UNITED STATESSECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549

_________________

FORM 10-K/A (Amendment No. 1)

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

# Commission file number
000-01859

# KNAPE & VOGT
MANUFACTURING COMPANY (Exact Name of
Registrant as Specified in Its Charter)

|Michigan                                              
 (State or Other Jurisdiction of Incorporation of Organization) | 38-0722920
(I.R.S. Employer Identification No.)
|---------------------------------------------------------------------------------------------------------------------- | -----------------------------------------------

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

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

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

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]

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [__]
No [X]

The aggregate market value of voting
stock held by nonaffiliates of the registrant (for this purpose only, the
affiliates of the registrant have been assumed to be the executive officers and directors
of the registrant) was $55,138,573 as of January 1, 2005 (based on $13.05 per share which
was the closing sale price as reported on that date by NASDAQ).

Number of shares outstanding of
each class of common stock as of August 26, 2005: 2,486,372 shares of Common Stock,
par value $2.00 per share, and 2,024,133 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 21, 2005, are incorporated by reference into
Part III of this Report.

1

---



EXPLANATORY NOTE The
purpose of this Amendment No. 1 to the Form 10-K Annual Report is to file a corrected Item 8 - Financial
Statements and Supplementary Data
(Selected portions of the Company's Annual Report to Shareholders for the fiscal year
ended July 2, 2005). The printed  Financial Statements  and Supplementary Data delivered to shareholders
as part of the annual report were correct. However, the Form 10-K filed with the
Securities and Exchange Commission via EDGAR contained an inadvertent error in the Consolidated Balance
Sheets table on page 19, and inadvertent errors in Notes 9, 10 and 13.
The purpose of this Amendment No. 1 is to file a corrected Item 8.
On the Consolidated Balance Sheets  (page 4 of this Form 10-K/A),
the "Assets held for sale" of 1,281,213 is now correctly included in the July 2, 2005 column (it was mistakenly included
in the July 3, 2004 column in the original filing).  In Note 9 a number of dollar signs that were
omitted in the original filing have been included (page 16 of this Form 10-K/A).  In the statutory tax
rate table (page 19 of this Form 10-K/A), the "Tax audit settlement" of (169,000) is now correctly included in
the July 3, 2004 column (it was mistakenly included in the July 2, 2005 column in the original filing).
In the table showing the fiscal 2003 business segments (page 22 of this Form 10-K/A), "Net sales to
external customers" in the "Home and Commercial Products" column is now correctly stated as $89,215,101
(it was mistakenly shown as $89,215 in the original filing). The remainder of the document is unchanged.

2

---



# ITEM 8 
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Immediately
following are the consolidated balance sheets of KV and its subsidiaries as of July 2,
2005 and July 3, 2004, and the related consolidated statements of operations,
stockholders equity and cash flows for each of the three years in the period ended
July 2, 2005, the notes thereto, and the report of independent registered public
accounting firm.

# Knape & Vogt
Manufacturing Company and SubsidiariesConsolidated Statements of Operations

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

See accompanying
notes to consolidated financial statements.

3

---



# Knape & Vogt Manufacturing
Company and SubsidiariesConsolidated Balance Sheets

|                                                              
|--------------------------------------------------------------
|
|                                                              
|Assets                                                        
|                                                              
|Current Assets                                                
|Cash and equivalents                                          
|Accounts receivable, less allowances of $533,000 and $673,000,
|respectively                                                  
|Inventories, including inventory on consignment at customer   
|locations of $3,486,000 and $3,292,000 respectively           
|Prepaid expenses and other current assets                     
|Assets held for sale                                          
|                                                              
|Total Current Assets                                          
|                                                              
|Property and Equipment                                        
|Land and improvements                                         
|Buildings                                                     
|Machinery and equipment                                       
|Construction in progress                                      
|                                                              
|                                                              
|Less accumulated depreciation                                 
|                                                              
|Net Property and Equipment                                    
|                                                              
|Goodwill, net of accumulated amortization of $1,099,000       
|                                                              
|Prepaid Pension Cost                                          
|                                                              
|Other Assets                                                  
|                                                              
|                                                              
|                                                              

See accompanying
notes to consolidated financial statements.

4

---



# Knape & Vogt
Manufacturing Company and SubsidiariesConsolidated Balance Sheets

|                                                               
|---------------------------------------------------------------
|
|                                                               
|Liabilities and Stockholders' Equity                           
|                                                               
|Current Liabilities                                            
|Accounts payable                                               
|Accruals:                                                      
|Income taxes                                                   
|Accrued compensation                                           
|Accrued customer rebates and cooperative advertising           
|Other                                                          
|                                                               
|Total Current Liabilities                                      
|                                                               
|Other Retirement Benefits                                      
|                                                               
|Long-Term Debt and Capital Leases                              
|                                                               
|Deferred Income Taxes                                          
|                                                               
|Interest Rate Swap Agreement and Other Long-Term Liabilities   
|                                                               
|Total Liabilities                                              
|                                                               
|Stockholders' Equity                                           
|Stock:                                                         
|Common, $2 par - 6,000,000 shares authorized; 2,482,663 and    
|2,331,860 issued and outstanding                               
|Class B common, $2 par - 4,000,000 shares authorized; 2,027,842
|and 2,184,489 issued and outstanding                           
|Preferred - 2,000,000 shares authorized and unissued           
|Additional paid-in capital                                     
|Unearned stock grant                                           
|Accumulated other comprehensive loss:                          
|Derivative instrument                                          
|Minimum SERP adjustment                                        
|Minimum pension adjustment                                     
|Foreign currency translation adjustment                        
|                                                               
|Total accumulated other comprehensive loss                     
|Retained earnings                                              
|                                                               
|Total Stockholders' Equity                                     
|                                                               
|                                                               
|                                                               

See accompanying
notes to consolidated financial statements.

