BRIGGS & STRATTON CORPORATION AND SUBSIDIARIES

EXHIBIT NO. 13
ANNUAL REPORT TO SHAREHOLDERS FOR YEAR ENDED JUNE 30, 1996

2
CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994
1996 1995 1994
---- ---- ----

NET SALES ............................. $ 1,287,029,000 $ 1,339,677,000 $ 1,285,517,000

COST OF GOODS SOLD .................... 1,025,281,000 1,068,059,000 1,018,977,000
-------------- -------------- -------------
Gross Profit on Sales ............. 261,748,000 271,618,000 266,540,000

ENGINEERING, SELLING,
GENERAL AND
ADMINISTRATIVE EXPENSES ............. 108,339,000 101,852,000 94,795,000
-------------- -------------- -------------
Income from Operations ............ 153,409,000 169,766,000 171,745,000

INTEREST EXPENSE ...................... (10,069,000) (8,580,000) (8,997,000)

OTHER INCOME, Net ..................... 5,712,000 9,189,000 6,973,000
-------------- -------------- -------------

Income Before Provision for
Income Taxes ...................... 149,052,000 170,375,000 169,721,000
PROVISION FOR INCOME TAXES ............ 56,640,000 65,570,000 67,240,000
-------------- -------------- -------------

Net Income Before Cumulative Effect of
Accounting Changes ................ 92,412,000 104,805,000 102,481,000

CUMULATIVE EFFECT OF
ACCOUNTING CHANGES FOR:

Postretirement Health Care, Net of
Income Taxes of $25,722,000 ...... - - (40,232,000)

Postemployment Benefits, Net of
Income Taxes of $430,000 ......... - - (672,000)

Deferred Income Taxes ............. - - 8,346,000
-------------- -------------- -------------
- - (32,558,000)
-------------- -------------- -------------
NET INCOME ............................ $ 92,412,000 $ 104,805,000 $ 69,923,000
============== ============== =============

PER SHARE DATA:
Net Income Before Cumulative Effect of
Accounting Changes ............... $ 3.19 $ 3.62 $ 3.54

Cumulative Effect of
Accounting Changes ............... - - (1.12)
-------------- -------------- -------------
Net Income ........................ $ 3.19 $ 3.62 $ 2.42
============== ============== =============

The accompanying notes to consolidated financial statements are an integral
part of these statements.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 1996 AND JULY 2, 1995
ASSETS 1996 1995
-------------- -------------

CURRENT ASSETS:
Cash and Cash Equivalents .............................................. $ 150,639,000 $ 170,648,000
Receivables, Less Reserves of $1,544,000 and $1,537,000, Respectively... 119,346,000 94,116,000
Inventories -
Finished Products and Parts .......................................... 96,078,000 96,540,000
Work in Process ...................................................... 36,932,000 40,107,000
Raw Materials ........................................................ 4,393,000 4,027,000
-------------- -------------
Total Inventories .................................................. 137,403,000 140,674,000
Future Income Tax Benefits ............................................. 29,589,000 31,376,000
Prepaid Expenses ....................................................... 19,410,000 16,516,000
-------------- -------------
Total Current Assets ............................................... 456,387,000 453,330,000
PREPAID PENSION COST ..................................................... 4,682,000 -
DEFERRED INCOME TAX ASSET ................................................ 2,883,000 1,866,000
PLANT AND EQUIPMENT:
Land and Land Improvements ............................................. 15,603,000 9,499,000
Buildings .............................................................. 147,670,000 105,844,000
Machinery and Equipment ................................................ 594,608,000 507,606,000
Construction in Progress ............................................... 18,757,000 103,382,000
-------------- -------------
776,638,000 726,331,000

Less - Accumulated Depreciation and Unamortized
Investment Tax Credit ................................................ 402,426,000 383,034,000
-------------- -------------
Total Plant and Equipment, Net ................................... 374,212,000 343,297,000
-------------- -------------
$ 838,164,000 $ 798,493,000
============== =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts Payable ....................................................... $ 65,642,000 $ 63,913,000
Domestic Notes Payable ................................................. 5,000,000 6,750,000
Foreign Loans .......................................................... 14,922,000 19,653,000
Current Maturities on Long-Term Debt ................................... 15,000,000 -
Accrued Liabilities -
Wages and Salaries ................................................... 25,488,000 44,900,000
Warranty ............................................................. 26,257,000 30,353,000
Other ................................................................ 31,187,000 33,564,000
-------------- -------------
Total Accrued Liabilities .......................................... 82,932,000 108,817,000
Federal and State Income Taxes ......................................... 6,683,000 (1,878,000)
-------------- -------------
Total Current Liabilities .......................................... 190,179,000 197,255,000
ACCRUED PENSION COST ..................................................... - 1,606,000
ACCRUED EMPLOYEE BENEFITS ................................................ 18,431,000 16,447,000
ACCRUED POSTRETIREMENT HEALTH CARE OBLIGATION ............................ 69,049,000 68,707,000
LONG-TERM DEBT ........................................................... 60,000,000 75,000,000
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Common Stock -
Authorized 60,000,000 shares $.01 Par Value,
Issued and Outstanding 28,927,000 in 1996 and 1995 ................. 289,000 289,000
Additional Paid-In Capital ............................................. 40,898,000 41,698,000
Retained Earnings ...................................................... 459,666,000 397,627,000
Cumulative Translation Adjustments ..................................... (348,000) (136,000)
------------- -------------
Total Shareholders' Investment ..................................... 500,505,000 439,478,000
------------- -------------
$ 838,164,000 $ 798,493,000
============= =============

The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.

13
4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT

FOR THE YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994

Additional Cumulative
Common Paid-In Retained Translation
Stock Capital Earnings Adjustments
----- ---------- -------- -----------

BALANCES, JUNE 27, 1993 ....................... $ 145,000 $ 42,883,000 $ 318,247,000 $ (1,317,000)
Net Income ................................. - - 69,923,000 -
Cash Dividends Paid ($.90 per share) ....... - - (26,034,000) -
Purchase of Common Stock
for Treasury ............................. - (791,000) - -
Proceeds from Exercise of
Stock Options ............................ - 266,000 - -
Currency Translation Adjustments ........... - - - 470,000
--------- ------------ ------------- ------------
BALANCES, JULY 3, 1994 145,000 42,358,000 362,136,000 (847,000)
Net Income................................. - - 104,805,000 -
Cash Dividends Paid ($.98 per share)....... - - (28,348,000) -
Distribution of Shares of STRATTEC
SECURITY CORPORATION .................. - - (40,966,000) 1,226,000
Two-for-One Stock Split ................... 144,000 (144,000) - -
Purchase of Common Stock
for Treasury ............................ - (915,000) - -
Proceeds from Exercise of
Stock Options ........................... - 399,000 - -
Currency Translation Adjustments .......... - - - (515,000)
--------- ------------ ------------- ------------
BALANCES, JULY 2, 1995 ....................... 289,000 41,698,000 397,627,000 (136,000)
Net Income ................................ - - 92,412,000 -
Cash Dividends Paid ($1.05 per share)...... - - (30,373,000) -
Purchase of Common Stock
for Treasury ............................ - (1,185,000) - -
Proceeds from Exercise of
Stock Options ........................... - 385,000 - -
Currency Translation Adjustments .......... - - - (212,000)
--------- ------------ ------------- ------------
BALANCES, JUNE 30, 1996 ...................... $ 289,000 $ 40,898,000 $ 459,666,000 $ (348,000)
========= ============ ============= ============

The accompanying notes to consolidated financial statements are an integral
part of these statements.

