SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 11-K FOR ANNUAL REPORT 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 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 33-41313 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: Bairnco Corporation 401(k) Savings Plan and Trust B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Bairnco Corporation 2251 Lucien Way Maitland, Florida 32751 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Advisory Committee of Bairnco Corporation 401(k) Savings Plan and Trust: We have audited the accompanying statements of net assets available for benefits of Bairnco Corporation 401(k) Savings Plan and Trust (the Plan) as of December 31, 1998 and 1997, and the related statement of changes in net assets available for benefits for the year ended December 31, 1998. These financial statements and the supplemental schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and schedules 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 benefits of the Plan as of December 31, 1998 and 1997, and the changes in its net assets available for benefits for the year ended December 31, 1998, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of reportable transactions, assets held for investment and transactions with parties in interest are presented for purposes 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. The Fund Information in Note 6 is presented for purposes of additional analysis rather than to present the changes in net assets available for benefits of each fund. The supplemental schedules and Fund Information 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. Orlando, Florida March 9, 1999 Arthur Andersen LLP BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1998 AND 1997 1998 1997 ASSETS INVESTMENTS, at fair market value (Notes 2 & 3) Bairnco common stock $ 194,962 $ 277,830 Mutual funds 5,131,997 3,873,674 Participant notes receivable 193,146 108,523 TOTAL INVESTMENTS 5,520,105 4,260,027 RECEIVABLES Participants' contributions 71,745 69,647 Investment income -- 1,396 TOTAL RECEIVABLES 71,745 71,043 TOTAL ASSETS 5,591,850 4,331,070 NET ASSETS AVAILABLE FOR BENEFITS $5,591,850 $4,331,070 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS FOR THE YEAR ENDED DECEMBER 31, 1998 (Note 6) 1998 NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $4,331,070 ADDITIONS: Participants' contributions 1,038,728 Interest and dividends 157,892 Net realized and unrealized appreciation on investments (Note 2) 654,560 1,851,180 DEDUCTIONS: Distributions 584,679 Administrative expenses 5,721 590,400 NET INCREASE 1,260,780 NET ASSETS AVAILABLE FOR BENEFITS, end of year $5,591,850 The accompanying notes are an integral part of these financial statements. BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1998 and 1997 1. PLAN DESCRIPTION: The following description of the Bairnco Corporation 401(k) Savings Plan and Trust (the "Plan") provides only general information. Participants of the Plan should refer to the Plan document for a complete description of the Plan's provisions. The Plan document is available from Bairnco Corporation ("Bairnco" or the "Corporation") at its offices in Maitland, Florida. General Bairnco established the Plan effective July 1, 1991. The Plan is a defined contribution plan under which all full-time employees become eligible for participation on the first day of the month following completion of thirty days of service. Once an employee becomes eligible for participation, salary deferrals (contributions) may commence on any subsequent date. The Plan excludes non-resident aliens, leased employees and independent contractors from participating in the Plan. Union employees of the Corporation are permitted to participate in the Plan. The Plan is subject to the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 ("ERISA"). Contributions Under the terms of the Plan, allowable contributions are outlined as follows: Participant Contributions - The participants may elect to defer a minimum of 1% and a maximum of 20% of compensation, as defined in the Plan, not to exceed $10,000 for 1998. The maximum dollar amount that may be deferred is adjusted annually by the Internal Revenue Service. The amount of the compensation which is deferred, plus any earnings or losses on that amount, is not subject to federal income tax until the funds are actually distributed to the participant by the Plan. However, contributions are subject to FICA (Social Security and Medicare Taxes). Employer Contributions - The Corporation does not match elective deferrals pursuant to the Plan. Participant Accounts Each participant's account is credited with the participant's contribution and allocations of Plan earnings or losses, and charged with an allocation of administrative expenses. Allocations are based on participant account balances, as defined in the Plan. The benefit to which a participant is entitled is the amount that can be provided from the participant's vested account. Vesting A participant shall at all times have a 100 percent nonforfeitable interest in the value of his/her account attributable to all contributions made plus or minus investment earnings and losses thereon and related administrative costs. Transfers From Other Qualified Plans Participants who have an interest in any other qualified employee benefit plan (as described in Section 401(a) of the Internal Revenue Code) may transfer the distributions from these plans directly into the Plan at the discretion of the Administrative Committee (see