TWST: First, give us a quick profile, a bit of a background summary on the company. Then bring us up-to-date tell us what you see as your company and business today.

Mr. Fish: First, a very short background on myself. My father was a locksmith; the result is that I was a locksmith. I was cutting keys at the age of eight. By the time I was 17 and graduated high school, it was necessary to earn a living my mother said, 'You want to eat? Go to work' I started my business as a distributor of locks and keys with an initial capital of $20, and I had a bicycle to travel around Montreal. I borrowed $100 for key blanks from an uncle in Toronto and moved on from there: I went back for $200 and $300 and slowly, the company developed from 1949 through 1960. I was the major distributor in Montreal. In 1960, the Bell Telephone Company had a requirement for a push-button lock; they wanted to get away from keys. They went to the RCM police and said, 'Who can develop a lock for us?' and they said, 'Go see Aaron Fish in Montreal.' Now in the background, in the early 1950s I helped the RCM police to establish the lock division of the crime detection laboratory, so they knew me. The head of security, the late John Marett of Bell Canada and I went out and we looked at different lock companies. He was told, 'What you want is impossible.' By the time we got back to Montreal, I said, 'John, I'll go to work on it.' This was a big leap from being a distributor to becoming a developer, even though I had a solid background in mechanical locks. I built the first mechanical push-button lock in North America. The only problem was that I had already mortgaged my wife, children, the house and my friends' money and everyone else, which is normal for an entrepreneur! In 1964, I raised $35,000 and created a company called Unican Security Systems Ltd., a Canadian company. I had 50 percent, and there were seven partners. This carried me through to 1967. In 1967, I was basically out of money again but seriously out of money! I had borrowed everything on my distribution business, in fact, sold three-quarters of it. But my faith in the push-button lock just never wavered. I realized that I was either going to go public or go bankrupt. I met a stockbroker in Montreal, his name was Bruce Kippen, who was doing over- the-counter stuff, and I showed him what I had, which included letters from the police, Bell Canada, Western Electric, the U.S. Air Force, the U.S. Navy letters indicating, 'Aaron, make this lock, we need this product'. Three days later I had an underwriting agreement. I gave away 25 percent of the company for a quarter-million dollars. That was a huge amount of money in 1967! That launched the company. Lo and behold, the stock goes from $2 to $8. I print more 'funny money,' if you like, and now I have a million dollars. I go out and buy a manufacturing company, which then was called Capitol Industries. That gave me a base of die-casting and metal bending and all the things I needed to make locks. Remember, you have to go back, in 1967 when we went public, our sales were $180,000 for the whole year. I think we do that now about every hour! We really launched the company in 1968. By 1970, I had bought three or four bankrupt companies, one was ILCO, Independent Lock Company in Fitchburg, and by then we were at $13 million sales. So we were off the mark, if you like. From 1970 through today, I developed a very defined strategic focus for the company. First, I dropped every product where I felt I could not be number one or two worldwide in some reasonable amount of time. Then, I defined the products because when you look at security somebody says, 'Well, I make locks.' That goes all the way from suitcase locks to prison locks; there's no end. You have residential locks, commercial locks, electronic and what have you. I defined the company into a strategic focus where we had one segment for key blanks and key duplicating machines. In the past 10 years, we have become number one worldwide in both products. When I say number one, we are bigger than all of our competitors combined. To give you some sense, the company now makes 4,500,000 keys each day. So if you buy a BMW or a Honda, or you buy a Kwikset lock or a Baldwin, you actually have our keys in your hand. We make pretty well, most replacement keys used in North America and Europe. We developed a line of key duplicating machines. From a $700-machine we can give you a machine up to $60,000, the result being automobile companies are buying our electronic equipment to put into their car service depots. It is now our core business. We're very close to automobile companies. The Hondas, Fords, etc., we work with them. With new types of keys you'll pay anywhere from $75 to $300 to replace a key for a new car; that is, transponder keys, which include an anti-theft system. The second part of the focus is mechanical push-button locks, and that continues to be the most profitable product we have. We continue to expand the push-button lock business. People said to me years ago, 'Well, electronics will take over.' And I'm replaying, 'Well, electronics is not taking over. It's getting a share of the market.' For many applications people still like mechanical products in many places. For instance, every FedEx box and every UPS box has a mechanical push-button lock as do gun boxes. We now actually churn out about 2,000 mechanical push-button locks everyday. We have electronic access controls, which we started primarily in hospitality. I believe we install more electronic locks in hotels than anyone else in North America. We're easily a number two or three worldwide. We're installing in China, South America, Asia and Europe. In France, we have 1,000 hotels connected to our central. They operate an automatic check-in, check-out system. We are building our government business, and we are a major supplier to the U.S. government for electronic locks. We do buildings like the U.N. and the Pentagon. We do other military stuff that I can't just tell you about. This segment has a lot of growth. It has an unlimited potential. The fourth and last segment is safe and vault locks. About eight years ago, we were $1 million in sales in that area. Now we're over $30-odd million and easily number one. We're the major supplier to all of the big vault and safe makers. We export our locks to China. In Germany, we have three factories. Those are the four segments; the company now has become really solid and well entrenched. You can see our profit from operations is getting up into the 17-20% area. The EBITDA is solid, I think we're over $80 million for this year, and we just finished our year in June. So basically, we're marching along in those areas where we're a leader, we're strong, and of course, the industry will continue to grow because it's driven by criminality. Remember, as long as people steal, we'll make locks. I don't think that is going to change.

