<PAGE>
Exhibit 28.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1998
-----------------
Commission File Number 1-5881
------
THE BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
-----------------------------------------------------------------------
(Full Title of the Plan)
BROWN & SHARPE MANUFACTURING COMPANY
200 Frenchtown Road
North Kingstown, Rhode Island 02852-1700
(401) 886-2000
(Name of Issuer and Address of its Principal Executive Office)
<PAGE>
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, thereunto duly authorized, in North Kingstown, Rhode Island, on the
17th day of June 1999.
- ---- ---------
BROWN & SHARPE SAVINGS AND RETIREMENT
PLAN FOR MANAGEMENT EMPLOYEES
By: /s/ Alfred J. Corso
------------------------------
Alfred J. Corso
Controller
(Principal Accounting Officer)
2
<PAGE>
BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
Table of Contents
-----------------
Page
----
Report of Ernst & Young LLP, Independent Auditors 4
Audited Financial Statements:
Statements of Net Assets Available for Plan Benefits
at December 31, 1998 and 1997 5
Statements of Changes in Net Assets Available for Plan
Benefits for the Years Ended December 31, 1998 and 1997 5
Notes to Financial Statements 6-15
Supplemental Schedules:
Line 27a Schedule of Assets Held for Investment Purposes 16-17
Line 27d Schedule of Reportable Transactions 18-19
Consent of Independent Auditors 20
3
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
-------------------------------------------------
Brown & Sharpe Savings and Retirement Plan
for Management Employees Committee
Brown & Sharpe Manufacturing Company
We have audited the accompanying statements of net assets available for plan
benefits of the Brown & Sharpe Savings and Retirement Plan for Management
Employees (the "Plan") as of December 31, 1998 and 1997, and the related
statements of changes in net assets available for plan benefits for the years
then ended. 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, the financial statements referred to above present fairly,
in all material respects, the net assets available for plan benefits of the Plan
at December 31, 1998 and 1997, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1998, and reportable
transactions for the year then ended, are presented for purposes of additional
analysis and are not a required part of the financial statements but are
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. These supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in our audit of the 1998 financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
1998 financial statements taken as a whole.
ERNST & YOUNG LLP
May 21, 1999
4
<PAGE>
THE BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
-----------------------------------------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
----------------------------------------------------
<TABLE>
<CAPTION>
December 31,
------------
1998 1997
---- ----
<S> <C> <C>
Assets:
Investments (Notes 2 and 5) $38,064,463 $30,046,038
Employer contribution receivable 1,247,835 921,526
Plan loans receivable 597,970 587,411
----------- -----------
Net Assets Available for Plan Benefits $39,910,268 $31,554,975
=========== ===========
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
---------------------------------------------------------------
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Additions
- ---------
Contributions
Employer $ 1,866,590 $ 1,172,444
Employee 2,294,964 1,734,086
----------- -----------
4,161,554 2,906,530
Investment income
Interest and dividends 2,356,187 2,071,943
Net realized/unrealized appreciation
in fair value of investments 2,506,184 1,601,420
----------- -----------
Total additions 9,023,925 6,579,893
Deductions
- ----------
Payments to participants (1,044,489) (5,311,300)
Fees (1,702) (1,151)
----------- -----------
Total deductions (1,046,191) (5,312,451)
Transfers
- ---------
From Brown & Sharpe Employee Stock Owner-
ship and Profit Participation Plan (ESOP) 28,923 59,406
From Brown & Sharpe Savings
and Retirement Plan (SARP) 348,636 89,769
Transfers from other plans (Note 1) - 2,020,639
----------- -----------
Net transfers 377,559 2,169,814
----------- -----------
Net increase 8,355,293 3,437,256
Net assets, beginning of year 31,554,975 28,117,719
----------- -----------
Net assets, end of year $39,910,268 $31,554,975
=========== ===========
</TABLE>
See notes to the financial statements.
5
<PAGE>
THE BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
Notes To Financial Statements
-----------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
1. Plan Description
----------------
The following description of The Brown & Sharpe Savings and Retirement
Plan for Management Employees (the "Plan") provides only general
information. Participants should refer to the Summary Plan Description for
more complete details.
