<PAGE>   1

                                 UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, D.C. 20549

                            -----------------------

                                   FORM 10-K

                Annual Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934

                            -----------------------

For the fiscal year ended                            Commission File Number
    December 31, 1996                                        0-14903

                         Baldwin Piano & Organ Company
             (Exact name of registrant as specified in its charter)

Delaware                                                   31-1091812
(State or other jurisdiction of                            (IRS Employer
incorporation or organization)                             Identification No.)

422 Wards Corner Road
Loveland, Ohio                                                   45140-8390
(Address of Principal Executive Offices)                         (Zip Code)

Registrant's telephone number, including area code (513) 576-4500

Securities registered pursuant to Section 12(b) of the Act:

                                      None

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes __X__   No ____.


<PAGE>   2



         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.   [X]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant is $30,418,206 based upon the $14.00 per share price at which
the Common Stock was last sold as reported on the Nasdaq National Market
through March 21, 1997.

         The number of outstanding shares of Common Stock of Baldwin Piano &
Organ Company ("Company"), as of March 21, 1997, is 3,425,396.

                      DOCUMENTS INCORPORATED BY REFERENCE

         All of the information required by Items 6-8 of Part II of this Form
10-K is incorporated by reference from the Company's Annual Report to
Shareholders for the fiscal year ended December 31, 1996 ("1996 Annual Report
to Shareholders"). All of the information required by Items 10-13 of Part III
of this Form 10-K is incorporated by reference from the Company's definitive
Proxy Statement to be filed with the Securities and Exchange Commission on or
about April 25, 1997 relating to the Company's 1997 Annual Meeting of
Shareholders ("1997 Proxy Statement").


<PAGE>   3



                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.                                                                                                        Page
<S>               <C>                                                                                            <C>
Item  1.          Business                                                                                        1

Item  2.          Properties                                                                                     13

Item  3.          Legal Proceedings                                                                              14

Item  4.          Submission of Matters to a Vote of                                                             14
                  Security Holders


PART II.

Item  5.          Market for Registrant's Common Equity                                                          14
                  and Related Stockholder Matters

Item  6.          Selected Financial Data                                                                        15

Item  7.          Management's Discussion and Analysis of                                                        15
                  Financial Condition and Results of Operation

Item  8.          Financial Statements and Supplementary Data                                                    15

Item  9.          Changes in and Disagreements with Accountants                                                  15
                  on Accounting and Financial Disclosure

PART III.

Item 10.          Directors and Executive Officers of the                                                        15
                  Registrant

Item 11.          Executive Compensation                                                                         16

Item 12.          Security Ownership of Certain Beneficial                                                       16
                  Owners and Management

Item 13.          Certain Relationships and Related                                                              16
                  Transactions
</TABLE>


                                      (i)


<PAGE>   4



<TABLE>
<S>               <C>                                                                                            <C>
PART IV.

Item 14.          Exhibits, Financial Statement Schedules,                                                       17
                  and Reports on Form 8-K


SIGNATURES                                                                                                       25
</TABLE>

                                      (ii)


<PAGE>   5


                                     PART I

                                ITEM 1. BUSINESS

         As used herein, the terms "Company" or "Baldwin" refer to Baldwin
Piano & Organ Company and its subsidiaries and the Company's predecessors,
unless the context otherwise indicates.

         As a leader in the U.S. keyboard market, the Company's core business,
Baldwin manufactures and markets a full range of high quality keyboard
instruments featuring the Baldwin(R), Wurlitzer(R) and Chickering(TM)
trademarks.  From artist-accepted concert grand pianos to innovative digital
keyboards, renowned Baldwin instruments are found in homes, churches, academic
institutions and concert halls across the nation.

         Baldwin expands on its core business by providing in-house consumer
installment financing of musical products through its wholly-owned subsidiary
Keyboard Acceptance Corporation ("Finance"). With an emphasis on superior
service, revenues generated by Finance continue to grow significantly,
increasing 20% in 1996. Baldwin is the only U.S. musical products manufacturer
to offer direct consumer financing of its instruments.

         Through its Special Products Division, Baldwin offers electronic and
electromechanical design and manufacturing services for original equipment
manufacturers.

         Sales of the Company's products and other revenue are set forth by
industry segment in the following table:

<TABLE>
<CAPTION>
                                                                       (dollars in thousands)

                                                                       Year Ended December 31,
                                                              ------------------------------------------
                                                                1996              1995            1994
                                                              --------          -------         --------
         <S>                                                  <C>              <C>              <C>                    
         Musical Products and other:
          Musical Products.......................             $ 82,941          $ 85,085         $ 91,421
          Contract Furniture and
           Music.................................                4,455            10,565            6,706
                                                              --------          --------         --------
                  Total Segment..................               87,396            95,650           98,127
         Electronic Contracting .................               30,894            30,687           28,361
         Finance.................................                7,363             6,159            5,904
                                                              --------          --------         --------
                           Total ................             $125,653          $132,496         $132,392
                                                              ========          ========         ========
</TABLE>

Financial information regarding industry segments is shown in this Form 10-K in
Note 14 to the Consolidated Financial Statements of the Company on page 95,
attached hereto as Exhibit 13.1.

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STRATEGIC PLAN

         Baldwin is in the second year of a strategic plan designed to improve
the Company's competitiveness and enhance shareholder value. While the
short-term cost increases and revenue decreases associated with these strategic
initiatives adversely affected 1996 results, the Company expects to begin
realizing benefits from its efforts during 1997.

         In February 1997, Baldwin announced that it retained the
internationally known investment banking firm of Lehman Brothers to advise and
assist it in the continuing execution of its strategic plan. In particular,
Lehman Brothers has been specifically directed to: (a) assess the value of
Baldwin's non-core businesses and review strategies for such businesses; (b)
develop appropriate financial and capital structure targets and ratios,
including evaluating potential sources of additional liquidity; (c) review
current sources and potential uses of Baldwin's cash flow; and (d) review
strategic opportunities available to Baldwin, including acquisitions, mergers
or strategic alliances.

         The key elements of Baldwin's strategic plan include:

1.   Improve manufacturing efficiency and gross margins in acoustic piano
     business.

                  Baldwin is the leading U.S. manufacturer, retailer and
financing source of acoustic keyboard instruments. In 1996, the Company began
the implementation of its strategic initiative to modernize and simplify its
piano manufacturing operations. Utilizing synchronous manufacturing techniques,
the Company is gaining greater process efficiencies, reducing manufacturing
costs and inventories, and producing consistently high quality pianos for its
dealer network and consumers.

                  Synchronous manufacturing principles have been refined and
proven by advanced Japanese, U.S. and European manufacturers in many
industries.  For Baldwin, this approach enables greater efficiency in its
one-at-a-time piano assembly line. It replaces the older batch production
method and its inherent problems, such as less process control and higher
work-in-process and finished product inventories.

                  First tested in the second half of 1996 at the Company's
Juarez, Mexico components plant, Baldwin's synchronous manufacturing program is
resulting in dramatic reductions in cycle time, reduced inventories and faster
response to customer needs. In the piano keys department in Juarez, for
example, work-in-process inventory shows an 89% reduction; the plant floor area
required to assemble keys was reduced by 72%; and the start-to-completion time
to assemble a keyboard shows a 94% improvement. It

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<PAGE>   7

is also positively impacting many aspects of Baldwin production, from the
physical layout of manufacturing areas to the flow of information and the
development of closer relationships with suppliers.

                  Based on positive test results, Baldwin is expanding its
synchronous manufacturing program to all its piano production facilities in
1997.

2.   Focus on core business, customers and consumers.

                  In 1996, Baldwin exited two non-strategic, lower margin
businesses, allowing the Company to focus its efforts in its three core
businesses: pianos, retail financing, and electronic contracting. Exit from the
contract music and furniture businesses represented the single largest
contributor to both sales and profit decline in 1996. This business was
originally conceived to absorb plant overhead. The Company's synchronous
manufacturing initiative is intended to address the overhead cost pressures
created by the exit from these businesses.