TWST: Briefly, what do you see as the competitive market? Obviously, there are very large players and a lot of fractional players out there. What's happening as far as consolidation? Would that have any impact on you?

Mr. Fish: There has been a lot of consolidation; the Ingersolls through their Schlage division, the ASSA-Abloy Group out of Sweden and Williams out of the U.K, have literally bought up everything that's around. What's interesting is that we're a supplier to all of them. Because the segments where they're interested, like architectural hardware for new buildings, we're not involved. We will sell locks to those buildings, but only on the electronic or the push-button side. We therefore compete with them in a certain small area, but at the end of the day, we make key blanks for ASSA and Schlage. So we're a supplier to all building product suppliers. We're kind of unique, if you like. There's nobody else in the world that you can compare us with. I try to keep it that way. Chairmen of most lock companies know me. Actually, I was the oldest in the industry, having not changed my job since I was eight- years-old. And being 66, I've been in this industry longer than most other executives. I'm well-known in the industry. We publish two magazines. One is the 'Locksmith Ledger', teaching locksmiths how to open cars. The other one is 'Security Technology and Design', on the electronics side. Everybody that competes with us is also a customer.

TWST: How do you see your company evolving over the next five years, 10 years, whatever that long-term vision has to be for this type of enterprise?

Mr. Fish: Evolving with people or evolving with product and globally: there are two evolutions that we will go through. We are now in a situation where each of our major segments has a senior vp, essentially a president, Frank Belflower runs the U.S. operations, Massimo Bianchi runs the European operations and Stan Mazoff in Montreal runs the electronic access control. Each one is totally responsible, and we have one senior vp of finance and administration. We don't have a President, so that will have to evolve ' probably one of these four guys. They're all young, all in their 40s, and I think one of them should end up being the Chief Operating Officer, if you like and run the show. You have to look at succession somewhere. We've had two presidents. One lasted five years he was a lawyer, he's still on the board. He went back to law. Unfortunately, the last fellow, Maurice Andrien, only lasted nine months. His going away was not anything to do with the company. Maurice is now President of our biggest customer in the United States so that was okay. What I did was elevate each of the four senior operators and the company runs well. I mean, it's just running very well, and these guys work among themselves. Each has at least 20 years in the industry or more, some 25. The other side is where are you going globally. Last year we bought four companies. We bought Mauer Safelocks in Germany; we bought Elzett, a lock company in Hungary; we bought Alba, a key company in Mexico; and Lori, a cylinder company in the United States. These are now being integrated. Where do we go from here? It's very simple. Our next step is Brazil; we bought a little tiny company. So we're looking at Brazil, Argentina and China. Ultimately, we will need to have facilities in China and India. I am looking at the issues this summer. Brazil and Argentina will develop this year into manufacturing locations. We have a beautiful format. Every country has high-volume keys and low-volume keys, so what we do is set up a nucleus. They start manufacturing keys. We ship in the key duplicating machines and the electronic machines from other locations, we send the low-volume stuff from other locations. You then have an office with a nucleus. From that same office we sell the safe locks, the electronic access controls and push-button locks. Once you have a little factory and an office, customers gain confidence, they figure you're there to stay. With electronic products the customer has learned you don't buy the cheapest; you buy from the company that you feel will be in business next year and in five years. So the first thing they're doing is opening your financial statement, and if you don't have a solid statement, they won't buy from you. The customer must feel that you're committed to the industry and have the wherewithal to stay through whatever problems. Having said that, you'll find it interesting that there are many companies that make electronic access controls, but they don't make locks. We actually put electronics in the lock. We make the whole product. We're vertically integrated, imaging in a key blank: we extrude our own brass; we make our tooling; we make our stamping dies; we make our milling cutters; we build the milling machines; and we build the plastic injection molding machines to put the plastic head on a car key. The same for electronics. We design the software and hardware. Customer service and technical support is in-house. The result is we have more people but also, we have solid control and if you look at the financial statement, you know we have built a lot of equity and a lot of working capital. And that's what it's going to take to progress in this new world.