5

---



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

|                                          |  |  |   |           |   |  
|----------------------------------------- |  |  | - | --------- | - | -
|
|                                          |  |  |   |           |   |  
|Balance, June 29, 2002                    |  |  | $ | 9,034,304 |   | $
|Comprehensive income:                     |  | 
|Net income                                |  |  |   | -         |   |  
|Foreign currency translation              |  |  |   | -         |   |  
|adjustment                                |  | 
|Minimum SERP adjustment, net of           |  | 
|deferred taxes of $152,000                |  |  |   | -         |   |  
|Minimum pension adjustment, net of        |  | 
|deferred taxes of $302,000                |  |  |   | -         |   |  
|Loss on derivative instrument, net        |  | 
|of deferred taxes of $333,000             |  |  |   | -         |   |  
|                                          |  |  |   |          
|Other comprehensive loss                  |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Comprehensive income                      |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Cash dividends                            |  |  |   | -         |   |  
|Restricted stock forfeited (50 shares)    |  |  |   | (100      | ) |  
|Restricted stock issued (813 shares)      |  |  |   | 1,626     |   |  
|Repurchase and retirement of  shares of   |  | 
|common stock (2,280 shares)               |  |  |   | (4,560    | ) |  
|                                          |  |  |   |           |   |  
|Balance, June 28, 2003                    |  |  |   | 9,031,270 |   |  
|                                          |  | 
|Comprehensive income:                     |  | 
|Net income                                |  |  |   | -         |   |  
|Foreign currency translation              |  |  |   | -         |   |  
|adjustment                                |  | 
|Minimum SERP adjustment, net of           |  | 
|deferred taxes of $103,000                |  |  |   | -         |   |  
|Minimum pension adjustment, net of        |  | 
|deferred taxes of $157,000                |  |  |   | -         |   |  
|Gain on derivative instrument, net        |  | 
|of deferred taxes of $407,000             |  |  |   | -         |   |  
|                                          |  |  |   |          
|Other comprehensive income                |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Comprehensive income                      |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Cash dividends                            |  |  |   | -         |   |  
|Restricted stock issued (714 shares)      |  |  |   | 1,428     |   |  
|                                          |  |  |   |           |   |  
|Balance, July 3, 2004                     |  |  |   | 9,032,698 |   |  
|                                          |  | 
|Comprehensive income:                     |  | 
|Net income                                |  |  |   | -         |   |  
|Foreign currency translation              |  |  |   | -         |   |  
|adjustment                                |  | 
|Minimum SERP adjustment, net of           |  | 
|deferred taxes of $76,000                 |  |  |   | -         |   |  
|Minimum pension adjustment, net of        |  | 
|deferred taxes of $157,000                |  |  |   | -         |   |  
|Gain on derivative instrument, net        |  | 
|of deferred taxes of $335,000             |  |  |   | -         |   |  
|                                          |  |  |   |          
|Other comprehensive income                |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Comprehensive income                      |  |  |   | -         |   |  
|                                          |  |  |   |           |   |  
|Cash dividends                            |  |  |   | -         |   |  
|Restricted stock forfeited (6,600 shares) |  |  |   | (13,200   | ) |  
|Restricted stock issued (756 shares)      |  |  |   | 1,512     |   |  
|                                          |  |  |   |           |   |  
|Balance, July 2, 2005                     |  |  | $ | 9,021,010 |   | $
|                                          |  |  |   |           |   |  

See accompanying
notes to consolidated financial statements.

6

---



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

|                                                            | 
|----------------------------------------------------------- | 
|
|                                                            | 
|Operating Activities                                        | 
|Net income                                                  | 
|Adjustments to reconcile net income to net cash provided by | 
|operating activities:                                       | 
|Depreciation of property and equipment                      | 
|Amortization of other assets                                | 
|Deferred income taxes                                       | 
|Increase (decrease) in supplemental retirement benefits     | 
|(Increase) decrease in prepaid pension cost                 | 
|Impairment loss                                             | 
|Loss (gain) on disposal of property and equipment           | 
|Other                                                       | 
|Changes in operating assets and liabilities:                | 
|Accounts receivable                                         | 
|Inventories                                                 | 
|Other current assets                                        | 
|Accounts payable                                            | 
|Accruals                                                    | 
|                                                            | 
|Net cash provided by operating activities                   | 
|                                                            | 
|Investing Activities                                        | 
|Additions to property and equipment                         | 
|Proceeds from sales of property and equipment               | 
|Other, net                                                  | 
|                                                            | 
|Net cash used for investing activities                      | 
|                                                            | 
|Financing Activities                                        | 
|Dividends paid                                              | 
|Principal payments on capital lease obligations             | 
|Borrowings/(repayments) on long-term debt                   | 
|Repurchase and retirement of common stock                   | 
|                                                            | 
|Net cash provided by (used for) financing activities        | 
|                                                            | 
|Effect of Exchange Rate Changes on Cash                     | 
|                                                            | 
|Net Increase (Decrease) in Cash and Equivalents             | 
|Cash and equivalents, beginning of year                     | 
|                                                            | 
|Cash and equivalents, end of year                           | 
|                                                            | 
|Supplemental Information:                                   | 
|Interest paid                                               | 
|Income taxes paid                                           | 
|                                                            | 

See accompanying
notes to consolidated financial statements.

7

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

# NOTE 1. Nature of
Operations.

Knape
& Vogt Manufacturing Company and its wholly owned subsidiaries (the Company) design,
manufacture and distribute kitchen and bath storage solutions and office products for
original equipment manufacturers, specialty distributors, hardware chains and major home
centers. During fiscal 2004, the Company further defined its operating segments by the
major markets that it serves. Products are sold worldwide through the Companys own
sales personnel and through independent sales representatives. The Company is
headquartered in Grand Rapids, Michigan.

# NOTE 2. Summary of
Significant Accounting Policies

Principles
of Consolidation

The
consolidated financial statements have been prepared by the Company in accordance with
accounting principles generally accepted in the United States of America and include the
accounts of Knape & Vogt Manufacturing Company and its wholly owned foreign
subsidiary. All material intercompany balances, transactions and stockholdings have been
eliminated in consolidation.

The
Company utilizes a 52- or 53-week fiscal year, which ends on the Saturday nearest the end
of June. The fiscal years ended July 2, 2005 and June 28, 2003 contained 52 weeks and the
fiscal year ended July 3, 2004 contained 53 weeks.

Revenue
Recognition

The
Company records revenue when title to the product and risk of ownership passes to the
buyer. Sales are shown net of returns, discounts and any other form of sales incentive,
including cooperative advertising, rebates and merchandising displays. In certain
circumstances, the Company provides buyback programs and markdown allowances to its
customers. These amounts are fixed at the start of the contract period with the customer
and accounted for in accordance with Statement of Position No. 93-7, Reporting on
Advertising Costs and Emerging Issues Task Force No. 01-9, Accounting for
Consideration Given by a Vendor to a Customer. The cost of these programs are either
expensed at the time of the initial shipment of the goods or are expensed on a prorated
basis over the sales of the contract, if the Company has a written commitment from the
customer.

Concentration
of Credit Risk

The
Company performs ongoing credit evaluations and maintains reserves for potential credit
losses.

Shipping
and Handling Costs

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

Foreign
Currency

The
accounts of the foreign subsidiary are translated into U.S. dollars in accordance with
Statement of Financial Accounting Standards (SFAS) No. 52. Current assets and
liabilities are translated at year-end exchange rates, while long-term assets and
liabilities are translated at historical month-end rates. Income and expense accounts are
translated at average exchange rates in effect during the year. Translation adjustments
resulting from fluctuations in the exchange rates are recorded in accumulated other
comprehensive income, a separate component of stockholders equity. Gains and losses
from foreign currency transactions, such as those resulting from the settlement of foreign
receivables or payables are included in the consolidated statements of operations. These
foreign currency exchange net gains were $23,423 in fiscal 2005, $149,398 in fiscal 2004
and $6,432 in fiscal 2003.

8

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

Fair
Value Disclosures of Financial Instruments

Financial
instruments include cash and equivalents, accounts receivable, accounts payable, long-term
debt and an interest rate swap agreement. The carrying amounts of cash and equivalents,
accounts receivable, and accounts payable approximate fair value at July 2, 2005 and July
3, 2004, because of the short-term nature of these financial instruments. The estimated
carrying value of long-term debt approximates its fair value at July 2, 2005 and July 3,
2004 due to variable interest rates associated with the revolving line of credit. The
interest rate swap is valued based on a quoted market price.