14
5

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994

Increase (Decrease) in Cash and Cash Equivalents

1996 1995 1994
---- ---- ----

CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ................................................ $ 92,412,000 $ 104,805,000 $ 69,923,000
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities -
Cumulative Effect of Accounting Changes,
Net of Income Taxes ................................... - - 32,558,000
Depreciation ............................................ 43,032,000 44,445,000 42,950,000
(Gain) Loss on Disposition of Plant and Equipment ....... 2,692,000 1,452,000 (96,000)
Change in Operating Assets and Liabilities -
(Increase) Decrease in Receivables ..................... (25,230,000) 11,125,000 2,384,000
(Increase) Decrease in Inventories ..................... 3,271,000 (62,753,000) (11,605,000)
(Increase) in Other Current Assets ..................... (1,107,000) (4,720,000) (10,593,000)
Increase (Decrease) in Accounts Payable,
Accrued Liabilities and Income Taxes ................. (15,595,000) (8,220,000) 38,132,000
Other, Net ............................................. (4,979,000) 9,633,000 1,420,000
------------- ------------- ------------
Net Cash Provided by Operating Activities ............ 94,496,000 95,767,000 165,073,000
------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Plant and Equipment .......................... (77,746,000) (131,034,000) (40,804,000)
Proceeds Received on Sale of Plant and Equipment .......... 1,069,000 2,055,000 7,268,000
Sale of Short-Term Investments ............................ - - 70,422,000
Decrease in Cash Due to Spin-Off of Lock Business ......... - (174,000) -
------------- ------------- ------------
Net Cash Provided by (Used in) Investing Activities (76,677,000) (129,153,000) 36,886,000
------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings (Repayments) on Loans and Notes Payable .... (6,481,000) 12,080,000 5,396,000
Cash Dividends Paid ....................................... (30,373,000) (28,348,000) (26,034,000)
Purchase of Common Stock for Treasury ..................... (1,185,000) (915,000) (791,000)
Proceeds from Exercise of Stock Options ................... 385,000 399,000 266,000
------------- ------------- ------------
Net Cash Used in Financing Activities ................ (37,654,000) (16,784,000) (21,163,000)
------------- ------------- ------------
EFFECT OF FOREIGN CURRENCY EXCHANGE RATE
CHANGES ON CASH AND CASH EQUIVALENTS ...................... (174,000) (283,000) 804,000
------------- ------------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS .......................................... (20,009,000) (50,453,000) 181,600,000
CASH AND CASH EQUIVALENTS:
Beginning of Year ......................................... 170,648,000 221,101,000 39,501,000
------------- ------------- ------------
End of Year ............................................... $ 150,639,000 $ 170,648,000 $221,101,000
============= ============= ============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest Paid ............................................. $ 10,137,000 $ 8,501,000 $ 8,997,000
============= ============= ============
Income Taxes Paid ......................................... $ 48,865,000 $ 88,935,000 $ 77,748,000
============= ============= ============

The accompanying notes to consolidated financial statements are an integral
part of these statements.

15
6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 1996, JULY 2, 1995 AND JULY 3, 1994

(1) NATURE OF OPERATIONS:

Briggs & Stratton Corporation (the Company) is a U.S. based producer of air
cooled gasoline engines. These engines are sold primarily to original equipment
manufacturers of lawn and garden equipment and other gasoline engine powered
equipment worldwide.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Fiscal Year: The Company's fiscal year consists of 52 or 53 weeks, ending on
the Sunday nearest the last day of June in each year. Therefore, the 1996 and
1995 fiscal years were 52 weeks long and the 1994 fiscal year was 53 weeks
long. All references to years relate to fiscal years rather than calendar
years.

Principles of Consolidation: The consolidated financial statements include the
accounts of Briggs & Stratton Corporation and its wholly owned domestic and
foreign subsidiaries after elimination of intercompany accounts and
transactions.

Accounting 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 revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents: This caption includes cash and certificates of
deposit. The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

Inventories: Inventories are stated at cost, which does not exceed market. The
last-in, first-out (LIFO) method was used for determining the cost of
approximately 93% of total inventories at June 30, 1996 and at July 2, 1995 and
89% at July 3, 1994. The cost for the remaining portion of the inventories was
determined using the first-in, first-out (FIFO) method. If the FIFO inventory
valuation method had been used exclusively, inventories would have been
$48,125,000, $43,582,000 and $42,268,000 higher in the respective years. The
LIFO inventory adjustment was determined on an overall basis, and accordingly,
each class of inventory reflects an allocation based on the FIFO amounts.

Plant and Equipment and Depreciation:
Plant and equipment is stated at cost, and depreciation is computed using the
straight-line method at rates based upon the estimated useful lives of the
assets.

Expenditures for repairs and maintenance are charged to expense as incurred.
Expenditures for major renewals and betterments, which significantly extend the
useful lives of existing plant and equipment, are capitalized and depreciated.
Upon retirement or disposition of plant and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is recognized in other income.

Investment Tax Credits: The Company follows the deferral method of accounting
for the Federal investment tax credit. The credit, which was eliminated in
1986, has been recorded as an addition to accumulated depreciation and is being
amortized over the estimated useful lives of the related assets via a reduction
of depreciation expense.

The amounts amortized into income in each of the three years were $672,000 in
1996, $759,000 in 1995 and $830,000 in 1994. During 1995, $217,000 was
eliminated in the spin-off, as described in subsequent footnotes. At the end of
fiscal years 1996 and 1995, unamortized deferred investment tax credits
aggregated $1,577,000 and $2,249,000, respectively.

16
7
NOTES . . .

Income Taxes: The Provision for Income Taxes includes Federal, state and
foreign income taxes currently payable and those deferred or prepaid because of
temporary differences between financial statement and tax bases of assets and
liabilities. The Future Income Tax Benefits represent temporary differences
relating to current assets and current liabilities and the Deferred Income
Taxes represent temporary differences relating to noncurrent assets and
liabilities.

Research and Development Costs: Expenditures relating to the development of new
products and processes, including significant improvements and refinements to
existing products, are expensed as incurred. The amounts charged against income
were $12,737,000 in 1996, $13,112,000 in 1995 and $12,520,000 in 1994.

Accrued Employee Benefits: The Company's life insurance program includes
payment of a death benefit to beneficiaries of retired employees. The Company
accrues for the estimated cost of these benefits over the estimated working
life of the employee. Past service costs for all retired employees have been
fully provided for. The Company also accrues for the estimated cost of
supplemental retirement and death benefit agreements with executive officers.