TWST: Through the years that you've been there, can you distill the management philosophy that you use, the ABC's of business that you rely on?

Mr. Fish: My philosophy is very simple, and I've said this at annual meetings. My first concern is the customer. I am customer-oriented. I'm a peddler, that is how I started. My second concern is our employees. We have no unions. With over 1,000 people in Montreal and over 1,000 people in North Carolina, we don't have unions. Last is the shareholder. I'm the biggest single shareholder, but I know that if I take good care of my customers and I take good care of my people, the shareholder will do well. The fact is that in 10 years the stock went from $5 to $32 and split 8-to-1 in the interim, so anybody who bought shares for $5 or $6 ten or twelve years ago can cash in now for $240. And it's been very steady. This business of executives stating, 'We're here to create shareholder value,' that's a sham, that's baloney! You've got to get up there and say, 'We will make the best product at the lowest price for our customers.' Then everything takes care of itself. I don't believe in financial engineering. We write everything off; all our R&D is written off. Our fixed assets are way, way below replacement value on the books. So you've got my philosophy ' and it's the same with dividends. If you go back two years ago, when our earnings went over $1, people were saying, 'All you pay is $0.10 in dividends,' and I'd say, 'Well, I need the money to build the company.' I stated in our annual report, 'If you want dividends, buy a bank! I need our cash to buy machinery, do research and development and increase the size of the company.' In three years we went from $240 million sales to about $500 million and we're in a metal business, it's not like we turn out Internet stuff! It has been a good time. I'm comfortable with the company long-term.

TWST: As you speak with analysts and investors, are there any misperceptions out there today as to what this company is, what its strategy is?

Mr. Fish: Not at all. I have been as frank with investors and analysts as I am with you. I remember, about one and a-half years ago, an analyst in Montreal did a projection on the company they have their computer models I was invited to speak. I get up there at lunch and take a look at his projections and said, 'You're out of your helmet, there's no way we're going to hit that!' And the guy looked at me. I said, 'Look, I can give you a snow job once, not twice. I think that this projection is flawed.' The fact is I was right on, dead-on. He changed his projections, and now is going with what it should be. So we're quite frank. Quite honestly, I don't look at the market everyday?' If you said to me, 'Where's your stock in the last week, I called Montreal on Friday, they said it was ranging between $28 and $29 that was the first time in a week. I really don't check the market every day because I will not manage the company by quarters. I manage long term. If it's good for the company now, and we have to take a hit on earnings, we'll take it. We did in Germany in December. I took a $5-million hit because I wanted to lay off 65 people. The fact is, we took a division that was losing money and we turned it profitably in one shot. I said, 'Look, take the hit, we explain it to the analysts and that's the end of it.' There's no hidden agenda; I have always been up- front with them. I suppose that's why we have had a pretty good relationship at Nesbitt-Burns in Toronto and at Gordon Securities. Scott Fromson, he's only on it a couple of years, he's very good, and Dillon Reed, Montreal, James David is the analyst. Merrill Lynch just started covering our company from Montreal. They started about two months ago.

TWST: Thank you.

AARON M. FISH Chairman & CEO Unican Security Systems, Ltd. 7301 boul Decarie Montreal, QC H4P 2G7 Canada (514) 735-5411 (514) 735-0428 - FAX E-Mail: Website:

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