Derivative
Financial Instruments

The
Company uses an interest rate swap agreement to modify a portion of the variable rate
revolving line of credit to a fixed rate obligation, thereby reducing the exposure to
market rate fluctuations. The interest rate swap agreement is designated as a hedge, and
effectiveness is determined by matching the principal balance and terms with that specific
obligation. Amounts currently due to or from interest rate swap counter parties are
recorded in interest expense in the period in which they accrue. The derivative was
recognized as a liability on the balance sheet at its fair value of $434,763 at July 2,
2005 and $1,391,133 at July 2, 2004.

Cash
and Equivalents

Cash and
equivalents consist of cash and highly liquid investments with an original maturity of
three months or less at the date of purchase.

Inventories

Inventories
are stated at the lower of FIFO (first-in, first-out) cost or market. The Company also has
inventory provided to certain of its major customers on a consignment basis. When the
Company receives notice that the customer has utilized the consigned inventory, it
invoices the customer for the inventory and recognizes revenue on the sale of that
inventory.

Property,
Equipment and Depreciation

Property
and equipment are stated at cost and depreciated, for financial reporting purposes, using
the straight-line method over the estimated useful lives of the assets. For income tax
purposes, accelerated depreciation methods and shorter useful lives are used. Management
estimates that the cost to complete the items classified in construction in progress at
July 2, 2005 was approximately $1.3 million. Estimated depreciable lives are as follows:
land and improvements, 3 to 20 years; buildings, 3 to 40 years; machinery and equipment, 3
to 20 years.

Leased
Property Under Capital Leases

Property
under capital leases is amortized over the shorter of the lives of the respective leases
or the estimated useful lives of the assets. Amortization of capital leases for the years
ending July 2, 2005, July 3, 2004 and June 28, 2003 were $15,319, $15,319 and $7,660,
respectively.

Stock
Based Compensation

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

9

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

Goodwill
and Intangible Assets

In
accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the
Company is required to test the carrying value of goodwill for impairment at the reporting
unit level annually or more frequently if an event occurs. Goodwill represents the excess
of the purchase price over the fair value of net identifiable intangible assets. The
recorded goodwill primarily relates to the acquisition of Idea Industries.

Other
intangibles consist primarily of trademarks, brand names and patents that are being
amortized using the straight-line method over periods up to 15 years. Other intangibles
were $172,202, net of accumulated amortization of $183,832 as of July 2, 2005 and
$189,581, net of accumulated amortization of $119,103 as of July 3, 2004.

Self-Insurance

The
Company is partially self-insured for workers compensation and certain employee
health benefits. The Company is self-insured for environmental issues. The Company
purchases stop-loss coverage in order to limit its exposure to any significant levels of
workers compensation or employee health benefit claims. Losses are recorded when
reported and consist of individual case elements. Insurance reserves also include a
provision for incurred but not reported losses determined using certain actuarial
assumptions followed in the insurance industry and the Companys own historical
experience.

Income
Taxes

Deferred
income taxes are recognized for all temporary differences between tax and financial
reporting, and are measured using the enacted tax rates expected to apply to the taxable
income in the years in which those temporary differences are expected to reverse.

Advertising

The
Company offers cooperative advertising to certain customers. The advertising costs are
recorded in accordance with Statement of Position No. 93-7, Reporting on Advertising
Costs and Emerging Issues Task Force No. 01-9, Accounting for Consideration
Given by a Vendor to a Customer. The cost of these programs is expensed at the same
time that the corresponding sales are recognized and are recorded as a reduction of gross
sales. Other advertising costs are included in selling, general, and administrative
expenses. Advertising expense, including cooperative advertising, was $1,300,000 in 2005,
$1,305,000 in 2004 and $976,000 in 2003.

Earnings
Per Share

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

|                                 | 2005 | 2004       | 2003
|-------------------------------- | ---- | ---------- | ----
|                                 |     
|Numerators:                      |      |            |     
|Numerator  for  both  basic  and |     
|diluted EPS, net income          |      | $3,080,272 |     
|                                 |     
|Denominators:                    |     
|Denominator  for both  basic and |     
|diluted  EPS, weighted-average   |     
|common shares outstanding        |      | 4,514,243  |     
|                                 |     

10

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

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

|               | 2005 | 2004  | 2003
|-------------- | ---- | ----- | ----
|               |      |       |     
|Exercise Price |     
|$13.64         |      | 6,050 |     
|$14.09         |      | 7,700 |     
|$16.74         |      | -     |     
|$18.18         |      | -     |     
|$18.41         |      | -     |     
|$18.48         |      | -     |     
|$26.54         |      | -     |     

Comprehensive
Income

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

New
Accounting Standards

In
December 2004, the Financial Accounting Standards Board (FASB) issued a
revision of SFAS No. 123(R), Share-Based Payment, which supersedes APB Opinion No.
25. This statement focuses primarily on transactions in which an entity obtains employee
services in exchange for share-based payments. Under SFAS No. 123(R), a public company
generally is required to measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the award, with such
cost recognized over the applicable vesting period. In addition, SFAS No. 123(R) requires
an entity to provide certain disclosures in order to assist in understanding the nature of
share-based payment transactions and the effects of those transactions on the financial
statements. The provisions of SFAS No. 123(R) require application as of the beginning of
the first fiscal year that begins after June 15, 2005. As such, the Company is required to
adopt the provisions of SFAS No. 123(R) at the beginning of fiscal year 2006. The Company
has not granted such awards over the past three years. If in the future, the Company
should grant any such awards, it will account for such awards in accordance with SFAS No.
123(R).

In
December 2004, the FASB issued Staff Position (FSP) No. 109-1, Application
of FASB Statement No. 109, Accounting for Income Taxes for the Tax Deduction on Qualified
Production Activities Provided by the American Jobs Creation Act (the Act) of
2004. This had no impact on the Company for fiscal 2005. The Company has not completed
its assessment of the impact of the Act will have on its financial statements in fiscal
2006.

FASB
Staff Position (FSP) No. 109-2, Accounting and Disclosure Guidance for the
Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004
(FSP 109-2), provides guidance under FASB Statement No. 109, Accounting for
Income Taxes, with respect to recording the potential impact of the repatriation
provisions of the American Jobs Creation Act of 2004 (the Jobs Act) on
enterprises income tax expense and deferred tax liability. The Jobs Act was enacted
on October 22, 2004. FSP 109-2 states that an enterprise is allowed time beyond the
financial reporting period of enactment to evaluate the effect of the Jobs Act on its plan
for reinvestment or repatriation of foreign earnings for the purposes of applying FASB
Statement No. 109. The Company has evaluated the impact of repatriating funds from its
Canadian subsidiary and determined that the impact to its tax expense and deferred tax
liability will be immaterial. A formal plan has not been approved as of the date of this
report to repatriate funds back to the United States, however the Company anticipates that
this action will occur in fiscal 2006.