                  In addition, Baldwin decided to exit the church organ
business consummating an agreement for sale in early 1997. While church organs
represented a small business for Baldwin, it added inefficient complexity
because of its separate dealer base, customer base (churches), and need for a
separate selling organization.

                  Baldwin believes it must focus on its core businesses, which
have each demonstrated the potential to generate profitable returns on
investment.

3.   Drive product innovation.

                  Baldwin believes that in its core businesses, innovation is
key to continued success, profitability and growth. During 1996, Baldwin
completed the introduction of its new line of digital pianos, named Baldwin
Pianovelle(TM), with the introduction of three new models in the third quarter.
In addition, the Company developed its innovative and unique automated player
system, named Baldwin ConcertMaster(TM), which was introduced to the Company's
dealer network in January 1997.

                  Baldwin incurred higher interest expense in 1996, in part,
because of inventory required to support these new product launches. Because
many Baldwin dealers purchase products from the Company on a consignment basis,
Baldwin financed the new digital piano inventory necessary to supply its
approximately 400 dealers.

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<PAGE>   8

4.   Improve asset utilization.

                  In 1996, the Company completed its consolidation of the
Baldwin and Wurlitzer product lines and dealer networks. The Company also
streamlined its workforce with the reduction of 50 salaried employees.

                  The consolidation of the Baldwin and Wurlitzer lines and
dealer network resulted in depressed musical product sales during the first
half of 1996. The decrease is primarily attributable to fewer store fronts and
the change in accounting for Wurlitzer piano sales compared to 1995 to an "as
sold" basis versus "as shipped". The reduction in the workforce contributed to
lower fourth quarter 1996 earnings due to the one-time costs associated with
severance and outplacement. With its product and dealer consolidation complete
and streamlined workforce, Baldwin believes that it is better positioned to
compete effectively in the future.

MUSICAL PRODUCTS

         Since 1862, Baldwin musical products have been recognized for their
high quality, value and performance by professional musicians, educators and
consumers. Today, Baldwin musical products represent a broad range of acoustic
and electronic instruments aimed at an equally broad consumer base, consistent
with the Company's heritage. Baldwin musical products are sold through domestic
wholesale dealers (77%), Company-owned retail stores (10%), factory direct
sales (7%) and an international dealer network (6%).

         ACOUSTIC PIANOS

                  The Company's premier product is the Baldwin(R) concert grand
         piano, which is widely accepted for concert performances. Baldwin is
         the only domestic manufacturer of concert grand pianos which also
         produces a full line of vertical pianos. The Company has successfully
         incorporated a number of enhancements and construction techniques,
         originally designed for Baldwin grand pianos, into its vertical piano
         lines designed for home and institutional use. Such enhancements
         include plate and string mounting methods and soundboard construction.
         The Company believes that the quality and durability of the Baldwin
         concert grand pianos enhance the reputation, marketability and profit
         margins of its entire line of acoustic keyboard instruments.

                  In 1995, the Company's product lines were repositioned to
         eliminate product overlap and make Baldwin's acoustic offerings
         clearer to consumers. Baldwin now offers the three American brands,
         Baldwin(R), Chickering(TM) and Wurlitzer(R), that have represented
         nearly 50% of all domestic new piano

                                       4


<PAGE>   9



         purchases over the past four decades. In addition, separate Baldwin
         and Wurlitzer dealer and sales organizations were consolidated into a
         single, more efficient distribution network.

                  The Company's product line offering is broad in both styles
         and finishes of pianos in all classes ranging from 9-foot concert
         grand pianos to 37-inch vertical pianos (spinets).

         DIGITAL KEYBOARDS

                  Baldwin distributes a broad range of electronic keyboard
         instruments. Baldwin's products compete in the digital keyboard market
         segments that represent over 90% of the market for keyboard digital
         product sales. An increasing number of Baldwin piano dealers now
         report that a significant percentage of their business comes from
         digital keyboard sales. To gain a greater share of this growing
         segment, Baldwin introduced new digital piano products in September
         1995. The line was completed in August 1996 with seven models overall.

                  Pianovelle(TM) products are manufactured to Baldwin's
         specifications in Italy by GeneralMusic, Europe's largest digital
         keyboard manufacturer. Baldwin is working with GeneralMusic in
         designing a second generation product line based on superior piano
         tone and touch. Baldwin plans to introduce new products approximately
         every two years to capitalize on advances in electronic technology and
         address changing consumer needs.

         PRODUCT DEVELOPMENT

                  The Company's research staff, in conjunction with outside
         consulting and design services, engage in ongoing efforts to refine
         existing products and develop new products.

                  In electronic-based products, the Company uses outside
         sources for the development and production of its products.
         Outsourcing has enabled the Company to keep overall operating costs
         down while benefiting from other companies' expertise in advanced
         electronic technology and new material development.

                  In 1996, the Company completed development of a unique
         digital player system. This system, called Baldwin ConcertMaster(TM),
         was introduced in January 1997. It employs multi-media storage of
         music and recording capabilities and is available for factory or field
         installation only on Company brand acoustic products.

                                       5


<PAGE>   10



                  During 1996, 1995 and 1994, the Company's research and
         development expenditures were $475,000, $472,000 and $556,000,
         respectively.

         MARKETING AND DISTRIBUTION

                  The Company distributes its keyboard musical instruments in
         North America through approximately 400 independent dealers. The
         Company also operates 11 Company-owned stores in five large
         metropolitan areas.

                  In 1996, no single dealer accounted for more than 5% of the
         Company's keyboard musical instrument sales. The ten largest dealers
         accounted for approximately 20% of such sales.

                  The Company's domestic sales leadership is attributable, in
         part, to its excellent dealer network. The Company believes that it
         has been able to attract and maintain its dealers by offering a
         superior product line and numerous programs and services designed to
         assist dealers and promote the Company's products, including:

               o  An artist endorsement program in which over 375 well-known
                  pianists, composers, conductors, vocalists and music
                  organizations endorse Baldwin grand pianos, providing dealers
                  with extensive national and local product publicity and a
                  method of product differentiation.

               o  A dealer support program, providing training, promotional
                  assistance, and incentives.

               o  Sponsorship of educational activities, including piano
                  competitions, recitals and music fellowships.

               o  An installment finance program offering retail customers a
                  source of credit and assurance of the Company's continued
                  interest in product performance.

                  The 11 Company-owned retail outlets are located in Atlanta,
         Georgia; Cincinnati, Ohio; Indianapolis, Indiana; and Louisville and
         Lexington, Kentucky. These Company-owned retail outlets, which sell
         the Company's product lines, are generally situated in areas where
         they do not compete directly with the Company's independent dealers.
         The Company believes that the existence of Company-owned stores has
         not adversely affected the Company's relationship with its independent
         dealers.

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<PAGE>   11



                  In addition to accounting for approximately 10% of the
         Company's total keyboard sales in 1996, Baldwin's retail stores
         provide the Company with the opportunity to test new retailing
         concepts and dealer promotional ideas. Baldwin's retail stores also
         provide a better understanding of dealer problems and a source of
         management talent.

                  Baldwin introduced the Factory Direct Sales Program in 1994
         to access customers outside the geographic reach of the Company's
         independent dealer network and Company-owned retail outlets and also
         to cooperatively increase sales within those areas. This program
         accounted for approximately 7% of the Company's total keyboard sales
         in 1996.

                  The Company's products are distributed in Canada through
         approximately 30 independent dealers representing approximately 3% of
         the Company's total keyboard sales. The Company markets products
         through a number of international distributors in markets such as
         Mexico, France, Taiwan, Japan and England. These account for
         approximately 3% of the Company's keyboard sales in 1996.