Accrued Postretirement Health Care Obligation: During the 1994 fiscal year, the
Company adopted Financial Accounting Standard (FAS) No. 106 (Postretirement
Benefits Other Than Pensions). This change and the amounts associated with it
are more fully described in subsequent footnotes.

Advertising Costs: Advertising costs, included in Engineering, Selling, General
and Administrative Expenses on the accompanying Consolidated Statement of
Income, are expensed as incurred. These expenses totaled $7,066,000 in 1996,
$6,357,000 in 1995 and $5,411,000 in 1994.

Foreign Currency Translation: Foreign currency balance sheet accounts are
translated into United States dollars at the rates of exchange in effect at
fiscal year end. Income and expenses are translated at the average rates of
exchange in effect during the year. The related translation adjustments are
made directly to a separate component of shareholders' investment.

Derivatives: Potential gains and losses on foreign currency hedges with
controlled subsidiaries are carried on the balance sheet. Gains and losses
related to all other hedges of anticipated transactions are deferred and
recognized as adjustments of carrying amounts when the hedged transaction
occurs.

Start-Up Costs: It is the Company's policy to expense all start-up costs for
new manufacturing plants. Under this policy, the Company expensed $11,660,000
in fiscal 1996 and $5,300,000 in fiscal 1995.

Impairment of Assets: In 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of ".
This new standard requires companies to assess the need for adjustment to
carrying values of assets when an indicator of impairment is present. The
Company adopted this standard during the 1996 fiscal year and determined that
it has no impaired assets.

(3) INCOME TAXES:

The provision for income taxes consists of the following (in thousands of
dollars):

1996 1995 1994
Current ---- ---- ----

Federal ............ $ 46,448 $ 67,255 $ 62,795
State .............. 7,768 10,644 10,482
Foreign ............ 1,654 873 2,059
--------- --------- ---------
55,870 78,772 75,336
Deferred ............. 770 (13,202) (8,096)
--------- --------- ---------
Total $ 56,640 $ 65,570 $ 67,240
========= ========= =========

A reconciliation of the U.S. statutory tax rates to the effective tax rates
follows:

1996 1995 1994
---- ---- ----

U.S. statutory rate ......... 35.0% 35.0% 35.0%
State taxes, net of
Federal tax benefit ....... 3.4% 3.5% 3.6%
Foreign Sales Corporation
tax benefit ............... (.7%) (.6%) (.5%)
Other ....................... .3% .6% 1.5%
---- ---- ----
Effective tax rate .......... 38.0% 38.5% 39.6%
==== ==== ====

17
8

NOTES . . .

At the beginning of fiscal year 1994, the Company adopted FAS No. 109
(Accounting For Income Taxes) which required a change in the recording of
deferred taxes. The former method emphasized provisions which were made in the
income statement. The emphasis in the new method is on the balance sheet and
requires that the amounts to be recorded are the amounts which will eventually
be paid out. The adoption of this standard resulted in a cumulative adjustment
which was recorded as income totaling $8,346,000 or $ .29 per share.

The components of deferred tax assets and liabilities at the end of the fiscal
year were (in thousands of dollars):

1996 1995
---- ----
Future Income Tax Benefits:

Inventory .............................. $ 2,518 $ 3,710
Prepaid Expenses ....................... (158) 167
Payroll Related Accruals ............... 4,658 4,153
Warranty Reserves ...................... 10,240 11,838
Other Accrued Liabilities .............. 8,453 8,255
Miscellaneous .......................... 3,878 3,253
---------- ----------
$ 29,589 $ 31,376
========== ==========
Deferred Income Taxes:

Difference between book and
tax methods applied to
maintenance and supply
inventories .......................... $ 9,982 $ 6,618
Pension Cost ........................... (1,679) 400
Accumulated Depreciation ............... (41,768) (39,176)
Accrued Employee Benefits .............. 7,232 6,469
Postretirement .........................
Health Care Obligation ............... 26,929 26,796
Miscellaneous .......................... 2,187 759
---------- ----------
$ 2,883 $ 1,866
========== ==========

The Company has not recorded deferred income taxes applicable to undistributed
earnings of foreign subsidiaries that are indefinitely reinvested in foreign
operations. These undistributed earnings amounted to approximately $5,200,000
at June 30, 1996. If these earnings were remitted to the U.S., they would be
subject to U.S. income tax. However, this tax would be substantially less than
the U.S. statutory income tax because of available foreign tax credits.

(4) INDUSTRY SEGMENTS:
Certain information concerning the Company's industry segments is presented
below (in thousands of dollars):

1995 1994
---- ----

SALES -
Engines & parts ................ $ 1,276,264 $ 1,197,744
Locks .......................... 63,413 87,773
------------- -------------
$ 1,339,677 $ 1,285,517
============= =============
INCOME FROM OPERATIONS -
Engines & parts ................ $ 162,903 $ 158,900
Locks .......................... 6,863 12,845
------------- -------------
$ 169,766 $ 171,745
============= =============
ASSETS -
Engines & parts ................ $ 798,493 $ 467,561
Locks .......................... - 46,832
Unallocated .................... - 262,962
------------- -------------
$ 798,493 $ 777,355
============= =============
DEPRECIATION EXPENSE -
Engines & parts ................ $ 42,746 $ 40,605
Locks .......................... 1,699 2,345
------------- -------------
$ 44,445 $ 42,950
============= =============
EXPENDITURES FOR PLANT
AND EQUIPMENT -
Engines & parts ................ $ 124,604 $ 37,398
Locks .......................... 6,430 3,406
------------- -------------
$ 131,034 $ 40,804
============= =============

On February 27, 1995, the Company spun off its lock business to its
shareholders in a tax-free distribution. This spin-off was accomplished by
distributing shares in a newly created corporation on the basis of one share in
the new corporation for each five shares of Briggs & Stratton Corporation stock
held on February 16, 1995. The newly created corporation, STRATTEC SECURITY
CORPORATION, is publicly traded. This distribution resulted in a charge of
$40,966,000 against the retained earnings account and represented the total of
the net assets transferred to STRATTEC. The financial statements of Briggs &
Stratton Corporation have not been restated to deal with this distribution as a
discontinued operation because the amounts were not material. Because of the
spin-off, no industry segment data is being presented for 1996.

18
9

NOTES . . .

The preceding Sales, Income From Operations, Depreciation Expense, and
Expenditures For Plant and Equipment reflect 1995 data for the lock business
from the beginning of the fiscal year to the date of spin-off.

Unallocated assets include cash and cash equivalents, short-term investments,
future income tax benefits, prepaid pension costs and other assets.

Export sales for fiscal 1996 were $323,747,000 (25% of total sales), for fiscal
1995 were $312,234,000 (23%) and for fiscal 1994 were $264,866,000 (21%). These
sales were principally to customers in European countries.