In
November 2004, the FASB issued SFAS No. 151, Inventory Cost. This Statement amends
the guidance in Accounting Research Bulletin No. 43, Chapter 4, Inventory Pricing,
to clarify the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (scrap). SFAS No. 151 requires that those items be recognized
as current-period charges. In addition, this Statement requires that the allocation of
fixed production overhead to the costs of conversion be based on the normal capacity of
the production facilities. The provisions of SFAS No. 151 are effective for inventory
costs incurred in fiscal years beginning after June 15, 2005. As such, the Company is
required to adopt these provisions at the beginning of fiscal year 2006. The Company
believes that the impact of SFAS No. 151 will be immaterial to its consolidated
statements.

11

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

Use
of Estimates in Preparation of Financial Statements

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

Reclassifications

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

# NOTE 3.
Impairment/Severance

The
following presents a summary of pre-tax impairment/restructuring activities, by category
for the three years ended July 2, 2005.

|                            | 2005 | 2004 | 2003
|--------------------------- | ---- | ---- | ----
|                            |      |      |     
|Severance & stay on bonuses |      |      | $   
|Facility exit costs & other |      |      |     
|Asset impairment            |      |      |     
|                            |      |      |     
|Total                       |      |      | $   
|                            |      |      |     

During
fiscal 2005, the Company recognized asset impairment charges and accelerated depreciation
of $419,204 pre-tax on certain manufacturing equipment. The asset impairment component of
$115,088 was recorded in accordance with SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. The accelerated depreciation of $304,116 was recorded
in cost of goods sold as it is excluded from SFAS No. 144. The manufacturing equipment had
been utilized for backup production of precision drawer slide products. Those products are
now being partially sourced from overseas rather than manufactured in house, so the extra
capacity is no longer required. Some of the equipment will be abandoned and the useful
life was adjusted accordingly for depreciation purposes. The equipment that will be held
and used or sold was written-down to its estimated fair values as determined by the
Companys management based on estimated prices of similar assets or proceeds from
sale, respectively. The equipment that will be sold has been classified as assets held for
sale on the balance sheet.

In
January 2005, the Board of Directors approved a restructuring plan to close its Muncie,
Indiana facility and relocate its operations into existing available space in the Grand
Rapids, Michigan facility. In accordance with SFAS No. 144, the Company recorded pre-tax
impairment charges of $1,663,359 in fiscal 2005, consisting of the write down of the
long-lived assets; including real estate and manufacturing equipment located in Muncie
facility, to the lower of their carrying value or their estimated fair values, less the
disposition costs. Fair value estimates were determined by the Companys management,
with the assistance of independent appraisers, and were based on estimated proceeds from
sale. The fair value of the real estate was determined to be $1.0 million and the
equipment was adjusted to a fair value of $220,000. The closure of the facility and
relocation of the operations was completed in June 2005.

The
Company incurred certain qualifying exit costs in connection with the closure of the
Muncie facility, including severance and the relocation of certain equipment and
inventory. The severance/stay-on bonus costs and the facility exit and other costs of
$491,574 were expensed as they were incurred. All of the charges were recorded in the
Manufacturing division of the Company.

12

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

During
2003, the Company recorded $271,325 pre-tax of severance costs primarily related to the
resignation of two of its executive officers in August 2002.

The
following summarizes the restructuring accrual for the fiscal year ended July 2, 2005.
Fiscal years ended July 3, 2004 and June 28, 2003 did not have any accrual activity.
Facility exit costs associated with the movement of equipment and inventory, as well as
facility preparation and training related to the relocation, are recognized as incurred
and are not included in the ending restructuring accrual balance.

|                              | Severance &  Stay on bonuses | Facility exit Costs & other | Total
|----------------------------- | ---------------------------- | --------------------------- | -----
|                              |                              |                             |      
|Accrual balance, July 3, 2004 |                              |                             | $    
|Restructuring charges         |                              |                             |      
|Cash payments                 |                              |                             |      
|                              |                              |                             |      
|Accrual balance, July 2, 2005 |                              |                             | $    
|                              |                              |                             |      

# NOTE 4. Inventories

Inventories
are valued at the lower of FIFO (first-in, first-out) cost or market. Inventories are
summarized as follows:

|                  | July 2, 2005 | July 3, 2004
|----------------- | ------------ | ------------
|                  |              |             
|Finished products |              |             
|Consignment       |              |             
|Work in process   |              |             
|Raw materials     |              |             
|                  |              |             
|                  |              |             
|                  |              |             

# NOTE 5. Warranty

The
Company provides a limited lifetime warranty on most products sold. Depending on the
product, the lifetime warranty is generally defined as a range of three to fifteen years.
The Company does not sell or otherwise issue warranties or warranty extensions as stand
alone products. The warranty provides replacement of the product as the resolution for any
warranty claims. Reserves have been established for the various costs associated with the
Companys warranty program. General warranty reserves are based on historical claims
experience and other currently available information and are periodically adjusted for
business levels and other factors. Specific reserves are established if an issue is
identified with the amounts for such reserves based on the estimated cost to correct the
problem. The actual warranty expense could differ from the estimates made by the Company
based on product performance. The following table presents the changes in the
Companys product warranty liability:

|                                          | July 2, 2005 | July 3, 2004 | June 23, 2003
|----------------------------------------- | ------------ | ------------ | -------------
|                                          |              |              |              
|Accrued  warranty  costs at the beginning |              |              |              
|of the year                               |              |              | $            
|Payments made for warranty costs          |              |              |              
|Accrual for product warranty              |              |              |              
|                                          |              |              |              
|Accrued  warranty costs at the end of the |              |             
|year                                      |              |              | $            
|                                          |              |              |              

13

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

# NOTE 6. Long-Term Debt

Long-term
debt obligations are summarized as follows:

|                                       | July 2, 2005 | July 3, 2004
|-------------------------------------- | ------------ | ------------
|                                       |              |             
|Revolving credit agreement             |              |             
|Capital lease obligations              |              |             
|Less: Current portion of capital lease |              |             
|obligations                            |              |             
|                                       |              |             
|                                       |              |             
|                                       |              |             

The
Company has a $35 million three-year unsecured revolving credit facility that would have
matured on November 1, 2006. On May 31, 2005, the Company signed the First Amendment to
the credit facility with Comerica Bank. The First Amendment extends the revolving credit
maturity date to November 1, 2008 and revised certain of the financial covenants.

Interest
rates on outstanding loans under the revolving credit facility are either based on the
London Interbank Offering Rate (LIBOR), plus a negotiated spread over LIBOR, or at the
U.S. prime rate. The agreement requires the Company to pay a non-use fee on amounts not
outstanding under the credit facility based on a ratio of the Companys adjusted
total debt (funded debt less cash and cash equivalents) to EBITDA (earnings before
interest, income taxes, depreciation and amortization).

