<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] Annual Report
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For The Year Ended December 31, 1998
or
[ ] Transition Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934 (No Fee Required)
For The Transition Period from ________ to
Commission File Number 00107923
HANDLEMAN COMPANY SALARY DEFERRAL
AND STOCK PLAN
--------------
(Full title of the Plan)
HANDLEMAN COMPANY
-----------------
(Name of issuer of the securities held pursuant to the Plan)
500 Kirts Boulevard
Troy, Michigan 48084
--------------------
(Address of principal executive offices)
1 of 16
<PAGE>
The following financial statements and exhibits are presented pursuant to
Section 15(d) of the Securities Exchange Act of 1934:
Page
----
(a) Financial Statements:
Report of Independent Accountants I-1
Statement of Assets Available for Benefits
as of December 31, 1998 and 1997 I-2
Statement of Changes in Assets Available for
Benefits for the year ended December 31, 1998 I-3
Notes to Financial Statements I-4 to I-10
Item 27a -- Schedule of Assets Held for Investment
Purposes as of December 31, 1998 I-11
Item 27d -- Schedule of Reportable Transactions I-12 to I-13
for the year ended December 31, 1998
Schedules:
Schedule I, II and III have been omitted because
the required information is shown in the financial
statements or notes thereto, or in another schedule -
Exhibit
Number
-------
(b) 1. Consent of Independent Accountants with
respect to their report on their audit of
the financial statements of the Handleman
Company Salary Deferral and Stock Plan
as of and for the year ended December 31, 1998 28.1
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the Plan) have duly caused this annual
report to be signed by the undersigned thereunto duly authorized.
HANDLEMAN COMPANY SALARY DEFERRAL AND STOCK PLAN
By: /s/ Leonard A. Brams
---------------------------------------------
Leonard A. Brams, Senior Vice President and Chief
Financial Officer Handleman Company
2 of 16
<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGES
-----
Report of Independent Accountants 4
Financial Statements:
Statement of Assets Available for
Benefits as of December 31, 1998 and 1997 5
Statement of Changes in Assets Available
for Benefits for the year ended
December 31, 1998 6
Notes to Financial Statements 7-13
Supplemental Schedules:
Item 27a - Schedule of Assets Held for
Investment Purposes as of December 31, 1998 14
Item 27d - Schedule of Reportable Transactions
for the year ended December 31, 1998 15-16
3 of 16
<PAGE>
[LOGO APPEARS HERE]
[LETTERHEAD OF PRICEWATERHOUSECOOPERS APPEARS HERE]
Report of Independent Accountants
To the Administrative Committee of the
Handleman Company Salary Deferral and Stock Plan:
In our opinion, the accompanying statements of assets available for benefits and
the related statements of changes in assets available for benefits present
fairly, in all material respects, the net assets available for benefits of
Handleman Company Salary Deferral and Stock Plan (the "Plan") at December 31,
1998 and December 31, 1997, and the changes in net assets available for benefits
for the year ended December 31, 1998 in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules on pages 14
through 16 of this Form 11-K are presented for the purpose of additional
analysis and are not a required part of the basic 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 the audits of the basic financial statements and,
in our opinion, are fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
/s/ PricewaterhouseCoopers LLP
June 22, 1999
<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
STATEMENT OF ASSETS AVAILABLE FOR BENEFITS
December 31, 1998 and 1997
--------------------------
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS:
Accrued dividends and interest $ 257 $ 52
Employee contributions receivable 56,905 133,511
Employer contribution receivable 10,106 23,341
Investments at Estimated Fair Value
- -----------------------------------
KeyCorp Investments:
Employee Benefit Money Market Fund(1), (54,255 shares and 3,697 shares at 54,225 3,697
December 31, 1998 and 1997 respectively)
EB-Managed Guaranteed Investment Contract(2), (0 shares and 70,217 shares 0 851,905