In the fiscal years 1996, 1995 and 1994, there were sales to three major engine
customers that exceeded 10% of total Company net sales. The sales to these
customers are summarized below (in thousands of dollars and percent of total
Company sales):

1996 1995 1994
---- ---- ----
Customer Sales % Sales % Sales %
----- - ----- - ----- -

A $267,257 21% $237,241 18% $234,363 18%
B $177,314 14% $155,072 12% $148,091 12%
C $163,065 13% $189,916 14% $149,397 12%
-------- -- -------- -- -------- --
$607,636 48% $582,229 44% $531,851 42%
======== == ======== == ======== ==

(5) INDEBTEDNESS:

The Company had access to domestic lines of credit totaling $47,000,000 at June
30, 1996. These lines will remain available until cancelled by either party.
They provide amounts for short-term use at the then prevailing rate. There are
no significant compensating balance requirements and no borrowings at June 30,
1996 using these lines of credit.

The following data relates to domestic notes payable:

1996 1995
---- ----

Balance at
Fiscal Year End ........ $ 5,000,000 $ 6,750,000

Weighted Average
Interest Rate at
Fiscal Year End ........ 6.10% 5.00%

The lines of credit available to the Company in foreign countries are in
connection with short-term borrowings and bank overdrafts used in the normal
course of business. These amounts total $18,500,000, expire at various times
through November, 1997 and are renewable. None of these arrangements had
material commitment fees or compensating balance requirements.

The following information relates to the foreign loans:

1996 1995
---- ----

Balance at
Fiscal Year End ........ $ 14,922,000 $ 19,653,000

Weighted Average
Interest Rate at
Fiscal Year End ........ 4.60% 5.80%

The Company's long-term debt consists of 9.21% Senior Notes due June 15, 2001.
Payments on these notes are due in five equal annual installments beginning in
1997. The notes include covenants that limit total borrowings, require
maintenance of $200,000,000 minimum net worth and set certain restrictions on
the sale or collateralizing of the Company's assets.

(6) OTHER INCOME (EXPENSE):

The components of other income (expense) are (in thousands of dollars):

1996 1995 1994
---- ---- ----

Interest income .......... $ 4,477 $ 6,840 $ 3,527

Gain on sale of German
land and buildings ..... - - 2,819

Loss on the
disposition of
plant and equipment .... (2,692) (1,452) (2,723)

Income from joint
ventures .............. 2,957 2,842 2,307

Other items .............. 970 959 1,043
------- ------- -------
Total $ 5,712 $ 9,189 $ 6,973
======= ======= =======

(7) COMMITMENTS AND CONTINGENCIES:

The Company is a 50% guarantor on bank loans of two unconsolidated joint
ventures. One is in Japan for the manufacture of engines and the second in the
United States for the manufacture of parts. These bank loans totaled
approximately $13,000,000 at the end of 1996.

19
10

NOTES . . .

Product and general liability claims arise against the Company from time to
time in the ordinary course of business. The Company is self-insured for future
claims up to $1 million per claim. Accordingly, a reserve is maintained for the
estimated costs of such claims. At June 30, 1996, the reserve for product and
general liability claims was $6.5 million based on available information.
There is inherent uncertainty as to the eventual resolution of unsettled
claims. Management, however, believes that any losses in excess of established
reserves will not have a material effect on the Company's financial position or
results of operations.

The Company has no material commitments for materials or capital expenditures
at June 30, 1996.

(8) STOCK OPTIONS:

In 1990, shareholders approved the Stock Incentive Plan under which 400,000
shares of the Company's common stock were reserved for issuance. In fiscal
1994, shareholders approved an additional 1,250,000 shares for issuance under
the Plan, bringing the total shares reserved for issuance to 1,650,000. In
fiscal 1995, pursuant to the terms of the Plan, the number of shares reserved
for issuance was adjusted to 3,361,935 to reflect the two-for-one stock split
and the spin-off of its lock business.

Information on the options outstanding is as follows:

Options
Outstanding in
Number of
Common Stock
Shares
--------------
1996 1995 1994
---- ---- ----

Balance, beginning of year...... 1,169,620 606,864 390,184
Granted during the year -
1994 at $48.369............... - - 253,420
1995 at $45.854............... - 552,000 -
1996 at $49.080............... 600,000 - -
Increase due to spin-off........ - 83,843 -
Exercised during the year....... (65,089) (43,827) (19,000)
Terminated during the year...... - (29,260) (17,740)
--------- --------- -------
Balance, end of year............ 1,704,531 1,169,620 606,864
========= ========= =======

Grant Summary
- -------------------------------------------------------------------------

Fiscal Grant Exercise Date Options Expiration
Year Date Price (a) Exercisable Outstanding Date
- ------ ----- --------- ----------- ----------- ----------

1990 2-20-90 $13.014 50%, 1-1-94; 6,782 2-19-00
50%, 1-1-95
1991 2-19-91 14.524 50%, 1-1-95; 90,613 2-18-01
50%, 1-1-96
1992 5-18-92 21.525 50%, 1-1-96; 181,546 5-17-02
50%, 1-1-97
1994 8-16-93 48.369 8-16-96 258,085 8-16-98
1995 8-12-94 45.854 8-12-97 567,505 8-12-99
1996 8-7-95 49.080 8-7-98 600,000 8-7-00

There were no options granted in fiscal 1993.

(a) Exercise prices have been adjusted as appropriate to reflect a
two-for-one stock split and the spin-off of the Company's lock business.

In October 1995, the Financial Accounting Standards Board issued SFAS No. 123
"Accounting for Stock-Based Compensation." This standard establishes financial
accounting and reporting standards for stock-based employee compensation. The
Company plans to adopt the pro forma disclosure requirements of the statement,
and will continue to apply the accounting provisions of Accounting Principles
Board Opinion No. 25, as allowed by the new standard. This disclosure will be
effective for the fiscal 1997 financial statements.

(9) SHAREHOLDER RIGHTS PLAN:

On August 6, 1996, the Board of Directors declared a dividend distribution of
one common stock purchase right (a "right") for each share of the Company's
common stock outstanding on August 19, 1996. Each right would entitle
shareowners to buy one-half of one share of the Company's common stock at an
exercise price of $160.00 per full common share, subject to adjustment. The
rights are not currently exercisable, but would become exercisable if certain
events occurred relating to a person or group acquiring or attempting to
acquire 15 percent or more of the outstanding shares of common stock. The
rights expire on August 19, 2006, unless redeemed or exchanged by the Company
earlier. Rights granted under a previous plan expired July 1, 1996.

20
11

NOTES . . .

