<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
-----------------------------------
FORM 11-K
FOR ANNUAL REPORTS OF EMPLOYEE
STOCK PURCHASE, SAVINGS AND SIMILAR
PLANS PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
-----------------------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998.
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to__________.
Commission file number 1-2299
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Applied Industrial Technologies, Inc.
Supplemental Defined Contribution Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Applied Industrial Technologies, Inc.
One Applied Plaza
Cleveland, Ohio 44115-5056
<PAGE> 2
Financial Statements and Exhibit
- --------------------------------
Page No.
(a) Financial Statements (in this Reports)
-------------------- -----------------
Independent Auditors' Report 5
Statement of Net Assets Available 6
for Benefits -
December 31, 1998 and 1997
Statement of Changes in Net Assets 7
Available for Benefits -
Year Ended December 31, 1998
Statement of Changes in Net Assets 8
Available for Benefits -
Year Ended December 31, 1997
Statement of Changes in Net Assets 9
Available for Benefits -
Year Ended December 31, 1996
Notes to Financial Statements - 10
Years Ended December 31,
1998, 1997 and 1996
(b) Exhibit
-------
Independent Auditors' Consent 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Plan has duly caused this annual report to be signed on its behalf by the
undersigned, hereunto duly authorized.
APPLIED INDUSTRIAL TECHNOLOGIES,
INC. SUPPLEMENTAL DEFINED
CONTRIBUTION PLAN
By: Applied Industrial
Technologies, Inc., as Plan
Administrator
By: /s/ John R. Whitten
-----------------------------
Signature
John R. Whitten
-----------------------------
Printed Name
Vice President-Chief
Financial Officer & Treasurer
------------------------------
Title
Date: March 29, 1999
<PAGE> 3
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
Financial Statements
For the Years Ended
December 31, 1998, 1997 and 1996
And Independent Auditors' Report
<PAGE> 4
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PAGE
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits
As of December 31, 1998 and 1997 2
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 1998, 1997 and 1996 3 - 5
Notes to Financial Statements 6 - 10
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan
We have audited the accompanying statements of net assets available for benefits
of the Applied Industrial Technologies, Inc. Supplemental Defined Contribution
Plan (the "Plan") as of December 31, 1998 and 1997, and the related statements
of changes in net assets available for benefits for the year ended December 31,
1998, 1997 and 1996. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
1998 and 1997, and the changes in net assets available for benefits for the
years ended December 31, 1998, 1997 and 1996 in conformity with generally
accepted accounting principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information by fund is
presented for the purpose of additional analysis of the basic financial
statements rather than to present information regarding the net assets available
for benefits and changes in net assets available for benefits of the individual
funds, and is not a required part of the basic financial statements. The
supplemental information by fund is the responsibility of the Plan's management.
Such supplemental information by fund has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects when considered in relation
to the basic financial statements taken as a whole.
/s/Deloitte & Touche LLP
Cleveland, Ohio
March 26, 1999
<PAGE> 6
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- ------------------------------------------------------------------------------------------------------------------------------
-----------------SUPPLEMENTAL INFORMATION BY FUND----------------
AMERICAN INCOME AMERICAN
COMPANY FIDELITY FUNDAMENTAL FUND OF HANCOCK EUROPACIFIC
STOCK GROWTH INVESTORS AMERICA EQUITY GROWTH
(NOTE 2) (NOTE 2)
DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc.
common stock $ 281,415
Investment funds 7,809 $ 252,755 $ 210,475 $ 136,389
---------- ---------- ---------- ---------- ---------- ----------
Total investments 289,224 252,755 210,475 136,389
NET ASSETS AVAILABLE FOR BENEFITS $ 289,224 $ 252,755 $ 210,475 $ 136,389
========== ========== ========== ========== ========== ==========
DECEMBER 31, 1997
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc.
common stock $ 186,795
Investment funds 5,758 $ 325,794 $ 227,685 $ 164,289 $ 157,060 $ 146,937
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $ 192,553 $ 325,794 $ 227,685 $ 164,289 $ 157,060 $ 146,937
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
---------SUPPLEMENTAL INFORMATION BY FUND--------
BOND SMALL GROWTH AND
FUND OF FINANCIAL COMPANY GROWTH INCOME
AMERICA RESERVES STOCK STOCK STOCK TOTAL
(NOTE 2) (NOTE 2) (NOTE 2)
DECEMBER 31, 1998
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc.