At
July 2, 2005, there was a $22,500,000 balance outstanding under this agreement. The
interest rate on the first $20,000,000 of the outstanding balance was 3.3375% plus an
additional 85 basis points credit spread. The interest rate is adjusted to market rates at
the end of each interest period and is based on the 90 day LIBOR rate. The interest rate
on the remaining balance of $2,500,000 was 3.34%, which was the 30-day LIBOR rate, plus an
additional 85 basis points credit spread. The agreement requires the Company to pay a
non-use fee on amounts not outstanding under the credit facility. At July 2, 2005, the
non-use fee was .15%. Both the interest rate and the non-use fees on this agreement
fluctuate according to the ratio of the Companys adjusted total debt (funded debt
less cash and cash equivalents) to EBITDA (earnings before interest, income taxes,
depreciation and amortization). Compensating balances are not required by this agreement.
The Company is required under this agreement to maintain certain financial ratios and, at
July 2, 2005, was in compliance with these covenants.

# NOTE 7. Derivative
Financial Instruments

The
Company has entered into an interest rate swap agreement to modify a portion of the
variable rate revolving line of credit to a fixed rate obligation, thereby reducing the
exposure to market rate fluctuations. The interest rate swap agreement is designated as a
hedge, and effectiveness is determined by matching the principal balance and terms with
that specific obligation. Amounts currently due to or from interest-rate-swap
counter-party are recorded in interest expense in the period in which they accrue. The
derivative, which has a notional amount of $20,000,000, was recognized as a liability on
the balance sheet at its fair value of $434,763 at July 2, 2005 and $1,391,133 at July 3,
2004. Under this agreement, the Company pays the counterparty interest at a fixed rate of
6.25%, and the counterparty pays the Company interest at a variable rate equal to LIBOR.
The LIBOR rate on this agreement was 3.33% at July 2, 2005.

Neither
the Company nor the counterparty, which is a major U.S. bank, is required to collateralize
its obligation under the swap. The Company is exposed to loss if the counterparty should
default. At July 2, 2005, the Company had no exposure to credit loss on the interest rate
swap. The Company does not believe that any reasonably likely change in interest rates
would have a material adverse effect on the financial position, results of operations or
cash flows of the Company.

14

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
gain/(loss) recognized in other comprehensive income on the interest rate swap is made up
of the following components:

|                      | July 2, 2005 | July 3, 2004 | June 28, 2003
|--------------------- | ------------ | ------------ | -------------
|                      |              |              |              
|Change in fair value  |              |              |              
|of interest rate swap |              |              | $            
|Settlement to         |              |             
|interest expense      |              |              |              
|                      |              |             
|Other comprehensive   |              |             
|income (loss)         |              |              | $            

# NOTE 8. Lease Commitments

The
Company leases certain real property and equipment under agreements which expire on
various dates. Future minimum lease payments under operating and capital leases that have
initial or remaining noncancelable lease terms in excess of one year are summarized as
follows:

|Fiscal Year                               | Operating | Capital
|----------------------------------------- | --------- | -------
|                                          |           |        
|2006                                      |           |        
|2007                                      |           |        
|2008                                      |           |        
|2009                                      |           |        
|2010 and thereafter                       |           |        
|                                          |           |        
|Total minimum payments                    |           |        
|Less - interest on capital leases         |           |        
|                                          |           |        
|Total principal payable on capital leases |           |        
|(included in Note 6)                      |           |        
|                                          |           |        

Rent
expense under all operating leases was approximately $1,194,000, $1,273,000 and $1,017,000
in fiscal 2005, 2004 and 2003, respectively.

# NOTE 9. 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 pension and profit-sharing plans at July 2, 2005 and July 3,
2004 held a combined total of 284,637 shares of the Companys Class B common stock.

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

The
postretirement health-care plan covers substantially all employees. The plan is unfunded
and contributory. The plan was capped in fiscal 2002 to limit the amount that the Company
would pay toward the of health-care premiums for retirees.

15

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
Company uses a June 30 measurement date for the majority of its plans. The following
provides a reconciliation of benefit obligations, plan assets and funded status of the
Companys noncontributory pension plans, SERP and postretirement plans:

|                                | Pension Benefits | SERP Benefits | PostretirementHealth-Care Benefits
|------------------------------- | ---------------- | ------------- | ----------------------------------
|                                |                  |               |                                   
|                                |                  |               |                                   
|Change in benefit obligations   |                  |               |                                   
|Benefit obligations at          |                  |              
|beginning of year               |                  |               | $                                 
|Service cost                    |                  |               |                                   
|Interest cost                   |                  |               |                                   
|Actuarial (gains)/losses        |                  |               |                                   
|Benefits paid                   |                  |               |                                   
|Exchange rate                   |                  |               |                                   
|                                |                  |               |                                   
|Benefit obligations at end of   |                  |              
|year                            |                  |               | $                                 
|                                |                  |               |                                   
|Change in plan assets           |                  |              
|Fair value of plan assets at    |                  |              
|beginning of year               |                  |               | $                                 
|Actual return on plan assets    |                  |               |                                   
|Employer contributions          |                  |               |                                   
|Benefits paid                   |                  |               |                                   
|Exchange rate and other         |                  |               |                                   
|                                |                  |               |                                   
|Fair value of plan assets at    |                  |              
|end of year                     |                  |               | $                                 
|                                |                  |               |                                   
|Funded status                   |                  |               | $                                 
|Unrecognized transition amount  |                  |               |                                   
|Unrecognized net actuarial loss |                  |               |                                   
|Unrecognized prior service cost |                  |              
|                                |                  |               |                                   
|                                |                  |               |                                   
|Net amount recognized           |                  |               | $                                 
|                                |                  |               |                                   
|Amounts recognized in the       |                  |              
|consolidated balance sheets     |                  |              
|consist of:                     |                  |              
|Prepaid pension cost            |                  |               | $                                 
|Other retirement benefits       |                  |               |                                   
|Accumulated other               |                  |              
|comprehensive income            |                  |               |                                   
|                                |                  |               |                                   
|Net amount recognized           |                  |               | $                                 
|                                |                  |               |                                   

The
following table represents the weighted average actuarial assumptions used to develop the
projected benefit obligation at June 30, 2005 (Plan year-end) and to develop
net periodic benefit cost for the subsequent fiscal year. Actuarial assumptions used in
calculating benefit obligations at the end of a given fiscal year are determined at that
time. The assumptions used to determine the net periodic benefit cost in a given year,
however, are established at the end of the previous Plan year-end.

|                               |  |  |  |   |      | 
|------------------------------ |  |  |  | - | ---- | 
|
|                               |  |  |  |   |      | 
|Discount rate                  |  |  |  | 5 | .25% | 
|Expected return on plan assets |  |  |  | 8 | .0%  | 

16

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
Company evaluates the reasonableness of these assumptions on an annual basis taking into
consideration long-term trends and overall market conditions that may affect the cost of
providing the benefits under its pension and post-retirement plans.