         MARKETS AND COMPETITION

                  The principal markets for the Company's acoustic and
         electronic pianos are families with children of ages 6 to 12, young
         adults, and educational institutions.

                  The domestic keyboard musical instrument market has
         contracted in recent years. Industry-wide annual unit sales of
         acoustic pianos in the United States have declined 9% since 1995. The
         Company competes with a number of domestic and foreign manufacturers
         based on price relative to tone quality, performance characteristics,
         styling and finish options.

                  The Company's domestic market share for new acoustic pianos
         was approximately 25% in 1995 and 26% in 1996. In 1996, Baldwin showed
         its second consecutive year of unit share growth after several years
         of share decline. The Company believes that no single manufacturer has
         a domestic market share larger than the Company's.

                  Based on industry statistics, foreign piano manufacturers'
         combined market share for acoustic pianos in the domestic market has
         averaged approximately 51% over the last three years. Foreign
         competition in the piano market is most heavily concentrated in the
         market for small grand pianos and, to a lesser extent, in the market
         for large vertical pianos.

                                       7


<PAGE>   12



                  Electronic digital pianos, with annual industry sales in the
         U.S. of approximately 55,000 units, are approaching acoustic pianos in
         popularity. In 1996, industry unit sales increased by 2%. These units
         offer full-sized, touch sensitive dynamic keyboards which are
         considered by some potential customers as a viable substitute for a
         new or used acoustic piano.

                  To gain a greater share of this digital segment, Baldwin
         introduced additional models in August 1996. Called Baldwin
         Pianovelle(TM), these instruments employ Dimensional Acoustic
         Synthesis(TM) to recreate the classic sound of an acoustic piano.
         These pianos also use cutting edge technology which has resulted in a
         number of industry firsts. The upper-end pianos are the only digitals
         which can display score, chords and lyrics in a large built-in
         display. The Company increased its digital market share from
         approximately 3% in 1995 to approximately 4% in 1996 and intends to
         continue to aggressively pursue a higher market share in this area.

                  The domestic piano market continued its 15+ year decline in
         unit volume in 1996. While this market decline has been a challenge to
         Baldwin and its competitors in the domestic market, the Company
         believes there are reasons to conclude that the market decline may
         slow in the coming years. First, demographics indicate that the number
         of children between the ages of 6 and 12, whose families are a key
         market segment for Baldwin musical products, will be increasing
         through the year 2010. Second, for the past five years, the Company,
         individually and in conjunction with other manufacturers, continued
         sponsoring advertisements and promotions designed to increase consumer
         awareness of the positive effects of keyboard instruction on the
         physical and mental development of children. These positive effects
         on child development have been quantified in recently released
         research data. Finally, the Company continued its advertising efforts
         not only to reach dealers, schools, other institutional buyers and
         music instructors, but also to directly attract individual customers.

                  Sales of the Company's keyboard products are affected by the
         market for used keyboard instruments, although the Company is unaware
         of any reliable data evaluating the impact of sales of used
         instruments on the sale of new products. Information regarding the
         Company's market share contained herein is based solely on unit sales
         of new instruments. Information regarding dollar sales by the Company
         includes sales of new and used instruments.

                  The Company's retail stores and most of its independent
         dealers sell used keyboard products in addition to new

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<PAGE>   13



         instruments. The availability of used pianos and organs attracts
         potential purchasers who sometimes ultimately purchase new
         instruments.  Owners of pianos and organs will also often trade in
         their existing instruments for larger or more expensive instruments.

CHURCH ORGANS

                  In early 1997, the Company reached agreement to sell its
         church organ business, pending approval by the Company's lender. The
         church organ business is considered a non-core business because of its
         unique dealer and customer base. Exit from the church organ business
         is consistent with the Company's focus on its core piano business.

FINANCING OPERATIONS

         The Company's installment financing subsidiary, Finance, provides
point-of-sale consumer financing through keyboard product dealers located
throughout the United States. Baldwin is the only keyboard manufacturer that
also provides its own consumer financing for its musical instruments and has
been doing so for nearly a century. The Company believes that this long-term,
strongly focused attention to the music industry provides Baldwin with a
distinct competitive advantage.

         Over the last few years Finance has expanded its focus. In addition to
financing Baldwin products, Finance now makes its consumer financing available
through music dealers that do not carry the Company's musical products. During
1996, many new dealers were added to the Finance client base as a result of
this strategy.

         Finance offers music dealers consumer financing programs which include
competitive interest rates, rent-to-own options and prompt credit approval. In
addition to these continuing services, Finance both originates and cooperates
in special promotional programs with dealers.

         Finance maintains agreements with an independent entity to sell
substantially all of its installment receivable contracts up to a maximum
outstanding principal amount of $100 million. Certain installment receivables
are not eligible for sale and are retained by Finance. Finance continues to
service all installment receivables sold.

         Under the present arrangement at the time of each installment
receivable sale, Finance receives cash equal to the unpaid principal balance of
the contracts, less a holdback of 10% of the

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<PAGE>   14

principal balance of the contracts sold. The buyer of the installment
receivables earns interest on the outstanding principal balance of the
contracts based upon a floating interest rate provision. Over the lives of the
contracts, the difference between the actual yield on the installment contracts
sold, and the amount retained by the buyer under the floating interest rate
provision, is remitted to Finance as a service fee.

         Under the present sale agreement with the independent entity, Finance
is required to repurchase accounts that become more than 120 days past due or
accounts that are deemed uncollectible. The repurchase price is equal to the
remaining unpaid principal balance of the contract on the date repurchased,
less the related 10% holdback. At December 31, 1996, Finance remains
contingently liable on approximately $85 million of installment receivables.
Historically, credit losses have not been significant. The Company believes an
adequate allowance has been provided for any uncollectible receivables.

ELECTRONIC CONTRACTING

         In 1984, the Company began manufacturing printed circuit board
assemblies for manufacturers outside the music industry. Currently, the
Baldwin Special Products Division provides electronic and electromechanical
products and services to a broad range of original equipment manufacturers.
Final applications include commercial and industrial power controls, heating
and air conditioning systems, vending machines, mail handling systems, exercise
equipment and semiconductor fabrication equipment.

         The Baldwin Special Products Division has increased resource
investment, improved its work systems and expanded the customer/supplier
partnerships. In 1996, this Division entered into strategic partnerships with
two of its top five customers. In one strategic partnership, Baldwin enjoys
preferred supplier status increasing the likelihood for preferential access to
new business being outsourced by this customer. In the other, Baldwin has
entered into long term supply arrangements that give the Company preferred
supplier status for new business.

         The Baldwin Special Products Division is a full-service contract
supplier offering a complete line of engineering, design, testing, repair and
rework services, and assembly of electronic and electromechanical products.
Baldwin engineering and operations personnel work closely with customers to
take a concept or design, develop it, test it and turn it into a manufactured
circuit board assembly or finished product component.

         During 1996, the Baldwin Special Products Division increased its
investment in high technology capital and systems improvements

                                       10


<PAGE>   15

three fold compared to the average of the two previous years. This division is
also strengthening internal process effectiveness through enhancing strategic
partnerships with its own suppliers, personnel training and continuous
improvement of quality systems.

         The Company sells electronic assemblies to manufacturers through
Company representatives and electronics manufacturers' representatives with
territories covering 28 states. There are many contract manufacturers of
electronic assemblies and the Company does not have a significant share of the
market of such products. Although foreign manufacturers account for a
significant portion of the printed circuit board industry, the Company has
found numerous opportunities to compete effectively based on the consistency of
the quality of its products and its reputation for on-time delivery.