General
-------
The Plan is a defined contribution plan covering all eligible full-time
salaried employees of Brown & Sharpe Manufacturing Company (the "Company")
and its affiliated companies who participate in the Plan. Such employees
are immediately eligible to make deferred salary contributions to the
Plan. Prior to January 1, 1998, one year of service was required to
become a participant receiving Company contributions. Beginning on
January 1, 1998, six months of service is required to become a participant
receiving Company contributions. The Plan is subject to the provisions of
the Employee Retirement Income Security Act of 1974 (ERISA), as amended.
In July 1997, the Company purchased the remaining 50 percent interest in
its joint venture with Automation Software, Inc. In October 1997,
$2,020,639 of net assets were transferred from Automation Software, Inc.
into the Plan.
Contributions
-------------
The Plan permits a participant to make deferred salary contributions to
the Plan up to 16% of compensation up to a maximum of $10,000 in 1998 and
$9,500 in 1997, (indexed in future years) which is not subject to federal
income tax until distributed. Contributions are invested at the direction
of the employee in one or more investment alternatives, or "Funds," as
described below.
The Company may, at the discretion of the Board of Directors, make a
supplemental contribution of 4% of annual compensation plus 4% of the
amount over the Social Security wage base to the account of each
participant to be invested as instructed by the participant. The
Company's supplemental contributions for 1998 and 1997 were $1,247,835 and
$921,524, respectively.
In addition, the Plan provides for a Company contribution, or subsidy,
equal to one-quarter of the amount of each deferred salary contribution
invested directly in the Company Stock Fund. Such Company contributions
for 1998 and 1997 were $20,590 and $14,295, respectively.
In addition, at the discretion of the Board of Directors, the Company may
make a matching contribution equal to a percentage not to exceed 25% of
the elective contribution, disregarding any elective contribution in
excess of 6% of such eligible participant's salary for such Plan year.
Such contributions for 1998 and 1997 were $598,165 and $236,625,
respectively. On January 1, 1998, the Company agreed to make matching
contributions with each pay period employee contribution.
Participant Accounts
--------------------
A separate account is established for each participant when enrolled in
the Plan. Each participant's account is credited with (a) participant
salary deferrals, (b) Company contributions and (c) Plan
6
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
earnings. Guaranteed interest contract account earnings are valued on a
monthly basis and are allocated to participants based on a pro rated basis.
Investments
-----------
The Plan assets are held in a trust administered by Putnam Fiduciary Trust
Company as Trustee.
Participants direct the trustee to deposit contributions in one or more of
the following investment alternatives in multiples of 10%:
(1) Putnam New Opportunities Fund invests in a portfolio of stocks in
certain emerging industry groups that Putnam believes offer above-average
long-term growth potential; (2) the Company Stock Fund, managed by Putnam
Investments, consisting of Brown & Sharpe common stock; (3) the Putnam
Voyager Fund, invests in a combination of stocks of small companies expected
to grow over time as well as stocks of larger, more established
corporations; (4) the Putnam Fund for Growth & Income, invests mainly in
attractive priced stocks of companies that offer long-term growth potential
while also providing income; (5) The George Putnam Fund of Boston, invests
in stocks and corporate and government bonds, providing a balanced way to
pursue long-term rewards; (6) the Brown & Sharpe Stable Value Fund,
consisting of guaranteed investment contracts issued by American
International Life Assurance Company of New York, and the Putnam Stable
Value Fund, managed by Putnam Investments. This guaranteed investment
contract under which the issuer has agreed to pay the investor a guaranteed
rate of interest over terms ranging from 3 to 5 years matures on December
31, 1998. The contract automatically terminates at maturity date. A penalty
is imposed upon early termination of the contract. The issuer of this
contract is an insurance company, and because of this, the contract is more
susceptible to factors adversely affecting the insurance industry than
similar contracts issued by parties other than insurance companies. The
average interest rate of the fund was 6.14% in 1998. The interest rate
adjusts monthly. Transfers between investment funds can be made subject to
certain rules.
In 1998 the Plan added five new funds. They are: (1) Putnam Asset
Allocation - Growth Portfolio, invests in equities and fixed income
securities. The fund is weighted more toward equity investments that
traditionally return more than fixed income securities. (2) Putnam Asset
Allocation - Balanced Portfolio, that invests in equities and fixed income
securities. The fund takes a balanced approach between equities and fixed
income investments regarding investment philosophy. (3) Putnam Asset
Allocation - Conservative Portfolio, invests in equity and fixed income
securities weighted more towards the fixed income securities. (4) Putnam
Diversified Income Trust, seeks income consistent with preservation of
capital. The fund invests in fixed income securities such as U.S.