(10) RETIREMENT PLANS AND POSTRETIREMENT COSTS:

The Company has noncontributory, defined benefit retirement plans covering most
Wisconsin employees. The following tables summarize the plans' income and
expense, actuarial assumptions, and funded status for the three years indicated
(dollars in thousands):

Qualified Plans Supplemental Plans
------------------------------ ------------------------------
1996 1995 1994 1996 1995 1994
---- ---- ---- ---- ---- ----

Income and Expense:
- -------------------
Service Cost-Benefits Earned
During the Year................... $ 13,143 $ 15,098 $ 13,079 $ 456 $ 453 $ 296
Interest Cost on Projected
Benefit Obligation................ 41,722 39,877 36,408 926 904 706
Actual Return on Plan Assets........ (104,872) (89,941) (7,152) (9) (3) (3)
Net Amortization, Deferral
and Windows....................... 51,830 37,078 (42,978) 462 333 380
--------- -------- -------- -------- -------- -------
Net Periodic Pension
Expense (Income).................. $ 1,823 $ 2,112 $ (643) $ 1,835 $ 1,687 $ 1,379
========= ======== ======== ======== ======== =======
Actuarial Assumptions:
- ----------------------
Discount Rate Used to Determine
Present Value of Projected
Benefit Obligation................ 7.75% 7.75% 7.75% 7.75% 7.75% 7.75%
Expected Rate of Future
Compensation Level Increases...... 5.5% 5.5% 5.5% 5.5% 5.5% 5.5%
Expected Long-Term Rate of
Return on Plan Assets............. 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%

Funded Status:
- --------------
Actuarial Present Value of
Benefit Obligations:
Vested........................... $ 413,035 $389,117 $359,383 $ 8,286 $ 7,991 $ 6,560
Non-Vested....................... 34,268 36,144 34,382 21 6 23
--------- -------- -------- -------- -------- -------
Accumulated Benefit
Obligation..................... 447,303 425,261 393,765 8,307 7,997 6,583
Effect of Projected Future
Wage and Salary Increases......... 120,083 124,651 112,771 4,766 4,679 3,267
--------- -------- -------- -------- -------- -------
Projected Benefit Obligation...... 567,386 549,912 506,536 13,073 12,676 9,850
Plan Assets at Fair Market Value.... 681,819 609,385 560,585 126 100 103
--------- -------- -------- -------- -------- -------
Plan Assets in Excess of (Less Than)
Projected Benefit Obligation...... 114,433 59,473 54,049 (12,947) (12,576) (9,747)
Remaining Unrecognized Net
Obligation (Asset) Arising
from the Initial Application of
SFAS No. 87....................... (31,321) (36,902) (43,776) 179 258 336
Unrecognized Net Loss (Gain)........ (75,983) (21,992) (502) 4,494 5,277 3,416
Unrecognized Prior Service Cost..... (2,447) (2,185) (1,090) 1,029 1,102 1,176
--------- -------- -------- -------- -------- -------
Prepaid (Accrued) Pension Cost...... $ 4,682 $ (1,606) $ 8,681 $ (7,245) $ (5,939) $(4,819)
========= ======== ======== ======== ======== =======

As part of the spin-off of the lock business as described in Note 4, the
Company's pension trust transferred $15,872,000 in plan assets to STRATTEC
SECURITY CORPORATION in 1995. This resulted in an increase of $5,000,000 in the
prepaid pension cost account due to the Company transferring certain benefit
obligations and unrecognized amounts.

21
12

NOTES . . .

The Company offered early retirement windows to certain of its Milwaukee union
members during the 1995 fiscal year. As a result, $13,806,000 was added to
pension expense and $5,253,000 was added to postretirement health care expense
in the fourth quarter of the 1995 fiscal year. When the retirements were
scheduled to occur in the first fiscal quarter of 1996, a number of these union
members canceled their acceptance, and thus credits totaling $3,477,000 were
recorded as a change in the original accounting estimate.

During fiscal 1996, the defined benefit pension plan which covered employees at
two of the Company's plants was terminated and replaced by a defined
contribution retirement plan that includes most U.S. non-Wisconsin employees.
The impact of the termination was not material. Under the new plan, the Company
will make a contribution on behalf of covered employees equal to 2% of each
participant's gross income, as defined. For the portion of fiscal 1996 in which
the plan was in effect, the cost to the Company was $757,000.

Most U.S. employees of the Company may participate in a salary reduction
deferred compensation retirement plan. The Company makes matching contributions
of $.50 for every $1.00 deferred by a participant to a maximum of 1-1/2% or 3%
of each participant's salary, depending upon the participant's group. Company
contributions totaled $2,825,000 in 1996, $1,756,000 in 1995 and $1,630,000 in
1994.

At the beginning of fiscal year 1994, the Company adopted two Financial
Accounting Standards as follows:

FAS 106 - Postretirement Benefits Other
Than Pensions -

This standard requires that the Company record the expected
cost of health care and life insurance benefits during the
years that the employees render service - a significant change
from the preceding method which recognized health care benefits
on a cash basis. Postretirement life insurance benefits were
previously being accounted for in a manner substantially emulating
the new standards, so no adjustment was necessary. The cumulative
effect of this change in accounting for postretirement health care
benefits was a charge totaling $65,954,000 on a before tax basis or
$40,232,000 on an after tax basis ($1.39 per share).

For measurement purposes, a 10.5% annual rate of increase in the per
capita cost of covered health care claims was assumed for the years 1995
through 1997, decreasing gradually to 6% for the year 2007. The health
care cost trend rate assumption has a significant effect on the amounts
reported. The rates, if increased by one percentage point, would add
$7,172,000 to the accumulated postretirement benefit and $846,000 to the
service and interest cost for the year.

The discount rate used in determining the accumulated postretirement
benefit obligations was 7.75% compounded annually. Both the health care
and life insurance plans are unfunded.

The components of the accumulated postretirement benefit obligations
were (in thousands of dollars):

Health Care
-----------
1996 1995
---- ----

Retirees ...................... $33,044 $33,801
Fully Eligible
Plan Participants ........... 4,077 4,990
Other Active Participants ..... 32,628 34,616
------- -------
$69,749 $73,407
Unrecognized net obligation ... - -
Unrecognized gain ............. 4,000 -
------- -------
$73,749 $73,407
Less current portion .......... 4,700 4,700
------- -------
$69,049 $68,707
======= =======

Life Insurance
--------------
1996 1995
---- ----
Retirees ...................... $ 8,840 $ 8,553
Fully Eligible
Plan Participants ........... 2,226 1,453
Other Active Participants ..... 1,736 1,588
------- -------
$12,802 $11,594
Unrecognized net obligation ... (553) (600)
Unrecognized prior
service cost ................ (898) -
Unrecognized loss ............. (908) (1,096)
------- -------
$10,443 $ 9,898
Less current portion .......... - -
------- -------
$10,443 $ 9,898
======= =======

22
13

NOTES . . .

The current portion of the health care component above represents the
benefits expected to be paid within the next twelve months and is included
in the caption Accrued Liabilities in the accompanying balance sheet. The
net health care balance has its own caption in this balance sheet. The
life insurance component is included in the caption Accrued Employee
Benefits.