Note 4). Distributions A participant who has attained age 59-1/2 may elect, by filing a written application with the Administrative Committee, to withdraw any amount up to 100 percent of the vested portion of his/her account, for any reason. For participants who have not attained age 59-1/2, the reasons for such withdrawals are restricted to those defined in the Plan. Upon termination of employment, a participant can elect to have the balance in the participant's account distributed to the participant in a single lump sum cash distribution or a partial distribution, if requested in writing by the participant. As an alternative, the participant may also elect to leave the related funds in the Plan or transfer the related funds into another qualified plan. Participant Notes Receivable An active participant may borrow from his/her account a minimum of $1,000 up to a maximum equal to the lesser of (1) a total of $50,000 of borrowings within one year or (2) 50% of the participant's account balance. Loan transactions are treated as transfers between the investment fund and the participant notes receivable account. Loan terms range from 1-5 years or up to 15 years for the purchase of a primary residence. The loans are secured by the balance in the participant's account and bear interest at the prime rate at the time of borrowing plus 2%. During 1998, interest rates ranged from 9.75% to 10.5%. Principal and interest are paid quarterly through payroll deductions. As of December 31, 1998 and 1997, there were 61 and 43 loans outstanding. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Use of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions from the net assets available for benefits during the reporting period. Actual results could differ from those estimates. Basis Of Accounting- For the year ended December 31, 1998, the accounting records of the Plan and the Plan's assets were maintained by Schwab Retirement Plan Services, Inc. ("Schwab") a subsidiary of the Charles Schwab Corporation. The participants' account balances are determined on the cash basis; however, the Plan's financial statements contained herein are presented on an accrual basis. Investment Valuation and Income Recognition- Investments are stated at fair market value. Securities which are traded on a national securities exchange are valued at the last reported sales price on the last business day of the year. Any unlisted securities are valued at the bid price next preceding the close of business on the valuation date. Participant notes receivable are valued at cost, which approximates fair market value. Any unrealized appreciation/depreciation on investments represents the difference between fair market value of investments at the beginning of the Plan year or when acquired, whichever is later, and the fair market value of investments at the end of the Plan year. Interest income is recognized on the accrual basis. Administrative Expenses- Certain administrative expenses of the Plan are paid directly by Bairnco on behalf of the Plan. During the year ended December 31, 1998, Bairnco paid administrative expenses of approximately $16,000. Benefit Payments- Benefits are recorded when paid. 3. INVESTMENTS: There are currently eight investment options into which participants may direct the investment of their accounts. These are Invesco Strategic Technology Fund, Founders Growth Fund, Schwab 1000 Equity Fund, Strong Government Securities Fund, Schwab Retirement Money Fund, Neuberger & Berman Partners Fund and Neuberger & Berman Guardian Fund (collectively the "mutual funds"), and Bairnco Corporation Common Stock Fund ("Bairnco common stock fund"). Participants invest in units of participation of the fund which represents an undivided interest in the underlying assets of the fund. Participants may separately direct the investment of future deferrals and existing account balances into these eight investment options in increments of 5%. Participants are permitted to modify their elections for future deferrals and existing account balances between investment funds on a daily basis. The investments that represent 5% or more of the net assets available for benefits are as follows at December 31, 1998 and 1997: 1998 1997 Invesco Strategic Technology Fund $ 476,615 $ 312,018 Founders Growth Fund 844,891 551,921 Schwab 1000 Equity Fund 2,379,812 1,907,170 Strong Government Securities Fund 758,197 565,494 Schwab Retirement Money Fund 637,965 537,071 Bairnco Common Stock Fund 194,962 277,830 $5,292,442 $4,151,504 4. TRUST AGREEMENT: Schwab is the Plan's Trustee pursuant to the Plan document which is signed by the Corporation and Plan Trustee. Schwab manages the Plan assets and makes distributions to participants as directed by the Plan Administrator. The Administrative Committee of the Corporation is the Plan Administrator. Expenses incurred by the Plan Trustee or the Plan Administrator in the performance of their duties may be paid by the Plan or the Corporation at the Corporation's discretion. During 1998, all investment managers' fees were paid directly by the Plan. 5. PLAN TERMINATION: Although it has not expressed any intent to do so, the Corporation reserves the right under the Plan to terminate the Plan, in whole or in part, at any time. In the event of the Plan's termination, the Plan assets will be distributed to the participants in lump sum distributions or transferred to another qualified plan at the direction of the participant. 6. CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS, WITH FUND INFORMATION: The following schedule presents changes in net assets available for benefits, by fund, for the year ended December 31, 1998: Participant Directed Invesco Schwab Strong Schwab Neuberger Neuberger Bairnco Strategic Founders 1000 Government Retirement & Berman & Berman Common Participant Technology Growth Equity Securities Money Partners Guardian Stock Notes Other Fund Fund Fund Fund Fund Fund Fund Fund Receivable Receivable Total Net Assets Available for Benefits, beginning of year $312,018 $551,921 $1,907,170 $565,494 $537,071 $ -- $ -- $277,830 $108,523 $71,043 $4,331,070 Additions: Participant's contributions 157,803 287,199 321,615 151,154 64,831 7,179 3,164 43,685 -- 2,098 1,038,728 Interest and dividends (5) 47,062 17,830 52,496 31,558 2,448 946 6,953 -- (1,396) 157,892 Net realized and unrealized appreciation (depreciation) on investments 111,924 115,830 509,632 (617) 390 (3,128) (2,429) (77,042) -- -- 654,560 Total additions 269,722 450,091 849,077 203,033 96,779 6,499 1,681 (26,404) -- 702 1,851,180 Deductions: Distributions 64,038 86,971 319,600 55,558 37,899 1,728 -- 9,549 9,336 -- 584,679 Administrative expenses 740 1,145 2,210 759 455 5 6 401 -- -- 5,721 Total deductions 64,778 88,116 321,810 56,317 38,354 1,733 6 9,950 9,336 -- 590,400 Transfers to other funds (40,347) (69,005) (54,625) 45,987 42,469 23,626 4,450 (46,514) 93,959 -- -- Net increase (decrease) 164,597 292,970 472,642 192,703 100,894 28,392 6,125 (82,868) 84,623 702 1,260,780 Net Assets Available for Benefits, end of year $476,615 $844,891 $2,379,812 $758,197 $637,965 $28,392 $6,125 $194,962 $193,146 $71,745 $5,591,850 7. TRANSACTIONS WITH PARTIES IN INTEREST: Under ERISA, the Plan is required to report investment transactions with and compensation paid to a "party in interest". The term "party in interest" is broadly defined but includes Bairnco Corporation as the Plan's sponsor, Schwab, as Plan Trustee, and any person or corporation which renders services to the Plan. Certain fees for legal and accounting services provided in connection with the Plan were paid by the Plan sponsor on behalf of the Plan during these years and are not included in the accompanying financial statements. Additional fees paid by the Plan during 1998 for services rendered by parties in interest were based on rates which the Plan's Administrator believes were customary and reasonable. 8. INCOME TAX STATUS: The Plan obtained its latest determination letter on April 29, 1997, in which the Internal Revenue Service stated that the Plan, as then designed, was in compliance with the applicable requirements of the Internal Revenue Code. The plan administrator and legal counsel believe that the Plan is currently being operated in compliance with the applicable requirements of the Internal Revenue Code. 9. SUBSEQUENT EVENT Effective October 31, 1998, Bairnco purchased MII International, Inc. ("MII"). On December 11, 1998, Bairnco's Board of Directors elected to merge the MII 401(k) plan into the Plan effective January 1, 1999, at which time the employees of MII will begin participating in the Plan. 10. SUPPLEMENTAL SCHEDULES: Supplemental Schedule I lists the reportable transactions of the Plan for the year ended December 31, 1998. Purchases and sales are made at fair market value on the date of transaction. Supplemental Schedule II lists the Plan assets held for investment as of December 31, 1998. Supplemental Schedule III lists transactions with parties in interest of the Plan for the year ended December 31, 1998. SCHEDULE I BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 31, 1998 Sales Sales Sales Description of Transaction Purchases Cost Proceeds Net Gain Founders Growth Fund $433,631 $236,572 $256,491 $ 19,919 Schwab 1000 Equity Fund 512,349 390,721 549,339 158,618 Strong Government Securities Fund 317,252 117,020 123,932 6,912 Schwab Retirement Money Fund 229,053 127,794 128,549 755 The preceding notes are an integral part of this schedule. SCHEDULE II BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST SCHEDULE OF ASSETS HELD FOR INVESTMENT AS OF DECEMBER 31, 1998 Fair Market Description Value (Note 2) Cost Cash Equivalents Schwab Money Market Fund $ 1,411 $ 1,411 Common Stocks Bairnco Corporation 193,551 174,600 Total Bairnco Common Stock Fund $ 194,962 $ 176,011 Mutual Funds Invesco Strategic Technology Fund $ 476,615 $ 419,042 Founders Growth Fund 844,891 760,963 Schwab 1000 Equity Fund 2,379,812 1,521,336 Strong Government Securities Fund 758,197 741,957 Schwab Retirement Money Fund 637,965 637,965 Neuberger & Berman Partners Fund 28,392 30,914 Neuberger & Berman Guardian Fund 6,125 7,492 Total Mutual Funds $5,131,997 $4,119,669 Other Investments Participant Notes Receivable $ 193,146 $ 193,146 Total $5,520,105 $4,488,826 The preceding notes are an integral part of this schedule. SCHEDULE III BAIRNCO CORPORATION 401(k) SAVINGS PLAN AND TRUST SCHEDULE OF TRANSACTIONS WITH PARTIES IN INTEREST FOR THE YEAR ENDED DECEMBER 31, 1998 Description Amount Sold 8,228.303 units of Bairnco Corporation Common Stock between $5.563 and $11.375 per unit $ 71,213 Purchased 7,469.303 units of Bairnco Corporation Common Stock between $5.563 and $12.023 per unit $ 64,311 The preceding notes are an integral part of this schedule. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Administrative Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. BAIRNCO CORPORATION 401(K) SAVINGS PLAN AND TRUST (Name of Plan) Date: March 9, 1999 By: /s/ J. ROBERT WILKINSON J. ROBERT WILKINSON Administrative Committee Member