Government obligation, lower rated U.S. corporate debt and debt obligations
of foreign governments. (5) Putnam International Growth, invests in equities
of companies located outside of the United States.
The Company pays substantially all of the expenses associated with
administering this Plan.
Benefits
--------
A participant is always vested 100% in deferred salary contributions and
Company stock purchased at a discount and becomes 100% vested in Company
contributions after 3 years of service. On January 1, 1998, the Company
changed the vesting schedule to 5 years graduated 20 percent per year. If
the participant's service date was before January 1, 1998 and was not vested
then the vesting schedule is a three year schedule at 20 percent for the
first two years and 100% in the third year.
7
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
Upon termination of service, participants are eligible to receive the vested
value of their account in a lump sum payment or, if retired, in equal annual
installments over a 10-year period or deferred until a future date no later
than age 70-1/2.
Participants may borrow from their fund accounts a minimum of $1,000 and to
a maximum equal to the lesser of $50,000 or 50 percent of their vested
account balance. Loan transactions are treated as a transfer to (from) the
investment fund from (to) the loan fund. Loan terms range from one to five
years or up to fifteen years for the purchase of a primary residence. The
loans are secured by the balance in the participant's account and bear
interest at a rate commensurate with local prevailing rates as determined by
the Plan administrator. Principal and interest are paid ratably through
payroll deductions.
2. Summary of Significant Accounting Policies
------------------------------------------
The preparation of financial statements in accordance with GAAP requires the
use of management's estimates. Actual amounts could differ from these
estimates.
Investments, other than insurance contracts, are stated at fair value. The
shares of registered investment companies are valued at quoted market prices
which represent the net asset values of shares held by the Plan at year-end.
Investments in securities traded on a national securities exchange are
valued at the last reported sales price on the last business day of the
year. Investments in guaranteed interest contracts with insurance companies
and the Putnam Stable Value Fund are stated at contract value defined as
cost plus accrued interest less distributions to date, which approximates
fair value. The Plan loans receivable are valued at cost which approximates
fair value. Purchases and sales of securities are reflected on a trade-date
basis. The Plan presents in the statements of changes in net assets the net
appreciation (depreciation) in the fair value of its investments which
consists of the realized gains or losses and the unrealized appreciation
(depreciation) on those investments. Dividend income is accrued on the ex-
dividend date. Income from other investments is recorded as earned on an
accrual basis.
3. Tax Status
----------
The Internal Revenue Service has determined and informed the Company by a
letter dated May 9, 1995 that the Plan qualifies under Section 401(a) of the
Internal Revenue Code (IRC) and, therefore, the related trust is not subject
to tax under present income tax law. Once qualified, the Plan is required to
operate in conformity with the IRC to maintain its qualification. Management
is not aware of any course of action or series of events that have occurred
that might adversely affect the Plan's qualified status.
4. Plan Termination
----------------
The Company adopted this Plan with a view to maintaining it permanently.
However, the Company reserves the right to modify or amend the Plan from
time to time, or to terminate the Plan, and to discontinue making
contributions temporarily or permanently depending upon business and
economic conditions. The Company cannot amend the Plan so as to deprive any
participant of benefits already accrued under the Plan at the time of
amendment, nor can the Company take back any contributions which it has made
to the Plan except in limited circumstances involving factual error or
contributions thought to be deductible which are not deductible. Should the
Plan terminate, accounts would become fully vested, regardless of years of
service, and would be paid to participants as directed by the Committee
administering the Plan.
