Fellow Shareholders: A LETTER TO THE SHAREHOLDERS 2 2001 STRATTEC Annual Report Fiscal 2001 was one of those years a business would rather not experience, but comes along every once in a while anyway during the existence of a corporation. After a record production and sales year in fiscal 2000, we started fiscal 2001 at a fast pace. By late fall, however, the slumping economy significantly affected new-vehicle sales, and by mid-November, our customers responded by cutting their production. The reductions in vehicle production in November, December, January and February had the obvious effect on us, resulting in reduced production at both our manufacturing locations and temporary layoffs of our operations associates. While the economic slowdown has been an unpleasant experience for us as well as most businesses in North America, it was not entirely unexpected. Some forecasts had predicted a slowdown, and the incredible vigor of the auto industry in the preceding several years made some kind of adjustment likely. We therefore made it one of our missions for the fiscal year to optimize our processes and eliminate costs in a more organized and focused manner. The resulting cost-reduction teams made significant progress during the year, identifying and implementing cost cutting amounting to  an annualized $8 million. These reductions came from finding and eliminating waste, revising operating methods, and reducing employment levels. Had we not achieved these cost reductions, the effects of the economic slowdown on our business would have been more dramatic. In late December, one of our major customers abruptly announced that it was unilaterally reducing all of its material purchase orders by 5%, effective January 1st. We viewed this action as an arbitrary and unreasonable attempt to mitigate that customer’s negative financial condition resulting from its own internal issues. Our position on this action is that we should not and cannot allow our shareholders to suffer as a result of our customers’ self-induced problems. Nevertheless, that customer’s partial success in forcing this action on its supply base has encouraged other customers suffering under the economic slowdown to increase pressure for price reductions as well. While we recognize our customers’ rationale for this price reduction pressure, we are looking, and will continue to look, at solutions that are strategically fair and equitable for STRATTEC, its shareholders and its customers. In March, we began negotiations with PACE Local 7-0232, the union representing our hourly operations associates in Milwaukee. These negotiations were conducted in anticipation of the expiration of our then existing labor contract on May 31, 2001. On that date, both sides reached a tentative agreement for a new contract which included an extension of the current contract until June 6, 2001 to allow the union time to organize and call a ratification meeting of its members. Despite the endorsement of the tentative agreement by both the union Bargaining Committee and Executive Committee, the membership rejected the proposed contract by a narrow margin, and a strike against the company began. The strike lasted 16 days, during which time we operated the Milwaukee facility under a Strike Contingency Plan devised several months earlier. This plan included the build-up of certain component and finished goods inventories prior to May 31st, as well as an operating plan that used our salaried work force to produce parts. Thanks to this plan and the dedication and enthusiasm of our salaried employees, we were able to support our major customers’ requirements without interrupting their production processes. On June 22nd, after mediated negotiations, the union took another tentative agreement before the membership. This agreement was again endorsed by both the union Bargaining Committee and Executive Committee, and this time was ratified by the members. Despite the strike and its effects on our fourth quarter results, we believe the resulting 4-year contract is fair to both the Company and its hourly represented associates, and should provide us opportunities to continue to make changes for more efficient operations in our Milwaukee facility. The pricing pressure we are receiving from our customers is a continuation of prior years’ experience, but is now heightened by the need for these customers to reduce costs in the face of  a very competitive but stagnate market, and reduced automotive production at some of our their