The
net periodic benefit cost related to the defined benefit plans is made up of the following
components:

|                               | Pension Benefits | SERP Benefits
|------------------------------ | ---------------- | -------------
|                               |                  |              
|
|                               |                  |              
|Service cost                   |                  |              
|Interest cost                  |                  |              
|Expected return on plan assets |                  |              
|Net amortization               |                  |              
|                               |                  |              
|Net periodic benefit cost      |                  |              
|                               |                  |              

|                          | PostretirementHeath Care Benefits
|------------------------- | ---------------------------------
|                          |                                  
|
|                          |                                  
|Service cost              |                                  
|Interest cost             |                                  
|Net amortization          |                                  
|                          |                                  
|Net periodic benefit cost |                                  
|                          |                                  

The
health care cost trend rate used to determine the postretirement health-care benefit
obligation was 8.0% for 2005 and gradually decreases to 5.0% in 2008. The trend rate is a
significant factor in determining the amounts reported. A one-percentage-point change in
these assumed health-care cost trend rates would have the following effect on net periodic
benefit cost:

|One-Percentage Point                         | Increase | Decrease
|-------------------------------------------- | -------- | --------
|                                             |          |         
|Effect on total of service and interest cost |          |         
|components                                   |          |         
|Effect on postretirement health-care benefit |          |         
|obligation                                   |          |         

The
expected long-term rate of return used to determine the net periodic benefit cost was 8.0%
for both years. The Companys pension plan weighted-average asset allocation, by
asset category was as follows:

|                                 |  | 
|-------------------------------- |  | 
|
|                                 |  | 
|Equity securities                |  | 
|Debt securities                  |  | 
|Money market, stable value funds |  | 
|and cash                         |  | 
|                                 |  | 
|Total                            |  | 
|                                 |  | 

The
Company employs a total return investment approach whereby a mix of equities and fixed
income investments are used to maximize the long-term return of plan assets for a prudent
level of risk. Risk tolerance is established through careful consideration of plan
liabilities, plan funded status, and corporate financial condition. The investment
portfolio is comprised of a diversified blend of equity investments, including a mix of
large and small capital mutual funds, as well as growth, value, international mutual funds
and Company stock. Fixed income investments include both individual debt issues, along
with short-term and intermediate term bond funds.

17

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
Company reviews historical market data and long-term historical relationships, along with
current market factors, such as inflation and interest rates when determining the
long-term rate of return for plan assets. Peer data and historical returns are also
reviewed to check the reasonableness and appropriateness of the long-term rates.

The
Company expects to contribute approximately $105,000 to its Canadian defined benefit
pension plan, $312,000 to its SERP plan and $186,000 to its other post retirement benefit
plan in fiscal 2006. The U.S. defined pension plan will only be funded if it becomes
necessary under SFAS No. 87 to avoid an additional minimum liability from being recorded
on the consolidated financial statements. The estimated future benefit payments under our
benefit plans are as follows:

|          |  |  |  
|--------- |  |  | -
|
|          |  |  |  
|2006      |  |  | $
|2007      |  |  |  
|2008      |  |  |  
|2009      |  |  |  
|2010      |  |  |  
|2011-2015 |  |  |  
|          |  |  |  

The
Companys Board of Directors annually approves contributions to the defined
contribution plans. Expense for the discretionary profit-sharing plan amounted to
$759,869, $700,666 and $667,192 in fiscal 2005, 2004 and 2003, respectively.

The
Company also provides a 401(k) plan for all of its employees. Employees may contribute 100
percent of their pay up to Internal Revenue Service limits. For hourly employees, the
Company will match 50 percent of the first 4 percent that an employee contributes. The
amount expensed for the Company match provision of the plan was $203,053, $218,481, and
$225,473 in fiscal 2005, 2004 and 2003, respectively.

# NOTE 10. Income Taxes

Income
tax expense (benefit) consists of:

|Year Ended               | July 2,2005 | July 3,2004 | June 28,2003
|------------------------ | ----------- | ----------- | ------------
|                         |             |             |             
|Current:                 |             |             |             
|United States            |             |             | $           
|Foreign, state and local |             |             |             
|                         |             |             |             
|Total current            |             |             |             
|                         |             |             |             
|Deferred:                |             |            
|United States            |             |             |             
|Foreign                  |             |             |             
|State and local          |             |             |             
|                         |             |             |             
|Total deferred           |             |             |             
|                         |             |             |             
|Income tax expense       |             |             | $           
|                         |             |             |             

18

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
difference between the federal statutory tax rate and the effective tax rate was as
follows:

|Year Ended                            | July 2,2005 | July 3,2004 | June 28,2003
|------------------------------------- | ----------- | ----------- | ------------
|                                      |             |             |             
|Federal income taxes at the statutory |             |             |             
|rate                                  |             |             | $           
|Foreign earnings taxed at foreign     |             |            
|statutory rate                        |             |             |             
|State and local income taxes          |             |             |             
|Tax audit settlement                  |             |             |             
|Utilization of previously disallowed  |             |            
|loss                                  |             |             |             
|Valuation reserve for subsidiary      |             |            
|state taxes                           |             |             |             
|Expiration of statutory period/R&D    |             |            
|credits                               |             |             |             
|Other                                 |             |             |             
|                                      |             |             |             
|Income tax expense                    |             |             | $           
|                                      |             |             |             

During
the third quarter of fiscal 2005, the Company recognized one-time tax benefits of
$594,000. Of this total, $372,000 related to the expiration of a certain statutory period
and the related reversal of the associated tax contingencies. The remaining $222,000 of
tax benefits was related to amended filings for prior year research and development
credits.

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

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

|                                         | July 2, 2005 | July 3, 2004
|---------------------------------------- | ------------ | ------------
|                                         |              |             
|Property and equipment                   |              |             
|Pension accrual                          |              |             
|Subsidiary state tax NOL                 |              |             
|Supplemental retirement plan             |              |             
|Benefit related accruals                 |              |             
|Inventory reserves                       |              |             
|Rebates, advertising and royalty accrual |              |             
|Derivative instrument                    |              |             
|Other, including valuation allowances    |              |             
|                                         |              |             
|                                         |              |             
|                                         |              |             

The American
Jobs Creation Act of 2004 (the Jobs Act), enacted on October 22, 2004,
provides for a temporary 85% dividends received deduction on certain foreign earnings
repatriated during a one-year period. To qualify for the deduction, the earnings must be
reinvested in the United States pursuant to a domestic reinvestment plan established by a
Companys Chief Executive Office and approved by the Companys Board of
Directors. Certain other criteria in the Jobs Act must be satisfied as well. The
Companys period during which the qualifying distributions can be made includes
fiscal 2006.

19

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
Company is in the process of determining the amount of foreign earnings that will be
expatriated, if any, under the repatriation provisions of FSP 109-2, however, the Company
has not completed an evaluation of the impact of repatriating funds from its Canadian
subsidiary. A formal plan has not been approved as of the date of this report to
repatriate funds back to the United States, however, the Company anticipates that this
action will occur in fiscal 2006. The Company is considering $2.0 million to $4.0 million
to be repatriated. The related anticipated income tax effect of such repatriation is not
estimable at this time.

The
Companys Indiana subsidiary incurred a net operating loss in fiscal 2005. The
Company has total state net operating loss carryforwards in the amount of $820,000, which
expire from 2022 to 2024. Due to the fact that the Company is no longer manufacturing in
that state and will most likely have very little income tax expense payable to that state,
it is unlikely that the NOL will be utilized. Accordingly, management has recorded a
valuation reserve for the entire balance.