The net periodic postretirement costs recorded were (in thousands of
dollars):

Health Care
------------
1996 1995
---- ----

Service Cost-Benefits
attributed to service
during the year ................ $1,596 $1,680
Interest cost on accumulated
benefit obligation ............. 5,480 5,150
Other ........................... (91) -
------ ------
$6,985 $6,830
====== ======

Life Insurance
--------------
1996 1995
---- ----

Service Cost-Benefits
attributed to service
during the year ................ $ 90 $ 73
Interest cost on accumulated
benefit obligation ............. 947 801
Other ........................... 118 47
------ ------
$1,155 $ 921
====== ======

FAS 112 - Postemployment Benefits -

This standard was also adopted in fiscal 1994 and required that the
Company record the expected cost of postemployment benefits (not to be
confused with the postretirement benefits described in the preceding
paragraphs), also over the years that employees render service. These
benefits are substantially smaller amounts because they apply only to
employees who permanently terminate employment prior to retirement. The
cumulative effect of this change was a charge totaling $1,102,000 or
$672,000 after taxes ($ .02 per share). There will be no significant
increase in the annual costs of these plans.

The items included in this amount are disability payments, life
insurance and medical benefits, and these amounts are also discounted
using a 7.75% interest rate.

The balance in this reserve at the end of fiscal 1996 was $1,245,000
and at the end of fiscal 1995 was $1,106,000. Both were included in the
caption Accrued Employee Benefits in the accompanying balance sheets.

(11) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:

Cash and Cash Equivalents, Domestic Notes Payable and Foreign Loans: The
carrying amount approximates fair value because of the short maturity of those
instruments.

Long-Term Debt: The fair value of the Company's long-term debt is estimated
based on quotations made on similar issues.

The estimated fair values of the Company's financial instruments are as follows
(in thousands of dollars):

1996
-----------------------------------
Carrying Fair
Amount Value
-------- -----

Cash and Cash Equivalents .. $ 150,639 $ 150,639
Domestic Notes Payable ..... $ 5,000 $ 5,000
Foreign Loans .............. $ 14,922 $ 14,922
Long-Term Debt, including
current maturities ........ $ 75,000 $ 77,365

1995
-----------------------------------
Carrying Fair
Amount Value
-------- -----

Cash and Cash Equivalents .. $ 170,648 $ 170,648
Domestic Notes Payable ..... $ 6,750 $ 6,750
Foreign Loans .............. $ 19,653 $ 19,653
Long-Term Debt ............. $ 75,000 $ 81,500

23
14

NOTES . . .

(12) STOCK SPLIT:

On October 19, 1994, shareholders approved a doubling of the authorized common
stock shares to 60,000,000. This allowed the Company to effect a 2-for-1 stock
split previously authorized by the Board of Directors. The distribution on
November 14, 1994 increased the number of shares outstanding from 14,463,500 to
28,927,000. The amount of $144,000 was transferred from the additional paid-in
capital account to the common stock account to record this distribution. All
per share amounts in this report have been restated to reflect this stock
split.

(13) FOREIGN EXCHANGE RISK MANAGEMENT:

The Company enters into forward exchange contracts to hedge purchase and sale
commitments denominated in foreign currencies. The term of these currency
derivatives never exceeds one year and the purpose is to protect the Company
from the risk that the eventual dollars being transferred will be adversely
affected by changes in exchange rates.

The Company has forward foreign currency exchange contracts to purchase 4.8
billion Japanese yen for $46 million through June, 1997. These contracts are
used to hedge the commitments to purchase engines from the Company's Japanese
joint venture and accordingly any gain or loss has been deferred at the end of
the 1996 fiscal year. The amount deferred was a loss of approximately $2.3
million.

The Company's foreign subsidiaries have the following forward currency
contracts outstanding at the end of fiscal 1996:

In Millions
-----------
Local U.S. Latest
Currency Currency Dollars Expiration Date
- -------- -------- ------- ---------------

German Deutschemarks... 1.9 1.3 July, 1996
Canadian Dollars....... 4.8 3.5 June, 1997

There are no significant gains or losses included in the above amounts.

(14) SUBSEQUENT EVENT:

On July 1, 1996, the Company entered into a contract to sell its Menomonee
Falls, Wisconsin warehouse and manufacturing facility for $16.3 million. The
closing on this property is scheduled to occur on September 30, 1996. The
provisions of the contract state that the Company will continue to own and
occupy the warehouse portion of the facility for a period of up to ten years
(the "Reservation Period"). The contract also contains a buyout clause, at the
buyer's option, of the remaining Reservation Period under certain
circumstances. Given the provisions of the contract, the Company will be
required to account for this as a financing transaction and, therefore, any
cash received will be reflected as a liability and the net book value of the
facility will continue to be shown as an asset with depreciation expense
recorded each period. The pre-tax gain, which will be recognized at the earlier
of the exercise of the buyout option or the expiration of the Reservation
Period, is estimated to be $10 million to $12 million.

24
15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
Briggs & Stratton Corporation:

We have audited the accompanying consolidated balance sheets of Briggs &
Stratton Corporation (a Wisconsin Corporation) and subsidiaries as of June 30,
1996 and July 2, 1995, and the related consolidated statements of income,
shareholders' investment and cash flows for each of the three years in the
period ended June 30, 1996. These financial statements are the responsibility
of the Company'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 financial position of Briggs & Stratton Corporation
and subsidiaries as of June 30, 1996 and July 2, 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1996, in conformity with generally accepted accounting principles.

As discussed in Notes 3 and 10 to the consolidated financial statements,
effective at the beginning of the 1994 fiscal year, the Company changed its
methods of accounting for postretirement benefits other than pensions,
postemployment benefits and income taxes.

ARTHUR ANDERSEN LLP

Milwaukee, Wisconsin,
August 7, 1996.

26
16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION

FISCAL 1996 COMPARED TO FISCAL 1995

Sales for fiscal 1996 totaled $1,287,029,000, down 4% or $52,648,000 from the
preceding year. The reason for this decrease was the absence of sales from the
automotive lock business, which was spun off after eight months in the
preceding fiscal year. These sales amounted to $63,413,000 in fiscal 1995.

Excluding the lock business sales, engine business sales increased $10,765,000
between years. This change was caused by an approximate 1.8% improvement in
selling prices to the original equipment manufacturing customers, offset by a
1% decrease in engine unit sales that was almost entirely in the service sales
area.

The gross profit percentage remained consistent between years. This was the
result of several factors: increased startup costs of $6,360,000 and
inefficiencies related to the new plants, and less absorption of fixed costs
due to fewer engines produced were offset by lower profit sharing provisions
and a decrease of 5% in the unit price of aluminum, the major raw material used
in the manufacture of engines. In addition, the 1995 gross profit included a
$19,059,000 charge for the retirement window, of which $3,477,000 was reversed
in 1996 due to a change in circumstances (see Note 10).

Engineering, selling, general and administrative expenses increased $6,487,000
or 6% between years. This was due to increases in salaries, planned increases
in manpower costs relating to new venture activities, and higher advertising
expenses. Offsetting these, in part, was a reduction in profit sharing accruals
and the lack of engineering and selling expenses from the spun off lock
business.

Interest expense for the 1996 fiscal year was 17% higher than in 1995. This was
the result of using domestic short-term borrowing to finance increases in
accounts receivable and inventories in mid-year. Seasonal borrowings were paid
off by the end of the fiscal year. The preceding year had minimal seasonal
short-term borrowings.