MANUFACTURING

         The Company has fully integrated acoustic piano manufacturing
capability beginning with the treatment of raw lumber; proceeding through the
fabrication and finishing of the cabinetry and assembly of the inner workings;
and culminating in the creation of a completed musical instrument. During
1996, the Company began implementing an aggressive initiative to modernize and
simplify its piano manufacturing operations. Utilizing synchronous
manufacturing techniques, the Company is gaining greater process efficiencies,
reducing manufacturing costs and inventories, and producing consistently
high-quality pianos for its dealer network and consumers.

         Synchronous manufacturing principles have been refined and proven by
advanced Japanese, U.S. and European manufacturers in many industries. For
Baldwin, this approach enables greater efficiency in its one-at-a-time piano
assembly line. It replaces the older batch production method and its inherent
problems, such as less process control and higher work-in-process and finished
product inventories. Baldwin is expanding its synchronous manufacturing program
to all its piano production facilities in 1997.

         The Company's contract electronics manufacturing facility utilizes
specialized, computer-controlled production and testing equipment to
manufacture printed circuit boards and electromechanical assemblies for its
contract electronics manufacturing products.

                                       11


<PAGE>   16

RAW MATERIALS

         Raw materials required for the Company's acoustic piano manufacturing
operations are primarily purchased in the United States. Due to the Company's
unique products, a limited number of vendors are available for certain
specialized parts needed for keyboard instruments. Despite such limitations,
the Company has not experienced significant difficulties in obtaining adequate
supplies of raw materials. However, the failure of one or more such vendors to
continue to supply its products could cause delays in the Company's
manufacturing process until suitable alternate sources could be obtained.

         In electronic contracting, electronic components are purchased from
major semi-conductor manufacturers and distributors. To minimize costs and
facilitate availability of major components, the Company designs its products
to employ standard components.

SEASONALITY

         The Company's business is somewhat seasonal in nature with fourth
quarter musical products sales generally increasing during the holiday season.
In 1996, the fourth quarter accounted for approximately 31% of net sales,
consistent with fourth quarter results in the previous three years.

BACKLOG

         Because Baldwin consigns the majority of its musical products to its
dealer network, the Company has no significant backlog of sales of musical
products. The firm sales orders for electronic contracting and contract
furniture and music aggregated approximately $25 million and $22 million at
December 31, 1996 and 1995, respectively. The Company anticipates that all such
1996 orders will be filled during 1997.

WORKING CAPITAL

         The Company requires significant working capital to support its
operations. The Company builds inventory levels during the year to support its
high fourth quarter seasonal sales demand.

         The Company finances its working capital needs under a $50 million
revolving line of credit from General Electric Capital Corporation. Amounts
outstanding under the revolving line of credit are due one year after demand.
However, the lender retains absolute discretion regarding each advance, even if
no event of default then exists. Under the revolving line of credit, the

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<PAGE>   17

lender will make available a line of credit based on certain percentages of the
carrying value of the Company's inventories and trade accounts receivable.
Finance has entered into agreements with an independent entity to sell
substantially all of its installment receivable contracts up to a maximum
outstanding principal amount of $100 million, subject to certain repurchase
provisions described above under the caption "Financing Operations".

         For more information about the Company's credit facilities, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources" attached hereto as Exhibit 13.1.

EMPLOYEES

         As of December 31, 1996, the Company had approximately 1,530 full-time
employees. Approximately 245 hourly workers at the Company's Greenwood,
Mississippi facility are represented by the International Chemical Workers
Union, Local Union No. 800 and approximately 255 hourly workers at Fabricantes
Tecnicos, S.A. (wholly-owned subsidiary of the Company) Juarez, Mexico facility
are represented by the National Labor Union of Workers of Electronic Products.
All other employees are not represented by collective bargaining units. The
Company considers its relations with its employees to be good.

                               ITEM 2. PROPERTIES

         The Company operates the following manufacturing facilities, all of
which are owned. These properties are pledged as collateral under the Company's
various credit facilities.

<TABLE>
<CAPTION>
         Location                           Industry Segment                    Principal Products
         --------                           ----------------                    ------------------
  <S>                                        <C>                                <C>
  Greenwood, Mississippi                     Musical products                   Piano Cases/Piano
                                             and other                          Components

  Conway, Arkansas                           Musical products                   Grand Pianos
                                             and other

  Fayetteville, Arkansas                     Electronic                         Circuit Boards
                                             Contracting

  Trumann, Arkansas                          Musical products                   Pianos/Piano
                                             and other                          Components

  Juarez, Mexico                             Musical products                   Piano components
                                             and other
</TABLE>

                                       13


<PAGE>   18

         The Company's corporate offices and a retail showroom are located in a
50,000 square foot leased facility in a suburban office park in the greater
Cincinnati, Ohio metropolitan area.

         Generally, properties are utilized at normal capacity levels on a
single shift basis. During recent years, certain facilities were not utilized
at historical capacity levels as a result of lower sales volumes of certain
musical products, and the decision to exit the contract furniture and contract
music businesses.

         The Company maintains and services its facilities to ensure their
suitability for operations.

                           ITEM 3. LEGAL PROCEEDINGS

         The Company is involved in legal proceedings arising in its normal
course of business. The Company does not believe that any existing claim or
suit will have a material adverse effect on the business or financial condition
of the Company.

         The operations of the Company and its predecessors are subject to
federal, state and local laws regulating the discharge of pollutants into the
environment. The Company does not anticipate that any environmental matters
currently known to the Company will result in proceedings against the Company
or in any material liability.

          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         The Company submitted no matters to a vote of its shareholders during
the fourth quarter of the Company's 1996 fiscal year.

                                ----------------
                                    PART II
                                
                 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
                        AND RELATED STOCKHOLDER MATTERS

         The Company's common stock is not listed on any national securities
exchange and its principal United States trading market is through the Nasdaq
Stock Market's National Market. Quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission, and may not necessarily represent
actual transactions.

<TABLE>
<CAPTION>
         Year 1996                                           Year 1995
  Common Stock Bid Range                              Common Stock Bid Range
----------------------------                        ----------------------------
Quarter     High      Low                           Quarter     High       Low
----------------------------                        ----------------------------
<S>        <C>       <C>                            <C>         <C>       <C>
First      $14 1/2   $12 1/4                        First       $12 1/2   $10 1/4
</TABLE>


                                       14


<PAGE>   19



<TABLE>
<S>                  <C>               <C>                    <C>                  <C>              <C>
Second               $15 1/2           $12 3/4                Second               $15 1/4          $11 1/4
Third                $16 1/2           $14 1/2                Third                $14 1/8          $12
Fourth               $16 1/4           $11                    Fourth               $13 1/4          $12
</TABLE>

         As of March 21, 1997, the number of outstanding shares of the
Company's common stock was 3,425,396. The approximate number of record holders
of such shares was 121.

         The Company has paid no dividends since its inception and intends to
continue its policy of retaining earnings to finance future growth. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation - Liquidity and Capital Resources" on page 101, and Note 6 of Notes
to Consolidated Financial Statements of the Company on page 88 regarding
limitations on payment of dividends, attached hereto as Exhibit 13.1.

                        ITEM 6. SELECTED FINANCIAL DATA

         Incorporated by reference to Baldwin's 1996 Annual Report to
Shareholders.

                ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                        FINANCIAL CONDITION AND RESULTS OF OPERATIONS

         Incorporated by reference to Baldwin's 1996 Annual Report to
Shareholders.

         ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Incorporated by reference to Baldwin's 1996 Annual Report to
Shareholders.

         ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                 ON ACCOUNTING AND FINANCIAL DISCLOSURE

         No change in the Company's auditors has taken place within the
twenty-four months prior to, or in any period subsequent to, the Company's
December 31, 1996 consolidated financial statements.

                                    PART III

         ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Incorporated by reference to Baldwin's Proxy Statement for the 1997
Annual Meeting of Shareholders.

                                       15


<PAGE>   20

         ITEM 11. EXECUTIVE COMPENSATION.