8
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
5. Investments
-----------
Investments held at December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Description
- -----------
1998 1997
---- ----
<S> <C> <C>
Investments stated at fair value:
Company common stock $ 1,526,823 $ 1,616,375
Putnam Stable Value Fund 4,925,712 3,333,527
The George Putnam Fund of Boston 5,681,762 4,982,088
Putnam Fund for Growth & Income 7,300,299 6,089,609
Putnam Voyager Fund 7,436,449 5,687,376
Putnam New Opportunities Fund 10,347,530 6,714,154
Putnam Diversified Income Trust 57,915 -
Putnam Asset Allocation - Growth Portfolio 17,626 -
Putnam Asset Allocation - Balanced Portfolio 29,430 -
Putnam International Growth Fund 229,546 -
Putnam Asset Allocation - Conservative Portfolio 3,280 -
Investments stated at contract value:
Guaranteed interest contracts
American International Life Assurance
Company Contract #18181-M 508,091 1,622,909
----------- -----------
Total investments $38,064,463 $30,046,038
=========== ===========
</TABLE>
9
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
6. Allocation of Statements of Net Assets Available for Plan Benefits and
----------------------------------------------------------------------
Statements of Changes in Net Assets Available for Plan Benefits
---------------------------------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS AT DECEMBER 31, 1998, WITH
------------------------------------------------------------------------------
FUND INFORMATION
----------------
<TABLE>
<CAPTION>
Putnam
Brown & Sharpe George Growth & Putnam Putnam New
Plan Company Stable Value Putnam Income Voyager Opportunities Sub
Loans Stock Fund Fund Fund Fund Fund Fund Total
-------- ---------- ------------ ---------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments $ - $1,526,823 $5,433,803 $5,681,762 $7,300,299 $7,436,449 $10,347,530 $37,726,666
Employer contribution
receivable - 43,776 279,980 96,596 208,763 225,229 363,423 1,217,767
Plan loans receivable 597,970 - - - - - - 597,970
-------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Net Assets Available for
Plan Benefits $597,970 $1,570,599 $5,713,783 $5,778,358 $7,509,062 $7,661,678 $10,710,953 $39,542,403
======== ========== ========== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Putnam Putnam Asset Putnam Asset Putnam Asset
Diversified Allocation Allocation Putnam Allocation
Income Growth Balanced International Conservative Sub
Trust Fund Portfolio Growth Fund Portfolio Total Total
----------- ------- ---------- ------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments $57,915 $17,626 $29,430 $229,546 $3,280 $337,797 $38,064,463
Employer contribution
receivable 3,516 3,646 1,246 19,478 2,182 30,068 1,247,835
Plan loans receivable - - - - - - 597,970
------- ------- ------- -------- ------ -------- -----------
Net Assets Available for
Plan Benefits $61,431 $21,272 $30,676 $249,024 $5,462 $367,865 $39,910,268
======= ======= ======= ======== ====== ======== ===========
</TABLE>
10
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS AT DECEMBER 31, 1997, WITH
- ------------------------------------------------------------------------------
FUND INFORMATION
----------------
<TABLE>
<CAPTION>
Putnam
Brown & Sharpe George Growth & Putnam Putnam New
Plan Company Stable Value Putnam Income Voyager Opportunities
Loans Stock Fund Fund Fund Fund Fund Fund Total
-------------- ---------- ---------- ------------ ---------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Investments $ - $1,616,375 $4,956,436 $4,982,088 $6,089,609 $5,687,376 $6,714,154 $30,046,038
Employer contribution
receivable - 26,463 186,980 68,693 171,156 177,767 290,467 921,526
Plan loans receivable 587,411 - - - - - - 587,411
-------------- ---------- ---------- ------------ ---------- ---------- ---------- -------------
Net Assets Available for
Plan Benefits $ 587,411 $1,642,838 $5,143,416 $5,050,781 $6,260,765 $5,865,143 $7,004,621 $31,554,975
============== ========== ========== ============ ========== ========== ========== =============
</TABLE>
11
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR
---------------------------------------------------------------------------
ENDED DECEMBER 31, 1998, WITH FUND INFORMATION
----------------------------------------------
<TABLE>
<CAPTION>
Brown & Sharpe George Putnam Putnam Putnam New
Plan Company Stable Value Putnam Growth & Income Voyager Opportunities Sub
Loans Stock Fund Fund Fund Fund Fund Fund Total
--------- --------------- -------------- -------------- ------------- -------------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions
- ---------
Contributions
Employer $ - $ 86,418 $ 343,106 $ 146,048 $ 329,085 $ 345,850 $ 571,123 $1,821,630
Employee - 108,372 194,323 166,743 427,967 532,976 813,624 2,244,005
Loan repayments (238,814) 4,924 53,902 13,562 88,617 28,277 44,820 (4,712)
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
(238,814) 199,714 591,331 326,353 845,669 907,103 1,429,567 4,060,923
Investment
income
Interest and
dividends - 1,176 334,469 525,678 654,830 496,514 330,536 2,343,203
Net realized/
unrealized
appreciation
(depreciation)
in fair value of
investments - (296,145) - 25,385 306,056 904,198 1,562,113 2,501,607
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Total additions
(deductions) (238,814) (95,255) 925,800 877,416 1,806,555 2,307,815 3,322,216 8,905,733
Disbursements
- -------------
Payments to
participants 21,880 49,355 203,799 50,438 175,650 340,493 202,874 1,044,489
Loans to
participants (265,093) 15,136 22,981 35,830 48,122 68,834 74,190 -
Fees - 15 247 222 369 348 493 1,694
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Total
(disbursements)
additions (243,213) 64,506 227,027 86,490 224,141 409,675 277,557 1,046,183
Transfers
- ---------
Transfers from
ESOP - - - - 2,918 5,384 17,179 25,481
Transfers (to)
from SARP 6,160 34,754 35,605 75,970 38,416 53,177 104,554 348,636
Transfers between
funds - 52,768 (164,011) (139,319) (375,451) (160,166) 539,940 (246,239)
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Net transfers 6,160 87,522 (128,406) (63,349) (334,117) (101,605) 661,673 127,878
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Net increase
(decrease) 10,559 (72,239) 570,367 727,577 1,248,297 1,796,535 3,706,332 7,987,428
Net assets,
beginning of year 587,411 1,642,838 5,143,416 5,050,781 6,260,765 5,865,143 7,004,621 31,554,975
--------- ---------- ---------- ---------- ---------- ---------- ----------- -----------
Net assets, end
of year $ 597,970 $1,570,599 $5,713,783 $5,778,358 $7,509,062 $7,661,678 $10,710,953 $39,542,403
========= ========== ========== ========== ========== ========== =========== ===========
</TABLE>
12
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR
---------------------------------------------------------------------------
ENDED DECEMBER 31, 1998, WITH FUND INFORMATION
----------------------------------------------
<TABLE>
<CAPTION>
Putnam Putnam Asset Putnam Asset Putnam Asset
Diversified Allocation Allocation Putnam Allocation
Income Growth Balanced International Conservative Sub
Trust Fund Portfolio Growth Fund Portfolio Total Total
------------ ----------- ----------- ------------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Additions
- ---------
Contributions
Employer $ 5,029 $ 5,736 $ 2,514 $ 29,171 $ 2,510 $ 44,960 $ 1,866,590
Employee 5,407 10,416 7,183 25,679 2,274 50,959 2,294,964
Loan repayments 3,169 - - 1,254 289 4,712 -
------- ------- ------- -------- ------- -------- -----------
13,605 16,152 9,697 56,104 5,073 100,631 4,161,554
Investment income
Interest and dividends 1,842 432 736 9,461 513 12,984 2,356,187
Net realized/unrealized
appreciation
(depreciation)
in fair value of
investments (6,120) 913 (876) 8,463 2,197 4,577 2,506,184
------- ------- ------- -------- ------- -------- -----------
Total additions
(deductions) 9,327 17,497 9,557 74,028 7,783 118,192 9,023,925
Disbursements
- -------------
Payments to participants - - - - - - 1,044,489
Loans to participants - - - - - - -
Fees - - - 8 - 8 1,702
------- ------- ------- -------- ------- -------- -----------
Total (disbursements)
additions - - - 8 - 8 1,046,191
Transfers
Transfers from ESOP 253 1,147 261 1,528 253 3,442 28,923
