 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, 1997.


                                      -34-
<PAGE>
                    Independent Auditors' Report on Schedule



Knape & Vogt Manufacturing Company
Grand Rapids, Michigan

The audits  referred  to in our report  dated  August 8, 1997,  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
September 23, 1997


                                      -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, 1997:
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts                   $340,000         $318,000          $390,000           $268,000
      Cash discounts                       223,000           34,000                 -            257,000
                                          $563,000         $352,000          $390,000           $525,000
------------------------------------------------------------------------------------------------------------------
Year ended June 30, 1996
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts                $   338,000        $ 593,000          $ 591,000        $ 340,000
      Cash discounts                       216,000            7,000                 -           223,000
                                         $ 554,000        $ 600,000          $ 591,000        $ 563,000
-------------------------------------------------------------------------------------------------------------------
Year ended June 30, 1995
 Allowances deducted from
  assets:
    Accounts receivable for:
      Doubtful accounts                  $ 582,500        $ 145,000          $ 389,500         $338,000
      Cash discounts                       216,000                -                  -          216,000
----------------------------------  ----------------  ---------------  ---------------- ----------------
                                          $798,500        $ 145,000          $ 389,500         $554,000
-------------------------------------------------------------------------------------------------------------------
</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/ Allen E. Perry
                                       Allan E. Perry, President and Chief
                                       Executive Officer

Date:  September 26, 1997


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below on September 26, 1997, by the following  persons on
behalf of the registrant in the capacities  indicated.  Each director or officer
of the registrant,  whose signature  appears below,  hereby appoints  Richard C.
Simkins as his  attorney-in-fact,  to sign in his name and on his  behalf,  as a
director or officer of the  registrant,  and to file with the Commission any and
all amendments to this Report on Form 10-K.


/s/ Allan E. Perry                                /s/ Richard C. Simkins
Allan E. Perry, Chief Executive Officer           Richard C. Simkins, Principal
and Director                                      Financial and Accounting
                                                  Officer and Director

                                                  /s/ William R. Dutmers
Mary Rita Cuddohy, Director                       William R. Dutmers, Director

/s/ John E. Fallon
John E. Fallon, Director                          Michael J. Kregor, Director

/s/ Herbert F. Knape                              /s/ Raymond E. Knape         
Herbert F. Knape, Director                        Raymond E. Knape, Director

/s/ Richard S. Knape
Richard S. Knape, 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 was filed as
         Exhibit 3(a) of the Registrant's Form 10-K Annual Report for the fiscal
         year ended June 30, 1987, is incorporated by reference.

3(b)     Bylaws,  filed as Exhibit  3(b) of the  Registrant's  Form 10-K  Annual
         Report for the fiscal year June 30, 1987, is 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 November 29, 1993, as amended,
         which was filed as Exhibit 10(d) to the  Registrant's  Form 10-K Annual
         Report for the fiscal  year ended June 30,  1996,  is  incorporated  by
         reference.

21       Subsidiaries of Registrant.

23       Consent of BDO Seidman, LLP, independent public accountants.

24       Power of Attorney (Included on page 37).

27       Financial Data Schedule



                                      -38-
<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)

The Hirsh Company (organized under the laws of Illinois)




                                      -39-
<PAGE>
                                   EXHIBIT 23


               Consent of Independent Certified Public Accountants



We hereby consent to the  incorporation by reference of our reports dated August
8, 1997 , 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,  1997,  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 23, 1997


                                      -40-