         Incorporated by reference to Baldwin's Proxy Statement for the 1997
Annual Meeting of Shareholders.

         ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.

         Incorporated by reference to Baldwin's Proxy Statement for the 1997
Annual Meeting of Shareholders.

            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         Incorporated by reference to Baldwin's Proxy Statement for the 1997
Annual Meeting of Shareholders.

                                       16


<PAGE>   21


                                    PART IV

      ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, 
               AND REPORTS ON FORM 8-K

1.1   The following Consolidated Financial Statements of Baldwin Piano & Organ
      Company and Subsidiaries are incorporated by reference to Baldwin's 1996
      Annual Report to Shareholders.

                  Independent Auditors' Report.

                  Consolidated Statements of Earnings, years ended December 31,
                  1996, 1995 and 1994.

                  Consolidated Statements of Shareholders' Equity, years ended
                  December 31, 1996, 1995 and 1994.

                  Consolidated Balance Sheets, as of December 31, 1996 and
                  1995.

                  Consolidated Statements of Cash Flows, years ended December
                  31, 1996, 1995 and 1994.

                  Notes to Consolidated Financial Statements, years ended
                  December 31, 1996, 1995 and 1994.

2.1   Consolidated Financial Statement Schedules of Baldwin Piano & Organ
      Company and Subsidiaries:


<TABLE>
<CAPTION>
                                                                                                      Page Number
                                                                                                      -----------
                  <S>                                                                                     <C>
                  Independent Auditors' Report on Schedule                                                26
  
                  Schedule for the years ended
                  December 31, 1996, 1995 and 1994.                                                       27

</TABLE>
                      VIII.  Valuation and Qualifying Accounts.

                  All other schedules are omitted, as the required information
                  is inapplicable or the information is presented in the
                  consolidated financial statements or related notes.

3.1   Certificate of Incorporation of the Company, as amended. (1)

3.2   Amended and Restated Bylaws of Baldwin Piano & Organ Company dated as of
      February 10, 1997. (20)

                                       17


<PAGE>   22



4.1   Rights Agreement between the Company and The Provident Bank dated as of
      September 4, 1996. (21)

   MANAGEMENT CONTRACTS, COMPENSATORY PLANS AND ARRANGEMENTS

10.1  Baldwin Piano & Organ Company 1986 Incentive Stock Option Plan adopted on
      June 30, 1986. (1)

10.2  Baldwin Piano & Organ Company Retirement Plan for Salaried Employees, as
      amended. (1)

10.3  Baldwin Piano & Organ Company Retirement Trust for Salaried Employees
      dated September 28, 1984. (1)

10.4  Form of Indemnification Agreements between the Company and the Company's
      Officers and Directors dated June 30, 1986 and accompanying schedule. (1)

10.5  Consulting Agreement between the Company and Harold S. Smith dated as of
      April 14, 1993. (8)

10.6  Baldwin Piano & Organ Company Deferred Directors Fee Plan. (9)

10.7  Baldwin Piano & Organ Company Non-Qualified Deferred Compensation Plan.
      (9)

10.8  Baldwin Piano & Organ Company Non-Qualified Deferred Compensation Rabbi
      Trust Agreement as amended and restated as of October 4, 1993. (9)

10.9  Baldwin Piano & Organ Company 1994 Incentive Stock Option Plan. (11)

10.10 Baldwin Piano & Organ Company 1994 Management Incentive Plan. (12)

10.11 Baldwin Piano & Organ Company 1994 Long Term Incentive Plan. (12)

10.12 Agreement of Employment between Baldwin Piano & Organ Company and 
      Karen L. Hendricks dated as of November 18, 1994. (13)

10.13 Second Amended and Restated Agreement of Employment and Retirement Plan
      for Selected Key Employee between Baldwin Piano & Organ Company and 
      R. S. Harrison dated as of December 9, 1994. (13)

                                       18


<PAGE>   23



10.14 Change in Control Agreement between Baldwin Piano & Organ Company and
      Karen L. Hendricks dated June 26, 1996. (17)

10.15 Change in Control Agreement between Baldwin Piano & Organ Company and
      Stephen P. Brock dated June 11, 1996. (17)(18).

10.16 Agreement of Employment between Baldwin Piano & Organ Company and Perry
      H.  Schwartz dated as of November 5, 1996, as amended on November 11,
      1996.
                                ----------------

10.17 Office Space Lease Agreement between Wards Corner Associates Limited
      Partnership and the Company dated as of June 16, 1986. (1)

10.18 Guaranty dated February 23, 1988 in favor of General Electric Capital
      Corporation made by TWCA Corp (now known as `The Wurlitzer Company'). (2)

10.19 Security Agreement dated February 23, 1988 in favor of General Electric
      Capital Corporation made by TWCA Corp. (2)

10.20 Stock Pledge Agreement dated February 23, 1988 by and between Baldwin
      Piano & Organ Company and General Electric Capital Corporation relating
      to the Company's shares of TWCA Corp. (2)

10.21 Amended and Restated Revolving Credit and Security Agreement between the
      Company and General Electric Capital Corporation dated October 25, 1990.
      (5)

10.22 Pledge Agreement by the Company in favor of General Electric Capital
      Corporation dated October 25, 1990. (5)

10.23 Security Agreement by BPO Finance Corporation in favor of General
      Electric Capital Corporation dated October 25, 1990. (5)

10.24 Guaranty by BPO Finance Corporation in favor of General Electric Capital
      Corporation dated October 25, 1990. (5)

10.25 Purchase and Administration Agreement among the Company, BPO Finance
      Corporation, Retailer Funding Corporation and General Electric Capital
      Corporation, as a consenting party, dated as of October 1, 1990. (5)

10.26 Guaranty Agreement among the Company, BPO Finance Corporation, Retailer
      Funding Corporation and General Electric Capital Corporation dated as of
      October 1, 1990. (5)

                                       19


<PAGE>   24



10.27 Indemnification Agreement among BPO Finance Corporation, General Electric
      Capital Corporation and Kidder Peabody & Co. Incorporated as of October
      1, 1990. (5)

10.28 Retail Accounts Receivable Purchase Agreement among the Company, BPO
      Finance Corporation and The Wurlitzer Company dated as of October 1,
      1990.  (5)

10.29 Amendment dated as of February 15, 1994 to the October 25, 1990 Amended
      and Restated Revolving Credit Agreement between the Company and General
      Electric Capital Corporation. (10)

10.30 Amendment dated as of February 15, 1994 to the October 1, 1990 Purchase
      and Administration Agreement among the Company, Keyboard Acceptance
      Corporation (formerly known as BPO Finance Corporation), Retailer Funding
      Corporation and General Electric Capital Corporation as a consenting
      party. (10)

10.31 Amendment dated as of February 15, 1994 to the October 1, 1990 Guaranty
      Agreement among the Company, Keyboard Acceptance Corporation, Retailer
      Funding Corporation and General Electric Capital Corporation. (10)

10.32 Amended and Restated General Loan and Security Agreement dated as of
      February 24, 1994 between the Company and The Fifth Third Bank. (10)

10.33 Irrevocable Standby Letter of Credit issued August 13, 1993 by The Fifth
      Third Bank on behalf of the Company in favor of Harold S. Smith. (10)

10.34 Letter of Credit Reimbursement Agreement dated as of August 13, 1993
      between the Company and The Fifth Third Bank. (10)

10.35 Amendment to Office Space Lease Agreement between Baldwin Piano & Organ
      Company and Nooney Management Company dated as of June 11, 1991. (7)

10.36 Second Amendment dated as of December 1, 1994 to Purchase and
      Administration Agreement dated as of October 1, 1990 among Retailer
      Funding Corporation, Keyboard Acceptance Corporation (formerly BPO
      Finance Corporation) and General Electric Capital Corporation as a
      consenting party. (13)