at December 31, 1998 and 1997 respectively)
Investments at Fair Value as Determined by Quoted Market Price
- --------------------------------------------------------------
KeyCorp Investments
Victory U.S. Government Obligations Fund(3), (138,368 shares and 62,719 1,609,440 694,535
shares at December 31, 1998 and 1997, respectively)
American Balanced Fund(4), (186,555 shares and 163,906 shares at 2,940,109 2,570,048
December 31, 1998 and 1997, respectively)
Victory Stock Index Fund(5), (278,506 shares and 231,092 shares at 5,915,466 4,321,425
December 31, 1998 and 1997, respectively)
Handleman Company common stock(6), (190,516 shares and 192,835 shares 2,676,357 1,337,889
at December 31, 1998 and 1997, respectively)
N&B Genesis Fund(7), (7,600 shares and 0 shares at December 31, 1998 and 96,520 -
1997, respectively)
Fidelity Growth Opportunity Fund(8), (3,440 shares and 0 shares at 172,849 -
December 31, 1998 and 1997, respectively)
Janus Worldwide Fund(9), (3,186 shares and 0 shares at December 31, 1998 150,867 -
and 1997, respectively)
Loans to participants at rates of 9.5% to 10.0%, maturing in 1 to 5 years 347,209 207,884
----------- -----------
ASSETS AVAILABLE FOR BENEFITS $14,030,310 $10,144,287
=========== ===========
</TABLE>
(1) The Plan's cost of investment in the KeyCorp Employee Benefit Money
Market Fund was $54,225 and $3,697 as of December 31, 1998 and 1997,
respectively.
(2) The Plan's cost of investment in the EB-Managed Guaranteed Investment
Contract was $0 and $772,446 as of December 31, 1998 and 1997,
respectively.
(3) The Plan's cost of investment in the Victory U.S. Government Obligations
Fund was $1,530,994 and $645,075 as of December 31, 1998 and 1997,
respectively.
(4) The Plan's cost of investment in the American Balanced Fund was
$2,843,097 and $2,444,702 as of December 31, 1998 and 1997, respectively.
(5) The Plan's cost of investment in the Victory Stock Index Fund was
$4,535,572 and $3,330,768 as of December 31, 1998 and 1997, respectively.
(6) The Plan's cost of common stock was $1,731,162 and $1,749,053 as of
December 31, 1998 and 1997, respectively.
(7) The Plan's cost of investment in the N&B Genesis Fund was $98,064 and $0 as
of December 31, 1998 and 1997, respectively.
(8) The Plan's cost of investment in the Fidelity Growth Opportunity Fund was
$163,892 and $0 as of December 31, 1998 and 1997, respectively.
(9) The Plan's cost of investment in the Janus Worldwide Fund was $146,847 and
$0 as of December 31, 1998 and 1997, respectively.
The accompanying notes are an integral part of the financial statements.
I-2
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
STATEMENT OF CHANGES IN ASSETS
AVAILABLE FOR BENEFITS
for the year ended December 31, 1998
------------------------------------
<TABLE>
<CAPTION>
Additions: -------------------------
<S> <C>
Employer contributions $ 363,303
Employee authorized contributions 2,167,439
Dividend income 910,323
Interest income 30,900
Net appreciation in fair value of investments 2,126,122
Other 9,521
-------------------------
Total additions 5,607,608
Deductions:
Participants' benefits paid 1,697,034
Other 24,551
-------------------------
Total deductions 1,721,585
-------------------------
Net increase 3,886,023
Assets available for benefits, 10,144,287
-------------------------
beginning of year
Assets available for benefits, $14,030,310
=========================
end of year
</TABLE>
The accompanying notes are an integral part of the financial statements.
I-3
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Description of Plan
-------------------
The following description of the Handleman Company Salary Deferral and
Stock Plan (the "Plan") provides only general information. Participants
should refer to the Plan Document for a complete description of the Plan's
provisions.
General
The Plan is a defined contribution plan which includes salary deferral and
employee stock ownership provisions. The Plan covers all employees of the
Handleman Company (the "Company") and subsidiaries and affiliates that have
adopted the Plan who have one year of service and who are not covered by
collective bargaining agreements (unless they specifically refer to the
Plan). The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA).