Transfers (to) from SARP - - - - - - 348,636
Transfers between funds 51,851 2,628 20,858 173,476 (2,574) 246,239 -
------- ------- ------- -------- ------- -------- -----------
Net transfers 52,104 3,775 21,119 175,004 (2,321) 249,681 377,559
------- ------- ------- -------- ------- -------- -----------
Net increase (decrease) 61,431 21,272 30,676 249,024 5,462 367,865 8,355,293
Net assets, beginning of year - - - - - - 31,554,975
------- ------- ------- -------- ------- -------- -----------
Net assets, end of year $61,431 $21,272 $30,676 $249,024 $ 5,462 $367,865 $39,910,268
======= ======= ======= ======== ======= ======== ===========
</TABLE>
13
<PAGE>
Notes to Financial Statements (continued)
-----------------------------------------
Years Ended December 31, 1998 and 1997
--------------------------------------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS FOR THE YEAR
---------------------------------------------------------------------------
ENDED DECEMBER 31, 1997, WITH FUND INFORMATION
-----------------------------------------------
<TABLE>
<CAPTION>
Brown & Sharpe George Putnam Putnam Putnam New
Plan Company Stable Value Putnam Growth & Income Voyager Opportunities
Loans Stock Fund Fund Fund Fund Fund Fund Total
----- ---------- -------------- ------ --------------- ------- -------------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions
- ---------
Contributions
Employer $ - $ 49,341 $ 223,692 $ 87,302 $ 213,511 $ 225,769 $ 372,829 $1,172,444
Employee - 62,170 208,833 156,248 336,276 367,710 602,849 1,734,086
Loan repayments (144,472) 1,928 25,713 8,890 32,457 25,295 50,189 -
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
(144,472) 113,439 458,238 252,440 582,244 618,774 1,025,867 2,906,530
Investment income
Interest and
dividends - 455 333,334 459,632 776,148 339,281 163,093 2,071,943
Net realized/
unrealized
appreciation
(depreciation)
in fair value of
investments - (567,813) - 395,110 270,957 637,170 865,996 1,601,420
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
Total additions
(deductions) (144,472) (453,919) 791,572 1,107,182 1,629,349 1,595,225 2,054,956 6,579,893
Disbursements
- -------------
Payments to
participants (25,692) (151,393) (2,204,242) (1,184,996) (879,065) (442,062) (423,850) (5,311,300)
Loans to
participants 218,702 (712) (45,751) (20,598) (29,513) (38,734) (83,394) -
Forfeitures - (3,311) 8,197 (1,377) (274) (439) (2,796) -
Fees - - (244) (138) (222) (196) (351) (1,151)
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
Total (disbursements)
additions 193,010 (155,416) (2,242,040) (1,207,109) (909,074) (481,431) (510,391) (5,312,451)
Transfers
- ---------
Transfers
from ESOP - - 3,084 10,730 27,921 2,488 15,183 59,406
Transfers
(to) from SARP - 10,229 50,676 10,956 1,893 16,179 (164) 89,769
Transfers from
another Plan 51,267 - 287,147 75,055 442,904 557,288 606,978 2,020,639
Transfers between
funds - (408,098) (366,074) 96,110 406,520 242,966 28,576 -
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
Net transfers 51,267 (397,869) (25,167) 192,851 879,238 818,921 650,573 2,169,814
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
Net increase
(decrease) 99,805 (1,007,204) (1,475,635) 92,924 1,599,513 1,932,715 2,195,138 3,437,256
Net assets, beginning
of year 487,606 2,650,042 6 ,619,051 4,957,857 4,661,252 3,932,428 4,809,483 28,117,719
---------- ----------- ----------- ----------- --------- ---------- ---------- ----------
Net assets, end of
year $587,411 $1,642,838 $5,143,416 $5,050,781 $6,260,765 $5,865,143 $7,004,621 $31,554,975
========== =========== =========== =========== ========= ========== ========== ==========
</TABLE>
14
<PAGE>
Notes to Financial Statements (continued)
Years Ended December 31, 1998 and 1997
7. Transactions with Parties-In-Interest
-------------------------------------
The Plan invests in mutual funds managed by Putnam Investments, who is also
the Plan's recordkeeper and trustee. Therefore, these transactions qualify
as party-in-interest. There were no other party-in-interest transactions
that were prohibited by ERISA Section 406 and for which there was no
statutory or administrative exemption.