10.37 Indemnification agreement dated as of December 1, 1994 among General
      Electric Capital Corporation, Lehman Commercial Paper, Inc. and Keyboard
      Acceptance Corporation (formerly BPO Finance Corporation). (13)

                                       20


<PAGE>   25



10.38  Amendment #4 dated as of September 30, 1994 to that certain Revolving
       Credit and Security Agreement, dated as of June 15, 1984 and Restated as
       of October 15, 1990 between Baldwin Piano & Organ Company and General
       Electric Capital Corporation. (13)

10.39  Amendment #5 dated as of March 28, 1995 to that certain Revolving
       Credit and Security Agreement, dated as of June 15, 1984 and Restated as
       of October 15, 1990 between Baldwin Piano & Organ Company and General
       Electric Capital Corporation. (14)

10.40  Amendment No. 1 dated as of April 3, 1995 to that certain Amended and
       Restated General Loan and Security Agreement dated as of February 24,
       1994 between the Company and The Fifth Third Bank. (14)

10.41  Distribution Agreement between Baldwin Piano & Organ Company and
       GeneralMusic S.p.A. dated as of July 1, 1995. (15)

10.42  Amendment No. 2 dated as of October 1, 1995 to that certain Amended and
       Restated General Loan and Security Agreement dated as of February 24,
       1994 between the Company and The Fifth Third Bank. (16)

10.43  Amendment to Office Space Lease Agreement between Baldwin Piano & Organ
       Company and Nooney Krombach Company dated as of February 16, 1996. (16)

10.44  Amendment #6 dated as of August 9, 1996 to that certain Revolving Credit
       and Security Agreement, dated as of June 15, 1984, and Restated as of
       October 15, 1990, between Baldwin Piano & Organ Company and General
       Electric Capital Corporation. (19)

10.45  Land Lease Agreement between Fabricantes Tecnicos, S.A. DE C.V. and
       Delphi Automotive Systems, S.A. DE C.V. dated as of December 13, 1996.

10.46  Amendment #7 dated as of November 20, 1996 to that certain Revolving
       Credit and Security Agreement, dated as of June 15, 1984, and Restated as
       of October 15, 1990, between Baldwin Piano & Organ Company and General
       Electric Capital Corporation.

10.47  Third Amendment dated as of December 1, 1995 to Purchase and
       Administration Agreement dated as of October 1, 1990 as amended among
       Retailer Funding Corporation, Keyboard

                                       21


<PAGE>   26



      Acceptance Corporation and General Electric Capital Corporation as a
      consenting party.

10.48 Fourth Amendment dated as of November 1, 1996 to Purchase and
      Administrative Agreement dated as of October 1, 1990 among Retailer
      Funding Corporation, Keyboard Acceptance Corporation and General Electric
      Capital Corporation as a consenting party.

10.49 Amended and Restated Amendment and Supplemental Agreement between Baldwin
      Piano & Organ Company and GeneralMusic S.p.A. dated as of January 1,
      1997.

11.1  Statement regarding computation of per share earnings.

13.1  Information incorporated by reference to Baldwin's 1996 Annual Report to
      Shareholders for the year ended December 31, 1996: "Independent Auditors'
      Report", "Financial Statements" (including Notes thereto), "Five Year
      Summary" and "Management's Discussion and Analysis of Financial Condition
      and Results of Operation".

21.1  Subsidiaries of the Company.

23.1  Consent of Independent Accountants.

27.1  Financial Data Schedule.

99.1  Baldwin Stock Repurchase Plan. (3)

99.2  Amendment No. 1 to Baldwin Stock Repurchase Plan. (5)

99.3  Amendment No. 2 to Baldwin Stock Repurchase Plan. (7)

99.4  Press Release dated December 5, 1996.

99.5  Press Release dated January 14, 1997.

 (1)  Incorporated by reference from the Company's Form S-1 Registration
      Statement as declared effective by the Commission on October 8, 1986.

 (2)  Incorporated by reference from the Company's Form 8-K dated February 23,
      1988 as filed with the Commission on March 9, 1988.

 (3   Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1987.

 (4)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1989.

                                       22


<PAGE>   27



 (5)  Incorporated by reference from the Company's Form 8-K dated October 25,
      1990 as filed with the Commission on November 9, 1990.

 (6)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1990.

 (7)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1991.

 (8)  Incorporated by reference from the Company's Form S-3 Registration
      Statement as declared effective by the Commission on May 19, 1993.

 (9)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1993.

(10)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1993.

(11)  Incorporated by reference from the Company's proxy statement relating to
      its May 10, 1994 Annual Meeting of Shareholders.

(12)  Incorporated by reference from the Company's Form 10-Q for the period
      ended June 30, 1994.

(13)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1994.

(14)  Incorporated by reference from the Company's Form 10-Q for the period
      ended March 31, 1995.

(15)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1995.

(16)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1995.

(17)  Incorporated by reference from the Company's Form 10-Q for the period
      ended June 30, 1996.

(18)  Substantially identical documents were entered into by Baldwin Piano &
      Organ Company with George C. Huebner, Larry D. Thompson and Perry
      Schwartz dated June 18, 1996, June 27, 1996 and November 12, 1996,
      respectively.

(19)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1996.

                                       23


<PAGE>   28



(20)  Incorporated by reference from the Company's Form 8-K dated February 10,
      1997 as filed with the Commission on February 27, 1997.

(21)  Incorporated by reference from the Company's Form 8-K dated September 3,
      1996 as filed with the Commission on September 13, 1996.

Index to Exhibits - page 28

                              REPORTS ON FORM 8-K

         During the fourth quarter of 1996, the Company filed no reports on
Form 8-K. During the first quarter of 1997, the Company filed one report on
Form 8-K on February 27, 1997.

                                       24


<PAGE>   29



                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                         BALDWIN PIANO & ORGAN COMPANY

                  By:    /s/ KAREN L. HENDRICKS
                         -------------------------------------                 
                            Karen L. Hendricks, Chairman,
                         Chief Executive Officer and President

                         Date:     March 27, 1997
                         -------------------------------------

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

                          Principal Executive Officer:

<TABLE>
<S>    <C>                              <C>
Date:  March 27, 1997                    /s/ KAREN L. HENDRICKS
      ---------------                   -----------------------
                                        Karen L. Hendricks, Chairman, Chief
                                        Executive Officer, President
                                        and Director

Date:  March 27, 1997                    /s/ GEORGE E. CASTRUCCI
      ---------------                   ------------------------
                                        George E. Castrucci, Director

Date:  March 27, 1997                    /s/ WILLIAM B. CONNELL
      ---------------                   -----------------------
                                        William B. Connell, Director

Date:  March 27, 1997                    /s/ JOSEPH H. HEAD, JR.
      ---------------                   ------------------------
                                        Joseph H. Head, Jr., Director

Date:  March 27, 1997                    /s/ ROGER L. HOWE
      ---------------                   ------------------
                                        Roger L. Howe, Director

                                        Principal Financial and Accounting
                                        Officer:

Date:  March 27, 1997                    /s/ PERRY H. SCHWARTZ
      ---------------                   ----------------------
                                        Perry H. Schwartz, Executive Vice
                                        President and Chief Financial Officer
</TABLE>

                                       25


<PAGE>   30



                    INDEPENDENT AUDITORS' REPORT ON SCHEDULE

The Board of Directors
Baldwin Piano & Organ Company:

         Under date of February 25, 1997, except as to Note 16, which is as of
March 11, 1997, we reported on the consolidated balance sheets of Baldwin Piano
& Organ Company and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of earnings, shareholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1996,
as contained in the 1996 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in
the annual report on Form 10-K for the year 1996. In connection with our audits
of the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement schedule as listed in the index under
Part IV, item 14 (2.1) of this Form 10-K. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audits.