common stock $ 281,415
Investment funds $ 93,298 $ 16,754 $ 161,571 $ 470,819 $ 114,670 1,464,540
---------- ---------- ---------- ---------- ---------- ----------
Total investments 93,298 16,754 161,571 470,819 114,670 1,745,955
NET ASSETS AVAILABLE FOR BENEFITS $ 93,298 $ 16,754 $ 161,571 $ 470,819 $ 114,670 $1,745,955
========== ========== ========== ========== ========== ==========
DECEMBER 31, 1997
ASSETS:
Investments at fair value:
Applied Industrial Technologies, Inc.
common stock $ 186,795
Investment funds $ 55,370 $ 33,873 1,116,766
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS $ 55,370 $ 33,873 $1,303,561
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<PAGE> 7
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
---------------------SUPPLEMENTAL INFORMATION BY FUND------------------------
AMERICAN INCOME AMERICAN
COMPANY FIDELITY FUNDAMENTAL FUND OF HANCOCK EUROPACIFIC
STOCK GROWTH INVESTORS AMERICA EQUITY GROWTH
(NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 58,842 $ 73,394 $ 65,747 $ 34,919
Investment income 5,532 $ 2,959 24,005 22,631 $ 7 7,769
Net appreciation in market value of investments 11,513 10,895
---------- ---------- ---------- ---------- ---------- ----------
Total additions 64,374 2,959 108,912 88,378 7 53,583
DEDUCTIONS:
Distributions to participants 5,173 7,935 20,064 4,393
Net depreciation in market value of investments 98,496 1,778 4,216 1,098
Administrative expenses 1,800 1,569 1,066 1,001
---------- ---------- ---------- ---------- ---------- ----------
Total deductions 105,469 1,778 9,504 25,346 1,098 5,394
INTERFUND TRANSFERS 137,766 (326,975) (74,338) (16,846) (155,969) (58,737)
---------- ---------- ---------- ---------- ---------- ----------
INCREASE/(DECREASE) IN NET ASSETS
FOR THE YEAR 96,671 (325,794) 25,070 46,186 (157,060) (10,548)
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1998 192,553 325,794 227,685 164,289 157,060 146,937
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1998 $ 289,224 $ 252,755 $ 210,475 $ 136,389
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to financial statements.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
-------------SUPPLEMENTAL INFORMATION BY FUND-------
BOND SMALL GROWTH AND
FUND OF FINANCIAL COMPANY GROWTH INCOME
AMERICA RESERVES STOCK STOCK STOCK TOTAL
(NOTE 2) (NOTE 2) (NOTE 2)
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 26,760 $ 77,776 $ 111,521 $ 29,728 $ 478,687
Investment income 7,387 $ 2 2,825 17,601 10,438 101,156
Net appreciation in market value of investments 1,515 90,373 3,417 117,713
---------- ---------- ---------- ---------- ---------- ----------
Total additions 34,147 1,517 80,601 219,495 43,583 697,556
DEDUCTIONS:
Distributions to participants 46,711 23,035 10,215 16,298 133,824
Net depreciation in market value of investments 2,905 3,979 112,472
Administrative expenses 425 109 879 1,900 117 8,866
---------- ---------- ---------- ---------- ---------- ----------
Total deductions 50,041 23,144 15,073 18,198 117 255,162
INTERFUND TRANSFERS 53,822 4,508 96,043 269,522 71,204
---------- ---------- ---------- ---------- ---------- ----------
INCREASE/(DECREASE) IN NET ASSETS
FOR THE YEAR 37,928 (17,119) 161,571 470,819 114,670 442,394
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1998 55,370 33,873 1,303,561
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1998 $ 93,298 $ 16,754 $ 161,571 $ 470,819 $ 114,670 $1,745,955
========== ========== ========== ========== ========== ==========
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------------------------
----------------------SUPPLEMENTAL INFORMATION BY FUND------------------------
AMERICAN INCOME AMERICAN
COMPANY FIDELITY FUNDAMENTAL FUND OF HANCOCK EUROPACIFIC
STOCK GROWTH INVESTORS AMERICA EQUITY GROWTH
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 51,065 $ 126,959 $ 72,878 $ 55,289 $ 66,671 $ 59,772
Employer 27,257
Investment income 2,848 35,809 24,881 18,244 11,315
Net appreciation in market value of investments 37,146 14,003 13,563 6,965 10,947
---------- ---------- ---------- ---------- ---------- ----------
Total additions 118,316 176,771 111,322 80,498 77,618 71,087
DEDUCTIONS:
Distributions to participants 1,149 4,952 1,486 2,181 712
Net depreciation in market value of investments 3,748
Administrative expenses 2,420 1,112 1,109 427 654 851
---------- ---------- ---------- ---------- ---------- ----------