The following summarizes activity related to Brown & Sharpe capital stock
during the years ended December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
Shares Amount Shares Amount
------ ------ ------ ------
Brown & Sharpe Manufacturing Company
- ------------------------------------
<S> <C> <C> <C> <C>
Purchases of capital stock 233,123.44 $2,244,555 19,670.12 $243,824
Distributions of capital stock to participants 49,364.55 42,419 6,285.00 93,459
Sales of capital stock, at market value 151,568.59 1,995,553 42,190.00 590,722
</TABLE>
8. Year 2000 (unaudited)
---------------------
The Plan Sponsor has determined that it will be necessary to take certain
steps in order to ensure that the Plan's information systems are prepared
to handle year 2000 dates. The Plan Sponsor is taking a two phase approach.
The first phase addresses internal systems that must be modified or
replaced to function properly. Both internal and external resources are
being utilized to replace or modify existing software applications, and
test the software and equipment for the year 2000 modifications. The Plan
Sponsor anticipates substantially completing this phase of the project by
mid 1999. Costs associated with modifying software and equipment are not
estimated to be significant and will be paid by the Plan Sponsor.
For the second phase of the project, Plan management established formal
communications with its third party service providers to determine that
they have developed plans to address their own year 2000 problems as they
relate to the Plan's operations. All third party service providers have
indicated that they will be year 2000 compliant by early 1999. If
modifications of data processing systems of either the Plan, the Plan
Sponsor, or its service providers are not completely timely, the year 2000
problem could have a material impact on the operations of the Plan. Plan
management has not developed a contingency plan, because they are confident
that all systems will be year 2000 ready.
15
<PAGE>
SUPPLEMENTAL SCHEDULES
----------------------
<PAGE>
Brown & Sharpe Savings and Retirement Plan for Management Employees
EIN No. 05-0113140 Plan No. 002
Line 27a Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Shares or Face Value Description Current Value Cost
==============================================================================================================================
<S> <C> <C> <C>
The George Putnam Fund of Boston *
314,953.570 shares Balanced fund consisting of stocks and corporate $ 5,681,762 $ 5,279,936
and government bonds
Putnam New Opportunities Fund *
177,092.752 shares Long-term growth funds consisting of stock of 10,347,530 8,055,324
certain emerging industry groups that in Putnam
Investments' view offer long-term growth potential
Putnam Voyager Fund *
339,254.069 shares A combination of stocks of small companies expected 7,436,449 6,113,869
to grow over time in addition to stocks of larger more
established corporations
Brown & Sharpe Company Stock Fund *
190,852.833 shares Consisting of 190,852.833 shares of Brown & Sharpe 1,526,823 1,855,476
Class A & B Common Stock
Putnam Fund for Growth & Income *
356,285.942 shares A combination of attractive priced stocks of 7,300,299 6,758,528
companies viewed by Putnam to offer long-term growth
potential while also providing income
Brown & Sharpe Stable Value Fund
$508,091 face value American International Life Assurance Company 508,091 508,091
4,925,712 shares Putnam Stable Value Fund* 4,925,712 4,925,712
----------- -----------
5,433,803 5,433,803
----------- -----------
SUB TOTAL ASSETS HELD FOR INVESTMENTS $37,726,666 $33,496,936
=========== ===========
</TABLE>
*Identifies party-in-interest to the Plan
16
<PAGE>
Brown & Sharpe Savings and Retirement Plan for Management Employees
EIN No. 05-0113140 Plan No. 002
Line 27a Schedule of Assets Held for Investment Purposes (continued)
December 31, 1998
<TABLE>
<CAPTION>
Shares or Face Value Description Current Value Cost
==============================================================================================================================
<S> <C> <C> <C>
Putnam Diversified Income Trust *
5,036.107 shares Seeks income consistent with preservation $ 57,915 $ 60,870
of capital. The fund invests in fixed income
securities such as U.S. Government obligations,
lower rated U.S. corporate debt and debt
obligations of foreign governments.
Putnam Asset Allocation - Growth Portfolio *
1,293.188 shares Invests in equities and fixed income securities. 17,626 16,810
The fund is weighted more toward equity investments
that traditionally return more than fixed income
securities
Putnam Asset Allocation - Balanced Portfolio *
2,450.498 shares Invests in equities and fixed income securities. 29,430 29,446
The fund takes a balanced approach between equities
and fixed income investments regarding investment
philosophy.
Putnam Asset Allocation - Conservative Portfolio *
315.972 shares Invests in equity and fixed income securities
weighted more towards the fixed income securities. 3,280 3,233
Putnam International Growth Fund *
11,936.880 shares Invests in companies located outside of the United 229,546 222,374
States.
