6 Revenues by Geography North America 73% Europe 21% Rest of World 6% Fiscal 2003 Growth Focus Despite positive macro-economic indicators in the United States, Europe and Asia that indicate the potential for increased industrial activity, we have not yet seen sustained signs of increased demand in most of our customer markets, and the environment has not significantly improved.  Geographic revenue mix will shift with the addition of Widia sales in 2003. The manufacturing recovery is occurring more slowly and appears further out than anyone had anticipated, while the strength of the recovery remains a key question.  Regardless of the timing and strength of the recovery, we will continue to execute our strategy. We are very confident that we have durable systems in place to sustain focus and improvement in primary working capital, cash generation, debt reduction, product development and lean processes. The systems and processes we have built to sustain our progress now comprise the Kennametal Value Business System (KVBS) – a formal system built around our people, our values and our code of ethics. KVBS has six engines including Strategic Planning, Performance Planning & Management, Kennametal’s Lean Enterprise, the ACE Product Development Process, Mergers & Acquisitions System – and to be added in fiscal 2003, Business Intelligence and Customer Acquisition.  Growth Regardless of market conditions, we remain focused on gaining market share with new products, further penetration of existing accounts, moving into adjacent markets and expanding our geographic reach. These organic growth efforts will be augmented by the successful integration of Widia.  Lean Kennametal’s Lean Enterprise is our process for perpetual value creation through continuous improvement and the elimination of waste, and will be aggressively advanced in 2003.  People The greatest strength of our company is our people and we remain focused on their development. We substantially raised our investment in training and development to 1.5 percent of sales in 2002, and are targeting a minimum of 2 percent of sales in 2003. A leadership-training curriculum is being added to the technical program offered by Kennametal University, which will provide focused leadership, sales and marketing development to our employees. We demand very high levels of performance and we have accelerated our investment in the training and tools to support the requisite strong results.  With this foundation, our focus for fiscal 2003 will be in three key areas:  I wish to acknowledge the contributions of every member of our Board of Directors, and particularly Bill Newlin for his six years of service as Chairman. He has provided me considerable support during my three years here, and I look forward to working with him in his new role as lead director. We are also happy to welcome our newest director, Ronald M. DeFeo, Chairman, President, Chief Executive Officer and Chief Operating Officer, Terex Corporation, and look forward to benefiting from his insight in years to come. We continue to focus on the proper composition and size of our Board to ensure proper service to the company and to you, our shareowners. 