Total deductions 3,569 6,064 2,595 2,608 654 5,311
INTERFUND TRANSFERS 4,508 (14,130) 300 (3,067) 66 9,546
---------- ---------- ---------- ---------- ---------- ----------
INCREASE IN NET ASSETS
FOR THE YEAR 119,255 156,577 109,027 74,823 77,030 75,322
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1997 73,298 169,217 118,658 89,466 80,030 71,615
---------- ---------- ---------- ---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1997 $ 192,553 $ 325,794 $ 227,685 $ 164,289 $ 157,060 $ 146,937
========== ========== ========== ========== ========== ==========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
------SUPPLEMENTAL------
INFORMATION BY
FUND
BOND
FUND OF FINANCIAL
AMERICA RESERVES TOTAL
<S> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 17,547 $ 14,062 $ 464,243
Employer 27,257
Investment income 3,080 96,177
Net appreciation in market value of investments 813 1,945 85,382
---------- ---------- ----------
Total additions 21,440 16,007 673,059
DEDUCTIONS:
Distributions to participants 2,052 11,701 24,233
Net depreciation in market value of investments 3,748
Administrative expenses 115 81 6,769
---------- ---------- ----------
Total deductions 2,167 11,782 34,750
INTERFUND TRANSFERS 1,710 1,067
---------- ---------- ----------
INCREASE IN NET ASSETS
FOR THE YEAR 20,983 5,292 638,309
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1997 34,387 28,581 665,252
---------- ---------- ----------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1997 $ 55,370 $ 33,873 $1,303,561
========== ========== ==========
See notes to financial statements.
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
APPLIED INDUSTRIAL TECHNOLOGIES, INC. SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
-----------------------SUPPLEMENTAL INFORMATION BY FUND----------------------
AMERICAN INCOME AMERICAN
COMPANY FIDELITY FUNDAMENTAL FUND OF HANCOCK EUROPACIFIC
STOCK GROWTH INVESTORS AMERICA EQUITY GROWTH
<S> <C> <C> <C> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 141,710 $ 83,512 $ 71,542 $ 82,706 $ 62,551
Employer:
Cash $ 1,937
Applied Industrial Technologies, Inc.
common stock 72,246
Transfer from the King Bearings, Inc. Serp Plan 3,826 23,632 26,045 18,555 5,466 5,466
Investment income 1,234 1,386 912 2,615 (262) 978
Net appreciation in market value of investments 9,073 10,560 4,332 759 5,143
--------- --------- --------- --------- --------- ---------
Total additions 79,243 175,801 121,029 97,044 88,669 74,138
DEDUCTIONS:
Distributions to participants 214 1,224 3,696 4,999 657 504
Net depreciation in market value of investments 3,230
Administrative expenses 711 1,640 1,180 918 791 724
--------- --------- --------- --------- --------- ---------
Total deductions 4,155 2,864 4,876 5,917 1,448 1,228
INTERFUND TRANSFERS (1,790) (3,720) 2,505 (1,661) (7,191) (1,295)
--------- --------- --------- --------- --------- ---------
INCREASE IN NET ASSETS
FOR THE YEAR 73,298 169,217 118,658 89,466 80,030 71,615
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1996
--------- --------- --------- --------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $ 73,298 $ 169,217 $ 118,658 $ 89,466 $ 80,030 $ 71,615
========= ========= ========= ========= ========= =========
See notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
-----SUPPLEMENTAL-----
INFORMATION
BY FUND
BOND
FUND OF FINANCIAL
AMERICA RESERVES TOTAL
<S> <C> <C> <C>
ADDITIONS:
Contributions:
Participant $ 28,814 $ 16,566 $ 487,401
Employer:
Cash 1,937
Applied Industrial Technologies, Inc.
common stock 72,246
Transfer from the King Bearings, Inc. Serp Plan 3,826 86,816
Investment income 1,350 8,213
Net appreciation in market value of investments 351 448 30,666
--------- --------- ---------
Total additions 34,341 17,014 687,279
DEDUCTIONS:
Distributions to participants 965 12,259
Net depreciation in market value of investments 3,230
Administrative expenses 334 240 6,538
--------- --------- ---------
Total deductions 1,299 240 22,027
INTERFUND TRANSFERS 1,345 11,807
--------- --------- ---------
INCREASE IN NET ASSETS
FOR THE YEAR 34,387 28,581 665,252
NET ASSETS AVAILABLE FOR BENEFITS,
JANUARY 1, 1996
--------- --------- ---------
NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1996 $ 34,387 $ 28,581 $ 665,252
========= ========= =========
See notes to financial statements.
</TABLE>
<PAGE> 10
APPLIED INDUSTRIAL TECHNOLOGIES, INC.