# NOTE 11. Stock Option
Plans

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

The
Companys 1997 Stock Incentive plan provided 660,000 shares of the Companys
stock for issuance. Issuance could be in the form of stock options or restricted stock;
however, no more than 55,000 shares could be issued as restricted stock. No options have
been granted during fiscal 2005, 2004 and 2003.

The
Companys CEO had been granted 6,600 shares of restricted common stock and the option
to purchase an additional 27,500 shares of the Companys common stock at a price of
$14.43 per share. The grant and the options were subject to specific financial objectives
within a five-year performance period that ended on February 1, 2005. The objectives were
not met and the restricted stock and the options were forfeited.

All
of the options previously granted under this plan have expired and effective July 2, 2005,
this plan has been terminated.

Transactions
under the plans are as follows:

|Year Ended             | July 2,2005 | Weighted Average Exercise Price | July 3,2004 | Weighted Average Exercise Price | June 28,2003 | Weighted Average Exercise Price
|---------------------- | ----------- | ------------------------------- | ----------- | ------------------------------- | ------------ | -------------------------------
|                       |             |                                 |             |                                 |              |                                
|Options outstanding,   |             |                                 |             |                                 |              |                                
|beginning of year      |             |                                 |             | 252,933                         |              | $                              
|                       |             |                                 |             |                                 |              |                                
|Forfeited              |             |                                 |             | (239,183                        | )            | $                              
|                       |             |                                 |             |                                 |              |                                
|Options outstanding at |             |                                
|end of year            |             |                                 |             | 13,750                          |              | $                              
|                       |             |                                 |             |                                 |              |                                
|Options exercisable at |             |                                
|end of year            |             |                                 |             | 13,750                          |              | $                              
|                       |             |                                 |             |                                 |              |                                
|Options available for  |             |                                
|grant, end of year     |             |                                 |             | -                               |              |                                
|                       |             |                                 |             |                                 |              |                                

20

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

A
summary of stock options outstanding at July 2, 2005 follows:

|Price  | Outstanding   
and Exercisable 
    Shares | Weighted-
 Average 
 Exercise
  Price | Weighted-
  Average
 Remaining
Contractual
    Life
  (Years)
|------ | ------------------------------------------ | ------------------------------------- | -------------------------------------------------------------
|$13.64 |                                            |                                       |                                                              
|$14.09 |                                            |                                       |                                                              
|       |                                            |                                       |                                                              
|       |                                            |                                       |                                                              
|       |                                            |                                       |                                                              

The
Company uses the Black-Scholes option-pricing model to determine the fair value of each
option at the grant date, however no options have been granted for the years presented
above.

# NOTE 12.
Stockholders Equity

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

The
Company has a stock repurchase program, but has not purchased any shares in either fiscal
2005 or 2004. At July 2, 2005, the Company has remaining authorization to repurchase
272,202 shares.

# NOTE 13. Business
Segments

During
fiscal 2004, management began managing the business and reviewing financial information by
market channel rather than by the previous Business Products and Home & Commercial
Products divisions.

The
Business Products division was segregated into two market channels: OEM and Idea. The OEM
market channel sells precision drawer slides, hardware and ergonomic products to original
equipment office furniture manufacturers. The Idea market channel sells ergonomic products
to independent office furniture dealers. These dealers purchase product from office
furniture manufacturers and resell the furniture along with design and installation
services to the end customer.

The
Home & Commercial Products division was segregated into two market channels: consumer
and distribution/other. The consumer market channel sells a majority of the Companys
product lines to retailers. The distribution/other market channel sells many of the
Companys product lines to kitchen and bath OEM manufacturers and full line
woodworking distributors.

The
Manufacturing division manufactures or sources all products and sells them to the four
market channels. The selling price to the market channels is equal to the standard cost of
the product. Manufacturing cost variances from standard result in an operating profit or
loss for the Manufacturing division.

Management
has limited its review of the channels to net sales to external customers and operating
profit before administrative costs as shown below. In accordance with SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information, only
those measures prepared on an ongoing basis and reviewed by the chief operating decision
maker are disclosed. Due to the complexity in obtaining this information for prior years,
restatement of fiscal 2003 results by channel is impracticable.

21

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

The
accounting policies of the business segments are the same as those described in the
summary of significant accounting policies.

|                            | BusinessProductsOEM | BusinessProductsIdea | Consumer | Distributionand Other | Manufacturing | Corporateand Other | ConsolidatedTotal
|--------------------------- | ------------------- | -------------------- | -------- | --------------------- | ------------- | ------------------ | -----------------
|                            |                     |                      |          |                       |               |                    |                  
|Year Ended July 2, 2005:    |                     |                      |          |                       |               |                    |                  
|Net sales to                |                     |                     
|external customers          |                     |                      | $        | 43,120,858            |               | $                  | 9,086,172        
|Operating profit before     |                     |                     
|administrative costs, other |                     |                     
|expenses and income taxes   |                     |                      | $        | 3,096,687             |               | $                  | 1,172,306        
|Administrative costs,       |                     |                     
|other expenses              |                     |                      |          | -                     |               |                    | -                
|Income tax expense          |                     |                      |          | -                     |               |                    | -                
|                            |                     |                      |          |                       |               |                    |                  
|Net income (loss)           |                     |                      | $        | 3,096,687             |               | $                  | 1,172,306        
|                            |                     |                     
|Year Ended July 3, 2004:    |                     |                     
|Net sales to                |                     |                     
|external customers          |                     |                      | $        | 37,161,339            |               | $                  | 9,258,142        
|Operating profit before     |                     |                     
|administrative costs, other |                     |                     
|expenses and income taxes   |                     |                      | $        | (2,543,392            | )             | $                  | 1,301,708        
|Administrative costs,       |                     |                     
|other expenses              |                     |                      |          | -                     |               |                    | -                
|Income tax expense          |                     |                      |          | -                     |               |                    | -                
|                            |                     |                      |          |                       |               |                    |                  
|Net income (loss)           |                     |                      | $        | (2,543,392            | )             | $                  | 1,301,708        

In
fiscal year 2003, the Company segregated its business segments into the Office Products
and Home & Commercial Products divisions. This information is provided below:

|                          | OfficeProducts | Home andCommercialProducts | Corporateand Other | ConsolidatedTotal
|------------------------- | -------------- | -------------------------- | ------------------ | -----------------
|                          |                |                            |                    |                  
|Year Ended June 28, 2003: |                |                            |                    |                  
|Net  sales to external    |                |                           
|Customers                 |                |                            | $                  | 35,659,838       
|Income tax expense        |                |                           
|(benefit)                 |                |                            | $                  | (37,000          
|                          |                |                            |                    |                  
|Net income (loss)         |                |                            | $                  | (76,048          

22

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

Sales
to customers are attributed to the geographic areas based on the location of the customer.
Long-lived assets consist of property and equipment. Geographic information is as follows:

|Year Ended         | July 2,2005 | July 3, 2004 | June 28, 2003
|------------------ | ----------- | ------------ | -------------
|                   |             |              |              
|Net sales:         |             |              |              
|United States      |             |              | $            
|Canada             |             |              |              
|Other foreign      |             |              |              
|                   |             |              |              
|                   |             |              | $            
|                   |             |             
|Long-lived assets: |             |             
|United States      |             |              | $            
|Other foreign      |             |              |              
|                   |             |              |              
|                   |             |              | $            

The
Company does not believe that it is dependent upon any single customer, however the
Companys largest customer, who is in the Distribution/Other channel, accounts for
approximately 13.2% of consolidated gross sales.