$597,970 Plan Loan Receivable 7% to 10.25% 597,970 -
----------- -----------
TOTAL ASSETS HELD FOR INVESTMENTS $38,662,433 $33,829,669
=========== ===========
</TABLE>
* Identifies party-in-interest to the Plan
17
<PAGE>
BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
EIN No. 05-0113140 Plan No. 002
LINE 27d SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1998
------------------------------------
Category (iii) A series of securities transactions in excess of 5% of beginning
- --------------------------------------------------------------------------------
of year net assets
- ------------------
<TABLE>
<CAPTION>
Current Value of
----------------
Identity of Party Involved Description of Assets Purchase Price Selling Price Cost of Asset Asset on Transaction Net Gain
- -------------------------- --------------------- -------------- -------------- ------------- -------------------- --------
Date (Loss)
---- ------
<S> <C> <C> <C> <C> <C> <C>
Putnam Fiduciary Trust
Company The George Putnam Fund
of Boston *
Purchased 89,834.462
shares in
105 transactions $1,641,408 - $1,641,408 $1,641,408 -
Sold 51,971.460 shares
in 75 transactions - $ 967,120 934,703 967,120 $32,417
Putnam Fund for Growth
and Income *
Purchased 196,327.821
shares in 157
transactions 3,960,462 - 3,960,462 3,960,462 -
Sold 151,690.250
shares in 123
transactions - 3,055,828 3,010,239 3,055,828 45,589
Putnam Voyager Fund *
Purchased 154,693.346
shares in 148
transactions 3,122,169 - 3,122,169 3,122,169 -
Sold 113,989.220
shares in 117
transactions - 2,277,294 2,210,506 2,277,294 66,788
</TABLE>
18
<PAGE>
BROWN & SHARPE SAVINGS AND RETIREMENT PLAN FOR MANAGEMENT EMPLOYEES
EIN No. 05-0113140 Plan No. 002
SCHEDULE OF REPORTABLE TRANSACTIONS
For the Year Ended December 31, 1998
------------------------------------
Category (iii) A series of securities transactions in excess of 5% of beginning
- --------------------------------------------------------------------------------
of year net assets (continued)
- ------------------------------
<TABLE>
<CAPTION>
Current Value of
----------------
Identity of Party Involved Description of Assets Purchase Price Selling Price Cost of Asset Asset on Transaction Net Gain
- --------------------------- ------------------------ -------------- ------------- ------------- -------------------- --------
Date (Loss)
---- ------
<S> <C> <C> <C> <C> <C> <C>
Putnam Stable Value
Fund *
Purchased 9,183,679.250
shares in
214 transactions $9,183,679 - $9,183,679 $9,183,679 -
Sold 8,706,311.750
shares in 146
transactions - $8,706,312 8,706,312 8,706,312 -
Putnam New Opportunities
Fund *
Purchased 110,714.219
shares in
169 transactions 5,654,198 - 5,654,198 5,654,198 -
Sold 71,630.800
shares in 126
transactions - 3,582,935 3,529,007 3,582,935 $ 53,928
Putnam International Growth
Fund *
Purchased 111,816.470
shares in 112
transactions 2,048,578 - 2,048,578 2,048,578 -
Sold 99,879.590
shares in 32
transactions - 1,827,495 1,826,204 1,827,495 1,291
Brown & Sharpe Stock Fund *
Purchased 233,123.444
shares in
111 transactions 2,244,555 - 2,244,555 2,244,555 -
Sold 200,933.140 shares
in 70 transactions - 2,037,972 1,993,790 2,037,972 44,182
</TABLE>
* Identifies party-in-interest to the Plan
There were no category (i), (ii) or (iv) transactions for the year ended
December 31, 1998.
19
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-77575, and 33-23603) pertaining to the Brown & Sharpe Savings
and Retirement Plan for Management Employees of Brown & Sharpe Manufacturing
Company of our report dated May 21, 1999, with respect to the financial
statements and schedules of the Brown & Sharpe Savings and Retirement Plan for
Management Employees included in this Annual Report (Form 11-K) for the year
ended December 31, 1998.
ERNST & YOUNG LLP
Providence, Rhode Island
June 22, 1999
20