SUPPLEMENTAL DEFINED CONTRIBUTION PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE PLAN
The following description of the Applied Industrial Technologies, Inc.
Supplemental Defined Contribution Plan (the "Plan") is provided for
general information purposes only. Participants and users of the
financial statements should refer to the Plan document for more
complete information.
GENERAL - The Plan was established by Applied Industrial Technologies,
Inc. and its Subsidiaries (the "Company") effective January 1, 1996,
for the benefit of a select group of management or highly compensated
employees. This is a non-qualified Plan and is subject to the claims of
creditors in the case of bankruptcy of Applied Industrial Technologies,
Inc.
ADMINISTRATION - The Plan is administered by the Company. The Company's
powers and duties relate to making participant and employer
contributions to the Trustee, establishing investment objectives,
authorizing disbursements from the Trust, and resolving any questions
of Plan interpretation.
The assets of the Plan are maintained and administered by Key Trust Co.
of Ohio, N.A. acting as Trustee. The Trustee is responsible for the
custody of assets.
PARTICIPANT ACCOUNTS - Each participant's account is credited with that
participant's contribution and allocations of (a) the Company's
contribution and, (b) Plan earnings, and charged with an allocation of
administrative expenses. Allocations are based on participant earnings
or account balances, as defined. The benefit to which a participant is
entitled is the benefit that can be provided from the participant's
vested account.
PARTICIPATION AND CONTRIBUTIONS - Participation in the Plan is limited
to select management or highly compensated employees of the Company and
whose contributions under the Applied Industrial Technologies, Inc.
Retirement Savings Plan are limited.
Eligible participants elect to make contributions to the Plan. There
are no limits to the amount they can contribute. Participants may elect
to transfer excess contributions from the Retirement Savings Plan.
Supplemental Matching Contributions are equal to the amount that
matching Contributions under the Applied Industrial Technologies, Inc.
Retirement Savings Plan are limited each year due to the requirements
of the provisions of Sections 401(k) and 401(m) of the Internal Revenue
Code.
Supplemental Matching Contributions are made in the Company Stock Fund.
Contributions are excluded from participant's taxable income until such
amounts are received by them as a distribution from the Plan.
<PAGE> 11
INVESTMENT OF CONTRIBUTIONS - Participants elect investment of their
Supplemental 401(k) Contributions in 5% increments in the Plan's
Company Stock Fund, Fidelity Growth Fund, American Fundamental
Investors Fund, Income Fund of America, Hancock Equity Fund, American
EuroPacific Growth Fund, Bond Fund of America, Financial Reserves Fund,
Small Company Stock Fund, Growth Stock Fund or the Growth and Income
Stock Fund. Participants may elect to change their investment elections
as to future contributions and may also elect to reallocate a portion
or all of their account balances among the investment funds in
increments of 5% of the total amount to be reallocated. All such
elections are filed with the Trustee and become effective daily.
The value of the funds and the interest of individual participants
under each fund, are calculated daily (daily valuation).
VESTING AND DISTRIBUTIONS - Each participant is immediately and fully
vested in all Supplemental Salary Savings Contributions and earnings
thereon. Participants vest in Supplemental Matching Contributions at a
rate of 25% for each year of eligible service, becoming completely
vested after four years, or at death, termination of employment due to
permanent and total disability, or normal or early retirement as
defined in the Plan.
Upon termination of service, participants may receive lump sum
distributions of their vested account balances no later than 60 days
after the end of the Plan year in which they terminate employment with
the Company. Distributions upon retirement may be received as a lump
sum or as installments in accordance with the participant's election.
Participants may also apply for hardship withdrawals from their
Supplemental Salary Savings Contributions, subject to adherence to
Internal Revenue Service regulations and approval by the Company.
Forfeitures of nonvested amounts are applied to reduce future
Supplemental Matching Contributions. There were no forfeitures in 1998,
1997 or 1996.
PLAN TERMINATION - The Plan was adopted with the expectation that it
will continue indefinitely. The Company may, however, terminate the
Plan at any time and may amend the Plan from time to time. In the event
of termination of the Plan, all participants will immediately become
fully vested in the value of all Matching Employer Contributions made
on their behalf.
2. DESCRIPTION OF THE SEPARATE FUNDS
The Trustee maintains separate accounts for each Plan participant and
invests such participant's contributions, as directed by the
participant, in one or more of the following funds:
<PAGE> 12
- The Company Stock Fund consists of investments in the common stock of
Applied Industrial Technologies, Inc. and temporary investments in the
Trustee's EB Money Market Fund.
- The Fidelity Growth Fund consists of shares of Advisors Institutional
Equity Growth Fund, which invests in stocks with the objective of
capital appreciation.