Contributions
Employee authorized contributions of tax deferred compensation are limited
in any one year to the lesser of fifteen percent of employee compensation
or $10,000. In addition, total contributions by highly compensated
employees cannot exceed specific percentage limitations of the aggregate
contributions of all other employees as set forth in the Internal Revenue
Code.
The Company provides for a matching contribution equal to 25 percent of the
elective contribution made by each participant, up to six percent of such
participant's compensation, to be invested in company stock.
Plan Assets
To the extent practicable, Plan assets related to the Company stock portion
of the Plan are invested in Company stock. Employees may direct investment
of employee authorized contributions to the Plan into various investment
funds which are established by the Company from time to time.
Participant Accounts
Each participant's account is credited with employee authorized
contributions, in addition to an allocation of any Company contribution and
Plan earnings, net of Plan expenses. A participant must be employed by the
Company on the last day of the Company's fiscal year to receive the
allocation of Company contributions.
Salary Deferral Portion - Company contributions to the Salary Deferral
-----------------------
portion of the Plan are allocated to participants who are eligible as
defined by the Plan. There are certain limitations on the amounts
which can be allocated.
Stock Ownership Portion - Effective May 2, 1994, the Plan was amended
to discontinue Company contributions for employees hired after April
30, 1994. As of December 31, 1996, Company contributions for all
employees were discontinued.
I-4
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
-----------------------------
1. Description of Plan, continued
-------------------
Loans to Participants
The Plan allows participants to borrow against their account balances. The
maximum loan to any participant is the lesser of 50% of the participant's
non-forfeitable salary deferral account balance or $50,000.
Plan Expenses
Expenses of the Trustee and Administrative Committee are charged to
participant accounts unless the Company at its discretion elects to pay
these expenses. The Company paid such expenses for the year ended December
31, 1998.
Vesting
Participants are fully vested in amounts credited to their accounts prior
to July 1995.
Effective July 1, 1995, the Plan was amended to include a graded vesting
schedule for matching contributions of 20 percent for each year of service,
resulting in 100 percent vesting after five years of service. Nonvested
company contributions for terminated participants are forfeited by the
participant and are used to reduce future employer contributions to the
Plan.
Payment of Benefits
On termination of service, a participant will be eligible to receive the
plan assets allocated to the participant's account and which have vested or
an equivalent amount in cash. At December 31, 1998 and 1997, $1,027,833 and
$325,337 respectively, were reported as benefits payable on the Form
5500.
2. Summary of Accounting Policies
------------------------------
Company Contributions
Company contributions are accrued in the plan year to which the
contributions relate. Company contributions are in the form of Company
stock.
Investments
At the end of the plan year, Company stock is valued at the closing market
price of the stock on the last business day of the Plan's year. The EB-
Managed Guaranteed Investment Contract Fund, Victory U.S. Government
Obligations Fund, American Balanced Fund, Victory Stock Index Fund, N&B
Genesis Fund, Fidelity Growth Opportunity Fund, Janus Worldwide Fund and
Employee Benefit Money Market Fund are reflected at estimated fair values
or at the fair value as determined by quoted market prices at the year-end
date as reported by the Plan's investment custodian, KeyCorp.
The basis on which cost is determined to compute realized gains or losses
from sales of investments, other than the Company stock, is average cost.
The basis on which cost is determined for the Company stock is specific
identification.
The Plan presents in the statement of changes in assets the net
appreciation (depreciation) in fair value of investments which consists of
the realized gains or losses and the unrealized appreciation (depreciation)
on those investments.
For purposes of determining Company contributions, Company stock received
as the Company contribution is valued at the closing price on the day the
contribution is made.
I-5
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
-----------------------------
2. Summary of Accounting Policies, continued
------------------------------
Dividend Income
Dividend income is recognized on the ex-dividend date. Dividend income on
Company stock for the year ended December 31, 1998 was $0.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 changes in
assets during the reporting period. Actual results could differ from these
estimates.
