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assembly plants. To this end, we are seeing some attempts to reduce vehicle cost by de-contenting – a tactic which reduces the overall amount of standard and/or optional equipment on a vehicle. This is having an effect on our product by reducing the number of locks per vehicle on certain models. While this does cut cost for our customers, it reduces volume for us, on top of the already reduced volumes resulting from the current market conditions. 

De-contenting of our lock set packages is a trend that is likely to continue, as electronic remote key device usage increases as standard equipment on new vehicles. We have been anticipating this potential, and the actions we have taken to broaden our vehicle access product line were put in place partially as a defense against this slow erosion of our traditional product line. 

Expansion of our product line with additional access control products is an important part of our Alliance with WiTTE. The Alliance was formalized with the signing of legal agreements on November 28, 2000. To date, we have several Alliance programs under way, including a lockset program with Saab in Sweden and a hood latch program for Volkswagen in Mexico. Additionally, our WiTTE-STRATTEC LLC joint venture has signed letters of intent with intended partners in Brazil and China, and we are proceeding to formalize these relationships. We have one committed vehicle program for Brazil, and four committed programs for China. In addition, we are receiving quote requests for “global” vehicle programs. With these developments, we are encouraged that our globalization strategy is working for our customers and us. 

It is clear that the strategic challenges we have discussed in previous annual reports are still before us. But we believe we have put into place the necessary foundation upon which to build our future. In addition to the Alliance structure we have created with Witte, we are actively seeking relationships with other strategic partners that can further our interests and strengthen our position as a global provider of vehicle access control components and systems. We continue to develop our own in-house capabilities for designing, testing and producing these products. And we continue to emphasize cost reduction and efficiency enhancements in our existing processes to support our traditional product business. 

As the ultimate measure of our performance, our goal was to deliver a fifth consecutive year of increased EVA. Although we did not attain that goal, we still created $5.6 million positive EVA in fiscal 2001, our third best year. And we were able to deliver our second best year of earnings per share. We are pleased to be able to continue adding value to your investment in STRATTEC. For a more detailed discussion of financial operating results, please read the Management’s Discussion and Analysis of operating results on pages 10, 11 and 12 of this report. 

Despite fiscal 2001 being a difficult year for a number of reasons, we have weathered the storm reasonably well, and look to the future with optimism. We believe we are doing the right things to position our Company for additional economic value creation in the immediate and long-term future. Your support during this past year has been quite heartening, and we appreciate your confidence in us. We look forward to justifying that confidence. 

Sincerely, 

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August, 2001 

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