- The American Fundamental Investors Fund consists of shares of
Fundamental Investors, Inc. common stock, which invest in mature stocks
designed with the objective of growth from price appreciation and
income from dividends.
- The Income Fund of America Fund consists of shares of Income Fund of
America, which invests in stocks and bonds with the objective of
maximizing current income from dividends and interest.
- The Hancock Equity Fund consists of shares of John Hancock Special
Equity Fund that invests in stocks of emerging growth companies.
- The American EuroPacific Growth Fund consists of shares of the
EuroPacific Growth Fund, which invests in stocks from companies located
outside the U. S. with the objective of capital appreciation.
- The Bond Fund of America Fund consists of shares of the Bond Fund of
America, which invests in government and corporate bonds.
- The Financial Reserves Fund consists of units of the Trustee's PRISM
Victory Reserve Fund, which invests in high quality U.S. dollar
denominated money market instruments with the objective of maintaining
a stable share price.
- The Small Company Stock Fund consists of shares of the Franklin Small
Cap Growth Fund, which invests in small companies with the objective of
capital appreciation.
- The Growth Stock Fund consists of shares of the Growth Fund Portfolio,
which seeks to achieve growth of capital by investing in growth stocks
through three stock mutual funds; the Dreyfus Appreciation Fund, the
Enterprise Growth Fund, and the Harbor Capital Appreciation Fund.
- The Growth and Income Stock Fund consists of shares of the Victory
Stock Index Fund, which invests with the objective of capital
appreciation and dividend income.
The Plan's investment options provide for nine separate investment
funds in 1998 and eight separate investment funds in 1997 and 1996.
Effective January 1, 1998, the Growth and Income Stock Fund was added,
the Fidelity Growth Fund was replaced by the Growth Stock Fund and the
Hancock Equity Fund was replaced by the Small Company Stock Fund.
<PAGE> 13
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING - Each fund of the Trust is accounted for
separately. The accounts of these funds are maintained, and the
accompanying financial statements have been prepared, on the accrual
basis of accounting.
USE OF ESTIMATES - In preparing the financial statement in conformity
with generally accepted accounting principles, the Plan's administrator
is required to make estimates and assumptions that affect the reported
amounts of 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.
VALUATION OF INVESTMENTS - Investments are accounted for at cost on the
trade-date and are reported in the statement of net assets available
for benefits at fair value. The investment in Applied Industrial
Technologies, Inc. common stock is valued using the year-end closing
price listed by the New York Stock Exchange. Investment funds are
stated at values using year-end closing price for each of the funds or
quoted market prices.
BENEFITS PAYABLE - Distributions to participants are recorded by the
Plan when payments are made.
ADMINISTRATIVE EXPENSES - Administrative expenses of the Plan are paid
by the Plan or the Company, as determined by the Company.
4. INVESTMENTS
The Plan provides that, in accordance with the investment objectives
established by the Company, the Trustee of the Plan shall hold, invest,
reinvest, manage and administer all assets of the Plan as a trust fund
for the exclusive benefit of participants and their beneficiaries.
<PAGE> 14
Plan investments exceeding 5% of net assets available for benefits as
of December 31, 1998, 1997 and 1996, respectively, were as follows:
<TABLE>
<CAPTION>
Description of 1998 1997 1996
Investment
<S> <C> <C> <C>
Applied Industrial Technologies, Inc. Common Stock $281,415 $186,795 $70,747
Advisors Institutional Equity Growth Fund 325,794 170,744
Fundamental Investors, Inc. 252,755 227,685 119,758
Income Fund of America 210,475 164,289 90,321
John Hancock Special Equity Fund 157,060 80,763
EuroPacific Growth Fund 136,389 146,937 72,287
Bond Fund of America 93,298 55,370 34,692
Franklin Small Cap Growth 161,571
Growth and Income Fund 470,819
Victory Stock Index Fund 114,670
</TABLE>
5. TRANSFER FROM KING BEARING, INC. SERP PLAN
In October 1996, the King Bearing, Inc. SERP Plan was merged into the
Plan. Net assets totaling $86,816 were transferred to the Plan in 1996.
******
<PAGE> 1
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
Applied Industrial Technologies, Inc.
We consent to the incorporation by reference in Registration Statement No.
033-60687 of Applied Industrial Technologies, Inc. on Form S-8 of our report
dated March 26, 1999, appearing in this Annual Report on Form 11-K of the
Applied Industrial Technologies, Inc. Supplemental Defined Contribution Plan for
the year ended December 31, 1998.
/s/Deloitte & Touche LLP
March 26, 1999