3. Investments
-----------
During the Plan year ended December 31, 1998, the Plan's investments
(including investments bought and sold, as well as held during the year)
appreciated (depreciated) in value by $2,126,122 as follows:
<TABLE>
<CAPTION>
Investments at Estimated Fair Value
-----------------------------------
<S> <C>
KeyCorp Investment:
EB-Managed Guaranteed Investment Contract $ 25,533
Investments at Fair Value Determined
by Quoted Market Price
----------------------
KeyCorp Investments:
Victory U.S. Government Obligation Fund 55,708
American Balanced Fund 12,238
Victory Stock Index Fund 651,457
N&B Genesis Fund (3,557)
Fidelity Growth Opportunity Fund 8,188
Janus Worldwide Fund 3,317
Handleman Company Common Stock 1,373,238
-----------
$ 2,126,122
===========
</TABLE>
I-6
9 of 16
<PAGE>
Fund Information
- ----------------
The following is a summary of assets for each investment fund option for the
years ended December 31, 1998 and 1997 and of changes by investment fund for the
year ended December 31, 1998. The Handleman Common Stock Fund includes both
participant directed investments as well as investments of company matching
contributions.
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
ASSETS AND LIABILITIES BY INVESTMENT PROGRAM
DECEMBER 31, 1998
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
----------------------------------------------------------
EB-MANAGED VICTORY U.S.
GUARANTEED GOVERNMENT AMERICAN VICTORY N&B
HANDLEMAN INVESTMENT OBLIGATIONS BALANCED STOCK GENESIS
COMMON STOCK CONTRACT FUND FUND INDEX FUND FUND
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Accrued Dividends and Interest $ 257 - - - - -
Employer Contributions Receivable 10,106 - - - -
Employee Contributions Receivable 2,774 - $ 9,438 $ 16,337 $ 25,761 $ 496
KeyCorp Investments:
Employee Benefit Money Market Fund 54,225 - - - - -
EB-Managed Guaranteed Investment - - - - - -
Contract
Victory U.S. Government - - 1,609,440 - - -
Obligations Fund
American Balanced Fund - - - 2,940,109 - -
Victory Stock Index Fund - - - - 5,915,466 -
Handleman Company Common 2,676,357 - - - - -
Stock, 190,516 Shares
N&B Genesis Fund - - - - - 96,520
Fidelity Growth Opportunity Fund - - - - - -
Janus Worldwide Fund - - - - - -
Loans to Participants - - - - - -
------------ ---------- ------------ ----------- ---------- -------
ASSETS AVAILABLE FOR BENEFITS $2,743,719 $ 0 $1,618,878 $2,956,446 $5,941,227 $97,016
============ ========== ============ =========== ========== =======
<CAPTION>
---------------------------------
FIDELITY
GROWTH JANUS
OPPORTUNITY WORLDWIDE LOAN
FUND FUND FUND TOTAL
------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Accrued Dividends and Interest - - - $ 257
Employer Contributions Receivable - 10,106
Employee Contributions Receivable $ 824 $ 1,275 - 56,905
KeyCorp Investments:
Employee Benefit Money Market Fund - - - 54,225
EB-Managed Guaranteed Investment - - - 0
Contract
Victory U.S. Government - - - 1,609,440
Obligations Fund
American Balanced Fund - - - 2,940,109
Victory Stock Index Fund - - - 5,915,466
Handleman Company Common - - - 2,676,357
Stock, 190,516 Shares
N&B Genesis Fund - - - 96,520
Fidelity Growth Opportunity Fund 172,849 - - 172,849
Janus Worldwide Fund - 150,867 - 150,867
Loans to Participants - - $347,209 347,209
----------- ---------- -------- -----------
ASSETS AVAILABLE FOR BENEFITS $ 173,673 $ 152,142 $347,209 $14,030,310
=========== ========== ======== ===========
</TABLE>
I-7
10 of 16
<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
ASSETS AND LIABILITIES BY INVESTMENT PROGRAM
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
----------------------------------------------------------
EB-MANAGED VICTORY U.S.