The Company has available $47,000,000 in non-seasonal lines of credit and
$76,000,000 in seasonal lines, most of which were used in mid-year as described
above. The Company also makes extensive use of its foreign lines of credit
through its foreign subsidiaries. Management believes its lines of credit will
be adequate to fund its operations. Throughout the year, the Company was in
compliance with the covenants of its long-term loan agreement.

Other income decreased $3,477,000 between years, primarily because of a
reduction in interest income due to lower available investable funds. Funds
were used for seasonal working capital and the construction of the new
manufacturing plants. There also was an increase in the loss on disposition of
plant and equipment between years.

The effective income tax rate decreased to 38% in 1996 from 38.5% in the
previous year due to lower state income taxes, increased Foreign Sales
Corporation tax benefits, and reductions in other tax related items.

Cash and equivalents declined $20,009,000 between years because cash provided
by operating activities was more than offset by cash used in investing
activities and in financing activities.

Cash flow from operating activities of $94,496,000 was generated from net
income and depreciation, and an increase in federal and state income taxes
payable as a result of the timing of payments, offset in part by an increase in
accounts receivable of $25,230,000 related to higher sales late in the fiscal
year and a decrease in accrued liabilities of $25,885,000 primarily due to
decreased profit sharing provisions. Inventories were relatively consistent
between years.

Cash used in investing activities amounted to $76,677,000, substantially all of
which related to additions to plant and equipment. The major additions to plant
and equipment were for the construction of three new engine manufacturing
plants, a foundry, and plant expansions. Estimated capital expenditures of
$65,000,000 in fiscal 1997 are expected to be financed from cash balances,
operating cash flow and available lines of credit.

Cash flows used in financing activities amounted to $37,654,000. The
significant items were cash dividends of $30,373,000 and repayment of loans and
notes payable of $6,481,000.

During the fourth fiscal quarter, $15,000,000 was reclassified from long-term
debt to current liabilities. This represents the first payment of principal on
$75,000,000 of long-term debt to be repaid in equal annual amounts beginning in
June 1997 through the year 2001.

27
17

MANAGEMENT'S DISCUSSION . . .

FISCAL 1995 COMPARED TO FISCAL 1994

Sales increased 4% or $54,160,000 in the 1995 fiscal year. Total sales in 1995
reached $1,339,677,000, a new record for the Company. The number of engines
sold increased 3% in this fiscal year. The unit sales increase was the primary
reason for the sales dollar change. The vast majority of the sales increase was
in export markets due to improving economies in Europe and better product
availability. There was a very small increase in domestic engine sales.

Service sales increased 17% between years. Lock sales declined between years,
as expected, because of the spin-off of the lock business after eight months of
the fiscal year.

Product mix changed in fiscal 1995. Sales moved from higher priced to lower
priced engines in the Company's small engine line. Increases in the Company's
large engine line which carries higher selling prices more than offset the
activity in the small engine line. A modest price increase also contributed to
improved sales revenues between years.

Gross profit increased $5,078,000 or 2% between years. The gross profit rate
declined from 21% in 1994 to 20% in 1995 primarily because of an early
retirement window offered to and elected by some members of the United
Paperworkers International Union Local 7232 as part of the contract agreement
reached in December 1994. The $19,059,000 charge was reflected in the fourth
quarter of 1995 for a June or October 1995 window. Without this charge, the
Company's gross profit rate would have been higher in 1995.

The improvement in the gross profit rate, after adjusting for the cost of the
window, was the net result of several factors. The spreading of fixed costs
over a larger number of engine units was partially offset by a significant
increase in aluminum costs. The 1995 fiscal year also contained start-up costs
at new plants (discussed later in this comparison) totaling $5,300,000, and
accelerated depreciation of $5,600,000 on fixed assets not being moved to the
new plants.

Engineering, selling, general and administrative expenses increased $7,057,000
or 7% between years. This was a result of increased marketing and advertising
expenses and costs connected with the spin-off.

Interest expense declined modestly. Other income increased $2,216,000 primarily
because of increased interest income resulting from higher average cash
balances between years. The decline in cash balances occurred late in the
fiscal year.

The effective rate for the income tax provision was reduced from 39.6% in 1994
to 38.5% in 1995. This reduction was due to various miscellaneous differences.

Cash and cash equivalents decreased $50,453,000 between years. This was due
primarily to additional investment in finished goods inventories at fiscal year
end and capital expenditures for the new plants under construction. This cash
decrease was partially offset by funds generated from profitable operations in
1995.

Accounts receivable decreased between years due to the accounts spun off with
the lock business and lower sales late in the fourth quarter of fiscal 1995.

Inventories increased $62,753,000 between years. This was primarily due to two
factors. The Company maintained a stable rate of production while experiencing
a reduction in orders from equipment manufacturers due to less favorable spring
weather. In addition, the Company planned an increase in inventories to provide
a cushion for the transfer of engine assembly to the three new plants under
construction.

Additions to plant and equipment were significantly higher in 1995 than in 1994
or 1993. This was primarily due to the $101,500,000 that was spent on the
construction of the new plants.

28
18

MANAGEMENT'S DISCUSSION . . .

OTHER MATTERS

The Company will offer a final early retirement window in late fiscal 1997, in
accordance with the union contract with its Milwaukee hourly employees. It is
unknown how many employees will accept this offer. All elections under this
window must be completed in June 1997. If all eligible employees elect to take
this window, the charge to earnings could total a maximum of $53 million before
taxes.

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation." This standard establishes financial accounting and reporting
standards for stock-based employee compensation. The Company plans to adopt the
pro forma disclosure requirements of the statement, and will continue to apply
the accounting provisions of Accounting Principles Board Opinion No. 25, as
allowed by the new standard. This disclosure will be effective for the fiscal
1997 financial statements.

The U.S. Environmental Protection Agency (EPA) is developing national emission
standards under a two phase process for equipment powered by small air cooled
engines. In 1995, the EPA promulgated its Phase One emission standards, which
will be reflected in the Company's 1997 model year engines. The industry
expects Phase Two of the emission standards to be proposed within the next
year. It is expected that they will be phased in over several years. While it
is impossible to precisely quantify the cost of compliance until the standards
are issued, the Company believes compliance with the new standards will not
have a material effect on its financial position or results of operations.

The California Air Resources Board (CARB) has also adopted emission standards
to be effective in two tiers. Tier One was effective as of August 1995. Changes
to engine models that were necessary to comply with Tier One have been made.
Recently CARB has granted the Company's request that the California standard
for carbon monoxide be modified to harmonize it with that adopted by the EPA.
As a result of this change, a wider range of the Company's engines will meet
California's current emission standards. The costs to comply with the Tier One
California standards did not have a material effect on the financial position
or results of operations of the Company.

Tier Two of California engine emission standards will not be effective until
1999 or later. CARB has directed its staff to review its Tier Two standards in
light of technological and economic issues raised by the industry. In the event
the Company is unable to comply with future standards and they remain
unchanged, any resulting downturn in sales will not be material to the Company.