# NOTE 14. Quarterly
Results (Unaudited)

The
table below sets forth summary unaudited information on a quarterly basis. All of the
fiscal quarters contain 13 weeks, except for the fourth quarter of fiscal 2004, which
contained 14 weeks.

|Year Ended July 2, 2005              | 1st Quarter | 2nd Quarter | 3rd Quarter | 4th Quarter
|------------------------------------ | ----------- | ----------- | ----------- | -----------
|                                     |             |             |             |            
|Net sales                            |             |             | $           | 38,372,180 
|Gross profit                         |             |             | $           | 6,804,776  
|Operating income (loss)              |             |             | $           | 969,525    
|Net income (loss)                    |             |             | $           | 390,511    
|Earnings (loss) per share-basic and  |             |            
|diluted                              |             |             | $           | 0.09       
|Cash dividend-common stock           |             |             | $           | 0.165      
|Cash dividend-Class B common stock   |             |             | $           | 0.15       
|                                     |             |             |             |            
|
|                                     |             |             |             |            
|Net sales                            |             |             | $           | 36,005,957 
|Gross profit                         |             |             | $           | 7,052,310  
|Operating income                     |             |             | $           | 1,264,086  
|Net income                           |             |             | $           | 669,874    
|Earnings per share-basic and diluted |             |             | $           | 0.15       
|Cash dividend-common stock           |             |             | $           | 0.165      
|Cash dividend-Class B common stock   |             |             | $           | 0.15       
|                                     |             |             |             |            

# NOTE 15. Commitments and
Contingencies

In
1997, KV was sued by a former employee seeking additional benefits under an executive
retirement plan. This litigation has been dismissed and appealed through various courts.
In January 2005, the Sixth Circuit Court of Appeals denied the plaintiffs appeal of
the dismissal.

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

23

---



# Knape & Vogt
Manufacturing Company and Subsidiaries Notes to Consolidated
Financial Statements

During
the second quarter of fiscal 2005, a competitor filed a suit in the U.S. District Court of
the Central District of California alleging that KV infringes two of the competitors
U.S. patents. The competitor is seeking monetary damages and injunctive relief. KV has
received an opinion from its outside patent counsel that KVs products do not
infringe the competitors patents. KV has answered that it denies any liability and
will vigorously defend the suit.

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

In
the opinion of management, based on the information presently known and taking into
account established accruals of approximately $431,000 at July 2, 2005, the ultimate
liability for these matters will not have a material adverse effect on KVs financial
position or the results of its operations.

24

---



REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

Board of DirectorsKnape
& Vogt Manufacturing CompanyGrand Rapids, Michigan

We have audited the accompanying
consolidated balance sheets of Knape & Vogt Manufacturing Company and subsidiaries
(the Company) as of July 2, 2005 and July 3, 2004, and the related
consolidated statements of operations, stockholders equity, and cash flows for each
of the three years in the period ended July 2, 2005. Our audits also included the
financial statement schedule listed in the Index at Item 15. These financial statements
and financial statement schedule are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements and financial
statement schedule based on our audits.

We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting. Accordingly, we express no
such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such consolidated
financial statements present fairly, in all material respects, the financial position of
Knape & Vogt Manufacturing Company and subsidiaries as of July 2, 2005 and July 3,
2004, and the results of their operations and their cash flows for each of the three years
in the period ended July 2, 2005, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth therein.

/s/ Deloitte & Touche
LLPGrand Rapids, Michigan August 10, 2005

25

---



# 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 COMPANYBy /s/ William R. Dutmers
      
      William R. Dutmers       Chairman of the Board       and Chief Executive Officer
By /s/ Leslie J. Cummings
      
      Leslie J. Cummings      Vice President of Finance       and Treasurer
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: October 28, 2005

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed
below on October 28, 2005, by the following persons on behalf of the registrant in the
capacities indicated.

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

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

|/s/ Richard S. Knape          
Richard S. Knape, Director |  | /s/ Robert J. Knape          
Robert J. Knape, Director
|----------------------------------------------------------------------- |  | ---------------------------------------------------------------------

|/s/ Gregory Lambert          
Gregory Lambert, Director |  | /s/ Christopher Norman          
Christopher Norman, Director
|--------------------------------------------------------------------- |  | ---------------------------------------------------------------------------

26

---



# KNAPE & VOGT
MANUFACTURING COMPANY ANNUAL REPORT 
FORM 10-K

# EXHIBIT INDEX

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

| | 3(b)* | Bylaws as amended October 15, 2004, filed herewith as Exhibit 3(b). Amended
                    section was filed on October 15, 2004 in the Registrants Form 8K.
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 Comerica Bank dated August 28, 2003, which was filed as
                    Exhibit 10(a) of the Registrants Form 10-Q Quarterly Report for the first
                    quarter ended September 27, 2003, is incorporated by reference.
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | 10(j)* | Supplemental Executive Retirement Plan, adopted effective as of June 29, 2005,
                    is filed herewith.
| | ------ | ---------------------------------------------------------------------------------------------------------------------

| | 10(k)* | Annual Incentive Plan, adopted effective as of July 3, 2005, is filed herewith.
| | ------ | -------------------------------------------------------------------------------

| | 10(l)* | Form of Management Continuity Agreements adopted effective as of June 30, 2005,
                    between Knape & Vogt Manufacturing Company and William R. Dutmers, Raymond
                    N. Watson, Leslie J. Cummings, John J. Master, Daniel D. Pickett, Robert J.
                    Knape and Timothy R. Graber, is filed herewith.
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10(m)* | Agreement dated October 29, 2002 between Knape & Vogt
                    Manufacturing Company and William R. Dutmers is filed herewith.
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------

| | 10(n)* | First Amendment to the Credit Agreement with Comerica Bank dated May 31, 2005 is
                    filed herewith.
| | ------ | --------------------------------------------------------------------------------------------------------------------

| | 21* | Subsidiaries
of Registrant.
| | --- | ---------------------------

| | 23 | Consent
of Deloitte & Touche LLP, independent registered public accountants.
| | -- | ----------------------------------------------------------------------------

| | 31.1 | Certificate
of the Chairman of the Board and Chief Executive Officer of Knape & Vogt
Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 31.2 | Certificate
of the Executive Vice President of Finance and Treasurer of Knape & Vogt
Manufacturing Company pursuant to 15 U.S.C. Section 7241, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 32.1 | Certificate
of the Chairman of the Board and Chief Executive Officer of Knape & Vogt
Manufacturing Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | *
Previously filed
| | ------------------

27