GUARANTEED GOVERNMENT AMERICAN VICTORY
HANDLEMAN HANDLEMAN INVESTMENT OBLIGATIONS BALANCED STOCK LOAN
ESOP FUND COMMON STOCK CONTRACT FUND FUND INDEX FUND FUND TOTAL
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Accrued Dividends and Interest $ 2 $ 50 - - - - - $ 52
Employer Contributions Receivable - 23,341 - - - - - 23,341
Employee Contributions Receivable - 7,107 $ 13,635 $ 9,960 $ 40,601 $ 62,208 - 133,511
KeyCorp Investments:
Employee Benefit Money Market Fund 274 3,423 - - - - - 3,697
EB-Managed Guaranteed Investment
Contract - - 851,905 - - - - 851,905
Victory U.S. Government Obligations
Fund - - - 694,535 - - - 694,535
American Balanced Fund - - - - 2,570,048 - - 2,570,048
Victory Stock Index Fund - - - - - 4,321,425 - 4,321,425
Handleman Company Common Stock 518,831 819,058 - - - - - 1,337,889
192,835 Shares
Loans to Participants - - - - - - 207,884 207,884
--------- ------------ ---------- ---------- ---------- ---------- -------- -----------
ASSETS AVAILABLE $519,107 $852,979 $865,540 $704,495 $2,610,649 $4,383,633 $207,884 $10,144,287
========= ============ ========== ========== ========== ========== ======== ===========
FOR BENEFITS
</TABLE>
I-8
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
INCOME ANC CHANGES IN EQUITY TO INVESTMENT PROGRAM
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
PARTICIPANT DIRECTED
-----------------------------------------------------------------------------
EB-MANAGED VICTORY U.S. FIDELITY
GUARANTEED GOVERNMENT AMERICAN VICTORY N&B GROWTH
HANDLEMAN HANDLEMAN INVESTMENT OBLIGATIONS BALANCED STOCK GENESIS OPPORTUNITY
ESOP FUND COMMON STOCK CONTRACT FUND FUND INDEX FUND FUND FUND
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions:
Employer Contributions - $ 362,922 $ 114 - $ 152 $ 115 - -
Employee Contributions - 101,752 121,695 $ 303,312 611,780 987,768 10,868 9,068
Dividend Income - - - - 289,454 619,851 - 1,018
Total Interest Income 12 3,064 8 6 3 5 227 4,829
Net appreciation in fair
value of investments 357,441 1,015,797 25,533 55,708 12,238 651,457 (3,557) 8,188
Other Receipts (2) 162 352 1,730 404 1,137 - -
---------- ---------- ---------- ---------- ---------- ---------- -------- ----------
Total Additions 357,451 1,483,697 147,702 360,756 914,031 2,260,333 7,538 23,103
---------- ---------- ---------- ---------- ---------- ---------- -------- ----------
Deductions:
Participants' benefits 13,593 335,838 48,117 322,015 365,631 611,840 - -
Transfers Between Funds 862,965 (743,907) 965,125 (875,642) 202,603 90,899 (89,478) (150,570)
Other - 1,026 - - - - - -
---------- ---------- ---------- ---------- ---------- ---------- -------- ----------
Total Deductions 876,558 (407,043) 1,013,242 (553,627) 568,234 702,739 (89,478) (150,570)
---------- ---------- ---------- ---------- ---------- ---------- -------- ----------
Net Increase (519,107) 1,890,740 (865,540) 914,383 345,797 1,557,594 97,016 173,673
Assets Available for
Benefits, beginning of
year 519,107 852,979 865,540 704,495 2,610,649 4,383,633 0 0
---------- ---------- ---------- ---------- ---------- ---------- -------- ----------
Assets Available for
Benefits, end of year $ - $2,743,719 $ - $1,618,878 $2,956,446 $5,941,227 $ 97,016 $ 173,673
========== ========== ========== ========== ========== ========== ======== ==========
<CAPTION>
------------------------
JANUS
WORLDWIDE LOAN
FUND FUND TOTAL
--------------------------------------
<S> <C> <C> <C>
Additions:
Employer Contributions - - $ 363,303
Employee Contributions $ 21,196 - 2,167,439
Dividend Income - - 910,323
Total Interest Income 553 $ 22,193 30,900
Net appreciation in fair
value of investments 3,317 - 2,126,122
Other Receipts - 5,738 9,521
---------- --------- -----------
Total Additions 25,066 27,931 5,607,608
---------- --------- -----------
Deductions:
Participants' benefits - - 1,697,034
Transfers Between Funds (127,076) (134,919) 0
Other - 23,525 24,551
---------- --------- -----------
Total Deductions (127,076) (111,394) 1,721,585
---------- --------- -----------