29
19

MANAGEMENT'S DISCUSSION . . .

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements in Management's Discussion and Analysis, in the Letter to
Shareholders on pages 2 through 4 and in About Briggs & Stratton on pages 5
through 11 may contain forward-looking information (as defined in the Private
Securities Litigation Reform Act of 1995) that involves risk and uncertainty.
The words "anticipate", "believe", "estimate", "expect", "objective", and
"think" or similar expressions are intended to identify forward-looking
statements. Company results may differ materially from those projected in the
forward-looking statements. Any forward-looking statements are based on
management's current views and assumptions and involve risks and uncertainties
that could significantly affect final results. These uncertainties could
include, among other things, the effects of weather; actions of competitors;
changes in laws and regulations, including accounting standards; customer
demand; prices of purchased raw materials and parts; domestic economic
conditions, including housing starts and changes in consumer disposable income;
and foreign economic conditions, including currency rate fluctuations.

30
20
QUARTERLY FINANCIAL DATA, DIVIDEND AND MARKET INFORMATION (UNAUDITED)

In Thousands Per Share of Common Stock
------------------------------ ---------------------------------------------
(1) Market Price Range
Net Net (1) on New York
Quater Net Gross Income Income Dividends Stock Exchange(1)
Ended Sales Profit (Loss) (Loss) Declared High Low
----- ------ ------ ------ ------ --------- ---- ---

Fiscal 1996
- -----------
September $ 189,477 $ 19,141 $ (3,300) $ (.11) $ .26 41 32-3/4

December 329,357 65,763 23,924 .82 .26 44-1/8 39

March 460,201 104,082 45,226 1.57 .26 44-3/4 39-3/4

June 307,994 72,762 26,562 .91 .27 46-7/8 40-1/2
---------- --------- -------- ------ -----
Total $1,287,029 $ 261,748 $ 92,412 $ 3.19 $1.05
========== ========= ======== ====== =====

Fiscal 1995
- -----------
September $ 227,845 $ 39,799 $ 11,424 $ .39 $ .23 39-1/4 33-1/8

December 366,717 83,524 33,713 1.17 .25 36-1/2 30-1/2

March 450,163 105,438 47,331 1.64 .25 37-3/4 32-1/4

June 294,952 42,857 12,337 .42 .25 38 34
---------- --------- -------- ------ -----
Total $1,339,677 $ 271,618 $104,805 $ 3.62 $ .98
========== ========= ======== ====== =====

The number of record holders of Briggs & Stratton Corporation Common Stock on
August 15, 1996 was 6,471.
(1) Adjusted for 2-for-1 stock split effective November 14, 1994.

31
21
TEN YEAR COMPARISONS

- ------------------------------------------------------------------------------------------------
Fiscal Year 1996 1995
- ------------------------------------------------------------------------------------------------
(All dollar amounts other than per share data are stated in thousands)

SUMMARY OF OPERATIONS

NET SALES........................................................... 1,287,029 1,339,677

GROSS PROFIT ON SALES............................................... 261,748 271,618

PROVISION (CREDIT) FOR INCOME TAXES................................. 56,640 65,570

NET INCOME (LOSS) before cumulative effect of accounting changes.... 92,412 104,805

NET INCOME (LOSS)................................................... 92,412 104,805

AVERAGE NUMBER OF SHARES OF
COMMON STOCK OUTSTANDING.......................................... 28,927 28,927

PER SHARE OF COMMON STOCK:

Net Income (Loss) before cumulative effect of accounting changes.. 3.19 3.62

Net Income (Loss)................................................. 3.19 3.62

Cash Dividends.................................................... 1.05 .98

Shareholders' Investment.......................................... 17.30 15.19

OTHER DATA

SHAREHOLDERS' INVESTMENT............................................ 500,505 439,478

LONG-TERM DEBT...................................................... 60,000 75,000

TOTAL ASSETS........................................................ 838,164 798,493

PLANT AND EQUIPMENT................................................. 776,638 726,331

PLANT AND EQUIPMENT NET OF RESERVES................................. 374,212 343,297

PROVISION FOR DEPRECIATION.......................................... 43,032 44,445

EXPENDITURES FOR PLANT AND EQUIPMENT................................ 77,746 131,034

WORKING CAPITAL..................................................... 266,208 256,075

Current Ratio..................................................... 2.4 to 1 2.3 to 1

NUMBER OF EMPLOYEES AT YEAR END..................................... 7,199 6,958

NUMBER OF SHAREHOLDERS AT YEAR END.................................. 5,879 6,792

QUOTED MARKET PRICE:

High.............................................................. 46-7/8 39-1/4

Low............................................................... 32-3/4 30-1/2

NOTES:

(1) The number of shares of common stock and per share data have been
adjusted for a 2-for-1 stock split in 1995.

(2) The cumulative effects of accounting changes in 1994 were for
postretirement health care, postemployment benefits and deferred
income taxes.

32
22

- ---------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987
- ---------------------------------------------------------------------------------------------------

1,285,517 1,139,462 1,041,828 950,747 1,002,857 876,379 914,057 784,665

266,540 212,601 174,048 132,431 132,438 59,629 115,113 111,618

67,240 44,060 28,700 16,500 18,290 (13,980) 12,950 18,950

102,481 70,345 51,503 36,453 35,375 (20,032) 30,211 26,614

69,923 70,345 51,503 36,453 35,375 (20,032) 30,211 26,614

28,927 28,927 28,927 28,927 28,927 28,927 28,927 28,927

3.54 2.43 1.78 1.26 1.23 (.70) 1.05 .92

2.42 2.43 1.78 1.26 1.23 (.70) 1.05 .92

.90 .85 .80 .80 .80 .80 .80 .80

13.96 12.45 10.80 9.85 9.38 8.96 10.49 10.24

403,792 359,958 312,404 284,715 271,383 259,226 303,305 296,260

75,000 75,000 75,000 75,000 75,000 75,000 - -

777,355 656,107 613,853 556,791 535,040 560,816 510,600 451,879

669,593 658,120 643,433 632,488 606,863 580,184 513,700 470,586

285,890 295,542 309,698 320,364 326,288 330,198 295,573 273,903

42,950 47,222 41,113 36,447 39,889 38,995 29,955 24,502

40,804 38,110 40,224 32,036 37,797 79,513 57,001 52,235

276,040 195,019 137,008 105,298 84,082 63,757 63,372 77,281

2.3 to 1 2.2 to 1 1.9 to 1 1.8 to 1 1.7 to 1 1.4 to 1 1.4 to 1 1.8 to 1

8,628 7,950 7,799 7,242 7,994 7,316 9,827 8,611

6,228 6,651 7,118 7,943 8,466 9,222 6,923 7,206

45-1/8 34-1/4 27-3/8 16-7/8 17 17-3/8 21 21

32-1/2 21 16-3/8 10-1/4 12 12-3/8 10-1/8 15-3/4