         In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

                                                           KPMG PEAT MARWICK LLP

Cincinnati, Ohio
February 25, 1997

                                       26


<PAGE>   31



                                                                   SCHEDULE VIII

                 BALDWIN PIANO & ORGAN COMPANY AND SUBSIDIARIES

                                    --------

                       VALUATION AND QUALIFYING ACCOUNTS

                  Years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>
                                                          Additions
                                                          ---------
                                             Charged       Charged
                             Balance at      to cost       to other                            Balance at
                             beginning         and         accounts           Deductions         end of
   Description               of period       expenses      describe            describe          period
   -----------               ---------       --------      --------            --------          ------
<S>                          <C>              <C>             <C>             <C>                <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS:

Year ended
 December 31, 1996           $4,004,192       $  549,867      $   -           $1,015,936(1)      $3,538,123
                             ==========       ==========      ========        ==========         ==========    

Year ended
 December 31, 1995           $4,299,567       $  845,288      $   -           $1,140,663(1)      $4,004,192
                             ==========       ==========      ========        ==========         ==========    

Year ended
 December 31, 1994           $4,110,040       $1,183,876      $   -           $  994,349(1)      $4,299,567
                             ==========       ==========      ========        ==========         ==========    

RESERVE FOR INSTALLMENT RECEIVABLES
 SOLD WITH RECOURSE:

Year ended
 December 31, 1996           $1,510,000       $  700,000      $   -           $  803,000(2)      $1,407,000
                             ==========       ==========      ========        ==========         ==========    

Year ended
 December 31, 1995           $2,296,000       $  120,000     $   -            $  906,000(2)      $1,510,000
                             ==========       ==========      ========        ==========         ==========    

Year ended
 December 31, 1994           $2,706,000       $  120,000     $   -            $  530,000(2)      $2,296,000
                             ==========       ==========      ========        ==========         ==========    
</TABLE>


--------------------
   (1) Represents accounts charged off, less recoveries.  
   (2) Represents reserve related to accounts repurchased.

                                       27


<PAGE>   32



                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
                                                                                                      Sequentially
Exhibit                                                                                                Numbered
Number                             Exhibit                                                               Page
------                             -------                                                            -----------
<S>               <C>                                                                                     <C>
 3.1              Certificate of Incorporation of the Company,                                            *
                  as amended. (1)

 3.2              Amended and Restated Bylaws of Baldwin                                                  *
                  Piano & Organ Company dated as of February
                  10,1997.  (20)

 4.1              Rights Agreement between the Company and                                                *
                  The Provident Bank dated as of September
                  4, 1996.  (21)

10.1              Baldwin Piano & Organ Company 1986 Incentive                                            *
                  Stock Option Plan adopted on June 30, 1986. (1)

10.2              Baldwin Piano & Organ Company Retirement Plan                                           *
                  for Salaried Employees, as amended. (1)

10.3              Baldwin Piano & Organ Company Retirement Trust                                          *
                  for Salaried Employees dated September 28,
                  1984. (1)

10.4              Form of Indemnification Agreements between                                              *
                  the Company and the Company's Officers and
                  Directors dated June 30, 1986 and accompany-
                  ing schedule. (1)

10.5              Consulting Agreement between the Company                                                *
                  and Harold S. Smith dated as of April 14,
                  1993. (8)

10.6              Baldwin Piano & Organ Company Deferred                                                  *
                  Directors Fee Plan. (9)

10.7              Baldwin Piano & Organ Company Non-Qualified                                             *
                  Deferred Compensation Plan. (9)

10.8              Baldwin Piano & Organ Company Non-Qualified                                             *
                  Deferred Compensation Rabbi Trust Agreement
                  as amended and restated as of October 4,
                  1993. (9)
</TABLE>

                                       28


<PAGE>   33
 


<TABLE>
<S>               <C>                                                                                     <C>
10.9              Baldwin Piano & Organ Company 1994 Incentive                                            *
                  Stock Option Plan.  (11)

10.10             Baldwin Piano & Organ Company 1994 Management                                           *
                  Incentive Plan.  (12)

10.11             Baldwin Piano & Organ Company 1994 Long Term                                            *
                  Incentive Plan.  (12)

10.12             Agreement of Employment between Baldwin Piano                                           *
                  & Organ Company and Karen L. Hendricks dated
                  as of November 18, 1994.  (13)

10.13             Second Amended and Restated Agreement of                                                *
                  Employment and Retirement Plan for Selected
                  Key Employee between Baldwin Piano & Organ
                  Company and R. S. Harrison dated as of
                  December 9, 1994.  (13)

10.14             Change in Control Agreement between Baldwin                                             *
                  Piano & Organ Company and Karen L. Hendricks
                  dated June 26, 1996.  (17)

10.15             Change in Control Agreement between Baldwin                                             *
                  Piano & Organ Company and Stephen P. Brock
                  dated June 11, 1996.  (17)(18)

10.16             Agreement of Employment between Baldwin Piano                                           36
                  & Organ Company and Perry H. Schwartz dated as
                  of November 5, 1996, as amended on November
                  11, 1996.

10.17             Office Space Lease Agreement between Wards                                              *
                  Corner Associates Limited Partnership and the
                  Company dated as of June 16, 1986. (1)

10.18             Guaranty dated February 23, 1988 in favor                                               *
                  of General Electric Capital Corporation
                  made by TWCA Corp (now known as `The
                  Wurlitzer Company'). (2)

10.19             Security Agreement dated February 23, 1988                                              *
                  in favor of General Electric Capital Corpo-
                  ration made by TWCA Corp. (2)

10.20             Stock Pledge Agreement dated February 23, 1988                                          *
                  by and between Baldwin Piano & Organ Company
                  and General Electric Capital Corporation
                  relating to the Company's shares of TWCA
                  Corp. (2)
</TABLE>


                                       29


<PAGE>   34



<TABLE>
<S>               <C>                                                                                     <C>
10.21             Amended and Restated Revolving Credit and                                               *
                  Security Agreement between the Company and
                  General Electric Capital Corporation dated
                  October 25, 1990. (5)

10.22             Pledge Agreement by the Company in favor of                                             *
                  General Electric Capital Corporation dated
                  October 25, 1990. (5)

10.23             Security Agreement by BPO Finance Corporation                                           *
                  in favor of General Electric Capital Corpora-
                  tion dated October 25, 1990. (5)

10.24             Guaranty by BPO Finance Corporation in favor                                            *
                  of General Electric Capital Corporation dated
                  October 25, 1990. (5)

10.25             Purchase and Administration Agreement among                                             *
                  the Company, BPO Finance Corporation,
                  Retailer Funding Corporation and General
                  Electric Capital Corporation, as a consenting
                  party, dated as of October 1, 1990. (5)

10.26             Guaranty Agreement among the Company,                                                   *
                  BPO Finance Corporation, Retailer Funding
                  Corporation and General Electric Capital
                  Corporation dated as of October 1, 1990. (5)

10.27             Indemnification Agreement among BPO Finance                                             *
                  Corporation, General Electric Capital Corpo-
                  ration and Kidder Peabody & Co. Incorporated
                  as of October 1, 1990. (5)

10.28             Retail Accounts Receivable Purchase Agreement                                           *
                  among the Company, BPO Finance Corporation
                  and The Wurlitzer Company dated as of October
                  1, 1990. (5)

10.29             Amendment dated as of February 15, 1994 to                                              *
                  the October 25, 1990 Amended and Restated
                  Revolving Credit Agreement between the
                  Company and General Electric Capital
                  Corporation.  (10)

10.30             Amendment dated as of February 15, 1994 to                                              *
                  the October 1, 1990 Purchase and Adminis-
                  tration Agreement among the Company, Keyboard
                  Acceptance Corporation (formerly known as
                  BPO Finance Corporation), Retailer Funding
                  Corporation and General Electric Capital
                  Corporation as a consenting party.  (10)
</TABLE>