Net Increase 152,142 139,325 3,886,023
Assets Available for
Benefits, beginning of
year 0 207,884 10,144,287
---------- --------- -----------
Assets Available for
Benefits, end of year $ 152,142 $ 347,209 $14,030,310
========== ========= ===========
</TABLE>
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
NOTES TO FINANCIAL STATEMENTS, Continued
-----------------------------
5. Plan Termination
----------------
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
6. Tax Status
----------
The Internal Revenue Service has ruled that the Plan qualifies under
Section 401 of the Internal Revenue Code ("IRC") and is, therefore, not
subject to tax under present income tax laws. Once qualified, the Plan is
required to operate in conformity with the IRC to maintain its
qualification. The plan administrator is not aware of any course or action
or series of events that have occurred that might adversely affect the
Plan's qualified status.
The Plan obtained its latest determination letter on November 24, 1997, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the IRC.
I-10
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
Form 5500
Calendar Plan year 1998
ITEM 27a, SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
---------------------------------------------------------
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Asterisk Identity of
denotes party- issue, borrower Description
in-interest to lessor, or of Current
the Plan similar party Investment Cost Value
- ---------------- ------------------------ ------------------ --------- -----------
<S> <C> <C> <C> <C>
Reporting Criteria I:
- --------------------
Investment assets held by
the Plan on the last day
of the Plan year
* KeyCorp Cash Equivalents $ 54,225 $ 54,225
Employee Benefit
Money Market
Fund
* KeyCorp Short Term U.S. $1,530,994 $1,609,440
Victory U.S. Treasury Securities
Government Obligations Fund
* KeyCorp Common Stock and $2,843,097 $2,940,109
American
Balanced Fund Bond Fund
* KeyCorp Common Stock Fund $4,535,572 $5,915,466
Victory Stock
Index Fund
* Handleman Common Stock $1,731,162 $2,676,357
Company $.01 par value
Common Stock
* KeyCorp Common Stock Fund $ 98,064 $ 96,520
N&B
Genesis Fund
* KeyCorp Common Stock Fund $ 163,892 $ 172,849
Fidelity
Growth Opportunity Fund
* KeyCorp Common Stock Fund $ 146,847 $ 150,867
Janus
Worldwide Fund
* Loans to Interest rates of $ 0 $ 347,209
Participants 9.5% to 10% and
maturing in 1 to
5 years
</TABLE>
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS
for the year ended December 31, 1998
------------------------------------
<TABLE>
<CAPTION>
Current Value
Purchase Selling Cost of Asset on
Identity of Party Involved Description of Asset Price Price Asset ransaction Date
- -------------------------- -------------------- -------- ------- ------ ---------------
<S> <C> <C> <C> <C> C>
REPORTING CRITERION I: Any transaction within the plan year, with
- ----------------------
respect to any plan asset, involving an
amount in excess of five percent of the
current value of plan assets.
KeyCorp Victory U.S. Government Obligations Fund
1 purchase - 80,178 units $ 910,541 $ 910,541 $ 910,541
KeyCorp EB - Managed Guaranteed Investment Contract
1 sale - 69,691 units $ 870,485 780,272 870,485
KeyCorp Victory Stock Index Fund
1 purchase - 25,864 units 500,985 500,985 500,985
REPORTING CRITERION II: Any series of transactions (other than
- -----------------------
transactions with respect to securities)
within the plan year with or in conjunction
with the same person which, when aggregated,
regardless of the category of asset and the
gain or loss on any transaction, involves an
amount in excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION III: Any transaction within the plan year involving
- ------------------------
securities of the same issue if within the
plan year any series of transactions with
respect to such securities, when aggre-
gated, involves an amount in excess of five
percent of the current value of plan assets.
KeyCorp Employee Benefit Money
Market Fund
108 purchases - 992,462 units $ 992,462 $ 992,462 $ 992,462
135 sales - 941,660 units $ 941,660 941,660 941,660
KeyCorp American Balanced Fund
74 purchases - 67,011 units 1,069,287 1,069,287 1,069,287
97 sales units - 44,362 711,464 670,891 711,464
KeyCorp Victory Stock Index Fund
100 purchases - 98,946 shares 2,005,560 2,005,560 2,005,560
104 sales - 51,054 shares 1,062,977 800,756 1,062,977
KeyCorp Government Obligation Fund
60 purchases - 116,419 shares 1,333,863 1,333,863 1,333,863
KeyCorp Managed Guaranteed Investment Contract
43 sales - 81,809 shares 1,023,949 918,957 1,023,949
<CAPTION>
Net Gain
Identity of Party Involved Description of Asset or (Loss)
- -------------------------- -------------------- ---------
<S> <C> <C>
REPORTING CRITERION I: Any transaction within the plan year, with
- ----------------------
respect to any plan asset, involving an
amount in excess of five percent of the
current value of plan assets.
KeyCorp Victory U.S. Government Obligations Fund
1 purchase - 80,178 units
KeyCorp EB - Managed Guaranteed Investment Contract
1 sale - 69,691 units $ 90,213
KeyCorp Victory Stock Index Fund
1 purchase - 25,864 units
REPORTING CRITERION II: Any series of transactions (other than
- -----------------------
transactions with respect to securities)
within the plan year with or in conjunction
with the same person which, when aggregated,
regardless of the category of asset and the
gain or loss on any transaction, involves an
amount in excess of five percent of the
current value of plan assets.
None
REPORTING CRITERION III: Any transaction within the plan year involving
- ------------------------
securities of the same issue if within the
plan year any series of transactions with
respect to such securities, when aggre-
gated, involves an amount in excess of five
percent of the current value of plan assets.
KeyCorp Employee Benefit Money
Market Fund
108 purchases - 992,462 units
135 sales - 941,660 units
KeyCorp American Balanced Fund
74 purchases - 67,011 units
97 sales units - 44,362 $ 40,573
KeyCorp Victory Stock Index Fund
100 purchases - 98,946 shares
104 sales - 51,054 shares 262,221
KeyCorp Government Obligation Fund
60 purchases - 116,419 shares
KeyCorp Managed Guaranteed Investment Contract
43 sales - 81,809 shares 104,992
</TABLE>
I-12
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<PAGE>
HANDLEMAN COMPANY
SALARY DEFERRAL AND STOCK PLAN
ITEM 27d - SCHEDULE OF REPORTABLE TRANSACTIONS, Concluded
for the year ended December 31, 1998
------------------------------------
<TABLE>
<CAPTION>
Current Value
Purchase Selling Cost of Asset on Net Gain
Identity of Party Involved Description of Asset Price Price of Asset Transaction Date or (Loss)
- -------------------------- -------------------- ----- ----- -------- ---------------- --------
<S> <C> <C> <C> <C> <C> <C>
REPORTING CRITERION IV: Any transaction within the plan
- ----------------------
year with respect to securities
with or in conjunction with a
person if any prior or subsequent
single transaction within the plan
year with such person with respect
to securities exceeds five percent
of the current value of plan
assets.
None
</TABLE>
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<PAGE>
[LOGO]
[LETTERHEAD OF PRICEWATERHOUSECOOPERS APPEARS HERE]
EXHIBIT 28.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-69030) of Handleman Company of our report dated
June 22, 1999 relating to the financial statements of Handleman Company Salary
Deferral and Stock Plan, which appears in this Form 11-K.
PricewaterhouseCoopers LLP
June 24, 1999