                                       30


<PAGE>   35



<TABLE>
<S>               <C>                                                                                     <C>
10.31             Amendment dated as of February 15, 1994 to                                              *
                  the October 1, 1990 Guaranty Agreement among
                  the Company, Keyboard Acceptance Corporation,
                  Retailer Funding Corporation and General
                  Electric Capital Corporation.  (10)

10.32             Amended and Restated General Loan and Security                                          *
                  Agreement dated as of February 24, 1994 between
                  the Company and The Fifth Third Bank.  (10)

10.33             Irrevocable Standby Letter of Credit issued                                             *
                  August 13, 1993 by The Fifth Third Bank on
                  behalf of the Company in favor of Harold
                  S. Smith.  (10)

10.34             Letter of Credit Reimbursement Agreement                                                *
                  dated as of August 13, 1993 between the
                  Company and The Fifth Third Bank.  (10)

10.35             Amendment to Office Space Lease Agreement                                               *
                  between Baldwin Piano & Organ Company and
                  Nooney Management Company dated as of
                  June 11, 1991. (7)

10.36             Second Amendment dated as of December 1, 1994 to                                        *
                  Purchase and Administration Agreement dated as of October 1,
                  1990 among Retailer Funding Corporation, Keyboard Acceptance
                  Corporation (formerly BPO Finance Corporation) and General
                  Electric Capital Corporation as a consenting party. (13)

10.37             Indemnification Agreement dated as of Decem-                                            *
                  ber 1, 1994 among General Electric Capital
                  Corporation, Lehman Commercial Paper, Inc.
                  and Keyboard Acceptance Corporation (formerly
                  BPO Finance Corporation).  (13)

10.38             Amendment #4 dated as of September 30, 1994 to                                          *
                  that certain Revolving Credit and Security
                  Agreement, dated as of June 15, 1984 and
                  Restated as of October 15, 1990 between
                  Baldwin Piano & Organ Company and General
                  Electric Capital Corporation.  (13)

10.39             Amendment #5 dated as of March 28, 1995 to                                              *
                  that certain Revolving Credit and Security
                  Agreement, dated as of June 15, 1984 and
                  Restated as of October 15, 1990 between
                  Baldwin Piano & Organ Company and General
                  Electric Capital Corporation.  (14)
</TABLE>


                                       31


<PAGE>   36

<PAGE>   37



<TABLE>
<S>               <C>                                                                                     <C>
10.40             Amendment No. 1 dated as of April 3, 1995                                               *
                  to that certain Amended and Restated General
                  Loan and Security Agreement dated as of
                  February 24, 1994 between the Company and
                  The Fifth Third Bank.  (14)

10.41             Distribution Agreement between Baldwin Piano                                            *
                  & Organ Company and GeneralMusic S.p.A.
                  dated as of July 1, 1995.  (15)

10.42             Amendment No. 2 dated as of October 1, 1995                                             *
                  to that certain Amended and Restated General
                  Loan and Security Agreement dated as of
                  February 24, 1994 between the Company and
                  The Fifth Third Bank.  (16)

10.43             Amendment to Office Space Lease Agreement                                               *
                  between Baldwin Piano & Organ Company and
                  Nooney Krombach Company dated as of
                  February 16, 1996.  (16)

10.44             Amendment #6 dated as of August 9, 1996 to                                              *
                  that certain Revolving Credit and Security
                  Agreement, dated as of June 15, 1984, and
                  Restated as of October 15, 1990, between
                  Baldwin Piano & Organ Company and General
                  Electric Capital Corporation.  (19)

10.45             Land Lease Agreement between Fabricantes                                                41
                  Tecnicos, S.A. DE C.V. and Delphi Automotive
                  Systems, S.A. DE C.V. dated as of December
                  13, 1996.

10.46             Amendment #7 dated as of November 20, 1996                                              50
                  to that certain Revolving Credit and Security
                  Agreement, dated as of June 15, 1984, and
                  Restated as of October 15, 1990, between
                  Baldwin Piano & Organ Company and General
                  Electric Capital Corporation.

10.47             Third Amendment dated as of December 1, 1995                                            62
                  to Purchase and Administration Agreement dated
                  as of October 1, 1990 as amended among Retailer
                  Funding Corporation, Keyboard Acceptance
                  Corporation and General Electric Capital
                  Corporation as a consenting party.
</TABLE>

                                       32


<PAGE>   38



<TABLE>
<S>               <C>                                                                                     <C>
10.48             Fourth Amendment dated as of November 1, 1996                                           65
                  to Purchase and Administrative Agreement dated
                  as of October 1, 1990 among Retailer Funding
                  Corporation, Keyboard Acceptance Corporation
                  and General Electric Capital Corporation as a
                  consenting party.

10.49             Amended and Restated Amendment and Supplemental                                         72
                  Agreement between Baldwin Piano & Organ Company
                  and GeneralMusic S.p.A. dated as of January
                  1, 1997.

11.1              Statement regarding computation of per share                                            76
                  earnings.

13.1              Information incorporated by reference to                                                77
                  Baldwin's 1996 Annual Report to Shareholders for the year
                  ended December 31, 1996: "Independent Auditors' Report",
                  "Financial Statements" (including Notes thereto), "Five Year
                  Summary", and "Management's Discussion and Analysis of
                  Financial Condition and Results of Operation".

21.1              Subsidiaries of the Company.                                                            103

23.1              Consent of Independent Accountants.                                                     104

27.1              Financial Data Schedule.                                                                105

99.1              Baldwin Stock Repurchase Plan. (3)                                                      *

99.2              Amendment No. 1 to Baldwin Stock Repurchase                                             *
                  Plan. (5)

99.3              Amendment No. 2 to Baldwin Stock Repurchase                                             *
                  Plan. (7)

99.4              Press Release dated December 5, 1996.                                                   106

99.5              Press Release dated January 14, 1997.                                                   107
</TABLE>

*     Incorporated by reference as indicated in the applicable footnote.

(1)   Incorporated by reference from the Company's Form S-1 Registration
      Statement as declared effective by the Commission on October 8, 1986.

                                       33


<PAGE>   39



(2)   Incorporated by reference from the Company's Form 8-K dated February 23,
      1988 as filed with the Commission on March 9, 1988.

(3)   Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1987.

(4)   Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1989.

(5)   Incorporated by reference from the Company's Form 8-K dated October 25,
      1990 as filed with the Commission on November 9, 1990.

(6)   Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1990.

(7)   Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1991.

(8)   Incorporated by reference from the Company's Form S-3 Registration
      Statement as declared effective by the Commission on May 19, 1993.

(9)   Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1993.

(10)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1993.

(11)  Incorporated by reference from the Company's proxy statement relating to
      its May 10, 1994 Annual Meeting of Shareholders.

(12)  Incorporated by reference from the Company's Form 10-Q for the period
      ended June 30, 1994.

(13)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1994.

(14)  Incorporated by reference from the Company's Form 10-Q for the period
      ended March 31, 1995.

(15)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1995.

(16)  Incorporated by reference from the Company's Form 10-K for the period
      ended December 31, 1995.

(17)  Incorporated by reference from the Company's Form 10-Q for the period
      ended June 30, 1996.

                                       34


<PAGE>   40



(18)  Substantially identical documents were entered into by Baldwin Piano &
      Organ Company with George C. Huebner, Larry D. Thompson and Perry
      Schwartz dated June 18, 1996, June 27, 1996 and November 12, 1996,
      respectively.

(19)  Incorporated by reference from the Company's Form 10-Q for the period
      ended September 30, 1996.

(20)  Incorporated by reference from the Company's Form 8-K dated February 10,
      1997 as filed with the Commission on February 27, 1997.

(21)  Incorporated by reference from the Company's Form 8-K dated September 3,
      1996 as filed with the Commission on September 13, 1996.


                                       35